In December 2024, the Company and certain of its subsidiaries, and Ventas, Inc. (“Ventas”) and certain of its subsidiaries, amended the existing master lease arrangement pursuant to which the Company leases 120 communities. Beginning January 1, 2026, the Company will continue to lease 65 communities (“Renewal Communities”) and the remaining 55 communities (“Non-renewal Communities”) that are not renewed will either be sold by Ventas or transitioned, with such transitions commencing on or after September 1, 2025.

The amended master lease arrangement provides for an aggregate annual minimum rent for the Renewal Communities of $64.0 million beginning on January 1, 2026. Effective on January 1, 2027, and on January 1 of each lease year thereafter, the annual minimum rent will continue to be subject to an escalator equal to 3%. Under the amended master lease arrangement, the term of the leases for the Renewal Communities was extended through December 31, 2035 with one 10-year extension option remaining.

In addition, Ventas has agreed to fund costs associated with capital expenditures at the communities subject to the master lease arrangement in the aggregate amount of up to $35.0 million during the calendar years 2025 to 2027, provided that, with respect to any such amounts funded by Ventas, the annual rent under the master lease arrangement will prospectively increase by the amount of each reimbursement multiplied by the greater of (i) 8% and (ii) the United States 10-Year Treasury Rate plus 3.5%. No more than $15.0 million may be funded in each calendar year.

The amended master lease arrangement provides that Ventas will use commercially reasonable efforts to sell 11 of the Non-renewal Communities. Rent for any Non-renewal Communities to be sold will continue through December 31, 2025 regardless of the date of the sale (subject to a potential rent credit associated with the sale of one large community in the group). For the remaining 44 Non-renewal Communities, Ventas will begin transitions on or after September 1, 2025. Rent will terminate with respect to any community that is transitioned on the earlier of the date of such transition or December 31, 2025. In the event any Non-renewal Community is not sold or transitioned by December 31, 2025, the Company may manage such communities at a

In September 2024, the Company entered into a definitive agreement to acquire 11 senior living communities that were leased by the Company from a joint venture between Welltower Inc. (“Welltower”) and its joint venture partners for a purchase price of $300.0 million. Effective December 17, 2024, the Company successfully closed on the acquisition. As part of this transaction, the Company assumed $194.5 million of existing 4.92% fixed rate agency debt which is scheduled to mature in March 2027 and the remainder of the purchase price was paid with cash on hand. Previously, these communities were held in a triple-net lease with annualized cash rent payments of $22.3 million and an initial maturity of August 31, 2028. The leases for the 11 communities were previously classified as operating leases and were prospectively classified as financing leases from the purchase agreement date through the date of the acquisition.

In September 2024, the Company entered into a definitive agreement to acquire 25 senior living communities that were leased by the Company as of December 31, 2024 from Diversified Healthcare Trust for a purchase price of $135.0 million. As of December 31, 2024, these communities were held in a triple-net lease with annualized current cash rent payments of $10.2 million and a current maturity of December 31, 2032. The Company expects to complete the acquisition transaction in the first quarter of 2025, subject to the satisfaction of customary closing conditions for real estate transactions. The Company expects to fund the acquisition of the 25 communities through proceeds from mortgage financing and cash on hand.

The leases for the 25 communities were previously classified as operating leases and have been prospectively classified as financing leases subsequent to the amendment of the leasing arrangement through the date of acquisition. The amendment of the leasing arrangement resulted in the following changes to the amounts recognized on the Company's consolidated balance sheet.

In September 2024, the Company entered into a definitive agreement to acquire five senior living communities that are currently leased by the Company from Welltower for a purchase price of $175.0 million. As of December 31, 2024, these communities were held in a triple-net lease with annualized current cash rent payments of $13.7 million. The term of the lease was previously scheduled to expire in December 2024, but has been extended through the date of the acquisition. The Company expects to complete the acquisition transaction in the first quarter of 2025, subject to the satisfaction of customary closing conditions for real estate transactions. The Company expects to fund the acquisition of the five communities through proceeds from mortgage financing and cash on hand.

The definitive agreement included the finalization of the purchase price under the provisions of a purchase option arrangement with a variable price component based upon the fair value of the assets. The amendment of the leasing arrangement increased the financing lease right-of-use assets and lease obligations recognized for two of these communities on the Company's consolidated balance sheet each by $17.7 million. The leasing arrangements for three of these communities are accounted for as failed sale-leaseback transactions as the Company has not previously transferred control of the underlying assets for accounting purposes under a sale and leaseback arrangement with a purchase option.

In August 2024, the Company and Omega Healthcare Investors, Inc. ("Omega") amended the existing master lease pursuant to which the Company continues to lease 24 communities from Omega. The Company's amended master lease has an initial term to expire on December 31, 2037. As part of the amendment, Omega agreed to make available up to $80.0 million to fund costs associated with capital expenditures for the communities through December 31, 2037. The annual rent under the lease will not be adjusted upon reimbursements for capital expenditures in the aggregate amount of up to $30.0 million of the $80.0 million pool, which is available in certain tranches through June 30, 2028. With respect to the remaining $50.0 million of the $80.0 million pool, the annual rent under the lease will prospectively increase by the amount of each reimbursement multiplied by 9.5%. The $50.0 million is available in certain tranches beginning January 1, 2025, subject to certain annual reimbursement caps specified in the lease. Under the terms of the amendment, rent will escalate annually per the terms of the existing lease escalator, with a potential minor contingent rent adjustment beginning in 2028 depending on lease performance. The amendment to the lease arrangements increased the operating lease right-of-use assets and lease obligations recognized on the Company's consolidated balance sheet each by $253.4 million.

Prior to December 2023, the Company held a 20% equity interest in its former Health Care Services segment with the remaining 80% equity interest held by affiliates of HCA Healthcare, Inc. ("HCA Healthcare"). During 2023, the Company contributed $7.5 million to the Health Care Services Venture (the "HCS Venture"). During the three months ended December 31, 2023, the Company recognized a non-cash impairment charge of $26.0 million on its investment in the HCS Venture as a result of the Company's decision to sell its equity interest prior to the recovery of its market value. In December 2023, the Company completed the sale of its 20% equity interest in the HCS Venture to HCA Healthcare for cash proceeds of $27.4 million.

During the three months ended June 30, 2023, the Company entered into amendments to its existing lease arrangements with Welltower pursuant to which the Company continues to lease 74 communities. In connection with the amendments, the Company extended the maturity of one lease involving 39 communities from December 31, 2026 until June 30, 2032. As a result, the Company's amended lease arrangements provide that the current term for 69 of the communities will expire on June 30, 2032. The remaining five communities are subject to an agreement to be purchased by the Company as described above. The amendments did not change the amount of required lease payments over the previous term of the leases or the annual lease escalators. In addition, Welltower agreed to make available a pool in the aggregate amount of up to $17.0 million to fund costs associated with certain capital expenditure projects for 69 of the communities. Upon reimbursement of such expenditures, the annual minimum rent under the lease will prospectively increase by the amount of the reimbursement multiplied by the sum of the then current Secured Overnight Financing Rate ("SOFR") (subject to a floor of 3.0%) and a margin of 4.0%, and such amount will escalate annually consistent with the minimum rent escalation provisions of the 39 community lease.

The amended leases for 35 of such communities were prospectively classified as operating leases subsequent to the amendment. The amendment to the lease arrangements increased the right-of-use assets and lease obligations recognized on the Company's consolidated balance sheet each by $122.3 million.

The amendments replaced the net worth covenant provisions requiring the Company to maintain at least $400.0 million of stockholders' equity with a consolidated tangible net worth covenant requiring the Company to maintain at least $2.0 billion of tangible net worth, generally calculated as stockholders' equity plus accumulated depreciation and amortization less intangible assets and further adjusted for certain other items. So long as it maintains tangible net worth as defined in the leases of at least $1.5 billion, the Company will also be able to cure any breach by posting collateral with Welltower.

In the three months ended December 31, 2022, the Company and a lessor entered into an amendment to the Company’s existing master lease pursuant to which the Company continues to lease 24 communities. The amendment removed certain asset repurchase clauses and adjusted the extension option provisions. The amendment did not change the amount of required lease payments or the initial term of the lease. The leases for 16 of these communities were previously accounted for as failed sale-leaseback transactions as the Company had not previously transferred control of the underlying assets for accounting purposes. The Company determined that the adjustment of the extension option provisions and the removal of the asset repurchase clauses in December 2022 resulted in the transfer of control of the assets of the 16 communities for accounting purposes and resulted in

qualification as a sale. The Company recognized a $73.9 million non-cash gain on sale of communities for the transaction in the three months ended December 31, 2022. In addition, the amended leases for such communities are prospectively classified as operating leases as of December 31, 2022, the effective date of the amendment. The amendment of the leasing arrangement resulted in the following changes to the amounts recognized on the Company's consolidated balance sheet.


(in millions)

Property, plant and equipment and leasehold intangibles, net	$	(220.5)
Operating lease right-of-use assets	91.6
Total assets	$	(128.9)

Financing lease obligations	$	(294.4)
Operating lease obligations	91.6
(Loss) gain on sale of communities, net	73.9
Total liabilities and equity	$	(128.9)