BROOKDALE SENIOR LIVING INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements in this Quarterly Report on Form 10-Q may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are subject to
various risks and uncertainties and include all statements that are not
historical statements of fact and those regarding our intent, belief or
expectations. Forward-looking statements are generally identifiable by use of
forward-looking terminology such as "may," "will," "should," "could," "would,"
"potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate,"
"believe," "project," "predict," "continue," "plan," "target," or other similar
words or expressions. These forward-looking statements are based on certain
assumptions and expectations, and our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Although we
believe that expectations reflected in any forward-looking statements are based
on reasonable assumptions, we can give no assurance that our assumptions or
expectations will be attained and actual results and performance could differ
materially from those projected. Factors which could have a material adverse
effect on our operations and future prospects or which could cause events or
circumstances to differ from the forward-looking statements include, but are not
limited to, the impacts of the COVID-19 pandemic, including the response efforts
of federal, state, and local government authorities, businesses, individuals,
and us on our business, results of operations, cash flow, revenue, expenses,
liquidity, and our strategic initiatives, including plans for future growth,
which will depend on many factors, some of which cannot be foreseen, including
the duration, severity, and breadth of the pandemic and any resurgence or
variants of the disease, including the Delta variant, the impact of COVID-19 on
the nation's economy and debt and equity markets and the local economies in our
markets, the development, availability, utilization, and efficacy of COVID-19
testing, therapeutic agents, and vaccines and the prioritization of such
resources among businesses and demographic groups, government financial and
regulatory relief efforts that may become available to business and individuals,
including our ability to qualify for and satisfy the terms and conditions of
financial relief, perceptions regarding the safety of senior living communities
during and after the pandemic, changes in demand for senior living communities
and our ability to adapt our sales and marketing efforts to meet that demand,
the impact of COVID-19 on our residents' and their families' ability to afford
our resident fees, including due to changes in unemployment rates, consumer
confidence, housing markets, and equity markets caused by COVID-19, changes in
the acuity levels of our new residents, the disproportionate impact of COVID-19
on seniors generally and those residing in our communities, the duration and
costs of our response efforts, including increased equipment, supplies, labor,
litigation, testing, vaccination clinic, and other expenses, potentially greater
associate attrition and use of contract labor due to our associate vaccine
mandate, the impact of COVID-19 on our ability to complete financings and
refinancings of various assets, or other transactions or to generate sufficient
cash flow to cover required interest and lease payments and to satisfy financial
and other covenants in our debt and lease documents, increased regulatory
requirements, including unfunded, mandatory testing, increased enforcement
actions resulting from COVID-19, government action that may limit our collection
or discharge efforts for delinquent accounts, and the frequency and magnitude of
legal actions and liability claims that may arise due to COVID-19 or our
response efforts; events which adversely affect the ability of seniors to afford
resident fees, including downturns in the economy, housing market, consumer
confidence, or the equity markets and unemployment among resident family
members; changes in reimbursement rates, methods, or timing under governmental
reimbursement programs including the Medicare and Medicaid programs; the impact
of ongoing healthcare reform efforts; the effects of senior housing construction
and development, lower industry occupancy (including due to the pandemic), and
increased competition; conditions of housing markets, regulatory changes, acts
of nature, and the effects of climate change in geographic areas where we are
concentrated; terminations of our resident agreements and vacancies in the
living spaces we lease, including due to the pandemic; limits on our ability to
use net operating loss carryovers to reduce future tax payments; failure to
maintain the security and functionality of our information systems, to prevent a
cybersecurity attack or breach, or to comply with applicable privacy and
consumer protection laws, including HIPAA; our ability to complete our capital
expenditures in accordance with our plans; our ability to identify and pursue
development, investment and acquisition opportunities and our ability to
successfully integrate acquisitions; competition for the acquisition of assets;
our ability to complete pending or expected disposition, acquisition, or other
transactions on agreed upon terms or at all, including in respect of the
satisfaction of closing conditions, the risk that regulatory approvals are not
obtained or are subject to unanticipated conditions, and uncertainties as to the
timing of closing, and our ability to identify and pursue any such opportunities
in the future; risks related to the implementation of our strategy, including
initiatives undertaken to execute on our strategic priorities and their effect
on our results; delays in obtaining regulatory approvals; disruptions in the
financial markets or decreases in the appraised values, performance, or
occupancy of our communities that affect our ability to obtain financing or
extend or refinance debt as it matures and our financing costs; our ability to
generate sufficient cash flow to cover required interest and long-term lease
payments and to fund our planned capital projects; the effect of our
non-compliance with any of our debt or lease agreements (including the financial
covenants contained therein), including the risk of lenders or lessors declaring
a cross default in the event of our non-compliance with any such agreements and
the risk of loss of our property securing leases and indebtedness due to any
resulting lease terminations and foreclosure actions; the effect of our
indebtedness and long-term leases on our liquidity; the potential phasing out of
LIBOR which may increase the costs of our debt obligations; our ability to
obtain additional capital on terms acceptable to us;

                                       28
--------------------------------------------------------------------------------

departures of key officers and potential disruption caused by changes in
management; increased competition for or a shortage of personnel (including due
to the pandemic or general labor market conditions), wage pressures resulting
from increased competition, low unemployment levels, minimum wage increases and
changes in overtime laws, and union activity; environmental contamination at any
of our communities; failure to comply with existing environmental laws; an
adverse determination or resolution of complaints filed against us, including
class action and stockholder derivative complaints; the cost and difficulty of
complying with increasing and evolving regulation; costs to respond to, and
adverse determinations resulting from, government reviews, audits and
investigations; unanticipated costs to comply with legislative or regulatory
developments; the risks associated with current global economic conditions and
general economic factors such as inflation, the consumer price index, commodity
costs, fuel and other energy costs, costs of salaries, wages, benefits, and
insurance, interest rates, and tax rates; the impact of seasonal contagious
illness or an outbreak of COVID-19 or other contagious disease in the markets in
which we operate; actions of activist stockholders, including a proxy contest;
as well as other risks detailed from time to time in our filings with the
Securities and Exchange Commission, including those set forth under "Item 1A.
Risk Factors" contained in our Annual Report on Form 10-K for the year ended
December 31, 2020 and Part II, "Item 1A. Risk Factors" and elsewhere in this
Quarterly Report on Form 10-Q. When considering forward-looking statements, you
should keep in mind the risk factors and other cautionary statements in such SEC
filings. Readers are cautioned not to place undue reliance on any of these
forward-looking statements, which reflect management's views as of the date of
this Quarterly Report on Form 10-Q. We cannot guarantee future results, levels
of activity, performance or achievements, and, except as required by law, we
expressly disclaim any obligation to release publicly any updates or revisions
to any forward-looking statements contained in this Quarterly Report on Form
10-Q to reflect any change in our expectations with regard thereto or change in
events, conditions or circumstances on which any statement is based.

                                       29
--------------------------------------------------------------------------------

Overview

We are the nation's premier operator of senior living communities, operating and
managing 682 communities in 41 states as of September 30, 2021, with the ability
to serve more than 60,000 residents. We offer our residents access to a broad
continuum of services across the most attractive sectors of the senior living
industry. We operate and manage independent living, assisted living, memory
care, and continuing care retirement communities ("CCRCs").

Our goal is to be the first choice in senior living by being the nation's most
trusted and effective senior living provider and employer. Our senior living
communities and our comprehensive network help to provide seniors with care and
services in an environment that feels like home. Our expertise in healthcare,
hospitality, and real estate provides residents with opportunities to improve
wellness, pursue passions, and stay connected with friends and loved ones. By
providing residents with a range of service options as their needs change, we
provide greater continuity of care, enabling seniors to age-in-place, which we
believe enables them to maintain residency with us for a longer period of time.
The ability of residents to age-in-place is also beneficial to our residents and
their families who are concerned with care decisions for their elderly
relatives.

As of September 30, 2021, we operated in four business segments: Independent
Living; Assisted Living and Memory Care; CCRCs; and Management Services. Prior
to July 1, 2021, we had an additional reportable segment, Health Care Services.
On July 1, 2021, we sold 80% of our equity in the Health Care Services segment,
through which we formerly provided home health, hospice, and outpatient therapy
services to our residents and seniors living outside our communities. For
periods beginning July 1, 2021, the results of operations and financial position
of the Health Care Services segment are deconsolidated from our consolidated
financial statements and our 20% equity interest in the Health Care Services
venture ("HCS Venture") is accounted for under the equity method of accounting.

COVID-19 Pandemic Update

The COVID-19 pandemic has significantly disrupted the senior living industry and
our business. The health and wellbeing of our residents, patients, and
associates is and has been our highest priority as we continue to serve and care
for seniors through the COVID-19 pandemic. In addition to the updates below,
readers are directed to the "COVID-19 Pandemic" section of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the year ended December 31, 2020
filed with the Securities and Exchange Commission ("SEC") on February 25, 2021
for more information about the impact of the pandemic and our response efforts
on our business, results of operations, and financial condition.

Vaccine Update. By April 9, 2021, we completed at least three rounds of COVID-19
vaccine clinics at all of our communities through the Pharmacy Partnership for
Long-Term Care Program offered through the U.S. Centers for Disease Control and
Prevention ("CDC"). Upon completion of such clinics, our COVID-19 positive
resident caseload had decreased by 97% since the peak in mid-December 2020. As
of October 31, 2021, our resident vaccine acceptance rate was 95%. The CDC has
recently recommended that certain populations, including residents in long-term
care settings, should receive a COVID-19 booster dose. We have completed booster
vaccine clinics in the vast majority of our communities. We have adopted a
policy requiring our associates to be vaccinated against COVID-19, subject to
limited exceptions, which we are implementing in a phased approach beginning
with our corporate associates and field and community leadership.


                                       30
--------------------------------------------------------------------------------

Rebuilding Occupancy. We continue to execute on key initiatives to rebuild
occupancy lost due to the pandemic. Our consolidated senior housing monthly net
move-ins and move-outs turned positive in March 2021 for the first time since
the pandemic began. Beginning in March 2021, we have achieved eight consecutive
months of weighted average consolidated senior housing occupancy growth on a
sequential basis. According to data from the National Investment Center for the
Seniors Housing & Care Industry ("NIC"), seniors housing occupancy increased 120
basis points from the second quarter to the third quarter of 2021 for stabilized
portfolios. Our weighted average consolidated senior housing occupancy increased
200 basis points sequentially for the third quarter of 2021 compared to the
second quarter of 2021. During the three months ended September 30, 2021, the
nationwide spread of the Delta variant caused some moderation in our sequential
monthly occupancy growth rate. We believe that some potential residents and
their families were more cautious, or temporarily delayed their decision
regarding, moving into senior living communities in certain areas as the Delta
variant spread. The table below sets forth our consolidated occupancy trend
during the pandemic.
                        Q1       Q2       Q3       Q4       Q1       Q2       Q3
                       2020     2020     2020     2020     2021     2021     2021
Weighted average      83.2  %  78.7  %  75.3  %  72.7  %  69.6  %  70.5  %  72.5  %
Quarter end           82.2  %  77.8  %  75.0  %  71.5  %  70.6  %  72.6  %  74.2  %



                            January         February         March         April          May          June          July         August         September        October
                              2021            2021           2021          2021          2021          2021          2021          2021            2021             2021
Weighted average                70.0  %          69.4  %       69.4  %       69.9  %       70.5  %       71.2  %       72.0  %       72.5  %           73.0  %        73.3  %
Month end                       70.4  %          70.1  %       70.6  %       71.1  %       71.6  %       72.6  %       73.3  %       73.7  %           74.2  %        74.5  %



As of July 31, 2021, all of our communities were open for visitors, new resident
move-ins, and prospective residents. During the three months ended September 30,
2021, several of our communities experienced restrictions on visitors, new
resident move-ins, and prospective residents, with a peak of such restrictions
occurring in mid-September 2021. As of October 31, 2021, substantially all of
our communities were open for visitors, new resident move-ins, and prospective
residents. We may revert to more restrictive measures at our communities,
including restrictions on visitors and move-ins, if the pandemic worsens, as
necessary to comply with regulatory requirements, or at the direction of state
or local health authorities. We cannot predict with reasonable certainty whether
or when our occupancy will return to pre-COVID-19 pandemic levels or the extent
to which the pandemic's effect on occupancy may adversely affect the amount of
resident fees we are able to collect from our residents.

Revenue and Expense Impacts. Compared to our pre-pandemic expectations for
fiscal 2020, we estimate that the pandemic resulted in $76.4 million and $303.4
million of lost resident fee revenue for the three and nine months ended
September 30, 2021, respectively. Estimated lost resident fee revenue includes
$76.4 million and $252.4 million in our consolidated senior housing portfolio
for the three and nine months ended September 30, 2021, respectively, and $51.0
million in our Health Care Services segment for the nine months ended
September 30, 2021. On a cumulative basis through September 30, 2021, we
estimate that the pandemic has resulted in approximately $584.5 million of lost
resident fee revenue, including $480.9 million in our consolidated senior
housing portfolio. The estimated lost revenue represents the difference between
the actual resident fee revenue for the period and our pre-pandemic expectations
for the 2020 period.

For the three and nine months ended September 30, 2021, we recognized
$7.2 million and $44.3 million, respectively, of facility operating expense for
incremental direct costs to respond to the pandemic. For the three and nine
months ended September 30, 2020, we recognized $24.5 million and $95.1 million,
respectively, of such facility operating expense. The direct costs include those
for: acquisition of additional personal protective equipment ("PPE"), medical
equipment, and cleaning and disposable food service supplies; enhanced cleaning
and environmental sanitation; increased employee-related costs, including labor,
workers compensation, and health plan expense; increased expense for general
liability claims; and COVID-19 testing of residents and associates where not
otherwise covered by government payor or third-party insurance sources. On a
cumulative basis through September 30, 2021, we have incurred $169.8 million of
pandemic related facility operating expense since the beginning of fiscal 2020.
For the three and nine months ended September 30, 2021, we recorded $0.6 million
and $13.4 million, respectively, of non-cash impairment charges in our operating
results for our operating lease right-of-use assets and property, plant and
equipment and leasehold intangibles, primarily due to the COVID-19 pandemic and
lower than expected operating performance at communities with impaired assets.
For the three and nine months ended September 30, 2020, we recorded $8.2 million
and $95.2 million, respectively, of such non-cash impairment charges.

Liquidity. We have taken, and continue to take, actions to enhance and preserve
our liquidity in response to the pandemic. As of September 30, 2021, our total
liquidity was $645.8 million, consisting of $478.5 million of unrestricted cash
and cash equivalents, $157.9 million of marketable securities, and $9.4 million
of availability on our secured credit facility. We continue to seek
opportunities to enhance and preserve our liquidity, including through
increasing occupancy and maintaining expense

                                       31
--------------------------------------------------------------------------------

discipline, continuing to evaluate our financing structure and the state of debt
markets, and seeking further government-sponsored financial relief related to
the pandemic. There is no assurance that debt financing will continue to be
available on terms consistent with our expectations or at all, or that our
efforts will be successful in seeking further government-sponsored financial
relief or regarding the amount of, or conditions required to qualify for, any
such relief.

Financial Relief. The Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act"), signed into law on March 27, 2020, and Paycheck Protection Program and Health Care Enhancement Act, signed into law on April 24, 2020, provide liquidity and financial relief to certain businesses, among other things. Certain impacts of such programs are provided below.

•During the nine months ended September 30, 2021, we accepted $0.8 million of
cash from grants from the Public Health and Social Services Emergency Fund
("Provider Relief Fund") administered by the U.S. Department of Health and Human
Services ("HHS"), under which grants have been made available to eligible
healthcare providers for healthcare related expenses or lost revenues
attributable to COVID-19. The grants received in the nine months ended
September 30, 2021 represented incentive payments made pursuant to the Nursing
Home Infection Control Distribution, which related to our skilled nursing care
provided through our CCRCs.

In September 2021, HHS announced that it has allocated $17.0 billion for a Phase
4 general distribution from the Provider Relief Fund. According to HHS guidance,
it intends to allocate 75% of the Phase 4 general distribution based on eligible
applicants' changes in revenues and operating expenses from patient care
attributable to COVID-19 for the second half of 2020 and the first quarter of
2021, with smaller providers to receive a supplement in addition to a base
payment. HHS will determine the exact amount of the base payments and
supplements after analyzing data from all the applications received. HHS intends
to allocate 25% of the Phase 4 general distribution for bonus payments that are
based on the amount and type of services provided to Medicaid, Children's Health
Insurance Program ("CHIP"), and Medicare patients. We applied for the Phase 4
general distribution and intend to pursue any additional funding that may become
available. There can be no assurance that we will qualify for, or receive, such
future grants in the amount we expect, that additional restrictions on the
permissible uses or terms and conditions of the grants will not be imposed by
HHS, or that future funding programs will be made available for which we
qualify.

•During the year ended December 31, 2020, we received $87.5 million under the
Accelerated and Advance Payment Program administered by the Centers for Medicare
& Medicaid Services ("CMS"), $75.2 million of which related to our Health Care
Services segment and $12.3 million related to our CCRCs segment and of which
$2.5 million and $87.5 million was received in the three and nine months ended
September 30, 2020, respectively. Recoupment of advanced payments began one year
after payments were issued at a rate of 25% of Medicare payments for the first
eleven months following the anniversary of issuance and at a rate of 50% of
Medicare payments for the next six months. Any outstanding balance of advanced
payments will be due following such recoupment period. During the three and nine
months ended September 30, 2021, $3.5 million and $17.8 million, respectively,
of the advanced payments were recouped. Pursuant to the sale of 80% of our
equity in our Health Care Services segment (as described below), $63.6 million
of such obligations related to our Health Care Services segment were retained by
the unconsolidated HCS Venture. As of September 30, 2021, the outstanding
balance of advanced payments related to our CCRCs segment was $6.1 million, of
which we expect recoupment of approximately $3.0 million during the three months
ended December 31, 2021 and the remainder in 2022.

•During the year ended December 31, 2020, we deferred payment of $72.7 million
of the employer portion of social security payroll taxes incurred from March 27,
2020 through December 31, 2020 pursuant to the CARES Act. One-half of such
deferral amount will become due on each of December 31, 2021 and December 31,
2022. Pursuant to the sale of 80% of our equity in our Health Care Services
segment, $9.6 million of such obligations related to our Health Care Services
segment were retained by the unconsolidated HCS Venture. We expect to pay
$31.6 million of the deferred payments in both December 2021 and 2022.

•We are eligible to claim the employee retention credit for certain of our
associates under the CARES Act. The credit for 2020 is available to employers
that fully or partially suspended operations during any calendar quarter in 2020
due to orders from an appropriate governmental authority limiting commerce,
travel, or group meetings due to COVID-19, and is equal to 50% of qualified
wages paid after March 12, 2020 through December 31, 2020 to qualified
employees, with a maximum credit of $5,000 per employee. During the nine months
ended September 30, 2021, we recognized $9.9 million of employee retention
credits on wages paid from March 12, 2020 to December 31, 2020 within other
operating income, of which none were recognized during the three months ended
September 30, 2021. During the three and nine months ended September 30, 2021,
we received $1.1 million for the employee retention credits, which were
previously recognized within other operating income. The credit was modified and
extended by subsequent legislation for wages paid from January 1, 2021 through
December 31, 2021, and we are assessing our eligibility to claim such credit.
There can be no assurance that we will qualify for, or receive, credits in the
amount or on the timing we expect.

                                       32
--------------------------------------------------------------------------------

In addition to the grants described above, during the three and nine months ended September 30, 2021, we received and recognized $0.1 million and $1.4 million, respectively, of other operating income from grants from other government sources.

We cannot predict with reasonable certainty the impacts that COVID-19 ultimately
will have on our business, results of operations, cash flow, and liquidity, and
our response efforts may continue to delay or negatively impact our strategic
initiatives, including plans for future growth. The ultimate impacts of COVID-19
will depend on many factors, some of which cannot be foreseen, including the
duration, severity, and breadth of the pandemic and any resurgence or variants
of the disease, including the Delta variant; the impact of COVID-19 on the
nation's economy and debt and equity markets and the local economies in our
markets; the development, availability, utilization, and efficacy of COVID-19
testing, therapeutic agents, and vaccines and the prioritization of such
resources among businesses and demographic groups; government financial and
regulatory relief efforts that may become available to business and individuals,
including our ability to qualify for and satisfy the terms and conditions of
financial relief; perceptions regarding the safety of senior living communities
during and after the pandemic; changes in demand for senior living communities
and our ability to adapt our sales and marketing efforts to meet that demand;
the impact of COVID-19 on our residents' and their families' ability to afford
our resident fees, including due to changes in unemployment rates, consumer
confidence, housing markets, and equity markets caused by COVID-19; changes in
the acuity levels of our new residents; the disproportionate impact of COVID-19
on seniors generally and those residing in our communities; the duration and
costs of our response efforts, including increased equipment, supplies, labor,
litigation, testing, vaccination clinic, and other expenses; potentially greater
associate attrition and use of contract labor due to our associate vaccine
mandate; the impact of COVID-19 on our ability to complete financings and
refinancings of various assets or other transactions or to generate sufficient
cash flow to cover required debt, interest, and lease payments and to satisfy
financial and other covenants in our debt and lease documents; increased
regulatory requirements, including unfunded, mandatory testing; increased
enforcement actions resulting from COVID-19; government action that may limit
our collection or discharge efforts for delinquent accounts; and the frequency
and magnitude of legal actions and liability claims that may arise due to
COVID-19 or our response efforts.


                                       33
--------------------------------------------------------------------------------

Sale of Health Care Services

On July 1, 2021, we completed the sale of 80% of our equity in our Health Care
Services segment to affiliates of HCA Healthcare, Inc. ("HCA Healthcare") for a
purchase price of $400.0 million in cash, subject to certain adjustments set
forth in the Securities Purchase Agreement (the "Purchase Agreement") dated
February 24, 2021, including a reduction for the remaining outstanding balance
as of the closing of Medicare advance payments and deferred payroll tax payments
related to the Health Care Services segment (the "HCS Sale"). We received net
cash proceeds of $305.8 million at closing on July 1, 2021 and $6.8 million upon
completion of the post-closing net working capital adjustment in October 2021.
The Purchase Agreement also contained certain agreed upon indemnities for the
benefit of the purchaser. Pursuant to the Purchase Agreement, at closing of the
transaction, we retained a 20% equity interest in the HCS Venture.

The results and financial position of our Health Care Services segment were
deconsolidated from our consolidated financial statements as of July 1, 2021 and
our 20% equity interest in the HCS Venture is accounted for under the equity
method of accounting subsequent to that date. As of July 1, 2021, we recognized
a $100.0 million asset within investment in unconsolidated ventures on our
consolidated balance sheet for the estimated fair value of our retained 20%
noncontrolling interest in the HCS Venture. We recognized a $288.2 million gain
on sale, net of transaction costs, within our condensed consolidated statement
of operations for the three months ended September 30, 2021 for the HCS Sale.
Refer to Note 17 to the condensed consolidated financial statements for selected
financial data for the Health Care Services segment through June 30, 2021.

In September 2021, the HCS Venture entered into a Securities Purchase Agreement
with LHC Group Inc., providing for the sale of home health, hospice, and
outpatient therapy agencies in areas not served by HCA Healthcare. Upon the
completion of the sale on November 1, 2021, we received $35.0 million of cash
distributions from the HCS Venture from the net sale proceeds, which further
enhanced our liquidity. We continue to retain a 20% equity interest in the
remaining HCS Venture, which continues to operate home health, hospice, and
outpatient therapy agencies in areas served by HCA Healthcare.

Community Transactions

During the period from January 1, 2020 through September 30, 2021, we terminated
triple-net lease obligations on an aggregate of 33 communities (2,978 units),
including through the acquisition of 27 formerly leased communities (2,453
units), we sold four owned communities (504 units), and we sold our ownership
interest in our unconsolidated entry fee CCRC venture (the "CCRC Venture") with
Healthpeak Properties, Inc. ("Healthpeak"). On July 26, 2020, we entered into
definitive agreements with Ventas, Inc. ("Ventas") to restructure our 120
community (10,174 units) triple-net master lease arrangements. In addition, we
conveyed to Ventas five communities (471 units) and manage the communities
following the closing. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in our Annual Report on
Form 10-K for the year ended December 31, 2020 filed with the SEC on February
25, 2021 for more details regarding the terms of significant transactions that
occurred prior to 2021.

During the nine months ended September 30, 2021, we completed the sale of two
owned communities (129 units) for cash proceeds of $8.5 million, net of
transaction costs, and for which we recognized a net gain on sale of assets of
$0.5 million.

We expect to close on the disposition of three owned unencumbered communities
(250 units) classified as held for sale as of September 30, 2021. The closings
of the sales of the communities are subject to the satisfaction of various
closing conditions, including (where applicable) the receipt of regulatory
approvals. There can be no assurance that the transactions will close or, if
they do, when the actual closings will occur.

Completed Dispositions of Entry Fee CCRCs by Unconsolidated Venture

Prior to the January 31, 2020 closing of our sale of our ownership interest in
the CCRC Venture, we and Healthpeak moved the remaining two entry fee CCRCs into
a new unconsolidated entry fee CCRC venture on substantially the same terms as
the CCRC Venture to accommodate the sale of such two communities. During the
three months ended June 30, 2021, the new unconsolidated entry fee CCRC venture
completed the sale of the two remaining entry fee CCRCs for cash proceeds of
$14.0 million, net of associated mortgage debt repayments and transaction costs.
Subsequent to the sale transaction, the new unconsolidated entry fee CCRC
venture has no continuing operations. During the three months ended June 30,
2021, we received $5.4 million of cash distributions from the new unconsolidated
entry fee CCRC venture and recognized $13.9 million of equity in earnings of
unconsolidated ventures for the our proportionate share of the net income of the
new unconsolidated entry fee CCRC venture, which was primarily comprised of a
gain on sale of assets for the sale of the two remaining entry fee CCRCs. During
the three months ended September 30, 2021, we received $3.0 million of
additional cash distributions from the new unconsolidated entry fee CCRC
venture.

                                       34
--------------------------------------------------------------------------------

Community Labor

We continue to see pressures associated with the intensely competitive labor
environment. We have increased our recruiting efforts to fill open positions
and, in certain markets, are actively adjusting wages to remain competitive. We
seek to ensure that our communities are staffed with full and part-time
associates, though our use of more expensive contract labor and overtime has
increased to fill open positions. We expect the intensity of this competitive
environment will be transitory, though likely to continue into 2022.

Convertible Senior Notes Offering

On October 1, 2021, we issued $230.0 million principal amount of 2.00%
convertible senior notes due 2026 (the "Notes"). We received net proceeds of
$224.3 million at closing after the deduction of the initial purchasers'
discount. We used approximately $15.9 million of the net proceeds to pay the
cost of the capped call transactions described below. We also used a portion of
the net proceeds to repay a $45.0 million note payable and $29.2 million of
mortgage debt and intend to use the remaining net proceeds for general corporate
purposes, including refinancing or repaying maturing debt. The Notes were issued
pursuant to, and are governed by, the Indenture dated as of October 1, 2021 by
and between us and American Stock Transfer & Trust Company, LLC, as trustee.

The Notes are our senior unsecured obligations and rank senior in right of
payment to any of our indebtedness that is expressly subordinated in right of
payment to the Notes, and equal in right of payment to any of our indebtedness
that is not so subordinated. The Notes are effectively junior in right of
payment to any of our secured indebtedness to the extent of the value of the
assets securing such indebtedness; and structurally junior to all indebtedness
and other liabilities (including trade payables) and any preferred equity of our
current or future subsidiaries.

The Notes bear interest at 2.00% per year, payable semi-annually in arrears in
cash on April 15 and October 15 of each year, beginning on April 15, 2022. The
Notes will mature on October 15, 2026, unless earlier converted, redeemed or
repurchased in accordance with their terms. Holders of the Notes may convert all
or any portion of their Notes at their option at any time prior to the close of
business on the business day immediately preceding July 15, 2026, only under the
following circumstances: (1) during any calendar quarter commencing after the
calendar quarter ending on December 31, 2021 (and only during such calendar
quarter), if the last reported sale price of our common stock for at least 20
trading days (whether or not consecutive) during a period of 30 consecutive
trading days ending on, and including, the last trading day of the immediately
preceding calendar quarter is greater than or equal to 130% of the conversion
price on each applicable trading day; (2) during the five business day period
after any ten consecutive trading day period (the "measurement period") in which
the trading price per $1,000 principal amount of Notes for each trading day of
the measurement period was less than 98% of the product of the last reported
sale price of our common stock and the conversion rate for the Notes on each
such trading day; (3) if we call any or all of the Notes for redemption, at any
time prior to the close of business on the second scheduled trading day
immediately preceding the redemption date, but only with respect to the Notes
called (or deemed called) for redemption; or (4) upon the occurrence of
specified corporate events. On or after July 15, 2026, holders may convert all
or any portion of their Notes at any time prior to the close of business on the
second scheduled trading day immediately preceding the maturity date regardless
of the foregoing conditions. Upon conversion, we will satisfy our conversion
obligation by paying or delivering, as the case may be, cash, shares of our
common stock or a combination of cash and shares of our common stock at our
election.

The conversion rate for the Notes is initially 123.4568 shares of our common
stock per $1,000 principal amount of Notes (equivalent to an initial conversion
price of approximately $8.10 per share of common stock). The conversion rate
will be subject to adjustment in some events but will not be adjusted for any
accrued and unpaid interest. In addition, following certain corporate events
that occur prior to the maturity date or following the issuance of a notice of
redemption, we will increase the conversion rate for a holder who elects to
convert our Notes in connection with such a corporate event or who elects to
convert any Notes called (or deemed called) for redemption during the related
redemption period in certain circumstances.

We may not redeem the Notes prior to October 21, 2024. We may redeem for cash
all or (subject to certain limitations) any portion of the Notes, at our option,
on or after October 21, 2024 and prior to the 51st scheduled trading day
immediately preceding the maturity date if the last reported sale price of our
common stock has been at least 130% of the conversion price then in effect for
at least 20 trading days (whether or not consecutive) during any 30 consecutive
trading day period (including the last trading day of such period) ending on,
and including, the trading day immediately preceding the date on which we
provide notice of redemption at a redemption price equal to 100% of the
principal amount of the Notes to be redeemed, plus accrued and unpaid interest
to, but excluding, the redemption date. No sinking fund is provided for the
Notes.

If we undergo a fundamental change (as defined in the Indenture) prior to the
maturity date, holders may require us to repurchase for cash all or any portion
of their Notes at a fundamental change repurchase price equal to 100% of the
principal

                                       35
--------------------------------------------------------------------------------

amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Notes and the shares of common stock issuable upon conversion of the Notes,
if any, have not been, and are not required to be, registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. The Notes were issued to the initial purchasers in reliance
upon Section 4(a)(2) of the Securities Act in transactions not involving any
public offering. The Notes were resold by the initial purchasers to persons whom
the initial purchasers reasonably believed are "qualified institutional buyers,"
as defined in, and in accordance with, Rule 144A under the Securities Act.

In connection with the offering of the Notes, we entered into privately
negotiated capped call transactions ("Capped Call Transactions") with each of
Bank of America, N.A., Royal Bank of Canada, Wells Fargo Bank, National
Association or their respective affiliates (the "Capped Call Counterparties").
The Capped Call Transactions initially cover, subject to customary anti-dilution
adjustments, the number of shares of our common stock that initially underlie
the Notes and initially have an exercise price of $8.10 per share of common
stock. The cap price of the Capped Call Transactions is initially approximately
$9.90 per share of our common stock, representing a premium of 65% above the
last reported sale price of $6.00 per share of our common stock on September 28,
2021, and is subject to certain adjustments under the terms of the Capped Call
Transactions. The Capped Call Transactions are expected generally to reduce or
offset potential dilution to holders of our common stock upon conversion of the
Notes and/or offset the potential cash payments that we could be required to
make in excess of the principal amount of any converted Notes upon conversion
thereof, with such reduction and/or offset subject to a cap based on the cap
price.

The Capped Call Transactions are separate transactions entered into by us with
the Capped Call counterparties and are not part of the terms of the Notes. The
Capped Call Transactions had a cost of $15.9 million, which was paid on October
1, 2021 from the proceeds of the Notes. We will separately account for Capped
Call Transactions from the Notes and will recognize the cost as a reduction of
additional paid-in capital in the three months ending December 31, 2021 as the
Capped Call Transactions are indexed to our common stock.

Results of Operations

As of September 30, 2021, our total operations included 682 communities with a
capacity to serve over 60,000 residents. As of that date, we owned 348
communities (31,783 units), leased 300 communities (21,026 units), and managed
34 communities (4,913 units). The following discussion should be read in
conjunction with our condensed consolidated financial statements and the related
notes, which are included in "Item 1. Financial Statements" of this Quarterly
Report on Form 10-Q. The results of operations for any particular period are not
necessarily indicative of results for any future period. Transactions completed
during the period of January 1, 2020 to September 30, 2021 affect the
comparability of our results of operations.

We use the operating measures described below in connection with operating and
managing our business and reporting our results of operations.
•Senior housing operating results and data presented on a same community basis
reflect results and data of a consistent population of communities by excluding
the impact of changes in the composition of our portfolio of communities. The
operating results exclude natural disaster expense and related insurance
recoveries. We define our same community portfolio as communities consolidated
and operational for the full period in both comparison years. Consolidated
communities excluded from the same community portfolio include communities
acquired or disposed of since the beginning of the prior year, communities
classified as assets held for sale, certain communities planned for disposition,
certain communities that have undergone or are undergoing expansion,
redevelopment, and repositioning projects, and certain communities that have
experienced a casualty event that significantly impacts their operations. Our
management uses same community operating results and data for decision making,
and we believe such results and data provide useful information to investors,
because it enables comparisons of revenue, expense, and other operating measures
for a consistent portfolio over time without giving effect to the impacts of
communities that were not consolidated and operational for the comparison
periods, communities acquired or disposed during the comparison periods (or
planned for disposition), and communities with results that are or likely will
be impacted by completed or in-process development-related capital expenditure
projects. As presented herein, same community results include the direct costs
incurred to respond to the COVID-19 pandemic.

•RevPAR, or average monthly senior housing resident fee revenue per available
unit, is defined as resident fee revenue for the corresponding portfolio for the
period (excluding Health Care Services segment revenue, revenue from private
duty services provided to seniors living outside of our communities, and
entrance fee amortization), divided by the weighted average number of available
units in the corresponding portfolio for the period, divided by the number of
months in the

                                       36
--------------------------------------------------------------------------------

period. We measure RevPAR at the consolidated level, as well as at the segment
level with respect to our Independent Living, Assisted Living and Memory Care,
and CCRCs segments. Our management uses RevPAR for decision making, and we
believe the measure provides useful information to investors, because the
measure is an indicator of senior housing resident fee revenue performance that
reflects the impact of both senior housing occupancy and rate.

•RevPOR, or average monthly senior housing resident fee revenue per occupied
unit, is defined as resident fee revenue for the corresponding portfolio for the
period (excluding Health Care Services segment revenue, revenue from private
duty services provided to seniors living outside of our communities, and
entrance fee amortization), divided by the weighted average number of occupied
units in the corresponding portfolio for the period, divided by the number of
months in the period. We measure RevPOR at the consolidated level, as well as at
the segment level with respect to our Independent Living, Assisted Living and
Memory Care, and CCRCs segments. Our management uses RevPOR for decision making,
and we believe the measure provides useful information to investors, because it
reflects the average amount of senior housing resident fee revenue we derive
from an occupied unit per month without factoring occupancy rates. RevPOR is a
significant driver of our senior housing revenue performance.

•Weighted average occupancy rate reflects the percentage of units at our owned
and leased communities being utilized by residents over a reporting period. We
measure occupancy rates with respect to our Independent Living, Assisted Living
and Memory Care, and CCRCs segments, and also measure this metric both on a
consolidated senior housing and a same community basis. Our management uses
weighted average occupancy, and we believe the measure provides useful
information to investors, because it is a significant driver of our senior
housing revenue performance.

This section includes the non-GAAP performance measure Adjusted EBITDA. See
"Non-GAAP Financial Measures" below for our definition of the measure and other
important information regarding such measure, including reconciliations to the
most comparable GAAP measure.

Comparison of Three Months Ended September 30, 2021 and 2020

Summary Operating Results

The following table summarizes our overall operating results for the three months ended September 30, 2021 and 2020.

                                                    Three Months Ended
                                                       September 30,                         Increase (Decrease)
(in thousands)                                    2021               2020               Amount               Percent
Total resident fees and management fees
revenue                                       $ 603,716          $ 706,440          $  (102,724)                 (14.5) %
Other operating income                               89             10,765              (10,676)                 (99.2) %
Facility operating expense                      480,423            570,530              (90,107)                 (15.8) %
Net income (loss)                               174,263           (124,993)             299,256                        NM
Adjusted EBITDA                                  34,582            (64,019)              98,601                        NM



The decrease in total resident fees and management fees revenue was primarily
attributable to the deconsolidation of results of the Health Care Services
segment effective July 1, 2021, which resulted in a decrease of $89.9 million of
resident fees compared to the three months ended September 30, 2020. The
disposition of 12 communities through sales and conveyances of owned communities
and lease terminations since the beginning of the prior year period resulted in
$7.4 million less in resident fees during the three months ended September 30,
2021 compared to the prior year period. The decrease was also attributable to a
0.9% decrease in same community RevPAR, comprised of a 300 basis point decrease
in same community weighted average occupancy and a 3.1% increase in same
community RevPOR. Management fee revenue decreased $2.0 million primarily due to
the transition of management agreements on 43 net communities since the
beginning of the prior year period.

During the three months ended September 30, 2021 and 2020, we recognized $0.1
million and $10.8 million, respectively, of government grants as other operating
income based on our estimates of our satisfaction of the conditions of the
grants during the period.

The decrease in facility operating expense was primarily attributable to the
deconsolidation of results of the Health Care Services segment effective July 1,
2021, which resulted in a decrease of $94.3 million of facility operating
expense compared to the three months ended September 30, 2020. Additionally, the
disposition of communities since the beginning of the prior year period resulted
in $7.7 million less in facility operating expense during the three months ended
September 30, 2021 compared

                                       37
--------------------------------------------------------------------------------

to the prior year period. These decreases in facility operating expense were
partially offset by a 2.9% increase in same community facility operating
expense, including an increase in labor expense arising from increased contract
labor and overtime costs due to the intensely competitive labor market,
partially offset by a $14.0 million decrease in incremental direct costs to
respond to the COVID-19 pandemic. Facility operating expense for the three
months ended September 30, 2021 and 2020 includes $7.2 million and $24.5
million, respectively, of incremental direct costs to respond to the COVID-19
pandemic.

The increase in net income was primarily attributable to the HCS Sale resulting
in a net gain on sale of $288.2 million and decreases in facility operating
lease expense, depreciation and amortization expense, non-cash asset impairment
expense, and general and administrative expense, partially offset by the net
impact of the revenue, other operating income, and facility operating expense
factors previously discussed.

The increase in Adjusted EBITDA was primarily attributable to the $119.2 million
one-time cash lease payment made to Ventas in connection with our lease
restructuring transaction effective July 26, 2020 and a decrease in general and
administrative expense (excluding non-cash stock based compensation expense and
transaction and organizational restructuring costs), partially offset by the net
impact of the revenue, other operating income, and facility operating expense
factors previously discussed.

Operating Results - Senior Housing Segments

The following table summarizes the operating results and data of our three
senior housing segments (Independent Living, Assisted Living and Memory Care,
and CCRCs) on a combined basis for the three months ended September 30, 2021 and
2020, including operating results and data on a same community basis. See
management's discussion and analysis of the operating results on an individual
segment basis on the following pages.
                                                    Three Months Ended
                                                       September 30,                            Increase (Decrease)
(in thousands, except communities, units,
occupancy, RevPAR, and RevPOR)                    2021               2020                  Amount                   Percent
Resident fees                                 $ 600,095          $ 610,868          $     (10,773)                       (1.8) %
Other operating income                        $      89          $   4,873          $      (4,784)                      (98.2) %
Facility operating expense                    $ 480,423          $ 476,197          $       4,226                         0.9  %

Number of communities (period end)                  648                652                     (4)                       (0.6) %
Number of units (period end)                     52,809             53,110                   (301)                       (0.6) %
Total average units                              52,811             53,440                   (629)                       (1.2) %
RevPAR                                        $   3,784          $   3,806          $         (22)                       (0.6) %
Occupancy rate (weighted average)                  72.5  %            75.3  %                (280)    bps                    n/a

RevPOR                                        $   5,219          $   5,056          $         163                         3.2  %

Same Community Operating Results and Data
Resident fees                                 $ 569,606          $ 574,949          $      (5,343)                       (0.9) %
Other operating income                        $      87          $   3,704          $      (3,617)                      (97.7) %
Facility operating expense                    $ 453,632          $ 440,977          $      12,655                         2.9  %

Number of communities                               634                634                      -                           -
Total average units                              50,148             50,143                      5                           -
RevPAR                                        $   3,786          $   3,822          $         (36)                       (0.9) %
Occupancy rate (weighted average)                  72.5  %            75.5  %                (300)    bps                    n/a
RevPOR                                        $   5,222          $   5,064          $         158                         3.1  %




                                       38

--------------------------------------------------------------------------------

Independent Living Segment

The following table summarizes the operating results and data for our Independent Living segment for the three months ended September 30, 2021 and 2020, including operating results and data on a same community basis.

                                                    Three Months Ended
                                                       September 30,                            Increase (Decrease)
(in thousands, except communities, units,
occupancy, RevPAR, and RevPOR)                    2021               2020                  Amount                   Percent
Resident fees                                 $ 119,584          $ 125,762          $      (6,178)                       (4.9) %

Other operating income                        $       9          $      96          $         (87)                      (90.6) %
Facility operating expense                    $  82,860          $  83,420          $        (560)                       (0.7) %

Number of communities (period end)                   68                 68                      -                           -
Number of units (period end)                     12,567             12,534                     33                         0.3  %
Total average units                              12,567             12,534                     33                         0.3  %
RevPAR                                        $   3,172          $   3,345          $        (173)                       (5.2) %
Occupancy rate (weighted average)                  74.7  %            80.0  %                (530)    bps                    n/a

RevPOR                                        $   4,244          $   4,182          $          62                         1.5  %

Same Community Operating Results and Data
Resident fees                                 $ 115,999          $ 122,498          $      (6,499)                       (5.3) %
Other operating income                        $       9          $      96          $         (87)                      (90.6) %
Facility operating expense                    $  80,149          $  80,659          $        (510)                       (0.6) %

Number of communities                                66                 66                      -                           -
Total average units                              12,165             12,156                      9                         0.1  %
RevPAR                                        $   3,179          $   3,359          $        (180)                       (5.4) %
Occupancy rate (weighted average)                  74.8  %            79.9  %                (510)    bps                    n/a
RevPOR                                        $   4,250          $   4,203          $          47                         1.1  %



The decrease in the segment's resident fees was primarily attributable to a
decrease in the segment's same community RevPAR, comprised of a 510 basis point
decrease in same community weighted average occupancy and an 1.1% increase in
same community RevPOR. The decrease in the segment's same community weighted
average occupancy primarily reflects the impact of the net move-in and move-out
activity at our communities since the beginning of the prior year period. The
segment's period end occupancy increased on a sequential basis for both the
three months ended June 30, 2021 and September 30, 2021. The increase in the
segment's same community RevPOR was primarily the result of in-place rent
increases.

The decrease in the segment's facility operating expense was primarily
attributable to a decrease in the segment's same community facility operating
expense, including a $1.3 million decrease in incremental direct costs to
respond to the COVID-19 pandemic and a decrease in food costs due to reduced
occupancy during the period. These decreases in the segment's same community
facility operating expense were partially offset by an increase in repairs and
maintenance costs due to more move-ins during the period. The segment's facility
operating expense for the three months ended September 30, 2021 and 2020
includes $0.9 million and $2.2 million, respectively, of incremental direct
costs to respond to the COVID-19 pandemic.


                                       39
--------------------------------------------------------------------------------

Assisted Living and Memory Care Segment

The following table summarizes the operating results and data for our Assisted
Living and Memory Care segment for the three months ended September 30, 2021 and
2020, including operating results and data on a same community basis.
                                                    Three Months Ended
                                                       September 30,                            Increase (Decrease)
(in thousands, except communities, units,
occupancy, RevPAR, and RevPOR)                    2021               2020                  Amount                   Percent
Resident fees                                 $ 402,621          $ 408,695          $      (6,074)                       (1.5) %
Other operating income                        $      75          $   1,936          $      (1,861)                      (96.1) %
Facility operating expense                    $ 327,372          $ 323,479          $       3,893                         1.2  %

Number of communities (period end)                  560                563                     (3)                       (0.5) %
Number of units (period end)                     34,891             35,124                   (233)                       (0.7) %
Total average units                              34,893             35,268                   (375)                       (1.1) %
RevPAR                                        $   3,845          $   3,863          $         (18)                       (0.5) %
Occupancy rate (weighted average)                  71.9  %            74.4  %                (250)    bps                    n/a

RevPOR                                        $   5,347          $   5,193          $         154                         3.0  %

Same Community Operating Results and Data
Resident fees                                 $ 396,999          $ 400,484          $      (3,485)                       (0.9) %
Other operating income                        $      75          $   1,937          $      (1,862)                      (96.1) %
Facility operating expense                    $ 323,056          $ 314,277          $       8,779                         2.8  %

Number of communities                               554                554                      -                           -
Total average units                              34,380             34,384                     (4)                          -
RevPAR                                        $   3,849          $   3,882          $         (33)                       (0.9) %
Occupancy rate (weighted average)                  71.8  %            74.4  %                (260)    bps                    n/a
RevPOR                                        $   5,363          $   5,221          $         142                         2.7  %



The decrease in the segment's resident fees was primarily attributable to a
decrease in the segment's same community RevPAR, comprised of a 260 basis point
decrease in same community weighted average occupancy and a 2.7% increase in
same community RevPOR. The decrease in the segment's same community weighted
average occupancy primarily reflects the impact of the net move-in and move-out
activity at our communities since the beginning of the prior year period. The
segment's period end occupancy increased on a sequential basis for both the
three months ended June 30, 2021 and September 30, 2021. The increase in the
segment's same community RevPOR was primarily the result of in-place rent
increases. Additionally, the disposition of 10 communities (836 units) since the
beginning of the prior year period resulted in $2.8 million less in resident
fees during the three months ended September 30, 2021 compared to the prior year
period.

The increase in the segment's facility operating expense was primarily
attributable to an increase in the segment's same community facility operating
expense, including an increase in labor expense arising from increased contract
labor and overtime costs due to the intensely competitive labor market. The
increase in the segment's same community facility operating expense was
partially offset by a $10.7 million decrease in incremental direct costs to
respond to the COVID-19 pandemic. The increase in the segment's facility
operating expense was partially offset by the disposition of communities since
the beginning of the prior year period, which resulted in $2.8 million less in
facility operating expense during the three months ended September 30, 2021
compared to the prior year period. The segment's facility operating expense for
the three months ended September 30, 2021 and 2020 includes $4.8 million and
$15.5 million, respectively, of incremental direct costs to respond to the
COVID-19 pandemic.

                                       40
--------------------------------------------------------------------------------

CCRCs Segment

The following table summarizes the operating results and data for our CCRCs segment for the three months ended September 30, 2021 and 2020, including operating results and data on a same community basis.

                                                   Three Months Ended
                                                      September 30,                           Increase (Decrease)
(in thousands, except communities, units,
occupancy, RevPAR, and RevPOR)                   2021              2020                  Amount                   Percent
Resident fees                                 $ 77,890          $ 76,411          $       1,479                         1.9  %
Other operating income                        $      5          $  2,841          $      (2,836)                      (99.8) %
Facility operating expense                    $ 70,191          $ 69,298          $         893                         1.3  %

Number of communities (period end)                  20                21                     (1)                       (4.8) %
Number of units (period end)                     5,351             5,452                   (101)                       (1.9) %
Total average units                              5,351             5,638                   (287)                       (5.1) %
RevPAR                                        $  4,824          $  4,477          $         347                         7.8  %
Occupancy rate (weighted average)                 71.2  %           70.7  %                  50     bps                    n/a

RevPOR                                        $  6,777          $  6,332          $         445                         7.0  %

Same Community Operating Results and Data
Resident fees                                 $ 56,608          $ 51,967          $       4,641                         8.9  %
Other operating income                        $      3          $  1,671          $      (1,668)                      (99.8) %
Facility operating expense                    $ 50,427          $ 46,041          $       4,386                         9.5  %

Number of communities                               14                14                      -                           -
Total average units                              3,603             3,603                      -                           -
RevPAR                                        $  5,237          $  4,808          $         429                         8.9  %
Occupancy rate (weighted average)                 71.8  %           71.2  %                  60     bps                    n/a
RevPOR                                        $  7,294          $  6,751          $         543                         8.0  %



The increase in the segment's resident fees was primarily attributable to the
increase in the segment's same community RevPAR, comprised of an 8.0% increase
in same community RevPOR and a 60 basis point increase in same community
weighted average occupancy. The increase in the segment's same community RevPOR
was primarily the result of an occupancy mix shift from less independent living
services to more skilled nursing services within the segment and in-place rent
increases. The increase in the segment's same community weighted average
occupancy primarily reflects the impact of the net move-in and move-out activity
at our communities since the beginning of the prior year period. The segment's
period end occupancy increased on a sequential basis for each of the three
months ended March 31, 2021, June 30, 2021, and September 30, 2021. The increase
in resident fees was partially offset by disposition of two communities (456
units) since the beginning of the prior year period, which resulted in $4.6
million less in resident fees during the three months ended September 30, 2021
compared to the prior year period.

The increase in the segment's facility operating expense was primarily
attributable to an increase in the segment's same community facility operating
expense, including an increase in labor expense arising from increased contract
labor and overtime costs due to the intensely competitive labor market and an
increase in healthcare supplies costs to respond to increased skilled nursing
occupancy during the current year period. These increases in the segment's same
community facility operating expense were partially offset by a $2.1 million
decrease in incremental direct costs to respond to the COVID-19 pandemic. The
increase in the segment's facility operating expense was partially offset by the
disposition of communities since the beginning of the prior year period, which
resulted in $4.9 million less in facility operating expense during the three
months ended September 30, 2021 compared to the prior year period. The segment's
facility operating expense for the three months ended September 30, 2021 and
2020 includes $1.5 million and $4.4 million, respectively, of incremental direct
costs to respond to the COVID-19 pandemic.


                                       41
--------------------------------------------------------------------------------

Operating Results - Management Services Segment

The following table summarizes the operating results and data for our Management Services segment for the three months ended September 30, 2021 and 2020.

                                                    Three Months Ended
                                                       September 30,                        Increase (Decrease)
(in thousands, except communities and units)      2021               2020              Amount               Percent
Management fees                               $    3,621          $  5,669          $   (2,048)                 (36.1) %
Reimbursed costs incurred on behalf of
managed communities                           $   37,849          $ 90,775          $  (52,926)                 (58.3) %
Costs incurred on behalf of managed
communities                                   $   37,849          $ 90,775          $  (52,926)                 (58.3) %

Number of communities (period end)                    34                74                 (40)                 (54.1) %
Number of units (period end)                       4,913             9,980              (5,067)                 (50.8) %
Total average units                                5,328            10,446              (5,118)                 (49.0) %



The decrease in management fees was primarily attributable to the transition of
management arrangements on 43 net communities since the beginning of the prior
year period generally for management arrangements on certain former
unconsolidated ventures in which we sold our interest and interim management
arrangements on formerly leased communities. Management fees of $3.6 million for
the three months ended September 30, 2021 include $0.2 million of management
fees attributable to communities for which our management agreements were
terminated during such period.

The decrease in reimbursed costs and costs incurred on behalf of managed communities was primarily attributable to terminations of management agreements subsequent to the beginning of the prior year period.

Operating Results - Other Income and Expense Items

The following table summarizes other income and expense items in our operating results for the three months ended September 30, 2021 and 2020.

                                                  Three Months Ended
                                                    September 30,                            Increase (Decrease)
(in thousands)                                 2021                2020                Amount                Percent

General and administrative expense $ 43,812 $ 54,138

        $   (10,326)                   (19.1) %
Facility operating lease expense               43,226              51,620               (8,394)                   (16.3) %
Depreciation and amortization                  84,560              87,821               (3,261)                    (3.7) %
Asset impairment                                  639               8,213               (7,574)                   (92.2) %

Interest income                                   286                 607                 (321)                   (52.9) %
Interest expense                               49,361              50,546               (1,185)                    (2.3) %
Gain (loss) on debt modification and
extinguishment, net                                 -              (7,917)               7,917                          NM
Equity in earnings (loss) of
unconsolidated ventures                        (1,474)               (293)              (1,181)                         NM
Gain (loss) on sale of assets, net            288,375               2,209              286,166                          NM
Other non-operating income (loss)                 571                 948                 (377)                   (39.8) %
Benefit (provision) for income taxes          (15,279)            (14,884)                (395)                    (2.7) %



General and Administrative Expense. The decrease in general and administrative
expense was primarily attributable to decreases in transaction costs,
compensation costs as a result of a reduction in our corporate headcount related
to the sale of 80% of our equity in our Health Care Services segment, and
non-cash stock-based compensation expense. General and administrative expense
includes transaction and organizational restructuring costs of $0.9 million and
$6.3 million for the three months ended September 30, 2021 and 2020,
respectively. Transaction costs include those directly related to acquisition,
disposition, financing and leasing activity, and stockholder relations advisory
matters, and are primarily comprised of legal, finance, consulting, professional
fees, and other third-party costs. Organizational restructuring costs include
those related to our efforts to reduce general and administrative expense and
our senior leadership changes, including severance costs. In addition to

                                       42
--------------------------------------------------------------------------------

the reductions in general and administrative expense directly attributable to
the HCS Sale, we expect reductions of general and administrative expense for
indirect scaling initiatives, including initiatives previously completed.

Facility Operating Lease Expense. The decrease in facility operating lease expense was primarily due to the Ventas lease portfolio restructuring during the prior year period and lease termination activity since the beginning of the prior year period.

Depreciation and Amortization. The decrease in depreciation and amortization
expense was primarily due to disposition activity since the beginning of the
prior year period and leasehold improvements for certain leased communities
becoming fully depreciated since the beginning of the prior year period.

Asset Impairment. During the three months ended September 30, 2021 and 2020, we
recorded $0.6 million and $8.2 million, respectively, of non-cash impairment
charges, primarily for natural disaster related property damage at certain
communities and for right-of-use assets for certain leased communities with
decreased future cash flow estimates as a result of the COVID-19 pandemic.

Gain (loss) on Debt Modification and Extinguishment, Net. The decrease in loss
on debt modification and extinguishment was primarily due to $7.8 million of
costs incurred during the three months ended September 30, 2020 for debt
modifications and extinguishments.

Gain (loss) on sale of assets, net. The increase in gain on sale of assets is due to the $288.2 million gain recognized for the HCS Sale.

Benefit (Provision) for Income Taxes. The difference between our effective tax
rate for the three months ended September 30, 2021 and 2020 was primarily due to
the HCS Sale that occurred in the three months ended September 30, 2021.

We recorded an aggregate deferred federal, state, and local tax expense of $81.0
million and a reduction in the valuation allowance of $71.8 million, primarily a
result of the HCS Sale in the three months ended September 30, 2021. The change
in the valuation allowance for the three months ended September 30, 2021
resulted from the anticipated reversal of future tax liabilities offset by
future tax deductions. We recorded an aggregate deferred federal, state, and
local tax benefit of $27.4 million as a result of the operating loss for the
three months ended September 30, 2020, which was offset by an increase in the
valuation allowance of $40.0 million. The change in the valuation allowance for
the three months ended September 30, 2020 resulted from the anticipated reversal
of future tax liabilities offset by future tax deductions.

We evaluate our deferred tax assets each quarter to determine if a valuation
allowance is required based on whether it is more likely than not that some
portion of the deferred tax asset would not be realized. Our valuation allowance
as of September 30, 2021 and December 31, 2020 was $354.5 million and $381.0
million, respectively.

Comparison of Nine Months Ended September 30, 2021 and 2020

Summary Operating Results

The following table summarizes our overall operating results for the nine months ended September 30, 2021 and 2020.

                                                       Nine Months Ended
                                                         September 30,                           Increase (Decrease)
(in thousands)                                     2021                 2020                Amount               Percent
Total resident fees and management fees
revenue                                       $ 1,955,608          $ 2,335,567          $  (379,959)                 (16.3) %
Other operating income                             12,132               37,458              (25,326)                 (67.6) %
Facility operating expense                      1,587,581            1,765,046             (177,465)                 (10.1) %
Net income (loss)                                 (17,644)             126,084             (143,728)                       NM
Adjusted EBITDA                                   102,627              165,783              (63,156)                 (38.1) %



The decrease in total resident fees and management fees revenue was primarily
attributable to a $276.7 million decrease in resident fees, including a 7.7%
decrease in same community RevPAR, comprised of an 850 basis point decrease in
same community weighted average occupancy and a 3.4% increase in same community
RevPOR. In addition, the deconsolidation of results of the Health Care Services
segment effective July 1, 2021 resulted in a decrease of $89.9 million of
resident fees compared to the nine months ended September 30, 2020. The
disposition of 15 communities through sales and conveyances of

                                       43
--------------------------------------------------------------------------------

owned communities and lease terminations since the beginning of the prior year
period resulted in $35.3 million less in resident fees during the nine months
ended September 30, 2021 compared to the prior year period. Management fee
revenue decreased $103.3 million primarily due to $100.0 million of management
fee revenue recognized during the three months ended March 31, 2020 for the
management termination fee payment from Healthpeak and transition of management
agreements on 66 net communities subsequent to the beginning of the prior year
period.

During the nine months ended September 30, 2021 and 2020, we recognized $12.1 million and $37.5 million, respectively, of government grants and employee retention credits as other operating income based on our estimates of our satisfaction of the conditions of the grants and credits during the period.

The decrease in facility operating expense was primarily attributable to a
$124.3 million decrease in facility operating expenses for the Health Care
Services segment, primarily due to deconsolidation of results of the segment
effective July 1, 2021, which resulted in a $94.3 million decrease in facility
operating expenses. Additionally, the disposition of communities since the
beginning of the prior year period resulted in $34.1 million less in facility
operating expense during the nine months ended September 30, 2021 compared to
the prior year period. Same community facility operating expense decreased 1.5%
which was primarily due to a $42.8 million decrease in incremental direct costs
to respond to the COVID-19 pandemic and a decrease in food costs due to reduced
occupancy during the period. These decreases in same community facility
operating expense were partially offset by an increase in labor costs arising
from an increase in contract labor and overtime costs due to a competitive labor
market and an increase in advertising costs as we scaled back advertising during
the prior year period due to the pandemic. Facility operating expense for the
nine months ended September 30, 2021 and 2020 includes $44.3 million and $95.1
million, respectively, of incremental direct costs to respond to the COVID-19
pandemic.

The decrease in net income was primarily attributable to the net impact of the
revenue, other operating income, and facility operating expense factors
previously discussed, as well as an $84.6 million decrease in net gain on sale
of assets, primarily due to a $369.8 million gain on sale of assets recognized
for the sale of our ownership interest in the CCRC Venture during the prior year
period compared to the $288.2 million gain related to the sale of 80% of our
equity in our Health Care Services segment in the current period. These
decreases were partially offset by decreases in non-cash asset impairment
expense, facility operating lease expense, depreciation and impairment expense,
and general and administrative expense compared to the prior year period.

The decrease in Adjusted EBITDA was primarily attributable to the revenue, other
operating income, and facility operating expense factors previously discussed,
partially offset by a $163.0 million decrease in cash facility operating lease
payments, primarily reflecting reduced cash lease payments as a result of the
lease restructuring transaction with Ventas on July 26, 2020.


                                       44
--------------------------------------------------------------------------------

Operating Results - Senior Housing Segments

The following table summarizes the operating results and data of our three
senior housing segments (Independent Living, Assisted Living and Memory Care,
and CCRCs) on a combined basis for the nine months ended September 30, 2021 and
2020 including operating results and data on a same community basis. See
management's discussion and analysis of the operating results on an individual
segment basis on the following pages.
                                                       Nine Months Ended
                                                         September 30,                              Increase (Decrease)
(in thousands, except communities, units,
occupancy, RevPAR, and RevPOR)                     2021                 2020                   Amount                  Percent
Resident fees                                 $ 1,764,259          $ 1,940,215          $          (175,956)                (9.1) %
Other operating income                        $     9,027          $    14,571          $            (5,544)               (38.0) %
Facility operating expense                    $ 1,416,128          $ 1,469,300          $           (53,172)                (3.6) %

Number of communities (period end)                    648                  652                      (4)                     (0.6) %
Number of units (period end)                       52,809               53,110                    (301)                     (0.6) %
Total average units                                52,898               53,888                    (990)                     (1.8) %
RevPAR                                        $     3,702          $     3,997          $         (295)                     (7.4) %
Occupancy rate (weighted average)                    70.9  %              79.1  %                 (820)  bps                    n/a

RevPOR                                        $     5,225          $     5,054          $          171                       3.4  %

Same Community Operating Results and Data
Resident fees                                 $ 1,673,510          $ 1,813,002          $     (139,492)                     (7.7) %
Other operating income                        $     8,249          $    10,148          $       (1,899)                    (18.7) %
Facility operating expense                    $ 1,335,267          $ 1,355,460          $      (20,193)                     (1.5) %

Number of communities                                 634                  634                       -                         -
Total average units                                50,148               50,146                       2                         -
RevPAR                                        $     3,708          $     4,017          $         (309)                     (7.7) %
Occupancy rate (weighted average)                    70.8  %              79.3  %                 (850)  bps                    n/a
RevPOR                                        $     5,236          $     5,065          $          171                       3.4  %




                                       45

--------------------------------------------------------------------------------

Independent Living Segment

The following table summarizes the operating results and data for our Independent Living segment for the nine months ended September 30, 2021 and 2020, including operating results and data on a same community basis.

                                                     Nine Months Ended
                                                       September 30,                            Increase (Decrease)
(in thousands, except communities, units,
occupancy, RevPAR, and RevPOR)                    2021               2020                  Amount                   Percent
Resident fees                                 $ 356,371          $ 391,902          $     (35,531)                       (9.1) %
Other operating income                        $   1,484          $      96          $       1,388                             NM
Facility operating expense                    $ 248,501          $ 257,108          $      (8,607)                       (3.3) %

Number of communities (period end)                   68                 68                      -                           -
Number of units (period end)                     12,567             12,534                     33                         0.3  %
Total average units                              12,553             12,532                     21                         0.2  %
RevPAR                                        $   3,154          $   3,475          $        (321)                       (9.2) %
Occupancy rate (weighted average)                  73.9  %            83.5  %                (960)    bps                    n/a

RevPOR                                        $   4,266          $   4,160          $         106                         2.5  %

Same Community Operating Results and Data
Resident fees                                 $ 346,283          $ 382,119          $     (35,836)                       (9.4) %
Other operating income                        $   1,446          $      96          $       1,350                             NM
Facility operating expense                    $ 240,819          $ 249,683          $      (8,864)                       (3.6) %

Number of communities                                66                 66                      -                           -
Total average units                              12,163             12,157                      6                           -
RevPAR                                        $   3,163          $   3,492          $        (329)                       (9.4) %
Occupancy rate (weighted average)                  73.9  %            83.5  %                (960)    bps                    n/a
RevPOR                                        $   4,279          $   4,183          $          96                         2.3  %



The decrease in the segment's resident fees was primarily attributable to a
decrease in the segment's same community RevPAR, comprised of a 960 basis point
decrease in same community weighted average occupancy and a 2.3% increase in
same community RevPOR. The decrease in the segment's same community weighted
average occupancy primarily reflects the impact of the net move-in and move-out
activity at our communities since the beginning of the prior year period. The
segment's period end occupancy increased on a sequential basis for both the
three months ended June 30, 2021 and September 30, 2021. The increase in the
segment's same community RevPOR was primarily the result of in-place rent
increases.

The decrease in the segment's facility operating expense was primarily
attributable to a decrease in the segment's same community facility operating
expense, including a $7.5 million decrease in incremental direct costs to
respond to the COVID-19 pandemic and a decrease in food costs due to reduced
occupancy during the period. These decreases in the segment's same community
facility operating expense were partially offset by an increase in advertising
costs as we scaled back advertising during the prior year period as a result of
the pandemic. The segment's facility operating expense for the nine months ended
September 30, 2021 and 2020 includes $5.4 million and $13.0 million,
respectively, of incremental direct costs to respond to the COVID-19 pandemic.


                                       46
--------------------------------------------------------------------------------

Assisted Living and Memory Care Segment

The following table summarizes the operating results and data for our Assisted
Living and Memory Care segment for the nine months ended September 30, 2021 and
2020, including operating results and data on a same community basis.
                                                       Nine Months Ended
                                                         September 30,                              Increase (Decrease)
(in thousands, except communities, units,
occupancy, RevPAR, and RevPOR)                     2021                 2020                   Amount                  Percent
Resident fees                                 $ 1,181,277          $ 1,298,330          $          (117,053)                (9.0) %
Other operating income                        $     5,808          $     2,088          $              3,720               178.2  %
Facility operating expense                    $   963,266          $   993,557          $           (30,291)                (3.0) %

Number of communities (period end)                    560                  563                      (3)                     (0.5) %
Number of units (period end)                       34,891               35,124                    (233)                     (0.7) %
Total average units                                35,007               35,666                    (659)                     (1.8) %
RevPAR                                        $     3,748          $     4,045          $         (297)                     (7.3) %
Occupancy rate (weighted average)                    69.9  %              78.1  %                 (820)  bps                    n/a

RevPOR                                        $     5,363          $     5,181          $          182                       3.5  %

Same Community Operating Results and Data
Resident fees                                 $ 1,162,599          $ 1,262,793          $     (100,194)                     (7.9) %
Other operating income                        $     5,648          $     2,088          $        3,560                     170.5  %
Facility operating expense                    $   946,728          $   962,294          $      (15,566)                     (1.6) %

Number of communities                                 554                  554                       -                         -
Total average units                                34,382               34,386                      (4)                        -
RevPAR                                        $     3,757          $     4,080          $         (323)                     (7.9) %
Occupancy rate (weighted average)                    69.8  %              78.1  %                 (830)  bps                    n/a
RevPOR                                        $     5,383          $     5,222          $          161                       3.1  %



The decrease in the segment's resident fees was primarily attributable to a
decrease in the segment's same community RevPAR, comprised of an 830 basis point
decrease in same community weighted average occupancy and a 3.1% increase in
same community RevPOR. The decrease in the segment's same community weighted
average occupancy primarily reflects the impact of the net move-in and move-out
activity at our communities since the beginning of the prior year period. The
segment's period end occupancy increased on a sequential basis for both the
three months ended June 30, 2021 and September 30, 2021. The increase in the
segment's same community RevPOR was primarily the result of in-place rent
increases. Additionally, the disposition of 13 communities (1,044 units) since
the beginning of the prior year period resulted in $16.6 million less in
resident fees during the nine months ended September 30, 2021 compared to the
prior year period.

The decrease in the segment's facility operating expense was primarily
attributable to the disposition of communities since the beginning of the prior
year period, which resulted in $16.1 million less in facility operating expense
during the nine months ended September 30, 2021 compared to the prior year
period, and a decrease in the segment's same community facility operating
expense. The decrease in the segment's same community facility operating expense
was primarily attributable to a $31.3 million decrease in incremental direct
costs to respond to the COVID-19 pandemic and a decrease in food costs due to
reduced occupancy during the period. These decreases in the segment's same
community facility operating expense were partially offset by an increase in
labor costs arising from an increase in contract labor and overtime costs due to
a competitive labor market and an increase in advertising costs as we scaled
back advertising during the prior year period as a result of the pandemic. The
segment's facility operating expense for the nine months ended September 30,
2021 and 2020 includes $29.8 million and $61.9 million, respectively, of
incremental direct costs to respond to the COVID-19 pandemic.


                                       47
--------------------------------------------------------------------------------

CCRCs Segment

The following table summarizes the operating results and data for our CCRCs segment for the nine months ended September 30, 2021 and 2020, including operating results and data on a same community basis.

                                                     Nine Months Ended
                                                       September 30,                            Increase (Decrease)
(in thousands, except communities, units,
occupancy, RevPAR, and RevPOR)                    2021               2020                  Amount                   Percent
Resident fees                                 $ 226,611          $ 249,983          $     (23,372)                       (9.3) %
Other operating income                        $   1,735          $  12,387          $     (10,652)                      (86.0) %
Facility operating expense                    $ 204,361          $ 218,635          $     (14,274)                       (6.5) %

Number of communities (period end)                   20                 21                     (1)                       (4.8) %
Number of units (period end)                      5,351              5,452                   (101)                       (1.9) %
Total average units                               5,338              5,690                   (352)                       (6.2) %
RevPAR                                        $   4,689          $   4,850          $        (161)                       (3.3) %
Occupancy rate (weighted average)                  70.0  %            75.7  %                (570)    bps                    n/a

RevPOR                                        $   6,702          $   6,405          $         297                         4.6  %

Same Community Operating Results and Data
Resident fees                                 $ 164,628          $ 168,090          $      (3,462)                       (2.1) %
Other operating income                        $   1,155          $   7,964          $      (6,809)                      (85.5) %
Facility operating expense                    $ 147,720          $ 143,483          $       4,237                         3.0  %

Number of communities                                14                 14                      -                           -
Total average units                               3,603              3,603                      -                           -
RevPAR                                        $   5,077          $   5,184          $        (107)                       (2.1) %
Occupancy rate (weighted average)                  70.1  %            76.3  %                (620)    bps                    n/a
RevPOR                                        $   7,246          $   6,793          $         453                         6.7  %



The decrease in the segment's resident fees was primarily attributable to the
disposition of two communities (456 units) since the beginning of the prior year
period which resulted in $18.7 million less in resident fees during the nine
months ended September 30, 2021 compared to the prior year period. Additionally,
there was a decrease in the segment's same community RevPAR, comprised of a 620
basis point decrease in same community weighted average occupancy and a 6.7%
increase in same community RevPOR. The decrease in the segment's same community
weighted average occupancy primarily reflects the impact of the net move-in and
move-out activity at our communities since the beginning of the prior year
period. The segment's period end occupancy increased on a sequential basis for
each of the three months ended March 31, 2021, June 30, 2021, and September 30,
2021. The increase in the segment's same community RevPOR was primarily the
result of an occupancy mix shift from less independent living services to more
skilled nursing services within the segment and in-place rent increases.

The decrease in the segment's facility operating expense was primarily
attributable to the disposition of communities since the beginning of the prior
year period, which resulted in $18.1 million less in facility operating expense
during the nine months ended September 30, 2021 compared to the prior year
period, partially offset by an increase in the segment's same community facility
operating expense. The increase in the segment's same community facility
operating expense was primarily attributable to an increase in labor expense
arising from increased contract labor and overtime costs due to a competitive
labor market and wage rate increases and an increase in healthcare supplies
costs to respond to increased skilled nursing occupancy during the current year
period. These increases in the segment's same community facility operating
expense were partially offset by a $4.0 million decrease in incremental direct
costs to respond to the COVID-19 pandemic and a decrease in food costs due to
reduced occupancy during the period. The segment's facility operating expense
for the nine months ended September 30, 2021 and 2020 includes $6.9 million and
$14.3 million, respectively, of incremental direct costs to respond to the
COVID-19 pandemic.

                                       48
--------------------------------------------------------------------------------

Operating Results - Management Services Segment

The following table summarizes the operating results and data for our Management Services segment for the nine months ended September 30, 2021 and 2020.

                                                     Nine Months Ended
                                                       September 30,                             Increase (Decrease)
(in thousands, except communities and units)      2021               2020                   Amount                   Percent
Management fees                               $  17,185          $ 120,460          $            (103,275)               (85.7) %
Reimbursed costs incurred on behalf of
managed communities                           $ 146,651          $ 315,003          $            (168,352)               (53.4) %
Costs incurred on behalf of managed
communities                                   $ 146,651          $ 315,003          $            (168,352)               (53.4) %

Number of communities (period end)                   34                 74                            (40)               (54.1) %
Number of units (period end)                      4,913              9,980                         (5,067)               (50.8) %
Total average units                               6,647             11,559                         (4,912)               (42.5) %



The decrease in management fees was primarily attributable to $100.0 million of
management agreement termination fees recognized for the nine months ended
September 30, 2020 for the management agreement termination fee received from
Healthpeak in connection with the sale of our ownership interest in the CCRC
Venture. As of September 30, 2021, we have completed the transition of
management arrangements on 66 net communities since the beginning of the prior
year period, generally for management arrangements on certain former
unconsolidated ventures in which we sold our interest and interim management
arrangements on formerly leased communities. Management fees of $17.2 million
for the nine months ended September 30, 2021 include $5.2 million of management
agreement termination fees and $2.6 million of other management fees
attributable to communities for which our management agreements were terminated
during such period.

The decrease in reimbursed costs and costs incurred on behalf of managed communities was primarily attributable to terminations of management agreements subsequent to the beginning of the prior year period.

Operating Results - Other Income and Expense Items

The following table summarizes other income and expense items in our operating results for the nine months ended September 30, 2021 and 2020.

                                                  Nine Months Ended
                                                    September 30,                          Increase (Decrease)
(in thousands)                                 2021               2020              Amount                 Percent

General and administrative expense $ 146,155 $ 161,251

      $  (15,096)                     (9.4) %
Facility operating lease expense             131,508            178,480             (46,972)                    (26.3) %
Depreciation and amortization                252,042            271,713             (19,671)                     (7.2) %
Asset impairment                              13,394             96,729             (83,335)                    (86.2) %

Interest income                                1,048              4,305              (3,257)                    (75.7) %
Interest expense                             147,025            159,328             (12,303)                     (7.7) %
Gain (loss) on debt modification and
extinguishment, net                                -             11,107             (11,107)                          NM
Equity in earnings (loss) of
unconsolidated ventures                       11,941               (863)             12,804                           NM
Gain (loss) on sale of assets, net           289,408            374,019             (84,611)                    (22.6) %
Other non-operating income (loss)              5,163              4,598                 565                      12.3  %
Benefit (provision) for income taxes         (15,239)            (7,560)             (7,679)                   (101.6) %



General and Administrative Expense. The decrease in general and administrative
expense was primarily attributable to decreases in transaction and
organizational restructuring costs, compensation costs as a result of a
reduction in our corporate headcount related to the sale of 80% of our equity in
our Health Care Services segment and as we scaled our general and administrative
costs in connection with community dispositions, non-cash stock-based
compensation expense, and travel costs. These decreases were partially offset by
an increase in incentive compensation costs. General and administrative expense

                                       49
--------------------------------------------------------------------------------

includes transaction and organizational restructuring costs of $3.5 million and
$11.6 million for the nine months ended September 30, 2021 and 2020,
respectively. Transaction costs include those directly related to acquisition,
disposition, financing and leasing activity, and stockholder relations advisory
matters, and are primarily comprised of legal, finance, consulting, professional
fees and other third-party costs. Organizational restructuring costs include
those related to our efforts to reduce general and administrative expense and
our senior leadership changes, including severance costs. General and
administrative expense of $146.2 million for the nine months ended September 30,
2021 includes direct general and administrative expense attributable to the
Health Care Services segment, which was deconsolidated on July 1, 2021. In
addition to the reductions in general and administrative expense directly
attributable to the HCS Sale, we expect reductions of general and administrative
expense for indirect scaling initiatives, including initiatives previously
completed.

Facility Operating Lease Expense. The decrease in facility operating lease
expense was primarily due to the Ventas lease portfolio restructuring during the
prior year and lease termination activity since the beginning of the prior year
period.

Depreciation and Amortization. The decrease in depreciation and amortization
expense was primarily due to disposition activity since the beginning of the
prior year period and leasehold improvements for certain leased communities
becoming fully depreciated since the beginning of the prior year period.

Asset Impairment. During the current year period, we recorded $13.4 million of
non-cash impairment charges, primarily for right-of-use assets for certain
leased communities with decreased future cash flow estimates as a result of the
COVID-19 pandemic and for natural disaster related property damage sustained at
certain communities during the period. During the prior year period, we recorded
$96.7 million of non-cash impairment charges, primarily for right-of-use assets
for certain leased communities with decreased future cash flow estimates as a
result of the COVID-19 pandemic.

Interest Expense. The decrease in interest expense was primarily due to a decrease in interest expense on long-term debt, reflecting the impact of lower interest rates, and the acquisition of communities previously subject to financing leases since the beginning of the prior year period.

Gain (loss) on Debt Modification and Extinguishment, Net. The decrease in gain
(loss) on debt modification and extinguishment, net was primarily due to a $19.7
million gain on debt extinguishment recognized during the three months ended
March 31, 2020 for the extinguishment of financing lease obligations for the
acquisition from Healthpeak of eight communities which were previously subject
to sale-leaseback transactions in which we were deemed to have continuing
involvement. This gain was partially offset by $7.8 million of costs incurred
during the three months ended September 30, 2020 for debt modifications and
extinguishments.

Equity in Earnings (Loss) of Unconsolidated Ventures. The change in equity in
earnings (loss) of unconsolidated ventures was primarily due to the gain on sale
of assets recognized by our unconsolidated entry fee CCRC venture for the sale
of the two remaining entry fee CCRCs during the current year period.

Gain (Loss) on Sale of Assets, Net. The decrease in gain on sale of assets, net
was primarily due to a $369.8 million gain on sale of assets recognized for the
sale of our ownership interest in the CCRC Venture during the prior year period
compared to the $288.2 million gain related to the HCS Sale in the current
period.

Benefit (Provision) for Income Taxes. The difference between our effective tax
rate for the nine months ended September 30, 2021 and 2020 was primarily due to
the tax impact of the multi-part transaction with Healthpeak that occurred in
the three months ended March 31, 2020 as well as the HCS Sale in the three
months ended September 30, 2021. The impact represented the tax expense recorded
on the gain on the sale of our interest in the CCRC Venture and the HCS Sale,
offset by a decrease in the valuation allowance that was a direct result of the
multi-part transaction with Healthpeak and the HCS Sale, respectively.

We recorded an aggregate deferred federal, state, and local tax expense of $35.0
million for the nine months ended September 30, 2021, of which $104.3 million
was recorded as the result of the HCS Sale, offset by a benefit of $69.3 million
as a result of the operating loss for the nine months ended September 30, 2021.
The tax expense was offset by a decrease in the valuation allowance of $26.5
million, resulting from the HCS Sale, current operating losses, and the
anticipated reversal of future tax liabilities offset by future tax deductions.
We recorded an aggregate deferred federal, state, and local tax expense of $36.8
million, of which, $56.3 million was recorded as a result of the benefit on our
operating loss for the nine months ended September 30, 2020. The benefit was
offset by $93.1 million of tax expense that was recorded on the sale of our
interest in the CCRC Venture. The tax expense was offset by a decrease in the
valuation allowance of $39.5 million. The change in the valuation allowance for
the nine months ended September 30, 2020 resulted from the tax impact of the
Healthpeak transaction, the increase in valuation allowance on current operating
losses, and the anticipated reversal of future tax liabilities offset by future
tax deductions.

                                       50
--------------------------------------------------------------------------------

Liquidity and Capital Resources

This section includes the non-GAAP liquidity measure Adjusted Free Cash Flow.
See "Non-GAAP Financial Measures" below for our definition of the measure and
other important information regarding such measure, including reconciliations to
the most comparable GAAP measure.

Liquidity and Indebtedness

The following is a summary of cash flows from operating, investing, and financing activities, as reflected in the condensed consolidated statements of cash flows, and our Adjusted Free Cash Flow:

                                                Nine Months Ended
                                                  September 30,                           Increase (Decrease)
(in thousands)                              2021                2020                Amount                Percent
Net cash provided by (used in)
operating activities                    $  (13,247)         $  132,150          $  (145,397)                         NM
Net cash provided by (used in)
investing activities                       201,729            (343,964)             545,693                          NM
Net cash provided by (used in)
financing activities                       (75,731)            403,192             (478,923)                         NM
Net increase (decrease) in cash, cash
equivalents, and restricted cash           112,751             191,378              (78,627)                   (41.1) %
Cash, cash equivalents, and restricted
cash at beginning of period                465,148             301,697              163,451                     54.2  %
Cash, cash equivalents, and restricted
cash at end of period                   $  577,899          $  493,075          $    84,824                     17.2  %
Adjusted Free Cash Flow                 $ (147,991)         $    4,306          $  (152,297)                         NM



The change in net cash provided by (used in) operating activities was
attributable primarily to a decrease in same community revenue compared to the
prior year period, the $100.0 million management agreement termination fee
payment received from Healthpeak in connection with the sale of our ownership
interest in the CCRC Venture in the prior year period, $87.5 million of cash
received under the Medicare accelerated and advance payment program in the prior
year period, $50.1 million of the employer portion of social security payroll
taxes deferred during the prior year period, and a $35.3 million decrease in
government grants accepted and credits received compared to the prior year
period. These changes were partially offset by a $163.0 million decrease in cash
facility operating lease payments, including the impact of the $119.2 million
one-time cash lease payment made to Ventas in connection with our lease
restructuring transaction with Ventas effective July 26, 2020.

The change in net cash provided by (used in) investing activities was primarily
attributable to $472.2 million of cash paid for the acquisition of communities
during the prior year period, a $74.2 million increase in proceeds from sales
and maturities of marketable securities, a $14.9 million decrease in cash paid
for capital expenditures, and a $7.5 million decrease in purchases of marketable
securities compared to the prior year period. These changes were partially
offset by a $15.5 million decrease in net proceeds from the sale of assets
compared to the prior year period.

The change in net cash provided by (used in) financing activities was primarily
attributable to a $936.7 million decrease in debt proceeds compared to the prior
year period, partially offset by a $422.6 million decrease in repayment of debt
and financing lease obligations, an $18.1 million decrease in cash paid for
share repurchases, and a $17.9 million decrease in cash paid for financing costs
compared to the prior year period.

The change in Adjusted Free Cash Flow was primarily attributable to the change
in net cash provided by (used in) operating activities, excluding distributions
from unconsolidated ventures and changes in prepaid insurance premiums financed
with notes payable.

Our principal sources of liquidity have historically been from:

•cash balances on hand, cash equivalents, and marketable securities;
•cash flows from operations;
•proceeds from our credit facilities;
•funds generated through unconsolidated venture arrangements;
•proceeds from mortgage financing or refinancing of various assets;
•funds raised in the debt or equity markets; and

                                       51
--------------------------------------------------------------------------------

•proceeds from the disposition of assets.

Over the longer-term, we expect to continue to fund our business through these
principal sources of liquidity. During 2020, we also received cash grants and
advanced Medicare payments under programs expanded or created under the CARES
Act, and we have elected to utilize the CARES Act payroll tax deferral program,
each as described above.

Our liquidity requirements have historically arisen from:

•working capital;
•operating costs such as employee compensation and related benefits, severance
costs, general and administrative expense, and supply costs;
•debt, interest, and lease payments;
•acquisition consideration, lease termination and restructuring costs, and
transaction and integration costs;
•capital expenditures and improvements, including the expansion, renovation,
redevelopment, and repositioning of our current communities and the development
of new communities;
•cash collateral required to be posted in connection with our financial
instruments and insurance programs;
•purchases of common stock under our share repurchase authorizations;
•other corporate initiatives (including integration, information systems,
branding, and other strategic projects); and
•prior to 2009, dividend payments.

Over the near-term, we expect that our liquidity requirements will primarily arise from:

•working capital;
•operating costs such as employee compensation and related benefits, severance
costs, general and administrative expense, and supply costs, including those
related to the COVID-19 pandemic;
•debt, interest, and lease payments;
•payment of deferred payroll taxes under the CARES Act;
•recoupment of payments received under the Accelerated and Advance Payment
Program;
•acquisition consideration;
•transaction costs and investment in our health care and wellness initiatives;
•capital expenditures and improvements, including the expansion, renovation,
redevelopment, and repositioning of our existing communities;
•cash collateral required to be posted in connection with our financial
instruments and insurance programs; and
•other corporate initiatives (including information systems and other strategic
projects).

We are highly leveraged and have significant debt and lease obligations. As of
September 30, 2021, we had $3.9 billion of debt outstanding, at a weighted
average interest rate of 3.6%. As of such date, 98.3%, or $3.8 billion of our
total debt obligations represented non-recourse property-level mortgage
financings. As of September 30, 2021, $1.4 billion of our long-term debt is
variable rate debt subject to interest rate cap agreements. The remaining $128.2
million of our long-term variable rate debt is not subject to any interest rate
cap agreements. As of September 30, 2021, $70.6 million of letters of credit and
no cash borrowings were outstanding under our $80.0 million secured credit
facility. We also had a separate secured letter of credit facility providing up
to $15.0 million of letters of credit as of September 30, 2021 under which
$13.6 million had been issued as of that date.

On October 1, 2021, we issued $230.0 million principal amount of 2.00%
convertible senior notes due 2026 and we received net proceeds of $224.3 million
at closing after the deduction of the initial purchasers' discount as described
above. We utilized $15.9 million of the net proceeds to pay our cost of the
capped call transactions described above. Additionally, we used a portion of the
net proceeds to repay a $45.0 million note payable and $29.2 million of mortgage
debt and we intend to use the remaining net proceeds for general corporate
purposes, including refinancing or repaying maturing debt.

As of September 30, 2021, we had $1.4 billion of operating and financing lease obligations. For the twelve months ending September 30, 2022, we will be required to make approximately $271.9 million of cash lease payments in connection with our existing operating and financing leases.

Total liquidity of $645.8 million as of September 30, 2021 included $478.5
million of unrestricted cash and cash equivalents (excluding restricted cash and
lease security deposits of $102.1 million in the aggregate), $157.9 million of
marketable securities, and $9.4 million of availability on our secured credit
facility. Total liquidity as of September 30, 2021 increased $70.3 million from
total liquidity of $575.5 million as of December 31, 2020. The increase was
primarily attributable to the sale of 80% of our equity in our Health Care
Services segment on July 1, 2021, for net cash proceeds of $305.8 million at
closing,

                                       52
--------------------------------------------------------------------------------

partially offset by negative $148.0 million of Adjusted Free Cash Flow and $60.7
million of payments of mortgage debt during the nine months ended September 30,
2021. As described above, we received cash proceeds of $208.3 million at closing
for the issuance of convertible senior notes, net of the initial purchasers'
discount and the cost of the capped call transactions, on October 1, 2021, which
further enhanced our liquidity.

We currently estimate our net cash proceeds from the convertible senior notes
transactions and our historical principal sources of liquidity, primarily our
cash flows from operations, together with cash balances on hand, cash
equivalents, and marketable securities will be sufficient to fund our liquidity
needs for at least the next 12 months.

We continue to seek opportunities to enhance and preserve our liquidity,
including through maintaining expense discipline and increasing occupancy,
continuing to evaluate our financing structure and the state of debt markets,
and seeking further government-sponsored financial relief related to the
COVID-19 pandemic. As of September 30, 2021, we have no remaining 2021 mortgage
debt maturities and our 2022 mortgage debt maturities are $310.6 million,
excluding recurring monthly principal payments. We have continued efforts on our
plan to repay or refinance those maturities. There is no assurance that debt
financing will continue to be available on terms consistent with our
expectations or at all, or that our efforts will be successful in seeking
further government-sponsored financial relief or regarding the amount of, or
conditions required to qualify for, any such relief.

Our actual liquidity and capital funding requirements depend on numerous
factors, including our operating results, our actual level of capital
expenditures, general economic conditions, and the cost of capital, as well as
other factors described in "Item 1A. Risk Factors" in our Annual Report on Form
10-K for the year ended December 31, 2020 filed with the SEC on February 25,
2021, Part II, "Item 1A", and elsewhere in this Quarterly Report on Form 10-Q.
Disruptions in the financial markets may have an adverse impact on our liquidity
by making it more difficult for us to obtain financing or refinancing of various
assets. Since the amount of mortgage financing available for our communities is
generally dependent on their appraised values and performance, decreases in
their appraised values, including due to adverse changes in real estate market
conditions, or their performance, could result in available mortgage refinancing
amounts that are less than the communities' maturing indebtedness. In addition,
our inability to satisfy underwriting criteria for individual communities may
limit our access to our historical lending sources for such communities. If we
are unable to obtain refinancing proceeds sufficient to cover maturing
indebtedness, our liquidity could be adversely impacted and we may seek
alternative sources of financing, which may be less attractive or unavailable.
Shortfalls in cash flows from estimated operating results or other principal
sources of liquidity may have an adverse impact on our ability to fund our
planned capital expenditures, or to pursue any acquisition, investment,
development, or potential lease restructuring opportunities that we identify, or
to fund investments to support our strategy. In order to continue some of these
activities at historical or planned levels, we may incur additional indebtedness
or lease financing to provide additional funding. There can be no assurance that
any such additional financing will be available or on terms that are acceptable
to us.

Our capital expenditures are comprised of community-level, corporate, and
development capital expenditures. Community-level capital expenditures include
recurring expenditures (routine maintenance of communities over $1,500 per
occurrence and for unit turnovers over $500 per unit) and community renovations,
apartment upgrades, and other major building infrastructure projects. Corporate
capital expenditures include those for information technology systems and
equipment, the expansion of our support platform and, prior to July 1, 2021,
healthcare services programs, and the remediation or replacement of assets as a
result of casualty losses. Development capital expenditures include community
expansions, major community redevelopment and repositioning projects, and the
development of new communities.

With our development capital expenditures program, we intend to expand,
renovate, redevelop, and reposition certain of our communities where
economically advantageous. Certain of our communities may benefit from additions
and expansions or from adding a new level of service for residents to meet the
evolving needs of our customers. These development projects include converting
space from one level of care to another, reconfiguration of existing units, the
addition of services that are not currently present, or physical plant
modifications.


                                       53
--------------------------------------------------------------------------------

The following table summarizes our capital expenditures for the nine months ended September 30, 2021 for our consolidated business: (in millions) Community-level capital expenditures, net(1) $ 73.8 Corporate capital expenditures, net(2)

            17.6

Non-development capital expenditures, net(3) 91.4 Development capital expenditures, net

              2.7
Total capital expenditures, net                 $ 94.1

(1)Reflects the amount invested, net of lessor reimbursements of $34.6 million.

(2)Includes $7.2 million of remediation costs at our communities resulting from natural disasters.

(3)Amount is included in Adjusted Free Cash Flow.

In the aggregate, we expect our full-year 2021 non-development capital
expenditures, net of anticipated lessor reimbursements, to be approximately
$140.0 million. In addition, we expect our full-year 2021 development capital
expenditures to be approximately $8.0 million, net of anticipated lessor
reimbursements, and such projects include those for expansion, repositioning,
redeveloping, and major renovation of selected existing senior living
communities. We anticipate that our 2021 capital expenditures will be funded
from cash on hand, cash equivalents, marketable securities, cash flows from
operations, and reimbursements from lessors.

Funding our planned capital expenditures, pursuing any acquisition, investment,
development, or potential lease restructuring opportunities that we identify, or
funding investments to support our strategy may require additional capital. We
expect to continue to assess our financing alternatives periodically and access
the capital markets opportunistically. If our existing resources are
insufficient to satisfy our liquidity requirements, we may need to sell
additional equity or debt securities. Any such sale of additional equity
securities will dilute the percentage ownership of our existing stockholders,
and we cannot be certain that additional public or private financing will be
available in amounts or on terms acceptable to us, if at all. Any newly issued
equity securities may have rights, preferences, or privileges senior to those of
our common stock. If we are unable to raise additional funds or obtain them on
terms acceptable to us, we may have to delay or abandon our plans.

Credit Facilities

On December 11, 2020, we entered into a revolving credit agreement with Capital
One, National Association, as administrative agent and lender and the other
lenders from time to time parties thereto. The agreement provides a commitment
amount of up to $80.0 million which can be drawn in cash or as letters of
credit. The agreement matures on January 15, 2024. Amounts drawn under the
facility will bear interest at 30-day LIBOR plus an applicable margin which was
2.75% as of September 30, 2021. Additionally, a quarterly commitment fee of
0.25% per annum was applicable on the unused portion of the facility as of
September 30, 2021. The revolving credit facility is currently secured by first
priority mortgages and negative pledges on certain of our communities. Available
capacity under the facility will vary from time to time based upon borrowing
base calculations related to the appraised value and performance of the
communities securing the credit facility.

As of September 30, 2021, $70.6 million of letters of credit and no cash
borrowings were outstanding under our $80.0 million secured credit facility and
the facility had $9.4 million of availability. We also had a separate secured
letter of credit facility providing up to $15.0 million of letters of credit as
of September 30, 2021 under which $13.6 million had been issued as of that date.


                                       54
--------------------------------------------------------------------------------

Long-Term Leases

As of September 30, 2021, we operated 300 communities under long-term leases
(234 operating leases and 66 financing leases). The substantial majority of our
lease arrangements are structured as master leases. Under a master lease,
numerous communities are leased through an indivisible lease. We typically
guarantee the performance and lease payment obligations of our subsidiary
lessees under the master leases. Due to the nature of such master leases, it is
difficult to restructure the composition of our leased portfolios or economic
terms of the leases without the consent of the applicable landlord. In addition,
an event of default related to an individual property or limited number of
properties within a master lease portfolio may result in a default on the entire
master lease portfolio.

The leases relating to these communities are generally fixed rate leases with
annual escalators that are either fixed or based upon changes in the consumer
price index or leased property revenue. We are responsible for all operating
costs, including repairs, property taxes, and insurance. The lease terms
generally provide for renewal or extension options from 5 to 20 years, and, in
some instances, purchase options.

The community leases contain other customary terms, which may include assignment
and change of control restrictions, maintenance and capital expenditure
obligations, termination provisions, and financial covenants, such as those
requiring us to maintain prescribed minimum liquidity, net worth, and
stockholders' equity levels and lease coverage ratios. In addition, our lease
documents generally contain non-financial covenants, such as those requiring us
to comply with Medicare or Medicaid provider requirements and maintain insurance
coverage. Certain leases contain cure provisions, which generally allow us to
post an additional lease security deposit if the required covenant is not met.

In addition, certain of our master leases contain radius restrictions, which
limit our ability to own, develop, or acquire new communities within a specified
distance from certain existing communities covered by such agreements. These
radius restrictions could negatively affect our ability to expand, develop, or
acquire senior housing communities and operating companies.

For the three and nine months ended September 30, 2021, our cash lease payments
for our operating leases were $51.1 million and $158.8 million, respectively and
for our financing leases were $16.7 million and $49.2 million, respectively. For
the twelve months ending September 30, 2022, we will be required to make $271.9
million of cash lease payments in connection with our existing operating and
financing leases. Our capital expenditure plans for 2021 include required
minimum spend of approximately $18 million for capital expenditures under
certain of our community leases. Additionally, we are required to spend an
average of approximately $26 million per year for each of the following four
years and approximately $17 million thereafter under the initial lease terms of
such leases.

Debt and Lease Covenants

Certain of our debt and lease documents contain restrictions and financial
covenants, such as those requiring us to maintain prescribed minimum liquidity,
net worth, and stockholders' equity levels and debt service and lease coverage
ratios, in each case on a consolidated, portfolio-wide, multi-community,
single-community, and/or entity basis. Net worth is generally calculated as
stockholders' equity as calculated in accordance with GAAP, and in certain
circumstances, reduced by intangible assets or liabilities or increased by
deferred gains from sale-leaseback transactions and deferred entrance fee
revenue. The debt service and lease coverage ratios are generally calculated as
revenues less operating expenses, including an implied management fee and a
reserve for capital expenditures, divided by the debt (principal and interest)
or lease payment. In addition, our debt and lease documents generally contain
non-financial covenants, such as those requiring us to comply with Medicare or
Medicaid provider requirements and maintain insurance coverage.

Our failure to comply with applicable covenants could constitute an event of
default under the applicable debt or lease documents. Many of our debt and lease
documents contain cross-default provisions so that a default under one of these
instruments could cause a default under other debt and lease documents
(including documents with other lenders and lessors).

Furthermore, our debt and leases are secured by our communities and, in certain
cases, a guaranty by us and/or one or more of our subsidiaries. Therefore, if an
event of default has occurred under any of our debt or lease documents, subject
to cure provisions in certain instances, the respective lender or lessor would
have the right to declare all the related outstanding amounts of indebtedness or
cash lease obligations immediately due and payable, to foreclose on our
mortgaged communities, to terminate our leasehold interests, to foreclose on
other collateral securing the indebtedness and leases, to discontinue our
operation of leased communities, and/or to pursue other remedies available to
such lender or lessor. Further, an event of default could trigger cross-default
provisions in our other debt and lease documents (including documents with other
lenders or

                                       55
--------------------------------------------------------------------------------

lessors). We cannot provide assurance that we would be able to pay the debt or
lease obligations if they became due upon acceleration following an event of
default.

As of September 30, 2021, we are in compliance with the financial covenants of our debt agreements and long-term leases.

Contractual Commitments

Significant ongoing commitments consist primarily of leases, debt, and certain
other long-term liabilities. For a summary and complete presentation and
description of our ongoing commitments and contractual obligations, see the
"Contractual Commitments" section of 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, 2020 filed with the SEC on February 25, 2021.
There have been no material changes outside the ordinary course of business in
our contractual commitments during the nine months ended September 30, 2021. As
described above, on October 1, 2021, we issued $230.0 million principal amount
of 2.00% convertible senior notes due 2026.

Off-Balance Sheet Arrangements

As of September 30, 2021, we do not have an interest in any off-balance sheet
arrangements that have or are reasonably likely to have a material current or
future effect on our financial condition, revenues or expenses, results of
operations, liquidity, cash requirements, or capital resources. We own interests
in certain unconsolidated ventures as described under Note 2 to the condensed
consolidated financial statements. Except in limited circumstances, our risk of
loss is limited to our investment in each venture.

Non-GAAP Financial Measures

This Quarterly Report on Form 10-Q contains the financial measures Adjusted
EBITDA and Adjusted Free Cash Flow, which are not calculated in accordance with
U.S. generally accepted accounting principles ("GAAP"). Presentations of these
non-GAAP financial measures are intended to aid investors in better
understanding the factors and trends affecting our performance and liquidity.
However, investors should not consider these non-GAAP financial measures as a
substitute for financial measures determined in accordance with GAAP, including
net income (loss), income (loss) from operations, or net cash provided by (used
in) operating activities. We caution investors that amounts presented in
accordance with our definitions of these non-GAAP financial measures may not be
comparable to similar measures disclosed by other companies because not all
companies calculate non-GAAP measures in the same manner. We urge investors to
review the following reconciliations of these non-GAAP financial measures from
the most comparable financial measures determined in accordance with GAAP.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP performance measure that we define as net income
(loss) excluding: benefit/provision for income taxes, non-operating
income/expense items, and depreciation and amortization; and further adjusted to
exclude income/expense associated with non-cash, non-operational, transactional,
cost reduction, or organizational restructuring items that management does not
consider as part of our underlying core operating performance and that
management believes impact the comparability of performance between periods. For
the periods presented herein, such other items include non-cash impairment
charges, gain/loss on facility lease termination and modification, operating
lease expense adjustment, amortization of deferred gain, change in future
service obligation, non-cash stock-based compensation expense, and transaction
and organizational restructuring costs. Transaction costs include those directly
related to acquisition, disposition, financing, and leasing activity, and
stockholder relations advisory matters, and are primarily comprised of legal,
finance, consulting, professional fees, and other third-party costs.
Organizational restructuring costs include those related to our efforts to
reduce general and administrative expense and our senior leadership changes,
including severance.

We believe that presentation of Adjusted EBITDA as a performance measure is
useful to investors because (i) it is one of the metrics used by our management
for budgeting and other planning purposes, to review our historic and
prospective core operating performance, and to make day-to-day operating
decisions; (ii) it provides an assessment of operational factors that management
can impact in the short-term, namely revenues and the controllable cost
structure of the organization, by eliminating items related to our financing and
capital structure and other items that management does not consider as part of
our underlying core operating performance and that management believes impact
the comparability of performance between periods; and (iii) we believe that this
measure is used by research analysts and investors to evaluate our operating
results and to value companies in our industry.


                                       56
--------------------------------------------------------------------------------

Adjusted EBITDA has material limitations as a performance measure, including:
(i) excluded interest and income tax are necessary to operate our business under
our current financing and capital structure; (ii) excluded depreciation,
amortization, and impairment charges may represent the wear and tear and/or
reduction in value of our communities, goodwill, and other assets and may be
indicative of future needs for capital expenditures; and (iii) we may incur
income/expense similar to those for which adjustments are made, such as
gain/loss on sale of assets, facility lease termination and modification, or
debt modification and extinguishment, non-cash stock-based compensation expense,
and transaction and other costs, and such income/expense may significantly
affect our operating results.

The table below reconciles Adjusted EBITDA from net income (loss).

                                                    Three Months Ended                     Nine Months Ended
                                                      September 30,                          September 30,
(in thousands)                                   2021               2020                2021               2020
Net income (loss)                            $ 174,263          $ (124,993)         $ (17,644)         $ 126,084
Provision (benefit) for income taxes            15,279              14,884             15,239              7,560
Equity in (earnings) loss of unconsolidated
ventures                                         1,474                 293            (11,941)               863
Loss (gain) on debt modification and
extinguishment, net                                  -               7,917                  -            (11,107)
Loss (gain) on sale of assets, net            (288,375)             (2,209)          (289,408)          (374,019)
Other non-operating (income) loss                 (571)               (948)            (5,163)            (4,598)
Interest expense                                49,361              50,546            147,025            159,328
Interest income                                   (286)               (607)            (1,048)            (4,305)
Income (loss) from operations                  (48,855)            (55,117)          (162,940)          (100,194)
Depreciation and amortization                   84,560              87,821            252,042            271,713
Asset impairment                                   639               8,213             13,394             96,729

Operating lease expense adjustment              (6,273)           (117,322)           (16,263)          (132,276)
Non-cash stock-based compensation expense        3,568               6,136             12,878             18,212
Transaction and organizational restructuring
costs                                              943               6,250              3,516             11,599
Adjusted EBITDA(1)                           $  34,582          $  (64,019)         $ 102,627          $ 165,783



(1)   Adjusted EBITDA includes:
•$0.1 million and $12.1 million benefit for the three and nine months ended
September 30, 2021, respectively, and $10.8 million and $37.5 million benefit
for the three and nine months ended September 30, 2020 of government grants and
credits recognized in other operating income
•$119.2 million one-time cash lease payment made to Ventas in connection with
our lease restructuring transaction effective July 26, 2020 for the three and
nine months ended September 30, 2020
•$100.0 million benefit for the nine months ended September 30, 2020 for the
management agreement termination fee payment received from Healthpeak in
connection with the sale of our ownership interest in the CCRC Venture

Adjusted Free Cash Flow

Adjusted Free Cash Flow is a non-GAAP liquidity measure that we define as net
cash provided by (used in) operating activities before: distributions from
unconsolidated ventures from cumulative share of net earnings, changes in
prepaid insurance premiums financed with notes payable, changes in operating
lease liability for lease termination, cash paid/received for gain/loss on
facility lease termination and modification, and lessor capital expenditure
reimbursements under operating leases; plus: property insurance proceeds and
proceeds from refundable entrance fees, net of refunds; less: non-development
capital expenditures and payment of financing lease obligations. Non-development
capital expenditures are comprised of corporate and community-level capital
expenditures, including those related to maintenance, renovations, upgrades, and
other major building infrastructure projects for our communities and is
presented net of lessor reimbursements. Non-development capital expenditures do
not include capital expenditures for: community expansions, major community
redevelopment and repositioning projects, and the development of new
communities.

We believe that presentation of Adjusted Free Cash Flow as a liquidity measure
is useful to investors because (i) it is one of the metrics used by our
management for budgeting and other planning purposes, to review our historic and
prospective sources of operating liquidity, and to review our ability to service
our outstanding indebtedness, pay dividends to stockholders, engage in

                                       57
--------------------------------------------------------------------------------

share repurchases, and make capital expenditures, including development capital
expenditures; and (ii) it provides an indicator to management to determine if
adjustments to current spending decisions are needed.

Adjusted Free Cash Flow has material limitations as a liquidity measure,
including: (i) it does not represent cash available for dividends, share
repurchases, or discretionary expenditures since certain non-discretionary
expenditures, including mandatory debt principal payments, are not reflected in
this measure; (ii) the cash portion of non-recurring charges related to
gain/loss on facility lease termination generally represent charges/gains that
may significantly affect our liquidity; and (iii) the impact of timing of cash
expenditures, including the timing of non-development capital expenditures,
limits the usefulness of the measure for short-term comparisons.

The table below reconciles Adjusted Free Cash Flow from net cash provided by (used in) operating activities.

                                                      Three Months Ended                     Nine Months Ended
                                                        September 30,                          September 30,
(in thousands)                                     2021               2020                2021                2020
Net cash provided by (used in) operating
activities                                     $   7,200          $  (77,169)         $  (13,247)         $ 132,150
Net cash provided by (used in) investing
activities                                       203,974             (48,554)            201,729           (343,964)
Net cash provided by (used in) financing
activities                                       (19,177)             96,668             (75,731)           403,192
Net increase (decrease) in cash, cash
equivalents, and restricted cash               $ 191,997          $  

(29,055) $ 112,751 $ 191,378

Net cash provided by (used in) operating
activities                                     $   7,200          $  (77,169)         $  (13,247)         $ 132,150
Distributions from unconsolidated ventures
from cumulative share of net earnings               (836)               (766)             (6,191)              (766)
Changes in prepaid insurance premiums financed
with notes payable                                (4,151)             (5,841)              4,634              5,823

Changes in assets and liabilities for lessor
capital expenditure reimbursements under
operating leases                                 (11,551)             (3,131)            (27,057)           (13,640)
Non-development capital expenditures, net        (28,193)            (22,872)            (91,438)          (104,949)
Payment of financing lease obligations            (5,039)             (4,548)            (14,692)           (14,312)
Adjusted Free Cash Flow(1)                     $ (42,570)         $ 

(114,327) $ (147,991) $ 4,306

(1)   Adjusted Free Cash Flow includes transaction and organizational
restructuring costs of $0.9 million and $3.5 million for the three and nine
months ended September 30, 2021, respectively, and $6.3 million and $11.6
million for the three and nine months ended September 30, 2020, respectively.
Additionally, Adjusted Free Cash Flow includes:
•$1.1 million and $3.3 million benefit for the three and nine months ended
September 30, 2021, respectively, and $4.4 million and $38.6 million benefit for
the three and nine months ended September 30, 2020, respectively, from Provider
Relief Funds and other government grants and credits accepted or received
•$3.5 million and $17.8 million recoupment of accelerated/advanced Medicare
payments for the three and nine months ended September 30, 2021, respectively
•$2.5 million and $87.5 million benefit from accelerated/advanced Medicare
payments received for the three and nine months ended September 30, 2020,
respectively
•$23.6 million and $50.1 million benefit from payroll taxes deferred for the
three and nine months ended September 30, 2020, respectively
•$119.2 million one-time cash lease payment made to Ventas in connection with
our lease restructuring transaction effective July 26, 2020 for the three and
nine months ended September 30, 2020
•$100.0 million benefit for the nine months ended September 30, 2020 for the
management agreement termination fee payment received from Healthpeak in
connection with the sale of our ownership interest in the CCRC Venture

© Edgar Online, source Glimpses