New Senior Investment Group Inc. (Form: 10-K, Received: 02/25/2021 16:09:37)

00016101142020FYfalsePrimarily includes the non-cash write-offs of straight-line rent receivables and net above-market rent lease intangible assets, offset by the fair value of furniture, fixtures, equipment and other improvements received by us as a result of the Lease Termination (as defined in Note 1). Refer to "Note 3 - Lease Termination" for details.For the year ended December 31, 2020, amount primarily consists of net proceeds from the AL/MC Portfolio Disposition. Refer to "Note 5 - Dispositions" for details.For the year ended December 31, 2020, amount primarily consists of repayments of debt in conjunction with the AL/MC Portfolio Disposition. Refer to "Note 5 - Dispositions" for 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the annual period ended December 31, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number: 001-36499


New Senior Investment Group Inc.

(Exact name of registrant as specified in its charter)


Delaware						80-0912734
(State or other jurisdiction of incorporation						(I.R.S. Employer Identification No.)
or organization)


55 West 46th Street, Suite 2204
New York	New York	10036
(Address of principal executive offices)


(646)			822-3700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12 (b) of the Act:


Title of each class:	Trading Symbol	Name of exchange on which registered:
Common stock, par value $0.01 per share	SNR	New York Stock Exchange (“NYSE”)

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

o Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

The aggregate market value of the common stock held by non-affiliates as of June 30, 2020 (computed based on the closing price on such date as reported on the NYSE) was approximately $300 million.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date.

Common stock, par value $0.01 per share: 82,986,838 shares outstanding as of February 19, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for New Senior’s 2021 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2020, are incorporated by reference in Part III of this Annual Report on Form 10-K.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of New Senior Investment Group Inc.’s (“New Senior,” the “Company,” “we,” “us” or “our”) investments, the stability of our earnings, and our financing needs. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “endeavor,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual outcome of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

•the severity, duration and scope of the novel coronavirus (“COVID-19”) global pandemic, the effects of the pandemic and measures intended to prevent its spread on our and our tenant’s business, results of operations, cash flows and financial condition, including declines in occupancy and rental revenues and increases in operating expenses; constraints in our ability to access capital and other sources of funding, including due to fluctuations in the trading price of our common stock; increased risk of claims, litigation and regulatory proceedings; and the ability of federal, state and local governments to effectively respond to and manage the pandemic on an ongoing basis to prevent its continued spread;

•our ability to comply with the terms of our financings, which depends in part on the performance of our property managers and triple net lease tenant;

•any increase in our borrowing costs as a result of rising interest rates, the expected discontinuation of the London Inter-Bank Offered Rate (LIBOR) and the transition to any other interest rate benchmark, or other factors;

•our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due or as needed to comply with the terms of our covenants or to facilitate our ability to sell assets;

•our ability to manage our liquidity and sustain distributions to our stockholders, particularly in light of the cash shortfall described in this report under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”;

•our dependence on our property managers and tenant to operate our properties successfully and in compliance with the terms of our agreements with them, the terms of our financings and applicable law;

•factors affecting the performance of our properties, such as a decline in occupancy and increases in operating costs (including, but not limited to, the costs of labor, supplies, insurance and property taxes);

•concentration risk with respect to Holiday Retirement (“Holiday”), which, for the year ended December 31, 2020, accounted for 94.8% of total net operating income (“NOI”) from continuing operations;

•risks associated with a change of control in the ownership or senior management of Holiday;

•our ability and the ability of our property managers and tenant to obtain and maintain adequate property, liability and other insurance from reputable, financially stable providers;

•changes of federal, state and local laws and regulations relating to employment, fraud and abuse practices, Medicaid reimbursement and licensure, etc., including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or otherwise affect the operations of our property managers or tenant;

•the ability of our property managers and tenant to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to us and third parties, particularly in light of the impacts of the COVID-19 pandemic on their businesses;

•the quality and size of our investment pipeline, our ability to execute investments at attractive risk-adjusted prices, our ability to finance our investments on favorable terms, and our ability to deploy investable cash in a timely manner;

•our ability to sell properties on favorable terms and to realize the anticipated benefits from any such dispositions, including as a result of a reduction of real estate value related to the COVID-19 pandemic;

•changes in economic conditions generally and the real estate, senior housing and bond markets specifically, including general economic uncertainty as a result of the COVID-19 pandemic and a worsening of global economic conditions or low levels of economic growth;

•our stock price performance and any disruption or lack of access to the capital markets or other sources of financing, including as a result of factors influenced by the COVID-19 pandemic;

iii

•the impact of any current or future legal proceedings and regulatory investigations and inquiries on us or our property managers;

•our reliance on our property managers for timely delivery of accurate property-level financial results; and

•our ability to maintain our qualification as a Real Estate Investment Trust (“REIT”) for U.S. federal income tax purposes and the potentially onerous consequences that any failure to maintain such qualification would have on our business.

Although we believe that the expectations reflected in any forward-looking statements contained herein are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The factors noted above could cause our actual results to differ significantly from those indicated by any forward-looking statement.

Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our management’s views only as of the date of this Annual Report on Form 10-K. We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.

SPECIAL NOTE REGARDING EXHIBITS

In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

•have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

•were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Annual Report on Form 10-K and the Company’s other public filings, which are available without charge through the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

FORM 10-K

INDEX


		Page
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Mine Safety Disclosures	31
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	33
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 8.	Financial Statements and Supplementary Data	56
	Report of Independent Registered Public Accounting Firm	57
	Consolidated Balance Sheets as of December 31, 2020 and 2019	60
	Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018	61
	Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018	62
	Consolidated Statements of Changes in Equity for the years ended December 31, 2020, 2019 and 2018	63
	Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018	64
	Notes to Consolidated Financial Statements	66
	Financial Statement Schedules
	Schedule III - Real Estate and Accumulated Depreciation	96
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	101
Item 9A.	Controls and Procedures	101
	Management’s Report on Internal Control over Financial Reporting
Item 9B.	Other Information	102
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	102
Item 11.	Executive Compensation	102
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	102
Item 13.	Certain Relationships and Related Transactions, and Director Independence	102
Item 14.	Principal Accounting Fees and Services	102
	PART IV
Item 15.	Exhibits; Financial Statement Schedules	103
Item 16.	Form 10-K Summary	105
	Signatures	106

PART I

ITEM 1. BUSINESS

COMPANY OVERVIEW

We are an internally managed real estate investment trust focused solely on senior housing properties. We hold a geographically diversified portfolio of primarily private pay senior housing properties located across the United States. As of December 31, 2020, our portfolio was comprised of 103 senior housing properties across 36 states, which positions us as one of the largest owners of senior housing properties in the United States.

We are organized and operate as a single reportable segment, Senior Housing Properties. We changed our structure in 2020 and no longer operate in two reportable segments: Managed Independent Living (“IL”) Properties, and Other Properties. Refer to “Note 6 – Segment Reporting” to our consolidated financial statements for additional details.

We were formed as a Delaware limited liability company and wholly owned subsidiary of Drive Shack Inc., formerly Newcastle Investment Corp. (“Drive Shack”), on May 17, 2012. On November 6, 2014, we were spun off from Drive Shack and listed on the NYSE under the symbol “SNR.” We are headquartered in New York, New York.

Through December 31, 2018, we were externally managed and advised by an affiliate of Fortress Investment Group LLC (the “Former Manager”). On November 19, 2018, we entered into definitive agreements with the Former Manager to internalize our management, effective January 1, 2019 (the “Internalization”). In connection with the Internalization, we also entered into a Transition Services Agreement with the Former Manager to continue to provide certain services for a transition period. Following the effectiveness of the Internalization, our board of directors concluded its formal review of strategic alternatives, which the Company initially announced in February 2018.

The majority of our portfolio is managed by some of the largest and most experienced operators in the United States. Currently, our managed properties are managed by affiliates or subsidiaries of each of Holiday Retirement (“Holiday”), Merrill Gardens LLC (“Merrill Gardens”), and Grace Management, Inc. (“Grace”). We also own one continuing care retirement community (“CCRC”) and lease this property under a triple net lease agreement to Watermark Retirement Communities, Inc. (“Watermark”), a healthcare operating company. Holiday is among the top three largest senior housing operators in the United States. The assets in our portfolio are described in more detail below under “Our Portfolio.”

Our investment strategy is focused on acquiring private pay senior housing properties. However, from time to time, we may explore new business opportunities and asset categories as part of our business strategy.

Impact of the COVID-19 Pandemic On Our Business

The novel coronavirus (COVID-19) global pandemic is causing significant disruptions to the U.S. and global economies and has contributed to volatility and negative pressure in financial markets. The outbreak, which became widespread in the U.S. in early 2020, led federal, state and local governments and public health authorities to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. Some of these measures have persisted into 2021, including in the areas we operate.

As an owner of senior living properties, with a portfolio of 102 IL properties and one CCRC, COVID-19 has impacted, and continues to impact, our business in various ways. Our three property managers and one tenant have all put into place various protocols to address the COVID-19 pandemic at our communities across the U.S. Some of the measures taken at the onset of the pandemic included restrictions on all non-essential visitors (including family), closure of group dining facilities and other common areas, restrictions on resident movements and group activities, as well as enhanced protocols which have required increased labor, property cleaning expenses and costs related to procuring necessary supplies such as meal containers and personal protective equipment (“PPE”). Over the last several months, our managers and tenant have lifted certain restrictions in a phased approach, based on both the status of state and local regulations that affect the property as well as the status of any COVID-19 cases at the property. Lifting restrictions at our properties, particularly restrictions related to onsite visitors, while being done in a measured approach in compliance with all state and local regulations, may contribute to an increase in COVID-19 cases.

COVID-19 has had, and will likely continue to have, an impact on three metrics that are fundamental to our business: occupancy, rental rates and operating expenses. We describe these impacts in more detail throughout “Management's Discussion and Analysis of Financial Condition.”

INVESTMENT ACTIVITY

On February 10, 2020, we completed the sale of all 28 managed assisted living/memory care (“AL/MC”) properties pursuant to a Purchase and Sale Agreement, dated as of October 31, 2019 (the “Sale Agreement”), for a gross sales price of $385.0 million (“AL/MC Portfolio Disposition”). The sale of these properties represented a strategic shift that had a major effect on our operations and financial results. Accordingly, the operations of these properties for the current and prior periods are classified as discontinued operations in the financial statements included in this Annual Report on Form 10-K. Refer to “Note 4 – Discontinued Operations” for additional details.

In conjunction with the AL/MC Portfolio Disposition, we repaid existing loan agreements and entered into a new financing for $270.0 million which is secured by 14 Senior Housing Properties. We also amended our $125.0 million credit facility (the “Revolver”) secured by nine Senior Housing Properties. The maturity of the Revolver has been extended to February 2024, compared to the previous maturity date in December 2021. The Revolver borrowing capacity may be increased from $125.0 million to $500.0 million, subject to customary terms and conditions.

As a result of these refinancing initiatives, our weighted average debt maturity increased from 4.8 years as of December 31, 2019 to 5.3 years as of December 31, 2020. We have no significant near-term debt maturities until 2025.

During 2020, we did not purchase any properties.

SENIOR HOUSING INDUSTRY

Overview

For an overview of the senior housing industry, see “Opportunity to Consolidate Large and Fragmented Industry” and “Attractive Demand - Supply Fundamentals to Drive Organic Growth.”

Following the completion of the AL/MC Portfolio Disposition, we have only one property in our portfolio that has health care components that are licensed by the state and that participates in Medicare and Medicaid. This property is a CCRC, which has independent living, assisting living (“AL”), memory care (“MC”) and skilled nursing facility (“SNF”) care.

Large and Fragmented Industry

We believe there are significant investment opportunities in the U.S. senior housing market driven by three factors: (i) long-term demand growth from significant increases in the senior citizen population, (ii) highly fragmented ownership of senior housing properties among many smaller local and regional owner/operators and (iii) operational improvement opportunities to increase property-level net operating income. We estimate the size of the senior housing industry in the United States to be approximately $350 billion, and, according to the 2020 American Seniors Housing Association 50 Report, approximately 65% of these senior housing facilities are owned by operators with 10 or fewer properties.

Attractive Demand - Supply Fundamentals

We believe that the rapidly growing senior citizen population in the U.S. will result in a substantially increased demand over time for senior housing properties as the baby boomer generation ages, life expectancies lengthen and more health-related services are demanded. The U.S. Census Bureau estimates that the total number of people aged 65 and older is expected to increase from approximately 49.2 million in 2016 to 78.0 million by 2035, with the number of citizens aged 65 and older expected to grow at four times the rate of the overall population by 2035. Healthcare is the largest private-sector industry in the U.S., with healthcare expenditures in the U.S. accounting for approximately 18% of gross domestic product in 2019. According to the Center for Medicare and Medicaid Services (“CMS”), the average annual compounded growth rate for national healthcare expenditures from 2019 through 2028 is expected to be 5.4%. Additionally, senior citizens are the largest consumers of healthcare services. The target age group for our properties is seniors over 70 years old while a typical resident is 80 to 85 years of age. According to CMS, average per capita healthcare expenditures by those 65 years and older continue to be about three times more than the average spent by those 19 to 64 years old. Demand for senior housing is driven both by growth of an aging population and by an increasing array of services and support required by residents. According to the U.S. Census Bureau, the percentage of Americans over 65 years of age seeking assistance with basic and instrumental activities of daily living is 20%, increasing to 27% for Americans over 75 years of age. To address these resident needs, senior housing provides varying and flexible levels of services. While our target population is growing, industry occupancy has been impacted by an elevated level of new supply in recent years. However, the ratio of units under construction to existing inventory has declined for nine consecutive quarters, according to the National Investment Center for Seniors Housing and Care (“NIC”).

Differentiated Strategy Focused on Private Pay Senior Housing

We have generally sought investments in senior housing facilities that have an emphasis on private pay sources of revenue which we believe is more stable and predictable compared to government reimbursed property types. We believe this strategy distinguishes us from our publicly-traded peers. Private pay residents are individuals who are personally obligated to pay the costs of their housing and services without relying significantly on reimbursement payments from Medicaid or Medicare. Sources for these private payments include: (i) pensions, savings and retirement funds; (ii) proceeds from the sale of real estate and personal property; (iii) assistance from residents’ families; and (iv) private insurance. While our investments may have minimal level of revenues related to government reimbursements, we focus on investments with high levels of private pay revenue and, for the year ended December 31, 2020, private pay sources represented 99.8% of the property level revenue from continuing operations derived from the residents at our facilities. Private pay facilities are not subject to governmental rate setting and, accordingly, we believe they provide for more predictable and higher rental rates from residents than facilities primarily reliant on government-funded sources.

The senior housing industry offers a full continuum of care to seniors with product types that range from “mostly housing” (i.e., senior apartments) to “mostly healthcare” (i.e., skilled nursing, hospitals, etc.). We primarily focus on product types at the center of this continuum, namely IL properties and, prior to the AL/MC Portfolio Disposition, AL/MC properties. Many of our peers have significant exposure to skilled nursing facilities and hospitals providing higher acuity levels of healthcare. Accordingly, these peers have higher levels of exposure to revenues derived from Medicaid and Medicare reimbursements. Our facilities are predominantly reliant on private pay sources of revenue and have reduced risk exposure to regulatory changes in the healthcare arena. We believe that our focused portfolio of primarily IL properties will allow investors to participate in the positive fundamentals of the senior housing sector without similar levels of risk exposure associated with higher acuity types of healthcare real estate.

Attractive, Geographically Diverse Portfolio

We started building our platform in July 2012 and owned 103 properties with a gross real estate value of $2.1 billion as of December 31, 2020. Our portfolio is geographically diverse, with a presence in 36 different states. As of December 31, 2020, we had 102 IL properties and one rental CCRC. All of our IL properties are owned on a managed basis while our CCRC property is leased.

GOVERNMENT REGULATION

Our CCRC and its operations are subject to extensive and complex federal, state and local healthcare laws and regulations relating to fraud and abuse practices, government reimbursement, licensure and certificate of need (“CON”) and similar laws governing the operation of healthcare properties. While the CCRC within our portfolio is subject to varying types of regulatory and licensing requirements, we expect that the healthcare industry, in general, will continue to face increased regulation, enforcement and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services,

among others. In fact, some states have revised and strengthened their regulation of senior housing properties and that trend may continue. In addition, efforts by third-party payors, such as Governmental Programs (as defined below) and private insurance payor organizations (which include insurance companies, health maintenance organizations and other types of health plans/managed care organizations) to impose more stringent controls upon operators are expected to intensify and continue. Changes in applicable federal, state or local laws and regulations and new interpretations of existing laws and regulations could have a material adverse effect on our business.

As used in this section, “Governmental Program” means, individually and collectively, any federal, state or local governmental reimbursement programs administered through a governmental body, agency thereof or contractor thereof (including a Governmental Program Payor) including, without limitation, the Medicare and Medicaid programs, waiver programs under the aforementioned programs or successor programs to any of the aforementioned programs. “Governmental Program Payor” means a private insurance payor organization which has a contract with a Governmental Program to arrange for the provision of assisted living property or SNF services to Governmental Program beneficiaries and which receives reimbursement from the Governmental Program to do so.

Our CCRC is regulated by state and local laws governing licensure, provision of services, staffing requirements and other operational matters. Owners and/or operators of certain senior housing properties, are required to be licensed or certified by the state in which they operate. In granting and renewing such licenses, the state regulatory agencies consider numerous factors relating to a property’s physical plant and operations, including, but not limited to, admission and discharge standards, staffing and training. A decision to grant or renew a license may also be affected by a property’s record with respect to licensure compliance, patient and consumer rights, medication guidelines and other regulations. Certain states require additional licensure and impose additional staffing and other operational standards in order for a property to provide higher levels of assisted living services. Senior housing properties may also be subject to state and/or local building, zoning, fire and food service laws before licensing or certification may be granted. Senior housing properties may also be subject to additional building code requires under the licensing process such as the National Fire Protection Association Life Safety Code and these components may be more restrictive than local residential building codes. Our CCRC may also be affected by changes in accreditation standards or procedures of accreditation bodies that are recognized by states or a Governmental Program in the licensure or certification process.

In the future, we may also acquire senior housing properties that include SNFs. SNFs are licensed by the state in which the facility is located, and, if an owner chooses to participate in Medicaid, Medicare or certain other Governmental Programs, the facility must also be certified to participate in such programs. In that regard, SNFs are particularly subject to myriad, comprehensive federal Medicare and Medicaid certification requirements that not only require state licensure but also separately (apart from state licensure) regulate the type, quantity and quality of the medical and/or nursing care provided, ancillary services (e.g., respiratory, occupational, physical and infusion therapies), qualifications of the administrative personnel and nursing staff, the adequacy of the physical plant and equipment, reimbursement and rate setting and other operational issues and policies.

In the future, we may also acquire certain healthcare properties (including assisted living properties in some states and SNFs in most states) that are subject to a variety of CON or similar laws. Where applicable, such laws generally require, among other requirements, as a prerequisite to licensure that a facility demonstrate the need for (i) constructing a new facility, (ii) adding beds or expanding an existing facility, (iii) investing in major capital equipment or adding new services, (iv) changing the ownership or control of an existing licensed facility, or (v) terminating services that have been previously approved through the CON process. These laws could affect, and even restrict, our ability to expand into new markets and to expand our properties and services in existing markets. In addition, CON laws may constrain the ability of an operator to transfer responsibility for operating a particular facility to a new operator. If we have to replace a facility operator who is excluded from participating in a federal or state healthcare program (as discussed below), our ability to replace the operator may be affected by a particular state’s CON laws, regulations and applicable guidance governing changes in provider control.

Aside from CON considerations, transfers of ownership, provider control and/or operations of assisted living properties and SNFs are subject to licensure and other regulatory approvals not required for transfers of other types of commercial operations and real estate. These regulations may also constrain or even impede our ability to replace property managers or tenant of our properties, and they may also impact our acquisition or sale of senior housing properties. In addition, if any of our licensed properties operate outside of its licensed authority, doing so could subject the facility to penalties, including fines, a denial of new admissions, suspension of its license, revocation of its license or closure of the facility. Failure to obtain licensure or loss or suspension of licensure or certification may prevent an assisted living property or SNF from operating or result in a suspension of Governmental Program reimbursement payment until all licensure or certification issues have been resolved.

The level of assisted living Medicaid reimbursement varies from state to state. Thus, the revenues generated by our CCRC may be adversely affected by payor mix, acuity level, changes in Medicaid eligibility and reimbursement levels. In addition, a state could lose its Medicaid waiver and no longer be permitted to utilize Medicaid dollars to reimburse for assisted living services. Such changes in revenues could in turn have a material adverse effect on our business. Many states are now reimbursing providers of long term care services, which includes SNFs, through mandatory Medicaid Managed Care Organizations (“MMCOs”). These arrangements may result in an increase in denied claims and/or reduced Medicaid rates as a result of contracting pressures.

A significant portion of the revenues received by our CCRC is from self-pay residents. The remaining revenue source is primarily Medicare and Medicaid under certain federal waiver programs. As a part of the Omnibus Budget Reconciliation Act of 1981 (“OBRA”), Congress established a waiver program enabling some states to offer Medicaid reimbursement to assisted living providers as an alternative to institutional long-term care services. The provisions of OBRA and subsequent federal enactments permit states to seek a waiver from typical Medicaid requirements to develop cost-effective alternatives to long-term care, including Medicaid payments for assisted living and, in some instances, including payment for such services through Governmental Program Payors. There can be no guarantee that a state Medicaid program operating pursuant to a waiver will be able to maintain its waiver status that funding levels will not decrease or that eligibility requirements will not change.

Rates paid by self-pay residents of properties within our managed properties are determined in accordance with applicable provisions of the management agreements entered into with our property managers, and are impacted by local market conditions and operating costs. Rates paid by self-pay residents of our triple net lease property are determined by the tenant.

Unlike assisted living operators, SNF operators typically receive most of their revenues from the Medicare and Medicaid programs, with the balance representing reimbursement payments from private insurance payor organizations (and perhaps minimal self-pay). Consequently, changes in federal or state reimbursement policies may also adversely affect our business if we acquire properties with a SNF component.

The percentage of federal Medicaid revenue support used for long-term care varies from state to state, due in part to different ratios of elderly population and eligibility requirements. Within certain federal guidelines, states have a fairly wide range of discretion to determine eligibility and to establish a reimbursement methodology for SNF Medicaid patients. Many states reimburse SNFs pursuant to fixed daily Medicaid rates which are applied prospectively based on patient acuity and the historical costs incurred in providing patient care. Reasonable costs typically include allowances for staffing, administrative and general expenses, property and equipment (e.g., real estate taxes, depreciation and fair rental).

The Medicare SNF benefit covers skilled nursing care, rehabilitation services and other goods and services, and the facility receives a pre-determined daily rate for each day of care, up to 100 days. These prospective payment system (“PPS”) rates are expected to cover all operating and capital costs that efficient properties would be expected to incur in furnishing most SNF services, with certain high-cost, low-probability ancillary services paid separately.

There is a risk that some skilled nursing facilities’ costs could exceed the fixed payments under the prospective payment system for skilled nursing facilities (“SNF PPS”), and there is also a risk that payments under the SNF PPS may be set below the costs to provide certain items and services, which could have a material adverse effect on an SNF. Further, SNFs are subject to periodic pre- and post-payment reviews and other audits by federal and state authorities. Such a review or audit could result in recoupments, denials, or delay of payments in the future, which could have a material adverse effect on the business of a SNF. In addition, the implementation of the “Patient Driven Payment Model” which revises the payment classification system for therapy services in skilled nursing facilities, may impact reimbursement by revising the classifications of certain patients.

In the ordinary course of business, our CCRC has been and is subject regularly to inspections, inquiries, investigations and audits by state agencies that oversee applicable laws and regulations. State licensure laws and, where applicable, Governmental Program certification, require license renewals and compliance surveys on an annual or bi-annual basis. The failure of our CCRC to maintain or renew any required license or regulatory approval, as well as the failure of our managers to correct serious deficiencies identified in a compliance survey, could result in the suspension of operations at a property. In addition, if our CCRC, where applicable, is found to be out of compliance with Governmental Program conditions of participation, the property’s manager may be excluded from participating in those Governmental Programs. Any such occurrence may impair the ability of a property manager to meet its obligations. If we have to replace a property manager, our ability to do so may be affected by the federal and state regulations governing such changes. This may result in payment delays, an inability to find a

replacement property manager or other difficulties. Unannounced surveys or inspections of a property may occur annually or bi-annually or following a regulator’s receipt of a complaint regarding the property. From time-to-time, our properties receive deficiency reports from state regulatory bodies resulting from such inspections or surveys. Most deficiencies are resolved through a plan of corrective action relating to the property’s operations but, whether the deficiencies are cured or not, the applicable governmental authority typically has the authority to take further action against a licensee. Such an action could result in the imposition of fines, imposition of a provisional or conditional license, suspension or revocation of a license or Governmental Program participation, suspension or denial of admissions or imposition of other sanctions, including criminal penalties. The imposition of such sanctions may adversely affect our business.

SNF, CCRCs and properties participating in Medicaid waiver programs (collectively, “Licensed Healthcare Properties”) that participate in Governmental Programs are subject to numerous federal, state and local laws, including implementing regulations and applicable governmental guidance that govern the operational, financial and other arrangements that may be entered into by healthcare properties and other providers. Certain of these laws prohibit direct or indirect payments of any kind for the purpose of inducing or encouraging the referral of patients for medical products or services reimbursable by Governmental Programs. All healthcare providers, including, but not limited to, assisted living properties and SNFs that participate in Governmental Programs, are also subject to the Federal Anti-Kickback Statute, a criminal statute which generally prohibits persons from offering, providing, soliciting or receiving remuneration to induce either the referral of an individual or the furnishing of a good or service for which payment may be made under a federal Governmental Program. SNFs and certain other types of healthcare properties and providers are also subject to the Federal Ethics in Patient Referral Act of 1989, commonly referred to as the “Stark Law.” The Stark Law generally prohibits the submission of claims to Medicare for payment if the claim results from a physician referral for certain designated services and the physician has a financial relationship with the health service provider that does not qualify under one of the exceptions for a financial relationship under the Stark Law. Many states have similar prohibitions on physician self-referrals and submission of claims which are applicable to all payor sources, including state Medicaid programs.

Other laws require providers to furnish only medically necessary services and submit to the Governmental Program and Governmental Program Payors valid and accurate statements for each service, and other laws require providers to comply with a variety of safety, health and other requirements relating to the condition of the licensed property and the quality of care provided. Sanctions for violations of these laws may include, but are not limited to, criminal and/or civil penalties and fines, loss of licensure, immediate termination of government payments and exclusion from any Governmental Program participation. In certain circumstances, violation of these laws (such as those prohibiting abusive and fraudulent behavior and, in the case of Governmental Program Payors, also prohibiting insurance fraud) with respect to one property may subject other properties under common control or ownership to sanctions, including exclusion from participation in Governmental Programs. In the ordinary course of business, our properties are regularly subjected to inquiries, investigations and audits by the federal and state agencies that oversee these laws.

Further, healthcare properties and other providers, including, but not limited to, assisted living properties and SNFs, that receive Governmental Program payments, are subject to substantial financial and other (in some cases, criminal) penalties under the Civil Monetary Penalties Act, the Federal False Claims Act and, in particular, actions under the Federal False Claims Act’s “whistleblower” provisions. Violations of these laws can also subject persons and entities to termination from participation in Governmental Programs or result in the imposition of substantial damages, fines or other penalties. Private enforcement of healthcare fraud has increased due in large part to amendments to the Federal False Claims Act that encourage private individuals to sue on behalf of the government. These whistleblower suits brought by private individuals, known as “qui tam actions,” may be filed by almost anyone, including present and former patients, nurses and other employees. Significantly, if a claim is successfully adjudicated, the Federal False Claims Act provides for treble damages in addition to penalties up to $22,363 per claim. Various state false claim act and anti-kickback laws may also apply to each property operator, regardless of payor source (i.e., such as a private insurance payor organization or a Governmental Program), and violations of those state laws can also result in substantial fines and/or adverse licensure actions to our material detriment.

Government investigations and enforcement actions brought against the healthcare industry have increased dramatically over the past several years and are expected to continue. Some of these enforcement actions represent novel legal theories and expansions in the application of the Federal False Claims Act. Governmental agencies, both state and federal, are also devoting increasing attention and resources to anti-fraud initiatives against healthcare properties and other providers. Legislative developments, including changes to federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), have greatly expanded the definition of healthcare fraud and related offenses and broadened its scope to include certain private insurance payor organizations in addition to Governmental Programs. Congress also has greatly increased funding for the Department of Justice, Federal Bureau of Investigation and the Office of the Inspector General of the Department of Health and Human Services (“HHS”) to audit, investigate and prosecute suspected healthcare fraud. Moreover, a significant portion of the

billions in healthcare fraud recoveries over the past several years has also been returned to government agencies to further fund their fraud investigation and prosecution efforts. Responding to, and defending against, any of these potential government investigations and enforcement actions, or any state or federal false claims act actions, is expensive, and the cost, including attorneys’ fees, may be substantial and adversely impact our performance. Any of these actions could result in a financial payment to state and federal authorities, which payments could adversely impact our performance. In addition, the Office of Inspector General could require in the settlement of an investigation that some or all of our facilities operate under a Corporate Integrity Agreement for a number of years, which could be costly and adversely affect our performance.

HIPAA regulations provide for communication of health information through standard electronic transaction formats and for the privacy and security of health information. In order to comply with the regulations, healthcare providers that meet the definition of a Covered Entity as defined by HIPAA often must undertake significant operational and technical implementation efforts. Operators also may face significant financial exposure if they fail to maintain the privacy and security of medical records and other personal health information about individuals. The Health Information Technology for Economic and Clinical Health Act (“HITECH”), passed in February 2009, strengthened the HHS Secretary’s authority to impose civil money penalties for HIPAA violations occurring after February 18, 2009. HITECH directs the HHS Secretary to provide for periodic audits to ensure that covered entities and their business associates (as that term is defined under HIPAA) comply with the applicable HITECH requirements, increasing the likelihood that a HIPAA violation will result in an enforcement action. The CMS issued an interim final rule which conformed HIPAA enforcement regulations to HITECH, increasing the maximum penalty for multiple violations of a single requirement or prohibition to $1.5 million. Higher penalties may accrue for violations of multiple requirements or prohibitions. Additionally, on January 17, 2013, the CMS released a final rule, which expands the applicability of HIPAA and HITECH and strengthens the government’s ability to enforce these laws. The final rule broadens the definition of “business associate” and provides for civil money penalty liability against covered entities and business associates for the acts of their agents regardless of whether a business associate agreement is in place. Additionally, the final rule adopts certain changes to the HIPAA enforcement regulations to incorporate the increased and tiered civil monetary penalty structure provided by HITECH, and makes business associates of covered entities directly liable under HIPAA for compliance with certain of the HIPAA privacy standards and HIPAA security standards. HIPAA violations are also potentially subject to criminal penalties.

The Patient Protection and Affordable Care Act (the “Affordable Care Act”) and the HealthCare and Education Reconciliation Act of 2010, which amends the Affordable Care Act (collectively, the “Health Reform Laws”), and the June 28, 2012 United States Supreme Court ruling upholding the individual mandate of the Health Reform Laws and partially invalidating the expansion of Medicaid (further discussed below) may have a significant impact on Medicare, Medicaid and other Governmental Programs, as well as private insurance payor organizations, which in turn may impact the reimbursement amounts received by our properties which participate in Governmental Programs. In fact, the Health Reform Laws could have a substantial and material adverse effect on all parties directly or indirectly involved in the healthcare system. Together, the Health Reform Laws make the most sweeping and fundamental changes to the U.S. healthcare system undertaken since the creation of Medicare and Medicaid and contain various provisions that may directly impact our business.

Finally, entities that run IL facilities, AL facilities and SNFs can be subject to private causes of action that may be brought by plaintiff’s counsel against these facilities, which can raise allegations under state law facilities for among other things elder abuse, wrongful death, negligence, failure to provide care and for other causes of action designed to redress injuries allegedly suffered by residents. These actions can be brought as class actions, and whether pursued on behalf of an individual or a class may result in substantial financial recoveries.

These Health Reform Laws include, without limitation, the expansion of Medicaid eligibility, requiring most individuals to have health insurance, establishing new regulations on certain private insurance payor organizations (including Governmental Program Payors), establishing health insurance exchanges and modifying certain payment systems to encourage more cost-effective care and a reduction of inefficiencies and waste, including through new tools to address fraud and abuse. Because many of our properties deliver healthcare services, we will be impacted by the risks associated with the healthcare industry, including the Health Reform Laws. While the expansion of healthcare coverage may result in some additional demand for services provided by our properties, reimbursement levels may be lower than the costs required to provide such services, which could materially adversely affect our business. The Health Reform Laws also enhance certain fraud and abuse penalty provisions in the event of one or more violations of the federal healthcare regulatory laws. In addition, the Health Reform Laws have provisions that impact the health coverage that our property managers or tenant provide to their respective employees. We cannot predict whether the existing Health Reform Laws, or future healthcare reform legislation or regulatory changes, will have a material impact on our business.

Additionally, certain provisions of the Health Reform Laws are designed to increase transparency and program integrity of SNFs. Specifically, SNFs will be required to institute compliance and ethics programs. Additionally, the Health Reform Laws make it easier for consumers to file complaints against nursing homes by mandating that states establish complaint websites. The provisions calling for enhanced transparency will increase the administrative burden and costs on SNF providers.

OUR PORTFOLIO

The key characteristics of our senior housing portfolio, excluding properties classified as discontinued operations, are set forth in the tables below (dollars in thousands):


			As of December 31,		Year Ended December 31,
Year	Number of Communities	Number of Beds	Real Estate Investments, at Cost (A)		Real Estate Investment per Bed		Total Revenues (B)		Number of States
2020	103	12,438	$	2,125,648	$	171	$	336,281	36
2019	103	12,439	2,112,321		170		345,903		36

(A) Real estate investments, at cost represents the gross carrying value of real estate before accumulated depreciation and amortization.

(B) Revenues relate to the period the properties were owned by us in a calendar year and, therefore, are not indicative of full-year results for all properties.

We classify our properties by asset type and operating model, as described in more detail below.

Product Type

IL Properties: IL properties are age-restricted, multifamily properties with central dining that provide residents access to meals and other services such as housekeeping, linen service, transportation and social and recreational activities. A typical resident is 80 to 85 years old and is relatively healthy. Residents are typically charged all-inclusive monthly rates.

CCRC Properties: CCRCs are a particular type of retirement community that offer several levels (generally more than three) of health care at one facility or campus, often including independent living, assisted living/memory care and skilled nursing. CCRCs offer a tiered approach to the aging process, accommodating residents’ changing needs as they age.

Former AL/MC Properties: Prior to the AL/MC Portfolio Disposition, we also focused on AL/MC properties, which are state-regulated rental properties that provide the same services as IL properties and additionally have staff to provide residents assistance with activities of daily living, such as management of medications, bathing, dressing, toileting, ambulating and eating. AL/MC properties may include memory care properties that specifically provide care for individuals with Alzheimer’s disease and other forms of dementia or memory loss. The average age of an AL/MC resident is similar to that of an IL resident, but AL/MC residents typically have greater healthcare needs. Residents are typically charged all-inclusive monthly rates for IL services and additional “care charges” for AL/MC services, which vary depending on the types of services required. AL/MC properties are generally private pay, although many states will allow residents to cover a portion of the cost with Medicaid.

Operating Model

Our current operating model is focused on Managed Properties and our Triple Net Lease Property.

Managed Properties: We have entered into long-term property management agreements for our managed properties with Holiday, Merrill Gardens, and Grace. Our property management agreements have initial five-year or 10-year terms, with successive, automatic one-year renewal periods. We pay property management fees of 4.5% to 5.0% of effective gross income pursuant to our property management agreements and, in some cases, the property managers are eligible to earn an incentive fee based on operating performance. As the owner of the Managed Properties, we are responsible for the properties’ operating costs, including maintenance, utilities, taxes, insurance, repairs, capital improvements and the payroll expense of property-level employees. The payroll expense is structured as a reimbursement to the property manager, who is the employer of record. We have various rights as the property owner under our property management agreements, including rights to set budget guidelines and to terminate and exercise remedies under those agreements as provided therein. However, we rely on our property managers’ personnel, expertise, technical accounting resources and information systems, proprietary information, good faith and judgment to manage our senior housing operations efficiently and effectively. We also rely on our property managers to otherwise operate our properties in compliance with the terms of the management agreements, although we have various rights as the property owner to terminate and exercise remedies under the management agreements.

Triple Net Lease Property: We own one CCRC that is leased to the tenant pursuant to a triple net lease. Our triple net lease arrangement has an initial term of approximately 15 years and includes renewal options and annual rent increases ranging from 2.75% to 3.25%. Under the triple net lease, the tenant is typically responsible for (i) operating its portion of the portfolio and bearing the related costs, including maintenance, utilities, taxes, insurance, repairs, capital improvements, and the payroll expense of property-level employees, and (ii) complying with the terms of the mortgage financing documents.

Prior to 2019, we had additional triple net lease agreements with affiliates of Holiday. On May 9, 2018, we entered into a lease termination agreement to terminate our triple net leases with affiliates of Holiday relating to 51 IL properties (the “Holiday Portfolio”). The lease termination was effective May 14, 2018 (the “Lease Termination”). Concurrently with the Lease Termination, we entered into property management agreements with Holiday to manage the properties in the Holiday Portfolio following the Lease Termination in exchange for a property management fee. As a result, such properties are now included in the Managed Properties operating model. Refer to “Note 3 – Lease Termination” to our consolidated financial statements for additional details.

FINANCING STRATEGY

Our ability to access capital in a timely and cost effective manner is critical to the success of our business strategy because it affects our ability to make future investments. Our access to and cost of external capital are dependent on various factors, including general market conditions, interest rates, credit ratings on our securities, expectations of our potential future earnings and cash distributions and the trading price of our common stock.

We employ leverage as part of our investment strategy. We do not have a predetermined target debt to equity ratio as we believe the appropriate leverage for the particular assets we are financing depends on the credit quality of those assets. We utilize leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates. We strive to maintain our financial strength and invest profitably by actively managing our leverage, optimizing our capital structure and developing our access to multiple sources of liquidity. Historically, we have relied primarily on non-recourse U.S. government agency financing to finance a portion of our real estate investments. We may, over time, seek access to additional sources of liquidity, including revolving credit agreements, bank debt, the unsecured public debt and equity markets. Generally, we attempt to match the long-term duration of our investments in senior housing properties with staggered maturities of long-term debt and equity. As of December 31, 2020, 69.2% of our consolidated debt was variable rate debt.

Subject to maintaining our qualification as a REIT, we may, from time to time, utilize derivative financial instruments to manage interest rate risk associated with our borrowings. These derivative instruments may include interest rate swap agreements, interest rate cap agreements, interest rate floor or collar agreements or other financial instruments that we deem appropriate.

POLICIES WITH RESPECT TO CERTAIN OTHER ACTIVITIES

Subject to the approval of our board of directors, we have the authority to offer our common stock or other equity or debt securities in exchange for property and to repurchase or otherwise reacquire our common stock or any other securities and may engage in such activities in the future.

We also may make loans to, or provide guarantees of certain obligations of, our subsidiaries.

Subject to the percentage ownership and gross income and asset tests necessary for REIT qualification, we may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities.

We may engage in the purchase and sale of investments.

Our officers and directors may change any of these policies without a vote of our stockholders.

In the event that we determine to raise additional equity capital, our board of directors has the authority, without stockholder approval (subject to certain NYSE requirements), to issue additional common stock or preferred stock in any manner and on such terms and for such consideration it deems appropriate, including in exchange for property.

OPERATIONAL AND REGULATORY STRUCTURE

REIT Qualification

We are organized and conduct our operations to qualify as a REIT for U.S. federal income tax purposes. Our qualification as a REIT depends upon our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code (“Code”), relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels to our stockholders and the concentration of ownership of our capital stock. Commencing with our initial taxable year ending December 31, 2014, we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Code and we believe that our intended manner of operation will continue to enable us to meet the requirements for qualification and taxation as a REIT.

COMPETITION

We generally compete for investments in senior housing with other market participants, such as other REITs, real estate partnerships, private equity and hedge fund investors, banks, insurance companies, finance and investment companies, government-sponsored agencies, healthcare operators, developers and other investors. Many of our anticipated competitors are significantly larger than we are, have better access to capital and other resources and may have other advantages over us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could lead them to offer higher prices for assets that we might be interested in acquiring and cause us to lose bids for those assets. In addition, other potential purchasers of senior housing properties may be more attractive to sellers of senior housing properties if the sellers believe that these potential purchasers could obtain any necessary third party approvals and consents more easily than us.

Our property managers and tenant compete on a local and regional basis with operators of properties that provide comparable services. Operators compete for residents based on a number of factors including quality of care, reputation, physical appearance of properties, location, services offered, family preferences, staff and price. We also face competition from other healthcare facilities for residents, such as physicians and other healthcare providers that provide comparable properties and services, as well as home care options, including technology-enabled home health care options.

SEASONALITY

There are slight seasonal impacts in our business, with move-in volumes generally being slightly stronger in the summer months and lower in the colder winter months, and utility costs generally being higher in the first and third quarters of each year due to colder temperature and warmer temperatures, respectively. These seasonal impacts have been affected by the COVID-19 pandemic, which among other things suppressed move-in volumes throughout the year due to restrictions and protocols in place. Refer to “Item 1. "Business- Impact of the COVID-19 Pandemic On Our Business" of this Annual Report Form 10-K for additional details.

EMPLOYEES AND HUMAN CAPITAL

As of December 31, 2020, we had 17 full-time employees and an eight-member Board of Directors with a diverse mix of women and men in management, leadership, and board positions. We strive to maintain a workplace that is free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by law. We conduct annual trainings to prevent harassment and discrimination and monitor employee conduct year-round.

We believe that our employees are fairly compensated, without regard to gender, race and ethnicity, and recognized appropriately for outstanding performance. Our compensation program is designed to attract and retain talent. We continually assess and strive to enhance employee satisfaction and engagement. Our employees are offered opportunities to participate in professional development programs at the Company’s expense.

Prior to the Internalization, we did not have any employees. Our officers and other individuals who provided services to us prior to the Internalization were employed by the Former Manager. In connection with the Internalization, we hired 16 of the 17 employees who had supported our business while employed by the Former Manager, including two of our executive officers.

As the owner of managed properties, we are responsible for the payroll expense of property-level employees (as well as the properties’ other operating costs). The payroll expense is structured as a reimbursement to the property manager, who is the employer of record.

ADDITIONAL INFORMATION

We file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the SEC. Our SEC filings are available to the public from the SEC’s website at www.sec.gov. We make the materials available free of charge through our website, www.newseniorinv.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information on, or accessible through, our website is not a part of, and is not incorporated into, this report.

EXECUTIVE OFFICERS OF THE REGISTRANT

The current executive officers of the Company, as of February 1, 2021, are listed below.

Name

Age

Current Position

Susan Givens

Chief Executive Officer

Lori B. Marino

Executive Vice President, General Counsel and Corporate Secretary

Bhairav Patel

Executive Vice President of Finance and Accounting and Interim Chief Financial Officer

Susan Givens was appointed Chief Executive Officer and a director of the Company in October 2014, which included serving as the Chief Executive Officer of the Company while the Company was externally managed by the Former Manager from 2014 through the Internalization. Ms. Givens has nearly 20 years of private equity, capital markets, mergers and acquisitions, general management and finance experience. Prior to her current appointment, Ms. Givens was a Managing Director in the Private Equity group at the Former Manager, where she served from 2001 to 2014. While at the Former Manager she also served as the Chief Financial Officer and Treasurer of New Residential Investment Corp., and was responsible for various real estate, healthcare, financial services, infrastructure and leisure investments during her tenure. In addition, Ms. Givens was also responsible for overseeing equity capital markets transactions in the Former Manager’s Private Equity group. Prior to joining the Former Manager, she held various private equity and investment banking roles at Seaport Capital and Deutsche Bank in New York and London. Ms. Givens is a member of the 2021 Executive Board of the National Association of Real Estate Investment Trusts (NAREIT). She is also a member of The Real Estate Roundtable.

Lori B. Marino has served as the Executive Vice President, General Counsel and Secretary of the Company since April 2019. Prior to joining the Company, Ms. Marino served as Vice President, Deputy General Counsel & Secretary at ITT Inc., a publicly-traded global multi-industrial manufacturer, from 2016 to 2019 and as Vice President, Chief Corporate Counsel & Secretary from 2013 to 2016. Prior to that, she held various positions from 2007 through 2012 at Medco Health Solutions, Inc., most recently as Vice President, Assistant General Counsel and Assistant Secretary. She began her career as a corporate associate at the law firm of Cravath, Swaine & Moore LLP in New York.

Bhairav Patel has served as the Executive Vice President of Finance and Accounting since January 2019 and as the interim Chief Financial Officer since October 2019. Mr. Patel previously served as a Managing Director at the Former Manager from 2014 to 2018. Mr. Patel joined the Former Manager in 2007 and has served in various capacities within the corporate accounting and finance divisions, including as head of the Former Manager’s financial planning and analysis group. Prior to joining the Former Manager, Mr. Patel served as an accounting manager at GSC Group, a credit-based alternative investment manager. Mr. Patel is also a Certified Public Accountant (inactive).

ITEM 1A. RISK FACTORS

You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating us and our common stock. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition. The risk factors generally have been separated into the following groups: risks related to our business, risks related to our taxation as a REIT and risks related to our common stock. However, these categories do overlap and should not be considered exclusive.

RISK FACTORS SUMMARY

The following is a summary of the principal risks that could adversely affect our business, operations, and financial results.

Risks related to our business

•The COVID-19 pandemic and measures intended to prevent its spread have had, and may continue to have, a material adverse effect on our business, results of operations, financial condition and liquidity, as well as on the price of our common stock, and may heighten or increase the magnitude of the other risks we face.

•Our investments are concentrated in senior housing real estate, and in certain geographic areas.

•Covenants in our debt instruments limit our operational flexibility (including our ability to sell assets) and breaches of these covenants could materially adversely affect our business, results of operations and financial condition.

•We may be unable to obtain financing on favorable terms, if at all, which may impede our ability to grow or to make distributions to our stockholders.

•Return on our investments and our ability to distribute cash may be affected by our use of leverage.

•We rely on a limited number of operators and are subject to manager concentration risk.

•We may not be able to complete new investments, and the investments we do complete may not be successful.

•Real estate investments are relatively illiquid.

•We are dependent on our operators for the performance of our assets, and, as a REIT, we are not able to operate certain types of managed properties.

•Various factors can result in our managed properties performing poorly, such as weak occupancy or increased expenses.

•We and our operators rely on information technology in our operations, and any material failure, inadequacy, interruption or breach of that technology could harm our business.

•Our property managers and our tenant may be faced with significant potential litigation and rising insurance costs that may affect their ability to obtain and maintain adequate liability and other insurance and, in the case of our triple net lease property, our tenant’s ability to pay its lease payments and generally to fulfill its insurance and indemnification obligations to us.

•Our operators may fail to comply with laws relating to the operation of our properties, which may have a material adverse effect on the ability of our tenant to provide services and pay us rent and adversely affect the profitability of our managed properties and the value of our properties.

•Senior housing and healthcare properties are at greater risk for civil lawsuits.

•We may not be able to attract and retain management and other key employees.

•Competition may affect our operators’ ability to meet their obligations to us.

•Overbuilding in markets in which our senior housing properties are located could adversely affect our future occupancy rates, operating margins and profitability.

•Tenants may be unable or unwilling to satisfy their lease obligations to us, and there can be no assurance that the applicable guarantor of our lease will be able to cover any shortfall or maintain compliance with applicable financial covenants, which may have a material adverse effect on our financial condition, cash flows, results of operations and liquidity.

•We could incur substantial liabilities and costs from potential environmental disputes.

Risks related to our Licensed Healthcare Properties

•Our current Licensed Healthcare Properties and any that we might buy in the future are subject to extensive regulations. Failure to comply, or allegations of failing to comply, could have a material adverse effect on us.

•Transfers of healthcare properties may require regulatory approvals, and these properties may not have efficient alternative uses.

•Changes in reimbursement rates, payment rates or methods of payment from government and other third-party payors, including Medicaid and Medicare, could have a material adverse effect on us and our operators.

Risks related to our taxation as a REIT

•Our failure to qualify as a REIT would result in higher taxes and reduced cash available for distribution to our stockholders.

•Drive Shack’s failure to qualify as a REIT could cause us to lose our REIT status.

•Our failure to continue to qualify as a REIT would cause our stock to be delisted from the NYSE.

•Qualifying as a REIT involves highly technical and complex provisions of the Code.

•Dividends payable by REITs do not qualify for the reduced tax rates available for some “qualified dividends.”

•We may be unable to pay sufficient distributions to our stockholders to satisfy the REIT distribution requirements, and such requirements could adversely affect our liquidity and our ability to execute our business plan.

•The stock ownership limit imposed by the Code on REITs and our certificate of incorporation may inhibit market activity in our stock and restrict our business combination opportunities.

•Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.

•Complying with REIT requirements may negatively impact our investment returns or cause us to forgo otherwise attractive opportunities, liquidate assets or contribute assets to the taxable REIT subsidiary ("TRS").

•Complying with the REIT requirements may limit our ability to hedge effectively.

•Distributions to tax-exempt investors may be classified as unrelated business taxable income.

•The tax on prohibited transactions will limit our ability to engage in certain transactions which could be treated as prohibited transactions for U.S. federal income tax purposes.

•Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.

•The lease of our properties to a TRS is subject to special requirements.

•Changes to U.S. federal income tax laws could materially and adversely affect us and our stockholders.

Risks related to our common stock

•We have not established a minimum distribution payment level, and may be unable to pay distributions in the future.

•The market for our stock may not provide you with adequate liquidity, which may make it difficult for you to sell the common stock when you want or at prices you find attractive.

•Your percentage ownership in our Company may be diluted in the future.

•Our outstanding Redeemable Series A Preferred stock and any debt, equity or equity-related securities, that we may issue in the future may negatively affect the market price of our common stock.

•We may in the future choose to pay dividends in our own stock, in which case you could be required to pay income taxes in excess of the cash dividends you receive.

•An increase in market interest rates may have an adverse effect on the market price of our common stock.

•Provisions in our certificate of incorporation and bylaws and of Delaware law may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.

RISKS RELATED TO OUR BUSINESS

The ongoing COVID-19 global pandemic and measures intended to prevent its spread have had, and may continue to have, a material adverse effect on our business, results of operations, financial condition and liquidity, as well as on the price of our common stock.

The COVID-19 pandemic is causing significant disruptions to the U.S. and global economies and has contributed to volatility and negative pressure in financial markets. The outbreak has led federal, state and local governments and public health authorities to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders.

Our portfolio consists entirely of independent senior living properties. Accordingly, factors that affect real estate and the senior housing industry will have a more pronounced effect on our portfolio relative to a portfolio of more diversified investments. In particular, because COVID-19 has had disproportionately severe impacts on the health of seniors, we expect to be more significantly affected by COVID-19 than other REITs that focus on different sectors. Although our operators have taken, and are continuing to take, various measures to reduce the risk of transmission of COVID-19 in our properties, including limiting visitor access to our properties and access to common areas within our properties, and we are working proactively with our property managers to monitor their protocols and share best practices for reducing the spread of COVID-19, we can provide no assurance that these measures will be effective in preventing cases of COVID-19 within our properties. Residents and associates at some of our properties have already contracted COVID-19, and we expect to continue to see cases of COVID-19 for the foreseeable future.

COVID-19 and the measures that we have taken in response to combat the virus have resulted in reduced occupancy rates of our properties, resulting in reduced rental revenue, and we expect occupancy rates will continue to be depressed for at least the duration of the COVID-19 pandemic due to a reduction in, or in some cases prohibitions on, new tenant move-ins, stricter move-in criteria, lower inquiry volumes, and reduced in-person tours, as well as incidences of COVID-19 outbreaks at our communities or the perception that outbreaks may occur. These outbreaks, which directly affect the lifestyle of our residents as well as the staff at our communities, have and could continue to materially and adversely disrupt operations, even in communities where there is only one or a few confirmed cases of COVID-19. Outbreaks also could cause significant reputational harm to us and our operators and could adversely affect demand for senior housing both during the pandemic and after the pandemic subsides.

Responding to the COVID-19 pandemic also has caused our operators to face material cost increases as a result of the need for the procurement of PPE and other supplies such as packaging necessary for in-room meal deliveries to residents. While to date these costs have largely been offset by variable expense savings associated with lower occupancy and strong expense management from our operators, we can provide no assurance that this will continue and depending on how the pandemic evolves, there may be other future operating expenses that we may be required to bear, such as costs for testing kits for residents and staff, temperature screening machines, additional cleaning equipment, or new protocols related to the properties. The COVID-19 pandemic has also caused and is likely to continue to cause regulatory changes and, as a result, our industry may face increased regulatory scrutiny. Any changes in the regulatory framework or the intensity or extent of government or private enforcement actions could materially increase operating costs incurred by us or our property managers or tenant for monitoring and reporting compliance.

The COVID-19 pandemic has also caused, and is likely to continue to cause, severe economic, market and other disruptions worldwide, including a significant decline and volatility in equity markets and in asset values more generally. These factors have significantly affected the price of our common stock, which traded as high as $8.35 per share and as low as $1.72 per share during the year ended December 31, 2020. We cannot assure you that conditions in the credit, capital and other financial markets will not continue to deteriorate as a result of the pandemic, or that our ability to obtain financing, including through refinancing our existing indebtedness at the times of maturity, will not become constrained, which could adversely affect the availability and terms of our ability to access equity and debt capital markets, or make future borrowings, renewals or refinancings. In addition, our liquidity may be adversely affected by these factors, reductions in our revenues due to decreased occupancy in our properties and reduced asset values, which over time may limit the borrowing availability under the Revolver. Our residents and tenant are also likely experiencing deteriorating financial conditions as a result of the COVID-19 pandemic and may be unwilling or unable to satisfy their obligations to us on a timely basis, or at all, which may further reduce our revenues and cash flows.

The impact of the COVID-19 pandemic on our managed portfolio of communities is direct, because we receive cash flow from the operations of the property (as compared to receiving contractual rent from our third party tenant-operator under our single triple-net lease structure), and we also bear all operational risks and liabilities associated with the operation of these managed

properties, other than those arising out of certain actions by our property managers, such as their gross negligence or willful misconduct. Accordingly, we may be directly adversely impacted by increased exposure to our business caused by the pandemic to lawsuits or other legal or regulatory proceedings filed at the same time across multiple jurisdictions, such as professional liability litigation alleging wrongful death or negligence claims related to COVID-19 outbreaks that have occurred or may occur at our properties. These claims may result in significant damage awards and not be indemnified or subject to sufficient insurance coverage. Federal, state, local and industry-initiated efforts may limit us, our property managers’ and our tenant’s liabilities from COVID-19 related quality of care litigation, but the extent of such limitations are uncertain and such liabilities could still be significant. These same factors may also affect our triple net lease tenant and may limit its ability to pay the contractual rent to us when due.

The extent of the COVID-19 pandemic’s effect on our business, operational, financial performance and liquidity will depend on future developments, including the duration, spread, intensity and recurrence of the pandemic, health and safety actions taken to contain its spread, the timing, availability, continuing efficacy and public usage and acceptance of vaccines, and how quickly and to what extent normal economic and operating conditions can resume within the markets in which we operate, each of which is highly uncertain and very difficult to predict at this time. Even after the COVID-19 pandemic subsides, we may continue to experience adverse impacts to our business and financial results as a result of its global economic impact, including any economic downturn or recession that may occur in the future. The adverse impact of the COVID-19 pandemic on our business, results of operations, financial condition, cash flows and stock price could be material.

In addition, to the extent COVID-19 adversely affects our business, financial condition, and results of operations and economic conditions more generally, it may also have the effect of heightening or increasing the magnitude of many of the other risk factors described herein.

Our investments are concentrated in senior housing real estate, and in certain geographic areas.

Our investments are concentrated solely in the senior housing sector. Any factors that affect real estate and the senior housing industry will have a more pronounced effect on our portfolio relative to a portfolio of more diversified investments. In addition, the geographic concentration of our assets in certain states may result in losses due to our significant exposure to the effects of economic and real estate conditions in those markets. The geographic location of our properties and the percentage of total revenues by geographic location are set forth under Item 1. "Business-Our Portfolio" of this Annual Report Form 10-K. As a result of this concentration, a material portion of our portfolios are significantly exposed to the effects of economic and real estate conditions in those particular markets, such as the supply of competing properties, home prices, income levels, the financial condition of our tenant, and general levels of employment and economic activity. To the extent that weak economic or real estate conditions affect markets in which we have a significant presence more severely than other areas of the country, our financial performance could be negatively impacted. Some or all of these properties could be affected if these regions experience severe weather or natural disasters; including as a result of climate change, delays in obtaining regulatory approvals; delays or decreases in the availability of personnel or services; and/or changes in the regulatory, political or fiscal environment.

Covenants in our debt instruments limit our operational flexibility (including our ability to sell assets) and impose requirements on our operators, and breaches of these covenants could materially adversely affect our business, results of operations and financial condition.

The terms of our financings require us to comply with a number of customary financial and other covenants, minimum tangible net worth requirements, REIT status and certain levels of debt service coverage. Our continued ability to conduct business is subject to compliance with these financial and other covenants, which limit our operational flexibility and depend on the compliance of our tenant with the terms of the applicable lease. The terms of the financings of our leased asset generally treat an event of default by the tenant or guarantor under the related lease and guaranty as an event of default under the financing. Therefore, our ability to comply with certain terms of our financings depends on the actions and operating results of our tenant and guarantor, which is outside of our control.

Mortgages and other loan documents for financings secured by our properties contain customary covenants such as those that limit or restrict our ability, without the consent of the lender, to further encumber or sell the applicable properties, or to replace the applicable tenant or operator. Breaches of certain covenants may result in defaults under the mortgages and other loan documents for financings secured by our properties and cross-defaults under certain of our other indebtedness, even if we satisfy our payment obligations to the respective obligee. Covenants that limit our operational flexibility as well as defaults resulting from the breach of any of these covenants could materially adversely affect our business, results of operations and financial condition. A failure to comply with the terms of our financings could result in the acceleration of the requirement to repay all or a portion of our outstanding indebtedness. In addition, the terms of our financings may prohibit or limit our ability

to amend or terminate our triple net lease if we desired to do so, including in situations where our tenant and guarantor may not have the resources to make payments under the terms of the lease or guaranty, respectively.

If we are unable to obtain financing on favorable terms, it may impede our ability to grow or to make distributions to our stockholders.

We do not currently retain any cash from operations on account of the distributions we make to stockholders (see “We have not established a minimum distribution payment level, and we cannot assure you of our ability to pay any distributions in the future.”). If we are unable to generate enough cash flow, we have relied in the past and may need to rely in the future on external sources of capital, including debt and equity financing or asset sales, to fulfill our capital requirements. If we cannot access these external sources of capital, we may not be able to make the investments needed to grow our business or to make distributions to stockholders. In addition, we may seek to refinance the debt on our leased asset if we anticipate that our tenant may not be able to comply with the terms of the applicable lease, which could result in an event of default and there can be no assurance that we will be able to obtain such refinancing on attractive terms or at all.

Our ability to obtain financing or refinance existing debt depends upon a number of factors, some of which we have little or no control over, including but not limited to:

•general availability of credit and market conditions, including rising interest rates and increasing borrowing costs;

•the market price of the shares of our equity securities;

•the market’s perception of our growth potential, compliance with applicable laws and our historic and potential future earnings and cash distributions;

•our degree of financial leverage and operational flexibility;

•the financing integrity of our lenders, which might impact their ability to meet their commitments to us or their willingness to make additional loans to us, and our inability to replace the financing commitment of any lender who loses such financing integrity on favorable terms, or at all;

•the stability in the market value of our properties;

•the financial performance and general market perception of our property managers and tenant;

•changes in the credit ratings on United States government debt securities or default or delay in payment by the United States of its obligations; and

•issues facing the healthcare industry, including, but not limited to, healthcare reform and changes in government reimbursement policies.

Any limitation on our access to financing as a result of these or other factors could impede our ability to grow and have a material adverse effect on our liquidity, ability to fund operations, make payments on our debt obligations, fund distributions to our stockholders, including distributions or redemption obligations under our Redeemable Series A Preferred Stock, acquire properties and undertake development activities.

Our determination of how much leverage to apply to our investments may adversely affect our return on our investments and may reduce cash available for distribution.

We have leveraged our assets through a variety of borrowings, including floating rate financings. We do not have any policies that limit the amount or type of leverage we may incur. The return we are able to earn on our investments and cash available for distribution to our stockholders may be significantly reduced due to changes in market conditions, which may cause the cost of our financing to increase relative to the income that can be derived from our assets (see “We have not established a minimum distribution payment level, and we cannot assure you of our ability to pay any distributions in the future.”).

We rely on a limited number of operators and are subject to manager concentration risk.

All of our managed properties are subject to management agreements with three operators: Holiday, Merrill Gardens and Grace. However, Holiday is our most significant operator, serving as the manager of 98 of our 102 managed properties and representing 99.3% of the NOI from our managed properties as of December 31, 2020.

The risks of relying so significantly on one operator is that we rely upon its personnel, expertise, technical resources and information systems, compliance procedures and programs, proprietary information, good faith and judgment to manage our senior housing operations efficiently and effectively (see “We are dependent on our operators for the performance of our assets, and, as a REIT, we are not able to operate certain types of managed properties.”). Any failure, inability or unwillingness on the

part of our property managers to satisfy their respective obligations under our management agreements, or any change of control, acquisition, wind down or other change in the business operations of our property managers, or adverse developments in our property managers’ business and affairs or financial condition that impacts or impairs their ability to manage our properties efficiently and effectively and in compliance with applicable laws, could have a material adverse effect on our business, results of operations or financial condition.

We may not be able to complete new investments, and the investments we do complete may not be successful.

We face significant competition from other REITs, investment companies, private equity and hedge fund investors, sovereign funds, healthcare operators, lenders, developers and other institutional investors, some of whom may have greater resources or lower costs of capital than we do. Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our business goals and could improve the bargaining power of property owners seeking to sell, thereby impeding our investment, acquisition and development activities. A failure to make investments at favorable prices, or to finance acquisitions on commercially favorable terms, could have a material adverse effect on our business, results of operations or financial condition.

We might never realize the anticipated benefits of the investments we do complete. We might encounter unanticipated difficulties and expenditures relating to any investments. We may not be able to consummate attractive acquisition opportunities because of market conditions, liquidity constraints, regulatory reasons or other factors. The current low interest rate environment may create difficulties for sourcing new investments, for instance by driving sales prices up. Furthermore, notwithstanding pre-acquisition due diligence, newly acquired properties might require significant management attention or may have unexpected issues. For example, we could acquire a property that contains undisclosed defects in design or construction. In addition, after our acquisition of a property, the market in which the acquired property is located may experience unexpected changes that adversely affect the property’s value. The occupancy of properties that we acquire may decline during our ownership, and rents or returns that are in effect or expected at the time a property is acquired may decline. Also, our operating costs for acquired properties may be higher than we anticipate, acquisitions of properties may not yield the returns we expect and, if financed using debt or new equity issuances, may result in stockholder dilution. For these reasons, among others, any acquisitions of additional properties may adversely affect our business, results of operations or financial condition.

Real estate investments are relatively illiquid.

Real estate investments are relatively illiquid, and our ability to quickly sell or exchange our properties in response to changes in economic or other conditions is limited. In the event we desire or need to sell any of our properties, the value of those properties and our ability to sell at a price or on terms acceptable to us could be adversely affected by factors including a downturn in the real estate industry or any weakness in the senior housing industry. We cannot assure you that we will recognize the full value of any property that we sell, and our inability to respond quickly to changes in the performance of our investments could adversely affect our business, results of operations or financial condition.

We are dependent on our operators for the performance of our assets.

During the year ended December 31, 2020, 95.4% of our NOI from continuing operations was attributable to our managed portfolio. We have engaged third parties to operate all of our managed assets on our behalf. The income generated by our managed properties depends on the ability of our property managers to successfully manage these properties, which is a complex task. Although we have various rights pursuant to our property management agreements, we rely upon our property managers’ personnel, expertise, technical resources and information systems, compliance procedures and programs, proprietary information, good faith and judgment to manage our senior housing operations efficiently and effectively. We also rely on our property managers to set appropriate resident fees, to provide accurate property-level financial results for our properties in a timely manner and to otherwise operate our senior housing properties in compliance with the terms of our property management agreements and all applicable laws and regulations. We rely on our property managers to attract and retain skilled management personnel and property level personnel who are responsible for the day-to-day operations of our properties. We have various rights as the property owner under our property management agreements, including various rights to set budget guidelines and to terminate and exercise remedies under those agreements as provided therein. A failure to effectively manage property operating expense, including, without limitation, labor costs and resident referral fees, or significant changes in our property managers’ ability to manage our properties efficiently and effectively, could adversely affect the income we receive from our properties and have a material adverse effect on us. Any failure, inability or unwillingness on the part of our property managers to satisfy their respective obligations under our management agreements, or any change of control, acquisition, wind down or

other change in the business operations of our property managers, or adverse developments in our property managers’ business and affairs or financial condition that impacts or impairs their ability to manage our properties efficiently and effectively and in compliance with applicable laws, could have a material adverse effect on our business, results of operations or financial condition.

While we monitor our property managers’ performance, we have limited recourse under our property management agreements to address poor performance other than through exercising our termination rights. Termination may be an unattractive remedy since we may not be able to identify a suitable alternative operator and transitioning management is subject to risks and in some cases we may incur termination fees.

In summary, our performance is almost entirely dependent on the abilities and performance of our property managers, and even if we desired to take management control of our properties, due to tax law restrictions we are unable to self-manage certain types of senior housing properties that we have owned in the past and may own again in the future.

Various factors can result in our managed properties performing poorly, such as weak occupancy or increased expenses.

Currently, all but one of our properties are owned on a managed basis. Compared to leased properties, which generally provide a steady and predictable cash flow, properties owned on a managed basis are generally subject to more volatility in NOI. This could have an adverse effect on our results of operations and cash flows. In addition, we are required to cover all property-related expenses for our managed portfolio, including maintenance, utilities, taxes, insurance, repairs and capital improvements, which could have an adverse effect on our liquidity.

A failure by our operators to grow or maintain occupancy could adversely affect the NOI generated by our managed properties. Unlike a typical apartment leasing arrangement that involves lease agreements with terms of a year or longer, resident agreements at our senior housing properties generally allow residents to terminate their agreements with 30 days’ notice. In an effort to increase occupancy or avoid a decline in occupancy, our property managers may offer incentives or discounts, which could also have a material adverse effect on our results of operations.

Occupancy levels at our properties may not increase, or may decline, due to a variety of factors, including, without limitation, falling home prices, declining incomes, stagnant home sales, competition from other senior housing developments, reputational issues faced by our operators, a regulatory ban on admissions or forced closure. In addition, the senior housing sector may experience a decline in occupancy due to the state of the national, regional or local economies and the related decision of certain potential residents to elect home care options instead of senior housing. Occupancy levels may also decline due to seasonal contagious illnesses such as influenza.

In terms of expenses, wages and employee benefits represent a significant part of the expense structure at our properties. We rely on our property managers to attract and retain skilled management personnel and property level personnel who are responsible for the day-to-day operations of our properties, but we are responsible for the payroll expense of property-level employees (as well as the properties’ other operating costs). Our property managers may be required to pay increased compensation or offer other incentives to retain key personnel and other employees. In particular, the market for qualified nurses and healthcare professionals is highly competitive. Periodic and geographic area shortages of nurses or other trained personnel may require our property managers to increase the wages and benefits offered to their employees in order to attract and retain these personnel or to hire temporary personnel, which are generally more expensive than regular employees. In addition, certain states have recently increased or proposed to increase the minimum wage, which could increase our property operating expenses and adversely affect our results of operations. Changes in minimum wage laws can have an impact beyond the expense of minimum wage workers, because an increase in the minimum wage can result in an increase in wages for workers who are relatively close to the minimum wage. In addition to pressure from wages, employee benefits costs, including employee health insurance and workers’ compensation insurance costs, have materially increased in recent years. Increasing employee health and workers’ compensation insurance costs may materially and negatively affect the NOI of our properties. We cannot assure you that labor costs at our properties will not increase or that any increase will be matched by corresponding increases in rates charged to residents. Any significant failure by our property managers to control labor costs or to pass on increased labor costs to residents through rate increases could have a material adverse effect on our business, financial condition and results of operations.

Property-level insurance coverage, in particular property and casualty insurance and general and professional liability insurance, is also a significant expense for us and is managed for us by our property managers. We have seen significant increases in costs in recent years, due to claims data and a general tightening of the insurance markets and in 2020 due to

concerns related to COVID-19, and the failure by or inability of our property managers to control the rising costs of insurance could have a material adverse effect on our business, financial condition and results of operations.

We and our operators rely on information technology in our operations, and any material failure, inadequacy, interruption or breach of that technology could harm our business.

We and our operators rely on information technology networks and systems to process, transmit and store electronic information and to manage or support a variety of our business processes, including financial transactions and maintenance of records, which may include personal identifying information of the residents at our properties. We and our operators rely on commercially available systems, software, tools and monitoring to provide security for processing, transmitting and storing this confidential information, such as individually identifiable information relating to financial accounts. Although we and our operators have taken steps to protect the security of the data maintained in our information systems, it is possible that such security measures will not be able to prevent the systems’ improper functioning, or the improper disclosure of personally identifiable information such as in the event of cyber-attacks. Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. We and our operators employ a number of measures to prevent, detect and mitigate these threats; however, there is no guarantee such efforts will be successful in preventing or promptly detecting a cyber-attack. A cybersecurity attack could compromise the confidential information of our employees, our tenant, our vendors and the residents. A successful attack could disrupt and otherwise adversely affect our business operations and financial prospects, damage our reputation and involve significant legal and/or financial liabilities and penalties, including through lawsuits by third-parties. A cybersecurity attack could trigger mandatory self-reporting to the federal Office of Civil Rights with the Department of Health and Human Services and could result in civil fines under the Health Insurance Portability and Accountability Act (“HIPAA”). Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could materially and adversely affect our business, financial condition and results of operations.

Our property managers and our tenant may be faced with significant potential litigation and rising insurance costs that not only affect their ability to obtain and maintain adequate liability and other insurance, but also may affect, in the case of our triple net lease property, our tenant’s ability to pay its lease payments and generally to fulfill its insurance and indemnification obligations to us.

In some states, advocacy groups monitor the quality of care at assisted and independent living communities, and these groups have brought litigation against operators. Also, in several instances, private litigation by assisted and independent living community residents or their families have succeeded in winning very large damage awards for alleged neglect or mistreatment and we cannot assure you that we will not be subject to these types of claims. The effect of this litigation and potential litigation has been to, amongst other matters, materially increase the costs of monitoring and reporting quality of care compliance. The cost of liability and medical malpractice insurance has increased and may continue to increase. This may affect the ability of some of our property managers and our tenant to obtain and maintain adequate liability and other insurance and manage their related risk exposures. In addition to causing some of our property managers and our tenant to be unable to fulfill their insurance, indemnification and other obligations to us under their property management agreements or leases and thereby potentially exposing us to those risks, these litigation risks and costs could cause our tenant to become unable to pay rents due to us. Such nonpayment could potentially affect our ability to meet future monetary obligations under our financing arrangements.

The failure to comply with laws relating to the operation of our properties may result in increased expenditures, litigation or otherwise have a material adverse effect on our business, including on the ability of our tenant to provide services, pay us rent, the profitability of our managed properties and the value of our properties.

We and our operators are subject to or impacted by extensive, frequently changing federal, state and local laws and regulations. Some of these laws and regulations include: state laws related to patient abuse and neglect; laws protecting consumers against deceptive practices; laws relating to the operation of our properties and how our property managers and our tenant conduct their operations, such as fire, health and safety laws and privacy laws; the Americans with Disabilities Act, the Fair Housing Act, and similar state and local laws; and safety and health standards set by the Occupational Safety and Health Administration. We and our operators expend significant resources to maintain compliance with these laws and regulations, and responding to any allegations of noncompliance would result in the expenditure of significant resources. If we or our operators fail to comply with any applicable legal requirements, or are unable to cure deficiencies, certain sanctions may be imposed and, if imposed, may materially and adversely affect our tenant’s ability to pay its rent, the profitability of our managed properties, the values of our

properties, our ability to complete additional acquisitions in the state in which the violation occurred, and our reputation. Further, changes in the regulatory framework could have a material adverse effect on the ability of our tenant to pay us rent (and any such nonpayment could potentially affect our ability to meet future monetary obligations under our financing arrangements), as well as the profitability of, and the values of, our properties.

We and our operators are required to comply with federal and state laws governing the privacy, security, use and disclosure of individually identifiable information, including financial information and protected health information. When one of our communities operates in such a way as to meet the definition of a Covered Entity under HIPAA, we and our operators are required to comply with the HIPAA privacy rule, security standards and standards for electronic healthcare transactions. State laws also govern the privacy of individual health information, and these laws are, in some jurisdictions, more stringent than HIPAA. Other federal and state laws govern the privacy of individually identifiable information.

The management of infectious medical waste, as well as certain other hazardous or toxic substances, including handling, storage, transportation, treatment and disposal, is also subject to regulation under various laws, including federal, state and local environmental laws. Further, the presence of asbestos-based materials, mold, lead-based paint, contaminants in drinking water, radon and/or other substances at any of the communities we own or may acquire may lead to the incurrence of costs for remediation, mitigation or the implementation of an operations and maintenance plan. For instance, building owners and those exercising control over a building’s management are sometimes required to identify and warn employees and other employers operating in the building of risks associated with the known or potential asbestos-containing materials. Environmental laws also govern the removal, encapsulation, disturbance, handling and/or disposal of asbestos-containing materials and potential asbestos-containing materials when such materials are in poor condition or in the event of construction, remodeling, renovation, or demolition of a building. Such laws may impose additional costs or liability for improper handling of such materials or a release to the environment, and third parties alleging exposure to such materials may seek recovery from owners or operators of real estate for personal injury.

While we are not aware of material non-compliance with or liabilities under environmental laws associated with our properties or operations, including related to infectious medical waste, hazardous or toxic substances, asbestos, mold, lead-based paint, contaminants in drinking water, radon and/or other substances at our senior housing properties, these environmental laws are amended from time to time and we cannot predict when and to what extent liability or the need to incur additional capital or operational costs may arise. In addition, because these environmental laws vary from jurisdiction to jurisdiction, expansion of our operations to locations where we do not currently operate may subject us to additional restrictions on the manner in which we operate our senior housing properties. If we or our operators fail to comply with applicable federal, state or local standards, we or they could be subject to civil sanctions and criminal penalties, which could materially and adversely affect our business, financial condition and results of operations.

Senior housing and healthcare properties are at greater risk for lawsuits involving negligent care and breach of duty.

Senior housing and healthcare properties are at greater risk for lawsuits alleging negligent care and/or breach of duty due to the oversight and care services provided. These suits can be costly to defend and can negatively impact the reputation of a community, which in turn can have a negative impact on occupancy and operations. Judgements can be significant and could affect our property managers’ and our tenant’s ability to satisfy their obligations to us. If any of our property managers or our tenant becomes unable to operate our properties, or if our tenant becomes unable to pay its rent because of a judgement, we may experience difficulty in finding a substitute tenant or property manager or selling the affected property for a fair and commercially reasonable price, and the value of an affected property may decline materially.

We may not be able to attract and retain management and other key employees.

Our employees, particularly our management, are vital to our success and difficult to replace. We may be unable to retain them or to attract other highly qualified individuals, particularly if we do not offer employment terms competitive with the rest of the market. Failure to attract and retain highly qualified employees, or failure to develop and implement a viable succession plan, could result in inadequate depth of institutional knowledge or skill sets, adversely affecting our business.

Competition may affect our operators’ ability to meet their obligations to us.

Our property managers compete with other companies on a number of different levels, including: the quality of care provided, reputation, the physical appearance of a property, price and range of services offered, alternatives for healthcare delivery, the supply of competing properties, physicians, staff, referral sources, location, the size and demographics of the population in surrounding areas and the financial condition of our tenant and managers. A property manager’s inability to successfully

compete with other companies on one or more of the foregoing levels could adversely affect the senior housing property and materially reduce our property-level NOI.

The healthcare industry is also highly competitive, and our operators may encounter increased competition for residents and patients, including with respect to the scope and quality of care and services provided, reputation and financial condition, physical appearance of the properties, price and location. The operations of our properties depend on the competitiveness and financial viability of the properties. If our managers are unable to successfully compete with other operators and managers by maintaining profitable occupancy and rate levels, their ability to generate income for us may be materially adversely affected. The operations of our triple net lease tenant also depend upon its ability to successfully compete with other operators. If our tenant is unable to successfully compete, its ability to fulfill its obligations to us, including the ability to make rent payments to us, may be materially adversely affected.

Overbuilding in markets in which our senior housing properties are located could adversely affect our future occupancy rates, operating margins and profitability.

The senior housing industry generally has limited barriers to entry, and, as a consequence, the development of new senior housing properties could outpace demand. If development outpaces demand for those asset types in the markets in which our properties are located, those markets may become saturated, and we could experience decreased occupancy, reduced operating margins and lower profitability. New supply is expected to remain at elevated levels and has had, and is expected to continue to have, a negative impact on our portfolio.

Our current tenant and any future tenants may be unable or unwilling to satisfy their lease obligations to us, and there can be no assurance that the applicable guarantor of our lease will be able to cover any shortfall or maintain compliance with applicable financial covenants, which may have a material adverse effect on our financial condition, cash flows, results of operations and liquidity.

Since May 2015, our CCRC is leased on a triple net basis to a tenant. Rental income from our triple net lease represented 4.6% of our NOI during the year ended December 31, 2020.

Our triple net lease and any triple net leases we may enter into in the future subject us to credit and other risks from our tenant. Any failure by a tenant to effectively conduct its operations or to maintain and improve our properties could adversely affect its business reputation and its ability to attract and retain residents in our properties, which could impair such tenant’s ability to generate sufficient income to satisfy its obligations to us. Our tenant has also agreed, and we expect our future tenants will also agree, to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with their respective businesses, and we cannot assure you that they will have sufficient assets, income, access to financing and insurance coverage to enable them to satisfy their respective indemnification obligations.

If a tenant is not able to satisfy its obligations to us, we would be entitled, among other remedies, to use any funds of such tenant then held by us and to seek recourse against the guarantor under its guaranty of the applicable lease. The guaranty of the applicable lease subjects us to credit risk from our guarantor. There can be no assurance that a guarantor will have the resources necessary to satisfy its obligations to us under its guaranty of the applicable lease in the event that a tenant fails to satisfy its lease obligations to us in full, which would have a material adverse effect on our financial condition, results of operations, liquidity and ability to make payments on our financings. In addition, a guarantor’s obligations to us may be limited to an amount that is less than our damages under the related lease.

We cannot assure you that our tenant and lease guarantor will remain in compliance with any applicable financial covenants, either through the performance of the underlying portfolio or through the use of cash cures, if permitted. A failure to comply with or cure a financial covenant, if applicable, would generally give rise to an event of a default under a lease, and such event of default could result in an event of default under our financing for the applicable property, which could have a material adverse effect on our financial position, cash flows, results of operations and liquidity.

Even if our tenant is current on its obligations to make payments to us, a breach of a non-curable financial covenant applicable to a tenant or guarantor could result in an event of default under the applicable financing, which could have a material adverse effect on our financial position, cash flows, results of operations and liquidity. The failure of our tenant or any of our lease guarantors to comply with the terms of their respective leases, or the termination of any of our leases before the expiration of

the original term (even in the absence of a breach by the tenant), could have a material adverse effect on our financial position, cash flows, results of operations and liquidity.

In addition, we cannot predict whether our tenant will satisfy its obligations to us or renew its leases at the end of the applicable term, and we may agree to voluntarily terminate the lease prior to the end of its stated term.

If there is a default under one or more of our leases, or these leases are not renewed or they are terminated before the expiration of the original term, it may not be feasible to re-lease such properties to a new tenant. There can be no assurance that we would be able to identify a suitable replacement tenant, enter into a lease with a new tenant on terms as favorable to us as the current leases or that we would be able to lease those properties at all.

Upon the termination of any lease, we may decide to sell the properties or to operate such properties on a managed basis. A sale would subject us to reinvestment risk, and owning the properties on a managed basis could be meaningfully less profitable than owning such properties subject to a lease.

Our tenant and guarantor may not be able to satisfy the payments due to us or otherwise comply with the terms of the applicable lease or guaranty, which may result in a tenant or guarantor bankruptcy or insolvency, or a tenant or guarantor might become subject to bankruptcy or insolvency proceedings for other reasons, which could have a material adverse effect on us.

We may be required to fund certain expenses (e.g., real estate taxes and maintenance) to preserve the value of our property, avoid the imposition of liens on a property and/or transition a property to a new tenant. If we cannot transition a leased property to a new tenant, we may take possession of that property, which may expose us to certain successor liabilities. Should such events occur, our revenue and operating cash flow may be adversely affected.

If any of our properties are found to be contaminated, or if we become involved in any environmental disputes, we could incur substantial liabilities and costs.

Under federal and state environmental laws and regulations, owners, tenants, and operators of real property may be liable for costs related to the investigation, removal and remediation of hazardous or toxic substances that are released from or are present at or under, or that are disposed of in connection with such property. Owners, tenants, and operators of real property may also face other environmental liabilities, including governmental fines and penalties imposed by regulatory authorities and damages for injuries to persons, property or natural resources. Environmental laws and regulations may impose joint and several liability without regard to whether the owner, tenant, or operator was aware of, or was responsible for, the presence, release or disposal of hazardous or toxic substances. In certain circumstances, environmental liability may result from the activities of a current or former owner, tenant, or operator of the property, or if waste disposed is released at another location. As owners of real property, we may therefore become liable for releases of hazardous or toxic substances that are released by us or other parties. We are generally indemnified by our property managers and tenant of our properties for contamination caused by them, but these indemnities may not adequately cover all environmental costs. Further, although we do not believe we have incurred such liabilities as would have a material effect on our business, financial condition, and results of operations, we could be subject to substantial future liability for environmental contamination we have no knowledge about as of this date and/or for which we may not be at fault.

RISKS RELATED TO OUR LICENSED HEALTHCARE PROPERTIES

We only have one property in our portfolio that has health care components that are licensed by the state and that participates in Medicare and Medicaid. This property is a continuing care retirement community (“CCRC”), which has independent senior housing units, assisting living units, memory care, and skilled nursing facility (“SNF”) beds.

Our current Licensed Healthcare Properties and any that we might buy in the future are subject to extensive regulations. Failure to comply, or allegations of failing to comply, could have a material adverse effect on us.

Various governmental authorities mandate certain physical and operational characteristics of our Licensed Healthcare Properties and any potential future Licensed Healthcare Properties. Changes in laws and regulations relating to these matters may require significant expenditures. Our property management agreements and triple net lease generally require our operators and tenant to maintain our properties in compliance with applicable laws and regulations, and we expend resources to monitor their compliance. However, our monitoring efforts may fail to detect weaknesses in our operators’ and tenant’s performance on the clinical and other aspects of their duties, which could expose the operator to the risk of penalties, license suspension or

revocation, criminal sanctions and civil litigation. Any such actions, even if ultimately dismissed or decided in our favor, could have a material adverse effect on our reputation and results of operations. In addition, our operators and tenant may neglect maintenance of our properties if they suffer financial distress. In the case of our triple net lease property, we may agree to fund capital expenditures in return for rent increases or other concessions. Our available financial resources or those of our tenant may be insufficient to fund the expenditures required to operate our properties in accordance with applicable laws and regulations. If we fund these expenditures, our tenant’s financial resources may be insufficient to satisfy its increased rental payments to us or other incremental obligations. Failure to obtain a license or registration, or loss of a required license or registration, would prevent a property from operating in the manner intended by the property managers or our tenant, which could have a material adverse effect on our property managers’ ability to generate income for us or our tenant’s ability to make rent payments to us. Any compliance issues could also make it more difficult to obtain or maintain required licenses and registrations.

Licensing, Medicare and Medicaid and other laws may also require some or all of our operators to comply with extensive standards governing their operations and such operations are subject to routine inspections. In addition, certain laws prohibit fraud by senior housing operators and other healthcare communities, including civil and criminal laws that prohibit false claims in Medicare, Medicaid and other programs that regulate patient referrals. In recent years, federal and state governments have devoted increasing resources to monitoring the quality of care at senior housing communities and to anti-fraud investigations in healthcare operations generally. When violations of applicable laws are identified, federal or state authorities may impose civil monetary damages, treble damages, repayment requirements and criminal sanctions. In addition to these penalties, violation of any of these laws may subject our operators to exclusion from participation in any federal or state healthcare program. For example, if an operator is subject to a criminal conviction relating to the delivery of goods or services under the Medicare or Medicaid programs, the operator would be excluded from participation in those programs for five years. These fraud and abuse laws and regulations are complex, and we and our operators do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations. While we do not believe our operators are in violation of these prohibitions, we cannot assure you that governmental officials charged with the responsibility of enforcing the provisions of these prohibitions will not assert that an operator is in violation of such laws and regulations. Violations of law often result in significant media attention. Healthcare communities may also be subject to license revocation or conditional licensure and exclusion from or conditional Medicare or Medicaid participation. When quality of care deficiencies or improper billing are alleged or identified, various laws, including laws prohibiting patient abuse and neglect, may authorize civil money penalties or fines; the suspension, modification or revocation of a license (which could result in the suspension of operations) or Medicare or Medicaid participation; the suspension or denial of admissions of residents; the removal of residents from properties; the denial of payments in full or in part; the implementation of state oversight, temporary management or receivership; and the imposition of criminal penalties. We, our property managers and our tenant have received inquiries and requests from various government agencies and we have in the past and may in the future receive notices of potential sanctions, and governmental authorities may impose such sanctions from time to time on our properties based on allegations of violations or alleged or actual failures to cure identified deficiencies. If imposed, such sanctions may adversely affect the profitability of managed properties, the ability to maintain managed properties (including properties unrelated to the property in question) in a given state, our ability to continue to engage certain managers and our tenant’s ability to pay rents to us (and any such nonpayment could potentially affect our ability to meet future monetary obligations or could trigger an event of default under our financing arrangements). Any such claims could also result in material civil litigation. Federal and state requirements for change in control of healthcare communities, including, as applicable, approvals of the proposed operator for licensure, certificate of need (“CON”), Medicare and Medicaid participation, and the terms of our debt may also limit or delay our ability to find a substitute tenant or property managers. If any of our property managers or our tenant becomes unable to operate our properties, or if our tenant becomes unable to pay its rent because it has violated government regulations or payment laws, we may experience difficulty in finding a substitute tenant or property manager or selling the affected property for a fair and commercially reasonable price, and the value of an affected property may decline materially.

Future changes in government regulation may adversely affect the healthcare industry, including our Licensed Healthcare Properties and healthcare operations, property managers and tenant, and our property managers and our tenant may not achieve and maintain occupancy and rate levels that will enable them to satisfy their obligations to us. Any adverse changes in the regulation of the healthcare industry or the competitiveness of our property managers and our tenant could have a more pronounced effect on us than if we had investments outside the senior housing and healthcare industries.

Transfers of healthcare properties may require regulatory approvals, and these properties may not have efficient alternative uses.

Transfers of healthcare properties to successor operators frequently are subject to regulatory approvals or notifications, including, but not limited to, change of ownership approvals under a CON or determination of need laws, state licensure laws,

Medicare and Medicaid provider arrangements that are not required for transfers of other types of real estate. The replacement of a healthcare property operator could be delayed by the approval process of any federal, state or local agency necessary for the transfer of the property or the replacement of the operator licensed to manage the property, whether as a result of regulatory issues identified elsewhere in this report or otherwise. Alternatively, given the specialized nature of our properties, we may be required to spend substantial time and funds to adapt these properties to other uses. If we are unable to timely transfer properties to successor operators or find efficient alternative uses, our revenue and operations may be adversely affected.

Changes in reimbursement rates, payment rates or methods of payment from government and other third-party payors, including Medicaid and Medicare, could have a material adverse effect on us and our operators.

Certain of our operators rely on reimbursement from third-party payors, including the Medicare and Medicaid programs. Medicare and Medicaid programs, as well as numerous private insurance and managed care plans, generally require participating providers to accept government-determined reimbursement levels as payment in full for services rendered, without regard to the facility’s charges. Changes in the reimbursement rate or methods of payment from third-party payors, including Medicare and Medicaid, or the implementation of other measures to reduce reimbursements for services provided by our property managers or our tenant, could result in a substantial reduction in our and our tenant’s revenues. In addition, the implementation of the Patient Driven Payment Model which revises the payment classification system for therapy services in skilled nursing facilities, may impact our tenant by revising the classifications of certain patients.

Additionally, revenue under third-party payor agreements can change after examination and retroactive adjustment by payors during the claims settlement processes or as a result of post-payment audits. Payors may disallow requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable or because additional documentation is necessary or because certain services were not covered or were not medically necessary. We cannot assure you that our operators who currently depend on governmental or private payor reimbursement will be adequately reimbursed for the services they provide. Significant limits by governmental and private third-party payors on the scope of services reimbursed or on reimbursement rates and fees, whether from legislation, administrative actions or private payor efforts, could have a material adverse effect on liquidity, financial condition and results of operations, which could affect adversely their ability to comply with the terms of our leases and have a material adverse effect on us.

RISKS RELATED TO OUR TAXATION AS A REIT

Our failure to qualify as a REIT would result in higher taxes and reduced cash available for distribution to our stockholders.

We are organized and conduct our operations to qualify as a REIT for U.S. federal income tax purposes. Our ability to satisfy the REIT asset tests depends upon our analysis of the fair market values of our assets, some of which are not susceptible to a precise determination, and for which we do not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Moreover, the proper classification of one or more of our investments may be uncertain in some circumstances, which could affect the application of the REIT qualification requirements. Accordingly, there can be no assurance that the Internal Revenue Service will not contend that our investments violate the REIT requirements.

If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax for taxable years beginning prior to January 1, 2018, on our taxable income at regular corporate rates and distributions to stockholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of, and trading prices for, our stock. Unless entitled to relief under certain provisions of the Code, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we initially ceased to qualify as a REIT.

Drive Shack’s failure to qualify as a REIT could cause us to lose our REIT status.

If Drive Shack failed to qualify as a REIT for a taxable year ending on or before December 31, 2015, the rule against re-electing REIT status following a loss of such status could also apply to us if we were treated as a successor to Drive Shack for U.S. federal income tax purposes, which could cause us to fail to qualify for taxation as a REIT for our 2019 and/or earlier years. Although Drive Shack has provided (i) a representation in the Separation and Distribution Agreement that it had no knowledge of any fact or circumstance that would cause us to fail to qualify as a REIT and (ii) a covenant in the Separation and Distribution Agreement to use its reasonable best efforts to maintain its REIT status for each of Drive Shack’s taxable years ending on or before 2015 (unless Drive Shack obtains an opinion from a nationally recognized tax counsel or a private letter ruling from the IRS to the effect that Drive Shack’s failure to maintain its REIT status will not cause us to fail to qualify as a REIT under the successor REIT rule referred to above), no assurance can be given that such representation and covenant would prevent us from failing to qualify as a REIT. In the event of a breach of this covenant, we may be able to seek damages from Drive Shack, but there can be no assurance that such damages, if any, would appropriately compensate us. In addition, if Drive Shack were to fail to qualify as a REIT despite its reasonable best efforts, we would have no claim against Drive Shack.

Our failure to continue to qualify as a REIT would cause our stock to be delisted from the NYSE.

The NYSE requires, as a condition to the continued listing of our shares, that we maintain our REIT status. Consequently, if we fail to maintain our REIT status, our shares would promptly be delisted from the NYSE, which would significantly decrease the trading activity in our shares and make it more difficult to raise equity financing or complete acquisitions in the future.

If we were delisted as a result of losing our REIT status and desired to relist our shares on the NYSE, we would have to reapply to the NYSE to be listed as a domestic corporation. As the NYSE’s listing standards for REITs are less onerous than its standards for domestic corporations, we might not be able to satisfy the NYSE’s listing standards for a domestic corporation. As a result, if we were delisted from the NYSE, we might not be able to relist as a domestic corporation, in which case our shares could not trade on the NYSE.

Qualifying as a REIT involves highly technical and complex provisions of the Code.

Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT depends on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Compliance with these requirements must be carefully monitored, and there can be no assurance that we will be able to successfully monitor our compliance.

Dividends payable by REITs do not qualify for the reduced tax rates available for some “qualified dividends.”

Dividends payable to domestic stockholders that are individuals, trusts and estates are generally taxed at reduced tax rates applicable to “qualified dividends.” Dividends payable by REITs, however, generally are not eligible for those reduced rates. The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock. In addition, the relative attractiveness of real estate in general may be adversely affected by the favorable tax treatment given to non-REIT corporate dividends, which could affect the value of our real estate assets negatively.

We may be unable to pay sufficient distributions to our stockholders to satisfy the REIT distribution requirements, and such requirements could adversely affect our liquidity and our ability to execute our business plan.

We generally must distribute at least 90% of our REIT taxable income annually, excluding any net capital gain, in order for corporate income tax not to apply to earnings that we distribute. To qualify for the tax benefits accorded to REITs, we intend to make distributions to our stockholders in amounts such that we distribute an amount at least equal to all or substantially all of our REIT taxable income each year, subject to certain adjustments. However, differences in timing between the recognition of taxable income and the actual receipt of cash could cause us to fail to meet, or could require us to sell assets, borrow funds on a short-term or long-term basis or take other disadvantageous actions to meet, the 90% distribution requirement of the Code. Certain of our assets may generate substantial mismatches between taxable income and available cash. As a result, the requirement to distribute a substantial portion of our REIT taxable income could cause us to, without limitation: (i) sell assets in

adverse market conditions; (ii) borrow on unfavorable terms; (iii) distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt; or (iv) make taxable distributions of our capital stock or debt securities in order to comply with REIT requirements. Further, amounts distributed will not be available to fund investment activities. If we fail to obtain debt or equity capital in the future, it could limit our ability to satisfy our liquidity needs, which could adversely affect the value of our common stock.

The stock ownership limit imposed by the Code on REITs and our certificate of incorporation may inhibit market activity in our stock and restrict our business combination opportunities.

In order for us to maintain our qualification as a REIT under the Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year after our first taxable year. Our certificate of incorporation, with certain exceptions, authorizes our board of directors to take the actions that are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of directors, no person may own more than 9.8% of the aggregate value of our outstanding capital stock. Our board of directors may grant an exemption in its sole discretion, subject to such conditions, representations and undertakings as it may determine in its sole discretion. These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.

Even if we remain qualified for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. Moreover, if a REIT distributes less than the sum of 85% of its ordinary income, 95% of its capital gain net income and any undistributed shortfall from prior year (“Required Distribution”) to its stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then it is required to pay an excise tax on 4% of any shortfall between the Required Distribution and the amount that was actually distributed. If we are subject to any of these taxes, they would decrease cash available for our operations and distribution to our stockholders. In addition, our TRS is subject to corporate level income tax at regular rates.

Complying with REIT requirements may negatively impact our investment returns or cause us to forgo otherwise attractive opportunities, liquidate assets or contribute assets to the TRS.

To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. As a result of these tests, we may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution, forgo otherwise attractive investment opportunities, liquidate assets in adverse market conditions or contribute assets to a TRS that is subject to regular corporate federal income tax. Our ability to acquire investments will be subject to the applicable REIT qualification tests, and we may have to hold these interests through our TRS, which would negatively impact our returns from these assets. In general, compliance with the REIT requirements may hinder our ability to make and retain certain attractive investments.

Complying with the REIT requirements may limit our ability to hedge effectively.

The existing REIT provisions of the Code may substantially limit our ability to hedge our operations because a significant amount of the income from those hedging transactions is likely to be treated as non-qualifying income for purposes of both REIT gross income tests. In addition, we must limit our aggregate income from non-qualified hedging transactions, from our provision of services and from other non-qualifying sources, to less than 5% of our annual gross income (determined without regard to gross income from qualified hedging transactions). As a result, we may have to limit our use of certain hedging techniques or implement those hedges through total return swaps. This could result in greater risks associated with changes in interest rates than we would otherwise want to incur or could increase the cost of our hedging activities. If we fail to comply with these limitations, we could lose our REIT qualification for U.S. federal income tax purposes, unless our failure was due to reasonable cause, and not due to willful neglect, and we meet certain other technical requirements. Even if our failure were due to reasonable cause, we might incur a penalty tax.

Distributions to tax-exempt investors may be classified as unrelated business taxable income.

An investor that is a tax-exempt organization for U.S. federal income tax purposes and therefore generally exempt from U.S. federal income taxation may nevertheless be subject to tax on its “unrelated business taxable income.” Neither ordinary nor capital gain distributions with respect to our stock nor gain from the sale of stock should generally constitute unrelated business taxable income to a tax-exempt investor. However, there are certain exceptions to this rule. In particular:

•part of the income and gain recognized by certain qualified employee pension trusts with respect to our stock may be treated as unrelated business taxable income if shares of our stock are predominantly held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one of the REIT ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as unrelated business taxable income; and

•part of the income and gain recognized by a tax-exempt investor with respect to our stock would constitute unrelated business taxable income if the investor incurs debt in order to acquire the stock.

The tax on prohibited transactions will limit our ability to engage in certain transactions which could be treated as prohibited transactions for U.S. federal income tax purposes.

Net income that we derive from a prohibited transaction is subject to a 100% tax. The term “prohibited transaction” generally includes a sale or other disposition of property that is held primarily for sale to customers in the ordinary course of our trade or business. We might be subject to this tax if we were to dispose of our property in a manner that was treated as a prohibited transaction for U.S. federal income tax purposes.

We generally intend to conduct our operations so that no significant asset that we own (or are treated as owning) will be treated as, or as having been, held for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. As a result, we may choose not to engage in certain sales at the REIT level due to the risk of prohibited transaction treatment, even though the sales might otherwise be beneficial to us. In addition, whether property is held “primarily for sale to customers in the ordinary course of a trade or business” depends on the particular facts and circumstances. No assurance can be given that any property that we sell will not be treated as property held for sale to customers, or that we can comply with certain safe-harbor provisions of the Code that would prevent such treatment as a prohibited transaction. The 100% prohibited transaction tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates.

Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.

To qualify as a REIT, we must comply with requirements regarding the composition of our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

The lease of certain properties to a TRS, and other structures in which we hold properties, is subject to special requirements.

We have in the past leased, and could in the future lease, certain “qualified healthcare properties” (which generally include assisted living properties and certain independent living properties) to our TRS (or a disregarded entity owned by a TRS) under the provisions of RIDEA. In such a structure, the TRS, in turn, contracts with a third-party operator to manage the healthcare operations at these properties. The rents paid by the TRS in this structure will be treated as qualifying rents from real property for purposes of the REIT requirements only if (i) they are paid pursuant to an arm’s-length lease of a qualified healthcare property and (ii) the operator qualified as an “eligible independent contractor” with respect to the property. An operator qualifies as an eligible independent contractor if it meets certain ownership tests with respect to us, and if, at the time the operator entered into the property management agreement, the operator was actively engaged in the trade or business of operating qualified healthcare properties for any person who is not a related person to us or the TRS. If any of the above conditions are not satisfied with respect to a RIDEA structure, then the rents would not be considered income from a qualifying source for purposes of the REIT rules, which could cause us to incur penalty taxes or to fail to qualify as a REIT. In addition, other structures in which we hold properties may, depending on the circumstances, be subject to certain requirements relating to

the classification of the property, the need for the property to be managed by an eligible independent contractor or other requirements, and those requirements or our ability to comply therewith may be uncertain. Any failure to satisfy these requirements could adversely affect our ability to qualify for taxation as a REIT.

Changes to U.S. federal income tax laws could materially and adversely affect us and our stockholders.

The present U.S. federal income tax treatment of REITs and their stockholders may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the U.S. federal income tax treatment of an investment in our shares. The U.S. federal income tax rules, including those dealing with REITs, are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. We cannot predict how changes in the tax laws might affect our investors or us. Revisions to U.S. federal tax laws and interpretations thereof could significantly and negatively affect our ability to qualify as a REIT, as well as the tax considerations relevant to an investment in us, or could cause us to change our investments and commitments.

RISKS RELATED TO OUR COMMON STOCK

We have not established a minimum distribution payment level, and we cannot assure you of our ability to pay any distributions in the future.

Our cash flows from operating activities, less capital expenditures and principal payments, have been, and continue to be, less than the amount of distributions to our stockholders. There can be no assurance that we will pay cash dividends in an amount consistent with prior quarters. Any difference between the amount of any future dividend and the amount of dividends in prior quarters could be material, and there can be no assurance that our board will declare any dividend at all.

We cannot assure you that we will be able to successfully operate our business, execute our investment strategy or generate sufficient liquidity to make or sustain distributions to our stockholders. Our ability to make distributions to our stockholders depends, in part, on the liquidity we generate on a recurring basis as well as the liquidity generated from episodic asset sales. The liquidity we generate on a recurring basis, which is generally equal to our cash flows from operating activities, less capital expenditures and principal payments on our debt, has consistently been less than the amount of distributions to our stockholders in prior quarters. We have funded the shortfall using cash on hand. A portion of that amount is held in operating accounts used to fund expenses at our managed properties and, therefore, may not be available for distribution to stockholders. For further information about factors that could affect our liquidity, see Part I, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” and Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”

In the case of any future dividend, we may, but are not obligated to, fund the shortfall described above using cash generated from asset sales, but there can be no assurance that we will have such sources of cash or other potential sources of cash from non-operating activities (see “Real estate investments are relatively illiquid,” and “The tax on prohibited transactions will limit our ability to engage in certain transactions which would be treated as prohibited transactions for U.S. federal income tax purposes.”). Moreover, we may decide to use cash generated from asset sales for other corporate purposes, such as new investments or capital expenditures. A failure to deploy the proceeds of asset sales into investments with an adequate cash yield could exacerbate the shortfall while increasing our reliance on liquidity generated other than through operations to fund distributions, which could further impair our ability to make distributions at the current level or even at a lower level. The reduction in the amount of any future dividend could be material.

Furthermore, while we are required to make distributions in order to maintain our REIT status, we may elect not to maintain our REIT status, in which case we would no longer be required to make such distributions. Moreover, even if we do elect to maintain our REIT status, we may elect to comply with the applicable requirements by, after completing various procedural steps, distributing, under certain circumstances, a portion of the required amount in the form of shares of our common stock in lieu of cash. If we elect not to maintain our REIT status or to satisfy any required distributions in shares of common stock in lieu of cash, such action could negatively affect our business and financial condition as well as the price of our common stock. No assurance can be given that we will pay any dividends on shares of our common stock in the future.

We can provide no assurance that the market for our stock will provide you with adequate liquidity, which may make it difficult for you to sell the common stock when you want or at prices you find attractive.

The market price of our common stock may fluctuate widely, depending upon many factors, some of which may be beyond our control. These factors include, without limitation:

•a shift in our investor base;

•our quarterly or annual earnings, or those of other comparable companies;

•actual or anticipated fluctuations in our operating results;

•our dependence on our property managers and tenant to operate our properties successfully and in compliance with the terms of our agreements with them, applicable law and the terms of our financings;

•changes in accounting standards, policies, guidance, interpretations or principles;

•announcements by us or our competitors of significant investments, acquisitions or dispositions;

•the failure of securities analysts to cover our common stock;

•changes in earnings estimates by securities analysts or our ability to meet those estimates;

•the operating and stock price performance of other comparable companies;

•overall market fluctuations; and

•general economic conditions.

Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

Your percentage ownership in our Company may be diluted in the future.

Your percentage ownership in our Company may be diluted in the future because of equity awards that we expect will be granted to our directors, officers and employees, as well as other equity instruments such as debt and equity financing. Our board of directors has approved an Amended and Restated Nonqualified Stock Option and Incentive Award Plan (the “Plan”) providing for the grant of equity-based awards, including restricted stock, stock options, stock appreciation rights, performance awards and other equity-based and non-equity based awards, in each case to our directors, officers, employees, service providers, consultants and advisors. We have reserved 27,922,570 shares of our common stock for issuance under the Plan and as of December 31, 2020, 22,642,798 shares are available for issuance under the Plan.

Our outstanding Redeemable Series A Preferred stock as well as any debt, equity or equity-related securities, including additional preferred stock that we may issue in the future, may negatively affect the market price of our common stock.

As of December 31, 2020, there were 200,000 shares of Redeemable Series A Preferred Stock issued and outstanding. Additionally, we may in the future incur or issue debt or issue equity or equity-related securities. Upon our liquidation, dissolution or winding up, lenders and holders of our debt and holders of our preferred stock, including holders of the outstanding shares of our Redeemable Series A Preferred Stock, would receive a distribution of our available assets before common stockholders. Any future incurrence or issuance of debt would increase our interest cost and could adversely affect our results of operations and cash flows. We are not required to offer any additional equity securities to existing common stockholders on a preemptive basis. Therefore, additional issuances of common stock, directly or through convertible or exchangeable securities (including limited partnership interests in our operating partnership), warrants or options, will dilute the holdings of our existing common stockholders and such issuances, or the perception of such issuances, may reduce the market price of our common stock. Our outstanding Redeemable Series A Preferred Stock provides that, subject to certain exceptions, no dividend or other distribution may be declared, made or paid or set apart for payment upon a class of capital stock ranking junior to or on parity with the Redeemable Series A Preferred Stock. Additionally, any preferred stock issued by us in the future would likely have a preference on distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to common stockholders. Because our decision to incur or issue debt or issue equity or equity-related securities, including additional preferred stock, in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. Thus, common stockholders bear the risk that our future incurrence or issuance of debt or issuance of equity or equity-related securities, including additional preferred stock, will adversely affect the market price of our common stock.

We may in the future choose to pay dividends in our stock, in which case you could be required to pay income taxes in excess of the cash dividends you receive.

We may in the future distribute taxable dividends that are payable in cash and shares of our common stock at the election of each stockholder. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. If a U.S. stockholder sells the stock that it receives as a dividend in order to pay this tax, the sale proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common stock.

In August 2017, the IRS issued guidance authorizing elective cash/stock dividends to be made by public REITs where there is a minimum (of at least 20%) amount of cash that may be paid as part of the dividend, provided that certain requirements are met. It is unclear whether and to what extent we would be able to or choose to pay taxable dividends in cash and stock. No assurance can be given that the IRS will not impose additional requirements in the future with respect to taxable cash/stock dividends, including on a retroactive basis, or assert that the requirements for such taxable cash/stock dividends have not been met.

An increase in market interest rates may have an adverse effect on the market price of our common stock.

One of the factors that investors may consider in deciding whether to buy or sell shares of our common stock is our distribution rate as a percentage of our share price relative to market interest rates. If the market price of our common stock is based primarily on the earnings and return that we derive from our investments and income with respect to our investments and our related distributions to stockholders, and not from the market value of the investments themselves, then interest rate fluctuations and capital market conditions will likely affect the market price of our common stock. For instance, if market interest rates rise without an increase in our distribution rate, the market price of our common stock could decrease as potential investors may require a higher distribution yield on our common stock or seek other securities paying higher distributions or interest. In addition, rising interest rates would result in increased interest expense on our floating rate debt, thereby adversely affecting cash flow and our ability to service our indebtedness and pay distributions.

In addition, we have loans, derivative contracts, and other financial instruments with terms that are benchmarked to LIBOR, which is expected to be discontinued at the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021 or whether LIBOR will be replaced by alternative reference rates. Certain of our newer loans and financial instruments have alternative LIBOR provisions which give our lenders substantial flexibility in setting alternative rates if and when LIBOR is discontinued. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates and their impact on the market for or value of any LIBOR-linked securities, loans, derivatives and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations.

Provisions in our certificate of incorporation and bylaws and of Delaware law may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.

Our certificate of incorporation, bylaws and Delaware law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others:

•a classified board of directors with staggered three-year terms;

•amendment of provisions in our certificate of incorporation and bylaws regarding the election of directors, classes of directors, the term of office of directors, the filling of director vacancies and the resignation and removal of directors only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote thereon;

•amendment of provisions in our certificate of incorporation regarding corporate opportunity only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote thereon;

•removal of directors only for cause and only with the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote in the election of directors;

•our board of directors to determine the powers, preferences and rights of our preferred stock and to issue such preferred stock without stockholder approval;

•advance notice requirements applicable to stockholders for director nominations and actions to be taken at annual meetings; and

•a prohibition, in our certificate of incorporation, stating that no holder of shares of our common stock will have cumulative voting rights in the election of directors, which means that the holders of a majority of the issued and outstanding shares of common stock can elect all the directors standing for election.

Public stockholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is considered favorable to stockholders. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control or a change in our management and board of directors and, as a result, may adversely affect the market price of our common stock and stockholders’ ability to realize any potential change of control premium.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our direct investments in senior housing are described under Item 1, “Business - Our Portfolio.”

We lease our principal executive and administrative office located at 55 West 46th St, Suite 2204, New York, New York, 10036.

We maintain our properties in good condition and believe that our current facilities are adequate to meet the present needs of our business. We do not believe any individual property is material to our financial condition or results of operations.

ITEM 3. LEGAL PROCEEDINGS

We are and may become involved in legal proceedings, including regulatory investigations and inquiries, in the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, we do not expect our current and any threatened legal proceedings to have a material adverse effect on our financial position or results of operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material adverse effect on our financial results.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

We have one class of common stock which trades on the NYSE under the trading symbol “SNR”. On February 19, 2021, the closing sale price for our common stock, as reported on the NYSE, was $5.72 and there were approximately 38 stockholders of record. This figure does not reflect the beneficial ownership of shares held in nominee name.

PERFORMANCE GRAPH

The following graph compares the cumulative total return for our shares (stock price change plus reinvested dividends) with the comparable return of three indices: S&P 500 Index, MSCI US REIT Index and FTSE NAREIT Equity Index. The graph assumes an investment of $100 in our shares and in each of the indices on November 7, 2014, and that all dividends were reinvested. The past performance of our shares is not an indication of future performance.



Index	12/31/15		12/31/16		12/31/17		12/31/18		12/31/19		12/31/20
New Senior Investment Group Inc.	$	100.00	$	109.53	$	94.71	$	57.75	$	116.54	$	85.47
S&P 500 Index	100.00		111.96		136.40		130.42		171.49		203.04
MSCI US REIT Index	100.00		108.60		114.11		108.89		137.03		126.65
FTSE NAREIT Equity Index	100.00		107.42		107.26		114.12		138.67		129.69

ITEM 6. SELECTED FINANCIAL DATA

The financial data as of and for the years ended December 31, 2020, 2019 and 2018 has been derived from our audited financial statements for those dates included elsewhere in this Annual Report on Form 10-K. The financial data for the years ended December 31, 2017 and 2016 has been derived from our audited financial statements that are not included in this Annual Report on Form 10-K. The selected financial data provided below should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and related notes.

Operating results for the periods presented are not necessarily indicative of the results that may be expected for any future period. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.

We have reclassified income and expenses attributable to properties classified as discontinued operations at December 31, 2020 to “Discontinued operations, net” for all the period presented. See “Note 4 – Discontinued Operations” to our consolidated financial statements for more information.

Operating Data


	Years Ended December 31,
(dollars in thousands, except share data)	2020		2019		2018		2017		2016



Total revenues	$	336,281	$	345,903	$	323,024	$	324,465	$	345,446











Total expenses	356,747		375,111		509,792		376,229		424,897



Income (loss) before income taxes	(20,466)		8,978		(146,678)		19,999		(66,095)
Income tax expense (benefit)	178		210		4,950		2,378		(861)
Income (loss) from continuing operations	(20,644)		8,768		(151,628)		17,621		(65,234)
Discontinued operations, net	16,885		(6,754)		(7,727)		(5,413)		(7,015)
Net income (loss)	(3,759)		2,014		(159,355)		12,208		(72,249)
Deemed dividend on redeemable preferred stock	(2,403)		(2,407)		—		—		—
Net income (loss) attributable to common stockholders	$	(6,162)	$	(393)	$	(159,355)	$	12,208	$	(72,249)

Basic earnings per common share (A):
Income (loss) from continuing operations attributable to common stockholders	$	(0.28)	$	0.08	$	(1.85)	$	0.21	$	(0.79)
Discontinued operations, net	0.20		(0.08)		(0.09)		(0.06)		(0.09)
Net income (loss) attributable to common stockholders (B)	$	(0.08)	$	—	$	(1.94)	$	0.15	$	(0.88)

Diluted earnings per common share (A):
Income (loss) from continuing operations attributable to common stockholders	$	(0.28)	$	0.08	$	(1.85)	$	0.21	$	(0.79)
Discontinued operations, net	0.20		(0.08)		(0.09)		(0.06)		(0.09)
Net income (loss) attributable to common stockholders (B)	$	(0.08)	$	—	$	(1.94)	$	0.15	$	(0.88)
Weighted average number of shares of common stock outstanding
Basic	82,496,460		82,208,173		82,148,869		82,145,295		82,357,349
Diluted (C)	82,496,460		82,208,173		82,148,869		82,741,322		82,357,349

Dividends declared per share of common stock	$	0.33	$	0.52	$	0.78	$	1.04	$	1.04

(A) Basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding. The outstanding shares used to calculate the weighted average basic shares exclude 454,921 and 754,594 restricted stock awards, net of forfeitures, as of December 31, 2020 and 2019, respectively, as those shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic EPS share. Diluted EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding plus the additional dilutive effect, if any, of common stock equivalents during each period.

(B) Amounts may not sum due to rounding.

(C) Dilutive share equivalents and options were excluded for the years ended December 31, 2020, 2018 and 2016 as their inclusion would have been anti-dilutive given our loss position.

Cash Flow Data


	Years Ended December 31,
(dollars in thousands)	2020		2019		2018		2017		2016
Net cash provided by (used in):
Operating activities	$	53,303	$	75,411	$	121,077	$	60,445	$	102,345
Investing activities	360,433		(15,009)		(19,162)		319,895		2,144
Financing activities	(423,770)		(89,229)		(166,744)		(320,372)		(146,479)

Balance Sheet Data

The following table presents data on a consolidated basis including assets and liabilities relating to properties classified as discontinued operations:


	December 31,
(dollars in thousands)	2020		2019		2018		2017		2016
Total assets	$	1,773,536	$	2,194,709	$	2,286,258	$	2,508,027	$	2,821,728
Total debt, net	1,486,164		1,845,727		1,884,882		1,907,928		2,130,387
Total liabilities	1,550,050		1,917,808		1,963,806		2,002,142		2,242,833
Redeemable preferred stock	20,253		40,506		40,000		—		—
Total equity	203,233		236,395		282,452		505,885		578,895

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations is intended to help the reader understand the results of operations and financial condition of New Senior. The following should be read in conjunction with the consolidated financial statements and notes thereto included within this Annual Report on Form 10-K. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those included in Part I, Item 1A “Risk Factors.”

OVERVIEW

Our Business

As of December 31, 2020, we were a REIT with a portfolio of 103 senior housing properties located across the United States. We believe that we are the only REIT focused solely on senior housing and we are one of the largest owners of senior housing properties. We are listed on the NYSE under the symbol “SNR” and are headquartered in New York, New York.

We are organized and operate as a single reportable segment, Senior Housing Properties. We changed our structure in 2020 and no longer operate in two reportable segments: Managed Independent Living (“IL”) Properties, and Other Properties. See our consolidated financial statements and the related notes included in Item 8 “Financial Statements and Supplementary Data.”

COVID-19 & Considerations Related to Our Business

The novel coronavirus (COVID-19) global pandemic is causing significant disruptions to the U.S. and global economies and has contributed to volatility and negative pressure in financial markets. The outbreak has led federal, state and local governments and public health authorities to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders.

As an owner of senior living properties, with a portfolio of 102 IL properties and one continuing care retirement community (“CCRC”), COVID-19 has impacted our business in various ways. Our three property managers and one tenant have all put into place various protocols to address the COVID-19 pandemic at our communities across the U.S. Some of the measures taken at the onset of the pandemic included restrictions on all non-essential visitors (including family), closure of group dining facilities and other common areas, restrictions on resident movements and group activities, as well as enhanced protocols which have

required increased labor, property cleaning expenses and costs related to procuring necessary supplies such as meal containers and personal protective equipment (“PPE”). Over the last several months, our properties have lifted certain restrictions in a phased approach, based on both the status of state and local regulations that affect the property as well as the status of any COVID-19 cases at the property. Lifting restrictions at our properties, particularly restrictions related to onsite visitors, even while being done in a measured approach in compliance with all state and local regulations, may contribute to an increase in COVID-19 cases.

COVID-19 is having and will likely continue to have an impact on three metrics that are fundamental to our business: occupancy, rental rates and operating expenses.

Occupancy:

Following the COVID-19 outbreak, occupancy at our properties began to decrease materially as move-ins at those properties slowed due to the voluntary restrictions our operators have imposed on move-ins at our properties as discussed above. At the same time, the pandemic raises the risk of an elevated level of resident illnesses and therefore higher move-out levels at our properties. While move-out levels were slightly below historical levels at the onset of the pandemic, they have increased in recent months, likely due to pent-up demand to move-out that has been hampered by the pandemic. We do not know the extent of the ultimate impacts that COVID-19 will have on our business, and whether it will fundamentally alter the demand for senior housing in general or in our properties in particular. Ending occupancy in the third quarter of 2020 decreased 160 basis points compared to the second quarter, and 150 basis points in the fourth quarter of 2020 compared to the third quarter. The timing of a recovery in occupancy is difficult to predict and could be harmed by the incidence of COVID-19 at our properties or the perception that outbreaks could occur.

The senior housing industry offers a full continuum of care to seniors with product types that range from “mostly housing” (i.e., senior apartments) to “mostly healthcare” (i.e., skilled nursing, hospitals, etc.). We primarily focus on product types at the center of this continuum, namely IL properties. We believe that our focused portfolio of primarily IL properties will allow investors to participate in the positive fundamentals of the senior housing sector. However, according to the U.S. Centers for Disease Control and Prevention (the “CDC”), older adults and people of any age who have serious underlying medical conditions might be at higher risk for severe illness from COVID-19. The CDC guidance also states that people age 65 and older and those living in nursing homes or long-term care facilities are at high-risk for severe illness from COVID-19. While we do not own nursing facilities, the age and other demographics of our residents fall within the CDC guidance. We do not know if or how this will affect seniors’ views on different types of senior living and whether it will alter demand for our types of senior living properties in the future.

Rental Rates:

Our cash flows from operating activities are primarily driven by rental revenues and fees received from residents of our managed properties, and we typically increase rental fees annually. Seniors, like much of the U.S. population, may be experiencing deteriorating financial conditions as a result of the COVID-19 pandemic, which may make it difficult for them to pay rent. In addition, there may be pressure for us to reduce rental rates or offer other concessions in light of the pandemic and its effects on our residents and our business.

Operating Expenses:

During the first quarter of 2020, operating expenses were in line with expectations through the middle of March. We saw a slight increase in property level expenses associated with the COVID-19 pandemic towards the end of March, driven by expenditures related to the procurement of PPE and other supplies such as packaging necessary for in-room meal deliveries to residents. Since the second quarter of 2020, these costs have continued, but they been largely offset by variable expense savings associated with lower occupancy and strong expense management from our operators. Depending on how the pandemic continues to evolve, there may be other future operating expenses that we may be required to bear or need to continue to bear, such as costs for testing kits for residents and staff, temperature screening machines, additional cleaning equipment, or new protocols related to the properties.

Given the evolving nature of the COVID-19 pandemic, all of the observations and forward-looking statements above represent our current good faith views based upon the information that we have available to us at this time. We believe that the extent of the pandemic’s effect on our business, operational and financial performance and liquidity will depend upon many factors and future developments, including the duration, spread, intensity and recurrence of the pandemic, health and safety actions taken to contain its spread, the availability, continuing efficacy and public usage and acceptance of vaccines, and how quickly and to what extent normal economic and operating conditions can resume within the markets in which we operate, each of which is highly uncertain and difficult to predict at this time. Even after the COVID-19 pandemic subsides, we may continue to experience adverse impacts to our business and financial results as a result of its global economic impact, including any

economic downturn or recession that may occur in the future. See also Item 1A. ”Risk Factors” and below “Liquidity and Capital Resources,” for additional discussions regarding COVID-19 and its impact on our business.

Other Recent Developments

Formed a Strategic Relationship with Atria Senior Living

In February 2021, we announced that we entered into management agreements with Atria Senior Living (“Atria”), pursuant to which we intend to transition the management of 21 properties from Holiday to Atria in the second quarter of 2021.

Completion of AL/MC Portfolio Disposition & Related Refinancing Activity

On February 10, 2020, we completed the sale of all 28 of our managed assisted living/memory care (“AL/MC”) properties pursuant to a Purchase and Sale Agreement, dated as of October 31, 2019 (the “Sale Agreement”), for a gross sale price of $385.0 million (“AL/MC Portfolio Disposition”). We recognized a gain on sale of $20.0 million from the AL/MC Portfolio Disposition, which is recorded in “Gain on sale of real estate” within “Discontinued operations, net” in our Consolidated Statements of Operations. The sale of these properties represented a strategic shift that had a major effect on our operations and financial results. Accordingly, the operations of these properties were classified as discontinued operations in our consolidated financial statements included in this Annual Report on Form 10-K. All prior period information has been reclassified to conform to current period presentation. Refer to “Note 4 – Discontinued Operations” to our consolidated financial statements for additional details.

In February 2020, in conjunction with the AL/MC Portfolio Disposition, we repaid $368.1 million of debt and recognized a loss of extinguishment of debt of $5.9 million, comprising of $4.5 million in prepayment penalties and $1.4 million in the write-off of unamortized deferred financing costs on the loans, which is included in “Loss on extinguishment of debt” in our Consolidated Statements of Operations. We also entered into a new financing for $270.0 million, which is secured by 14 Senior Housing Properties. In addition, we amended our secured revolving credit facility in the amount of $125.0 million (the “Revolver”), which is currently secured by nine Senior Housing Properties and the pledge of the equity interests of certain of our wholly owned subsidiaries. The amendment extended the maturity of the Revolver from December 2021 to February 2024. The amendment allows the Revolver to be increased with lender consent to a maximum aggregate amount of borrowing capacity of $500.0 million, subject to customary terms and conditions. Refer to “Note 9 – Debt, Net” to our consolidated financial statements for additional details.

During the third quarter of 2020, we entered into a $270.0 million notional interest rate swap with a maturity in September 2025 that effectively converts LIBOR-based floating rate debt to fixed rate debt, thus reducing the impact of interest-rate changes on future interest expense.

MARKET CONSIDERATIONS

Senior housing is a $350 billion market, and ownership of senior housing assets is highly fragmented. Given these industry fundamentals and compelling demographics that we expect will drive increased demand for senior housing, we believe the senior housing industry could present attractive investment opportunities. However, increased competition from other buyers of senior housing assets, as well as liquidity constraints and other factors, including the COVID-19 pandemic, could impair our ability to source attractive investment opportunities within the senior housing industry and thus to seek investments in the broader healthcare industry. There can be no assurance that any investments we may make will be successful, and investments in asset classes other than senior housing could involve additional risks and uncertainties.

According to data from the National Investment Center for Seniors Housing and Care (“NIC”) on the 99 Primary and Secondary Markets, occupancy was down 680 basis points year-over-year in the fourth quarter of 2020, the third full quarter impacted by the COVID-19 pandemic. New Senior’s occupancy results outperformed the industry in the fourth quarter, with same store managed occupancy down 560 basis points year-over-year. Industry occupancy for majority IL facilities was down 620 basis points year-over-year, while industry occupancy for majority AL facilities was down 740 basis points year-over-year.

Industry-wide, new supply remains elevated compared to pre-2015 levels, but continues to decrease. Units under construction represent 5.1% of inventory, but the ratio has decreased 230 basis points from the recent high in the third quarter of 2018. The ratio of IL construction to inventory (5.1%) is slightly higher than that for AL (5.0%).

While supply trends have improved recently, rate growth has decelerated over the past several quarters. Industry rate growth was 1.5% in the fourth quarter of 2020, down from the recent high of 3.4% in the first quarter of 2019. Rate growth for IL facilities (1.6%) was slightly higher than rate growth for AL facilities (1.4%).

The value of our existing portfolio could be impacted by new construction, as well as increased availability and popularity of home health care or other alternatives to senior housing, by hampering occupancy and rate growth, along with increasing operating expenses.

Additionally, as discussed in more detail above, the COVID-19 pandemic impacted our business in 2020 and will continue to have an impact in 2021. The timing of a recovery is difficult to predict, and could be harmed by the incidence of COVID-19 at our properties or the perception that outbreaks could occur.

RESULTS OF OPERATIONS

Segment Overview

Our primary business is investing in senior housing properties. Due to the AL/MC Portfolio Disposition in 2020, we changed our structure during the fourth quarter of 2020 to one reportable segment. This change was made based on the financial information reviewed and used by the chief operating decision maker to make operating decisions, assess performance, develop strategy and allocate capital resources. More than 98.1% of our revenues are derived from managed properties.

Net Operating Income

We evaluate performance of our properties based on net operating income ("NOI") and Cash NOI. We consider NOI and Cash NOI important supplemental measures used to evaluate the operating performance of our properties because they allow investors, analysts and our management to assess our unleveraged property-level operating results and to compare our operating results between periods and to the operating results of other real estate companies on a consistent basis. We define NOI as total revenues less property-level operating expenses, which include property management fees and travel cost reimbursements. We define Cash NOI as NOI excluding the effects of straight-line rental revenue, amortization of above/ below market lease intangibles and the amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives.

Our Senior Housing Properties segment is primarily comprised of independent living senior housing properties that are operated by property managers to which we pay a management fee. We also own one CCRC leased on a long-term basis, and our tenant is typically responsible for bearing property-related expenses including maintenance, utilities, taxes, insurance, repairs, capital improvements and the payroll expense of property-level employees. Depreciation and amortization, interest expense, acquisition, transaction and integration expense, termination fee, management fees and incentive compensation to affiliate, general and administrative expense, loss on extinguishment of debt, impairment of real estate, other expense (income), gain (loss) on sale of real estate, gain on lease termination, litigation proceeds, net, and income tax expense (benefit) are not allocated to individual properties for purposes of assessing property performance. In deciding how to allocate resources and assess performance, our chief operating decision maker regularly evaluates the performance of our reportable segment on the basis of NOI and Cash NOI.

Effective May 14, 2018, we terminated our triple net leases with respect to the properties in the Holiday Portfolio and concurrently entered into property management agreements with Holiday with respect to such properties. This resulted in a significant increase in resident fees and services and property operating expenses with a corresponding decrease in rental revenue during the years ended December 31, 2019 and 2018.

Same Store

Same store information is intended to enable management to evaluate the performance of a consistent portfolio of real estate in a manner that eliminates variances attributable to changes in the composition of our portfolio over time, due to sales and various other factors. Properties acquired, sold, transitioned to other operators or between segments, or classified as held for sale or discontinued operations during the comparable periods are excluded from the same store amounts. Same store portfolio results

comparing 2019 and 2018 exclude the performance of the Holiday Portfolio which was converted from a triple net lease structure to a managed structure in May 2018 as a result of the Lease Termination. Refer to “Note 3 - Lease Termination” in our consolidated financial statements for additional details.

Year ended December 31, 2020 compared to the year ended December 31, 2019

The following table provides a reconciliation of our NOI to net income (loss), and compares the results of operations for the respective periods:


	Years Ended December 31,				Increase (Decrease)
(dollars in thousands)	2020		2019		Amount		%




Total NOI	$	138,220	$	141,546	$	(3,326)	(2.3)	%
Expenses
Interest expense	61,562		76,364		(14,802)		(19.4)	%
Depreciation and amortization	66,291		68,806		(2,515)		(3.7)	%
General and administrative expense	23,018		21,672		1,346		6.2	%
Acquisition, transaction and integration expense	467		1,501		(1,034)		(68.9)	%


Loss on extinguishment of debt	5,884		335		5,549		NM

Other expense	1,464		2,076		(612)		(29.5)	%
Total expenses	158,686		170,754		(12,068)		(7.1)	%
Loss on sale of real estate	—		(122)		122		NM

Litigation proceeds, net	—		38,308		(38,308)		NM
Income (loss) before income taxes	(20,466)		8,978		(29,444)		NM
Income tax expense	178		210		(32)		(15.2)	%
Income (loss) from continuing operations	(20,644)		8,768		(29,412)		NM
Discontinued Operations:
Gain on sale of real estate	19,992		—		19,992		NM
Loss from discontinued operations	(3,107)		(6,754)		3,647		(54.0)	%
Discontinued operations, net	16,885		(6,754)		23,639		NM
Net income (loss)	(3,759)		2,014		(5,773)		NM
Deemed dividend on redeemable preferred stock	(2,403)		(2,407)		4		(0.2)	%
Net income (loss) attributable to common stockholders	$	(6,162)	$	(393)	$	(5,769)	NM

_______________

NM – Not meaningful

The following table presents same store and total portfolio results as of and for the years ended December 31, 2020 and 2019:


	Same Store Portfolio								Total Portfolio
(dollars in thousands, except per bed data)	2020		2019		Change		%		2020		2019		Change		%
Resident fees and services	$	329,951	$	336,367	$	(6,416)	(1.9)	%	$	329,951	$	339,573	$	(9,622)	(2.8)	%
Rental revenue	6,330		6,330		—		—	%	6,330		6,330		—		—	%
Less: Property operating expense	198,061		200,600		(2,539)		(1.3)	%	198,061		204,357		(6,296)		(3.1)	%
NOI	138,220		142,097		(3,877)		(2.7)	%	138,220		141,546		(3,326)		(2.3)	%
Straight-line rental revenue	(431)		(589)		158		(26.8)	%	(431)		(589)		158		(26.8)	%
Amortization of deferred community fees and other (A)	(2,012)		1,547		(3,559)		NM		(2,012)		1,473		(3,485)		NM
Cash NOI	$	135,777	$	143,055	$	(7,278)	(5.1)	%	$	135,777	$	142,430	$	(6,653)	(4.7)	%

Total properties as of year end	103		103						103		103
Average available beds	12,439		12,438						12,439		12,545

(A) Includes amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives.

Resident fees and services

Total resident fees and services decreased $9.6 million. This decrease is primarily attributable to a decrease in average occupancy rates and resident fees and services from two AL/MC assets sold during the second quarter of 2019. This decrease is partially offset by an increase in average rental rates.

Same store resident fees and services decreased $6.4 million. This decrease is primarily attributable to a decrease in average occupancy rates, partially offset by an increase in average rental rates.

Rental revenue

Rental revenue relates to rents from our triple net lease property. Same store and total rental revenue remained unchanged for the comparative periods. As a percentage of rental revenue, NOI was 100% of revenue for each fiscal year as the lessee operates the property and bears the related costs, including maintenance, utilities, taxes, insurance, repairs, capital improvements and the payroll expense of property-level employees.

Property operating expense

Total property operating expense decreased $6.3 million. This is primarily due to the sale of two AL/MC assets during the second quarter of 2019 and variable expense savings associated with lower occupancy and strong expense management from our operators, partially offset by costs incurred in response to the COVID-19 pandemic.

Same store operating expenses decreased $2.5 million. This is primarily due to year-end actuarial adjustments for group health insurance and workers comp in 2020 and variable expense savings associated with lower occupancy and strong expense management from our operators, partially offset by costs incurred in response to the COVID-19 pandemic.

NOI

Total NOI and same store NOI decreased $3.3 million and $3.9 million, respectively, from the prior year. See above for the variance explanations.

Cash NOI

Total and same store Cash NOI decreased $6.7 million and $7.3 million, respectively, from the prior year due to more rent incentives given to residents and lower NOI. See above for variance explanations.

Expenses

Interest expense

Interest expense decreased $14.8 million, primarily due to a lower average debt balance and lower effective interest rates as a result of debt repayments in conjunction with the AL/MC Portfolio Disposition, lower interest rate on debt refinanced in 2020 and a decrease in LIBOR for the comparative periods. The weighted average effective interest rates for the years ended December 31, 2020 and 2019 were 3.91% and 4.67%, respectively.

Depreciation and amortization

Depreciation and amortization expense decreased $2.5 million primarily due to certain intangible assets becoming fully amortized and certain furniture, fixtures and equipment becoming fully depreciated as of December 31, 2019.

General and administrative expense

General and administrative expense increased $1.3 million primarily due to additional compensation expense, including the amortization of equity-based compensation granted to officers and employees during the year ended December 31, 2020.

Acquisition, transaction and integration expense

Acquisition, transaction and integration expense decreased $1.0 million primarily due to costs associated with the strategic review during the year ended December 31, 2019.

Loss on extinguishment of debt

Loss on extinguishment of debt increased $5.5 million. During the year ended December 31, 2020, we incurred $5.9 million of loss on extinguishment of debt consisting of $4.5 million of prepayment penalties and a $1.4 million write-off of unamortized deferred financing fees related to debt paid off in conjunction with the AL/MC Portfolio Disposition.

Other expense

Other expense decreased $0.6 million primarily due to a reduction in the value of our interest rate caps, which were not designated as hedging instruments, during the year ended December 31, 2020.

Loss on sale of real estate

During the year ended December 31, 2019, we sold two AL/MC properties and recognized a loss on sale of $0.1 million.

Litigation proceeds, net

As described in “Note 19 – Commitments and Contingencies” to our consolidated financial statements, on July 31, 2019, the derivative lawsuit, captioned Cumming v. Edens, et al., C.A. No. 13007-VCS was settled and approved by the relevant court. During the year ended December 31, 2019, we recorded $38.3 million in litigation proceeds net of a court-approved fee and expense award to plaintiff’s counsel of $14.5 million, as well as $0.3 million in unreimbursed legal fees.

Income tax expense

Discontinued operations, net

Discontinued operations, net increased $23.6 million primarily due to the sale of 28 AL/MC properties in February 2020, which resulted in a gain on sale of real estate of $20.0 million.

Year ended December 31, 2019 compared to the year ended December 31, 2018

The following table provides a reconciliation of NOI to net income (loss), and compares the results of operations for the respective periods:


	Years Ended December 31,				Increase (Decrease)
(dollars in thousands)	2019		2018		Amount		%




Total NOI	$	141,546	$	150,537	$	(8,991)	(6.0)	%
Expenses
Interest expense	76,364		85,643		(9,279)		(10.8)	%
Depreciation and amortization	68,806		80,129		(11,323)		(14.1)	%
General and administrative expense	21,672		13,382		8,290		61.9	%
Acquisition, transaction and integration expense	1,501		15,905		(14,404)		NM
Termination fee to affiliate	—		50,000		(50,000)		NM
Management fees to affiliate	—		14,814		(14,814)		(100.0)	%
Loss on extinguishment of debt	335		64,746		(64,411)		NM
Impairment on real estate held for sale	—		8,725		(8,725)		NM
Other expense	2,076		3,961		(1,885)		(47.6)	%
Total expenses	170,754		337,305		(166,551)		(49.4)	%
Loss on sale of real estate	(122)		—		(122)		NM
Gain on lease termination	—		40,090		(40,090)		NM
Litigation proceeds, net	38,308		—		38,308		NM
Income (loss) before income taxes	8,978		(146,678)		155,656		NM
Income tax expense	210		4,950		(4,740)		(95.8)	%
Income (loss) from continuing operation	8,768		(151,628)		160,396		NM
Discontinued Operations:

Loss from discontinued operations	(6,754)		(7,727)		973		(12.6)	%
Discontinued operations, net	(6,754)		(7,727)		973		(12.6)	%
Net income (loss)	2,014		(159,355)		161,369		NM
Deemed dividend on redeemable preferred stock	(2,407)		—		(2,407)		NM
Net income (loss) attributable to common stockholders	$	(393)	$	(159,355)	$	158,962	NM

_______________

NM – Not meaningful

The following table presents same store and total portfolio results as of and for the years ended December 31, 2019 and 2018:


	Same Store Portfolio								Total Portfolio
(dollars in thousands, except per bed data)	2019		2018		Change		%		2019		2018		Change		%
Resident fees and services	$	172,263	$	172,457	$	(194)	(0.1)	%	$	339,573	$	283,617	$	55,956	19.7	%
Rental revenue	6,330		6,327		3		—	%	6,330		39,407		(33,077)		(83.9)	%
Less: Property operating expense	102,565		102,211		354		0.3	%	204,357		172,487		31,870		18.5	%
NOI	76,028		76,573		(545)		(0.7)	%	141,546		150,537		(8,991)		(6.0)	%
Straight-line rental revenue	(589)		(743)		154		(20.7)	%	(589)		(5,365)		4,776		(89.0)	%
Amortization of deferred community fees and other (A)	(474)		393		(867)		NM		1,473		2,893		(1,420)		(49.1)	%
Cash NOI	$	74,965	$	76,223	$	(1,258)	(1.7)	%	$	142,430	$	148,065	$	(5,635)	(3.8)	%

Total properties as of year end	52		52						103		105
Average available beds	6,590		6,590						12,545		12,229

(A) Includes amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives.

Resident fees and services

Total resident fees and services increased $56.0 million, primarily due to fees from the Holiday Portfolio, which was converted from a triple net lease structure to a managed properties structure following the Lease Termination in May 2018, partially offset by a decrease in fees due to the sale of two AL/MC assets in the second quarter of 2019.

Same store resident fees and services decreased $0.2 million primarily due to a decrease in average occupancy. This decrease was partially offset by an increase in average rates.

Rental revenue

Rental revenue relates to rents from our triple net lease properties. Total rental revenue decreased $33.1 million due to the Lease Termination effective May 14, 2018, which converted the Holiday Portfolio from a triple net lease operating model to a managed properties operating model.

Same store rental revenue remained relatively unchanged for the comparative periods.

Property operating expense

Total property operating expense increased $31.9 million primarily due to the property operating expense related to the Holiday Portfolio, which was converted from a triple net lease structure to a managed properties structure following the Lease Termination in May 2018. This increase was partially offset by a decrease in property operating expense due to the sale of two AL/MC assets in the second quarter of 2019.

Same store property operating expense increased $0.4 million primarily due to higher labor costs during the year ended December 31, 2019.

NOI

Total NOI and same store NOI decreased $9.0 million and $0.5 million, respectively. See above for the variance explanations.

Cash NOI

Total Cash NOI decreased $5.6 million primarily due to lower NOI. See above for variance explanations. This was partially offset by a lower straight line rental revenue adjustment due to the Lease Termination in May 2018.

Same store Cash NOI decreased $1.3 million primarily due to lower NOI and more rent incentives given to residents. See above for variance explanations.

Expenses

Interest expense

Interest expense decreased $9.3 million, primarily due to lower effective interest rates as a result of debt refinancings in conjunction with the Lease Termination in May 2018 and the Term Loan in October 2018, partially offset by an increase in the average LIBOR rates for the comparative periods. Refer to “Note 9 - Debt, Net” in our consolidated financial statements for additional details.

Depreciation and amortization

Depreciation and amortization expense decreased $11.3 million primarily due to certain intangible assets becoming fully amortized during the year ended December 31, 2018.

General and administrative expense

General and administrative expense increased $8.3 million primarily due to additional compensation expense, including the amortization of equity-based compensation, as a result of the Internalization effective December 31, 2018.

Acquisition, transaction and integration expense

Acquisition, transaction and integration expense decreased $14.4 million primarily due to costs associated with the strategic review during the year ended December 31, 2018.

Termination fee to affiliate

In connection with the termination of the Management Agreement effective December 31, 2018, we incurred a termination fee of $50.0 million due to the Former Manager during the year ended December 31, 2018.

Management fees to affiliate

Management fees to affiliate expense decreased $14.8 million, primarily due to the termination of the Management Agreement with the Former Manager as a result of the Internalization effective December 31, 2018.

Loss on extinguishment of debt

Loss on extinguishment of debt decreased $64.4 million primarily due to $58.5 million of prepayment penalties and write off of unamortized deferred financing costs related to the debt paid off in conjunction with the Lease Termination and $6.2 million for the write off of unamortized deferred financing costs in conjunction with the refinancing of the Term Loan in October 2018.

Impairment of real estate held for sale

During the year ended December 31, 2018, we recognized impairment of $8.7 million related to two properties, which are classified as held for sale as of December 31, 2018. No impairment was recorded in 2019.

Other expense

Other expense decreased $1.9 million primarily due to a reduction in the value of our interest rate caps, which were not designated as hedging instruments, during the year ended December 31, 2019.

Loss on sale of real estate

During the year ended December 31, 2019, we sold two properties and recognized a loss on sale of $0.1 million. There were no asset sales in 2018.

Gain on lease termination

During the year ended December 31, 2018, we recognized a gain of $40.1 million as a result of the Lease Termination in May 2018. There were no lease terminations in 2019.

Litigation proceeds, net

Income tax expense

We are organized and conduct our operations to qualify as a REIT under the requirements of the Code. However, certain of our activities are conducted through our TRS and therefore are subject to federal and state income taxes. Income tax expense decreased $4.7 million from the prior year, primarily due to a valuation allowance recorded against our net deferred tax assets during the year ended December 31, 2018 as management believes that it is more likely than not that our net deferred tax assets will not be realized.

Discontinued operations, net

For the years ended December 31, 2019 and 2018, loss from discontinued operations reflects the operations of the 28 AL/MC properties that were sold in February 2020. Loss from discontinued operations decreased $1.0 million primarily due to a valuation allowance recorded against our net deferred tax assets during the year ended December 31, 2018 as management believes that it is more likely than not that our net deferred tax assets will not be realized. Refer to “Note 4 – Discontinued Operations” in our consolidated financial statements for additional details.

LIQUIDITY AND CAPITAL RESOURCES

Our principal liquidity needs are to (i) fund operating expenses, (ii) meet debt service requirements, (iii) fund recurring capital expenditures and investment activities, if applicable, and (iv) make distributions to stockholders. As of December 31, 2020, we had approximately $33.0 million in liquidity, consisting of unrestricted cash and cash equivalents. A portion of this amount is held in operating accounts used to fund expenses at our managed properties and, therefore, may not be available for distribution to stockholders.

Our principal sources of liquidity are (i) cash flows from operating activities, (ii) proceeds from financing in the form of debt, and, from time to time, (iii) proceeds from dispositions of assets and (iv) proceeds from the issuance of equity securities. Our cash flows from operating activities are primarily driven by (i) resident fees and services received from residents of our managed properties and (ii) rental revenues from the tenant of our triple net lease property, less (iii) operating expenses (primarily property operating expense of our managed properties, general and administrative expenses, professional fees, insurance and taxes) and (iv) interest payments on our debt. Our principal uses of liquidity are the expenses included in cash flows from operating activities, plus capital expenditures, principal payments on debt, and distributions to our stockholders.

We anticipate that our cash on hand, our cash flows provided by operating activities, and cash available to be drawn down from the Revolver will be sufficient to fund our business operations, recurring capital expenditures, principal payments, and the distributions we are required to make to comply with REIT requirements over the next 12 months. Our actual distributions to stockholders have historically been higher than the REIT distribution requirement. The Revolver is an important source of liquidity for us. Our balance drawn under the Revolver fluctuates over time. Shortly after the onset of the pandemic in March 2020 and as a precaution, we borrowed $100.0 million under the Revolver. We paid down $40.0 million of the outstanding balance in May 2020 and the remainder in August 2020 due to the lack of a present need for funds, however, we continue to have access to the Revolver if our needs change in the future. The material terms of the Revolver are discussed in more detail in “Note 9 - Debt, Net” to our consolidated financial statements.

Our cash flows from operating activities, less capital expenditures and principal payments, have historically been less than the amount of distributions to our stockholders. We have in the past funded the shortfall using cash on hand. In light of the impacts of COVID-19, the board of directors reduced our quarterly cash dividend on shares of our common stock for the first quarter of 2020 by 50% to $0.065 per share. The board of directors maintained the same dividend level in the second quarter and third quarter of 2020, and subsequently on February 24, 2021 also approved a cash dividend on shares of its common stock for the fourth quarter of 2020 of 0.065 per share. The board of directors believes the dividend reduction in 2020 is the most prudent course of action and it continues to monitor our financial performance and liquidity. The board of directors will continue to re-evaluate the level of future dividends. There can be no assurance that we will pay cash dividends in an amount consistent with prior quarters. Any difference between the amount of any future dividend and the amount of dividends in prior quarters could be material, and there can be no assurance that our board of directors will declare any dividend at all.

In February 2020, in conjunction with the AL/MC Portfolio Disposition, we obtained mortgage financing in the aggregate amount of $270.0 million from KeyBank and assigned to Federal Home Loan Mortgage Corporation (the “2020 Freddie Financing”). The 2020 Freddie Financing is secured by 14 of our Senior Housing Properties, matures on March 1, 2030, and bears interest at an adjustable rate, adjusted monthly, equal to the sum of the one month LIBOR index rate plus 2.12%. Concurrently on the same date, we used the funds from the 2020 Freddie Financing and proceeds from the AL/MC Portfolio Disposition to prepay an aggregate of $368.1 million of secured loans. We recognized a loss on extinguishment of debt of $5.9 million, comprising of $4.5 million in prepayment penalties and $1.4 million in the write-off of unamortized deferred financing costs, and is recorded in “Loss on extinguishment of debt” on our Consolidated Statements of Operations. We incurred a total of $3.3 million in deferred financing costs, which have been capitalized and are being amortized over the life of the loan and the related amortization is included in “Interest expense” in our Consolidated Statements of Operations.

In addition, in February 2020, we also amended our Revolver in the amount of $125.0 million and extended its maturity from December 2021 to February 9, 2024. The amendment allows the Revolver to be increased with lender consent to a maximum aggregate amount of $500.0 million, of which (i) up to 10% may be used for the issuance of letters of credit, and (ii) up to 10% may be drawn by us in the form of swing loans. The Revolver bears an interest rate of, at our option, (i) the sum of LIBOR plus 2.0% or, in the case of a swing line loan, (ii) the greater of (a) the fluctuating annual rate of interest announced from time to time by KeyBank as its “prime rate,” plus 1.0% (b) 1.5% above the effective federal funds rate and (c) the sum of LIBOR for a one-month interest period plus 2.0%. The Revolver is secured by nine of our Senior Housing Properties and the pledge of the equity interests of certain of our wholly owned subsidiaries. We continue to pay a fee for unused amounts of the Revolver under certain circumstances, which was $0.2 million for the year ended December 31, 2020, which were recorded in “Interest expense” in our Consolidated Statements of Operations.

In August 2020, we entered into a $270.0 million notional interest rate swap with a maturity in September 2025 that effectively converts LIBOR-based floating rate debt to fixed rate debt, thus reducing the impact of interest-rate changes on future interest expense. The interest rate swap was designated and qualified as a cash flow hedge with the change in fair value included in the assessment of hedge effectiveness deferred as a component of other comprehensive income (“OCI”), and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

The expectations set forth above are forward-looking and subject to a number of uncertainties and assumptions, which are described below under “Factors That Could Impact Our Liquidity, Capital Resources and Capital Obligations” as well as “Part I, Item 1A. Risk Factors.” If our expectations about our liquidity prove to be incorrect, we could be subject to a shortfall in liquidity in the future, and this shortfall may occur rapidly and with little or no notice, which would limit our ability to address the shortfall on a timely basis.

Other Factors That Could Impact Our Liquidity, Capital Resources and Capital Obligations

The following factors could impact our liquidity, capital resources and capital obligations:

• Access to Financing: Decisions by investors, counterparties and lenders to enter into transactions with us will depend upon a number of factors, such as our historical and projected financial performance, compliance with covenant terms, industry and market trends, the availability of capital and our investors’, counterparties’ and lenders’ policies and rates applicable thereto and the relative attractiveness of alternative investment or lending opportunities.

• Impact of Expected Additional Borrowings or Sales of Assets on Cash Flows: The availability and timing of and proceeds from additional borrowings or refinancing of existing debt may be different than expected or may not occur as expected. The timing of any sale of assets, and the proceeds from any such sales, are unpredictable and may vary materially from an asset’s estimated fair value and carrying value.

• Compliance with Debt Obligations: Our financings subject us and our property managers to a number of obligations, and a failure to satisfy certain obligations, including (without limitation) a failure by the guarantors of our leases to satisfy certain financial covenants that depend in part on the performance of our leased assets, which is outside of our control, could give rise to a requirement to prepay outstanding debt or result in an event of default and the acceleration of the maturity date for repayment. We may also seek amendments to these debt covenants, and there can be no assurance that we will be able to obtain any such amendment on commercially reasonable terms, if at all.

As noted elsewhere in this Annual Report on Form 10-K, the impacts of the COVID-19 pandemic will affect the Company’s liquidity in various ways, including among other things by further impairing our ability to access the capital markets, by reducing our revenues due to decreased occupancy at our properties and reduced asset values, which over time may limit the borrowing availability under the Revolver.

Debt Obligations

Our debt contains various customary financial and other covenants, and in certain cases include a Debt Service Coverage Ratio, Project Yield or Minimum Net Worth, Minimum Consolidated Tangible Net Worth, Adjusted Consolidated EBITDA to Fixed Charges and Liquid Assets provision, as defined in the agreements. As of December 31, 2020, we were in compliance with all of such covenants.

Capital Expenditures

We anticipate that capital expenditures will be funded through operating cash flows from the Senior Housing Properties. Capital expenditures, net of insurance proceeds for the managed properties were $13.4 million for the year ended December 31, 2020. As landlord, we did not incur any capital expenditures for the CCRC leased to the tenant for the year ended December 31, 2020. After the onset of the pandemic in March 2020, we temporarily halted all elective capital expenditure projects and limited projects to those deemed essential. In summer 2020, we resumed elective capital expenditure projects that could be completed safely.

With respect to our CCRC under a triple net lease arrangement, the terms of this arrangement require the tenant to fund all necessary capital expenditures in order to maintain and improve the applicable property. To the extent that our tenant is unwilling or unable to fund these capital expenditure obligations under the existing lease arrangement, we may fund capital expenditures with additional borrowings or cash flow from the operations of the senior housing properties. We may also provide corresponding loans or advances to our tenant which would increase the rent payable to us. For further information regarding capital expenditures related to our triple net lease property, see “Contractual Obligations” below and “Note 19 – Commitments and Contingencies” to our consolidated financial statements.

Cash Flows

The following table provides a summary of our cash flows:


	Years Ended December 31,
(dollars in thousands)	2020		2019		2018
Net cash provided by (used in)
Operating activities	$	53,303	$	75,411	$	121,077
Investing activities	360,433		(15,009)		(19,162)
Financing activities	(423,770)		(89,229)		(166,744)
Net increase (decrease) in cash, cash equivalents and restricted cash	(10,034)		(28,827)		(64,829)
Cash, cash equivalents and restricted cash, beginning of year	63,829		92,656		157,485
Cash, cash equivalents and restricted cash, end of year	$	53,795	$	63,829	$	92,656

Operating activities

Net cash provided by operating activities was $53.3 million, $75.4 million and $121.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The decrease of $22.1 million in net cash provided by operating activities from 2019 to 2020 was primarily due to litigation proceeds of $38.3 million received in 2019 offset by a one-time termination fee of $10.0 million paid in 2019 to the Former Manager as a result of the Internalization.

The decrease of $45.7 million in net cash provided by operating activities from 2018 to 2019 was primarily due to the receipt of $70.0 million from Holiday due to the Lease Termination in May 2018 and a one-time termination fee of $10.0 million paid in 2019 to the Former Manager as result of the Internalization. The decrease was partially offset by litigation proceeds of $38.3 million received in 2019.

Investing activities

Net cash provided by investing activities was $360.4 million and net cash used in investing activities was $15.0 million and $19.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The increase of $375.4 million in net cash provided by investing activities from 2019 to 2020 was due to net proceeds of $375.0 million received in February 2020 from the AL/MC Portfolio Disposition.

The decrease of $4.2 million in net cash used in investing activities from 2018 to 2019 was primarily due to the receipt of $13.1 million in proceeds from the sale of two AL/MC assets in 2019, partially offset by $7.0 million of higher capital expenditures in 2019, primarily on the Holiday Portfolio following the Lease Termination in May 2018, and $2.4 million of higher capital expenditures related to properties classified as discontinued operations.

Financing activities

Net cash used in financing activities was $423.8 million, $89.2 million and $166.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The increase of $334.5 million in cash used in financing activities from 2019 to 2020 was primarily due to the repayments of debt in conjunction with the AL/MC Portfolio Disposition and debt refinancings of $576.1 million and a payment to the Former Manager in 2020 for the redemption of 200,000 Series A preferred shares of $20.0 million. This was partially offset by proceeds from the 2020 Freddie Financing of $270.0 million.

The decrease of $77.5 million in net cash used in financing activities from 2018 to 2019 was primarily due to a decrease of $51.7 million in exit fees paid on the extinguishment of debt primarily associated with refinancing the Term Loan in May 2018 and a decrease of $21.3 million in dividends paid due to a decrease in the per share dividend paid from $0.78 per share for the year ended December 31, 2018 to $0.52 per share during the year ended December 31, 2019.

REIT Compliance Requirements

We are organized and conduct our operations to qualify as a REIT for U.S. federal income tax purposes. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, excluding net capital gains. We intend to pay dividends greater than all of our REIT taxable income to holders of our common stock in 2021, if, and to the extent, authorized by our board of directors. We note that a portion of this requirement may be able to be met in future years with partial stock dividends, rather than cash distributions, subject to limitations. We expect that our operating cash flows will exceed REIT taxable income due to depreciation and other non-cash deductions in computing REIT taxable income. However, before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our obligations. If we do not have sufficient liquid assets to enable us to satisfy the 90% distribution requirement, or if we decide to retain cash, we may sell assets, issue additional equity securities or borrow funds to make cash distributions, or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

Income Tax

We are organized and conduct our operations to qualify as a REIT under the requirements of the Code. Currently, certain of our activities are conducted through our TRS and therefore are subject to federal and state income taxes at regular corporate tax rates.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2020, we do not have any off-balance sheet arrangements. We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose or variable interest entities established to facilitate off-balance sheet arrangements. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment or intend to provide additional funding to any such entities.

CONTRACTUAL OBLIGATIONS

As of December 31, 2020, we had the following material contractual obligations including estimates of interest payments on our floating rate debt (dollars in thousands):


	2021		2022 (D)		2023		2024		2025		Thereafter		Total
Principal payments	$	9,260	$	19,125	$	19,841	$	24,186	$	21,518	$	22,778	$	116,708
Balloon payments	—		48,419		—		—		1,098,238		238,759		1,385,416
Subtotal	9,260		67,544		19,841		24,186		1,119,756		261,537		1,502,124
Redeemable preferred stock	20,000		—		—		—		—		—		20,000
Interest & redeemable preferred stock dividend (A)(B)	46,761		44,060		42,955		42,387		35,544		24,530		236,237
Leases	654		515		472		240		8		305		2,194
Total obligations (C)	$	76,675	$	112,119	$	63,268	$	66,813	$	1,155,308	$	286,372	$	1,760,555

(A) Estimated interest payments on floating rate debt are calculated using LIBOR rates in effect at December 31, 2020 and may not be indicative of actual payments. Actual payments may vary significantly due to LIBOR fluctuations. See “Note 9 – Debt, Net” to our consolidated financial statements for further information about interest rates.

(B) Includes obligations to pay dividends of $1.2 million in 2021 on the Series A redeemable preferred stock.

(D) The Company has two one-year extension options to defer the balloon payment, the second extension requires the payment of a nominal extension fee.

In addition to our debt, we are a party to property management agreements with property managers. See “Note 19 – Commitment and Contingencies” to our consolidated financial statements for information related to our capital improvement, repair and lease commitments.

INFLATION

Our triple net lease provides for either fixed increases in base rents and/or indexed escalators, based on the Consumer Price Index. In our managed properties, resident agreements are generally month to month agreements affording us the opportunity to increase prices subject to market and other conditions.

NON-GAAP FINANCIAL MEASURES

A non-GAAP financial measure is a measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are not excluded from or included in the most directly comparable GAAP measure. We consider certain non-GAAP financial measures to be useful supplemental measures of our operating performance for management and investors. GAAP accounting for real estate assets assumes that the value of real estate assets diminishes predictably over time, even though real estate values historically have risen or fallen with market conditions. As a result, many industry investors look to non-GAAP financial measures for supplemental information about real estate companies.

You should not consider non-GAAP measures as alternatives to GAAP net (loss) income, which is an indicator of our financial performance, or as alternatives to GAAP cash flow from operating activities, which is a liquidity measure. Additionally, non-GAAP measures are not intended to be a measure of our ability to satisfy our debt and other cash requirements. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP measures in conjunction with GAAP net income, cash flow from operating activities, investing activities and financing activities, as presented in our consolidated financial statements, and other financial data included elsewhere in this report. Moreover, the comparability of non-GAAP financial measures across companies may be limited as a result of differences in the manner in which real estate companies calculate such measures.

Below is a description of the non-GAAP financial measures used by our management and reconciliations of these measures to the most directly comparable GAAP measures.

Funds From Operations, Normalized Funds From Operations and Adjusted Funds from Operations

We use Funds From Operations (“FFO”) and Normalized FFO as supplemental measures of our operating performance. We use the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO. NAREIT defines FFO as GAAP net income (loss) attributable to common stockholders, which includes loss from discontinued operations, excluding gains (losses) from sales of depreciable real estate assets and impairment charges of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated entities and joint ventures to reflect FFO on the same basis. FFO does not account for debt principal payments and is not intended as a measure of a REIT’s ability to satisfy such payments or any other cash requirements.

Normalized FFO, as defined below, measures the financial performance of our portfolio of assets excluding items that, although incidental to, are not reflective of the day-to-day operating performance of our portfolio of assets. We believe that Normalized FFO is useful because it facilitates the evaluation of our portfolio’s operating performance (i) between periods on a consistent basis and (ii) to the operating performance of other real estate companies. However, comparability may be limited because our calculation of Normalized FFO may differ significantly from that of other companies or because of features of our business that are not present in other companies.

We define Normalized FFO as FFO excluding the following income and expense items, as applicable: (a) acquisition, transaction and integration related expenses; (b) the write off of unamortized discounts, premiums, deferred financing costs, or additional costs, make whole payments and penalties or premiums incurred as the result of early repayment of debt (collectively “Gain (loss) on extinguishment of debt”); (c) incentive compensation to affiliate recognized as a result of sales of real estate; (d) the remeasurement of deferred tax assets; (e) valuation allowance on deferred tax assets, net; (f) termination fee to affiliate; (g) gain on lease termination; (h) compensation expense related to transition awards; (i) litigation proceeds; and (j) other items that we believe are not indicative of operating performance, generally reported as “Other expense (income)” in our Consolidated Statements of Operations.

We also use Adjusted FFO (“AFFO”) as a supplemental measure of our operating performance. We believe AFFO is useful because it facilitates the evaluation of (i) the current economic return on our portfolio of assets between periods on a consistent basis and (ii) our portfolio versus those of other real estate companies that report AFFO. However, comparability may be limited because our calculation of AFFO may differ significantly from that of other companies, or because of features of our business that are not present in other companies.

We define AFFO as Normalized FFO excluding the impact of the following: (a) straight-line rents; (b) amortization of above/ below market lease intangibles; (c) amortization of deferred financing costs; (d) amortization of premium or discount on mortgage notes payable; (e) amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives; and (f) amortization of equity-based compensation expense.

The following table sets forth a reconciliation of net income (loss) attributable to common stockholders to FFO, Normalized FFO and Adjusted FFO; adjustments below include amounts related to properties classified as discontinued operations:


	Year Ended December 31,
(dollars in thousands)	2020		2019		2018
Net income (loss) attributable to common stockholders	$	(6,162)	$	(393)	$	(159,355)
Depreciation and amortization	66,291		81,297		95,950
Impairment of real estate held for sale	—		—		8,725
(Gain) loss on sale of real estate	(19,992)		122		—
FFO	40,137		81,026		(54,680)
Acquisition, transaction and integration expense	1,504		2,081		15,919
Loss on extinguishment of debt	9,486		335		66,219
Compensation expense related to transition awards	1,280		1,925		—
Termination fee to affiliate	—		—		50,000
Gain on lease termination	—		—		(40,090)
Litigation proceeds, net	—		(38,308)		—
Non-cash valuation allowance on deferred tax assets, net	—		—		5,354
Other expense (A)	1,345		2,051		4,576
Normalized FFO	53,752		49,110		47,298
Straight line rent	(431)		(590)		(5,365)
Amortization of equity-based compensation expense	5,393		2,022		—
Amortization of deferred financing costs	3,380		4,004		10,519
Amortization of deferred community fees and other	(3,022)		1,303		2,935
Adjusted FFO	$	59,072	$	55,849	$	55,387

(A) Primarily includes damage remediation costs due to Hurricane Irma, changes in the fair value of financial instruments and casualty related charges.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) facilitates an assessment of the operating performance of our existing portfolio of assets on an unleveraged basis by eliminating the impact of our capital structure and tax position. We define Adjusted EBITDA as net income (loss) attributable to common stockholders, which includes loss from discontinued operations, before interest, taxes, depreciation and amortization (including non-cash equity-based compensation expense), excluding deemed dividends on redeemable preferred stock, gain or loss on sale of real estate, impairment of real estate held for sale, acquisition, transaction and integration expense, loss on extinguishment of debt, compensation expense related to transition awards, incentive compensation on sale of real estate, termination fee to affiliate, gain on lease termination, litigation proceeds, and other expense.

The following table sets forth a reconciliation of net income (loss) attributable to common stockholders to Adjusted EBITDA; adjustments below include amounts related to properties classified as discontinued operations:


	Years Ended December 31,
(dollars in thousands)	2020		2019		2018
Net income (loss) attributable to common stockholders	$	(6,162)	$	(393)	$	(159,355)
Depreciation and amortization	66,291		81,297		95,950
Impairment of real estate held for sale	—		—		8,725
Deemed dividend on redeemable preferred stock	2,403		2,407		—
(Gain) loss on sale of real estate	(19,992)		122		—
Acquisition, transaction and integration expense	1,504		2,081		15,919
Loss on extinguishment of debt	9,486		335		66,219
Compensation expense related to transition awards	1,280		1,925		—

Termination fee to affiliate	—		—		50,000
Gain on lease termination	—		—		(40,090)
Litigation proceeds, net	—		(38,308)		—
Other expense (A)	1,345		2,051		4,576
Amortization of equity-based compensation expense	5,393		2,022		—
Interest expense	62,923		90,935		101,176
Income tax expense (B)	177		308		5,794
Adjusted EBITDA	$	124,648	$	144,782	$	148,914

(A) Primarily includes damage remediation costs due to Hurricane Irma, changes in the fair value of financial instruments and casualty related charges.

(B) 2018 includes a valuation allowance of $5.4 million recorded against our net deferred tax assets.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of financial condition and results of operations is based upon our historical financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Our estimates are based on information available to management at the time of preparation of the financial statements, including the result of historical analysis, our understanding and experience of our operations, our knowledge of the industry and market-participant data available to us.

Actual results have historically been in line with management’s estimates and judgments used in applying each of the accounting policies described below, and management periodically re-evaluates accounting estimates and assumptions. Actual results could differ from these estimates and materially impact our consolidated financial statements. However, we do not expect our assessments and assumptions below to materially change in the future.

A summary of our significant accounting policies is presented in "Note 2 - Summary of Significant Accounting Policies" to our consolidated financial statements. The following is a summary of our accounting policies that are most effected by judgments, estimates and assumptions.

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, Revenues from Contracts with Customers (“ASC 606”) using the modified retrospective method of adoption. This standard requires revenue to be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. The adoption did not result in an adjustment to beginning retained earnings and did not have a significant impact on our consolidated financial statements. Substantially all of our revenue has been generated through our triple net lease and managed property leasing arrangements, which are specifically excluded from ASC 606, and are accounted for under other applicable GAAP standards. We account for ancillary revenue under ASC 606. The timing and pattern of revenue recognition of our ancillary revenue under ASC 606 is consistent with that under the prior accounting model.

Resident fees and services include monthly rental revenue, care income and ancillary income recognized from managed properties. Resident fees and services are recognized monthly as services are provided. Most lease agreements with residents are cancellable by the resident with 30 days’ notice. Ancillary income primarily relates to non-refundable community fees. Non-refundable community fees are recognized on a straight-line basis over the estimated length of stay of residents, which management estimates to be approximately 24 months for AL/MC properties and 33 months for IL properties.

Acquisition Accounting

The Company’s real estate acquisitions are generally classified as asset acquisitions. The cost of the asset acquired is allocated to tangible and intangible assets and assumed liabilities at their fair values as of the transaction date, no goodwill is recognized, third party transaction costs are capitalized and any associated contingent consideration is generally recorded when the amount of consideration is reasonably estimable and probable of being paid. The measurement period in which to record adjustments to the transaction is also eliminated. The determination of the fair value of net assets acquired involves significant judgment and estimates, such as estimated future cash flow projections, appropriate discount and capitalization rates and other estimates based on available market information. Estimates of future cash flows are based on a number of factors including property operating results, known and anticipated trends, as well as market and economic conditions.

In measuring the fair value of tangible and identified intangible assets acquired and liabilities assumed, management uses information obtained as a result of pre-acquisition due diligence, marketing, leasing activities and independent appraisals. In the case of real property, the fair value of the tangible assets acquired is determined by valuing the property as if it were vacant. Significant estimates impacting the measurement at fair value of our real estate property include expected future rental rates and occupancy, construction cost data and qualitative selection of comparable market transactions as well as the assessment of the relative quality and condition of our acquired properties.

Recognized intangible assets primarily include the fair value of in-place resident leases. We estimate the fair value of in-place leases as (i) the present value of the estimated rental revenue that would have been forgone, offset by variable costs that would have otherwise been incurred during a reasonable lease-up period, as if the acquired units were vacant and (ii) the estimated absorption costs, such as additional marketing costs that would have been incurred during the lease-up period. The acquisition fair value of the in-place lease intangibles is amortized over the estimated length of stay of the residents at the senior housing properties on a straight-line basis, which approximates 24 months for AL/MC and CCRC properties and 33 months for IL properties.

Impairment of Long Lived Assets

We periodically evaluate long-lived assets, including definite lived intangible assets, primarily consisting of our real estate investments, for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. In performing this evaluation, market conditions and our current intentions with respect to holding or disposing of the asset are considered. If the sum of the expected future undiscounted cash flows is less than book value, we recognize an impairment loss equal to the amount by which the asset’s carrying value exceeds its fair value. An impairment loss is recognized at the time any such determination is made.

Income Taxes

As a REIT, we are generally not subject to federal income tax on income that we distribute as dividends to our stockholders. Our determination that we qualify as a REIT is based on interpretation of tax laws and our conclusion has an impact on the measurement and recognition of income tax expense. If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax for taxable years beginning prior to January 1, 2018, on our taxable income at regular corporate rates and distributions to stockholders would not be deductible by us in computing our taxable income. Failing to qualify as a REIT could materially and adversely affect our financial position, performance and liquidity.

RECENT ACCOUNTING PRONOUNCEMENTS

See “Note 2 - Summary of Significant Accounting Policies” to our consolidated financial statements for information about recent accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in interest rates, credit spreads, foreign currency exchange rates, commodity prices and equity prices. The primary market risks that we are exposed to are interest rate risk and credit risk. These risks are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. All of our market risk sensitive assets and liabilities are for non-trading purposes only. In addition, we are exposed to liquidity risk.

Interest Rate Risk

We are exposed to market risk related to changes in interest rates on borrowings under our mortgage loans that are floating rate obligations. These market risks result primarily from changes in LIBOR or prime rates. We continuously monitor our level of floating rate debt with respect to our total debt and other factors, including our assessment of current and future economic conditions.

For fixed rate debt, interest rate fluctuations generally affect the fair value, but do not impact our earnings or cash flows. Therefore, interest rate risk does not have a significant impact on our fixed rate debt obligations until such obligations mature or until we elect to prepay and refinance such obligations. If interest rates have risen at the time our fixed rate debt matures or is refinanced, our future earnings and cash flows could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of maturity or refinancing may lower our overall borrowing costs.

For floating rate debt, interest rate fluctuations can affect the fair value, as well as earnings and cash flows. Generally, if market interest rates rise, our earnings and cash flows could be adversely affected by an increase in interest expense, and lower interest rates may reduce our borrowing costs and improve our operational results. We continuously monitor our interest rate exposure and may elect to use derivative instruments to manage interest rate risk associated with floating rate debt.

In August 2020, we entered into an interest rate swap with a notional amount of $270.0 million that matures in September 2025 and in May 2019, we entered into an interest rate swap with a notional amount of $350.0 million that matures in May 2022. These swaps effectively convert LIBOR-based floating-rate debt to fixed-rate debt, thus reducing the impact of interest-rate changes on future interest expense. After considering the effect of the interest rate swap, $419.3 million of our floating rate debt with an average coupon rate of 2.54% would be subject to interest rate fluctuations. As a result, a 100 basis point increase in interest rates would increase annual interest expense by $4.1 million. However, a 100 basis point decrease in interest rates would also increase annual interest expense by $2.4 million due to the impact of LIBOR floors included in certain debt agreements.

The table below sets forth the outstanding face amount of our debt subject to LIBOR fluctuations after incorporating the impact of the interest rate swap discussed above, excluding debt associated with assets classified as discontinued operations:


	Outstanding Face Amount
	December 31, 2020		December 31, 2019
Floating Rate	$	419,316	$	789,036
Fixed Rate	1,082,808		814,680
Total	$	1,502,124	$	1,603,716

LIBOR is currently expected to be phased out at the end of calendar year 2021. A portion of our debt, which includes certain mortgage loans and our revolving credit facility, is required to pay interest at floating rates based on LIBOR. We also hold derivatives (interest rate swaps) indexed to LIBOR as hedging instruments, as described above. In the event that LIBOR is phased out, the interest rate for our floating rate debt and the swap rate for our interest rate swaps will be based on an alternative floating rate as specified in the applicable debt instrument or agreement, or as otherwise agreed upon between us and our lenders. Certain of our newer loans and financial instruments have alternative LIBOR provisions, which generally give our lenders substantial flexibility in setting alternative rates if and when LIBOR is discontinued. We expect that the provisions of our other debt agreements relating to the calculation of interest will likely be amended, and over the past year we have been working with our lenders in the ordinary course to manage transition efforts to be prepared for this phase-out. We do not know what standard, if any, will replace LIBOR if it is phased out. Currently we cannot estimate the overall impact of the phase-out of LIBOR on our current debt agreements, although it is possible that an alternative variable rate could be higher or more volatile, which could raise our borrowing costs.

Liquidity Risk

As described further in Part I, Item IA. “Risk Factors,” the following factors could affect our liquidity, access to capital resources and our capital obligations.

•Our stock price performance could impair our ability to access the capital markets, and any disruption to the capital markets or other sources of financing generally could also negatively affect our liquidity.

•Our failure to comply with the terms of our financings or a default by our lease counterparty (including a failure by the lease guarantor to satisfy certain financial covenants that depend on the performance of our leased assets, which are outside of our control) could result in the acceleration of the requirement to repay our indebtedness or require us to seek amendments to such agreements, which we may not be able to obtain on commercially reasonable terms, if at all.

•Our ability to obtain financing or refinancing on favorable terms, if at all.

•Real estate investments are relatively illiquid, and our ability to quickly sell or exchange our properties in response to changes in economic or other conditions is limited. In the event we desire or need to sell any of our properties, the value of those properties and our ability to sell at a price or on terms acceptable to us could be adversely affected by a downturn in the real estate industry generally, weakness in the senior housing and healthcare industries or other factors.

•Because we derive substantially all of our revenues from operations conducted by third parties, any inability or unwillingness by these property managers to satisfy their respective obligations to us or to renew their leases with us upon expiration of the terms thereof could have a material adverse effect on our liquidity, financial condition, our ability to service our indebtedness and to make distributions to our stockholders.

•To comply with the 90% distribution requirement applicable to REITs and to avoid income and excise taxes, we must make distributions to our stockholders. Our actual distributions to stockholders have historically been higher than the REIT distribution requirement. Distributions will limit our ability to finance investments and may limit our ability to engage in transactions that are otherwise in the best interests of our stockholders. Although we do not anticipate any inability to satisfy the REIT distribution requirement, from time to time, we may not have sufficient cash or other liquid assets to do so. For example, timing differences between the receipt of income and payment of deductible expenses, on the one hand, and the inclusion of that income and deduction of those expenses in arriving at our taxable income, on the other hand, or non-deductible expenses such as principal amortization or repayments or capital expenditures in excess of non-cash deductions may cause us to fail to have sufficient cash or liquid assets to enable us

to satisfy the 90% distribution requirement. In the event that timing differences occur or we decide to retain cash or to distribute such greater amount as may be necessary to avoid income and excise taxation, we may seek to borrow funds, issue additional equity securities, pay taxable stock dividends, distribute other property or securities or engage in a transaction intended to enable us to meet the REIT distribution requirements. Any of these actions may require us to raise additional capital to meet our obligations; however, limitations on our ability to access capital, as described above, could have an adverse effect on our ability to make required payments on our debt obligations, make distributions to our stockholders or make future investments necessary to implement our business strategy. The terms of the instruments governing our existing indebtedness restrict our ability to engage in certain types of these transactions.

•As discussed in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources,” the impacts of the COVID-19 pandemic will affect the Company’s liquidity in various ways, including among other things by further impairing our ability to access the capital markets, by reducing our revenues due to decreased occupancy at our properties and reduced asset values, which over time may limit the borrowing availability under the Revolver.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


			Page
Index to Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm			57
Consolidated Balance Sheets as of December 31, 2020 and 2019			60
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018			61
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018			62
Consolidated Statements of Changes in Equity for the years ended December 31, 2020, 2019 and 2018			63
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018			64
Notes to Consolidated Financial Statements			66
Note 1. Organization			66
Note 2. Summary of Significant Accounting Policies			67
Note 3. Lease Termination			73
Note 4. Discontinued Operations			73
Note 5. Dispositions			75
Note 6. Segment Reporting			76
Note 7. Real Estate Investments			76
Note 8. Receivables and Other Assets, Net			78
Note 9. Debt, Net			79
Note 10. Derivative Instruments			81
Note 11. Accrued Expenses and Other Liabilities			82
Note 12. Fair Value Measurement			82
Note 13. Transactions With Affiliates			82
Note 14. Income Taxes			84
Note 15. Stock-Based Compensation			85
Note 16. Redeemable Preferred Stock, Equity and Earnings Per Share			87
Note 17. Concentration of Credit Risk			90
Note 18. Future Minimum Rents			91
Note 19. Commitments and Contingencies			92
Note 20. Subsequent Events			93
Note 21. Quarterly Financial Information			94
Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation			96

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

New Senior Investment Group Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of New Senior Investment Group Inc. and Subsidiaries (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.


			Impairment of Real Estate Investments

Description of the Matter			At December 31, 2020, the Company’s net real estate investments balance was $1,705.6 million. As discussed in Note 2 of the consolidated financial statements, the Company evaluates its real estate investments periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Auditing management’s impairment assessment for real estate investments was especially challenging and involved a high degree of subjectivity as a result of the assumptions and estimates inherent in estimating the future net cash flows of the properties used in the assessment. The Company’s impairment assessment for real estate investments is sensitive to the significant assumptions including, management’s intentions with respect to holding or disposing of individual real estate investments, uncertainty related to significant changes in the Company’s use of assets or the strategy for its overall business, as well as possible negative economic or industry trends for the Company or its tenants. These assumptions are forward-looking and could be affected by future economic and market conditions.









How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to evaluate real estate investments for impairment. For example, we tested controls over management’s process for timely identification of impairment indicators and review of significant assumptions and data inputs used to develop the properties’ expected future net cash flows. To test the Company’s impairment assessment for real estate investments, we performed audit procedures that included, among others, identifying and evaluating indicators of impairment and testing significant assumptions described above and the underlying data used in the impairment assessment. For example, we compared the significant assumptions and inputs used by management to market data including occupancy trends, absorption and rent trends. We also tested the completeness and accuracy of the underlying data used in the Company’s impairment analysis. We held discussions with management about the current status of potential transactions and about management’s judgments to understand the probability of future events that could affect the hold period for the properties. In addition, we searched for and evaluated information that corroborated or contradicted the Company’s assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2014.

New York, New York

February 25, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

New Senior Investment Group Inc. and Subsidiaries

Opinion on Internal Control over Financial Reporting

We have audited New Senior Investment Group Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, New Senior Investment Group Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15 and our report dated February 25, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2014.

New York, New York

February 25, 2021

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)


	December 31,
Assets	2020		2019
Real estate investments:
Land	$	134,643	$	134,643
Buildings, improvements and other	1,983,363		1,970,036
Accumulated depreciation	(417,455)		(351,555)
Net real estate property	1,700,551		1,753,124
Acquired lease and other intangible assets	7,642		7,642
Accumulated amortization	(2,595)		(2,238)
Net real estate intangibles	5,047		5,404
Net real estate investments	1,705,598		1,758,528

Assets from discontinued operations	—		363,489
Cash and cash equivalents	33,046		39,614
Receivables and other assets, net	34,892		33,078
Total Assets	$	1,773,536	$	2,194,709

Liabilities, Redeemable Preferred Stock and Equity
Liabilities
Debt, net	$	1,486,164	$	1,590,632
Liabilities from discontinued operations	—		267,856
Accrued expenses and other liabilities	63,886		59,320

Total Liabilities	1,550,050		1,917,808

Commitments and contingencies (Note 19)

Redeemable Preferred Stock, par value $0.01 per share with $100 liquidation preference, 200,000 shares authorized, issued, and outstanding as of December 31, 2020 and 400,000 shares authorized, issued, and outstanding as of December 31, 2019	20,253		40,506

Equity
Preferred Stock par value $0.01 per share, 99,800,000 shares (excluding 200,000 shares of redeemable preferred stock) authorized and none issued or outstanding as of December 31, 2020 and 99,600,000 shares (excluding 400,000 shares of redeemable preferred stock) authorized and none issued or outstanding as of December 31, 2019	—		—
Common stock par value $0.01 per share, 2,000,000,000 shares authorized, 83,023,970 and 82,964,438 shares issued and outstanding as of December 31, 2020 and 2019, respectively	830		830
Additional paid-in capital	907,577		901,889
Accumulated deficit	(694,194)		(660,588)
Accumulated other comprehensive loss	(10,980)		(5,736)
Total Equity	203,233		236,395

Total Liabilities, Redeemable Preferred Stock and Equity	$	1,773,536	$	2,194,709

See accompanying notes to consolidated financial statements.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except share data)


	Years Ended December 31,
	2020		2019		2018
Revenues
Resident fees and services	$	329,951	$	339,573	$	283,617
Rental revenue	6,330		6,330		39,407
Total revenues	336,281		345,903		323,024

Expenses
Property operating expense	198,061		204,357		172,487
Interest expense	61,562		76,364		85,643
Depreciation and amortization	66,291		68,806		80,129
General and administrative expense	23,018		21,672		13,382
Acquisition, transaction, and integration expense	467		1,501		15,905
Termination fee to affiliate	—		—		50,000
Management fees to affiliate	—		—		14,814
Loss on extinguishment of debt	5,884		335		64,746
Impairment of real estate held for sale	—		—		8,725
Other expense	1,464		2,076		3,961
Total expenses	356,747		375,111		509,792
Loss on sale of real estate	—		(122)		—
Gain on lease termination	—		—		40,090
Litigation proceeds, net	—		38,308		—
Income (loss) before income taxes	(20,466)		8,978		(146,678)
Income tax expense	178		210		4,950
Income (loss) from continuing operations	(20,644)		8,768		(151,628)
Discontinued Operations:
Gain on sale of real estate	19,992		—		—
Loss from discontinued operations	(3,107)		(6,754)		(7,727)
Discontinued operations, net	16,885		(6,754)		(7,727)
Net income (loss)	(3,759)		2,014		(159,355)
Deemed dividend on redeemable preferred stock	(2,403)		(2,407)		—
Net income (loss) attributable to common stockholders	$	(6,162)	$	(393)	$	(159,355)

Basic earnings per common share: (A)
Income (loss) from continuing operations attributable to common stockholders	$	(0.28)	$	0.08	$	(1.85)
Discontinued operations, net	0.20		(0.08)		(0.09)
Net income (loss) attributable to common stockholders (B)	$	(0.08)	$	—	$	(1.94)

Diluted earnings per common share: (A)
Income (loss) from continuing operations attributable to common stockholders	$	(0.28)	$	0.08	$	(1.85)
Discontinued operations, net	0.20		(0.08)		(0.09)
Net income (loss) attributable to common stockholders (B)	$	(0.08)	$	—	$	(1.94)

Weighted average number of shares of common stock outstanding
Basic	82,496,460		82,208,173		82,148,869
Diluted (C)	82,496,460		82,208,173		82,148,869

Dividends declared and paid per share of common stock	$	0.33	$	0.52	$	0.78

(A) Basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding. The outstanding shares used to calculate the weighted average basic shares exclude 454,921 and 754,594 restricted stock awards, net of forfeitures, as of December 31, 2020 and 2019, respectively, as those shares were issued but had not vested and therefore, not considered outstanding for purposes of computing basic income (loss) per share. Diluted EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding plus the additional dilutive effect, if any, of common stock equivalents during each period.

(B) Amounts may not sum due to rounding.

(C) Dilutive share equivalents and options were excluded for the years ended December 31, 2020 and 2018 as their inclusion would have been anti-dilutive given our loss position.

See accompanying notes to consolidated financial statements.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands, except share data)


	Years Ended December 31,
	2020		2019		2018
Net income (loss)	$	(3,759)	$	2,014	$	(159,355)
Other comprehensive income (loss):
Unrealized loss on cash flow hedge	(5,244)		(5,736)		—
Total other comprehensive loss	(5,244)		(5,736)		—
Total comprehensive income (loss)	$	(9,003)	$	(3,722)	$	(159,355)

See accompanying notes to consolidated financial statements.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands, except share data)


	Common Stock			Accumulated Deficit		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Total Equity
	Shares	Amount
Equity at December 31, 2017	82,148,869	$	821	$	(393,068)	$	898,132	$	—	$	505,885
Director shares issued	—	—		—		3		—		3
Dividends declared ($0.78 per share)	—	—		(64,081)		—		—		(64,081)
Net loss	—	—		(159,355)		—		—		(159,355)
Equity at December 31, 2018	82,148,869	$	821	$	(616,504)	$	898,135	$	—	$	282,452
Restricted stock awards issued	916,415	9		—		(9)		—		—
Amortization of equity-based compensation	—	—		—		3,488		—		3,488
Director shares issued	60,975	1		—		274		—		275
Restricted stock awards forfeited	(161,821)	(1)		—		1		—		—
Dividends declared - common stock ($0.52 per share)	—	—		(42,749)		—		—		(42,749)
Dividends declared - equity awards ($0.26 - $0.52 per share)	—	—		(942)		—		—		(942)
Deemed dividend on redeemable preferred stock	—	—		(506)		—		—		(506)
Dividends declared on redeemable preferred stock	—	—		(1,901)		—		—		(1,901)
Other comprehensive income (loss)	—	—		—		—		(5,736)		(5,736)
Net income	—	—		2,014		—		—		2,014
Equity at December 31, 2019	82,964,438	$	830	$	(660,588)	$	901,889	$	(5,736)	$	236,395
Equity awards vested	120,370	1		—		—		—		1
Shares repurchased and retired to satisfy tax withholding upon vesting	(121,240)	(1)		—		(1,051)		—		(1,052)
Amortization of equity-based compensation	—	—		—		6,559		—		6,559
Directors shares issued	60,402	—		—		180		—		180

Dividends declared - common stock ($0.325 per share)	—	—		(26,811)		—		—		(26,811)
Dividends declared - equity awards ($0.065 - $0.325 per share)	—	—		(633)		—		—		(633)
Deemed dividend on redeemable preferred stock	—	—		(253)		—		—		(253)
Dividends declared on redeemable preferred stock	—	—		(2,150)		—		—		(2,150)
Other comprehensive income (loss)	—	—		—		—		(5,244)		(5,244)
Net loss	—	—		(3,759)		—		—		(3,759)
Equity at December 31, 2020	83,023,970	$	830	$	(694,194)	$	907,577	$	(10,980)	$	203,233

See accompanying notes to consolidated financial statements.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)


	Years Ended December 31,
	2020		2019		2018
Cash Flows From Operating Activities
Net income (loss)	$	(3,759)	$	2,014	$	(159,355)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of tangible assets and amortization of intangible assets	66,291		68,806		80,165
Amortization of deferred financing costs	3,216		2,450		9,725
Amortization of deferred revenue, net	(1,099)		1,768		2,795

Non-cash straight-line rental revenue	(431)		(590)		(5,365)
(Gain) loss on sale of real estate	(19,992)		122		—
Non-cash adjustment on lease termination (A)	—		—		29,910
Loss on extinguishment of debt	5,884		335		64,746
Non-cash termination fee to affiliate	—		—		40,000
Impairment of real estate held for sale	—		—		8,725
Provision for bad debt	—		—		1,699
Amortization of equity-based compensation	6,559		3,488		—

Non-cash valuation allowance on deferred tax assets, net	—		—		4,715
Other non-cash expense	1,730		1,564		4,418
Changes in:
Receivables and other assets, net	2,683		(876)		(5,107)
Due to affiliates	—		—		16,371
Accrued expenses and other liabilities	(4,674)		(17,583)		9,717
Net cash provided by (used in) operating activities - continuing operations	56,408		61,498		103,159
Net cash provided by (used in) operating activities - discontinued operations	(3,105)		13,913		17,918
Net cash provided by operating activities	53,303		75,411		121,077
Cash Flows From Investing Activities
Proceeds from the sale of real estate, net	—		13,086		—
Capital expenditures	(13,437)		(21,131)		(14,155)
Insurance proceeds	65		1,423		971

Net cash provided by (used in) investing activities - continuing operations	(13,372)		(6,622)		(13,184)
Net cash provided by (used in) investing activities - discontinued operations (B)	373,805		(8,387)		(5,978)
Net cash provided by (used in) investing activities	360,433		(15,009)		(19,162)
Cash Flows From Financing Activities
Principal payments of mortgage notes payable and capital lease obligations	(3,646)		(6,748)		(13,343)
Proceeds from mortgage notes payable	270,015		—		1,440,000
Repayments of mortgage notes payable and capital lease obligation	(369,000)		(13,272)		(1,383,785)
Payment of exit fee on extinguishment of debt	(4,504)		(206)		(51,908)
Proceeds from borrowings on revolving credit facility	100,000		—		—
Repayments of borrowings on revolving credit facility	(100,000)		—		—
Payment of common stock dividend	(26,811)		(42,749)		(64,081)

Payment of redeemable preferred stock dividend	(2,656)		(1,901)		—
Payment of restricted stock dividend	(336)		—		—
Payment of deferred financing costs, net	(4,704)		(349)		(23,992)
Purchase of interest rate caps	(81)		(35)		(2,746)
Taxes paid for net settlement of equity-based compensation awards	(1,051)		—		—
Redemption of Series A Preferred Stock	(20,000)		—		—
Net cash provided by (used in) financing activities - continuing operations	(162,774)		(65,260)		(99,855)
Net cash provided by (used in) financing activities - discontinued operations (C)	(260,996)		(23,969)		(66,889)
Net cash provided by (used in) financing activities	(423,770)		(89,229)		(166,744)
Net increase (decrease) in cash, cash equivalents and restricted cash	(10,034)		(28,827)		(64,829)
Cash, cash equivalents and restricted cash, beginning of year	63,829		92,656		157,485
Cash, cash equivalents and restricted cash, end of year	$	53,795	$	63,829	$	92,656
(A) Primarily includes the non-cash write-offs of straight-line rent receivables and net above-market rent lease intangible assets, offset by the fair value of furniture, fixtures, equipment and other improvements received by us as a result of the Lease Termination (as defined in "Note 1 - Organization"). Refer to "Note 3 - Lease Termination" for details. (B) For the year ended December 31, 2020, amount primarily consists of net proceeds from the AL/MC Portfolio Disposition. Refer to "Note 5 - Dispositions" for details. (C) For the year ended December 31, 2020, amount primarily consists of repayments of debt in conjunction with the AL/MC Portfolio Disposition. Refer to "Note 5 - Dispositions" for details.



	Years Ended December 31,
	2020		2019		2018
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest expense	$	61,425	$	87,454	$	89,505
Cash paid during the year for income taxes	287		349		326

Supplemental Schedule of Non-Cash Investing and Financing Activities
Issuance of common stock and exercise of options	$	180	$	275	$	—
Issuance of Redeemable Preferred Stock	—		—		40,000
Capital lease assets	965		764		569
Furniture, fixtures, equipment and other improvements (A)	—		—		10,065

(A) Fair value of furniture, fixtures, equipment and other improvements received by us as a result of the Lease Termination. Refer to "Note 3 - Lease Termination" for details.


	Years Ended December 31,
	2020		2019		2018
Reconciliation of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents	$	39,614	$	72,422	$	137,327
Restricted cash (A)	24,215		20,234		20,158
Total including discontinued operations, beginning of period	$	63,829	$	92,656	$	157,485

Cash and cash equivalents	$	33,046	$	39,614	$	72,422
Restricted cash (A)	20,749		24,215		20,234
Total including discontinued operations, end of period	$	53,795	$	63,829	$	92,656

(A) Consists of (i) amounts held by lender in tax, insurance, replacement reserve and other escrow accounts and (ii) security deposits; amounts relating to continuing operations are included in "Receivables and other assets, net" in our Consolidated Balance Sheets.

See accompanying notes to consolidated financial statements.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

1. ORGANIZATION

New Senior Investment Group Inc. (“New Senior,” “we,” “us” or “our”) is a Real Estate Investment Trust (“REIT”) primarily focused on investing in private pay senior housing properties. We were formed as a Delaware limited liability company in 2012, converted to a Delaware corporation on May 30, 2014 and changed our name to New Senior Investment Group Inc. on June 16, 2014. We are listed on the New York Stock Exchange (“NYSE”) under the symbol “SNR” and are headquartered in New York, New York.

As of December 31, 2020, we owned a geographically diversified portfolio of 103 primarily private pay senior housing properties, consisting of 102 Independent Living (“IL”) properties and one Continuing Care Retirement Community (“CCRC”), located across 36 states. Our 102 IL properties are managed by Holiday Retirement (“Holiday”), a portfolio company that is majority owned by private equity funds managed by an affiliate of FIG LLC (the “Former Manager”), a subsidiary of Fortress Investment Group LLC (“Fortress”), subsidiaries of Merrill Gardens LLC (“Merrill Gardens”), a former affiliate of our Former Manager, and Grace Management, Inc. (“Grace”) (collectively, the “Property Managers”), under Property Management Agreements (collectively, the “Property Management Agreements”). Under the Property Management Agreements, the Property Managers are responsible for the day-to-day operations of our senior housing properties and are entitled to a management fee in accordance with the terms of the Property Management Agreements. Our Property Management Agreements have initial five-year or ten-year terms, with successive, automatic one-year renewal periods. We pay property management fees of 4.5% to 5.0% of effective gross income pursuant to our Property Management Agreements and, in some cases, the Property Managers are eligible to earn an incentive fee based on operating performance. Our CCRC is leased to a healthcare operating company under a triple net lease agreement. In a triple net lease arrangement, the lessee agrees to operate and maintain the property at its own expense, including maintenance, utilities, taxes, insurance, repairs, capital improvements and the payroll expense of property-level employees. Our triple net lease agreement has an initial term of 15 years and includes a renewal option and annual rent increases ranging from 2.75% to 3.25%. Prior to 2019, we held additional triple net lease agreements with affiliates of Holiday. On May 9, 2018, we entered into a lease termination agreement to terminate our triple net leases relating to 51 IL properties (the “Holiday Portfolio”). The lease termination was effective May 14, 2018 (the “Lease Termination”). Concurrently with the Lease Termination, we entered into property management agreements with Holiday to manage the properties in the Holiday Portfolio following the Lease Termination in exchange for a property management fee. As a result, such properties are now managed properties. Refer to "Note 3 – Lease Termination" for additional details.

On February 10, 2020, we completed the sale of all 28 AL/MC properties (the “AL/MC Portfolio Disposition”) pursuant to a Purchase and Sale Agreement, dated as of October 31, 2019 (the “Sale Agreement”), with affiliates of ReNew REIT LLC. Effective October 31, 2019, we classified the AL/MC properties as held for sale and, accordingly, the operations of these properties for the current and prior periods have been classified as discontinued operations in our Consolidated Statements of Operations. Refer to “Note 4 – Discontinued Operations" and “Note 5 – Dispositions” for additional details. Due to the AL/MC Portfolio Disposition in 2020, during the fourth quarter of 2020 we changed our structure from two reportable segments (Managed IL Properties and Other Properties) to one reportable segment (Senior Housing Properties). Accordingly, all prior period segment information has been reclassified to conform to the current period presentation.

Through December 31, 2018, we were externally managed and advised by an affiliate of the Former Manager. On November 19, 2018, we entered into definitive agreements with the Former Manager to internalize our management, effective December 31, 2018 (the “Internalization”). In connection with the Internalization, we also entered into a Transition Services Agreement with the Former Manager to continue to provide certain services for a transition period. In connection with the termination of the Management Agreement, we (i) made a one-time cash payment of $10.0 million to the Former Manager in January 2019, and (ii) issued to the Former Manager 400,000 shares of our newly created Redeemable Series A Cumulative Perpetual Preferred Stock (the “Redeemable Preferred Stock”), with an aggregate fair value of $20.3 million and $40.5 million for the years ended December 31, 2020 and 2019, respectively. In December 2020, we received redemption request for, and redeemed 200,000 shares of the Redeemable Preferred Stock for $20.3 million including accrued dividends.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Coronavirus global pandemic

The novel coronavirus (COVID-19) global pandemic is causing significant disruptions to the U.S. and global economies and has contributed to volatility and negative pressure in financial markets. During year ended December 31, 2020, we incurred $3.1 million of COVID-19 related costs, which were recorded in “Property operating expense” in our Consolidated Statements of Operations. These costs mainly consist of personal protective equipment (“PPE”) and other supplies such as packaging necessary for in-room meal deliveries to our residents and to a lesser extent testing kits for residents and staff, temperature screening machines, additional cleaning equipment, or protocols related to the properties. During the year ended December 31, 2020, we saw these costs continue, but they have been largely offset by variable expense savings associated with lower occupancy and strong expense management from our operators. Depending upon how the pandemic continues to evolve, there may be other future operating expenses that we may be required to bear. However, the full extent to which the pandemic will directly or indirectly impact our business including revenues, expenses, value of our real estate, collectability of receivables and operating cash flows is highly uncertain and difficult to predict. If the economic downturn resulting from COVID-19 and measures taken to contain it persists over a long period of time, it could have a prolonged negative impact on our financial condition and results of operations. As the extent and duration of the increasingly broad effects of COVID-19 on the U.S. economy remains unclear, it is difficult for us to assess and estimate its impact on our results of operations at this time.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP’’) with the instructions to Form 10-K and Article 10 of Regulation S-X. The consolidated financial statements include the accounts of New Senior and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated. We consolidate those entities in which we have control over significant operating, financial and investing decisions of the entity. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Certain prior period amounts have been reclassified to conform to the current period’s presentation, primarily related to classification of certain properties as discontinued operations and the change in our reportable segments.

Use of Estimates

Management is required to make estimates and assumptions when preparing financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the accompanying consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from management’s estimates.

Revenue Recognition

Resident Fees and Services – Resident fees and services include monthly rental revenue, care income and ancillary income recognized from managed properties. Resident fees and services are recognized monthly as services are provided. Most lease agreements with residents are cancellable by the resident with 30 days’ notice. Ancillary income primarily relates to non-refundable community fees. Non-refundable community fees are recognized on a straight-line basis over the estimated lengths of stay of residents, which approximate 24 months for AL/MC properties and 33 months for IL properties.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Rental Revenue – Rental revenue from the triple net lease property is recognized on a straight-line basis over the applicable term of the lease when collectability is reasonably assured. Recognizing rental revenue on a straight-line basis typically results in recognizing revenue in excess of cash amounts contractually due from our tenant during the first half of the lease term, creating a straight-line rent receivable.

Acquisition Accounting

The Company’s real estate acquisitions are generally classified as asset acquisitions. The cost of the business or asset acquired is allocated to tangible and intangible assets and assumed liabilities at their fair values as of the transaction date, no goodwill is recognized, third party transaction costs are capitalized and any associated contingent consideration is generally recorded when the amount of consideration is reasonably estimable and probable of being paid. The measurement period in which to record adjustments to the transaction is also eliminated. The determination of the fair value of net assets acquired involves significant judgment and estimates, such as estimated future cash flow projections, appropriate discount and capitalization rates and other estimates based on available market information. Estimates of future cash flows are based on a number of factors including property operating results, known and anticipated trends, as well as market and economic conditions.

In measuring the fair value of tangible and identified intangible assets acquired and liabilities assumed, management uses information obtained as a result of pre-acquisition due diligence, marketing, leasing activities and independent appraisals. In the case of buildings, the fair value of the tangible assets acquired is determined by valuing the property as if it were vacant. Significant estimates impacting the measurement at fair value of our real property include construction cost data and qualitative selection of comparable market transactions as well as the assessment of the relative quality and condition of the acquired properties.

Real Estate Investments

Real estate investments are recorded at cost less accumulated depreciation or accumulated amortization.

Depreciation is calculated on a straight-line basis using estimated remaining useful lives not to exceed 40 years for buildings, 3 to 10 years for building improvements and 3 to 10 years for other fixed assets.

Amortization for in-place lease intangibles, ground lease intangibles and other intangibles is calculated on a straight-line basis using estimated useful lives of 24 to 33 months, 74 to 82 years and 5 to 13 years, respectively. Amortization for above/below market lease intangibles is calculated on a straight-line basis using estimated useful lives of 15 to 17 years.

Impairment of Long Lived Assets

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and all highly liquid short term investments with maturities of 90 days or less, when purchased.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Restricted Cash

Restricted cash primarily consists of (i) amounts held by lenders in tax, insurance, replacement reserve and other escrow accounts and (ii) security deposits and is included in “Receivables and other assets, net” in our Consolidated Balance Sheets.

Deferred Financing Costs

Deferred financing costs consist of fees and direct costs incurred in obtaining financing. Deferred financing costs are presented as a direct deduction from the carrying amount of the related debt liability. Deferred financing costs related to debt instruments, excluding the revolving credit facility, are amortized over the terms of the related borrowings using the effective interest rate method as a component of interest expense. Deferred financing costs related to the revolving credit facility are amortized over the term of the debt using the straight-line method, which approximates the effective interest method. Amortized costs of $3.2 million, $2.5 million and $9.7 million are included in “Interest expense” in our Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018, respectively.

Deferred Revenue

Deferred revenue primarily includes non-refundable community fees received when residents move in, and are included within “Accrued expenses and other liabilities” in our Consolidated Balance Sheets. Deferred revenue amounts are amortized into income on a straight-line basis over the estimated length of stay of the resident, and are included within “Resident fees and services” in our Consolidated Statements of Operations.

Income Taxes

New Senior is organized and conducts its operations to qualify as a REIT under the requirements of the Internal Revenue Code of 1986, as amended (“Code”). Requirements for qualification as a REIT include various restrictions on ownership of stock, requirements concerning distribution of taxable income and certain restrictions on the nature of assets and sources of income. A REIT must distribute at least 90% of its taxable income to its stockholders of which 85% plus any undistributed amounts from the prior year must be distributed within the taxable year in order to avoid the imposition of an excise tax. Distribution of the remaining balance may extend until timely filing of our tax return in the subsequent taxable year. Qualifying distributions of taxable income are deductible by a REIT in computing taxable income.

Certain activities are conducted through a taxable REIT subsidiary (“TRS”) and therefore are subject to federal and state income taxes. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of the enactment date. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances, and that causes us to change our judgment about the realizability of the related deferred tax asset, is included in the tax provision when such changes occur.

We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in our Consolidated Statements of Operations.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Fair Value Measurement

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy, which is described below, prioritizes the inputs we use in measuring fair value:

•Level 1 - Quoted prices for identical instruments in active markets.

•Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.

•Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Derivative Instruments

In the normal course of business, we may use derivative instruments to manage, or hedge, interest rate risk. We do not use derivative instruments for trading or speculative purposes. To qualify for hedge accounting, derivative instruments used for risk management purposes must effectively reduce the risk exposure that they are designed to hedge. In addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions, must be, and are expected to remain, probable of occurring in accordance with our related assertions. Our derivative instruments were executed with investment grade counterparties.

We recognize all derivatives as either assets or liabilities at fair value as of the reporting date in “Receivables and other assets, net” or “Accrued expenses and other liabilities,” respectively, on our Consolidated Balance Sheets. Derivative valuation requires us to make estimates and judgments that affect the fair value of the instruments. We apply hedge accounting on our interest rate swaps and therefore, changes in fair value of the instruments are recorded in “Accumulated other comprehensive income (loss)” in our Consolidated Balance Sheets. We do not apply hedge accounting on our interest rate caps and therefore, changes in fair value of these instruments are recorded in “Other expense” in our Consolidated Statements of Operations.

Assets Held for Sale and Discontinued Operations

We classify certain long-lived assets as held for sale once the criteria, as defined by GAAP, has been met. Assets held for sale are included in “Receivables and other assets, net” in our Consolidated Balance Sheets. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell and are no longer depreciated. We estimate the fair value of assets held for sale based on sales price expectation less estimated cost to sell.

We report discontinued operations when a component of the Company or group of components that has been disposed of or classified as held for sale and represents a strategic shift that has or will have a major effect on the Company’s operations and financial results. The results of operations for assets meeting the definition of discontinued operations are reflected in our Consolidated Statements of Operations as “Discontinued operations” for all periods presented. Interest expense on the mortgages collateralized by properties classified as discontinued operations, which is required to be repaid upon the disposal of the properties, is reclassified to “Discontinued operations” in our Consolidated Statements of Operations.

Sale of Assets

We recognize sales of assets only upon the closing of the transactions with the purchaser. We recognize gains on assets sold when we transfer control of the asset upon closing and if the collectability of the sales price is reasonably assured. Sales of our real estate are generally not executory across points in time and our performance obligations from these contracts are expected to fall within a single period.

Equity-Based Compensation

Compensation expense for all equity-based awards including those with graded vesting schedules granted to employees and non-employees is recognized in “General and administrative expense” in our Consolidated Statements of Operations on a straight-line basis over the vesting period based on the grant date fair value of the award. Forfeitures of equity-based awards are

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

recognized as they occur and the reversal is recognized in “General and administrative expense” in our Consolidated Statements of Operations.

Termination Fee to Affiliate

This represents amount due to the Former Manager pursuant to the termination of the Management Agreement with the Former Manager.

Redeemable Preferred Stock

On December 31, 2018, we issued 400,000 shares of our Redeemable Preferred Stock to the Former Manager as consideration for the termination of the Management Agreement. The Redeemable Preferred Stock are non-voting and have a $100 liquidation preference. Holders of the Redeemable Preferred Stock are entitled to cumulative cash dividends at a rate per annum of 6.00% on the liquidation preference amount plus all accumulated and unpaid dividends.

In the event of any voluntary or involuntary liquidation, dissolution or winding up, the holders of shares of the Redeemable Preferred Stock will receive out of the assets of the Company legally available for distribution to its stockholders before any payment is made to the holders of any series of preferred stock ranking junior to the Redeemable Preferred Stock or to any holder of the Company’s common stock but subject to the rights of any class or series of securities ranking senior to or on parity with the Redeemable Preferred Stock, a payment per share equal to the liquidation preference plus any accumulated and unpaid dividends.

We may redeem, at any time, all but not less than all of the shares of Redeemable Preferred Stock for cash at a price equal to the liquidation preference amount of the Series A Preferred Stock plus all accumulated and unpaid dividends thereon (the “Redemption Price”). On or after December 31, 2020, the holders of a majority of the then outstanding shares of Redeemable Preferred Stock will have the right to require us to redeem up to 50% of the outstanding shares of Redeemable Preferred Stock, and on or after December 31, 2021, the holders of a majority of the then outstanding shares of Redeemable Preferred Stock will have the right to require us to redeem all or any portion of the outstanding shares of Redeemable Preferred Stock, in each case, for cash at the Redemption Price. Upon the occurrence of a Change of Control (as defined in the certificate of designation governing the Redeemable Preferred Stock), the Redeemable Preferred Stock is required to be redeemed in whole at the Redemption Price. Due to the ability of the holders to require us to redeem the outstanding shares, the Redeemable Preferred Stock is excluded from Equity in our Consolidated Balance Sheets.

Earnings per Share

The two-class method determines EPS for each class of common stock and participating securities according to dividends declared (or accumulated) and their respective participation rights in undistributed earnings. Non-vested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and, therefore are included in the computation of basic EPS pursuant to the two-class method. During the year ended December 31, 2020, we issued 475,417 restricted stock units, net of forfeitures, to officers, employees and non-employee directors with certain participating rights (“Participating RSUs”).

Diluted earnings per share of common stock is calculated by including the effect of dilutive securities. Participating RSUs are included in the computation of diluted EPS by using the more dilutive of the two-class method or treasury stock method. Any anti-dilutive securities are excluded from the calculation. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund losses.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, (codified under Accounting Standards Codification (“ASC”) 842, Leases). This standard amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. As lessee, a right-of-use asset and corresponding liability for future obligations under a leasing arrangement would be recognized on the balance sheet. As lessor, gross leases will be subject to allocation between lease and non-lease service components, with the latter accounted for under the new revenue recognition standard. Additionally, under the new lease standard, only incremental initial direct costs incurred in the execution of a lease can be capitalized by the lessor and lessee.

We adopted ASC 842 on January 1, 2019 under the modified retrospective transition approach using the effective date as the date of initial application. Therefore, financial information and disclosures under ASC 842 have not been provided for periods prior to January 1, 2019. We elected the “package of practical expedients”, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We also elected the short-term lease practical expedient, which permits us to not recognize right-of-use asset or lease liability for operating leases with an initial lease term equal to or less than 12 months. In addition, we made an accounting policy election to treat lease and related non-lease components in a contract as a single performance obligation to the extent that the timing and pattern of revenue recognition are the same for the lease and non-lease components and the combined single lease component is classified as an operating lease.

Lessor Accounting

As a lessor, our recognition of rental revenue remained consistent with prior accounting guidance. Rental revenue from our triple net lease property is recognized on a straight-line basis over the applicable term of the lease. When collectability is determined not probable, any lease income is limited to the lesser of the lease income reflected on a straight-line basis or the cash collected.

Resident leases associated with our managed properties contain service components. We elected the practical expedient to account for our resident leases as a single lease component. We elected the practical expedient to account for our resident leases as a single lease component since (1) the timing and pattern or transfer of the lease and non-lease components is the same, (2) the lease component is the predominant component, and (3) the combined single lease component would be classified as an operating lease.

Lessee Accounting

We determine if a contract is or contains a lease at inception. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use asset and lease liability are recognized at the commencement date based on the present value of lease payments over the lease term. We use our incremental borrowing rate to determine the present value of lease payments as the rates implicit in our leases are not readily determinable. As of December 31, 2020, our operating lease right-of-use asset, which approximates our operating lease liability, was $1.7 million for our corporate office, land and equipment leases. Our operating lease right-of-use asset is included in “Buildings, improvements and other” and our operating lease liability is included in “Accrued expenses and other liabilities” in our Consolidated Balance Sheets. The weighted average remaining lease term for our operating leases was 12.7 years and 11.8 years at December 31, 2020 and 2019, respectively. The weighted average discount rate was 5.98% and 6.06% at December 31, 2020 and 2019, respectively.

Upon the adoption of ASC 842, capital leases under prior accounting guidance were classified as finance leases, which did not have a significant change to our accounting for such leases.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Recently Adopted Accounting Pronouncements

On January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires a company to recognize an impairment allowance equal to its current estimate of all contractual cash flows that it does not expect to collect from financial assets measured at amortized cost. The adoption of this standard did not have a material impact on our consolidated financial statements as our entire balance of receivables relates to lease agreements with our residents and tenant, which are specifically excluded from this standard.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Rate (“LIBOR”) or another rate that is expected to be discontinued. Companies can adopt ASU 2020-04 anytime during the effective period of March 12, 2020 through December 31, 2022. We are currently assessing the provisions of ASU 2020-04 and have not made any hedge accounting elections as of December 31, 2020. If an election is made at a later date, we will apply the provisions of this guidance.

3. LEASE TERMINATION

On May 9, 2018, we entered into a lease termination agreement with affiliates of Holiday to terminate our triple net leases relating to the Holiday Portfolio. The Lease Termination was effective May 14, 2018. We received total consideration of $115.6 million, including a $70.0 million termination payment and retention of $45.6 million in security deposits held by us. In connection with the Lease Termination, we also assumed ownership of certain furniture, fixtures, equipment and other improvements with a fair market value of $10.1 million. As a result of the Lease Termination, we recognized a gain on lease termination of $40.1 million after adjusting for write-offs of straight-line rent receivables of $84.3 million and net above-market rent lease intangible assets of $1.2 million.

Concurrently with the Lease Termination, we entered into property management agreements with Holiday pursuant to which we pay a management fee equal to a monthly base fee in the amount of 5% of effective gross income in the first year of the term and 4.5% of effective gross income for the remainder of the term. In addition, Holiday is eligible to earn an annual incentive fee of up to 2% of effective gross income if the Holiday Portfolio achieves certain performance thresholds. The agreements may be terminated without penalty after the first year of the term.

4. DISCONTINUED OPERATIONS

On October 31, 2019, we entered into a Sale Agreement with affiliates of ReNew REIT LLC to sell our entire AL/MC portfolio consisting of 28 AL/MC properties, and we completed this transaction on February 10, 2020. As a result of the Sale Agreement, these properties have been reclassified as discontinued operations in our consolidated financial statements. The sale was completed on February 10, 2020. Refer to “Note 5 - Dispositions” for details.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

As of December 31, 2019, the assets and liabilities associated with discontinued operations are as follows:


	December 31, 2019
Assets
Real estate investments:
Land	$	43,313
Buildings, improvements and other	397,808
Accumulated depreciation	(87,719)
Net real estate property	353,402
Acquired lease and other intangible assets	996
Accumulated amortization	(996)
Net real estate intangibles	—
Net real estate investments	353,402

Receivables and other assets, net	10,087
Assets from discontinued operations	$	363,489

Liabilities
Debt, net	$	255,096
Accrued expenses and other liabilities	12,760

Liabilities from discontinued operations	$	267,856

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

For the years ended December 31, 2020, 2019 and 2018, the results of operations associated with discontinued operations are as follows:


	Years Ended December 31,
	2020		2019		2018
Revenues
Resident fees and services	$	14,024	$	119,307	$	121,274
Total revenues	14,024		119,307		121,274

Expenses
Property operating expense	11,328		98,447		95,299
Interest expense	1,361		14,571		15,533
Depreciation and amortization	—		12,491		15,821
Acquisition, transaction, and integration expense	1,037		580		14
General and administrative expense	8		32		6
Loss on extinguishment of debt	3,602		—		1,473
Other (income) expense	(204)		(158)		11
Total expenses	17,132		125,963		128,157
Loss before income taxes	(3,108)		(6,656)		(6,883)
Income tax (benefit) expense	(1)		98		844
Loss from discontinued operations	$	(3,107)	$	(6,754)	$	(7,727)

5. DISPOSITIONS

2020 Activity

On February 10, 2020, we completed the AL/MC Portfolio Disposition for a gross sale price of $385.0 million and recognized a gain on sale of $20.0 million, which is recorded in “Gain on sale of real estate” within “Discontinued operations, net” in our Consolidated Statements of Operations for the year ended December 31, 2020. In conjunction with the sale, we repaid $260.2 million of debt specifically attributable to the properties included in the AL/MC Portfolio Disposition and recognized a loss on extinguishment of debt of $3.6 million, comprising of $2.5 million in prepayment penalties and $1.1 million in the write-off of unamortized deferred financing costs, which is included in “Loss from discontinued operations” in our Consolidated Statements of Operations for the year ended December 31, 2020.

2019 Activity

During the year ended December 31, 2019, we sold two AL/MC properties for a combined sale price of $13.8 million, and recognized a loss on sale of $0.1 million, which is included in “Loss on sale of real estate” in our Consolidated Statements of Operations. In connection with these dispositions, we repaid $13.7 million of debt. Prior to the sale, both assets were classified as “Assets held for sale” and included in “Receivables and other assets, net” in our Consolidated Balance Sheet as of December 31, 2018.

2018 Activity

We did not have any dispositions during the year ended December 31, 2018.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

6. SEGMENT REPORTING

Our primary business is investing in senior housing properties. Due to the AL/MC Portfolio Disposition in 2020, during the fourth quarter of 2020 we changed our structure from two reportable segments (Managed IL Properties and Other Properties) to one reportable segment (Senior Housing Properties). More than 98.1% of our revenues are derived from managed IL properties. This change was made based on the financial information reviewed and used by the chief operating decision maker to make operating decisions, assess performance, develop strategy and allocate capital resources. Accordingly, all prior period segment information has been reclassified to conform to the current period presentation.

The following table presents the percentage of total revenues by geographic location (excluding properties classified as discontinued operations):


	As of and for the year ended December 31, 2020			As of and for the year ended December 31, 2019
	Number of Communities	% of Total Revenue		Number of Communities	% of Total Revenue
California	9	10.2	%	9	10.6	%
Florida	9	8.9	%	9	9.0	%
North Carolina	8	8.6	%	8	8.4	%
Texas	9	8.0	%	9	8.0	%
Oregon	8	7.2	%	8	7.1	%
Pennsylvania	5	5.7	%	5	6.1	%
Other	55	51.4	%	55	50.8	%
Total	103	100.0	%	103	100.0	%

7. REAL ESTATE INVESTMENTS

The following table summarizes our real estate investments (excluding properties classified as discontinued operations):


	December 31, 2020						December 31, 2019
	Gross Carrying Amount		Accumulated Depreciation		Net Carrying Value		Gross Carrying Amount		Accumulated Depreciation		Net Carrying Value
Land	$	134,643	$	—	$	134,643	$	134,643	$	—	$	134,643
Building and improvements	1,873,132		(321,025)		1,552,107		1,863,866		(266,420)		1,597,446
Furniture, fixtures and equipment	110,231		(96,430)		13,801		106,170		(85,135)		21,035
Total real estate investments	$	2,118,006	$	(417,455)	$	1,700,551	$	2,104,679	$	(351,555)	$	1,753,124

Depreciation expense was $65.9 million, $68.4 million and $72.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The following table summarizes our real estate intangibles (excluding properties classified as discontinued operations):


	December 31, 2020							December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted Average Remaining Amortization Period
Intangible lease assets	$	7,642	$	(2,595)	$	5,047	44.1 years	$	7,642	$	(2,238)	$	5,404	43.0 years

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Amortization expense was $0.4 million, $0.4 million and $8.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The following table sets forth the estimated future amortization of intangible assets (excluding properties classified as discontinued operations) as of December 31, 2020:


Years Ending December 31
2021	$	354
2022	354
2023	354
2024	354
2025	234
Thereafter	3,397
Total intangibles	$	5,047

Real estate impairment

We evaluated long-lived assets, primarily consisting of our real estate investments, for impairment indicators. In performing this evaluation, market conditions and our current intentions with respect to holding or disposing of the asset are considered. Where indicators of impairment are present, we evaluated whether the sum of the expected future undiscounted cash flows is less than book value.

We recognized impairment of real estate held for sale of $8.7 million for the year ended December 31, 2018 in our Consolidated Statements of Operations, which represents the charge necessary to adjust the carrying values of two AL/MC properties classified as held for sale to their estimated fair values less costs to sell. No impairment was recognized for the years ended December 31, 2020 and 2019.

Impact of hurricanes

During the year ended 2018, we recognized $0.6 million for damage remediation and other incremental costs for six properties impacted by Hurricane Florence, which are included in “Other expense” in our Consolidated Statements of Operations.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

8. RECEIVABLES AND OTHER ASSETS, NET

The following table summarizes our receivables and other assets, net (excluding properties classified as discontinued operations):


	December 31, 2020		December 31, 2019
Escrows held by lenders (A)	$	17,694	$	15,895
Straight-line rent receivable	4,515		4,084
Prepaid expenses	3,923		3,534
Security deposits	3,037		2,763
Resident receivables, net	1,151		1,345

Income tax receivable	—		821

Other assets and receivables	4,572		4,636
Total receivables and other assets, net	$	34,892	$	33,078

(A) Represents amounts held by lenders in tax, insurance, replacement reserve and other escrow accounts that are related to mortgage notes collateralized by our properties.

The following table summarizes the allowance for doubtful accounts and the related provision for resident receivables (excluding properties classified as discontinued operations):


	Years Ended December 31,
	2020		2019		2018
Balance, beginning of period	$	—	$	1,075	$	588
Provision for uncollectible receivables (A)	—		—		1,699
Write-offs, net of recoveries	—		(1,075)		(1,212)
Balance, end of period	$	—	$	—	$	1075

(A) In accordance with ASC 842 effective January 1, 2019, collectability of receivables is assessed and incorporated in lease revenue.

For the year ended December 31, 2018, the provision for resident receivables and related write-offs are included in “Property operating expense” in our Consolidated Statements of Operations.

Straight-line Rent Receivable

Rental revenue from our triple net lease property is recognized on a straight-line basis over the applicable term of the lease when collectability of substantially all rents is probable. Recognizing rental revenue on a straight-line basis typically results in recognizing revenue in excess of cash amounts contractually due from our tenant during the first half of the lease term, creating a straight-line rent receivable.

We assess the collectability of straight-line rent receivables on an ongoing basis. This assessment is based on several qualitative and quantitative factors, including and as appropriate, the payment history of the triple net lease tenant, the tenant’s ability to satisfy its lease obligations, the value of the underlying collateral or deposit, if any, and current economic conditions. If our evaluation of these factors indicates it is not probable that we will collect substantially all rents, any lease income is limited to the lesser of the lease income reflected on a straight-line basis or cash collected.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

9. DEBT, NET

The following table summarizes our debt, net (excluding debt secured by properties classified as discontinued operations):


	December 31, 2020							December 31, 2019
	Outstanding Face Amount		Carrying Value(A)		Maturity Date	Stated Interest Rate	Weighted Average Maturity (Years)	Outstanding Face Amount		Carrying Value(A)
Floating Rate (B)(C)	$	1,039,316	$	1,025,110	Mar 2022 - Mar 2030	1M LIBOR + 2.00% to 1M LIBOR + 2.75%	5.7	$	1,139,036	$	1,128,100
Fixed Rate	462,808		461,054		Sep 2025	4.25%	4.5	464,680		462,532
Total	$	1,502,124	$	1,486,164			5.3	$	1,603,716	$	1,590,632

(A) The totals are reported net of deferred financing costs of $16.0 million and $13.1 million as of December 31, 2020 and 2019, respectively.

(B) Substantially all of these loans have LIBOR caps that range between 3.38% and 3.75% as of December 31, 2020. Includes $49.3 million of debt that has a LIBOR floor of 0.25%.

(C) As of December 31, 2020, $620.0 million of total floating rate debt has been hedged using interest rate swaps, which are carried at fair value. See “Note 10 - Derivative Instruments” for more information.

The carrying values of the collateral relating to the floating rate and fixed rate debt were $1.2 billion and $0.5 billion, respectively, as of both December 31, 2020 and 2019.

Mortgage Debt

In May 2018, we repaid $663.8 million of secured loans in conjunction with the Lease Termination. We recognized a loss on extinguishment of debt of $58.5 million, comprising of $51.9 million in prepayment penalties and $6.6 million in the write-off of unamortized deferred financing costs on the loans. The repayment was facilitated by a one-year secured term loan of $720.0 million bearing interest at LIBOR plus 4.0% for the first six months and increasing by 50 basis points after the sixth monthly payment date and by an additional 50 basis points after the ninth monthly payment date (the “Term Loan”). We incurred a total of $12.3 million in deferred financing costs, which have been capitalized and amortized over the life of the Term Loan and the amortization is included in “Interest expense” in our Consolidated Statements of Operations. In October 2018, we refinanced the Term Loan with a seven-year secured loan of $720.0 million bearing interest at LIBOR plus 2.32%. We recognized a loss on extinguishment of debt of $6.2 million, which represents the write off of unamortized deferred financing costs. We incurred a total of $11.8 million in deferred financing costs, which have been capitalized and are being amortized over the life of the loan and the related amortization is included in “Interest expense” in our Consolidated Statements of Operations.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Revolving Credit Facility

In December 2018, we entered into a three-year secured revolving credit facility in the amount of $125.0 million bearing interest at LIBOR plus 2.5% (the “Revolver”), which was secured by eight AL/MC properties (classified as discontinued operations as of December 31, 2019) and the pledge of equity interests of certain of our wholly owned subsidiaries that directly or indirectly own such properties. Concurrently on the same day, we used the funds from the financing to prepay an aggregate of $125.4 million of secured loans. We recognized a loss on extinguishment of debt of $1.5 million, comprising of $1.2 million in prepayment penalties and $0.3 million in the write-off of unamortized deferred financing costs on the loans, which is included in “Loss from discontinued operations” in our Consolidated Statements of Operations. We incurred a total of $3.1 million in deferred financing costs, which have been capitalized and are being amortized over the life of the Revolver and the amortization is included in “Loss from discontinued operations” in our Consolidated Statements of Operations. As of December 31, 2019, there was $50.0 million of borrowings outstanding under the Revolver collateralized by properties classified as discontinued operations, and the outstanding balance is included in “Liabilities from discontinued operations” in our Consolidated Balance Sheets. The Revolver may be increased up to a maximum aggregate amount of $300.0 million, of which (i) a portion in an amount of 10.0% of the Revolver may be used for the issuance of letters of credit, and (ii) a portion in an amount of 10.0% of the Revolver may be drawn by us in the form of swing loans. We pay a fee for unused amounts of the Revolver under certain circumstances of $0.2 million for the year ended December 31, 2019, and included in “Loss from discontinued operations” in our Consolidated Statements of Operations.

In February 2020, in connection with the AL/MC Portfolio Disposition, we also amended the Revolver and extended its maturity from December 2021 to February 9, 2024. The amendment allows the Revolver to be increased with lender consent to a maximum aggregate amount of $500.0 million, of which (i) up to 10.0% may be used for the issuance of letters of credit, and (ii) up to 10.0% may be drawn by us in the form of swing loans. The Revolver bears an interest rate of, at our option, (i) the sum of LIBOR plus 2.0% or, in the case of a swing line loan, (ii) the greater of (a) the fluctuating annual rate of interest announced from time to time by KeyBank as its “prime rate,” plus 1.0% (b) 1.5% above the effective federal funds rate and (c) the sum of LIBOR for a one-month interest period plus 2.0%. The Revolver is secured by nine of our Senior Housing Properties and the pledge of the equity interests of certain of our wholly owned subsidiaries. As of December 31, 2020, there were no borrowings outstanding under the Revolver. We continue to pay a fee for unused amounts of the Revolver under certain circumstances, which was $0.2 million for the year ended December 31, 2020 and included in “Interest expense” in our Consolidated Statements of Operations.

We repaid $469.0 million and $13.3 million of debt during the years ended December 31, 2020 and 2019, respectively, and recognized a loss on extinguishment of debt of $5.9 million and $0.3 million, respectively, which represents exit fees and the write-off of related unamortized deferred financing costs.

Our debt (excluding debt collateralized by properties classified as discontinued operations) has contractual maturities as follows:


	Principal Payments		Balloon Payments		Total
2021	$	9,260	$	—	$	9,260
2022	19,125		48,419		67,544
2023	19,841		—		19,841
2024	24,186		—		24,186
2025	21,518		1,098,238		1,119,756
Thereafter	22,778		238,759		261,537
Total outstanding face amount	$	116,708	$	1,385,416	$	1,502,124

Our debt contains various customary financial and other covenants, in some cases including Debt Service Coverage Ratio, Project Yield or Minimum Net Worth, Minimum Consolidated Tangible Net Worth, Adjusted Consolidated EBITDA to Fixed Charges and Liquid Assets provision, as defined in the agreements. We were in compliance with the covenants in our debt agreements as of December 31, 2020.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

10. DERIVATIVE INSTRUMENTS

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements.

Derivatives Designated as Hedging Instruments

Interest rate swap

In August 2020, we entered into a $270.0 million notional interest rate swap with a maturity in September 2025 that effectively converts LIBOR-based floating rate debt to fixed rate debt, thus reducing the impact of interest-rate changes on future interest expense. In May 2019, we entered into a $350.0 million notional interest rate swap with a maturity of May 2022 that effectively converts LIBOR-based floating rate debt to fixed rate debt, thus reducing the impact of interest-rate changes on future interest expense. These interest rate swaps were designated and qualified as cash flow hedged with the change in fair value included in the assessment of hedge effectiveness deferred as a component of OCI, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

As of December 31, 2020 and 2019, our interest rate swap liability of $11.7 million and $5.9 million, respectively was recorded in “Accrued expenses and other liabilities” in our Consolidated Balance Sheets. For the years ended December 31, 2020 and 2019, $6.1 million and $0.2 million of loss was reclassified from accumulated other comprehensive income (loss) into earnings and was recorded in “Interest expense” in our Consolidated Statements of Operations, respectively. As of December 31, 2020, approximately $8.1 million of our swap liability, which is included in accumulated other comprehensive income (loss), is expected to be reclassified into earnings in the next 12 months.

Derivatives Not Designated as Hedging Instruments

Interest rate caps

As of December 31, 2020 and 2019, our interest rate cap assets were recorded in “Receivables and other assets, net” in our Consolidated Balance Sheets. Fair value losses recognized for the years ended December 31, 2020, 2019 and 2018 were $0.1 million, $0.6 million and $2.1 million. These amounts are included in “Other expense” in our Consolidated Statements of Operations and “Other non-cash expense” in our Consolidated Statements of Cash Flows.

In October 2018, we paid $2.5 million to enter into an interest rate cap on the refinancing of the Term Loan, which caps LIBOR at 3.68%, has a notional value of $720.0 million and is effective through November 1, 2021.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

11. ACCRUED EXPENSES AND OTHER LIABILITIES

The following table summarizes our accrued expenses and other liabilities (excluding properties classified as discontinued operations):


	December 31, 2020		December 31, 2019
Accounts payable and accrued expenses	$	15,067	$	17,554
Security deposits payable	2,303		2,486
Due to property managers	9,782		6,752
Mortgage interest payable	3,874		5,665
Deferred community fees, net	5,201		5,865
Rent collected in advance	1,735		2,099
Property tax payable	5,754		5,627
Operating lease liability	1,745		1,942
Derivative liability	11,687		5,896
Other liabilities	6,738		5,434
Total accrued expenses and other liabilities	$	63,886	$	59,320

12. FAIR VALUE MEASUREMENTS

The carrying amounts and fair values of our financial instruments were as follows (excluding properties classified as discontinued operations):


	Fair Value Hierarchy	December 31, 2020				December 31, 2019
		Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Cash and cash equivalents (A)	1	$	33,046	$	33,046	$	39,614	$	39,614
Restricted cash (A)	1	20,731		20,731		18,658		18,658
Interest rate caps (B)(D)	2	10		10		IMM		IMM
Financial Liabilities:
Mortgage debt (C)	3	$	1,486,164	$	1,524,210	$	1,590,632	$	1,592,855

Interest rate swap (B)	2	10,980		10,980		5,736		5,736

(A) The carrying approximates fair values.

(B) Fair value based on pricing models that consider inputs including forward yield curves, cap strike rates, cap volatility and discount rates.

(C) Fair value based on a discounted cash flow valuation model. Significant inputs in the model include amounts and timing of expected future cash flows and market yields which are constructed based on inputs implied from similar debt offerings. Our mortgage debt is not measured at fair value on our Consolidated Balance Sheets.

(D) As of December 31, 2019, the carrying and fair values of our interest rate caps were not material.

13. TRANSACTIONS WITH AFFILIATES

The following disclosures describe transactions with Fortress, Holiday and Merrill Gardens or prior to the Internalization. For additional information regarding the Internalization, the termination of the Management Agreement with our Former Manager and the transition arrangements between the parties, please refer to “Note 1 – Organization”.

Management Agreements

Prior to January 1, 2019, we were party to a management agreement (the “Management Agreement”) with the Former Manager, under which the Former Manager advised us on various aspects of our business and managed our day-to-day operations, subject to the supervision of our board of directors. For its management services, the Former Manager was entitled to a base management fee of 1.5% per annum of our gross equity. Gross equity was generally defined as the equity invested by Drive

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Shack Inc. (“Drive Shack”) (including cash contributed to us) as of the completion of the spin-off from Drive Shack, plus the aggregate offering price from stock offerings, plus certain capital contributions to subsidiaries, less capital distributions (calculated without regard to depreciation and amortization) and repurchases of common stock, calculated and payable monthly in arrears in cash. We incurred $14.8 million of management fees during the year ended December 31, 2018 under the Management Agreement, which are included in “Management fees to affiliate” in our Consolidated Statements of Operations.

The Former Manager was entitled to receive, on a quarterly basis, incentive compensation on a cumulative, but not compounding basis, in an amount equal to the product of (A) 25% of the dollar amount by which (1)(a) funds from operations (as defined in the Management Agreement) before the incentive compensation per share of common stock, plus (b) gains (or losses) from sales of property per share of common stock, plus (c) internal and third party acquisition-related expenses, plus (d) unconsummated transaction expenses, and plus (e) other non-routine items (as defined in the Management Agreement), exceed (2) an amount equal to (a) the weighted average value per share of the equity invested by Drive Shack in the assets of New Senior (including cash contributed to us) as of the completion of the spin-off and the price per share of our common stock in any offerings by us (adjusted for prior capital dividends or capital distributions, which shall be calculated without regard to depreciation and amortization and repurchases of common stock) multiplied by (b) a simple interest rate of 10% per annum, multiplied by (B) the weighted average number of shares of common stock outstanding. The Former Manager did not earn incentive compensation during the year ended December 31, 2018. The Former Manager was also entitled to receive, upon the successful completion of an equity offering, options with respect to 10% of the number of shares sold in the offering with an exercise price equal to the price paid by the purchaser in the offering.

Because the Former Manager’s employees performed certain legal, accounting, due diligence, asset management and other services that outside professionals or outside consultants otherwise would perform, the Former Manager was paid or reimbursed, pursuant to the Management Agreement, for the cost of performing such tasks, provided that such costs and reimbursements are no greater than those which would be paid to outside professionals or consultants on an arm’s-length basis. We were also required to pay all operating expenses, except those specifically required to be borne by the Former Manager under the Management Agreement. We were required to pay expenses that included, but were not limited to, issuance and transaction costs incidental to the sourcing, evaluation, acquisition, management, disposition, and financing of our investments, legal, underwriting, sourcing, asset management and accounting and auditing fees and expenses, the compensation and expenses of independent directors, the costs associated with the establishment and maintenance of any credit facilities and other indebtedness (including commitment fees, legal fees, closing costs, etc.), expenses associated with other securities offerings, the costs of printing and mailing proxies and reports to our stockholders, costs incurred by employees or agents of the Former Manager for travel on our behalf, costs associated with any computer software or hardware that was used by us, costs to obtain liability insurance to indemnify directors and officers and the compensation and expenses of our transfer agent.

For the year ended December 31, 2018, our reimbursement to the Former Manager for costs incurred for tasks and other services performed under the Management Agreement was $7.5 million, of which $6.3 million was included in “General and administrative expense” and $1.2 million was included in “Acquisition, transaction and integration expense” in our Consolidated Statements of Operations.

Property Management Agreements

We are party to property management agreements with Merrill Gardens, a former affiliate of Fortress, and Holiday, a portfolio company that is majority owned by a private equity fund managed by an affiliate of Fortress, to manage most of our senior housing properties. Pursuant to these property management agreements, we pay monthly property management fees. For IL properties managed by Merrill Gardens and Holiday, we generally pay management fees equal to 4.5% to 5% of effective gross income. For certain property management agreements, we may also pay an incentive fee based on operating performance of the properties. No incentive fees were incurred during the year ended December 31, 2018. Property management fees are included in “Property operating expense” in our Consolidated Statements of Operations. Other amounts paid to managers affiliated with the Former Manager that are included in property operating expense are payroll expense and travel reimbursement costs. The payroll expense is structured as a reimbursement to the property manager, who is the employer of record.

For the year ended December 31, 2018, we incurred property management fees and property-level payroll expenses of $14.3 million and $65.8 million, respectively, with respect to property managers affiliated with the Former Manager (excluding properties classified as discontinued operations), which are included in “Property operating expense” in our Consolidated Statements of Operations. Travel reimbursement costs were not material.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

As of December 31, 2018, we had payables for property management fees of $1.4 million, and property-level payroll expenses of $5.4 million, with respect to property managers affiliated with the Former Manager (excluding properties classified as discontinued operations), which are included in “Due to affiliates” in our Consolidated Balance Sheets. The property management agreements with managers affiliated with the Former Manager have initial terms of 5 or 10 years and provide for automatic one-year extensions after the initial term, subject to termination rights.

14. INCOME TAXES

New Senior is organized and conducts its operations to qualify as a REIT under the requirements of the Code. However, certain of our activities are conducted through our TRS and therefore are subject to federal and state income taxes at regular corporate tax rates.

The following table presents the provision (benefit) for income taxes (excluding discontinued operations):


	Years Ended December 31,
	2020		2019		2018
Current
Federal	$	—	$	—	$	(26)
State and local	178		210		260
Total current provision	178		210		234
Deferred
Federal	—		—		3,699
State and local	—		—		1,017
Total deferred provision	—		—		4,716
Total provision (benefit) for income taxes	$	178	$	210	$	4,950

The income tax provision relating to properties classified as discontinued operations was not material for December 31, 2020 and $0.1 million, and $0.8 million for the years ended December 31, 2019 and 2018, respectively.

Generally, our effective tax rate differs from the federal statutory rate as a result of state and local taxes and non-taxable REIT income. The table below provides a reconciliation of our provision for income taxes, based on the statutory rate of 21%, to the effective tax rate (excluding discontinued operations).


	Years Ended December 31,
	2020		2019		2018
Statutory U.S. federal income tax rate	21.00	%	21.00	%	21.00	%
Non-taxable REIT (loss)	(21.77)	%	(30.33)	%	(20.91)	%
State and local taxes	(0.88)	%	2.26	%	(0.85)	%

Valuation allowance	0.81	%	9.24	%	(2.56)	%
Other	(0.05)	%	0.17	%	—	%
Effective income tax rate	(0.89)	%	2.34	%	(3.32)	%

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities (excluding discontinued operations) are presented below:


	December 31,
	2020		2019
Deferred tax assets:
Prepaid fees and rent	$	3	$	9
Net operating loss	7,149		7,330
Deferred rent	—		152
Depreciation and amortization	391		377
Other	24		—
Total deferred tax assets	7,567		7,868
Less valuation allowance	7,567		7,857
Net deferred tax assets	—		11
Deferred tax liabilities:
Depreciation and amortization	—		—
Other	—		11
Total deferred tax liabilities	—		11
Total net deferred tax assets	$	—	$	—

Net deferred tax assets are included within “Receivables and other assets, net” in our Consolidated Balance Sheets.

As of December 31, 2020, our TRS had a loss carryforward of approximately $28.0 million for federal income tax purposes and $30.4 million for state income tax purposes, which will begin to expire at the end of 2034. The net operating loss carryforward can generally be used to offset future taxable income, if and when it arises.

In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income by the TRS during the periods in which temporary differences become deductible and before the net operating loss carryforward expires. We have recorded a valuation allowance of $7.6 million against our net deferred tax assets as of December 31, 2020 as management believes that it is more likely than not that our net deferred tax assets will not be realized. However, the amount of the deferred tax asset considered realizable could be adjusted if (i) estimates of future taxable income during the carryforward period are reduced or increased or (ii) objective negative evidence in the form of cumulative losses is no longer present.

New Senior and our TRS file income tax returns with the U.S. federal government and various state and local jurisdictions. Generally, we are no longer subject to tax examinations by tax authorities for tax years ended prior to December 31, 2016. The examination of our TRS federal income tax return for the year ended December 31, 2013 was completed and is no longer subject to examination. The conclusion of the examination resulted in a minimal reduction to the TRS’s net operating loss carryforward. We have assessed our tax positions for all open years and concluded that there are no material uncertainties to be recognized. As of December 31, 2020, we do not believe that there will be a significant change to uncertain tax positions during the next 12 months.

15. STOCK-BASED COMPENSATION

Amended and Restated Stock Option and Incentive Award Plan

On January 1, 2019, our board of directors adopted an Amended and Restated Nonqualified Stock Option and Incentive Award Plan (the “Plan”) providing for the grant of equity-based awards, including restricted stock awards (RSAs), restricted stock units (RSUs), stock options, stock appreciation rights, performance awards and other equity-based and non-equity based awards, in each case to our directors, officers, employees, service providers, consultants and advisors. We have reserved 27,922,570 shares of our common stock for issuance under the Plan and as of December 31, 2020, 22,642,798 of the reserved shares under the Plan are available for future awards.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Stock Options

Stock options issued under the plan expire 10 years from the date of grant and vest over a period of 3.0 years from the date of grant. During the year December 31, 2019, the fair value of the options as of the date of grant was determined using the Black-Scholes option-pricing model with the following weighted average assumptions (no options were issued in 2018):


	Range	Weighted Average
Expected volatility (mix of historical and implied)	32.0% - 34.0%	33.7%
Expected dividend yield	9.3% - 9.6%	9.3%
Expected remaining term	6 years	6 years
Risk free rate	2.4% - 2.7%	2.7%
Fair value per option at valuation date	$0.50 - $0.64	$0.52

The following is a summary of stock option activity for the year ended December 31, 2020:


	Options	Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Life (years)	Intrinsic Value
Outstanding as of December 31, 2019	10,073,241	$8.57
Granted (A)	20,098	0.32
Exercised	—	—
Forfeited	—	—
Expired	—	—
Outstanding as of December 31, 2020	10,093,339	8.55	4.4	$	6,533
Exercisable as of December 31, 2020	8,155,861	9.62	3.5	$	4,076

(A) In January 2020, strike prices for outstanding options as of December 31, 2019 were reduced by $0.52 (the “2019 ROC Adjustment”), reflecting the portion of our 2019 dividends which were deemed return of capital pursuant to the terms of the Plan. As a result, 20,098 additional options were issued to the Former Manager, in order to maintain the intrinsic value of an option grant with a strike price below the 2019 ROC Adjustment.

A total unrecognized compensation expense of $0.6 million as of December 31, 2020 is expected to be amortized over a weighted average term of 1.1 years.

Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs")

RSAs and RSUs issued under the plan vest primarily over a period of 1 to 3 years from the date of grant. During the years December 31, 2020 and 2019, the fair value of these awards as of the date of grant was determined using the Company's stock price on such date.

The following is a summary the Company's RSAs and RSUs activity for the year ended December 31, 2020:


	RSAs	Weighted Average Grant Date Fair Value	RSUs	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2019	754,594	$4.46	266,032	$7.04
Granted	—	—	477,981	5.59
Vested	(299,673)	4.40	(146,560)	6.80
Forfeited	—	—	(16,098)	7.04
Outstanding as of December 31, 2020	454,921	4.49	581,355	5.90

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

As of December 31, 2020, we had $1.1 million of unrecognized compensation expense related to non-vested RSAs. That cost is expected to be amortized on a straight-line basis over a weighted average term of 1.1 years. No RSAs were granted during the years ended December 31, 2020 and 2018. The weighted average grant date fair value of RSAs granted in 2019 was $4.40. The total fair value at the vesting date of RSAs vested in 2020 was $2.1 million. No RSAs vested in 2019 and 2018.

As of December 31, 2020, we had $2.1 million of unrecognized compensation expense related to non-vested RSUs. That cost is expected to be amortized on a straight-line basis over a weighted average term of 1.5 years. No RSUs were granted during the year ended December 31, 2018. The weighted average grant date fair value of RSUs granted in 2020 and 2019 was $5.59 and $7.06, respectively. The total fair value at the vesting date of RSUs vested in 2020 was $0.7 million. No RSUs vested in 2019 and 2018.

Performance Stock Units ("PSUs")

Actual PSUs earned may range from 0% - 200% of the PSUs allocated to the award recipient, based on the Company's Total Shareholder Return ("TSR") compared to a peer group based on companies with similar assets and revenue over a three-year performance period that commenced on their respective grant dates.

The fair value of the PSUs as of the date of grant was determined using a Monte Carlo simulation using the following inputs:


	2020		2019
	Range	Weighted Average	Range	Weighted Average
Expected volatility (historical)	30.9%	30.9%	28.0%	28.0%
Expected dividend yield	—%	—%	9.1%	9.1%
Expected remaining term	2.9 years	2.9 years	2.4 years	2.4 years
Fair value per unit at valuation date	$6.89 - $8.80	$8.28	$6.89 - $8.80	$12.44

The following is a summary of PSU activity in 2020:


	Performance Stock Units	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2019	476,717	$12.53
Granted	394,231	8.28
Vested	—	—
Forfeited	—	—
Outstanding as of December 31, 2020	870,948	10.61

As of December 31, 2020, we had $4.8 million of unrecognized compensation expense related to non-vested PSUs. That cost is expected to be amortized on a straight-line basis over a weighted average term of 1.5 years. No PSUs were granted during the year ended December 31, 2018. None of the PSUs have vested.

For the year ended December 31, 2020 and 2019, we recognized $6.6 million and $3.5 million, respectively, of compensation expense relating to the equity-based awards, which is included in “General and administrative expense” in our Consolidated Statements of Operations.

16. REDEEMABLE PREFERRED STOCK, EQUITY AND EARNINGS PER SHARE

Redeemable Preferred Stock

On December 31, 2018, we issued 400,000 shares of our Redeemable Preferred Stock to the Manager as consideration for the termination of the Management Agreement. The Redeemable Preferred Stock is non-voting and has a $100 liquidation preference. Holders of the Redeemable Preferred Stock are entitled to cumulative cash dividends at a rate per annum of 6.0% on the liquidation preference amount plus all accumulated and unpaid dividends.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

We may redeem, at any time, all but not less than all of the shares of Redeemable Preferred Stock for cash at a price equal to the liquidation preference amount of the Redeemable Preferred Stock plus all accumulated and unpaid dividends thereon (the “Redemption Price”). On or after December 31, 2020, the holders of a majority of the then outstanding shares of Redeemable Preferred Stock will have the right to require us to redeem up to 50% of the outstanding shares of Redeemable Preferred Stock, and on or after December 31, 2021, the holders of a majority of the then outstanding shares of Redeemable Preferred Stock will have the right to require us to redeem all or any portion of the outstanding shares of Redeemable Preferred Stock, in each case, for cash at the Redemption Price. Upon the occurrence of a Change of Control (as defined in the certificate of designation governing the Redeemable Preferred Stock), the Redeemable Preferred Stock is required to be redeemed in whole at the Redemption Price. Due to the ability of the holders to require us to redeem the outstanding shares, the Redeemable Preferred Stock is excluded from Equity and reflected in our Consolidated Balance Sheets at its initial fair value of $40.0 million. The carrying value of the Redeemable Preferred Stock is increased by the accumulated and unpaid dividends in the period with a corresponding increase in accumulated deficit. Accrued dividends are treated as deductions in the calculation of net income (loss) applicable to common stockholders.

In December 2020, we received a redemption request for, and redeemed 200,000 shares of the Redeemable Preferred Stock for $20.3 million, including accrued dividends.

The following table is a rollforward of our Redeemable Preferred Stock for the year ended December 31, 2020:


Balance as of December 31, 2019	$	40,506
Redemptions	(20,000)
Accrued dividend	2,403
Paid dividend	(2,656)
Balance as of December 31, 2020	$	20,253

Equity and Dividends

During the years ended December 31, 2020, 2019 and 2018, we declared dividends per share of common stock of $0.33, $0.52 and $0.78, respectively.

2020 Activity

In the first quarter of 2020, strike prices for outstanding options were reduced by $0.52, reflecting the portion of our 2019 dividends which were deemed return of capital.

2019 Activity

In the first quarter of 2019, strike prices for outstanding options were reduced by $0.78, reflecting the portion of our 2018 dividends which were deemed return of capital.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Prior to the spin-off, Drive Shack had issued rights relating to shares of Drive Shack’s common stock (the “Drive Shack options”) to the Former Manager in connection with capital raising activities. In connection with the spin-off, 5.5 million options that were held by the Former Manager, or by the directors, officers or employees of the Former Manager, were converted into an adjusted Drive Shack option and a right relating to a number of shares of New Senior common stock (the “New Senior option”). The exercise price of each adjusted Drive Shack option and New Senior option was set to collectively maintain the intrinsic value of the Drive Shack option immediately prior to the spin-off and to maintain the ratio of the exercise price of the adjusted Drive Shack option and the New Senior option, respectively, to the fair market value of the underlying shares as of the spin-off date, in each case based on the five day average closing price subsequent to the spin-off date. The options expired or expire, as applicable, between January 12, 2015 and August 18, 2024. In January 2020, strike prices for outstanding options as of December 31, 2019 were reduced by a range of $0.26 and $0.52, reflecting the portion of our 2019 dividends which were deemed return of capital pursuant to the terms of the Plan.

2018 Activity

In the first quarter of 2018, strike prices for outstanding options were reduced by $1.04, reflecting the portion of our 2017 dividends which were deemed return of capital.

In March 2018, we granted options to a new director relating to 5,000 shares of common stock, the grant date fair value of which was not material.

Earnings Per Share

Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted EPS is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding plus the additional dilutive effect, if any, of common stock equivalents during each period. Our common stock equivalents are our outstanding stock options and equity-based compensation awards.

We have certain equity-based compensation awards that contain non-forfeitable rights to dividends, which are considered participating securities for the purposes of computing EPS pursuant to the two-class method, and therefore we apply the two-class method in our computation of EPS. The two-class method is an earnings allocation methodology that determines EPS for shares of common stock and participating securities according to dividends declared or accumulated and participating rights in undistributed earnings. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund losses.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

The following table sets forth the computation of basic and diluted income (loss) per share of common stock for the years ended December 31, 2020, 2019, and 2018:


	Years Ended December 31,
	2020		2019		2018
Numerator for basic and diluted earnings per share:
Income (loss) from continuing operations attributable to common stockholders	$	(23,047)	$	6,361	$	(151,628)
Discontinued operations	16,885		(6,754)		(7,727)
Net income (loss) attributable to common stockholders	(6,162)		(393)		(159,355)
Less: Non-forfeitable dividends allocated to participating RSUs	(115)		—		—
Net income (loss) available to shares of common stock outstanding	$	(6,277)	$	(393)	$	(159,355)

Denominator:
Basic weighted average shares of common stock outstanding (A)	82,496,460		82,208,173		82,148,869
Dilutive shares of common stock - equity awards and options (B)	—		1,664,085		—
Diluted weighted average shares of common stock	82,496,460		83,872,258		82,148,869
Basic earnings per common share:
Income (loss) from continuing operations attributable to shares of common stock	$	(0.28)	$	0.08	$	(1.85)
Discontinued operations	0.20		(0.08)		(0.09)
Net income (loss) attributable to shares of common stock	$	(0.08)	$	—	$	(1.94)
Diluted earnings per common share:
Income (loss) from continuing operations attributable to shares of common stock	$	(0.28)	$	0.08	$	(1.85)
Discontinued operations	0.20		(0.08)		(0.09)
Net income (loss) attributable to shares of common stock	$	(0.08)	$	—	$	(1.94)

(A) The outstanding shares used to calculate the weighted average basic shares exclude 454,921 and 754,594 restricted stock awards as of December 31, 2020 and 2019, net of forfeitures, respectively, as those shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic loss per share for the years ended December 31, 2020 and 2019.

(B) During the years ended December 31, 2020, and 2018, 989,375 and 499,957 dilutive share equivalents and options were excluded given our loss position, respectively.

17. CONCENTRATION OF CREDIT RISK

The following table presents our managed properties and other properties as a percentage of total real estate investments (based on their carrying amount and excluding properties classified as held for sale or discontinued operations):


	December 31,
	2020		2019		2018

Holiday managed properties (A)	95.5	%	95.5	%	95.7	%



Merrill Gardens managed properties	0.9	%	0.9	%	0.9	%

All other	3.6	%	3.6	%	3.4	%

(A) Effective May 14, 2018, we terminated our triple net leases with respect to the properties in the Holiday Portfolio and concurrently entered into property management agreements with Holiday with respect to such properties. These assets are included in the Holiday managed properties as of the date of the lease termination.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Managed Properties

The following table presents the properties managed by Holiday and Merrill Gardens as a percentage of real estate investments, net, revenue and NOI (excluding properties classified as discontinued operations):


	As of and for the year ended December 31,
	2020				2019				2018
	Holiday		Merrill Gardens		Holiday		Merrill Gardens		Holiday		Merrill Gardens
Real estate investments, net
IL properties	98.4	%	0.9	%	98.4	%	0.9	%	98.5	%	0.9	%

Revenue
IL properties	97.2	%	2.1	%	97.0	%	2.3	%	96.3	%	2.8	%

NOI
IL properties	99.3	%	0.5	%	98.5	%	1.3	%	98.0	%	1.5	%

Effective May 14, 2018, we terminated our triple net leases with respect to the properties in the Holiday Portfolio and concurrently entered into property management agreements with Holiday with respect to such properties. The real estate investments, net, revenue and NOI for such properties following the Lease Termination have been included in managed properties above. This resulted in a significant increase in the real estate investments, net, revenue and NOI of managed properties.

Because Holiday and Merrill Gardens manage, but do not lease our properties, we are not directly exposed to their credit risk in the same manner or to the same extent as that of our triple net lease tenant. However, we rely on Holiday and Merrill Gardens’ personnel, expertise, accounting resources and information systems, proprietary information, good faith and judgment to manage our properties efficiently and effectively. We also rely on Holiday and Merrill Gardens to otherwise operate our properties in compliance with the terms of the Property Management Agreements, although we have various rights as the property owner to terminate and exercise remedies under the Property Management Agreements. Holiday’s and Merrill Gardens’s inability or unwillingness to satisfy their obligations under those agreements, to efficiently and effectively manage our properties, or to provide timely and accurate accounting information could have a material adverse effect on us. Additionally, significant changes in Holiday’s and Merrill Gardens’ senior management or adverse developments in their business and affairs or financial condition could have a material adverse effect on us.

18. FUTURE MINIMUM RENTS

The following table sets forth future contracted minimum rents from the tenant of our triple net lease property, excluding contingent payment escalations, as of December 31, 2020:


Years Ending December 31
2021	$	6,066
2022	6,233
2023	6,405
2024	6,581
2025	6,762
Thereafter	32,126
Total future minimum rents	$	64,173

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

19. COMMITMENTS AND CONTINGENCIES

As of December 31, 2020, management believes there are no material contingencies that would affect our results of operations, cash flows or financial position.

Certain Obligations, Liabilities and Litigation

We are and may become subject to various obligations, liabilities, investigations, inquiries and litigation assumed in connection with or arising from our on-going business, as well as acquisitions, sales, leasing and other activities. These obligations and liabilities (including the costs associated with investigations, inquiries and litigation) may be greater than expected or may not be known in advance. Any such obligations or liabilities could have a material adverse effect on our financial position, cash flows and results of operations, particularly if we are not entitled to indemnification, or if a responsible third party fails to indemnify us.

Certain Tax-Related Covenants

If we are treated as a successor to Drive Shack under applicable U.S. federal income tax rules, and if Drive Shack failed to qualify as a REIT for a taxable year ending on or before December 31, 2015, we could be prohibited from electing to be a REIT. Accordingly, in the separation and distribution agreement regarding our spin-off from Drive Shack (the “Separation and Distribution Agreement”), Drive Shack (i) represented that it had no knowledge of any fact or circumstance that would cause us to fail to qualify as a REIT, (ii) covenanted to use commercially reasonable efforts to cooperate with New Senior as necessary to enable us to qualify for taxation as a REIT and receive customary legal opinions concerning REIT status, including providing information and representations to us and our tax counsel with respect to the composition of Drive Shack’s income and assets, the composition of its stockholders and its operation as a REIT, and (iii) covenanted to use its reasonable best efforts to maintain its REIT status for each of Drive Shack’s taxable years ending on or before December 31, 2015 (unless Drive Shack obtains an opinion from a nationally recognized tax counsel or a private letter ruling from the Internal Revenue Service (“IRS”) to the effect that Drive Shack’s failure to maintain its REIT status will not cause us to fail to qualify as a REIT under the successor REIT rule referred to above). To date, Drive Shack has not informed us of any challenge to its REIT status for the applicable time period.

Proceedings Indemnified and Defended by Third Parties

From time to time, we are party to certain legal actions, regulatory investigations and claims for which third parties are contractually obligated to indemnify, defend and hold us harmless. While we are presently not being defended by any tenant and other obligated third parties in these types of matters, there is no assurance that our tenant, their affiliates or other obligated third parties will continue to defend us in these matters, or that such parties will have sufficient assets, income and access to financing to enable them to satisfy their defense and indemnification obligations to us.

In addition, although we and our operators maintain insurance programs against certain risks, including commercial general liability, property, casualty and directors’ and officers’ liability, we cannot provide assurance that such policies will be sufficient to mitigate the financial impact of any individual or group of legal actions, regulatory investigations or claims.

Environmental Costs

As a commercial real estate owner, we are subject to potential environmental costs. As of December 31, 2020, management is not aware of any environmental concerns that would have a material adverse effect on our financial position or results of operations.

Capital Improvement, Repair and Lease Commitments

We have agreed to make $1.0 million available for capital improvements during the 15-year lease period, which ends in 2030, to the triple net lease property under Watermark, none of which has been funded as of December 31, 2020. Upon funding these capital improvements, we will be entitled to a rent increase.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

Leases

As the lessee, we currently lease our corporate office space located in New York, New York under an operating lease agreement. The lease requires fixed monthly rent payments, expires on June 30, 2024 and does not have any renewal option. We also currently lease land and equipment (dishwashers, copy machines and buses) used at certain of our managed properties under operating lease agreements. Our leases have remaining lease terms ranging from 1 month to 66 years. We do not include any renewal options in our lease terms for calculating our lease liability because as of December 31, 2020, we were not reasonably certain if we will exercise these renewal options at this time.

As of December 31, 2020, our future minimum lease obligations (excluding expense escalations) under our operating leases, including our office lease disclosed above and excluding discontinued operations are as follows:


Years	Operating Leases
2021	$	654
2022	515
2023	472
2024	240
2025	8
Thereafter	305
Total future minimum lease payments	2,194
Less imputed interest	(449)
Total operating lease liability	$	1,745

Litigation Settlement

As previously described in Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2018 and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019, a derivative lawsuit, captioned Cumming v. Edens, et al., C.A. No. 13007-VCS, was brought on behalf of the Company against certain current and former members of the Company’s board of directors, Fortress Investment Group LLC and certain affiliates and Holiday Acquisition Holdings LLC. On April 23, 2019, the parties reached an agreement to settle the derivative lawsuit. The settlement provided for the payment of $53.0 million to the Company and the recommendation of certain corporate governance changes in exchange for customary releases. The settlement was approved by the Delaware Court of Chancery on July 31, 2019 and a judgment issued the same day. Cash proceeds of $38.6 million were distributed to the Company, which reflected a court-approved fee and expense award to plaintiff’s counsel of $14.5 million. The Company also paid $0.3 million in unreimbursed legal fees. These proceeds were recorded in “Litigation proceeds, net” in our Consolidated Statements of Operations. The Company previously submitted and recommended the agreed-upon governance changes to its stockholders at the Company’s annual meeting of stockholders which was held in June 2019.

20. SUBSEQUENT EVENTS

These consolidated financial statements include a discussion of material events, if any, which have occurred subsequent to December 31, 2020 (referred to as subsequent events) through the issuance of the consolidated financial statements.

On February 24, 2021, our board of directors declared a cash dividend on our common stock of $0.065 per share of common stock for the quarter ended December 31, 2020. The dividend is payable on March 26, 2021 to stockholders of record on March 12, 2021.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)

21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


	Quarters Ended								Year Ended December 31
	March 31		June 30		September 30		December 31
2020
Revenue	$	86,590	$	84,533	$	83,165	$	81,993	$	336,281
Net operating income	35,525		35,773		33,208		33,714		138,220

Income (loss) from continuing operations	(11,048)		(2,658)		(3,750)		(3,188)		(20,644)
Discontinued operations, net	16,885		—		—		—		16,885
Net income (loss)	5,837		(2,658)		(3,750)		(3,188)		(3,759)
Net income (loss) attributable to common stockholders	$	5,239	$	(3,257)	$	(4,355)	$	(3,789)	$	(6,162)

Basic earnings per common share:
Income (loss) from continuing operations attributable to common stockholders	$	(0.14)	$	(0.04)	$	(0.05)	$	(0.05)	$	(0.28)
Discontinued operations, net	0.20		0.00		0.00		0.00		0.20
Net income (loss) attributable to common stockholders	$	0.06	$	(0.04)	$	(0.05)	$	(0.05)	$	(0.08)

Diluted earnings per common share:
Income (loss) from continuing operations attributable to common stockholders	$	(0.14)	$	(0.04)	$	(0.05)	$	(0.05)	$	(0.28)
Discontinued operations, net	0.20		0.00		0.00		0.00		0.20
Net income (loss) attributable to common stockholders	$	0.06	$	(0.04)	$	(0.05)	$	(0.05)	$	(0.08)

Weighted average number of shares of common stock outstanding
Basic	82,386,622		82,459,741		82,568,919		82,568,966		82,496,460
Diluted	82,386,622		82,459,741		82,568,919		82,568,966		82,496,460

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019 and 2018

(dollars in tables in thousands, except share data)


	Quarters Ended								Year Ended December 31
	March 31		June 30		September 30		December 31
2019
Revenue	$	87,331	$	86,404	$	85,956	$	86,212	$	345,903
Net operating income	34,392		35,711		35,380		36,063		141,546
Litigation proceeds, net	—		—		38,226		82		38,308


Income (loss) from continuing operations	(9,317)		(6,962)		31,348		(6,301)		8,768
Income (loss) from discontinued operations	(1,876)		(2,624)		(2,499)		245		(6,754)
Net income (loss)	(11,193)		(9,586)		28,849		(6,056)		2,014
Net income (loss) attributable to common stockholders	$	(11,791)	$	(10,185)	$	28,244	$	(6,661)	$	(393)

Basic earnings per common share:
Income (loss) from continuing operations attributable to common stockholders	$	(0.12)	$	(0.09)	$	0.37	$	(0.08)	$	0.08
Discontinued operations	(0.02)		(0.03)		(0.03)		0.00		(0.08)
Net income (loss) attributable to common stockholders	$	(0.14)	$	(0.12)	$	0.34	$	(0.08)	$	0.00

Diluted earnings per common share:
Income (loss) from continuing operations attributable to common stockholders	$	(0.12)	$	(0.09)	$	0.37	$	(0.08)	$	0.08
Discontinued operations	(0.02)		(0.03)		(0.03)		0.00		(0.08)
Net income (loss) attributable to common stockholders	$	(0.14)	$	(0.12)	$	0.34	$	(0.08)	$	0.00

Weighted average number of shares of common stock outstanding
Basic	82,203,069		82,209,844		82,209,844		82,209,844		82,208,173
Diluted	82,203,069		82,209,844		83,964,231		82,209,844		82,208,173

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2020

(dollars in thousands)


		Location				Initial Cost to the Company								Gross Amount Carried at Close of Period
Property Name	Type	City	State	Encumbrances		Land		Buildings and Improvements		Furniture, Fixtures and Equipment		Costs Capitalized Subsequent to Acquisition		Land		Buildings and Improvements		Furniture, Fixtures and Equipment		Total (A)		Accumulated Depreciation		Net Book Value		Year Constructed / Renovated	Year Acquired	Life on Which Depreciation in Income Statement is Computed
Managed Properties
Andover Place	IL	Little Rock	AR	$	13,939	$	630	$	14,664	$	783	$	1,143	$	630	$	15,525	$	1,065	$	17,220	$	(3,310)	$	13,910	1991/NA	2015	3-40 years
Vista de la Montana	IL	Surprise	AZ	$	12,450	$	1,131	$	11,077	$	635	$	390	$	1,131	$	11,229	$	873	$	13,233	$	(2,907)	$	10,326	1998/NA	2013	3-40 years
Arcadia Place	IL	Vista	CA	$	16,508	$	1,570	$	14,252	$	804	$	1,294	$	1,570	$	15,300	$	1,050	$	17,920	$	(3,466)	$	14,454	1989/NA	2015	3-40 years
Chateau at Harveston	IL	Temecula	CA	$	25,818	$	1,564	$	27,532	$	838	$	427	$	1,564	$	27,833	$	964	$	30,361	$	(5,095)	$	25,266	2008/NA	2015	3-40 years
Golden Oaks	IL	Yucaipa	CA	$	28,133	$	772	$	24,989	$	867	$	532	$	772	$	25,271	$	1,118	$	27,161	$	(5,065)	$	22,096	2008/NA	2015	3-40 years
Rancho Village	IL	Palmdale	CA	$	24,607	$	323	$	22,341	$	882	$	685	$	323	$	22,584	$	1,325	$	24,232	$	(4,784)	$	19,448	2008/NA	2015	3-40 years
Simi Hills	IL	Simi Valley	CA	$	26,025	$	3,209	$	21,999	$	730	$	320	$	3,209	$	22,123	$	926	$	26,258	$	(4,861)	$	21,397	2006/NA	2013	3-40 years
The Remington	IL	Hanford	CA	$	13,573	$	1,300	$	16,003	$	825	$	806	$	1,300	$	16,277	$	1,357	$	18,934	$	(3,640)	$	15,294	1997/NA	2015	3-40 years
The Springs of Escondido	IL	Escondido	CA	$	15,313	$	670	$	14,392	$	721	$	2,047	$	670	$	15,650	$	1,510	$	17,830	$	(3,936)	$	13,894	1986/NA	2015	3-40 years
The Springs of Napa	IL	Napa	CA	$	15,346	$	2,420	$	11,978	$	700	$	601	$	2,420	$	12,195	$	1,084	$	15,699	$	(3,021)	$	12,678	1996/NA	2015	3-40 years
The Westmont	IL	Santa Clara	CA	$	25,725	$	—	$	18,049	$	754	$	1,911	$	—	$	19,182	$	1,532	$	20,714	$	(4,569)	$	16,145	1991/NA	2013	3-40 years
Courtyard at Lakewood	IL	Lakewood	CO	$	13,875	$	1,327	$	14,198	$	350	$	784	$	1,327	$	14,676	$	655	$	16,658	$	(3,308)	$	13,350	1992/NA	2013	3-40 years
Greeley Place	IL	Greeley	CO	$	9,000	$	237	$	13,859	$	596	$	769	$	237	$	14,332	$	893	$	15,462	$	(3,315)	$	12,147	1986/NA	2013	3-40 years
Parkwood Estates	IL	Fort Collins	CO	$	12,787	$	638	$	18,055	$	627	$	491	$	638	$	18,389	$	784	$	19,811	$	(4,062)	$	15,749	1987/NA	2013	3-40 years
Pueblo Regent	IL	Pueblo	CO	$	9,225	$	446	$	13,800	$	377	$	346	$	446	$	14,040	$	483	$	14,969	$	(2,965)	$	12,004	1985/NA	2013	3-40 years
Quincy Place	IL	Denver	CO	$	16,369	$	1,180	$	18,200	$	825	$	1,456	$	1,180	$	19,291	$	1,190	$	21,661	$	(3,986)	$	17,675	1996/NA	2015	3-40 years
Lodge at Cold Spring	IL	Rocky Hill	CT	$	14,039	$	—	$	25,807	$	605	$	649	$	—	$	26,121	$	940	$	27,061	$	(5,514)	$	21,547	1998/NA	2013	3-40 years
Village Gate	IL	Farmington	CT	$	23,700	$	3,592	$	23,254	$	268	$	809	$	3,592	$	23,522	$	809	$	27,923	$	(4,886)	$	23,037	1989/NA	2013	3-40 years
Augustine Landing	IL	Jacksonville	FL	$	18,999	$	680	$	19,635	$	770	$	735	$	680	$	20,140	$	1,000	$	21,820	$	(3,895)	$	17,925	1999/NA	2015	3-40 years
Cherry Laurel	IL	Tallahassee	FL	$	12,750	$	1,100	$	20,457	$	668	$	852	$	1,100	$	20,691	$	1,286	$	23,077	$	(4,856)	$	18,221	2001/NA	2013	3-40 years
Desoto Beach Club	IL	Sarasota	FL	$	17,925	$	668	$	23,944	$	668	$	534	$	668	$	24,065	$	1,082	$	25,815	$	(5,325)	$	20,490	2005/NA	2013	3-40 years
Marion Woods	IL	Ocala	FL	$	19,856	$	540	$	20,048	$	882	$	1,003	$	540	$	20,617	$	1,316	$	22,473	$	(4,561)	$	17,912	2003/NA	2015	3-40 years
Regency Residence	IL	Port Richey	FL	$	15,075	$	1,100	$	14,088	$	771	$	1,003	$	1,100	$	14,579	$	1,284	$	16,963	$	(3,698)	$	13,265	1987/NA	2013	3-40 years
Sterling Court	IL	Deltona	FL	$	10,627	$	1,095	$	13,960	$	954	$	792	$	1,095	$	14,456	$	1,249	$	16,800	$	(3,695)	$	13,105	2008/NA	2015	3-40 years
University Pines	IL	Pensacola	FL	$	20,972	$	1,080	$	19,150	$	777	$	1,025	$	1,080	$	19,893	$	1,059	$	22,032	$	(3,902)	$	18,130	1996/NA	2015	3-40 years
Venetian Gardens	IL	Venice	FL	$	—	$	865	$	21,173	$	860	$	563	$	865	$	21,382	$	1,214	$	23,461	$	(4,659)	$	18,802	2007/NA	2015	3-40 years
Windward Palms	IL	Boynton Beach	FL	$	—	$	1,564	$	20,097	$	867	$	1,131	$	1,564	$	20,947	$	1,148	$	23,659	$	(4,681)	$	18,978	2007/NA	2015	3-40 years
Pinegate	IL	Macon	GA	$	12,850	$	540	$	12,290	$	811	$	1,543	$	540	$	13,319	$	1,325	$	15,184	$	(3,055)	$	12,129	2001/NA	2015	3-40 years
Kalama Heights	IL	Kihei	HI	$	22,804	$	3,360	$	27,212	$	846	$	731	$	3,360	$	27,535	$	1,254	$	32,149	$	(5,516)	$	26,633	2000/NA	2015	3-40 years
Illahee Hills	IL	Urbandale	IA	$	10,464	$	694	$	11,980	$	476	$	445	$	694	$	12,082	$	820	$	13,596	$	(2,934)	$	10,662	1995/NA	2013	3-40 years
Palmer Hills	IL	Bettendorf	IA	$	10,367	$	1,488	$	10,878	$	466	$	809	$	1,488	$	11,251	$	903	$	13,642	$	(2,846)	$	10,796	1990/NA	2013	3-40 years
Blair House	IL	Normal	IL	$	11,914	$	329	$	14,498	$	627	$	361	$	329	$	14,660	$	827	$	15,816	$	(3,445)	$	12,371	1989/NA	2013	3-40 years
Redbud Hills	IL	Bloomington	IN	$	16,434	$	2,140	$	17,839	$	797	$	632	$	2,140	$	18,239	$	1,029	$	21,408	$	(3,724)	$	17,684	1998/NA	2015	3-40 years
Grasslands Estates	IL	Wichita	KS	$	13,237	$	504	$	17,888	$	802	$	342	$	504	$	17,962	$	1,071	$	19,537	$	(4,220)	$	15,317	2001/NA	2013	3-40 years
Greenwood Terrace	IL	Lenexa	KS	19,564		950		21,883		811		1,268		950		22,293		1,669		24,912		(5,032)		19,880		2003/NA	2015	3-40 years
Thornton Place	IL	Topeka	KS	11,111		327		14,415		734		354		327		14,550		953		15,830		(3,725)		12,105		1998/NA	2013	3-40 years

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2020

(dollars in thousands)


		Location			Initial Cost to the Company				Gross Amount Carried at Close of Period
Property Name	Type	City	State	Encumbrances	Land	Buildings and Improvements	Furniture, Fixtures and Equipment	Costs Capitalized Subsequent to Acquisition	Land	Buildings and Improvements	Furniture, Fixtures and Equipment	Total (A)	Accumulated Depreciation	Net Book Value	Year Constructed / Renovated	Year Acquired	Life on Which Depreciation in Income Statement is Computed
Jackson Oaks	IL	Paducah	KY	6,450	267	19,195	864	304	267	19,350	1,013	20,630	(4,476)	16,154	2004/NA	2013	3-40 years
Summerfield Estates	IL	Shreveport	LA	—	525	5,584	175	561	525	5,715	604	6,844	(1,483)	5,361	1988/NA	2013	3-40 years
Waterview Court	IL	Shreveport	LA	4,265	1,267	4,070	376	1,923	1,267	5,550	820	7,637	(2,102)	5,535	1999/NA	2015	3-40 years
Bluebird Estates	IL	East Longmeadow	MA	24,357	5,745	24,591	954	602	5,745	25,048	1,099	31,892	(5,471)	26,421	2008/NA	2015	3-40 years
Quail Run Estates	IL	Agawam	MA	18,723	1,410	21,330	853	843	1,410	21,753	1,273	24,436	(4,970)	19,466	1996/NA	2015	3-40 years
Blue Water Lodge	IL	Fort Gratiot	MI	16,400	62	16,034	833	277	62	16,144	999	17,205	(3,923)	13,282	2001/NA	2013	3-40 years
Genesee Gardens	IL	Flint Township	MI	15,836	420	17,080	825	722	420	17,534	1,093	19,047	(3,681)	15,366	2001/NA	2015	3-40 years
Briarcrest Estates	IL	Ballwin	MO	11,287	1,255	16,509	525	862	1,255	17,028	868	19,151	(3,802)	15,349	1990/NA	2013	3-40 years
Country Squire	IL	St. Joseph	MO	12,467	864	16,353	627	503	864	16,490	994	18,348	(3,886)	14,462	1990/NA	2013	3-40 years
Orchid Terrace	IL	St. Louis	MO	23,929	1,061	26,636	833	172	1,061	26,691	950	28,702	(5,690)	23,012	2006/NA	2013	3-40 years
Chateau Ridgeland	IL	Ridgeland	MS	7,492	967	7,277	535	516	967	7,454	874	9,295	(2,135)	7,160	1986/NA	2013	3-40 years
Aspen View	IL	Billings	MT	14,053	930	22,611	881	1,097	930	23,482	1,107	25,519	(4,760)	20,759	1996/NA	2015	3-40 years
Grizzly Peak	IL	Missoula	MT	16,717	309	16,447	658	323	309	16,581	846	17,736	(3,777)	13,959	1997/NA	2013	3-40 years
Cedar Ridge	IL	Burlington	NC	15,574	1,030	20,330	832	550	1,030	20,716	996	22,742	(3,947)	18,795	2006/NA	2015	3-40 years
Crescent Heights	IL	Concord	NC	22,025	1,960	21,290	867	444	1,960	21,518	1,083	24,561	(4,700)	19,861	2008/NA	2015	3-40 years
Durham Regent	IL	Durham	NC	16,425	1,061	24,149	605	1,040	1,061	24,507	1,287	26,855	(5,145)	21,710	1989/NA	2013	3-40 years
Forsyth Court	IL	Winston Salem	NC	11,899	1,428	13,286	499	1,724	1,428	14,538	971	16,937	(3,393)	13,544	1989/NA	2015	3-40 years
Jordan Oaks	IL	Cary	NC	19,950	2,103	20,847	774	494	2,103	20,934	1,180	24,217	(4,893)	19,324	2003/NA	2013	3-40 years
Lodge at Wake Forest	IL	Wake Forest	NC	28,181	1,209	22,571	867	593	1,209	22,908	1,124	25,241	(4,727)	20,514	2008/NA	2015	3-40 years
Shads Landing	IL	Charlotte	NC	—	1,939	21,988	846	367	1,939	22,180	1,020	25,139	(4,931)	20,208	2008/NA	2015	3-40 years
Woods at Holly Tree	IL	Wilmington	NC	27,272	3,310	24,934	811	804	3,310	25,221	1,328	29,859	(5,025)	24,834	2001/NA	2015	3-40 years
Rolling Hills Ranch	IL	Omaha	NE	—	1,022	16,251	846	408	1,022	16,513	990	18,525	(3,768)	14,757	2007/NA	2015	3-40 years
Maple Suites	IL	Dover	NH	28,675	1,084	30,943	838	536	1,084	31,238	1,080	33,402	(6,497)	26,905	2007/NA	2015	3-40 years
Montara Meadows	IL	Las Vegas	NV	11,623	1,840	11,654	1,206	2,608	1,840	13,103	2,365	17,308	(4,412)	12,896	1986/NA	2015	3-40 years
Sky Peaks	IL	Reno	NV	18,900	1,061	19,793	605	379	1,061	19,887	891	21,839	(4,448)	17,391	2002/NA	2013	3-40 years
Fleming Point	IL	Greece	NY	19,875	699	20,644	668	759	699	21,112	959	22,770	(4,654)	18,116	2004/NA	2013	3-40 years
Manor at Woodside	IL	Poughkeepsie	NY	—	—	12,130	670	2,003	—	13,688	1,115	14,803	(3,884)	10,919	2001/NA	2013	3-40 years
Maple Downs	IL	Fayetteville	NY	20,850	782	25,656	668	667	782	26,054	937	27,773	(5,516)	22,257	2003/NA	2013	3-40 years
Alexis Gardens	IL	Toledo	OH	17,314	450	18,412	811	684	450	18,849	1,058	20,357	(3,861)	16,496	2002/NA	2015	3-40 years
Copley Place	IL	Copley	OH	11,388	553	19,125	867	130	553	19,374	748	20,675	(4,169)	16,506	2008/NA	2015	3-40 years
Lionwood	IL	Oklahoma City	OK	—	744	5,180	383	1,557	744	6,309	812	7,865	(1,945)	5,920	2000/NA	2015	3-40 years
Fountains at Hidden Lakes	IL	Salem	OR	9,750	903	6,568	—	538	903	6,902	204	8,009	(1,363)	6,646	1990/NA	2013	3-40 years

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2020

(dollars in thousands)


		Location			Initial Cost to the Company				Gross Amount Carried at Close of Period
Property Name	Type	City	State	Encumbrances	Land	Buildings and Improvements	Furniture, Fixtures and Equipment	Costs Capitalized Subsequent to Acquisition	Land	Buildings and Improvements	Furniture, Fixtures and Equipment	Total (A)	Accumulated Depreciation	Net Book Value	Year Constructed / Renovated	Year Acquired	Life on Which Depreciation in Income Statement is Computed
Hidden Lakes	IL	Salem	OR	17,325	1,389	16,639	893	928	1,389	17,089	1,371	19,849	(4,175)	15,674	1990/NA	2013	3-40 years
Parkrose Chateau	IL	Portland	OR	12,518	2,742	17,472	749	1,007	2,742	18,202	1,027	21,971	(3,796)	18,175	1991/NA	2015	3-40 years
Rock Creek	IL	Hillsboro	OR	16,427	1,617	11,783	486	381	1,617	11,869	781	14,267	(2,751)	11,516	1996/NA	2013	3-40 years
Sheldon Oaks	IL	Eugene	OR	14,325	1,577	17,380	675	358	1,577	17,584	828	19,989	(4,006)	15,983	1995/NA	2013	3-40 years
Stone Lodge	IL	Bend	OR	19,596	1,200	25,753	790	911	1,200	26,348	1,106	28,654	(4,846)	23,808	1999/NA	2015	3-40 years
Stoneybrook Lodge	IL	Corvallis	OR	25,875	1,543	18,119	843	412	1,543	18,335	1,039	20,917	(4,329)	16,588	1999/NA	2013	3-40 years
The Regent	IL	Corvallis	OR	11,325	1,111	7,720	228	417	1,111	7,840	524	9,475	(1,841)	7,634	1983/NA	2013	3-40 years
Essex House	IL	Lemoyne	PA	16,050	936	25,585	668	379	936	25,678	954	27,568	(5,473)	22,095	2002/NA	2013	3-40 years
Manor at Oakridge	IL	Harrisburg	PA	15,150	992	24,379	764	286	992	24,520	908	26,420	(5,223)	21,197	2000/NA	2013	3-40 years
Niagara Village	IL	Erie	PA	12,793	750	16,544	790	722	750	16,994	1,062	18,806	(3,652)	15,154	1999/NA	2015	3-40 years
Walnut Woods	IL	Boyertown	PA	15,600	308	18,058	496	793	308	18,603	744	19,655	(3,944)	15,711	1997/NA	2013	3-40 years
Indigo Pines	IL	Hilton Head	SC	15,272	2,850	15,970	832	1,794	2,850	16,724	1,872	21,446	(4,261)	17,185	1999/NA	2015	3-40 years
Holiday Hills Estates	IL	Rapid City	SD	12,014	430	22,209	790	794	430	22,784	1,008	24,222	(4,209)	20,013	1999/NA	2015	3-40 years
Echo Ridge	IL	Knoxville	TN	20,826	1,522	21,469	770	482	1,522	21,704	1,017	24,243	(4,316)	19,927	1997/NA	2015	3-40 years
Uffelman Estates	IL	Clarksville	TN	9,600	625	10,521	298	530	625	10,791	558	11,974	(2,395)	9,579	1993/NA	2013	3-40 years
Arlington Plaza	IL	Arlington	TX	7,135	319	9,821	391	389	319	9,939	661	10,919	(2,368)	8,551	1987/NA	2013	3-40 years
Cypress Woods	IL	Kingwood	TX	—	1,376	19,815	860	681	1,376	20,247	1,109	22,732	(4,447)	18,285	2008/NA	2015	3-40 years
Dogwood Estates	IL	Denton	TX	15,779	1,002	18,525	714	447	1,002	18,837	850	20,689	(4,226)	16,463	2005/NA	2013	3-40 years
Madison Estates	IL	San Antonio	TX	9,262	1,528	14,850	268	1,269	1,528	15,428	958	17,914	(3,564)	14,350	1984/NA	2013	3-40 years
Pinewood Hills	IL	Flower Mound	TX	15,000	2,073	17,552	704	443	2,073	17,785	914	20,772	(4,060)	16,712	2007/NA	2013	3-40 years
The Bentley	IL	Dallas	TX	13,725	2,351	12,270	526	878	2,351	12,838	835	16,024	(3,011)	13,013	1996/NA	2013	3-40 years
The El Dorado	IL	Richardson	TX	7,350	1,316	12,220	710	437	1,316	12,384	983	14,683	(3,183)	11,500	1996/NA	2013	3-40 years
Ventura Place	IL	Lubbock	TX	14,100	1,018	18,034	946	783	1,018	18,317	1,447	20,782	(4,697)	16,085	1997/NA	2013	3-40 years
Whiterock Court	IL	Dallas	TX	10,239	2,837	12,205	446	690	2,837	12,521	821	16,179	(2,995)	13,184	2001/NA	2013	3-40 years
Chateau Brickyard	IL	Salt Lake City	UT	—	700	3,297	15	1,749	700	4,605	456	5,761	(1,780)	3,981	1984/2007	2012	3-40 years
Olympus Ranch	IL	Murray	UT	17,142	1,407	20,515	846	684	1,407	20,993	1,052	23,452	(4,268)	19,184	2008/NA	2015	3-40 years
Pioneer Valley Lodge	IL	North Logan	UT	5,908	1,049	17,920	740	256	1,049	18,019	898	19,966	(4,196)	15,770	2001/NA	2013	3-40 years
Colonial Harbor	IL	Yorktown	VA	16,389	2,211	19,523	689	600	2,211	19,665	1,147	23,023	(4,616)	18,407	2005/NA	2013	3-40 years
Elm Park Estates	IL	Roanoke	VA	13,527	990	15,648	770	673	990	16,025	1,066	18,081	(3,404)	14,677	1991/NA	2015	3-40 years
Heritage Oaks	IL	Richmond	VA	—	1,630	9,570	705	2,130	1,630	10,990	1,415	14,035	(3,580)	10,455	1987/NA	2013	3-40 years
Bridge Park	IL	Seattle	WA	12,703	2,315	18,607	1,135	623	2,315	18,899	1,465	22,679	(4,305)	18,374	2008/NA	2015	3-40 years
Peninsula	IL	Gig Harbor	WA	20,195	2,085	21,983	846	326	2,085	22,154	1,001	25,240	(4,383)	20,857	2008/NA	2015	3-40 years
Oakwood Hills	IL	Eau Claire	WI	13,275	516	18,872	645	256	516	18,943	830	20,289	(4,181)	16,108	2003/NA	2013	3-40 years
The Jefferson	IL	Middleton	WI	13,340	1,460	15,540	804	628	1,460	15,986	983	18,429	(3,383)	15,046	2005/NA	2015	3-40 years
Managed Properties Total				1,452,823	126,068	1,781,720	71,208	78,709	126,068	1,826,212	105,425	2,057,705	(407,757)	1,649,948

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2020

(dollars in thousands)


		Location				Initial Cost to the Company								Gross Amount Carried at Close of Period
Property Name	Type	City	State	Encumbrances		Land		Buildings and Improvements		Furniture, Fixtures and Equipment		Costs Capitalized Subsequent to Acquisition		Land		Buildings and Improvements		Furniture, Fixtures and Equipment		Total (A)		Accumulated Depreciation		Net Book Value		Year Constructed / Renovated	Year Acquired	Life on Which Depreciation in Income Statement is Computed
Triple Net Lease Property
Watermark at Logan Square	CCRC	Philadelphia	PA	49,301		8,575		46,031		2,380		990		8,575		46,776		2,625		57,976		(9,456)		48,520		1984/2009	2015	3-40 years
Triple Net Lease Property Total				49,301		8,575		46,031		2,380		990		8,575		46,776		2,625		57,976		(9,456)		48,520

All Other Assets
Corporate FF&E & Leasehold Improvements	N/A	New York	NY	—		—		—		—		652		—		144		508		652		(242)		410		N/A	2018	3-5 years
Right-of-use asset	N/A	N/A	N/A	—		—		—		—		1,673		—		—		1,673		1,673		—		1,673		N/A	N/A	3-5 years
All Other Assets Total				—		—		—		—		2,325		—		144		2,181		2,325		(242)		2,083

Grand Total				$	1,502,124	$	134,643	$	1,827,751	$	73,588	$	82,024	$	134,643	$	1,873,132	$	110,231	$	2,118,006	$	(417,455)	$	1,700,551

(A) For United States federal income tax purposes, the initial aggregate cost basis, including furniture, fixtures, and equipment, was approximately $2.05 billion as of December 31, 2020.

NEW SENIOR INVESTMENT GROUP INC. AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2020

(dollars in thousands)

The following table is a rollforward of the gross carrying amount and accumulated depreciation of real estate assets (depreciation is calculated on a straight line basis using the estimated useful lives detailed in “Note 2 - Summary of Significant Accounting Policies”):


	Years Ended December 31,
Gross carrying amount	2020		2019		2018
Beginning of period	$	2,545,800	$	2,513,769	$	2,511,762
Acquisitions	—		—		—
Additions	14,346		33,380		32,072
Sales and/or transfers to assets held for sale	(442,547)		—		(18,294)
Impairment of real estate held for sale	—		—		(8,725)
Disposals and other	407		(1,349)		(3,046)
End of period	$	2,118,006	$	2,545,800	$	2,513,769

Accumulated depreciation
Beginning of period	$	(439,274)	$	(358,368)	$	(275,794)
Depreciation expense	(65,914)		(80,937)		(87,698)
Sales and/or transfers to assets held for sale	87,733		—		5,124
Disposals and other	—		31		—
End of period	$	(417,455)	$	(439,274)	$	(358,368)

100

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

a.Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information is recorded, processed, summarized and reported accurately and on a timely basis. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2020, the Company’s disclosure controls and procedures are effective.

b.Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act of 1934, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States and includes those policies and procedures that:


•			pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•			provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
•			provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework.

Based on our assessment, management concluded that, as of December 31, 2020, the Company’s internal control over financial reporting was effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report included herein.

101

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding our executive officers is provided in Part I of this Annual Report on Form 10-K under the heading "Executive Officers of the Registrant".

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference to our definitive proxy statement for the 2021 annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A Exchange Act, within 120 days after the fiscal year ended December 31, 2020.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

102

PART IV

ITEM 15. EXHIBITS; FINANCIAL STATEMENT SCHEDULES

(a)

Financial statements and schedules:

See “Financial Statements and Supplementary Data” included in Part II, Item 8 of this Annual Report on Form 10-K.

(b)

Exhibits filed with this Annual Report on Form 10-K:

Exhibit No.

Exhibit Descriptions

Incorporated by Reference

Filed Herewith

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of New Senior Investment Group Inc.

8-K

001-36499

3.1

6/12/2019

3.2

Certificate of Designation for the Series A Preferred Stock.

8-K

001-36499

3.1

1/3/2019

3.3

Amended and Restated Bylaws of New Senior Investment Group Inc.

10-Q

001-36499

3.1

5/3/2020

4.1

Description of Securities

10.1

Transition Services Agreement, dated December 31, 2018, by and between New Senior Investment Group Inc. and FIG LLC

8-K

001-36499

10.1

1/3/2019

10.2**

Letter Agreement, dated November 16, 2018, by and between New Senior Investment Group Inc. and Susan Givens

10-K

001-36499

10.5

2/26/2019

10.3**

Letter Agreement, dated December 18, 2018, by and between New Senior Investment Group Inc. and Bhairav Patel

10-K

001-36499

10.7

2/26/2019

10.4**

Letter Agreement, dated April 9, 2020, by and between New Senior Investment Group Inc. and Lori B. Marino.

10-K

001-36499

10.7

2/28/2020

10.5**

Form of Indemnification Agreement by and between New Senior Investment Group Inc. and its directors and officers

001-36499

10.2

7/29/2014

10.6**

Amended and Restated New Senior Investment Group Inc. Nonqualified Stock Option and Incentive Award Plan

S-8

001-36499

99.1

1/22/2019

10.7**

Form of Restricted Stock Award Agreement

10-K

001-36499

10.10

2/26/2019

10.8**

Form of Option Award Agreement

10-K

001-36499

10.11

2/26/2019

10.9**

Form of Restricted Stock Unit Award Agreement for Directors

10-Q

001-36499

10.1

8/05/2019

10.10**

Form of Restricted Stock Unit Award Agreement for Executive Officers

10-Q

001-36499

10.2

8/05/2019

10.11**

Form of Performance Stock Unit Award Agreement for Executive Officers

10-Q

001-36499

10.3

8/05/2019

10.12

Multifamily Loan and Security Agreement - Seniors Housing dated as of August 12, 2015, by and between SNR 27 Alexis Gardens Owner LLC, a Delaware limited liability company, as Borrower (“Borrower”), and Walker & Dunlop, LLC, as Lender (“Lender”)

8-K

001-36499

10.1

8/17/2015

10.13

Multifamily Note - Fixed Rate Defeasance, dated as of August 12, 2015, executed by Borrower in favor of Lender, as defined in Exhibit 10.10

8-K

001-36499

10.2

8/17/2015

10.14

Master Multifamily Loan and Security Agreement - Senior Housing, dated as of October 10, 2018, by and among the entities listed on Schedule 1 thereto, as Borrowers, and Lender

8-K

001-36499

10.1

10/15/2018

103


10.15	Multifamily Note - Floating Rate, dated as of October 10, 2018, executed by Borrowers in favor of Lender	8-K	001-36499	10.2	10/15/2018
10.16	Credit Agreement, dated as of December 13, 2018, by and among the Company, as borrower, Agent, the lenders that are parties therein, and KeyBanc Capital Markets Inc., as lead arranger	8-K	001-36499	10.1	12/19/2018
10.17	First Amendment to Credit Agreement, dated as of May 10, 2019, by and among the Company, as borrower, Agent, the lenders that are parties therein, and KeyBanc Capital Markets Inc., as lead arranger	10-K	001-36499	10.20	2/28/2020
10.18	Second Amendment to Credit Agreement and Other Loan Documents, dated as of February 10, 2020, by and among the Company, as borrower, Agent, the lenders that are parties therein, and KeyBanc Capital Markets Inc., as lead arranger	8-K	001-36499	10.1	2/11/2020
10.19	Third Amendment to Credit Agreement and Other Loan Documents, dated as of April 7, 2020, by and among the Company, as borrower, Agent, the lenders that are parties therein, and KeyBanc Capital Markets Inc., as lead arranger	10-Q	001-36499	10.1	8/07/2020
10.20	Fourth Amendment to Credit Agreement and Other Loan Documents, dated as of June 29, 2020, by and among the Company, as borrower, Agent, the lenders that are parties therein, and KeyBanc Capital Markets Inc., as lead arranger	10-Q	001-36499	10.2	8/07/2020
10.21	Multifamily Loan and Security Agreement, dated as of February 10, 2020, by and between SNR 24 Bluebird Estates Owner LLC, as Borrower, and KeyBank National Association, as Lender	8-K	001-36499	10.2	2/11/2020
10.22	Multifamily Note – Floating Rate, dated as of February 10, 2020, executed by SNR 24 Bluebird Estates Owner LLC in favor of KeyBank National Association	8-K	001-36499	10.3	2/11/2020
10.23	Purchase and Sale Agreement, dated October 31, 2019, by and among the Seller and various purchaser parties named therein	8-K	001-36499	10.4	2/11/2020
21.1	Subsidiaries of the registrant					X
23.1	Consent of Ernst & Young LLP, independent registered accounting firm.					X
31.1	Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS*	Inline XBRL Instance Document.					X
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.					X
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.					X

104

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101

XBRL (Extensible Business Reporting Language) information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

Management contract or compensatory plan or arrangement.


In accordance with Instruction 2 to Item 601 of Regulation S-K, the Company has filed (i) only one of 28 Multifamily Loan and Security Agreements dated as of August 12, 2015 and the related Multifamily Notes as Exhibit 10.12 and Exhibit 10.13, respectively, (ii) only one of 50 Multifamily Loan and Security Agreements dated as of October 10, 2018 and the related Multifamily Notes as Exhibit 10.14 and Exhibit 10.15, respectively, and (iii) only one of the 14 Multifamily Loan and Security Agreements dated February 10, 2020 and the related Multifamily Notes as Exhibit 10.21 and 10.22, respectively. The omitted Multifamily Loan and Security Agreements and the related Multifamily Notes are substantially identical in all material respects to the Multifamily Loan and Security Agreements and Multifamily Notes that are filed as exhibits, except as to the borrower thereto, the principal amount and certain property-specific provisions.

ITEM 16. FORM 10-K SUMMARY

None.

105

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:


			NEW SENIOR INVESTMENT GROUP INC.
			By:			/s/ Bhairav Patel
			Name: Bhairav Patel
			Title: Executive Vice President of Finance and Accounting and Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

Director and Chief Executive Officer
(Principal Executive Officer)

/s/ Susan Givens

February 25, 2021

Susan Givens

Executive Vice President of Finance and Accounting and Interim Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

/s/ Bhairav Patel

February 25, 2021

Bhairav Patel

/s/ Robert F. Savage

Chairman of the Board

February 25, 2021

Robert F. Savage

/s/ Frances Aldrich Sevilla-Sacasa

Director

February 25, 2021

Frances Aldrich Sevilla-Sacasa

/s/ Virgis W. Colbert

Director

February 25, 2021

Virgis W. Colbert

/s/ Norman K. Jenkins

Director

February 25, 2021

Norman K. Jenkins

/s/ Michael D. Malone

Director

February 25, 2021

Michael D. Malone

/s/ Stuart A. McFarland

Director

February 25, 2021

Stuart A. McFarland

/s/ David H. Milner

Director

February 25, 2021

David H. Milner

/s/ Cassia van Hoof Holstein

Director

February 25, 2021

Cassia van Hoof Holstein

106

Exhibit 4.1

NEW SENIOR INVESTMENT GROUP INC.

DESCRIPTION OF COMMON STOCK

The following summary of our common stock is based on and qualified by our Amended and Restated Certificate of Incorporation (the “certificate of incorporation”), the Certificate of Designation (the “certificate of designation”) for our Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”), our Amended and Restated Bylaws (the “bylaws”) and applicable provisions of Delaware law. This summary is not complete. For a complete description of the terms and provisions of our common stock refer to the certificate of incorporation, bylaws and certificate of designation, all of which are filed as exhibits to this Annual Report on Form 10-K.

Our authorized capital stock consists of 2,000,000,000 shares of common stock, par value $0.01 per share, and 100,000,000 shares of preferred stock, par value $0.01 per share. As of December 31, 2019, 82,964,438 shares of our common stock were issued and outstanding and 400,000 shares of Series A Preferred Stock were issued and outstanding. All the outstanding shares of our common and preferred stock are fully paid and non-assessable.

Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Except as provided with respect to any other class or series of stock, the holders of our common stock will possess the exclusive right to vote for the election of directors and for all other purposes. Our certificate of incorporation and bylaws do not provide for cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of common stock can elect all of the directors standing for election, and the holders of the remaining shares will not be able to elect any directors.

Subject to any preference rights of holders the Series A Preferred Stock or any other preferred stock that we may issue in the future, holders of our common stock are entitled to receive dividends, if any, declared from time to time by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to share ratably in all assets remaining after the payment of liabilities, subject to the rights of the holders of the Series A Preferred Stock and any other of our preferred stock, if applicable, prior to distribution.

Holders of our common stock have no preemptive, subscription, redemption or conversion rights. Any shares of common stock issued pursuant to this prospectus will be validly issued, fully paid and nonassessable.

Restrictions on Ownership and Transfer of Capital Stock

In order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), for each taxable year beginning after December 31, 2014, our shares of capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, for our taxable years beginning after December 31, 2014, no more than 50% of the value of our outstanding shares of capital stock may be owned, directly or constructively, by five or fewer individuals (as defined in the Code to include certain entities) during the second half of any calendar year.

Our certificate of incorporation, subject to certain exceptions, contains restrictions on the number of shares of our capital stock that a person may own and may prohibit certain entities from owning our

shares. Our certificate of incorporation provides that (subject to certain exceptions described below) no person may beneficially or constructively own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding shares of common or capital stock. Pursuant to our certificate of incorporation, our board of directors has the power to increase or decrease the percentage of common or capital stock that a person may beneficially or constructively own. However, any decreased stock ownership limit will not apply to any person whose percentage ownership of our common or capital stock, as the case may be, is in excess of such decreased stock ownership limit until that person’s percentage ownership of our common or capital stock, as the case may be, equals or falls below the decreased stock ownership limit. Until such a person’s percentage ownership of our common or capital stock, as the case may be, falls below such decreased stock ownership limit, any further acquisition of common or capital stock will be in violation of the decreased stock ownership limit.

Our certificate of incorporation also prohibits any person from beneficially or constructively owning shares of our capital stock that would result in our being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT (including through ownership that results in our owning (actually or constructively) an interest in a tenant as described in Section 856(d)(2)(B) of the Code) and from transferring shares of our capital stock if the transfer would result in our capital stock being beneficially owned by fewer than 100 persons. Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our capital stock that will or may violate any of the foregoing restrictions on transferability and ownership, or who is the intended transferee of shares of our capital stock that are transferred to the trust (as described below), is required to give written notice immediately to us and provide us with such other information as we may request in order to determine the effect of such transfer on our qualification as a REIT. The foregoing restrictions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.

Our board of directors, in its sole discretion, may exempt a person from the foregoing restrictions. The person seeking an exemption must provide to our board of directors such conditions, representations and undertakings as our board of directors may deem reasonably necessary to conclude that granting the exemption will not cause us to lose our qualification as a REIT. Our board of directors may also require a ruling from the Internal Revenue Service (“IRS”) or an opinion of counsel in order to determine or ensure our qualification as a REIT in the context of granting such exemptions.

Any attempted transfer of our capital stock which, if effective, would result in a violation of the foregoing restrictions will cause the number of shares causing the violation (rounded up to the nearest whole share) to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries, and the proposed transferee will not acquire any rights in such shares. The automatic transfer will be deemed to be effective as of the close of business on the business day (as defined in our certificate of incorporation) prior to the date of the transfer. If, for any reason, the transfer to the trust does not occur or would not prevent a violation of the restrictions on ownership contained in our certificate of incorporation, our certificate of incorporation provides that the purported transfer will be void ab initio. Shares of our capital stock held in the trust will be issued and outstanding shares. The proposed transferee will not benefit economically from ownership of any shares of our capital stock held in the trust, will have no rights to dividends and no rights to vote or other rights attributable to the shares of capital stock held in the trust. The trustee of the trust will have all voting rights and rights to dividends or other distributions with respect to shares held in the trust. These rights will be exercised for the exclusive benefit of the charitable beneficiary. Any dividend or other distribution paid prior to our discovery that shares of capital stock have been transferred to the trust will be paid by the recipient to the trustee upon demand. Any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or distribution paid to the trustee will be held in trust for the charitable beneficiary. Subject to Delaware law,

the trustee will have the authority to rescind as void any vote cast by the proposed transferee prior to our discovery that the shares have been transferred to the trust and to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary. However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast the vote.

Within 20 days of receiving notice from us that shares of our capital stock have been transferred to the trust, the trustee will sell the shares to a person designated by the trustee, whose ownership of the shares will not violate the above ownership limitations. Upon such sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the proposed transferee and to the charitable beneficiary as follows: the proposed transferee will receive the lesser of (1) the price paid by the proposed transferee for the shares or, if the proposed transferee did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction), the market price (as defined in our certificate of incorporation) of the shares on the day of the event causing the shares to be held in the trust and (2) the price received by the trustee from the sale or other disposition of the shares. The trust may reduce the amount payable to the proposed transferee by the amount of dividends and distributions paid to the proposed transferee and owed by the proposed transferee to the trust.

Any net sale proceeds in excess of the amount payable to the proposed transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares of our capital stock have been transferred to the trust, the shares are sold by the proposed transferee, then (1) the shares shall be deemed to have been sold on behalf of the trust and (2) to the extent that the proposed transferee received an amount for the shares that exceeds the amount the proposed transferee was entitled to receive, the excess shall be paid to the trustee upon demand.

In addition, shares of our capital stock held in the trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and the market price on the date we, or our designee, accept the offer. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the proposed transferee.

Every owner of 5% or more (or such lower percentage as required by the Code or the regulations promulgated thereunder) in number or in value of all classes or series of our capital stock, including shares of our common stock, within 30 days after the end of each taxable year, will be required to give written notice to us stating the name and address of such owner, the number of shares of each class and series of shares of our capital stock that the owner beneficially owns and a description of the manner in which the shares are held. Each owner shall provide to us such additional information as we may request to determine the effect, if any, of the beneficial ownership on our qualification as a REIT and to ensure compliance with the ownership limitations. In addition, each such owner shall, upon demand, be required to provide to us such information as we may request, in good faith, to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance and to ensure compliance with the 9.8% ownership limitations in our certificate of incorporation.

These ownership limitations could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders.

Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation, Certificate of Designation and Bylaws

The following is a summary of certain provisions of our certificate of incorporation and bylaws that may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interest, including those attempts that might result in a premium over the market price for the shares held by stockholders.

Authorized but Unissued Shares

The authorized but unissued shares of our common stock will be available for future issuance without obtaining stockholder approval and the authorized but unissued shares of our preferred stock are available for future issuance with the approval of the holders of Series A Preferred Stock. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions, and employee benefit plans. The existence of authorized but unissued shares of our common stock and preferred stock could render more difficult or discourage an attempt to obtain control over us by means of a proxy contest, tender offer, merger or otherwise.

Delaware Business Combination Statute

We are organized under Delaware law. Some provisions of Delaware law may delay or prevent a transaction that would cause a change in our control. Our certificate of incorporation provides that Section 203 of the Delaware General Corporation Law (the “DGCL”), as amended, an anti-takeover law, will not apply to us. In general, this statute prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction by which that person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a business combination includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an interested stockholder is a person who, together with affiliates and associates, owns, or within three years prior, did own, 15% or more of voting stock.

Other Provisions of Our Certificate of Incorporation, Certificate of Designation and Bylaws

Our certificate of incorporation provides for a staggered board of directors consisting of three classes of directors. Directors of each class are chosen for three-year terms upon the expiration of their current terms and each year one class of our directors will be elected by our stockholders. There is no cumulative voting in the election of directors. This classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult. At least two annual meetings of stockholders, instead of one, will generally be required to effect a change in a majority of our board of directors.

Thus, the classified board provision could increase the likelihood that incumbent directors will retain their positions. The staggered terms of directors may delay, defer or prevent a tender offer or an attempt to change control of us, even though a tender offer or change in control might be believed by our stockholders to be in their best interest. In addition, our certificate of incorporation and bylaws provide that directors may be removed only for cause and only with the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote in the election of directors.

Pursuant to our certificate of incorporation, shares of our preferred stock may be issued from time to time, and the board of directors is authorized to determine and alter all rights, preferences, privileges, qualifications, limitations and restrictions without limitation.

The certificate of designation requires that we redeem the Series A Preferred Stock upon a Change of Control (as defined in the certificate of designation). If applicable law does not permit us to consummate such mandatory redemption because we do not have sufficient assets or funds legally available, then upon such Change of Control, all then outstanding shares of Series A Preferred Stock shall be purchased from the holders of Series A Preferred Stock by the acquiring person in such Change of Control for the Redemption Price (as defined in the certificate of designation). These provisions may dissuade potential purchasers from acquiring us if we are unable to pay the holders of Series A Preferred Stock the Redemption Price.

Stockholder Rights

Our certificate of incorporation and bylaws do not permit our stockholders to call special meetings of our stockholders. Written notice of any special meeting so called shall be given to each stockholder of record entitled to vote at such meeting not less than 10 or more than 60 days before the date of such meeting, unless otherwise required by law.

Our certificate of incorporation and bylaws provide that our stockholders may consent in writing to take any action in lieu of taking such action at a duly called annual or special meeting of our stockholders.

Our bylaws provide that nominations of persons for election to our board of directors may be made at any annual meeting of our stockholders, or at any special meeting of our stockholders called for the purpose of electing directors, (a) by or at the direction of our board of directors or (b) by any of our stockholders. In addition to any other applicable requirements, for a nomination to be properly brought by a stockholder, such stockholder must have given timely notice thereof in proper written form to our secretary. To be timely, a stockholder’s notice must be delivered to or mailed and received at our principal executive offices (a) in the case of an annual meeting of stockholders, not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by a stockholder in order to be timely must be so received not earlier than the opening of business 120 days before the date of such annual meeting and not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of our stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.

Our bylaws permit a stockholder, or a group of up to 20 stockholders, to nominate up to the greater of two director candidates or 20% of the number of directors then serving on the board of directors, if the nominating stockholder or group of stockholders has owned at least three percent or more of our outstanding common stock continuously for at least three years, provided that the stockholder(s) and the nominee(s) satisfy the eligibility, procedural and disclosure requirements specified in our bylaws. A proxy access nomination must be made not earlier than 150 days nor later than 120 days prior to the date the Company first distributed its proxy statement for the preceding year’s annual meeting of stockholders.

Our bylaws provide that no business may be transacted at any annual meeting of our stockholders, other than business that is either (a) specified in the notice of meeting given by or at the direction of our board of directors, (b) otherwise properly brought before the annual meeting by or at the direction of our board of directors, or (c) otherwise properly brought by any of our stockholders. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to our secretary. To be timely, a stockholder’s notice must be delivered to or mailed and received at our principal executive offices not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by a stockholder in order to be timely must be so received not earlier than the opening of business 120 days before the date of such annual meeting and not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. Our bylaws provide that no business may be transacted at any special meeting of our stockholders, other than business that is specified in the notice of meeting (or any supplement thereto).

Forum Selection Clause

Our bylaws provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers employees or agents owed to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine.

Limitations on Liability and Indemnification of Directors and Officers

Our certificate of incorporation and bylaws provide that our directors will not be personally liable to us or our stockholders for monetary damages for breach of a fiduciary duty as a director, except to the extent such limitation of liability is not permitted under the DGCL, as hereafter amended. The DGCL currently prohibits limitations on liability for:

a.any breach of the director’s duty of loyalty to us or our stockholders;

b.acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

c.liability under Delaware corporate law for an unlawful payment of dividends or an unlawful stock purchase or redemption of stock; or

d.any transaction from which the director derives an improper personal benefit.

Our certificate of incorporation and bylaws provide that we must indemnify our directors and officers to the fullest extent permitted by Delaware law. We are also expressly authorized to advance certain expenses (including attorneys’ fees and disbursements and court costs) to our directors and officers and carry directors’ and officers’ insurance providing indemnification for our directors and officers for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.

We have entered into separate indemnification agreements with each of our directors and executive officers. Each indemnification agreement provides, among other things, for indemnification to

the fullest extent permitted by law and our certificate of incorporation against (i) any and all expenses and liabilities, including judgments, fines, penalties and amounts paid in settlement of any claim and counsel fees and disbursements, (ii) any liability pursuant to a loan guaranty, or otherwise, for any of our indebtedness and (iii) any liabilities incurred as a result of acting on our behalf (as a fiduciary or otherwise) in connection with an employee benefit plan. The indemnification agreements provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law. These provisions and agreements may have the practical effect in some cases of eliminating our stockholders’ ability to collect monetary damages from our directors and executive officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, we have been informed that, in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Transfer Agent

The registrar and transfer agent for our common stock is Computershare Trust Company, N.A.

Listing

Our common stock is listed on the NYSE under the symbol “SNR.”

New Senior Entities as of December 31, 2020


Entity Name		Jurisdiction
1	New Senior Investment Group Inc.	Delaware
2	SNR Operations LLC (f/k/a TRS LLC)	Delaware
3	Propco LLC	Delaware
4	BF Leasing LLC	Delaware
5	BF Owner LLC	Delaware
6	B Leasing LLC	Delaware
7	B Owner LLC	Delaware
8	B California Leasing LLC	Delaware
9	B Oregon Leasing LLC	Delaware
10	B Arizona Leasing LLC	Delaware
11	B Utah Leasing LLC	Delaware
12	B Idaho Leasing LLC	Delaware
13	Orchard Park Leasing LLC	Delaware
14	Sunshine Villa Leasing LLC	Delaware
15	Sheldon Park Leasing LLC	Delaware
16	Desert Flower Leasing LLC	Delaware
17	Canyon Creek Leasing LLC	Delaware
18	Willow Park Leasing LLC	Delaware
19	B California Owner LLC	Delaware
20	B Oregon Owner LLC	Delaware
21	B Arizona Owner LLC	Delaware
22	B Utah Owner LLC	Delaware
23	B Idaho Owner LLC	Delaware
24	Orchard Park Owner LLC	Delaware
25	Sunshine Villa Owner LLC	Delaware
26	Sheldon Park Owner LLC	Delaware
27	Desert Flower Owner LLC	Delaware
28	Canyon Creek Owner LLC	Delaware
29	Willow Park Owner LLC	Delaware
30	RLG Leasing LLC	Delaware
31	RLG Owner LLC	Delaware
32	RLG Utah Leasing LLC	Delaware
33	RLG Utah Owner LLC	Delaware
34	Heritage Place Leasing LLC	Delaware
35	Golden Living Taylorsville Leasing LLC	Delaware


36	Chateau Brickyard Operations LLC	Delaware
37	Heritage Place Owner LLC	Delaware
38	Golden Living Taylorsville Owner LLC	Delaware
39	Chateau Brickyard Owner LLC	Delaware
40	Propco 2 LLC	Delaware
41	NIC Courtyards Owner LLC	Delaware
42	Propco 3 LLC	Delaware
43	NIC Courtyards Leasing LLC	Delaware
44	NIC Courtyards LLC	Delaware
45	NIC Acquisitions LLC	Delaware
46	NIC 4/5 Leasing LLC	Delaware
47	NIC 4 Florida Leasing LLC	Delaware
48	NIC 4 Village Place Leasing LLC	Delaware
49	NIC 4 Summerfield Leasing LLC	Delaware
50	NIC 4 Sunset Lake Leasing LLC	Delaware
51	NIC 4 North Carolina Leasing LLC	Delaware
52	NIC 4 Courtyards of New Bern Owner LP	Delaware
53	NIC 7 Glen Riddle Owner LLC	Delaware
54	NIC 7 Pennsylvania Owner LLC	Delaware
55	NIC 7 Owner LLC	Delaware
56	Propco 7 LLC	Delaware
57	NIC 6 Owner LLC	Delaware
58	Propco 6 LLC	Delaware
59	NIC 6 Manor at Woodside Management LLC	Delaware
60	NIC 6 New York Management LLC	Delaware
61	NIC 6 Management LLC	Delaware
62	NIC 6 New York Owner LLC	Delaware
63	NIC 7 Glen Riddle Leasing LLC	Delaware
64	NIC 7 Pennsylvania Leasing LLC	Delaware
65	NIC 7 Leasing LLC	Delaware
66	NIC Texas Courtyards Leasing LLC	Delaware
67	NIC 4 Royal Palm Leasing LLC	Delaware
68	NIC 6 Manor at Woodside Owner LLC	Delaware
69	NIC 4 Royal Palm Owner LLC	Delaware
70	Propco 9 LLC	Delaware
71	NIC 9 Virginia Owner LLC	Delaware
72	NIC 9 Heritage Oaks Owner LLC	Delaware
73	NIC 9 Virginia Management LLC	Delaware
74	NIC 9 Heritage Oaks Management LLC	Delaware
75	Propco 10 LLC	Delaware
76	NIC 10 Florida Leasing LLC	Delaware
77	NIC 10 Florida Owner LLC	Delaware
78	NIC 10 Barkley Place Leasing LLC	Delaware


79	NIC 10 Barkley Place Owner LLC	Delaware
80	Propco 12 LLC	Delaware
81	NIC 12 Owner LLC	Delaware
82	NIC 12 Arlington Plaza Owner LLC	Delaware
83	NIC 12 Blair House Owner LLC	Delaware
84	NIC 12 Blue Water Lodge Owner LLC	Delaware
85	NIC 12 Chateau Ridgeland Owner LLC	Delaware
86	NIC 12 Cherry Laurel Owner LLC	Delaware
87	NIC 12 Colonial Harbor Owner LLC	Delaware
88	NIC 12 Country Squire Owner LLC	Delaware
89	NIC 12 Courtyard At Lakewood Owner LLC	Delaware
90	NIC 12 Desoto Beach Club Owner LLC	Delaware
91	NIC 12 El Dorado Owner LLC	Delaware
92	NIC 12 Essex House Owner LLC	Delaware
93	NIC 12 Fleming Point Owner LLC	Delaware
94	NIC 12 Grasslands Estates Owner LLC	Delaware
95	NIC 12 Grizzly Peak Owner LLC	Delaware
96	NIC 13 Hidden Lakes Owner LLC	Delaware
97	NIC 12 Jackson Oaks Owner LLC	Delaware
98	NIC 12 Maple Downs Owner LLC	Delaware
99	NIC 12 Parkwood Estates Owner LLC	Delaware
100	NIC 12 Pioneer Valley Lodge Owner LLC	Delaware
101	NIC 12 Regency Residence Owner LLC	Delaware
102	NIC 12 Simi Hills Owner LLC	Delaware
103	NIC 12 Stoneybrook Lodge Owner LLC	Delaware
104	NIC 12 Summerfield Estates Owner LLC	Delaware
105	NIC 12 Ventura Place Owner LLC	Delaware
106	Propco 13 LLC	Delaware
107	NIC 13 Owner LLC	Delaware
108	NIC 13 The Bentley Owner LLC	Delaware
109	NIC 12 Briarcrest Estates Owner LLC	Delaware
110	NIC 13 Dogwood Estates Owner LLC	Delaware
111	NIC 13 Durham Regent Owner LP	Delaware
112	NIC 13 Fountains At Hidden Lakes Owner LLC	Delaware
113	NIC 13 Illahee Hills Owner LLC	Delaware
114	NIC 13 Jordan Oaks Owner LP	Delaware
115	NIC 13 Lodge at Cold Spring Owner LLC	Delaware
116	NIC 13 Madison Estates Owner LLC	Delaware
117	NIC 13 Manor at Oakridge Owner LLC	Delaware
118	NIC 13 Oakwood Hills Owner LLC	Delaware
119	NIC 13 Orchid Terrace Owner LLC	Delaware
120	NIC 13 Palmer Hills Owner LLC	Delaware


121	NIC 13 Pinewood Hills Owner LLC	Delaware
122	NIC 13 Pueblo Regent Owner LLC	Delaware
123	NIC 13 The Regent Owner LLC	Delaware
124	NIC 13 Rock Creek Owner LLC	Delaware
125	NIC 13 Sheldon Oaks Owner LLC	Delaware
126	NIC 13 Sky Peaks Owner LLC	Delaware
127	NIC 13 Thornton Place Owner LLC	Delaware
128	NIC 13 Uffelman Estates Owner LLC	Delaware
129	NIC 13 Village Gate Owner LLC	Delaware
130	NIC 13 Vista De La Montana Owner LLC	Delaware
131	NIC 13 Walnut Woods Owner LLC	Delaware
132	NIC 13 The Westmont Owner LLC	Delaware
133	NIC 13 Whiterock Court Owner LLC	Delaware
134	Propco 4 LLC	Delaware
135	NIC 4 Owner LLC	Delaware
136	NIC 4 Florida Owner LLC	Delaware
137	NIC 4 North Carolina Owner LLC	Delaware
138	NIC 4 Courtyards of New Bern Leasing LLC	Delaware
139	NIC 4 Village Place Owner LLC	Delaware
140	NIC 4 Summerfield Owner LLC	Delaware
141	NIC 4 Sunset Lake Owner LLC	Delaware
142	NIC 12 Greeley Place Owner LLC	Delaware
143	SNR Admin LLC (f/k/a NIC 14 Ohio Leasing LLC)	Delaware
144	NIC 15 New Hampshire Leasing LLC	Delaware
145	NIC 15 Pines of New Market Leasing LLC	Delaware
146	NIC 15 Kirkwood Corners Leasing LLC	Delaware
147	NIC 15 Pine Rock Manor Leasing LLC	Delaware
148	Propco 15 LLC	Delaware
149	NIC 15 New Hampshire Owner LLC	Delaware
150	NIC 15 Pines of New Market Owner LLC	Delaware
151	NIC 15 Pine Rock Manor Owner LLC	Delaware
152	NIC 15 Kirkwood Corners Owner LLC	Delaware
153	Propco 17 LLC	Delaware
154	NIC 17 Owner LLC	Delaware
155	NIC 17 Windsor Owner LLC (f/k/a NIC 10 Primrose Santa Rosa Owner LLC)	Delaware
156	NIC 17 Leasing LLC	Delaware
157	NIC 17 Windsor Leasing LLC	Delaware
158	Propco 18 LLC	Delaware
159	NIC 18 Owner LLC	Delaware
160	NIC 18 Gardens Owner LLC	Delaware
161	NIC 18 Leasing LLC	Delaware


162	NIC 18 Gardens Leasing LLC	Delaware
163	Propco 19 LLC	Delaware
164	NIC 19 Owner LLC	Delaware
165	NIC 19 Powell Owner LLC	Delaware
166	NIC 19 Raintree Owner LLC	Delaware
167	NIC 19 Leasing LLC	Delaware
168	NIC 19 Powell Leasing LLC	Delaware
169	NIC 19 Raintree Leasing LLC	Delaware
170	Propco 20 LLC	Delaware
171	NIC 20 Owner LLC	Delaware
172	NIC 20 Grand View Owner LLC	Delaware
173	NIC 20 Leasing LLC	Delaware
174	NIC 20 Grand View Leasing LLC	Delaware
175	Propco 21 LLC	Delaware
176	SNR 21 Owner LLC	Delaware
177	SNR 21 Logan Square Owner LLC	Delaware
178	Propco 22 LLC	Delaware
179	SNR 22 Owner LLC	Delaware
180	SNR 22 OKC Owner LLC	Delaware
181	SNR 22 Shreveport Owner LLC	Delaware
182	SNR 22 Winston Salem Owner LP	Delaware
183	SNR 22 Management LLC	Delaware
184	SNR 22 OKC Management LLC	Delaware
185	SNR 22 Shreveport Management LLC	Delaware
186	SNR 22 Winston-Salem Management LLC	Delaware
187	Propco 23 LLC	Delaware
188	SNR 23 Owner LLC	Delaware
189	SNR 23 Ivy Springs Owner LLC	Delaware
190	SNR 23 Grace Manor Owner LLC	Delaware
191	SNR 23 SNR Leasing LLC	Delaware
192	SNR 23 Ivy Springs Leasing LLC	Delaware
193	SNR 23 Grace Manor Leasing LLC	Delaware
194	Propco 24 LLC	Delaware
195	SNR 24 Owner LLC	Delaware
196	SNR 24 Bluebird Estates Owner LLC	Delaware
197	SNR 24 Bridge Park Owner LLC	Delaware
198	SNR 24 Chateau at Harveston Owner LLC	Delaware
199	SNR 24 Copley Place Owner LLC	Delaware
200	SNR 24 Crescent Heights Owner LP	Delaware
201	SNR 24 Cypress Woods Owner LLC	Delaware
202	SNR 24 Golden Oaks Owner LLC	Delaware
203	SNR 24 Lodge at Wake Forest Owner LP	Delaware
204	SNR 24 Maple Suites Owner LLC	Delaware


205	SNR 24 Olympus Ranch Owner LLC	Delaware
206	SNR 24 Peninsula Owner LLC	Delaware
207	SNR 24 Rancho Village Owner LLC	Delaware
208	SNR 24 Rolling Hills Ranch Owner LLC	Delaware
209	SNR 24 Shads Landing Owner LP	Delaware
210	SNR 24 Sterling Court Owner LLC	Delaware
211	SNR 24 Venetian Gardens Owner LLC	Delaware
212	SNR 24 Windward Palms Owner LLC	Delaware
213	SNR 24 Management LLC	Delaware
214	SNR 24 Bluebird Estates Management LLC	Delaware
215	SNR 24 Bridge Park Management LLC	Delaware
216	SNR 24 Chateau at Harveston Management LLC	Delaware
217	SNR 24 Copley Place Management LLC	Delaware
218	SNR 24 Crescent Heights Management LLC	Delaware
219	SNR 24 Cypress Woods Management LLC	Delaware
220	SNR 24 Golden Oaks Management LLC	Delaware
221	SNR 24 Lodge at Wake Forest Management LLC	Delaware
222	SNR 24 Maple Suites Management LLC	Delaware
223	SNR 24 Olympus Ranch Management LLC	Delaware
224	SNR 24 Peninsula Management LLC	Delaware
225	SNR 24 Rancho Village Management LLC	Delaware
226	SNR 24 Rolling Hills Ranch Management LLC	Delaware
227	SNR 24 Shads Landing Management LLC	Delaware
228	SNR 24 Sterling Court Management LLC	Delaware
229	SNR 24 Venetian Gardens Management LLC	Delaware
230	SNR 24 Windward Palms Management LLC	Delaware
231	Propco 25 LLC	Delaware
232	SNR 25 Owner LLC	Delaware
233	SNR 25 Legacy at Bear Creek Owner LLC	Delaware
234	SNR 25 Legacy at Georgetown Owner LLC	Delaware
235	SNR 25 Leasing LLC	Delaware
236	SNR 25 Legacy at Bear Creek Leasing LLC	Delaware
237	SNR 25 Legacy at Georgetown Leasing LLC	Delaware
238	Propco 27 LLC	Delaware
239	SNR 27 Owner LLC	Delaware
240	SNR 27 Alexis Gardens Owner LLC	Delaware
241	SNR 27 Andover Place Owner LLC	Delaware
242	SNR 27 Arcadia Place Owner LLC	Delaware
243	SNR 27 Aspen View Owner LLC	Delaware
244	SNR 27 Augustine Landing Owner LLC	Delaware
245	SNR 27 Cedar Ridge Owner LP	Delaware


246	SNR 27 Echo Ridge Owner LLC	Delaware
247	SNR 27 Elm Park Estates Owner LLC	Delaware
248	SNR 27 Genesee Gardens Owner LLC	Delaware
249	SNR 27 Greenwood Terrace Owner LLC	Delaware
250	SNR 27 Holiday Hills Estates Owner LLC	Delaware
251	SNR 27 Indigo Pines Owner LLC	Delaware
252	SNR 27 Kalama Heights Owner LLC	Delaware
253	SNR 27 Marion Woods Owner LLC	Delaware
254	SNR 27 Montara Meadows Owner LLC	Delaware
255	SNR 27 Niagara Village Owner LLC	Delaware
256	SNR 27 Parkrose Chateau Owner LLC	Delaware
257	SNR 27 Pinegate Owner LLC	Delaware
258	SNR 27 Quail Run Estates Owner LLC	Delaware
259	SNR 27 Quincy Place Owner LLC	Delaware
260	SNR 27 Redbud Hills Owner LLC	Delaware
261	SNR 27 Stone Lodge Owner LLC	Delaware
262	SNR 27 The Jefferson Owner LLC	Delaware
263	SNR 27 The Remington Owner LLC	Delaware
264	SNR 27 The Springs of Escondido Owner LLC	Delaware
265	SNR 27 The Springs of Napa Owner LLC	Delaware
266	SNR 27 The Woods at Holly Tree Owner LP	Delaware
267	SNR 27 University Pines Owner LLC	Delaware
268	SNR 27 Management LLC	Delaware
269	SNR 27 Alexis Gardens Management LLC	Delaware
270	SNR 27 Andover Place Management LLC	Delaware
271	SNR 27 Arcadia Place Management LLC	Delaware
272	SNR 27 Aspen View Management LLC	Delaware
273	SNR 27 Augustine Landing Management LLC	Delaware
274	SNR 27 Cedar Ridge Management LLC	Delaware
275	SNR 27 Echo Ridge Management LLC	Delaware
276	SNR 27 Elm Park Estates Management LLC	Delaware
277	SNR 27 Genesee Gardens Management LLC	Delaware
278	SNR 27 Greenwood Terrace Management LLC	Delaware
279	SNR 27 Holiday Hills Estates Management LLC	Delaware
280	SNR 27 Indigo Pines Management LLC	Delaware
281	SNR 27 Kalama Heights Management LLC	Delaware
282	SNR 27 Marion Woods Management LLC	Delaware
283	SNR 27 Montara Meadows Management LLC	Delaware
284	SNR 27 Niagara Village Management LLC	Delaware


285	SNR 27 Parkrose Chateau Management LLC	Delaware
286	SNR 27 Pinegate Management LLC	Delaware
287	SNR 27 Quail Run Estates Management LLC	Delaware
288	SNR 27 Quincy Place Management LLC	Delaware
289	SNR 27 Redbud Hills Management LLC	Delaware
290	SNR 27 Stone Lodge Management LLC	Delaware
291	SNR 27 The Jefferson Management LLC	Delaware
292	SNR 27 The Remington Management LLC	Delaware
293	SNR 27 The Springs of Escondido Management LLC Delaware	Delaware
294	SNR 27 The Springs of Napa Management LLC	Delaware
295	SNR 27 The Woods at Holly Tree Management LLC Delaware	Delaware
296	SNR 27 University Pines Management LLC	Delaware
297	NIC 4 Courtyards of New Bern Inc.	Delaware
298	NIC 13 Durham Regent Inc.	Delaware
299	NIC 13 Jordan Oaks Inc.	Delaware
300	SNR 22 Winston Salem Inc.	Delaware
301	SNR 24 Crescent Heights Inc.	Delaware
302	SNR 24 Lodge at Wake Forest Inc.	Delaware
303	SNR 24 Shads Landing Inc.	Delaware
304	SNR 27 Cedar Ridge Inc.	Delaware
305	SNR 27 The Woods at Holly Tree Inc.	Delaware
306	NIC 4 Courtyards of New Bern GP LLC	Delaware
307	NIC 13 Durham Regent Owner GP LLC	Delaware
308	NIC 13 Jordan Oaks Owner GP LLC	Delaware
309	SNR 22 Winston Salem Owner GP LLC	Delaware
310	SNR 24 Crescent Heights Owner GP LLC	Delaware
311	SNR 24 Lodge at Wake Forest Owner GP LLC	Delaware
312	SNR 24 Shads Landing Owner GP LLC	Delaware
313	SNR 27 Cedar Ridge Owner GP LLC	Delaware
314	SNR 27 The Woods at Holly Tree GP LLC	Delaware
315	NIC 12/13 Management LLC	Delaware
316	NIC 12 Arlington Plaza Management LLC	Delaware
317	NIC 13 The Bentley Management LLC	Delaware
318	NIC 12 Blair House Management LLC	Delaware
319	NIC 12 Blue Water Lodge Management LLC	Delaware
320	NIC 12 Briarcrest Estates Management LLC	Delaware
321	NIC 12 Chateau Ridgeland Management LLC	Delaware
322	NIC 12 Cherry Laurel Management LLC	Delaware
323	NIC 12 Colonial Harbor Management LLC	Delaware


324	NIC 12 Country Squire Management LLC	Delaware
325	NIC 12 Courtyard at Lakewood Management LLC	Delaware
326	NIC 12 Desoto Beach Club Management LLC	Delaware
327	NIC 13 Dogwood Estates Management LLC	Delaware
328	NIC 13 Durham Regent Management LLC	Delaware
329	NIC 12 El Dorado Management LLC	Delaware
330	NIC 12 Essex House Management LLC	Delaware
331	NIC 12 Fleming Point Management LLC	Delaware
332	NIC 13 Fountains at Hidden Lakes Management LLC	Delaware
333	NIC 12 Grasslands Estates Management LLC	Delaware
334	NIC 12 Greeley Place Management LLC	Delaware
335	NIC 12 Grizzly Peak Management LLC	Delaware
336	NIC 13 Hidden Lakes Management LLC	Delaware
337	NIC 13 Illahee Hills Management LLC	Delaware
338	NIC 12 Jackson Oaks Management LLC	Delaware
339	NIC 13 Jordan Oaks Management LLC	Delaware
340	NIC 13 Lodge at Cold Spring Management LLC	Delaware
341	NIC 13 Madison Estates Management LLC	Delaware
342	NIC 13 Manor at Oakridge Management LLC	Delaware
343	NIC 12 Maple Downs Management LLC	Delaware
344	NIC 13 Oakwood Hills Management LLC	Delaware
345	NIC 13 Orchid Terrace Management LLC	Delaware
346	NIC 13 Palmer Hills Management LLC	Delaware
347	NIC 12 Parkwood Estates Management LLC	Delaware
348	NIC 13 Pinewood Hills Management LLC	Delaware
349	NIC 12 Pioneer Valley Lodge Management LLC	Delaware
350	NIC 13 Pueblo Regent Management LLC	Delaware
351	NIC 12 Regency Residence Management LLC	Delaware
352	NIC 13 The Regent Management LLC	Delaware
353	NIC 13 Rock Creek Management LLC	Delaware
354	NIC 13 Sheldon Oaks Management LLC	Delaware
355	NIC 12 Simi Hills Management LLC	Delaware
356	NIC 13 Sky Peaks Management LLC	Delaware
357	NIC 12 Stoneybrook Lodge Management LLC	Delaware
358	NIC 12 Summerfield Estates Management LLC	Delaware
359	NIC 13 Thornton Place Management LLC	Delaware
360	NIC 13 Uffelman Estates Management LLC	Delaware
361	NIC 12 Ventura Place Management LLC	Delaware


362	NIC 13 Village Gate Management LLC	Delaware
363	NIC 13 Vista De La Montana Management LLC	Delaware
364	NIC 13 Walnut Woods Management LLC	Delaware
365	NIC 13 The Westmont Management LLC	Delaware
366	NIC 13 Whiterock Court Management LLC	Delaware
367	SNR 24 Dover Owner LLC	Delaware

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

1.Registration Statement (Form S-3 No. 333-225762) of New Senior Investment Group Inc. and Subsidiaries, and

2.Registration Statement (Form S-8 No. 333-229326) pertaining to the Nonqualified Stock Option and Incentive Award Plan of New Senior Investment Group Inc. and Subsidiaries;

of our reports dated February 25, 2021, with respect to the consolidated financial statements and schedule of New Senior Investment Group Inc. and Subsidiaries and the effectiveness of internal control over financial reporting of New Senior Investment Group Inc. and Subsidiaries included in this Annual Report (Form 10-K) of New Senior Investment Group Inc. and Subsidiaries for the year ended December 31, 2020.

/s/ Ernst & Young LLP

New York, New York

February 25, 2021

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, Susan Givens, certify that:

1.	I have reviewed this annual report on Form 10-K of New Senior Investment Group Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d – 15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


February 25, 2021			/s/ Susan Givens
(Date)			Susan Givens
			Director and Chief Executive Officer (Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, Bhairav Patel, certify that:

1.	I have reviewed this annual report on Form 10-K of New Senior Investment Group Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d – 15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


February 25, 2021			/s/ Bhairav Patel
(Date)			Bhairav Patel
			Executive Vice President of Finance and Accounting and Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

EXHIBIT 32.1

CERTIFICATION OF CEO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of New Senior Investment Group Inc. (the “Company”) for the annual period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Susan Givens, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of her knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Susan Givens
Susan Givens
Director and Chief Executive Officer (Principal Executive Officer)
February 25, 2021

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION OF CFO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of New Senior Investment Group Inc. (the “Company”) for the annual period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Bhairav Patel, as Interim Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Bhairav Patel
Bhairav Patel
Executive Vice President of Finance and Accounting and Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
February 25, 2021