v3.26.3
LEASES
 9 Months Ended
Sep. 30, 2026
Leases [Abstract]  
LEASES LEASES
The Company leases real property associated with 103 independent skilled nursing and senior living facilities under eight triple‑net master lease agreements with CareTrust REIT, Inc. (collectively, the Master Leases). The Master Leases have initial terms ranging from 13 to 20 years and include two or three five‑year renewal options at the Company’s election, subject to customary conditions. If the Company elects to renew the term of a Master Lease, the renewal will be effective to all, but not less than all, of the leased property then subject to such Master Lease.
The Master Leases are non‑cancelable prior to expiration without the consent of CareTrust. Rent consists of a fixed base amount subject to annual escalation equal to the lesser of 2.5% or the percentage change in the Consumer Price Index (not less than zero). As triple‑net leases, the Company is responsible for substantially all property‑level operating costs, including taxes, insurance, utilities, and maintenance. Total rent expense under the Master Leases was approximately $20,007 and $59,393 for the three and nine months ended September 30, 2026, respectively, and $18,800 and $52,830 for the three and nine months ended September 30, 2025, respectively.
The Master Leases require the Company to comply with certain financial covenants, including portfolio coverage and minimum rent coverage ratios, as well as customary reporting and other requirements. The Company was in compliance with all such requirements as of September 30, 2026.
The Company leases facilities where its independent subsidiaries operate under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years. Most of these leases contain renewal options, certain of which involve rent increases.
The Company's 101 independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases with CareTrust, are operated under 18 separate master lease arrangements. Under the master leases, a default at a single facility could subject one or more of the other facilities covered by the same master lease to the same default risk. Failure to comply with Medicare and Medicaid provider requirements is an event of default under several of the Company’s leases, master lease agreements and debt financing instruments. In addition, other potential defaults related to an individual facility may cause a default of an entire master lease portfolio and could trigger cross-default provisions in the Company’s outstanding debt arrangements and other leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the lease without the consent of the landlord.
The components of operating lease expense are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Rent - cost of services(1)
$66,970 $61,528 $198,888 $175,799 
Cost of services(2)
8,076 6,787 22,977 19,827 
General and administrative expense280 195 775 608 
$75,326 $68,510 $222,640 $196,234 
(1)Rent - cost of services includes deferred rent expense adjustments of $270 and $846 for the three and nine months ended September 30, 2026, respectively, and $225 and $632 for the three and nine months ended September 30, 2025, respectively. Additionally, rent - cost of services includes other costs such as consumer price index increases and short-term leases of $5,638 and $15,896 for the three and nine months ended September 30, 2026, respectively, and $4,922 and $13,560 for the three and nine months ended September 30, 2025, respectively.
(2)Cost of services includes costs consisting of property taxes and insurance.

Future minimum lease payments for all third-party leases as of September 30, 2026 are as follows:
YearAmount
2026 (remainder)$60,952 
2027243,486 
2028242,449 
2029237,998 
2030233,645 
2031223,071 
Thereafter1,836,964 
TOTAL LEASE PAYMENTS$3,078,565 
Less: present value adjustment (989,638)
PRESENT VALUE OF TOTAL LEASE LIABILITIES$2,088,927 
Less: current lease liabilities(120,388)
LONG-TERM OPERATING LEASE LIABILITIES$1,968,539 
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date. As of September 30, 2026, the weighted average remaining lease term is 13.7 years and the weighted average discount rate used to determine the operating lease liabilities is 6.1%.
Subsequent to September 30, 2026, the Company entered into three new master leases to add 17 stand-alone skilled nursing facilities and two campuses operated by the Company's independent subsidiaries with initial terms ranging from 15 to 20 years. As a result, the Company operates under 21 master lease arrangements. In connection with the new master leases, the Company recognized approximately $265,224 of additional lease liabilities and right-of-use assets.
Lessor Activities

The Company leases 39 owned real estate properties to third‑party operators, including 35 senior living operations operated by The Pennant Group, Inc. (Pennant). All of the leases are triple‑net arrangements, under which the tenants are responsible for substantially all property‑level operating costs, including taxes, insurance, utilities, and maintenance. The initial terms range from 14 to 16 years.
During the nine months ended September 30, 2026, the Company, through Standard Bearer, entered into three lease agreements with a third-party operator for three stand-alone senior living operations, each with initial lease terms of 15 years.
Total rental income from all third-party sources for the three and nine months ended September 30, 2026 and 2025 is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Pennant(1)
$4,623 $4,084 $13,263 $12,288 
Other third-party(2)(3)
2,544 2,542 8,781 6,694 
TOTAL$7,167 $6,626 $22,044 $18,982 
(1) Pennant rental income includes variable rent such as property taxes of $314 and $947 during the three and nine months ended September 30, 2026 and $274 and $854 for the three and nine months ended September 30, 2025.
(2) Other third-party includes rental revenue associated with the Company's subleases to third parties of $1,144 and $3,423 for the three and nine months ended September 30, 2026, and $1,116 and $3,339 for the three and nine months ended September 30, 2025, respectively.
(3) For the nine months ended September 30, 2026, other third-party revenue included $1,016 of rental income earned from acquired real estate properties during the period prior to their lease to the Company's independent operating subsidiaries.

Future contractual minimum annual rental income for all third-party leases as of September 30, 2026 were as follows:
Year
Amount
2026 (remainder)$7,417 
202729,181 
202828,666 
202928,516 
203027,416 
203127,410 
Thereafter110,405 
TOTAL$259,011 
LEASES LEASES
The Company leases real property associated with 103 independent skilled nursing and senior living facilities under eight triple‑net master lease agreements with CareTrust REIT, Inc. (collectively, the Master Leases). The Master Leases have initial terms ranging from 13 to 20 years and include two or three five‑year renewal options at the Company’s election, subject to customary conditions. If the Company elects to renew the term of a Master Lease, the renewal will be effective to all, but not less than all, of the leased property then subject to such Master Lease.
The Master Leases are non‑cancelable prior to expiration without the consent of CareTrust. Rent consists of a fixed base amount subject to annual escalation equal to the lesser of 2.5% or the percentage change in the Consumer Price Index (not less than zero). As triple‑net leases, the Company is responsible for substantially all property‑level operating costs, including taxes, insurance, utilities, and maintenance. Total rent expense under the Master Leases was approximately $20,007 and $59,393 for the three and nine months ended September 30, 2026, respectively, and $18,800 and $52,830 for the three and nine months ended September 30, 2025, respectively.
The Master Leases require the Company to comply with certain financial covenants, including portfolio coverage and minimum rent coverage ratios, as well as customary reporting and other requirements. The Company was in compliance with all such requirements as of September 30, 2026.
The Company leases facilities where its independent subsidiaries operate under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years. Most of these leases contain renewal options, certain of which involve rent increases.
The Company's 101 independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases with CareTrust, are operated under 18 separate master lease arrangements. Under the master leases, a default at a single facility could subject one or more of the other facilities covered by the same master lease to the same default risk. Failure to comply with Medicare and Medicaid provider requirements is an event of default under several of the Company’s leases, master lease agreements and debt financing instruments. In addition, other potential defaults related to an individual facility may cause a default of an entire master lease portfolio and could trigger cross-default provisions in the Company’s outstanding debt arrangements and other leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the lease without the consent of the landlord.
The components of operating lease expense are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Rent - cost of services(1)
$66,970 $61,528 $198,888 $175,799 
Cost of services(2)
8,076 6,787 22,977 19,827 
General and administrative expense280 195 775 608 
$75,326 $68,510 $222,640 $196,234 
(1)Rent - cost of services includes deferred rent expense adjustments of $270 and $846 for the three and nine months ended September 30, 2026, respectively, and $225 and $632 for the three and nine months ended September 30, 2025, respectively. Additionally, rent - cost of services includes other costs such as consumer price index increases and short-term leases of $5,638 and $15,896 for the three and nine months ended September 30, 2026, respectively, and $4,922 and $13,560 for the three and nine months ended September 30, 2025, respectively.
(2)Cost of services includes costs consisting of property taxes and insurance.

Future minimum lease payments for all third-party leases as of September 30, 2026 are as follows:
YearAmount
2026 (remainder)$60,952 
2027243,486 
2028242,449 
2029237,998 
2030233,645 
2031223,071 
Thereafter1,836,964 
TOTAL LEASE PAYMENTS$3,078,565 
Less: present value adjustment (989,638)
PRESENT VALUE OF TOTAL LEASE LIABILITIES$2,088,927 
Less: current lease liabilities(120,388)
LONG-TERM OPERATING LEASE LIABILITIES$1,968,539 
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date. As of September 30, 2026, the weighted average remaining lease term is 13.7 years and the weighted average discount rate used to determine the operating lease liabilities is 6.1%.
Subsequent to September 30, 2026, the Company entered into three new master leases to add 17 stand-alone skilled nursing facilities and two campuses operated by the Company's independent subsidiaries with initial terms ranging from 15 to 20 years. As a result, the Company operates under 21 master lease arrangements. In connection with the new master leases, the Company recognized approximately $265,224 of additional lease liabilities and right-of-use assets.
Lessor Activities

The Company leases 39 owned real estate properties to third‑party operators, including 35 senior living operations operated by The Pennant Group, Inc. (Pennant). All of the leases are triple‑net arrangements, under which the tenants are responsible for substantially all property‑level operating costs, including taxes, insurance, utilities, and maintenance. The initial terms range from 14 to 16 years.
During the nine months ended September 30, 2026, the Company, through Standard Bearer, entered into three lease agreements with a third-party operator for three stand-alone senior living operations, each with initial lease terms of 15 years.
Total rental income from all third-party sources for the three and nine months ended September 30, 2026 and 2025 is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Pennant(1)
$4,623 $4,084 $13,263 $12,288 
Other third-party(2)(3)
2,544 2,542 8,781 6,694 
TOTAL$7,167 $6,626 $22,044 $18,982 
(1) Pennant rental income includes variable rent such as property taxes of $314 and $947 during the three and nine months ended September 30, 2026 and $274 and $854 for the three and nine months ended September 30, 2025.
(2) Other third-party includes rental revenue associated with the Company's subleases to third parties of $1,144 and $3,423 for the three and nine months ended September 30, 2026, and $1,116 and $3,339 for the three and nine months ended September 30, 2025, respectively.
(3) For the nine months ended September 30, 2026, other third-party revenue included $1,016 of rental income earned from acquired real estate properties during the period prior to their lease to the Company's independent operating subsidiaries.

Future contractual minimum annual rental income for all third-party leases as of September 30, 2026 were as follows:
Year
Amount
2026 (remainder)$7,417 
202729,181 
202828,666 
202928,516 
203027,416 
203127,410 
Thereafter110,405 
TOTAL$259,011