LTC Properties Inc: Form 10-Q for the period ended Mar 31, 2026

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act adopted pursuant to the Private Securities Litigation Reform Act of 1995. Statements that are not purely historical may be forward-looking. You can identify some of the forward-looking statements by their use of forward-looking words, such as “believes,” “expects,” “may,” “will,” “could,” “would,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or the negative of those words or similar words. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions and financial trends that may affect our future plans of operation, business strategy, results of operations and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking statements, including, but not limited to, operational and legal risks and liabilities under our new SHOP segment; our dependence on the ability of our third-party independent operators to successfully manage and operate our SHOP communities; our dependence on our operators for revenue and cash flow; government regulation of the health care industry; changes in federal, state, or local laws limiting real estate investment trust (“REIT”) investments in the health care sector; federal and state health care cost containment measures including reductions in reimbursement from third-party payors such as Medicare and Medicaid; required regulatory approvals for operation of health care facilities; a failure to comply with applicable law or regulations for the operation of health care facilities; the adequacy of insurance coverage maintained by our operators; our reliance on a few major operators; our ability to find suitable replacement operators for our SHOP communities; our ability to renew leases or enter into favorable terms of renewals or new leases; the impact of inflation; operator financial or legal difficulties; the sufficiency of collateral securing mortgage loans; an impairment of our real estate investments; the relative illiquidity of our real estate investments; our ability to develop and complete construction projects; our ability to invest cash proceeds for health care properties; a failure to qualify as a REIT; our ability to grow if access to capital is limited; and a failure to maintain or increase our dividend. For a discussion of these and other factors that could cause actual results to differ from those contemplated in the forward-looking statements, please see the discussion under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and in our publicly available filings with the Securities and Exchange Commission. We do not undertake any responsibility to update or revise any of these factors or to announce publicly any revisions to forward-looking statements, whether as a result of new information, future events or otherwise. Although our management believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The actual results may differ materially from any forward-looking statements due to the risks and uncertainties of such statements.

Executive Overview

Company Overview

We are a health care real estate investment trust (“REIT”) that invests in seniors housing and health care properties through our owned seniors housing operating portfolio (“SHOP”), triple-net leases and joint ventures. We have been operating since August 1992.

Our primary seniors housing and health care property classifications include skilled nursing centers (“SNF”), assisted living communities (“ALF”), independent living communities (“ILF”), memory care communities (“MC”) and combinations thereof. We also have investments in other (“OTH”) types of properties, such as land parcels, projects under development (“UDP”) and a behavioral health care hospital. For purposes of this quarterly report and other presentations, we generally include ILF, ALF, MC, and combinations thereof in the seniors housing communities classification (“SH”).

Substantially all of our revenues and sources of cash flows from operations are derived from rents from operating leases, resident fees and services, interest earned on financing receivables, interest earned on outstanding loans receivable and income from investments in unconsolidated joint ventures. Income from our investments represent our primary source of liquidity to fund distributions and are dependent upon the performance of our SHOP communities and operators on their lease and loan obligations and the rates earned thereon. To the extent that the operators experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by investment type, property type and operator. Our monitoring process includes periodic review of financial statements for each facility, periodic review of operator credit, scheduled property inspections and review of covenant compliance.

In addition to our monitoring and research efforts, we also structure our investments to help mitigate payment risk. Some operating leases and loans are credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the operator and its affiliates.

We conduct and manage our business as two operating segments, for reporting and decision-making purposes: i) real estate investments (“Real Estate Investments”) segment which consists of owned real properties subject to non-cancelable triple-net leases (“NNN” or “Triple-Net Portfolio”), financing receivables, mortgage loans, notes receivable and unconsolidated joint ventures and ii) SHOP segment.

Business and Investment Strategy

Since commencing operations in August 1992, our objective has been to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in seniors housing and health care properties managed by experienced operators. Our goal is to invest in properties that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location and operator.

During the second quarter of 2025, we began utilizing the structure authorized by the REIT Investment Diversification and Empowerment Act of 2007 (Commonly referred to as “RIDEA”) as permitted by the Housing and Economic Recovery Act of 2008. Under RIDEA, we are permitted to participate directly in the cash flow of qualified healthcare properties (compared to receiving solely contractual rental income) and have certain oversight approval rights and the right to review operational and financial reporting information. However, our independent third-party operators ultimately control the day-to-day operations of the property, pursuant to the terms of our management agreements. Offering RIDEA structures represents a further aspect of our traditional strategy of investing through vehicles such as non-cancelable triple-net operating leases, mortgage loans, and structured finance. We believe that RIDEA structures provide us with additional investment and higher growth opportunities.

We also have identified opportunities to convert existing triple-net leases into our new SHOP segment, and in certain instances have completed these conversions. To develop and implement RIDEA structures, we may need to continue to commit financial and operational resources. While we anticipate that adding RIDEA transactions will be positive for our business model, our ability to succeed in this new segment will be determined by numerous factors, including our ability to identify suitable investments and our relationship with operators of our SHOP communities. We rely on the SHOP operator’s personnel, expertise, resources, good faith, and judgement to manage our SHOP communities efficiently and effectively. We also rely on the SHOP operators to set appropriate resident fees, provide accurate property-level financial results for our properties in a timely manner, and otherwise operate our SHOP communities in compliance with the terms of our management agreements and all applicable laws and regulations.

Depending upon the availability and cost of external capital, we anticipate making additional investments in seniors housing communities. New investments are generally funded from cash on hand, proceeds from periodic asset sales, temporary borrowings under our unsecured revolving line of credit and internally generated cash flows. Our investments generate internal cash from rent, resident fees and services, interest from financing receivables and interest receipts and principal payments on loan receivables and income from unconsolidated joint ventures. Permanent financing for future investments, which replaces funds drawn under our unsecured revolving line of credit, may be provided through a combination of public and private offerings of debt and equity securities and secured and unsecured debt financing. The timing, source and amount of cash flows provided by financing activities and used in investing activities are sensitive to the capital markets’ environment, especially to changes in interest rates. Changes in the capital markets’ environment may impact the availability of cost-effective capital.

We believe our business model has enabled and will continue to enable us to maintain the integrity of our property investments, including in response to financial difficulties that may be experienced by operators and the variability of cash flow from our SHOP segment. Traditionally, we have taken a conservative approach to managing our business, choosing to maintain liquidity and exercise patience until favorable investment opportunities arise.

Real Estate Portfolio Overview

The following tables summarize our real estate investment portfolio as of March 31, 2026 (dollar amounts in thousands):

(1) We have investments in owned properties, including our Triple-Net Portfolio and SHOP, financing receivables, mortgage loans, notes receivable and unconsolidated joint ventures in 23 states to 30 operators.

(2) Includes three parcels of land held-for-use and one behavioral health care hospital.

(3) We funded $14,310 under a $26,120 mortgage loan commitment for the construction of a 116-unit SH located in Illinois. The loan bears interest at a current rate of 9.0 % and an IRR of 9.5%.

(4) Excludes $2,268 variable rental income from lessee reimbursement of our real estate taxes.

(5) Resident fees and services include all amounts earned from residents, based on individual resident agreements, at our SHOP communities.

(6) Excludes $2,618 of interest income from financing receivables related to the sale of properties accounted for as a financing receivable.

(7) Included in the Interest and other income line item of our Consolidated Statements of Income.

As of March 31, 2026, we had $2.0 billion in net carrying value of investments as follows (in thousands):

The following table provides details on the components of revenues and related net operating income (“NOI”) across our portfolio (in thousands):

(1) At March 31, 2026, the straight-line rent receivable balance on our Consolidated Balance Sheets was $17,615.

(2) At March 31, 2026, the financing receivables effective interest receivable balance, which is included in the Interest receivable line item on our Consolidated Balance Sheets, was $7,075. During the three months ended March 31, 2026, we wrote-off $198 effective interest receivable previously recognized related to the sale of properties accounted for as a financing receivable.

(3) At March 31, 2026, the mortgage loans receivable effective interest receivable balance, which is included in the Interest receivable line item on our Consolidated Balance Sheets, was $14,394.

(4) At March 31, 2026, the other notes receivable effective interest receivable balance, which is included in the Interest receivable line item on our Consolidated Balance Sheets, was $50.

(5) See Non-GAAP Financial Measures below for additional information and reconciliation.

The following table outlines information related to our triple-net lease extensions during the three months ended March 31, 2026 (dollar amounts in thousands):

During the three months ended March 31, 2026, we terminated a master lease and converted two seniors housing communities covered under the master lease into our SHOP segment. Upon conversion, we entered into a management agreement with an operator new to us. The communities are located in Texas with a total of 88 units and an aggregate gross book value of $26.3 million.

Subsequent to March 31, 2026, we terminated an additional triple-net master lease and converted two seniors housing communities covered under the master lease into our SHOP segment. Upon conversion, we entered into a management agreement with another operator, also new to us. The communities are located in Georgia and South Carolina with a total of 159 units and an aggregate gross book value of $32.4 million.

Update on Certain Operators

Genesis Healthcare, Inc.

During the second quarter of 2025, we received written notice from Genesis Healthcare Inc. (“Genesis”) of its exercise of a 5-year extension option, which extended the term of the lease to April 30, 2031. During the third quarter of 2025, Genesis filed for Chapter 11 bankruptcy. Accordingly, we wrote-off the straight-line rent receivable balance of $1.3 million related to Genesis’ master lease. During the three months ended March 31, 2026, a federal bankruptcy judge approved the sale of Genesis’ assets to a newly formed investment group. Affiliates of Genesis lease six skilled nursing centers in New Mexico (five) and Alabama (one) with a total of 782 beds under a master lease with LTC. Genesis has paid their contractual rent through May 2026.

Prestige Healthcare

Prestige Healthcare (“Prestige”) operates 21 skilled nursing centers located in Michigan secured under four mortgage loans and two skilled nursing centers located in South Carolina under a master lease. Prestige is our largest operator based on total revenues and second largest operator based on total assets, representing 8.0% of our total revenues and 12.3% of our total assets as of March 31, 2026.

Prior to an amendment in July 2025, under Prestige’s $179.9 million mortgage loan secured by 14 properties, the minimum mortgage interest payment due to us was based on an annual current pay rate of 8.5% on the outstanding loan balance. The difference between the contractual interest rate and the current pay interest rate on the outstanding loan balance remained an obligation of Prestige and was payable through the application of security deposits we hold on behalf of Prestige or was payable at maturity.

During the third quarter of 2025, Prestige’s $179.9 million mortgage loan was modified to increase the current interest paid by Prestige from 8.5% to the then full contractual interest rate of 11.14% escalating annually. Additionally, the modification provides Prestige an option to prepay this mortgage loan at par and without penalty within a 12-month window beginning in July 2026. Prestige is required to provide us with at least a 90-day notice of its intention to exercise the option and the ability for Prestige to exercise the pre-payment option is contingent on several factors including Prestige being current and in good standing on all its mortgage loans with LTC and obtaining replacement financing. During the third quarter of 2025, in conjunction with the loan amendment that provided the borrower with a penalty-free early payoff option, we wrote-off $41.5 million of effective interest previously accrued related to this loan. During the three months ended March 31, 2026, Prestige provided notice of its intent to repay its $179.9 million mortgage loan and we expect them to repay the loan during the third quarter of 2026. Prestige is current on their contractual loan obligations through May 2026.

2026 Activities Overview

The following tables summarize our transactions during the three months ended March 31, 2026 (dollar amounts in thousands):

Owned Real Properties–SHOP

During the three months ended March 31, 2026, we continued to expand our SHOP segment. Accordingly, we terminated a triple-net master lease and converted two seniors housing communities covered under the master lease into our SHOP segment. Upon conversion, we entered into a management agreement with an operator new to us. The communities are located in Texas with a total of 88-units and an aggregate gross book value of $26.3 million.

Subsequent to March 31, 2026, we terminated a triple-net master lease and converted two seniors housing communities covered under the master lease into our SHOP segment. Upon conversion, we entered into a management agreement with another operator new to us. The communities are located in Georgia and South Carolina with a total of 159 units and an aggregate gross book value of $32.4 million.

Additionally, we acquired a portfolio of three seniors housing communities in Georgia. The following table summarizes acquisitions within our SHOP segment during the three months ended March 31, 2026 (dollar amounts in thousands):

(1) Subsequent to March 31, 2026, we acquired a 61-unit seniors housing community within our SHOP segment in Illinois for $9,205. In conjunction with the acquisition, we entered into a management agreement with an operator new to us.

(2) In conjunction with this acquisition, we entered into a management agreement with another operator also new to us.

(3) Excludes $100 of additional costs incurred related to 2025 acquisitions. Additionally, at acquisition, we received property tax proration credits of $76.

During the three months ended March 31, 2026, we funded capital improvement projects of $2.0 million within our SHOP segment.

Owned Real Properties–Triple-Net Portfolio

During the three months ended March 31, 2026, we extended a master lease covering four seniors housing communities in Oklahoma. The following table provides information related to the lease extension (dollar amounts in thousands):

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During the three months ended March 31, 2026 and subsequently, we terminated master leases and converted the communities covered under the master leases into our SHOP segment. See Owned Real Properties – SHOP above for more information regarding these master leases.

During the three months ended March 31, 2026, we invested in the following improvement projects within our Triple-Net Portfolio (in thousands):

Financing Receivables

The following table summarizes our financing receivable activity for the three months ended March 31, 2026 (in thousands):

(1) During 2022, we entered into a JV that purchased three skilled nursing centers with a total of 299 beds located in Florida. The JV leased the centers back to an affiliate of the seller and provided the seller-lessee with a purchase option. Our JV partner contributed $14,325 of equity into the joint venture. Accordingly, we consolidated the joint venture as Financing receivable and recorded the JV partner contribution as Non-controlling interest on our Consolidated Balance Sheets. During the three months ended March 31, 2026, the lessee exercised its purchase option to acquire the skilled nursing centers underlying the joint venture. In conjunction with this transaction, we received exit IRR income of $1,812. Additionally, we wrote-off $198 effective interest receivable previously recognized over the term of the financing receivable through payoff.

Mortgage Loans Receivable

The following table summarizes our mortgage loan receivable activity for the three months ended March 31, 2026 (in thousands):

(1) We funded the following:

(a) $6,515 under a $26,120 mortgage loan commitment for the construction of a 116-unit SH located in Illinois. The borrower contributed $12,300 of equity, which was used to initially fund the construction. During the third quarter of 2025, we began funding this commitment. Our remaining commitment is $11,811. The loan bears interest at a current rate of 9.0% and an IRR of 9.5%; and

(b) $640 under a $19,500 mortgage loan commitment for the construction of an 85-unit SH in Michigan. The borrower contributed $12,100 equity upon origination, which was used to initially fund the construction. Our remaining commitment is $1,757. The 8.8% interest-only loan matures in September 2026 and includes two one-year extension, each of which is contingent on certain coverage thresholds.

Preferred Equity Investment in Unconsolidated Joint Ventures

We have an acquisition, development and construction (“ADC”) loan that meets the accounting criteria to be considered a variable interest entity (“VIE”). We are not the primary beneficiary of the VIE as we do not have both: 1) the power to direct the activities that most significantly affect the VIE’s economic performance, and 2) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. However, we do have significant influence over the VIE. Therefore, we have accounted for the investment as a joint venture using the equity method of accounting. The following table provides information regarding our unconsolidated joint venture investment at March 31, 2026 (dollar amounts in thousands):

(1) Represents a $12,700 mortgage loan, which is comprised of $11,164 funded at origination during the three months ended June 30, 2024, an interest reserve of $750 and a capital expenditure reserve of $786. In accordance with U.S. generally accepted accounting principles (“GAAP”), this mortgage loan was determined to be an ADC loan and is accounted for as an unconsolidated JV. The five-year mortgage loan is interest-only at a current rate of 9.15%. During the three months ended March 31, 2026, the operator provided notice of its intent to pay off this mortgage loan. Subsequent to March 31, 2026, the mortgage loan was paid off.

Health Care Regulatory

The Centers for Medicare & Medicaid Services (“CMS”) annually updates Medicare SNF prospective payment system rates and other policies. On July 31, 2025, CMS issued a final rule to update Medicare payment policies and rates for SNFs under the SNF prospective payment system (“SNF PPS”) for fiscal year (“FY”) 2026. CMS announced that it was updating SNF PPS rates by 3.2% based on the final SNF market basket of 3.3%, plus a 0.6% market basket forecast error adjustment, and a negative 0.7% productivity adjustment, which amounts to an increase in SNF PPS payments of $1.16 billion compared to payments in FY 2025. CMS stated that its impact figures do not incorporate the SNF Value-Based Purchasing (“VBP”) reductions for certain SNFs subject to the net reduction in payments under the SNF VBP, which are estimated to total $208.36 million in FY 2026. CMS announced that it was finalizing several changes to the PDPM ICD-10-CM code mappings to allow providers to provide more accurate, consistent, and appropriate primary diagnoses that meet the criteria for skilled intervention during a Part A SNF stay. CMS finalized 34 changes to the PDPM ICD-10-CM code mappings to maintain consistency with the latest ICD-10-CM coding guidance. CMS also announced that for the SNF VBP Program, it was finalizing a series of operational and administrative proposals as part of the final rule. In addition, CMS announced that for the SNF Quality Reporting Program (“QRP”), it was finalizing its proposal to remove four standardized patient assessment data elements from the Minimum Data Set (“MDS”), the SNF resident assessment form, beginning with residents admitted on or after October 1, 2025. CMS also announced it was finalizing its proposal to amend the reconsideration request policy and process.

On April 2, 2026, CMS issued a proposed rule for updates to Medicare payment policies and rates for SNFs under the SNF PPS for FY 2027. CMS announced that for FY 2027, CMS proposed updating SNF PPS rates by 2.4% based on the proposed SNF market basket of 3.2%, and a negative 0.8% productivity adjustment. CMS stated that these impact figures do not incorporate SNF VBP reductions for certain SNFs subject to a net reduction in payments under the SNF VBP. CMS stated that SNF VBP adjustments are estimated to total $208.4 million in FY 2026. CMS also announced that for the SNF QRP, CMS is proposing to remove two COVID-19 measures, revising the data submission deadline, and requiring the submission of MDS data on all SNF residents receiving covered skilled care in a SNF, regardless of payer, and that CMS is seeking feedback on two Requests for Information (“RFI”). For the SNF VBP, CMS announced that it is providing estimated performance standards for the FY 2029 and FY 2030 program years and proposing an update to the program’s “snapshot date” for two measures that are calculated using MDS assessment data to maintain alignment with proposed SNF QRP submission deadlines for MDS assessment data.

There can be no assurance that these rules or future regulations modifying Medicare SNF payment rates or other requirements for Medicare and/or Medicaid participation will not have an adverse effect on the financial condition of our lessees and borrowers which could, in turn, adversely impact the timing or level of their payments to us and our overall financial condition. Failure by an operator to comply with regulatory requirements can, among other things, jeopardize a facility’s compliance with the conditions of participation under relevant federal and state healthcare programs. Further the ability of our operators to comply with applicable regulations can be adversely impacted by changes in the labor market and increases in inflation.

Key Performance Indicators, Trends and Uncertainties

We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to concentration risk and credit strength. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results in making operating decisions and for budget planning purposes.

Concentration Risk. We evaluate a tenant/operator concentration based on whether revenues from transactions with a single external operator equal or exceed 10% of our total revenues. No single operator accounted for 10% or more of total revenues for the three months ended March 31, 2026.

Additionally, we evaluate our concentration risk based on gross investment across asset mix, real estate investment mix, operator mix and geographic mix. Concentration risk is valuable to understand what portion of our real estate investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our investments that are real property or mortgage loans. The National Association of Real Estate Investment Trusts (“Nareit”), an organization representing U.S. REITs and publicly traded real estate companies, classifies a company with 50% or more of assets directly or indirectly in the equity ownership of real estate as an equity REIT. Investment mix measures the portion of our investments that relate to our various property classifications. Operator mix measures the portion of our investments that relate to our top five operators. Geographic mix measures the portion of our real estate investment that relate to our top five states.

The following table reflects our recent historical trends of concentration risk (gross investment, in thousands):

(1) Includes three parcels of land located adjacent to properties securing the Prestige Healthcare mortgage loan and are managed by Prestige.

(2) During the second quarter of 2025, we terminated our Anthem Memory Care, LLC (“Anthem”) triple-net master leases and converted the communities covered under the master leases into our SHOP segment. Accordingly, our Anthem Memory Care, LLC” communities were included with “SHOP operators” classification for periods subsequent to March 31, 2025.

(3) Our communities within our SHOP segment operated by independent operators on our behalf are classified as “SHOP operators”. Our SHOP segment is not subject to operator/credit concentration risk.

(4) During the three months ended March 31, 2026, we acquired three seniors housing communities in Georgia with a gross book value of $108,129. As a result of this transaction, California is no longer a top five state under our geographic mix and is replaced by Georgia. Accordingly, our “Georgia” properties were reclassified from “Remaining states” and our California properties were reclassified to “Remaining states” for all periods presented.

Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. Our leverage ratios include debt to gross asset value and debt to market capitalization. The leverage ratios indicate how much of our Consolidated Balance Sheets capitalization is related to long-term obligations. Our coverage ratios include interest coverage ratio and fixed charge coverage ratio. The coverage ratios indicate our ability to service interest and fixed charges (interest). The coverage ratios are based on earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) as defined by Nareit. See Non-GAAP Financial Measures below for information and reconciliation.

The following table reflects the recent historical trends for our credit strength measures:

Balance Sheet Metrics

(1) Decreased due to increase in market capitalization resulting from the sale of common stock under our equity distribution agreement, as well as increase in stock price partially offset by increase in outstanding debt.

(2) Decreased due to decrease in outstanding debt.

(3) Decreased due to decrease in outstanding debt, partially offset by decrease in market capitalization resulting from lower stock price.

(4) Decreased due to increase in interest expense partially offset by increase in net operating income from our SHOP segment.

(5) Increased due to increase in outstanding debt partially offset by increase in gross asset value.

(6) Increased due to increase in outstanding debt partially offset by increase in market capitalization resulting from the sale of common stock under our equity distribution agreement as well as increase in stock price.

(7) Decreased due to increase in interest expense and decrease in rental income, partially offset by increase in net operating income from our SHOP segment, and revenue from interest and other income.

(8) Increased due to increase in outstanding debt and decrease in market capitalization from lower stock price.

(9) In calculating our interest coverage and fixed charge coverage ratios above, we use EBITDAre. See Non-GAAP Financial Measures below for information and reconciliation.

We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved, and actual results may differ materially from our expectations. This may be a result of various factors, including, but not limited to

• the status of the economy;
• the status of capital markets, including prevailing interest rates;
• compliance with and changes to regulations and payment policies within the health care industry;
• changes in financing terms;
• competition within the health care and seniors housing industries;
• changes in federal, state and local legislation; and
• the duration, spread and severity of a public health crises such as a pandemic.

Management regularly monitors the economic and other factors listed above. We develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends.

Operating Results (unaudited, in thousands)

(1) Decreased primarily due to conversion of communities from our Triple-Net Portfolio to our SHOP segment and lower rent from property sales. The decreases were partially offset by rent increases from fair-market rent resets and the turnaround impact of the 2025 write-off of a straight-line rent receivable and lease incentive balance in connection with the termination of two existing leases with the same operator and combining them into a single master lease.

(2) Increase due to establishing our new SHOP segment during the second quarter of 2025. Resident fees and services include all amounts earned from residents, based on individual resident agreements, at our SHOP communities. Seniors housing operating expenses include costs incurred to operate the properties in our SHOP segment.

(3) Increased primarily due to $1,812 received in connection with the sale of a portfolio of three SNFs in Florida accounted for as a financing receivable. The increase was partially offset by decrease in interest income and the write-off of effective interest receivable, both related to the sale of such portfolio.

(4) Increased due to additional mortgage loan receivables funding partially offset by payoffs and a decrease in effective interest income related to converting Prestige mortgage loan to cash basis during the third quarter of 2025.

(5) Increased primarily due to entering into new term loans totaling $200,000 in the fourth quarter of 2025 and a higher average balance on our revolving line of credit partially offset by scheduled principal paydowns on our senior unsecured notes and lower interest rates.

(6) Increased due to acquisitions within our SHOP segment.

(7) Primarily represents the recovery of credit losses recorded in connection with the sale of three SNFs that were accounted for as a financing receivable. See (3) above.

(8) Primarily represents the write-off of a working capital note and the related interest receivable in connection with the transition of triple-net leases covering 12 properties to SHOP.

(9) Decreased primarily due to the conversion of 17 communities from our Triple-Net Portfolio to SHOP and property sales. Upon conversion into SHOP, two of the communities are operating and accounted for as one community.

(10) Increased primarily due to higher costs to support our growing SHOP segment and other corporate expenses.

(11) Decreased primarily due to the turnaround impact of a 13% exit IRR payment of $2,962 received in connection with the redemption of our preferred equity investment in a JV during the first quarter of 2025.

Non-GAAP Financial Measures

A non-GAAP financial measure is defined as a numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that excludes or includes amounts that are not excluded from or included in the most directly comparable measure calculated and presented in accordance with GAAP. We consider Funds from Operations (“FFO”), NOI and EBITDAre to be useful supplemental measures of our financial or operating performance.

Funds From Operations

FFO attributable to common stockholders, basic FFO attributable to common stockholders per share and diluted FFO attributable to common stockholders per share are supplemental measures of a REIT’s financial performance that are not defined by GAAP. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO facilitates comparisons of operating performance between periods.

We use FFO as a supplemental performance measurement of our cash flow generated by operations. FFO does not represent cash generated from operating activities in accordance with GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.

We calculate and report FFO in accordance with the definition and interpretive guidelines issued by Nareit. FFO, as defined by Nareit, means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current Nareit definition or that have a different interpretation of the current Nareit definition from us; therefore, caution should be exercised when comparing our FFO to that of other REITs.

The following table reconciles GAAP net income available to common stockholders to Nareit FFO available to common stockholders (unaudited, amounts in thousands, except per share amounts):

Net Operating Income

Net operating income or NOI is a non-GAAP financial measure that is calculated as net income (loss) (computed in accordance with GAAP) before (i) general and administrative expenses, (ii) transaction costs, (iii) (recovery) provision for credit losses, (iv) impairment loss, (v) depreciation and amortization, (vi) interest expense, (vii) gain or loss on sale of real estate and (viii) income tax benefit or expense. We use NOI to reflect the operating performance of our portfolio because NOI excludes certain items that are not associated with the operations of our properties.

NOI is not equivalent to our net income (loss) as determined under GAAP. Additionally, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount. Therefore, caution should be exercised when comparing our NOI to that of other REITs.

The following is a reconciliation of net income, which is the most directly comparable GAAP financial measure to NOI for the three months ended March 31, 2026 and 2025 (in thousands):

Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate

Earnings before interest, taxes, depreciation and amortization for real estate or EBITDAre is calculated as net income available to common stockholders (computed in accordance with GAAP) excluding (i) interest expense, (ii) income tax expense, (iii) real estate depreciation and amortization, (iv) impairment write-downs of depreciable real estate, (v) gains or losses on the sale of depreciable real estate, and (vi) adjustments for unconsolidated partnerships and joint ventures.

Adjusted EBITDAre is a supplemental non-GAAP financial measure calculated by adjusting EBIDAre for non-recurring items unrelated to ongoing operations. We believe these metrics provide useful information to investors because they exclude the impact of various income and expense items that are not indicative of operating performance.

EBITDAre and Adjusted EBITDAre are not alternatives to net income, operating income or cash flows from operating activities as calculated and presented in accordance with GAAP. You should not rely on EBITDAre or Adjusted EBITDAre as substitutes for any such GAAP financial measures or consider them in isolation, for the purpose of analyzing our financial performance, financial position or cash flows. Net income is the most directly comparable GAAP measure to EBITDAre and/or Adjusted EBITDAre.

The following is a reconciliation of net income (loss), which is the most directly comparable GAAP financial measure to EBITDAre and Adjusted EBITDAre for the periods presented below (in thousands):

(1) Includes exit IRR income of $1,812 and recovery of credit losses of $765, both in connection with the sale of a portfolio of three SNFs in Florida accounted for as a financing receivable, offset by transaction costs of $688 and a $198 write-off of effective interest related to the sale of such portfolio.

(2) Includes $1,800 received in connection with the redemption of our preferred equity investment in a joint venture and $600 of one-time income received from a former operator, offset by a $957 write-off of a working capital note and $392 of transaction costs related to establishing our new SHOP segment.

(3) Includes $41,455 effective interest write-off related to Prestige loan amendment that permits penalty-free early payoff window within an allowable window, $1,271 straight-line rent receivable write-off due to an operator’s bankruptcy filing, $554 provision for credit losses related to mortgage loan originations and $488 of transaction costs related to establishing our new SHOP segment, offset by the exit IRR of $975 received in connection with an early payoff of a mezzanine loan and recovery of credit losses of $375 related to loan payoffs.

(4) Includes $5,971 termination fee paid to New Perspective, $1,136 one-time costs associated with an employee’s retirement, $520 of transaction costs related to establishing our new SHOP segment and $384 of provision for credit losses related to a mortgage loan origination.

(5) Includes $2,693 write-off of a working capital note, $371 of related interest receivable, and $303 of transaction costs, all in connection with establishing our new SHOP segment, offset by the 13% exit IRR of $2,962 received in connection with the redemption of our preferred equity investment in a JV.

Liquidity and Capital Resources

Sources and Uses of Cash

As of March 31, 2026, we had $583.3 million in liquidity as follows (amounts in thousands, except number of share amounts):

(1) Subsequent to March 31, 2026, we repaid $56,000 under our unsecured revolving line of credit. Accordingly, we have $226,963 outstanding and $373,037 available for borrowing under our unsecured revolving line of credit as of May 6, 2026.

(2) Subsequent to March 31, 2026, we sold 1,402,933 shares of common stock for $51,917 of net proceeds under our Equity Distribution Agreement. Accordingly, as of May 6, 2026, we had $192,353 available under the Equity Distribution Agreement.

We believe that our current cash balance, cash flow from operations available for distribution or reinvestment, our borrowing capacity and our potential ability to access the capital markets are sufficient to provide for payment of our current operating costs, meet debt obligations and pay common dividends at least sufficient to maintain our REIT status and repay borrowings at, or prior to, their maturity. The timing, source and amount of cash flows used in financing and investing activities are sensitive to the capital markets environment, especially to changes in interest rates. In addition inflation may adversely affect the performance of our SHOP segment and our operators’ business, results of operations, cash flows and financial condition which could, in turn, adversely affect our financial position.

The operating results of the facilities will be impacted by various factors over which the operators/owners may have no control. Those factors include, without limitation, the health of the economy, inflation pressures, employee availability and cost, changes in supply of or demand for competing seniors housing and health care facilities, ability to hire and maintain qualified staff, ability to control other rising operating costs, and the potential for significant reforms in the health care industry and related occupancy challenges in the governmental regulations and financing of the health care industry or the impact of any other infectious disease and epidemic outbreaks. We cannot presently predict what impact these potential events may have, if any. We believe that adequate provision has been made for the possibility of loans proving uncollectible but we will continually evaluate the financial condition of the operations of our seniors housing and health care properties. In addition, we will monitor our borrowers and the underlying collateral for mortgage loans and will make future revisions to the provision, if considered necessary.

Our ability to access the capital markets and to pay dividends may be impacted by our borrowing capacity and compliance with financial covenants. We continuously evaluate the availability of cost-effective capital and believe we have sufficient liquidity for our current dividend, corporate expenses and additional capital investments in 2026.

Our investments, principally our investments in owned properties, financing receivables and mortgage loans, are subject to the possibility of loss of their carrying values as a result of changes in market prices, interest rates and inflationary expectations. The effects on interest rates may affect our costs of financing our operations and the fair-market value of our financial assets. Generally, our leases have agreed upon annual increases and our loans have predetermined increases in interest rates. Inasmuch as we may initially fund some of our investments with variable interest rate debt, we would be at risk of net interest margin deterioration if medium and long-term rates were to increase.

Our primary sources of cash include rent, resident fees and services, interest receipts, borrowings under our unsecured credit facility, public and private issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), seniors housing operating expenses, property tax expenses, real property investments (including acquisitions, capital expenditures and construction advances), loan advances and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows as summarized below (in thousands):

Cash Flows from Operating Activities

Cash flows from operating activities increased $1.2 million during the three months ended March 31, 2026, compared to the same period in 2025, primarily due to net income generated from growth in our SHOP segment.

Cash Flows from Investing Activities

Net cash used in investing activities increased by $68.4 million during the three months ended March 31, 2026, compared to the same period in 2025, primarily driven by a $108.2 million increase in real estate investments and a $6.1 million increase in investments in mortgage loans receivable. These increases were partially offset by a $62.2 million increase in proceeds from the sale of properties accounted for as a financing receivable and the turnaround impact of $13.0 million proceeds from the liquidation of our investment in an unconsolidated joint venture during the three months ended March 31, 2025.

Cash Flows from Financing Activities

Net cash provided by financing activities increased by $60.6 million during the three months ended March 31, 2026, compared to the same period in 2025, primarily driven by a $34.9 million increase in net proceeds from issuance of common stock and a $25.6 million increase in net borrowings under our revolving line of credit.

Debt Obligations

Unsecured Credit Facility. We have an unsecured credit agreement (the “Credit Agreement”) that provides for an aggregate commitment of the lenders of up to $800.0 million comprised of a $600.0 million revolving credit facility (the “Revolving Line of Credit”) and term loans totaling $200.0 million (the “Term Loans”). The Term Loans consist of $50.0 million, $55.0 million, $55.0 million and $40.0 million borrowings, with contractual maturities of three, four, five and seven years, respectively. The Credit Agreement provides for the opportunity to increase the total commitment to an aggregate $1.2 billion (the “Accordion”) and allows for a one-year extension option, subject to customary conditions.

Based on our leverage at March 31, 2026, the facility provides for interest annually at SOFR plus 110 basis points and a facility fee of 15 basis points.

Interest Rate Swap Agreements. During 2025, we entered into interest rate swaps with maturities of three, four, five and seven years, respectively (the “Interest Rate Swaps”) to effectively lock-in the forecasted interest payments on the Term Loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on our Consolidated Balance Sheets at fair value in Prepaid expenses and other assets, with cumulative changes in the fair value of these instruments recognized in Accumulated other comprehensive income (loss) on our Consolidated Balance Sheets. During the three months ended March 31, 2026, we recorded an increase of $1.1 million to the fair value of Interest Rate Swaps.

As of March 31, 2026, the terms of the Interest Rate Swaps are as follows (dollar amounts in thousands):

(1) During the third quarter of 2025, the interest rate swap was rolled into the Revolving Line of Credit.

Senior Unsecured Notes. We have senior unsecured notes held by institutional investors with interest rates ranging from 3.66% to 4.50%. The senior unsecured notes mature between 2026 and 2033.

The senior unsecured notes and the Credit Agreement, contain financial covenants, which are measured quarterly, that require us to maintain, among other things:

• a ratio of total indebtedness to total asset value not greater than 0.6 to 1.0;
• a ratio of secured debt to total asset value not greater than 0.35 to 1.0;
• a ratio of unsecured debt to the value of the unencumbered asset value not greater than 0.6 to 1.0; and
• a ratio of EBITDA, as calculated in the debt obligation, to fixed charges not less than 1.50 to 1.0.

At March 31, 2026, we were in compliance with all applicable financial covenants. These debt obligations also contain additional customary covenants and events of default that are subject to a number of important and significant limitations, qualifications and exceptions.

The debt obligations by component as of March 31, 2026 are as follows (dollar amounts in thousands):

(1) Represents weighted average interest rate as of March 31, 2026.

(2) Subsequent to March 31, 2026, we repaid $56,000 under our unsecured revolving line of credit. Accordingly, we have $226,963 outstanding and $373,037 available for borrowing under our unsecured revolving line of credit, as of May 6, 2026.

During the three months ended March 31, 2026, our debt borrowings and repayments were as follows (in thousands):

(1) Subsequent to March 31, 2026, we repaid $56,000 under our unsecured revolving line of credit. Accordingly, as of May 6, 2026, we have $226,963 outstanding and $373,037 available for borrowing under our unsecured revolving line of credit.

Equity

At March 31, 2026, we had 49,778,523 shares of common stock outstanding, total equity on our balance sheet was $1.2 billion and our equity securities had a market value of $1.8 billion. During the three months ended March 31, 2026, we declared and paid $29.2 million of cash dividends.

During the three months ended March 31, 2026, we acquired 149,745 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

Subsequent to March 31, 2026, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of April, May and June 2026, payable on April 30, May 29, and June 30, 2026, respectively, to stockholders of record on April 22, May 21, and June 22, 2026, respectively.

At-The-Market Program. We have an equity distribution agreement (the “Equity Distribution Agreement”) to offer and sell, from time to time, up to $400.0 million in aggregate offering price of shares of our common stock. The Equity Distribution Agreement provides for sales of common shares to be made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings.

During the three months ended March 31, 2026, we sold 1,145,565 shares of common stock for $43.4 million in net proceeds under our Equity Distribution Agreement. In conjunction with the sale of common stock, we incurred $550,000 of costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received. At March 31, 2026, we had $244.5 million available under the Equity Distribution Agreement. Subsequent to March 31, 2026, we sold 1,402,933 shares of common stock for $51.9 million in net proceeds under our Equity Distribution Agreement. Accordingly, as of May 6, 2026, we have $192.4 million available under the Equity Distribution Agreement.

Available Shelf Registrations. We have an automatic shelf registration statement on file with the SEC and currently have the ability to file additional automatic shelf registration statements to provide us with capacity to publicly offer an indeterminate amount of common stock, preferred stock, warrants, debt, depositary shares, or units. We may from time to time raise capital under our automatic registration statement in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. Our shelf registration statement expires in November 2027.

Stock-Based Compensation. During 2021, we adopted and our shareholders approved the 2021 Equity Participation Plan (“the 2021 Plan”), which replaced the 2015 Equity Participation Plan (“the 2015 Plan”). Under the 2021 Plan, 1,900,000 shares of common stock have been authorized and reserved for awards, less one share for every one share that was subject to an award granted under the 2015 Plan after December 31, 2020 and prior to adoption. In addition, any shares that are not issued under outstanding awards under the 2015 Plan because the shares were forfeited or cancelled after December 31, 2020 will be added to and again be available for awards under the 2021 Plan. Under the 2021 Plan, the shares were authorized and reserved for awards to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2021 Plan and the 2015 Plan are set by our compensation committee at its discretion. Beginning in the first quarter of 2024, we entered into Performance Stock Unit Award Agreements, based upon absolute and relative total shareholder return, under the 2021 Plan.

During the three months ended March 31, 2026, 125,176 shares of restricted stock and 170,827 performance-based stock units vested. During the three months ended March 31, 2026, we awarded restricted stock and performance-based stock units as follows:

(1) Vesting is based on achieving certain total shareholder return (“TSR”) targets in three years.

(2) Vesting is based on achieving certain TSR targets relative to the TSR of a predefined peer group in three years.

Critical Accounting Policies

Our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q are prepared in conformity with U.S. generally accepted accounting principles for interim financial information set forth in the Accounting Standards Codification as published by the Financial Accounting Standards Board, which require us to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and accompanying footnotes. We base these estimates on our experience and assumptions regarding future events we believe to be reasonable under the circumstances. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements. We have described our most critical accounting policies in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting policies or estimates since December 31, 2025.

There were no material changes in our market risk during the three months ended March 31, 2026. For additional information, refer to Item 7A as presented in our Annual Report on Form 10-K for the year ended December 31, 2025.

Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation our Co-Chief Executive Officers and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

There has not been any change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.