Diversified Healthcare Trust

02/24/2026 | Press release | Distributed by Public on 02/24/2026 05:01

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
OVERVIEW
We are a REIT organized under Maryland law that primarily owns senior living communities, medical office and life science properties and other healthcare related properties throughout the United States. As of December 31, 2025, we owned 298 properties located in 33 states and Washington, D.C., including 13 properties classified as held for sale.
As of December 31, 2025, we owned an equity interest in each of the Seaport JV and the LSMD JV that own medical office and life science properties located in five states with an aggregate of approximately 2.2 million rentable square feet that were 99% leased with an average (by annualized rental income) remaining lease term of 14.2 years.
Beginning in September 2025, we transitioned the management of 116 of our senior living communities previously managed by Five Star to seven different third party managers in connection with AlerisLife's sale of all of its assets and the wind-down of its business. As of December 31, 2025, we completed the transition of all of the Five Star managed senior living communities to these managers. As of December 31, 2025, our 212 senior living communities were managed by 14 new and existing third party managers. As we transitioned these communities from Five Star, we experienced temporary disruption, including reduction in our cash flows.
We are encouraged by positive trends, including increases in rates, margins and occupancy in our SHOP segment. Additionally, we expect that favorable supply and demand dynamics in the senior living industry will enable our managers to continue to grow occupancy and drive positive performance. While certain costs, primarily labor, insurance and food costs, have increased, we expect these cost increases to moderate, which will provide our managers the opportunity to increase rates in excess of increases in costs, resulting in improving returns to us.
In an effort to optimize performance, our asset management team reviews the results of each of our senior living communities and our operators, taking into account various factors such as performance metric benchmarks, location and other relevant data points. This comprehensive review process ensures that our decisions are data-driven and strategically aligned with our overall objectives. As a result of these reviews, our strategy to drive positive performance includes analyzing non-performing communities for potential disposition or transition to different operators.
We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, uncertainties surrounding interest rates and inflation, volatility in the public debt and equity markets, global geopolitical hostilities and tensions, any U.S. government shutdown, economic uncertainties and tariffs, labor market conditions and changes in real estate utilization. We expect to experience continued variability in labor, insurance and food costs in our SHOP segment. Inflationary pressures in the United States, as well as global geopolitical instability and tensions, have given rise to uncertainty regarding potential disruptions in the financial markets. Continued or intensified disruptions in the financial markets could adversely affect our financial condition and that of our managers, operators and tenants, could adversely impact the ability or willingness of our managers, operators, tenants or residents to pay amounts owed to us, could impair our ability to effectively deploy our capital or realize our target returns on our investments, may restrict our access to, and would likely increase, our cost of capital, and may cause the values of our properties and of our securities to decline.
PORTFOLIO OVERVIEW
The following tables present an overview of our portfolio (dollars in thousands, except investment per unit or square foot data):
As of December 31, 2025 Number
of
Properties 		Number of Units or Square
Feet
Gross Book Value of Real Estate Assets (1)
% of Total Gross Book Value of Real Estate Assets
Investment per Unit or
Square Foot (2)
2025 Revenues
% of 2025 Revenues
2025
NOI (3)
% of
2025
NOI
SHOP 212 23,217 units $ 4,416,727 70.4 % $ 190,237 $ 1,312,655 85.4 % $ 139,256 50.0 %
Medical Office and Life Science Portfolio 67 5,558,089 sq. ft. 1,489,391 23.7 % $ 268 193,809 12.6 % 108,130 38.8 %
Triple net leased senior living communities 9 1,328 units 161,734 2.6 % $ 121,788 15,773 1.0 % 15,769 5.7 %
Wellness centers 10 812,246 sq. ft. 208,110 3.3 % $ 256 15,616 1.0 % 15,358 5.5 %
Total 298 $ 6,275,962 100.0 % $ 1,537,853 100.0 % $ 278,513 100.0 %
Occupancy
As of and for the Year Ended December 31,
2025 2024
SHOP 81.0 % 79.3 %
Medical Office and Life Science Portfolio (4)
91.2 % 82.2 %
Triple net leased senior living communities 100.0 % 100.0 %
Wellness centers 100.0 % 100.0 %
(1)Represents gross book value of real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, if any.
(2)Represents gross book value of real estate assets divided by number of living units or rentable square feet, as applicable, at December 31, 2025.
(3)We calculate our NOI on a consolidated basis and by reportable segment. Our definition of NOI and our reconciliation of net income (loss) to NOI are included below under the heading "Non-GAAP Financial Measures".
(4)Medical office and life science property occupancy data is as of December 31, 2025 and 2024 and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.
We operate in, and report financial information for, the following two segments: SHOP and Medical Office and Life Science Portfolio. Our SHOP segment consists of managed senior living communities that provide short term and long term residential living and in some instances care and other services for residents where we pay fees to managers to operate the communities on our behalf. Our Medical Office and Life Science Portfolio segment primarily consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties primarily leased to biotech laboratories and other similar tenants.
We also report "all other" operations, which consists of triple net leased wellness centers and senior living communities that are leased to third party operators from which we receive rents.
Senior Housing Operating Portfolio
Our managed senior living communities are operated by third parties pursuant to management agreements and we lease nearly all of our senior living communities, including those managed by third party managers, to our TRSs.
Beginning in September 2025, we transitioned the management of 116 of our senior living communities previously managed byFive Starto seven different third party managers in connection with AlerisLife's sale of all of its assets and the wind-down of its business. As of December 31, 2025, we completed the transition of all of the Five Star managed senior living communities to these managers.
Five Star previously managed a large portion of our senior living communities for our account pursuant to an amended and restated master management agreement, or the Master Management Agreement, which was scheduled to expire in 2036 and terminated in December 2025 in connection with AlerisLife's sale of all of its assets and the wind-down of its business. Pursuant to the Master Management Agreement, Five Star received a management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for its direct costs and expenses related to such communities.
Our third party managers manage all 212 of our senior living communities as of December 31, 2025. In March 2024, we terminated our management agreement with one of our third party managers, Cedarhurst Senior Living, which manages certain of our communities located in Wisconsin and Illinois and transitioned these communities to another third party manager, Charter Senior Living, with which we have an existing relationship.
As a result of the transition of 116 of our senior living communities managed by Five Star to different third party managers, we incurred transition costs, including certain termination fees and other costs associated with the re-branding and marketing of these communities. For the year ended December 31, 2025, we recorded $10.4 million of these costs to acquisition and certain other transaction related costs in our consolidated statements of comprehensive income (loss).
The terms of the management agreements with our third party managers are generally as follows: the managers will receive a management fee equal to 5% to 6% of the gross revenues realized at the applicable senior living communities. Certain of our management agreements also provide that the manager will receive a reimbursement for direct costs and expenses related to such communities. Additionally, the managers have the ability to earn incentive fees equal to 15% to 30% of the amount by which EBITDA of the applicable communities exceeds the target EBITDA for the applicable communities. The managers can also earn a construction supervision fee ranging between 3% and 5% of construction costs.
The initial terms of the management agreements are generally five to ten years, subject to automatic extensions of successive terms of two years each unless earlier terminated or timely notice of nonrenewal is delivered. The management agreements also generally provide us with the right to terminate the management agreements for communities that do not earn 70% to 85% of the target EBITDA for such communities, after an agreed upon stabilized period.
The following table presents a summary of our managers as of December 31, 2025:
Manager Location Number of Communities Number of Units
Discovery Senior Living Various (7 States) 44 5,095
Sinceri Senior Living Various (11 States) 38 7,261
Charter Senior Living FL/IL/MD/TN/VA/WI 30 1,759
Phoenix Senior Living AL/AR/KY/MO/NC/SC 26 1,822
Tutera Senior Living IL/IN/KS/TN 18 1,967
Oaks-Caravita Senior Care (1)
GA/SC 16 890
Stellar Senior Living AZ/CO/NM/TX 14 2,015
Northstar Senior Living AZ/CA 7 418
Navion Senior Solutions SC 5 238
WellQuest Living CA/NV 5 798
Oaks Senior Living GA 3 264
IntegraCare Senior Living PA 2 146
Ciel Senior Living NY 1 306
Omega Senior Living NE 1 69
RMR TX 1 169
Total (2)
211 23,217
(1)Includes 13 communities with 669 units classified as held for sale as of December 31, 2025.
(2)Excludes one closed senior living community.
For further information regarding the terms of the management agreements with our managers and of the terminated Master Management Agreement and our other prior business arrangements with Five Star, see Note 6 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, and for more information about our dealings and relationships with Five Star generally, see "Related Person Transactions" below and Note 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Medical Office and Life Science Portfolio
As of December 31, 2025, we owned 67 medical office and life science properties located in 20 states and Washington, D.C. These properties have a total of 5.6 million square feet.
During the year ended December 31, 2025, we entered into new and renewal leases in our Medical Office and Life Science Portfolio segment as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):
Year Ended December 31, 2025
New Leases Renewals Total
Square feet leased during the period 158 260 418
Weighted average rental rate change (by rentable square feet) 20.0 % 8.5 % 12.4 %
Weighted average lease term (years) 10.6 6.9 8.2
Total leasing costs and concession commitments (1)
$ 12,201 $ 6,176 $ 18,377
Total leasing costs and concession commitments per square foot (1)
$ 76.99 $ 23.79 $ 43.96
Total leasing costs and concession commitments per square foot per year (1)
$ 7.27 $ 3.45 $ 5.33
(1)Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.
As of December 31, 2025, lease expirations in our Medical Office and Life Science Portfolio segment were as follows (dollars in thousands):
Year Number of Tenants Square Feet Leased Percent of Total Cumulative Percent of Total
Annualized Rental Income (1)
Percent of Total Cumulative Percent of Total
2026 41 506,485 10.0 % 10.0% $ 16,336 10.1% 10.1%
2027 45 565,428 11.2 % 21.2% 14,616 9.0% 19.1%
2028 43 1,057,034 20.9 % 42.1% 31,973 19.7% 38.8%
2029 42 464,028 9.2 % 51.3% 14,919 9.2% 48.0%
2030 32 338,925 6.7 % 58.0% 8,357 5.1% 53.1%
2031 21 821,580 16.2 % 74.2% 22,896 14.1% 67.2%
2032 16 271,967 5.4 % 79.6% 11,637 7.2% 74.4%
2033 15 299,163 5.9 % 85.5% 13,380 8.2% 82.6%
2034 12 212,364 4.2 % 89.7% 11,195 6.9% 89.5%
2035 and thereafter 23 530,573 10.3 % 100.0% 17,007 10.5% 100.0%
Total 290 5,067,547 100.0 % $ 162,316 100.0%
Weighted average remaining lease term (in years) 4.7 5.0
(1)Annualized rental income is based on rents pursuant to existing leases as of December 31, 2025, including straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our medical office and life science properties.
The following table presents information concerning our Medical Office and Life Science Portfolio tenants that represent 1% or more of total Medical Office and Life Science Portfolio annualized rental income as of December 31, 2025 (dollars in thousands):
Tenant Square Feet
Leased 		Percent of Total Square Feet Leased
Annualized
Rental
Income (1)
Percent of Total
Annualized
Rental
Income (1)
Lease
Expiration
Advocate Aurora Health 631,529 12.5% $ 16,939 10.4% 2031
Alamar Biosciences, Inc. 88,508 1.7% 6,827 4.2% 2034
KSQ Therapeutics, Inc. 54,633 1.1% 5,559 3.4% 2032
Sonova Holding AG 116,444 2.3% 5,405 3.3% 2033
Boston Children's Hospital 99,063 2.0% 4,377 2.7% 2028
Abbvie Inc. 197,976 3.9% 3,916 2.4% 2027
Tokio Marine Holdings Inc. 79,968 1.6% 3,908 2.4% 2026 - 2033
McKesson Corporation 477,772 9.4% 3,823 2.4% 2028 - 2030
United Healthcare Services, Inc. 149,719 3.0% 3,741 2.3% 2026
Revvity, Inc. 105,462 2.1% 3,681 2.3% 2028
Hawaii Pacific Health 85,956 1.7% 3,592 2.2% 2029 - 2036
Medtronic, Inc. 94,522 1.9% 3,387 2.1% 2028
New York University 109,983 2.2% 3,335 2.1% 2026 - 2031
HCA Holdings Inc. 66,296 1.3% 3,319 2.0% 2026 - 2031
Ultragenyx Pharmaceutical Inc. 63,048 1.2% 3,139 1.9% 2026
Sentara Health 139,212 2.7% 3,008 1.9% 2027 - 2032
Orthofix Medical Inc. 81,712 1.6% 2,814 1.7% 2037
The University of Kansas Health System 104,815 2.1% 2,447 1.5% 2027 - 2028
Cytek BioSciences, Inc. 99,378 2.0% 2,290 1.4% 2029
Think Surgical, Inc. 75,920 1.5% 2,161 1.3% 2026
Covenant Health System 55,807 1.1% 2,022 1.2% 2034
North American Science Associates, LLC 82,854 1.6% 1,846 1.2% 2029
Surgical Care Affiliates, LLC 38,208 0.8% 1,835 1.2% 2033
The Boeing Company 90,349 1.6% 1,818 1.1% 2028
All Other Tenants 1,878,413 37.1% 67,127 41.4% 2026 - 2045
Totals 5,067,547 100.0% $ 162,316 100.0%
(1)Annualized rental income is based on rents pursuant to existing leases as of December 31, 2025, including straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our medical office and life science properties.
All Other
As of December 31, 2025, lease expirations at our triple net leased wellness centers and senior living communities leased to third party operators were as follows (dollars in thousands):
Year Number of Properties Number of Units or Square Feet
Annualized Rental Income (1)
Percent of Total Cumulative Percent of Total
2026 - - $ - - % - %
2027 4 533 units 4,799 15.8 % 15.8 %
2028 - - - - % 15.8 %
2029 1 155 units 547 1.8 % 17.6 %
2030 5 277 units and 129,600 sq. ft. 5,046 16.7 % 34.3 %
2031 - - - - % 34.3 %
2032 - - - - % 34.3 %
2033 1 215 units 5,234 17.3 % 51.6 %
2034 - - - - % 51.6 %
2035 and thereafter 8 148 units and 682,646 sq. ft. 14,658 48.4 % 100.0 %
Total 19 $ 30,284 100.0 %
Weighted average remaining lease term (in years) 8.6 9.7
(1)Annualized rental income is based on rents pursuant to existing leases as of December 31, 2025. Annualized rental income includes estimated percentage rents and straight line rent adjustments and excludes lease value amortization.
GENERAL INDUSTRY TRENDS
The healthcare industry remains one of the most resilient commercial real estate sectors, in part due to the scale of the U.S. healthcare market, which collectively represents approximately 18% of the U.S. GDP, according to CMS. The healthcare sector's continued expansion has been driven by rising standards of care, increasing life expectancies and other demographic trends, as well as funding from both public and private sources.
In the medical office sector, the industry has been trending toward a greater proportion of outpatient care resulting in an increasing number of multi-practice medical office buildings, anchor leased by hospital systems, and a decline in free-standing medical practices, a potential benefit to our Medical Office and Life Science Portfolio. The pandemic further accelerated this trend because of stronger consumer preference for off-campus care in more convenient locations. Costs within the industry continue to be in focus with health system operating margins being under pressure in recent years, which is, while moderating, a theme that may continue in 2026.
In the life science sector, particularly with properties that provide laboratory or medical manufacturing space, over the years there has been significant capital invested across the bio-medical research space, driving a large increase in demand for laboratory and research space. Venture capital funding significantly declined in 2023, 2024 and 2025. Funding in the past three years has been increasingly concentrated on companies located in the top three markets of Boston, San Francisco and San Diego with more stringent requirements.
New construction of life science properties hit record levels in 2024 across major markets, and the construction pipeline, while decreasing, remains elevated into 2025. This has been met by softening demand from tenants and resulted in rising vacancy rates across the major life science markets.
We believe that the primary market for senior living services is individuals age 80 and older. According to U.S. Census data, the age 75+ demographic is projected to be among the fastest growing age cohorts in the United States with an average annual growth of 4% between 2025 and 2035. The U.S. Census Bureau projects that the age 75+ demographic as a percentage of the total U.S. population will increase from an estimated 8.1% in 2025 to 11.1% in 2035. Also, as a result of medical advances, seniors are living longer, and CMS reports that healthcare spending is projected to grow at an average rate of 5.8% per year, and as a result, in health spending as a percentage of GDP is projected to exceed 20% by 2033. Due to these demographic trends, we expect the demand for senior living services and housing to increase for the foreseeable future. Despite this trend, future economic downturns, softness in the U.S. housing market, higher levels of unemployment among our potential residents' family members, changes in demand and market practices, lower levels of consumer confidence, stock market volatility and/or changes in demographics could adversely affect the ability of seniors to afford the resident fees at our senior living communities.
The medical advances which are increasing average life spans are also causing some seniors to delay moving to senior living communities until they require greater care or to forgo moving to senior living communities altogether, but we do not believe this factor is sufficient to offset the long term positive demographic trends causing increased demand for senior living communities for the foreseeable future.
We believe there is a favorable mix of increased demand and limited supply for senior living communities which we expect will benefit us and our existing portfolio of senior living communities in the future. As a result of elevated financing and construction costs over recent years, inventory growth for senior living communities has been historically low. According to NIC, annual inventory growth was 0.5% across primary and secondary markets during the fourth quarter of 2025. Additionally, annual absorption was 2.8% for the fourth quarter of 2025, according to NIC. We expect improving market fundamentals and constrained supply to continue to result in increased occupancy at our senior living communities over the next 12 to 24 months.
The senior living industry is subject to extensive and frequently changing federal, state and local laws and regulations. For further information regarding these laws and regulations, and possible legislative and regulatory changes, see "Business-Government Regulation and Reimbursement" in Part I, Item 1 of this Annual Report on Form 10-K.
RESULTS OF OPERATIONS (dollars and square feet in thousands, unless otherwise noted)
The following table summarizes the results of operations of each of our segments for the years ended December 31, 2025 and 2024:
For the Year Ended December 31,
2025 2024
Revenues:
SHOP $ 1,312,655 $ 1,244,389
Medical Office and Life Science Portfolio 193,809 213,320
All Other 31,389 37,718
Total revenues $ 1,537,853 $ 1,495,427
Net loss:
SHOP $ (110,000) $ (89,807)
Medical Office and Life Science Portfolio (48,633) (66,668)
All Other (127,253) (213,780)
Net loss $ (285,886) $ (370,255)
The following sections analyze and discuss the results of operations of each of our segments for the periods presented.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 (dollars and square feet in thousands, except average monthly rate):
Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the year ended December 31, 2025 to the year ended December 31, 2024. Our definition of NOI and our reconciliation of net income (loss) to NOI and a description of why we believe NOI is an appropriate supplemental measure are included below under the heading "Non-GAAP Financial Measures." For a comparison of consolidated results for the year ended December 31, 2024 compared to the year ended December 31, 2023, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024.
For the Year Ended December 31,
2025 2024 $ Change % Change
NOI by segment:
SHOP $ 139,256 $ 106,060 $ 33,196 31.3 %
Medical Office and Life Science Portfolio 108,130 115,683 (7,553) (6.5) %
All Other 31,127 37,142 (6,015) (16.2) %
Total NOI 278,513 258,885 19,628 7.6 %
Depreciation and amortization 261,923 284,957 (23,034) (8.1) %
General and administrative 45,502 26,518 18,984 71.6 %
Acquisition and certain other transaction related costs 10,356 2,510 7,846 nm
Impairment of assets 165,702 70,734 94,968 134.3 %
Gain (loss) on sale of properties 117,730 (18,938) 136,668 nm
Gain on insurance recoveries 7,522 - 7,522 100.0 %
Interest and other income 5,839 8,950 (3,111) (34.8) %
Interest expense
(204,498) (235,239) 30,741 (13.1) %
Loss on modification or early extinguishment of debt (42,526) (324) (42,202) nm
Loss before income taxes and equity in net earnings of investees (320,903) (371,385) 50,482 (13.6) %
Income tax expense (1,743) (467) (1,276) nm
Equity in net earnings of investees 36,760 1,597 35,163 nm
Net loss $ (285,886) $ (370,255) $ 84,369 (22.8) %
nm - not meaningful
SHOP:
Comparable Properties (1)
All Properties
As of and For the Year Ended December 31, As of and For the Year Ended December 31,
2025 2024 2025 2024
Total properties 184 184 212 232
Number of units 21,201 21,201 23,217 24,978
Occupancy 81.9 % 80.9 % 81.0 % 79.3 %
Average monthly rate(2)
$ 5,404 $ 5,137 $ 5,455 $ 5,193
Year Ended December 31,
Comparable (1)
Non-Comparable
Properties Results Properties Results Consolidated Properties Results
2025 2024 $
Change 		%
Change 		2025 2024 2025 2024 $
Change 		%
Change
Residents fees and services $ 1,141,276 $ 1,073,753 $ 67,523 6.3 % $ 171,379 $ 170,636 $ 1,312,655 $ 1,244,389 $ 68,266 5.5 %
Property operating expenses (994,135) (949,223) $ 44,912 4.7 % (179,264) (189,106) (1,173,399) (1,138,329) $ 35,070 3.1 %
NOI $ 147,141 $ 124,530 $ 22,611 18.2 % $ (7,885) $ (18,470) $ 139,256 $ 106,060 $ 33,196 31.3 %
(1)Consists of senior living communities that we have owned, are in service and reported in the same segment since January 1, 2024; excludes communities classified as held for sale, closed or out of service, if any, and planned dispositions. Properties are included in same property once stabilized for the full period in both comparison periods presented.
(2)Average monthly rate reflects the average monthly residents fees and services per occupied unit for the period presented. The average monthly rate is calculated based on the actual number of days during the period.
Residents fees and services. Residents fees and services are the revenues earned at our managed senior living communities. We recognize these revenues as services are provided and related fees are accrued. Residents fees and services increased at our comparable properties primarily due to increases in occupancy and average monthly rate at our communities as shown in the table above. The increase at our comparable properties was driven by ongoing pricing strategies and sustained demand in the markets of our communities. Based on these observed trends, we expect both occupancy and average monthly rates to remain favorable during 2026, although such expectations are subject to market and operating conditions. The activity for our non-comparable properties reflects the 13 communities classified as held for sale as of December 31, 2025, 10 communities transitioned to an existing third party manager during 2024, four communities that are not stabilized for both periods presented and one closed community.
Property operating expenses.Property operating expenses consist of real estate taxes, utility expenses, insurance, wages and benefit costs of community level personnel, repairs and maintenance expense, management fees, cleaning expense and other direct costs of operating these communities. Property operating expenses increased at our comparable properties primarily due to increases in labor costs, management fees as a result of higher revenues, utilities, real estate taxes, marketing and other direct costs. These increases were partially offset by decreased insurance costs due to a reduction in premiums. The activity for our non-comparable properties reflects the 13 communities classified as held for sale as of December 31, 2025, 10 communities transitioned to an existing third party manager during 2024, four communities that are not stabilized for both periods presented and one closed community.
Net operating income.The change in NOI reflects the net changes in residents fees and services and property operating expenses described above.
Medical Office and Life Science Portfolio:
Comparable Properties (1)
All Properties
As of December 31, As of December 31,
2025 2024 2025 2024
Total properties 63 63 67 98
Total square feet 5,224 5,224 5,558 7,953
Occupancy 95.7 % 95.6 % 91.2 % 82.2 %
Year Ended December 31,
Comparable (1)
Non-Comparable
Properties Results Properties Results Consolidated Properties Results
2025 2024 $
Change 		%
Change 		2025 2024 2025 2024 $
Change 		%
Change
Rental income $ 159,257 $ 157,598 $ 1,659 1.1 % $ 34,552 $ 55,722 $ 193,809 $ 213,320 $ (19,511) (9.1) %
Property operating expenses (63,095) (62,792) 303 0.5 % (22,584) (34,845) (85,679) (97,637) (11,958) (12.2) %
NOI $ 96,162 $ 94,806 $ 1,356 1.4 % $ 11,968 $ 20,877 $ 108,130 $ 115,683 $ (7,553) (6.5) %
(1)Consists of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2024; excludes properties classified as held for sale or out of service undergoing redevelopment, if any, planned dispositions and properties owned by unconsolidated joint ventures of which we own an equity interest. Properties are included in same property once stabilized for the full period in both comparison periods presented.
Rental income.Rental income increased at our comparable properties primarily due to increases from our net leasing activity and a $600 termination fee paid by a former tenant at one of our properties during the year ended December 31, 2025. This space was subsequently re-leased to another tenant in April 2025. These increases were partially offset by a $1,380 reserve of rental income for a tenant that is in default and no longer paying rent. We have re-leased a portion of this space to another tenant with a 2026 lease commencement date. Rental income decreased at our non-comparable properties primarily due to dispositions since January 1, 2024 and a vacancy at one of our properties undergoing redevelopment.
Property operating expenses. Property operating expenses consist of real estate taxes, utility expenses, insurance, management fees, salaries and benefit costs of property level personnel, repairs and maintenance expense, cleaning expense and other direct costs of operating these properties. The increase in property operating expenses at our comparable properties was primarily due to increases in utility expenses, HVAC expenses and snow removal costs, partially offset by a decrease in insurance costs, real estate taxes due to lower assessed values as a result of successful tax appeals at certain of our properties, as well as other direct costs. Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2024.
Net operating income.The change in NOI reflects the net changes in rental income and property operating expenses described above.
All Other (1):
Comparable Properties (2)
All Properties
As of and For the Year Ended December 31, As of and For the Year Ended December 31,
2025 2024 2025 2024
Total properties:
Triple net leased senior living communities 8 8 9 27
Wellness centers 10 10 10 10
Rent coverage:
Other triple net leased senior living communities(3)
1.73 x 1.95 x 1.73 x 1.85 x
Wellness centers(3)
2.96 x 2.11 x 2.96 x 2.56 x
Year Ended December 31,
Comparable (2)
Non-Comparable
Properties Results Properties Results Consolidated Properties Results
2025 2024 $
Change 		%
Change 		2025 2024 2025 2024 $
Change 		%
Change
Rental income $ 29,652 $ 27,304 $ 2,348 8.6 % $ 1,737 $ 10,414 $ 31,389 $ 37,718 $ (6,329) (16.8) %
Property operating expenses (259) (529) (270) (51.0) % (3) (47) (262) (576) (314) (54.5) %
NOI $ 29,393 $ 26,775 $ 2,618 9.8 % $ 1,734 $ 10,367 $ 31,127 $ 37,142 $ (6,015) (16.2) %
(1)All Other operations consist of all of our other operations, including certain wellness centers and senior living communities that are leased to third party operators, which segment we do not consider to be sufficiently material to constitute a separate reportable segment, and any other income or expenses that are not attributable to a specific reportable segment.
(2)Consists of properties that we have owned and which have been reported in the same segment and leased to the same operator continuously since January 1, 2024; excludes properties classified as held for sale and planned dispositions, if any. Properties are included in same property once stabilized for the full period in both comparison periods presented.
(3)All tenant operating data presented are based upon the operating results provided by our tenants for the most recent prior period for which tenant operating results are available to us. Rent coverage is calculated using the annualized operating cash flows from our triple net lease tenants' operations of our properties, before subordinated charges, if any, divided by annualized rental income. We have not independently verified tenant operating data. Excludes data for historical periods prior to our ownership of certain properties.
Rental income.Rental income increased at our comparable properties primarily due to new leases for one of our wellness center tenants. The activity for our non-comparable properties primarily reflects the 18 triple net leased senior living communities that we sold in February 2025 as well as one senior living community that transitioned to a triple net lease in December 2025.
Property operating expenses. Property operating expenses consist of real estate taxes, insurance and other expenses that are not paid directly by our tenants. The decrease in property operating expenses for our comparable properties primarily reflects real estate taxes and other expenses paid directly by our tenants during the year ended December 31, 2025, which were previously paid by us during prior periods.
Net operating income.The change in NOI reflects the net changes in rental income and property operating expenses described above.
Consolidated:
References to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended December 31, 2025, compared to the year ended December 31, 2024.
Depreciation and amortization expense. Depreciation and amortization expense decreased primarily due to dispositions since January 1, 2024 and certain depreciable assets becoming fully depreciated, partially offset by the purchase of capital improvements at certain of our properties.
General and administrative expense. General and administrative expense consists of fees paid to RMR under our business management agreement, legal and accounting fees, fees and expenses of our Trustees, equity compensation expense and other costs relating to our status as a publicly traded company. General and administrative expense increased primarily due to an incentive management fee of $17,905 payable to RMR under our business management agreement.
Acquisition and certain other transaction related costs. For the year ended December 31, 2025, we incurred transition costs as a result of our transition of 116 communities to both new and existing third party managers. For the year ended December 31, 2024, acquisition and certain other transaction related costs primarily represent termination and other fees as a result of our transition of 13 communities to an existing third party manager.
Impairment of assets. For information about our asset impairment charges, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Gain (loss) on sale of properties.For information regarding (loss) gain on sale of properties, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Gain on insurance recoveries.During the year ended December 31, 2025, we recognized a gain on insurance recoveries related to cash received from our insurance provider in excess of our losses for a claim that was finalized. For further information regarding this gain on insurance recoveries, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Interest and other income.The decrease in interest and other income is primarily due to lower average invested cash balances and interest rates during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Interest expense. Interest expense decreased primarily due to the redemption during 2025 of an aggregate $380,000 of our remaining 9.75% senior unsecured notes due 2025. Additionally, there was a decrease in discount accretion for our senior secured notes due 2026 due to the full redemption of the remaining balance of these notes during 2025. During the years ended December 31, 2025 and 2024, we recognized discount accretion of $63,241 and $86,778, respectively, for our senior secured notes due 2026. These decreases were partially offset by four mortgage financings totaling $343,157 during 2025, the execution of a $120,000 mortgage loan in May 2024 at a fixed interest rate of 6.864% per annum and the issuance of $375,000 in aggregate principal amount of our 7.25% senior secured notes due 2030 in September 2025.
Loss on modification or early extinguishment of debt.During the year ended December 31, 2025, we recorded a loss on early extinguishment of debt in connection with the redemption of all $940,534 of our senior secured notes due 2026 and $380,000 of our remaining 9.75% senior unsecured notes due 2025. During the year ended December 31, 2024, we recorded a loss on early extinguishment of debt in connection with the partial redemption of an aggregate $120,000 of our outstanding 9.75% senior unsecured notes due 2025. For further information regarding our loss on modification or early extinguishment of debt, see Note 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Income tax expense.Income tax expense is the result of operating income we earned in certain jurisdictions where we are subject to state income taxes.
Equity in net earnings of investees. Equity in net earnings of investees is the change in the fair value of our investments in our joint ventures and also represents our proportionate share of the earnings of our equity method investment in AlerisLife. As a result of the wind-down of AlerisLife's business, during the year ended December 31, 2025, we recognized additional earnings from our investment based on disposition activities by AlerisLife resulting in a cash dividend of $27,200 received in January 2026. For further information regarding our investments in our joint ventures and AlerisLife, see Notes 2, 3 and 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Non-GAAP Financial Measures (dollars in thousands, except per share amounts)
We present certain "non-GAAP financial measures" within the meaning of applicable SEC rules, including FFO, Normalized FFO and NOI for the years ended December 31, 2025 and 2024. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.
Funds From Operations and Normalized Funds From Operations
We calculate FFO and Normalized FFO as shown below. FFO is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, excluding any gain or loss on sale of properties, equity in net earnings or losses of investees, loss on impairment of real estate assets, gains or losses on equity securities, net, if any, and including adjustments to reflect our proportionate share of FFO of our equity method investees, plus real estate depreciation and amortization of consolidated properties, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO, we adjust for the items shown below including similar adjustments for our unconsolidated joint ventures and incentive management fees, if any. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.
Our calculations of FFO and Normalized FFO for the years ended December 31, 2025 and 2024 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our consolidated financial statements, to FFO and Normalized FFO appear in the following table. This table also provides a comparison of distributions to shareholders, FFO and Normalized FFO and net income (loss) per share for these periods.
For the Year Ended December 31,
2025 2024
Net loss $ (285,886) $ (370,255)
Depreciation and amortization 261,923 284,957
(Gain) loss on sale of properties (117,730) 18,938
Impairment of assets 165,702 70,734
Equity in net earnings of investees (36,760) (1,597)
Share of FFO from unconsolidated joint ventures 9,649 9,006
Adjustments to reflect our share of FFO attributable to an equity method investment 5,699 13,807
FFO 2,597 25,590
Incentive management fees(1)
17,905 -
Acquisition and certain other transaction related costs 10,356 2,510
Gain on insurance recoveries (7,522) -
Loss on modification or early extinguishment of debt 42,526 324
Adjustments to reflect our share of Normalized FFO attributable to an equity method investment (1,441) (8,755)
Normalized FFO $ 64,421 $ 19,669
Weighted average common shares outstanding (basic and diluted) 240,286 239,535
Per common share data (basic and diluted):
Net loss $ (1.19) $ (1.55)
FFO $ 0.01 $ 0.11
Normalized FFO $ 0.27 $ 0.08
Distributions declared $ 0.04 $ 0.04
(1)Incentive management fees are estimated and accrued during the applicable measurement period. Actual incentive management fees are calculated based on common share total return, as defined in our business management agreement, for the three year period ending December 31 of the applicable calendar year, and are included in general and administrative expenses in our consolidated statements of comprehensive income (loss). In January 2026, we paid an incentive management fee of $17,905 to RMR for the year ended December 31, 2025.
Property Net Operating Income (NOI)
We calculate NOI as shown below. The calculation of NOI excludes certain components of net income (loss) in order to provide results that are more closely related to our property level results of operations. We define NOI as income from our real estate less our property operating expenses. NOI excludes depreciation and amortization. We use NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI differently than we do.
The calculation of NOI by reportable segment is included above in this Item 7. The following table includes the reconciliation of net loss to NOI for the years ended December 31, 2025 and 2024.
For the Year Ended December 31,
2025 2024
Reconciliation of Net Loss to NOI:
Net loss $ (285,886) $ (370,255)
Equity in net earnings of investees (36,760) (1,597)
Income tax expense 1,743 467
Loss before income taxes and equity in net earnings of investees (320,903) (371,385)
Loss on modification or early extinguishment of debt 42,526 324
Interest expense 204,498 235,239
Interest and other income (5,839) (8,950)
(Gain) loss on sale of properties (117,730) 18,938
Impairment of assets 165,702 70,734
Acquisition and certain other transaction related costs 10,356 2,510
General and administrative 45,502 26,518
Depreciation and amortization 261,923 284,957
Total NOI $ 278,513 $ 258,885
SHOP NOI $ 139,256 $ 106,060
Medical Office and Life Science Portfolio NOI 108,130 115,683
All Other NOI 31,127 37,142
Total NOI $ 278,513 $ 258,885
LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)
Our principal sources of cash to meet operating and capital expenses, pay our debt service obligations and make distributions to our shareholders are the operating cash flows we generate as residents fees and services revenues from our managed communities, rental income from our leased properties and proceeds from the disposition of certain properties. We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay our debt service obligations and make distributions to our shareholders for at least the next 12 months and for the foreseeable future thereafter. Our future cash flows from operating activities will depend primarily upon:
•our ability to maintain or increase the occupancy of, and the rates at, our properties;
•our ability to receive rents from our tenants;
•our and our managers' abilities to control operating expenses and capital expenses at our properties, including increased operating expenses that we may incur in response to wage and commodity price inflation, limited labor availability and increased insurance costs; and
•our managers' abilities to maintain or increase our returns from our managed senior living communities.
The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our Consolidated Statements of Cash Flows included in Part IV, Item 15 of this Annual Report on Form 10-K:
Year Ended December 31,
2025 2024
Cash and cash equivalents and restricted cash at beginning of period $ 149,854 $ 246,961
Net cash provided by (used in):
Operating activities (19,618) 112,223
Investing activities 483,572 (187,019)
Financing activities (492,009) (22,311)
Cash and cash equivalents and restricted cash at end of period $ 121,799 $ 149,854
Our Operating Liquidity and Resources
We receive residents fees and services revenues, net of expenses, from our managed senior living communities monthly, we generally receive minimum rents from tenants at our senior living communities, medical office and life science properties and triple net leased wellness centers monthly and we receive percentage rents from tenants at certain of our triple net senior living communities monthly, quarterly or annually.
The change in cash (used in) provided by operating activities for the year ended December 31, 2025 compared to 2024 was primarily due to the accreted interest of $152,869 paid during 2025 as a result of the redemption in full of our outstanding senior secured notes due 2026.
We incurred a $17,905 incentive management fee pursuant to our business management agreement for the year ended December 31, 2025. We paid this incentive management fee to RMR in January 2026.
Our Investing Liquidity and Resources
The change in cash provided by (used in) investing activities for the year ended December 31, 2025 compared to 2024 was primarily due to an increase in proceeds from the sale of properties, a $28,000 cash distribution paid to us by the Seaport JV, aggregate cash dividends of $20,400 paid to us by AlerisLife, a reduction in real estate improvements and our purchase on February 16, 2024 of approximately 34.0% of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price of $1.31 per share for a total purchase price, including transaction related costs, of $15,459. These changes were partially offset by $8,500 of contributions made to the Seaport JV in 2025.
The following is a summary of capital expenditures, development, redevelopment and other activities for the periods presented:
Year Ended December 31,
2025 2024
SHOP fixed assets and capital improvements $ 96,940 $ 93,043
Medical Office and Life Science Portfolio capital expenditures:
Lease related costs (1)
26,706 21,289
Building improvements (2)
7,802 6,002
Recurring capital expenditures - Medical Office and Life Science Portfolio 34,508 27,291
Wellness centers lease related costs (1)
- 20,618
Total recurring capital expenditures $ 131,448 $ 140,952
Development, redevelopment and other activities - SHOP (3)
$ 14,194 $ 46,558
Development, redevelopment and other activities - Medical Office and Life Science Portfolio (3)
308 3,012
Total development, redevelopment and other activities $ 14,502 $ 49,570
Capital expenditures by segment:
SHOP $ 111,134 $ 139,601
Medical Office and Life Science Portfolio 34,816 30,303
All Other - wellness centers - 20,618
Total capital expenditures $ 145,950 $ 190,522
(1)Includes capital expenditures to improve tenants' space or amounts paid directly to tenants to improve their space and other leasing related costs, such as brokerage commissions and tenant inducements.
(2)Includes capital expenditures to replace obsolete building components that extend the useful life of existing assets or other improvements to increase the marketability of the property.
(3)Includes capital expenditures that reposition a property or result in change of use or new sources of revenue.
We generally plan to continue investing capital in our properties, including redevelopment projects, to better position these properties in their respective markets in order to increase our returns in future years.
As of December 31, 2025, we had estimated unspent leasing related obligations at our medical office and life science properties of approximately $10,241, of which we expect to spend approximately $8,734 during the next 12 months. We expect to fund these obligations using operating cash flows and cash on hand.
We are currently in the process of redeveloping certain properties, primarily our managed senior living communities. We continue to assess opportunities to redevelop other properties in our SHOP segment and Medical Office and Life Science Portfolio segment. These redevelopment projects may require significant capital expenditures and time to complete and we may defer certain redevelopment projects to preserve liquidity. Additionally, due to labor availability constraints and wage and commodity price inflation, the capital investments we plan to make may be delayed or cost more than we expect.
During the year ended December 31, 2025, we sold 69 properties for an aggregate sales price of $604,874, excluding closing costs. The net proceeds from 35 of these properties sold, which had a sales price of $402,234, excluding closing costs, were used to partially redeem our then outstanding senior secured notes due 2026. As of February 20, 2026, we had 13 properties under agreement to sell for an aggregate sales price of $23,000, excluding closing costs. We may not complete the sales of any or all of the properties we currently plan to sell. Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such
sales as a result. For further information regarding our dispositions, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
On February 14, 2025, AlerisLife paid an aggregate cash dividend of $50,000 to its stockholders. Our pro rata share of this cash dividend was $17,000.
On July 15, 2025, AlerisLife paid an aggregate cash dividend of $10,000 to its stockholders. Our pro rata share of this cash dividend was $3,400.
On January 9, 2026, in connection with the wind-down of its business, AlerisLife paid an aggregate cash dividend of $80,000 to its stockholders. Our pro rata share of this cash dividend was $27,200.
On August 21, 2025, the Seaport JV paid an aggregate cash distribution of $280,000 to its investors in connection with the $1,000,000 refinancing of its prior mortgage loan in August 2025. Our pro rata share of this cash distribution was $28,000.
In January 2026, we provided notice to exercise our purchase option for the two properties securing our finance leases for $14,500, with closing expected in April 2026.
Our Financing Liquidity and Resources
The increase in cash used in financing activities for the year ended December 31, 2025 compared to 2024 was primarily due to the redemption of our outstanding senior secured notes due 2026 and redemption of our outstanding senior secured notes due 2025, partially offset by our issuance of $375,000 in aggregate principal amount of our 7.25% senior secured notes due 2030 in a private placement, raising net proceeds of $364,726, after deducting discounts and commissions to the initial purchasers and other fees and expenses. Additionally, we executed four mortgage financings for aggregate proceeds, excluding closing costs, of $343,157 in 2025.
In June 2025, we obtained a $150,000 revolving credit facility secured by 14 SHOP communities. Our revolving credit facility is available for general business purposes, including acquisitions. We can borrow, repay and reborrow funds available under our revolving credit facility, and no principal repayments are due, until maturity. Availability of borrowings under our credit agreement is subject to satisfying certain financial covenants and other credit facility conditions. Our revolving credit facility matures in June 2029 and we have two six-month extension options for the maturity date of the facility, subject to satisfaction of certain conditions and payment of an extension fee.
Interest payable on borrowings under our revolving credit facility is based on an annual rate of secured overnight financing rate, or SOFR, plus a premium of 2.50% to 3.00%, depending on our net leverage ratio, as defined in our credit agreement, which was 2.50% as of December 31, 2025. We also pay an unused commitment fee of 25 to 35 basis points per annum based on amounts outstanding under our revolving credit facility. As of December 31, 2025, the annual interest rate payable on borrowings under our revolving credit facility was 6.47%. As of December 31, 2025 and February 23, 2026, we had no borrowings under our revolving credit facility and $150,000 available for borrowings.
As of December 31, 2025, we had $105,407 of cash and cash equivalents. We typically use cash balances, net proceeds from offerings of securities, debt issuances or dispositions of assets and cash flows from our operations to fund our operations, debt repayments, distributions, acquisitions, investments, capital expenditures and other general business purposes.
During the year ended December 31, 2025, we paid quarterly cash distributions to our shareholders totaling approximately $9,661 using cash on hand. For further information regarding the distributions we paid during 2025, see Note 5 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
On January 15, 2026, we declared a quarterly distribution to common shareholders of record on January 26, 2026 of $0.01 per share, or approximately $2,421 in aggregate. We paid this distribution on February 19, 2026, using cash on hand.
We believe we may have access to various types of financings, including debt or equity offerings, to fund our operations and repay our debts and other obligations as they become due. Our ability to complete, and the costs associated with, future debt or equity transactions depends primarily upon market conditions and our then creditworthiness and our ability to be in compliance with our debt covenants. We have no control over market conditions. Our credit and debt ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, our liquidity position, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our
ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out that intention. A protracted negative impact on the economy or the industries in which our properties and businesses operate resulting from wage and commodity price inflation, high interest rates, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, economic downturns and a possible recession, may have various negative consequences including a decline in financing availability and increased costs for financing. Further, those conditions could also disrupt capital markets and limit our access to financing from public sources, particularly if the global financial markets experience significant disruptions.
In May 2024, we executed a $120,000 fixed rate, interest only mortgage loan secured by eight medical office and life science properties. This mortgage loan matures in June 2034 and requires that interest be paid at an annual rate of 6.864%. The net proceeds from this mortgage loan were approximately $117,100 after deducting estimated closing costs, and in June 2024 we used $60,000 of the net proceeds to partially redeem our then outstanding $500,000 9.75% senior notes due 2025.
In November 2024, we redeemed $60,000 of our outstanding 9.75% senior unsecured notes due 2025 using cash on hand.
In March 2025, we executed a $140,000 floating rate mortgage loan secured by 14 SHOP communities. This mortgage loan matures in March 2028 and requires that interest be paid at an annual rate of SOFR plus a premium of 2.50% with interest-only payments through April 2027, and we have two six-month extension options of the interest-only period, subject to satisfaction of certain conditions. In connection with this mortgage loan, we have purchased an interest rate cap with a SOFR strike rate equal to 4.50% pursuant to the terms of the applicable loan agreement.
In April 2025, we executed a $108,873 fixed rate mortgage financing secured by seven SHOP communities. These mortgage loans mature in May 2035 and require that interest be paid at an annual rate of 6.22% with interest-only payments through May 2030.
In May 2025, we executed a $64,000 fixed rate mortgage loan secured by four SHOP communities. This mortgage loan matures in June 2030 and requires that interest be paid at an annual rate of 6.57%.
In May 2025, we executed a $30,284 fixed rate mortgage financing secured by two SHOP communities. These mortgage loans mature in June 2035 and require that interest be paid at an annual rate of 6.36% with interest-only payments through June 2028.
From April through June 2025, we used the net proceeds from these 2025 mortgage financings, together with cash on hand, to fully redeem the remaining $380,000 principal balance of our 9.75% senior unsecured notes due June 2025.
In September 2025, we issued $375,000 in aggregate principal amount of our 7.25% senior secured notes due 2030 in a private placement, raising net proceeds of $364,726, after deducting discounts and commissions to the initial purchasers and other estimated fees and expenses. These notes are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by certain of our subsidiaries that own 36 properties, or the 2030 Collateral Guarantors, and on a joint, several and unsecured basis, by all of our subsidiaries other than the 2030 Collateral Guarantors and certain excluded subsidiaries. These notes and the guarantees provided by the 2030 Collateral Guarantors are secured by a first priority lien and security interest on 100% of the equity interests in each of the 2030 Collateral Guarantors. These notes require semi-annual interest payments through maturity. We used $307,006 of the net proceeds from this offering to partially redeem our then outstanding $641,376 senior secured notes due 2026.
In October 2025, we partially redeemed $10,249 of our then outstanding $334,370 senior secured notes due 2026.
In December 2025, we redeemed the remaining $324,121 of our outstanding senior secured notes due 2026 using net proceeds from the sales of both encumbered properties and unencumbered properties, as well as cash on hand.
In August 2025, Moody's upgraded our issuer credit rating from Caa3 to Caa1, senior secured notes due 2026 rating from Caa2 to B3, our 4.375% senior notes due 2031 rating from Caa3 to Caa1, and our senior unsecured notes from Ca to Caa2.
In September 2025, Standard & Poor's upgraded our issuer credit rating from CCC+ to B-, our senior secured notes due 2026 and our 4.375% senior notes due 2031 ratings from B to B+ and our senior unsecured notes note rating from CCC+ to B-. Additionally, Standard & Poor's rated our 7.25% senior secured notes due 2030 as B+.
For further information regarding our outstanding debt, see Note 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Debt Covenants
Our principal debt obligations at December 31, 2025 were: (1) $1,600,000 outstanding principal amount of senior unsecured notes; (2) $375,000 outstanding principal amount of senior secured notes; (3) $328,500 aggregate principal amount of fixed rate mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by 22 properties; and (4) $140,000 principal amount of a floating rate mortgage loan (excluding discounts, premiums and net debt issuance costs) secured by 14 properties. For further information regarding our indebtedness, see Note 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Our senior notes are governed by our senior notes indentures and their supplements. Our credit agreement, our mortgage loan agreements and our senior notes indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default. Our credit agreement and our senior notes indentures and their supplements also contain covenants that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts and require us to maintain various financial ratios. As of December 31, 2025, we believe we were in compliance with all of the covenants under our debt agreements. Although we continue to take steps to enhance our ability to maintain sufficient liquidity, as noted elsewhere in this Annual Report on Form 10-K, a protracted negative impact on the economy or the industries in which our properties and businesses operate resulting from wage or commodity price inflation, high interest rates, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, economic downturns or a possible recession, may cause increased pressure on our ability to satisfy financial and other covenants. If our operating results and financial condition are significantly negatively impacted by economic conditions or otherwise, we may fail to satisfy our debt covenants and conditions.
Our senior notes indentures and their supplements do not contain provisions for acceleration which could be triggered by our debt ratings. See "-Our Financing Liquidity and Resources" above for information regarding recent changes to our issuer credit rating and senior debt ratings.
Our revolving credit facility contains cross default provisions to any other debts of more than $25,000. Our senior unsecured notes indentures and their supplements contain cross default provisions to any other debts of more than $20,000 ($50,000 or more in the case of our senior notes indentures and supplements entered in February 2016, February 2018 and February 2021).
The loan agreements governing the aggregate $1,000,000 secured debt financing related to the Seaport JV contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default. We provide certain limited recourse guaranties on this debt, with our liability limited to $100,000. The debt secured by the properties included in the LSMD JV in which we own a 20% equity interest is guaranteed by this joint venture and is non-recourse to us.
Supplemental Guarantor Information
On February 3, 2021, we issued $500,000 of our 4.375% senior notes due 2031. As of December 31, 2025, all $500,000 of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint, several and unsecured basis, by all of our subsidiaries except certain excluded subsidiaries. The notes and related guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the applicable collateral, and are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $1,100,000 of senior unsecured notes do not have the benefit of any guarantees.
A subsidiary guarantor's guarantee of our 4.375% senior notes due 2031 and all other obligations of such subsidiary guarantor under the indenture governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and the indenture under certain circumstances, including on or after the date (a) the notes have an investment grade rating from two rating agencies and one of such investment grade ratings is a mid-BBB investment grade rating and (b) no default or event of default has occurred and is continuing under the indenture. Our non-guarantor subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due on our 4.375% senior notes due 2031 or their guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments. The rights of holders of our 4.375% senior notes due 2031
to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries' creditors and any preferred equity holders. As a result, our 4.375% senior notes due 2031 and their guarantees are structurally subordinated to all indebtedness, guarantees and other liabilities of our subsidiaries that do not guarantee our 4.375% senior notes due 2031, including guarantees of other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
The following tables present summarized financial information for guarantor entities and issuer, on a combined basis after eliminating (i) intercompany transactions and balances among the guarantor entities and (ii) equity in earnings from, and any investments in, any subsidiary that is a non-guarantor:
December 31, 2025
Real estate properties, net $ 2,474,149
Other assets, net 332,754
Total assets $ 2,806,903
Indebtedness, net $ 1,945,731
Other liabilities 195,493
Total liabilities $ 2,141,224
Year Ended December 31, 2025
Revenues $ 875,517
Expenses $ 1,010,831
Loss from continuing operations $ (340,267)
Net loss $ (305,360)
Related Person Transactions
We have relationships and historical and continuing transactions with RMR, RMR Inc., AlerisLife (including Five Star) and others related to them. For further information about these and other such relationships and related person transactions, see Notes 3, 6, 7 and 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference and our other filings with the SEC including our definitive Proxy Statement for our 2026 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2025. For further information about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including "Warning Concerning Forward-Looking Statements," Part I, Item 1, "Business" and Part I, Item 1A, "Risk Factors." We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.
Critical Accounting Estimates
Our critical accounting policies are those that will have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates. We believe that our judgments and estimates have been and will be consistently applied and produce financial information that fairly presents our results of operations. Our most critical accounting policies involve our investments in real property. These policies affect our:
•allocation of purchase prices among various asset categories, including allocations to above and below market leases, and the related impact on the recognition of rental income and depreciation and amortization expenses; and
•assessment of the carrying values and impairments of long lived assets.
We allocate the purchase prices of our properties to land, building and improvements based on determinations of the fair values of these assets assuming the properties are vacant. We determine the fair value of each property using methods similar to those used by independent appraisers, which may involve estimated cash flows that are based on a number of factors,
including capitalization rates and discount rates, among others. In some circumstances, we engage independent real estate appraisal firms to provide market information and evaluations which are relevant to our purchase price allocations and determinations of depreciable useful lives; however, we are ultimately responsible for the purchase price allocations and determinations of useful lives. We allocate a portion of the purchase price to above market and below market leases based on the present value (using an interest rate which reflects the risks associated with acquired in place leases at the time each property was acquired by us) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases. The terms of below market leases that include bargain renewal options, if any, are further adjusted if we determine that renewal is probable. We allocate a portion of the purchase price to acquired in place leases and tenant relationships based upon market estimates to lease up the property based on the leases in place at the time of purchase. In making these allocations, we consider factors such as estimated carrying costs during the expected lease up periods, including real estate taxes, insurance and other operating income and expenses and costs, such as leasing commissions, legal and other related expenses, to execute similar leases in current market conditions at the time a property was acquired by us. We allocate this aggregate value between acquired in place lease values and tenant relationships based on our evaluation of the specific characteristics of each tenant's lease. However, we have not separated the value of tenant relationships from the value of acquired in place leases because such value and related amortization expense is immaterial to our consolidated financial statements. If the value of tenant relationships becomes material in the future, we may separately allocate those amounts and amortize the allocated amount over the estimated life of the relationships.
We regularly evaluate our assets for indicators of impairment. Impairment indicators may include declining tenant or resident occupancy, weak ordeclining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of an asset. This analysis requires us to judge whether indicators of impairment exist and to estimate likely future cash flows. If indicators of impairment are present, we evaluate the carrying value of the affected assets by comparing it to the expected future undiscounted cash flows to be generated from those assets. The future cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. If we misjudge or estimate incorrectly or if future tenant operations, market or industry factors differ from our expectations, we may record an impairment charge that is inappropriate or fail to record a charge when we should have done so, or the amount of any such charges may be inaccurate. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value.
These accounting policies involve significant judgments made based upon our experience and the experience of our management and our Board of Trustees, including judgments about current valuations, ultimate realizable value, estimated useful lives, salvage or residual value, the ability and willingness of our tenants to perform their obligations to us and the current and likely future operating and competitive environments in which our properties are operated. In the future, we may need to revise our carrying value assessments to incorporate information which is not now known, and such revisions could increase or decrease our depreciation expense or impairment charges related to properties we own, result in the classification of our leases as other than operating leases or decrease the carrying values of our assets.
Impact of Government Reimbursement
For the year ended December 31, 2025, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments. Nonetheless, we own, and our managers, operators and tenants operate, facilities in many states that participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid programs and other federal and state healthcare payment programs. Also, some of our medical office and life science property tenants participate in federal Medicare and state Medicaid programs and other government healthcare payment programs. Because of shifting policy priorities, the current and projected federal budget deficit, other federal spending priorities and challenging fiscal conditions in some states, there have been numerous recent legislative and regulatory actions or proposed actions with respect to federal Medicare rates, state Medicaid rates and federal payments to states for Medicaid programs, as well as existing regulations that impact these matters. Further, there are other existing and recently enacted legislation, and related litigation, related to government payments, insurance and healthcare delivery. Examples of these, and other information regarding such matters and developments, are provided under the caption "Business-Government Regulation and Reimbursement" above in Part I, Item 1 of this Annual Report on Form 10-K. We cannot currently predict the type and magnitude of the potential Medicare and Medicaid policy changes, rate changes or other changes that may be implemented, but we believe that some of these changes will cause these government funded
healthcare programs to fail to provide rates that match our and our tenants' increasing expenses and that such changes may be material and adverse to our future financial results.
During the years ended December 31, 2025, 2024 and 2023, we recognized $0, $0 and $1,581, respectively, in interest and other income in our consolidated statements of comprehensive income (loss) related to funds received under the Coronavirus Aid, Relief, and Economic Security Act and the American Rescue Plan Act.
Seasonality
Senior housing operations have historically reflected modest seasonality. During fourth quarter holiday periods, residents at such communities are sometimes discharged to spend time with family and admission decisions are often deferred. The first quarter of each calendar year usually coincides with increased illness among residents which can result in increased costs or discharges to hospitals. As a result of these and other factors, these operations sometimes produce greater earnings in the second and third quarters of a calendar year and lesser earnings in the fourth and first calendar quarters. We do not expect these seasonal differences to have a material impact upon the ability of our tenants to pay our rent or our ability to fund our managed senior living operations or our other businesses. Our medical office and life science properties and wellness centers do not typically experience seasonality.
Impact of Climate Change
Concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns. These and other laws may cause energy or other costs at our properties to increase. We do not expect the direct impact of these increases to be material to our results of operations, because the increased costs either would be the responsibility of our tenants directly or in the longer term, passed through and paid by tenants of our properties. Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make some of our buildings obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our managers or tenants and their ability to pay rent or returns to us.
In an effort to reduce the effects of any increased energy costs in the future, we continuously study ways to improve the energy efficiency at all of our properties. Our property manager, RMR, is a member of the ENERGY STAR program, a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy that is focused on promoting energy efficiency at commercial properties through its "ENERGY STAR" partner program, and a member of the U.S. Green Building Council, a nonprofit organization focused on promoting energy efficiency at commercial properties through its leadership in energy and environmental design, or LEED®, green building program. RMR's annual Sustainability Report summarizes the ESG initiatives RMR and its clients, including DHC, employ. RMR's Sustainability Report may be accessed on RMR Inc.'s website at www.rmrgroup.com/corporate-sustainability/default.aspx. The information on or accessible through RMR Inc.'s website is not incorporated by reference into this Annual Report on Form 10-K. For more information, see "Business-Corporate Sustainability" in Part I, Item 1 of this Annual Report on Form 10-K.
Some observers believe severe weather in different parts of the world over the last few years is evidence of global climate change. Severe weather may have an adverse effect on certain properties we own. Rising sea levels could cause flooding at some of our properties, which may have an adverse effect on individual properties we own. We mitigate these risks by procuring, or requiring our tenants to procure, insurance coverage we believe adequate to protect us from material damages and losses resulting from the consequences of losses caused by climate change. However, we cannot be sure that our mitigation efforts will be sufficient or that future storms, rising sea levels or other changes that may occur due to future climate change could not have a material adverse effect on our financial results.
Diversified Healthcare Trust published this content on February 24, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 24, 2026 at 11:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]