# American Healthcare REIT, Inc. (AHR) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from American Healthcare REIT, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1632970/000163297025000018/ahr-20241231.htm
Accession: 0001632970-25-000018
Filing date: 2025-02-28
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/AHR/
All MD&A years: /company/AHR/mda/
Previous year: /company/AHR/mda/fy2023/ (FY 2023)
Next year: /company/AHR/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The use of the words “we,” “us” or “our” refers to American Healthcare REIT, Inc. and its subsidiaries, including American Healthcare REIT Holdings, LP, except where otherwise noted.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to promote understanding of our results of operations and financial condition. Such discussion is provided as a supplement to, and should be read in conjunction with our accompanying consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. Such consolidated financial statements and information have been prepared to reflect our financial position as of December 31, 2024 and 2023, together with our results of operations and cash flows for the years ended December 31, 2024, 2023 and 2022. This section discusses the results of operations and cash flows for fiscal year 2024 compared to fiscal year 2023. We have omitted the discussion related to the results of operations and changes in financial condition for fiscal year 2023 compared to fiscal year 2022 from this Annual Report on Form 10-K, but such discussion may be found in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our fiscal year 2023 Annual Report Form 10-K, which was filed with the U.S. Securities and Exchange Commission, or the SEC, on March 22, 2024.

Forward-Looking Statements

Certain statements contained in this report, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995 (collectively with the “Securities Act and Exchange Act, or the Acts”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the United States Securities and Exchange Commission, or SEC.

Any such forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, our management and involve uncertainties that could significantly affect our financial results. Such statements include, but are not limited to: (i) statements about our plans, strategies, initiatives and prospects, including any future capital-raising initiatives and planned or future acquisitions or dispositions of properties and other assets; and (ii) statements about our future results of operations, capital expenditures and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation: changes in economic conditions generally and the real estate market specifically; legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs, and regulations or proposed regulations governing the operations and sales of health care properties; the availability of capital; our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; changes in interest rates and foreign currency risk; competition in the real estate industry; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to REITs; the success of our investment strategy; cybersecurity incidents and information technology failures, including unauthorized access to our computer systems and/or our vendors’ computer systems and our third-party management companies’ computer systems and/or their vendors’ computer systems; our ability to retain our executive officers and key employees; unexpected labor costs and inflationary pressures; and those risks identified in Item 1A, Risk Factors in this Annual Report on Form 10-K. These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. Forward-looking statements in this Annual Report on Form 10-K speak only as of the date on which such statements are made, and undue reliance should not be placed on such statements. We undertake no obligation to update any such statements that may become untrue because of subsequent events. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

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Overview and Background

American Healthcare REIT, Inc., a Maryland corporation, is a self-managed REIT that acquires, owns and operates a diversified portfolio of clinical healthcare real estate properties, focusing primarily on outpatient medical, or OM, buildings, senior housing, skilled nursing facilities, or SNFs, and other healthcare-related facilities. We have built a fully-integrated management platform, with approximately 114 employees, that operates clinical healthcare properties throughout the United States, the United Kingdom and the Isle of Man. We own and operate our integrated senior health campuses and senior housing operating properties, or SHOP, utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure. We have also originated and acquired secured loans and may acquire other real estate-related investments in the future on an infrequent and opportunistic basis. We generally seek investments that produce current income; however, we have selectively developed, and may continue to selectively develop, healthcare real estate properties. We have elected to be taxed as a REIT for U.S. federal income tax purposes. We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Code.

Operating Partnership

We conduct substantially all of our operations through American Healthcare REIT Holdings, LP, or our operating partnership, and we are the sole general partner of our operating partnership. As of December 31, 2023, we owned 95.0% of the operating partnership units, or OP units, in our operating partnership, and the remaining 5.0% OP units were owned by the following limited partners: (i) AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T. Hanson, the non-executive Chairman of our board of directors, or our board, Danny Prosky, our Chief Executive Officer, President and director, and Mathieu B. Streiff, one of our non-executive directors; (ii) Platform Healthcare Investor T-II, LLC; (iii) Flaherty Trust; and (iv) a wholly owned subsidiary of Griffin Capital Company, LLC, or Griffin Capital. On August 19, 2024 and October 18, 2024, Platform Healthcare Investor T-II, LLC and Flaherty Trust, respectively, redeemed all of their OP units in exchange for 1,216,571 shares and 211,306 shares, respectively, of our Common Stock on a one-for-one basis and, as a result, are no longer limited partners of our operating partnership. On December 6, 2024, Griffin Capital redeemed a portion of its OP units in exchange 69,882 shares of our Common Stock on a one-for-one basis. As of December 31, 2024, we owned 98.7% of the OP units in our operating partnership, and the remaining 1.3% of the OP units were owned by the remaining limited partners. See Note 12, Redeemable Noncontrolling Interests, and Note 13, Equity — Noncontrolling Interests in Total Equity, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of the ownership in our operating partnership.

Public Offerings and Listing

On February 9, 2024, pursuant to a Registration Statement filed with the SEC, on Form S-11 (File No. 333-267464), as amended, we closed our underwritten public offering, or the February 2024 Offering, through which we issued 64,400,000 shares of Common Stock, for a total of $772,800,000 in gross offering proceeds. Such amounts include the exercise in full of the underwriters’ overallotment option to purchase up to an additional 8,400,000 shares of Common Stock. We listed these shares of Common Stock on the New York Stock Exchange, or NYSE, under the trading symbol “AHR” and began trading on February 7, 2024.

Following the closing of the February 2024 Offering and until August 5, 2024, we presented our Common Stock, Class T common stock and Class I common stock, as separate classes of common stock within our consolidated balance sheets and consolidated statements of equity. Any references to Common Stock in this Annual Report on Form 10-K refer to our NYSE-listed shares of common stock, whereas Class T common stock and Class I common stock refer to our historical non-listed shares of common stock. This applies to all historical periods presented herein. On August 5, 2024, 180 days after the listing of our Common Stock on the NYSE, each share of our Class T common stock and Class I common stock automatically converted into one share of our listed Common Stock.

On September 20, 2024, we closed our follow-on underwritten public offering, or the September 2024 Offering, under a prospectus supplement and related prospectus filed with the SEC pursuant to our effective shelf Registration Statement on Form S-3 (File No. 333-281488). Through the September 2024 Offering, we issued 20,010,000 shares of Common Stock, for a total of $471,236,000 in gross offering proceeds. Such amounts include the exercise in full of the underwriters’ overallotment option to purchase up to an additional 2,610,000 shares of Common Stock. These shares are also listed on the NYSE under the trading symbol “AHR” and began trading on September 19, 2024.

On November 18, 2024, we entered into a sales agreement and established an at-the-market equity offering program, or ATM Offering, under a prospectus supplement and related prospectus filed with the SEC pursuant to our effective shelf Registration Statement on Form S-3 (File No. 333-281488), pursuant to which we may, from time to time, offer and sell shares of Common Stock having an aggregate gross sales price of up to $500,000,000. Shares sold through the ATM Offering may be

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offered and sold in amounts to be determined by us from time to time, and are sold in negotiated transactions at market prices prevailing at the time of sale in accordance with Rule 415 under the Securities Act of 1933, as amended. During the year ended December 31, 2024, we sold an aggregate of 4,285,531 shares of Common Stock under the ATM Offering for gross proceeds of $120,220,000 at an average gross price of $28.05 per share. As of December 31, 2024, the remaining amount available under the ATM Offering for future sales of Common Stock was $379,780,000.

See Note 13, Equity — Common Stock, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of our public offerings.

Our Real Estate Investments Portfolio

We currently operate through four reportable business segments: integrated senior health campuses, OM, triple-net leased properties and SHOP. See Note 18, Segment Reporting, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion. As of December 31, 2024, we owned and/or operated 314 buildings and integrated senior health campuses representing approximately 19,155,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,533,212,000. In addition, as of December 31, 2024, we also owned a real estate-related debt investment purchased for $60,429,000.

Critical Accounting Estimates

Our critical accounting estimates have the most impact on the reporting of our financial condition and results of operations and require significant judgments and estimates. We believe that our judgments and estimates are consistently applied and produce financial information that fairly present our financial condition and results of operations. Our critical accounting estimates include (1) real estate investments purchase price allocation, (2) impairment of long-lived assets, (3) goodwill, (4) revenue recognition and (5) resident receivable allowances.

These critical accounting estimates may require complex judgment in their application and are evaluated on an ongoing basis using information that is available as well as various other assumptions believed to be reasonable under the circumstances. However, if our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, we may have applied a different accounting treatment, resulting in a material adverse impact to our consolidated financial condition and results of operations or a different presentation of our financial statements. A discussion of our significant accounting policies is included within Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K. There have been no significant changes to our critical accounting estimates during 2024. Below is a summary of the key judgments and assumptions used in our critical accounting estimates.

Real Estate Investments Purchase Price Allocation

Upon the acquisition of real estate properties or entities owning real estate properties, we determine whether the transaction is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired and liabilities assumed are not a business, we account for the transaction as an asset acquisition. Under both methods, we recognize the identifiable assets acquired and liabilities assumed; however, for a transaction accounted for as an asset acquisition, we capitalize transaction costs and allocate the purchase price using a relative fair value method allocating all accumulated costs, whereas, for a transaction accounted for as a business combination, we immediately expense transaction costs incurred associated with the business combination and allocate the purchase price based on the estimated fair value of each separately identifiable asset and liability.

In accounting for asset acquisitions and business combinations, we, with assistance from independent valuation specialists, measure the fair value of tangible and intangible identified assets and liabilities, as applicable, based on their respective fair values for acquired properties, which is then allocated to acquired investments in real estate. The fair value measurement and its allocation require significant judgment and, in some cases, involve complex calculations. Significant assumptions used to determine such fair values include comparable market transactions, capitalization rates, discount rates, property operating data, among other assumptions, all of which can be impacted by expectations about future market or economic conditions. These allocation assessments directly impact our financial statements, such as the amount of depreciation and amortization we record over the estimated useful life of the property or the term of the lease.

Impairment of Long-Lived Assets

We periodically perform an analysis that requires us to judge whether indicators of impairment exist and to estimate likely future cash flows when a review for the recoverability of real estate assets is necessary. Projections of expected future operating cash flows require that we estimate future revenue amounts, future property operating expenses and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow

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analysis, including capitalization and growth rates (for estimated future revenues and expenses), period of time we intend to hold and operate the property, general economic conditions and trends, or other available market data such as comparable sales, as applicable, could result in an incorrect assessment of the recoverability of the carrying value of our real estate assets. In the event that a real estate investment fails its recoverability test and our carrying value exceeds our estimated fair value, we would record an impairment loss to the extent the carrying value exceeds the estimated fair value of our real estate investment. Determining the fair value of real estate assets when measuring impairments involves significant judgment and generally utilizes comparable market transactions, negotiations with prospective buyers, or discounted future cash flow analyses subject to the capitalization and growth rates and other assumptions discussed above, as well the application of market discount rates to such cash flows. Our ability to accurately predict future operating results and resulting cash flows, and estimate fair values, impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our consolidated financial statements.

Goodwill

Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of a business acquired. This allocation is based upon our determination of the value of the acquired assets and assumed liabilities, which requires judgment and some of the estimates involve complex calculations. These allocation assessments have a direct impact on our financial statements. Our goodwill has an indeterminate life and is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Such evaluation could involve estimated future cash flows, which is highly subjective, and is based in part on assumptions regarding future events. We take a qualitative approach, as applicable, to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. When step one of the impairment test is utilized, we compare the fair value of the reporting unit with its carrying amount. We recognize an impairment loss to the extent the carrying value of goodwill exceeds the implied value in the current period.

Revenue Recognition

A significant portion of resident fees and services revenue represents healthcare service revenue that is reported at the amount that we expect to be entitled to in exchange for providing patient care. These amounts are due from patients, third-party payors (including health insurers and government programs), other healthcare facilities and others and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews and investigations. Such variable consideration is included in the determination of the estimated transaction price for providing care. These settlements include estimates based on the terms of the payment agreement with the payor, correspondence from the payor and our historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available), or as years are settled or are no longer subject to such audits, reviews and investigations.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see Note 2, Summary of Significant Accounting Policies — Recently Issued Accounting Pronouncements, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Acquisitions and Dispositions in 2024, 2023 and 2022

For a discussion of our acquisitions and dispositions of investments in 2024, 2023 and 2022, see Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, Note 3, Real Estate Investments, Net, and Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Factors Which May Influence Results of Operations

Other than the effects of inflation discussed below, as well as other national economic conditions affecting real estate generally, and as otherwise disclosed in our risk factors, we are not aware of any material trends or uncertainties that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, disposition, management and operation of our properties. For a further discussion of these and other factors that could impact our future results or performance, see Part I, Item 1A, Risk Factors, of this Annual Report on Form 10-K.

Inflation

During the years ended December 31, 2024, 2023 and 2022, inflation has affected our operations. The annual rate of inflation in the United States was 3.0% in January 2025, as measured by the Consumer Price Index. We believe inflation has impacted our operations such that we have experienced, and continue to experience, increases in the cost of labor, services,

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energy and supplies, and therefore continued inflationary pressures on our integrated senior health campuses and SHOP could continue to impact our profitability in future periods. To offset the impact of inflation on the cost of labor and services, we had our RIDEA managers bill higher than average annual rent and care fee increases for existing residents in 2023 and 2024, as compared to prior years, while adjusting market rates as frequently as needed based on competitor pricing and market conditions. We believe this practice will improve operating performance in our integrated senior health campuses and SHOP, as well as increase rent coverage and the stability of our real estate revenue in our triple-net leased properties over time.

For properties that are not operated under a RIDEA structure, there are provisions in the majority of our tenant leases that help us mitigate the impact of inflation. These provisions include negotiated rental increases, which historically range from 2% to 3% per year, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements. However, due to the long-term nature of existing leases, among other factors, the leases may not reset frequently enough to cover inflation.

In addition, inflation has also caused an increase in the cost of our variable-rate debt due to historically rising interest rates. See Item 7A, Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk, for a further discussion.

Scheduled Lease Expirations

Excluding our SHOP and integrated senior health campuses, as of December 31, 2024, our properties were 90.3% leased and, during 2025, 11.9% of the leased GLA is scheduled to expire. Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next 12 months. In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy. As of December 31, 2024, our remaining weighted average lease term was 6.8 years, excluding our SHOP and integrated senior health campuses.

Our combined SHOP and integrated senior health campuses were 87.2% leased as of December 31, 2024. Substantially all of our leases with residents at such properties are for a term of one year or less.

Results of Operations

Comparison of the Years Ended December 31, 2024 and 2023

Our operating results are primarily comprised of income derived from our portfolio of properties and expenses in connection with the acquisition and operation of such properties. Our primary sources of revenue include rent generated by our leased, non-RIDEA properties and resident fees and services revenue from our RIDEA properties. Our primary expenses include property operating expenses and rental expenses. In general, we expect such revenues and expenses related to our portfolio of RIDEA properties to increase in the future due to an overall increase in occupancies, resident fees and pricing of care services provided.

We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions. As of December 31, 2024, we operated through four reportable business segments: integrated senior health campuses, OM, SHOP and triple-net leased properties.

The most significant drivers behind changes in our consolidated results of operations for the year ended December 31, 2024, as compared to the year ended December 31, 2023, were primarily due to: the increase in resident occupancies and billing rates, partially offset by the adverse effect of inflation, which resulted in increases in the cost of labor, services, energy and supplies; our acquisitions and dispositions of investments subsequent to December 31, 2023; and the transition of the operations of certain leased senior housing and skilled nursing facilities from triple-net leased properties to a managed portfolio utilizing a RIDEA structure. Additional information behind the changes in our consolidated results of operations is discussed in more detail below. See Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, Note 3, Real Estate Investments, Net, and Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of our acquisitions and dispositions during 2024 and 2023.

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As of December 31, 2024 and 2023, we owned and/or operated the following types of properties (dollars in thousands):

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023"],["","Number of Buildings/ Campuses","","Aggregate Contract Purchase Price","","Leased % (1)","","Number of Buildings/ Campuses","","Aggregate Contract Purchase Price","","Leased % (1)"],["Integrated senior health campuses","126","","","$","2,020,596","","","88.0","%","","125","","","$","1,948,122","","","85.5","%"],["OM","84","","","1,205,145","","","87.9","%","","88","","","1,253,089","","","89.2","%"],["SHOP","84","","","934,306","","","85.4","%","","55","","","802,367","","","81.2","%"],["Triple-net leased properties","20","","","373,165","","","100","%","","28","","","469,965","","","100","%"],["Total/weighted average(2)","314","","","$","4,533,212","","","90.3","%","","296","","","$","4,473,543","","","91.3","%"]]
[[/GREPCENT_TABLE]]

___________

(1)Leased percentage includes all third-party leased space at our non-RIDEA properties (including master leases), except for our SHOP and integrated senior health campuses where leased percentage represents resident occupancy on the available units/beds therein.

(2)Weighted average leased percentage excludes our SHOP and integrated senior health campuses.

Revenues and Grant Income

Our primary sources of revenue include resident fees and services revenue generated by our RIDEA properties and rent from our leased, non-RIDEA properties. For the years ended December 31, 2024 and 2023, resident fees and services revenue primarily consisted of rental fees related to resident leases, extended health care fees and other ancillary services, and real estate revenue primarily consisted of base rent and expense recoveries. The amount of revenues generated by our RIDEA properties depends principally on our ability to maintain resident occupancy rates. The amount of revenues generated by our non-RIDEA properties is dependent on our ability to maintain tenant occupancy rates of currently leased space and to lease available space at the then existing rental rates. We also received grant income during 2023. Revenues and grant income by reportable segment consisted of the following for the periods presented below (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Resident Fees and Services Revenue"],["Integrated senior health campuses","$","1,619,812","","","$","1,481,880"],["SHOP","263,986","","","186,862"],["Total resident fees and services revenue","1,883,798","","","1,668,742"],["Real Estate Revenue"],["OM","134,740","","","146,068"],["Triple-net leased properties","52,130","","","44,333"],["Total real estate revenue","186,870","","","190,401"],["Grant Income"],["Integrated senior health campuses","\u2014","","","7,475"],["Total grant income","\u2014","","","7,475"],["Total revenues and grant income","$","2,070,668","","","$","1,866,618"]]
[[/GREPCENT_TABLE]]

Resident Fees and Services Revenue

For our integrated senior health campuses segment, we increased resident fees and services revenue by $137,932,000 for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to: (i) increased resident occupancy and higher resident fees as a result of an increase in billing rates and levels of care service provided; and (ii) an increase of $24,531,000 due to the expansion of our customer base, expansion of services offered and increases in billing rates for such services at ancillary business units within Trilogy Investors, LLC, or Trilogy.

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For our SHOP segment, we increased resident fees and services revenue by $77,124,000 for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to: (i) an increase of $43,750,000 due to the acquisition of 14 senior housing properties in Oregon in February 2024; (ii) an increase of $13,929,000 due to the transitioning of leased senior housing facilities in our Michigan ALF Portfolio to a managed portfolio utilizing a RIDEA structure in November 2023; (iii) an increase of $6,389,000 due to the acquisition of five senior housing properties in Washington in September 2024; (iv) an increase of $1,174,000 due to the acquisition of one senior housing property in Georgia in October 2024; and (v) increased resident occupancy and higher resident fees as a result of an increase in billing rates. Additionally, $6,026,000 of the increase in resident fees and services revenue for our SHOP segment for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to transitioning SNFs in our Central Wisconsin Senior Care Portfolio from triple-net leased properties to a managed portfolio utilizing a RIDEA structure in March 2023. Such increases in resident fees and services revenue in our SHOP segment were partially offset by a decrease of $12,599,000 due to real estate dispositions within our SHOP segment in 2023 and 2024.

Real Estate Revenue

For the year ended December 31, 2024, real estate revenue within our triple-net leased properties segment increased $7,797,000, as compared to the year ended December 31, 2023, primarily due to transitioning each of the leased SNFs in our Central Wisconsin Senior Care Portfolio to a managed portfolio utilizing a RIDEA structure in 2023 that resulted in the full amortization of an aggregate $8,073,000 of above-market leases recorded against real estate revenue in 2023, as well as a $1,966,000 increase in revenue due to the early extension of the lease at Crown Senior Care Portfolio located in the UK. Such increase was partially offset by a $2,358,000 decrease in real estate revenue generated from our Michigan ALF Portfolio prior to such transition to a managed portfolio utilizing a RIDEA structure in November 2023.

Real estate revenue for our OM segment decreased $11,328,000 for year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to dispositions of OM buildings during 2023 and 2024 and a slight decrease in occupancy.

Grant Income

For the year ended December 31, 2024, we did not recognize any grant income. For the year ended December 31, 2023, we recognized an aggregate $7,475,000 of grant income at our integrated senior health campuses and SHOP primarily related to government grants received through Coronavirus Aid, Relief, and Economic Security Act economic stimulus programs. As of April 2023, the federal government’s coronavirus public health emergency declaration expired, and certain relief measures have been wound down, and others are phased out.

Property Operating Expenses and Rental Expenses

Integrated senior health campuses and SHOP typically have a higher percentage of direct operating expenses to revenue and grant income than OM buildings and triple-net leased properties due to the nature of RIDEA-type facilities where we conduct day-to-day operations. Property operating expenses and property operating expenses as a percentage of resident fees and services revenue and grant income, as well as rental expenses and rental expenses as a percentage of real estate revenue, by reportable segment consisted of the following for the periods presented below (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Property Operating Expenses"],["Integrated senior health campuses","$","1,430,539","","","88.3","%","","$","1,335,817","","","89.7","%"],["SHOP","223,354","","","84.6","%","","166,493","","","89.1","%"],["Total property operating expenses","$","1,653,893","","","87.8","%","","$","1,502,310","","","89.6","%"],["Rental Expenses"],["OM","$","50,885","","","37.8","%","","$","54,457","","","37.3","%"],["Triple-net leased properties","2,354","","","4.5","%","","3,018","","","6.8","%"],["Total rental expenses","$","53,239","","","28.5","%","","$","57,475","","","30.2","%"]]
[[/GREPCENT_TABLE]]

For the year ended December 31, 2024, as compared to the year ended December 31, 2023, the increase in total property operating expenses for our integrated senior health campuses segment was predominately due to: (i) increased resident occupancy at the facilities within such segment; and (ii) an increase of $26,601,000 within Trilogy’s ancillary business units due to higher labor costs associated with the expansion of services offered and inflation’s impact on labor costs and other operating expenses.

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For the year ended December 31, 2024, as compared to the year ended December 31, 2023, total property operating expenses for our SHOP segment increased primarily due to: (i) an increase of $38,646,000 due to the acquisition of 14 senior housing properties in Oregon in February 2024; (ii) an increase of $15,102,000 due to the transitioning of the senior housing facilities in our Michigan ALF Portfolio from triple-net leased properties to a managed portfolio utilizing a RIDEA structure in November 2023; (iii) an increase of $4,536,000 due to the acquisition of five senior housing properties in Washington in September 2024; (iv) an increase of $1,071,000 due to the acquisition of one senior housing property in Georgia in October 2024; and (v) increased resident occupancy at the facilities within such segment. Additionally, $5,165,000 of the increase in total property operating expenses for our SHOP segment for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to transitioning the SNFs in our Central Wisconsin Senior Care Portfolio from triple-net leased properties to a managed portfolio utilizing a RIDEA structure in March 2023. Such increases in total property operating expenses for our SHOP segment were partially offset by a decrease of $14,285,000 due to real estate dispositions within our SHOP segment in 2023 and 2024.

Rental expenses for our OM segment decreased for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to the dispositions of OM buildings in 2023 and 2024.

Business Acquisition Expenses

For the year ended December 31, 2024, we recorded business acquisition expenses of $7,141,000 primarily related to $5,122,000 in aggregate acquisition costs incurred for properties operated under a RIDEA structure and included in our SHOP segment and $1,040,000 in aggregate costs incurred to purchase the noncontrolling interests in our real estate investments previously held by joint venture partners. For the year ended December 31, 2023, we recorded business acquisition expenses of $5,795,000 primarily due to: (i) $2,315,000 in aggregate transaction costs related to the transition of SNFs within the Central Wisconsin Senior Care Portfolio and the transition of senior housing facilities within the Michigan ALF Portfolio from triple-net leased properties to RIDEA structures in 2023; (ii) $2,105,000 of costs incurred in the pursuit of real estate and real estate-related investment opportunities; and (iii) $1,260,000 in aggregate acquisition costs for properties operated under a RIDEA structure and included in our SHOP segment.

Depreciation and Amortization

For the years ended December 31, 2024 and 2023, depreciation and amortization were $179,192,000 and $182,604,000, respectively, which primarily consisted of depreciation on our operating properties of $151,340,000 and $147,587,000, respectively, and amortization of our identified intangible assets of $25,186,000 and $32,323,000, respectively. For the year ended December 31, 2024, as compared to the year ended December 31, 2023, the decrease in depreciation and amortization of $3,412,000 was primarily due to the full amortization of an aggregate $6,635,000 of in-place leases related to the transition of the SNFs within our Central Wisconsin Senior Care Portfolio to a managed portfolio utilizing a RIDEA structure in March 2023 and the transition of the senior housing — leased facilities in our Michigan ALF Portfolio to a managed portfolio utilizing a RIDEA structure in November 2023. Such amounts were partially offset by the write-off of the remaining customer relationship intangible assets totaling $1,831,000, which were associated with a closed pharmacy within our integrated senior health campuses segment.

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Interest Expense

Interest expense, including gain or loss in fair value of derivative financial instruments, consisted of the following for the periods presented below (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Interest expense:"],["Lines of credit and term loan and derivative financial instruments","$","53,788","","","$","96,417"],["Mortgage loans payable","54,891","","","55,584"],["Amortization of deferred financing costs:"],["Lines of credit and term loan","2,934","","","3,060"],["Mortgage loans payable","2,561","","","2,284"],["Amortization of debt discount/premium, net","4,944","","","3,549"],["(Gain) loss in fair value of derivative financial instruments","(1,030)","","","926"],["Loss on debt and derivative extinguishments","5,382","","","345"],["Interest on finance lease liabilities","567","","","353"],["Interest expense on financing obligations and other liabilities","2,663","","","1,599"],["Total","$","126,700","","","$","164,117"]]
[[/GREPCENT_TABLE]]

The decrease in total interest expense for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to: (i) the payoff of $176,145,000 of variable-rate mortgage loans payable and paydown of $545,010,000 on our variable-rate lines of credit in February 2024 from the net proceeds received from the February 2024 Offering; (ii) the paydown of $194,000,000 on our variable-rate lines of credit in September 2024 from the net proceeds received from the September 2024 Offering; and (iii) the payoff of our remaining variable-rate mortgage loans payable and paydown of our variable-rate lines of credit in the fourth quarter of 2024 from the net proceeds received from the ATM Offering. Such decrease in total interest expense for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was partially offset by the $1,956,000 change from loss to gain in fair value of derivative financial instruments. See Note 8, Mortgage Loans Payable, Net, and Note 9, Lines of Credit and Term Loan, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of debt extinguishments.

Gain or Loss on Dispositions of Real Estate Investments

For the year ended December 31, 2024, we recognized an aggregate net gain on dispositions of our real estate investments of $5,213,000 primarily related to the sale of four OM buildings, one integrated senior health campus, eight triple-net leased properties and one land easement disposal on one of our OM properties. For the year ended December 31, 2023, we recognized an aggregate net gain on dispositions of our real estate investments of $32,472,000 primarily related to the sale of six SHOP within our Central Florida Senior Housing Portfolio and 16 OM buildings. See Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, and Note 3, Real Estate Investments, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Impairments

For the year ended December 31, 2024, as we continued to evaluate our properties based on their historical operating performance and our expected holding period, we determined that six of our OM, two of our integrated senior health campuses and two of our SHOP were impaired and recognized aggregate impairment charge of $45,755,000. For the year ended December 31, 2023, as we continued to evaluate additional non-strategic properties for sale, we recognized aggregate impairment charges of $13,899,000 for two of our SHOP within the Northern California Senior Housing Portfolio and for one of our OM buildings within the Homewood AL Portfolio. See Note 3, Real Estate Investments, Net — Impairment of Real Estate Investments, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of impairments of such real estate investments.

For the year ended December 31, 2024, we did not recognize impairment losses with respect to trade name intangible assets. For the year ended December 31, 2023, we recognized an impairment loss of $10,520,000 related to the write-off of trade name intangible assets at ancillary business units within Trilogy. See Note 6, Identified Intangible Assets and Liabilities, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of impairment of intangible assets.

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Gain on Re-measurement of Previously Held Equity Interest

For the year ended December 31, 2024, we did not recognize any gain on re-measurement of any previously held equity interest. For the year ended December 31, 2023, we recognized a $726,000 gain on re-measurement of the fair value of our previously held equity interest in Memory Care Partners, LLC. See Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of the acquisitions of previously held equity interests.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations, net proceeds from the issuances of equity securities, including through our ATM Offering, borrowings under our lines of credit and proceeds from the dispositions of real estate investments. For the next 12 months, our principal liquidity needs are to: (i) fund property operating expenses and general and administrative expenses; (ii) meet our debt service requirements (including principal and interest); (iii) fund development activities and capital expenditures; and (iv) make distributions to our stockholders, as required for us to continue to qualify as a REIT. We believe that the sources of liquidity described above will be sufficient to satisfy our cash requirements for the next 12 months and thereafter. We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Material Cash Requirements

Capital Improvement Expenditures

A capital plan for each investment is established upon acquisition that contemplates the estimated capital needs of that investment, including costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan also sets forth the anticipated sources of the necessary capital, which may include operating cash generated by the investment, capital reserves, a line of credit or other loan established with respect to the investment, other borrowings or additional equity investments from us and joint venture partners. The capital plan for each investment is adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs. As of December 31, 2024, we had $14,804,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures. Based on the budget for the properties we owned as of December 31, 2024, we estimated that expenditures for capital and tenant improvements as of such date are approximately $76,968,000 for 2025, although actual expenditures are predominantly discretionary and are dependent on many factors which are not presently known.

Contractual Obligations

The following table provides information with respect to: (i) the maturity and scheduled principal repayment of our secured mortgage loans payable and lines of credit and term loan; (ii) interest payments on our mortgage loans payable and lines of credit and term loan, excluding the effect of our interest rate swaps; (iii) ground and other lease obligations; and (iv) financing and other obligations as of December 31, 2024 (in thousands):

[[GREPCENT_TABLE]]
[["","Payments Due by Period"],["","2025","","2026-2027","","2028-2029","","Thereafter","","Total"],["Principal payments \u2014 fixed-rate debt","$","32,327","","","$","217,228","","","$","156,909","","","$","598,260","","","$","1,004,724"],["Interest payments \u2014 fixed-rate debt","36,495","","","63,271","","","45,967","","","324,342","","","470,075"],["Principal payments \u2014 variable-rate debt","32","","","550,000","","","139,000","","","\u2014","","","689,032"],["Interest payments \u2014 variable-rate debt (based on rates in effect as of December 31, 2024)","39,610","","","49,213","","","970","","","\u2014","","","89,793"],["Ground and other lease obligations","31,073","","","62,555","","","61,208","","","94,926","","","249,762"],["Financing obligations and other obligations","4,363","","","8,244","","","35,500","","","92","","","48,199"],["Total","$","143,900","","","$","950,511","","","$","439,554","","","$","1,017,620","","","$","2,551,585"]]
[[/GREPCENT_TABLE]]

Distributions and Share Repurchases

For information on distributions, see Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions, and the “Distributions” section below. For information on our share repurchase plan, see Note 13, Equity — Share Repurchase Plan, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

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Credit Facilities

As of December 31, 2024, we are party to a credit agreement, as amended, with an aggregate maximum principal amount up to $1,150,000,000, or the 2024 Credit Facility. In addition, we are party to an agreement, as amended, regarding a senior secured revolving credit facility with an aggregate maximum principal amount of $400,000,000, or the Trilogy Credit Facility. See Note 9, Lines of Credit and Term Loan, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

As of December 31, 2024, our borrowing capacity under the 2024 Credit Facility was $1,150,000,000. As of December 31, 2024, our borrowings outstanding under such credit facility was $689,000,000 and we had $461,000,000 available on such facility. We believe that such resource will be sufficient to satisfy our cash requirements for the next 12 months and the longer term thereafter.

Cash Flows

The following table sets forth changes in cash flows (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Cash, cash equivalents and restricted cash \u2014 beginning of period","$","90,782","","","$","111,906"],["Net cash provided by operating activities","176,087","","","98,535"],["Net cash (used in) provided by investing activities","(8,734)","","","9,396"],["Net cash used in financing activities","(134,743)","","","(129,062)"],["Effect of foreign currency translation on cash, cash equivalents and restricted cash","(91)","","","7"],["Cash, cash equivalents and restricted cash \u2014 end of period","$","123,301","","","$","90,782"]]
[[/GREPCENT_TABLE]]

The following summary discussion of our changes in our cash flows is based on our accompanying consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Operating Activities

For the years ended December 31, 2024 and 2023, cash flows provided by operating activities were primarily related to property operations, offset by payments of general and administrative expenses and interest payments on our outstanding indebtedness. In general, cash flows from operating activities are affected by the timing of cash receipts and payments, and have increased since 2022 primarily due to improved resident occupancy and expense management at our properties operated under a RIDEA structure. The increase in net cash provided by operating activities for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily driven by the increase in operating performance of our real estate investments in our integrated senior health campuses and SHOP segments, as well as a decrease in interest paid on our outstanding indebtedness as a result of mortgage payoffs and paydowns on our lines of credit using net proceeds from the February 2024 Offering, September 2024 Offering and ATM Offering. See the “Results of Operations” section above for further discussion.

Investing Activities

For the year ended December 31, 2024, as compared to the year ended December 31, 2023, the change from net cash provided by investing activities to net cash used in investing activities was primarily due to a $43,260,000 decrease in proceeds from dispositions of real estate investments and a $14,970,000 increase in cash paid to acquire real estate investments, partially offset by a $16,765,000 change from net issuance of real estate notes receivable to net principal repayments on real estate notes receivable, a $12,357,000 decrease in investments in unconsolidated entities and a $7,851,000 decrease in developments and capital expenditures. See Note 3, Real Estate Investments, Net and Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of our acquisitions and dispositions.

Financing Activities

For the year ended December 31, 2024, as compared to the year ended December 31, 2023, the increase in net cash used in financing activities was primarily due to the closing of the February 2024 Offering and the September 2024 Offering, as well as the commencement of the ATM Offering, that resulted in an aggregate $1,364,256,000 in gross offering proceeds from the issuance of Common Stock and a decrease of $11,128,000 in net payments on financing and other obligations. Such amounts were partially offset by: (i) a $988,993,000 change from net borrowings to net payments on our lines of credit and mortgage loans payable, primarily using the net proceeds from the February 2024 Offering, the September 2024 Offering and the ATM

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Offering for such payments; (ii) a $258,001,000 in cash paid to purchase the noncontrolling interest in Trilogy REIT Holdings LLC held by a joint venture partner; (iii) a $71,234,000 increase in the payment of offering costs primarily due to our equity offering activity in 2024 noted above; (iv) a $44,611,000 increase in distributions paid to common stockholders resulting from the increase in shares issued during 2024; and (v) a $18,933,000 increase in cash paid to redeem certain equity interests owned in Trilogy Investors, LLC.

During 2023, we repaid our lines of credits primarily from operating cash flows, net proceeds from dispositions and proceeds from long-term mortgage loans payable financed at lower interest rates. The increase in cash used to pay distributions to common stockholders was primarily due to our board’s suspension of our distribution reinvestment plan, or DRIP, offering beginning with distributions declared for the quarter ending December 31, 2022. The decrease in cash used to repurchase our common stock was primarily due to our board’s suspension of our share repurchase plan beginning with share repurchase requests for the quarter ending December 31, 2022. In February 2025, our board approved the termination of our DRIP and our share purchase plan terminated pursuant to its own terms.

Distributions

The following table reflects the income tax treatment for distributions reportable for the periods presented below (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Ordinary income","$","89,325","","","74.6","%","","$","2,208","","","2.9","%"],["Capital gain","8,769","","","7.3","","","\u2014","","","\u2014"],["Return of capital","21,629","","","18.1","","","73,614","","","97.1"],["","$","119,723","","","100","%","","$","75,822","","","100","%"]]
[[/GREPCENT_TABLE]]

Amounts listed above do not include distributions paid on nonvested shares of our restricted common stock which have been separately reported.

The following tables reflect distributions we paid for the periods presented below, along with the amount of distributions reinvested pursuant to our DRIP offering, as applicable, and the sources of distributions as compared to cash flows from operations or funds from operations attributable to controlling interest, or FFO, a non-GAAP financial measure (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["2024","","2023"],["Distributions paid in cash","$","120,895","","","","","$","76,284"],["Distributions reinvested","\u2014","","","","","\u2014"],["","$","120,895","","","","","$","76,284"],["Sources of distributions:"],["Cash flows from operations","$","120,895","","","100","%","","$","76,284","","","100","%"],["Proceeds from borrowings","\u2014","","","\u2014","","","\u2014","","","\u2014"],["","$","120,895","","","100","%","","$","76,284","","","100","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["2024","","2023"],["Distributions paid in cash","$","120,895","","","","","$","76,284"],["Distributions reinvested","\u2014","","","","","\u2014"],["","$","120,895","","","","","$","76,284"],["Sources of distributions:"],["FFO attributable to controlling interest","$","120,895","","","100","%","","$","65,567","","","86.0","%"],["Proceeds from borrowings","\u2014","","","\u2014","","","10,717","","","14.0"],["","$","120,895","","","100","%","","$","76,284","","","100","%"]]
[[/GREPCENT_TABLE]]

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As of December 31, 2024, any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and some portion of a distribution to our stockholders may have been paid from borrowings. For a further discussion of FFO, including a reconciliation of our GAAP net loss to FFO, see “Funds from Operations and Normalized Funds from Operations” below.

See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions, for a further discussion of our distributions.

Financing

Mortgage Loans Payable, Net

For a discussion of our mortgage loans payable, see Note 8, Mortgage Loans Payable, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Lines of Credit and Term Loan

For a discussion of our lines of credit and term loan, see Note 9, Lines of Credit and Term Loan, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

REIT Requirements

In order to maintain our qualification as a REIT for U.S. federal income tax purposes, we are required to distribute to our stockholders a minimum of 90.0% of our REIT taxable income. Existing Internal Revenue Service, or IRS, guidance includes a safe harbor pursuant to which publicly offered REITs can satisfy the distribution requirement by distributing a combination of cash and stock to stockholders. In general, to qualify under the safe harbor, each stockholder must elect to receive either cash or stock, and the aggregate cash component of the distribution to stockholders must represent at least 20.0% of the total distribution. In the event that there is a shortfall in net cash available due to factors including, without limitation, the timing of such distributions or the timing of the collection of receivables, we may seek to obtain capital to make distributions by means of unsecured and secured debt financing through one or more unaffiliated third parties. We may also make distributions with cash from capital transactions including, without limitation, the sale of one or more of our properties.

Commitments and Contingencies

For a discussion of our commitments and contingencies, see Note 11, Commitments and Contingencies, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Debt Service Requirements

A significant liquidity need is the payment of principal and interest on our outstanding indebtedness. As of December 31, 2024, we had $1,004,724,000 of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties. As of December 31, 2024, we had $689,032,000 outstanding and $860,968,000 remained available under our lines of credit. The weighted average effective interest rate on our outstanding debt factoring in our interest rate swaps was 4.41% per annum. See Note 8, Mortgage Loans Payable, Net, and Note 9, Lines of Credit and Term Loan, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

We are required by the terms of certain loan documents to meet various financial and non-financial covenants, such as leverage ratios, net worth ratios, debt service coverage ratios and fixed charge coverage ratios. As of December 31, 2024, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loan. If any future covenants are violated, we anticipate seeking a waiver or amending the debt covenants with the lenders when and if such event should occur. However, there can be no assurances that management will be able to effectively achieve such plans.

Related Party Transactions

For a discussion of related party transactions, see Note 14, Related Party Transactions, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

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Funds from Operations and Normalized Funds from Operations

Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, a non-GAAP financial measure, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. The use of funds from operations is recommended by the REIT industry as a supplemental performance measure, and our management uses FFO to evaluate our performance over time. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on funds from operations approved by the Board of Governors of NAREIT, or the White Paper. The White Paper defines funds from operations as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets, gains or losses upon consolidation of a previously held equity interest and impairment writedowns of certain real estate assets and investments, plus depreciation and amortization related to real estate, and after adjustments for unconsolidated partnerships and joint ventures. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that impairments are based on estimated future undiscounted cash flows. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations. Our FFO calculation complies with NAREIT’s policy described above.

Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate-related depreciation and amortization and impairments, provides a further understanding of our operating performance to investors, industry analysts and our management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, which may not be immediately apparent from net income (loss).

We define normalized FFO attributable to controlling interest, or Normalized FFO, as FFO further adjusted for the following items included in the determination of GAAP net income (loss): expensed acquisition fees and costs, which we refer to as business acquisition expenses; amounts relating to changes in deferred rent and amortization of above- and below-market leases; the non-cash impact of changes to our equity instruments; non-cash or non-recurring income or expense; the non-cash effect of income tax benefits or expenses; capitalized interest; impairment of intangible assets and goodwill; amortization of closing costs on debt security investments; mark-to-market adjustments included in net income (loss); gains or losses included in net income (loss) from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan; and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect Normalized FFO on the same basis.

However, FFO and Normalized FFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) as an indicator of our operating performance, GAAP cash flows from operations as an indicator of our liquidity or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and Normalized FFO measures and the adjustments to GAAP in calculating FFO and Normalized FFO.

Presentation of this information is intended to provide useful information to investors, industry analysts and management as they compare the operating performance used by the REIT industry, although it should be noted that not all REITs calculate funds from operations and normalized funds from operations the same way, so comparisons with other REITs may not be meaningful. FFO and Normalized FFO should be reviewed in conjunction with other measurements as an indication of our performance.

None of the SEC, NAREIT or any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or Normalized FFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and we would have to adjust our calculation and characterization of FFO or Normalized FFO.

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Net loss","$","(35,600)","","","$","(76,887)"],["Depreciation and amortization related to real estate \u2014 consolidated properties","179,040","","","182,452"],["Depreciation and amortization related to real estate \u2014 unconsolidated entities","1,186","","","401"],["Impairment of real estate investments \u2014 consolidated properties","45,755","","","13,899"],["Gain on dispositions of real estate investments, net \u2014 consolidated properties","(5,213)","","","(32,472)"],["Net (income) loss attributable to noncontrolling interests","(2,212)","","","5,418"],["Gain on re-measurement of previously held equity interest","\u2014","","","(726)"],["Depreciation, amortization, impairments, net gain/loss on dispositions and gain on re-measurements \u2014 noncontrolling interests","(17,851)","","","(26,518)"],["NAREIT FFO attributable to controlling interest","$","165,105","","","$","65,567"],["Business acquisition expenses","$","7,141","","","$","5,795"],["Amortization of above- and below-market leases","1,692","","","9,744"],["Amortization of closing costs \u2014 debt security investment","324","","","278"],["Change in deferred rent","(2,411)","","","1,149"],["Non-cash impact of changes to equity instruments","9,367","","","5,621"],["Capitalized interest","(334)","","","(163)"],["Loss on debt and derivative extinguishments","5,382","","","345"],["(Gain) loss in fair value of derivative financial instruments","(1,030)","","","926"],["Foreign currency loss (gain)","774","","","(2,307)"],["Impairment of intangible assets","\u2014","","","10,520"],["Adjustments for unconsolidated entities","(320)","","","(321)"],["Adjustments for noncontrolling interests","(768)","","","(4,786)"],["Normalized FFO attributable to controlling interest","$","184,922","","","$","92,368"]]
[[/GREPCENT_TABLE]]

Net Operating Income

Net operating income, or NOI, is a non-GAAP financial measure that is defined as net income (loss), computed in accordance with GAAP, generated from properties before general and administrative expenses, business acquisition expenses, depreciation and amortization, interest expense, gain or loss in fair value of derivative financial instruments, gain or loss on dispositions of real estate investments, impairment of real estate investments, impairment of intangible assets and goodwill, income or loss from unconsolidated entities, gain on re-measurement of previously held equity interests, foreign currency gain or loss, other income or expense and income tax benefit or expense.

NOI is not equivalent to our net income (loss) as determined under GAAP and may not be a useful measure in measuring operational income or cash flows. Furthermore, NOI should not be considered as an alternative to net income (loss) as an indication of our operating performance or as an alternative to cash flows from operations as an indication of our liquidity. NOI should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss). NOI should be reviewed in conjunction with other measurements as an indication of our performance.

We believe that NOI is an appropriate supplemental performance measure to reflect the performance of our operating assets because NOI excludes certain items that are not associated with the operations of the properties. We believe that NOI is a widely accepted measure of comparative operating performance in the real estate community and is useful to investors in understanding the profitability and operating performance of our property portfolio. However, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

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To facilitate understanding of this financial measure, the following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to NOI for the periods presented below (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Net loss","$","(35,600)","","","$","(76,887)"],["General and administrative","47,559","","","47,510"],["Business acquisition expenses","7,141","","","5,795"],["Depreciation and amortization","179,192","","","182,604"],["Interest expense","127,730","","","163,191"],["(Gain) loss in fair value of derivative financial instruments","(1,030)","","","926"],["Gain on dispositions of real estate investments, net","(5,213)","","","(32,472)"],["Impairment of real estate investments","45,755","","","13,899"],["Impairment of intangible assets","\u2014","","","10,520"],["Loss from unconsolidated entities","6,868","","","1,718"],["Gain on re-measurement of previously held equity interest","\u2014","","","(726)"],["Foreign currency loss (gain)","774","","","(2,307)"],["Other income, net","(11,353)","","","(7,601)"],["Income tax expense","1,713","","","663"],["Net operating income","$","363,536","","","$","306,833"]]
[[/GREPCENT_TABLE]]