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Debt | 9 Months Ended
--- | ---
Sep. 30, 2024
Debt Disclosure [Abstract] |
Debt | 6. Debt Long-term debt consists of the following.
(in thousands) | September 30, 2024 |  | December 31, 2023
Fixed rate mortgage notes payable due 2026 through 2047; weighted average interest rate of 4.37% and 4.26% as of September 30, 2024 and December 31, 2023, respectively. | $ | 2,067,155 |  |  | $ | 1,953,414 |
Variable rate mortgage notes payable due 2025 through 2030; weighted average interest rate of 7.53% and 7.74% as of September 30, 2024 and December 31, 2023, respectively | 1,416,783 |  |  | 1,524,907 |
Convertible notes payable due October 2026; interest rate of 2.00% as of both September 30, 2024 and December 31, 2023 | 230,000 |  |  | 230,000 |
Tangible equity units senior amortizing notes due November 2025; interest rate of 10.25% as of both September 30, 2024 and December 31, 2023 | 11,666 |  |  | 17,990 |
Notes payable for insurance premium financing due 2024; interest rate of 7.40% as of September 30, 2024 | 5,872 |  |  | — |
Deferred financing costs, net | (25,454) |  |  | (28,998) |
Total long-term debt | 3,706,022 |  |  | 3,697,313 |
Current portion | 51,525 |  |  | 41,463 |
Total long-term debt, less current portion | $ | 3,654,497 |  |  | $ | 3,655,850 |
As of September 30, 2024, the long-term debt, less current portion within the Company's condensed consolidated balance sheet includes $100.0 million of mortgage notes payable scheduled to mature in January 2025 with two one-year extension options, exercisable by the Company subject to the satisfaction of certain conditions. As of September 30, 2024, 91.5%, or $3.4 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings. As of September 30, 2024, $58.5 million of letters of credit and no cash borrowings were outstanding under the Company's $100.0 million secured credit facility. The Company also had a separate secured letter of credit facility providing up to $17.0 million of letters of credit as of September 30, 2024 under which $15.7 million had been issued as of that date. 2024 Mortgage Financings In February 2024, the Company obtained $50.0 million of debt secured by first priority mortgages on 11 communities. The loan bears interest at a variable rate equal to SOFR plus a margin of 350 basis points. The debt matures in February 2027 with two one-year extension options, exercisable subject to certain performance criteria. In September 2024, the Company obtained $182.5 million of debt secured by first priority mortgages on 16 communities. The loan bears interest at a fixed rate of 5.67% and is interest only for the first two years. The debt matures in October 2029. At the closing, the Company repaid $197.1 million of outstanding mortgage debt, which was scheduled to mature in September 2025, using proceeds from the $182.5 million debt and cash on hand. Convertible Senior Notes On September 30, 2024, the Company entered into privately negotiated exchange and subscription agreements (the “Exchange and Subscription Agreements”) with certain holders (the "Investors") of the Company’s outstanding 2.00% convertible senior notes due 2026 (the “2026 Notes”), each of whom may have also beneficially owned shares of the Company's common stock as of such date and at closing. On October 3, 2024, pursuant to the Exchange and Subscription Agreements, the Company issued $369.4 million aggregate principal amount of its 3.50% convertible senior notes due 2029 (the “2029 New Notes”). At closing, $219.4 million principal amount of the 2029 New Notes were issued in exchange for $206.7 million principal amount of the 2026 Notes and $150.0 million principal amount of the 2029 New Notes were issued for cash. The 2029 New Notes were issued pursuant to, and are governed by, an Indenture (the “2029 New Notes Indenture”), dated as of October 3, 2024 between the Company and Equiniti Trust Co., as trustee (the “Trustee”). Following the closing, $23.3 million in aggregate principal amount of the 2026 Notes remain outstanding with the terms unchanged. The 2029 New Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of its indebtedness that is expressly subordinated in right of payment to the 2029 New Notes, and equal in right of payment to any indebtedness that is not so subordinated. The 2029 New Notes are effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally junior to all indebtedness and other liabilities (including trade payables) and any preferred equity of current or future subsidiaries of the Company. Under the terms of the 2029 New Notes Indenture, subject to certain exceptions, the Company may not incur pari passu indebtedness in an aggregate principal amount exceeding $500 million. The 2029 New Notes bear interest at a rate of 3.50% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2025. The 2029 New Notes will mature on October 15, 2029, unless earlier converted or repurchased in accordance with their terms. Holders of the 2029 New Notes may convert all or any portion of their 2029 New Notes at their option at any time prior to the close of business on the business day immediately preceding July 15, 2029, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2024 (and only during such calendar quarter), if the last reported sale price of the common stock of the Company for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2029 New Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock of the Company and the conversion rate for the 2029 New Notes on each such trading day; or (3) upon the occurrence of specified corporate events. On or after July 15, 2029, holders may convert all or any portion of their 2029 New Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. Under the 2029 New Notes Indenture, the Company will not be obligated to deliver any shares of common stock to any holder upon any conversion of the 2029 New Notes whereby such holder would beneficially own a number of shares of Company common stock in excess of 19.9% of the total number of shares of Company common stock issued and outstanding immediately following such conversion. The conversion rate for the 2029 New Notes will initially be 111.1111 shares of common stock per $1,000 principal amount of the 2029 New Notes (equivalent to an initial conversion price of approximately $9.00 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its 2029 New Notes in connection with such a corporate event. The Company does not have the right to redeem the 2029 New Notes at its election before the maturity date. No sinking fund is provided for the 2029 New Notes. The Company’s net cash proceeds from the exchange and issuance transactions, after subtracting fees, discounts and estimated expenses payable by the Company, were approximately $135.0 million. The Company intends to use the proceeds to fund acquisitions and for general corporate purposes. The Company expects to recognize an approximately $15.0 million loss on debt extinguishment in the three months ended December 31, 2024 for the completed exchange and issuance transactions. Financial Covenants Certain of the Company's debt documents contain restrictions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and debt service ratios, and requiring the Company not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. In addition, the Company's debt documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. The Company's failure to comply with applicable covenants could constitute an event of default under the applicable debt documents. Many of the Company's debt documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Furthermore, the Company's mortgage debt is secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of September 30, 2024, the Company is in compliance with the financial covenants of its debt agreements.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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