•our previously existing master leases with Five Star for all of our senior living communities that Five Star leased, as well as our previously existing management agreements and pooling agreements with Five Star for our senior living communities that Five Star managed, were terminated and replaced with new management agreements and a related omnibus agreement. These new management and omnibus agreements were subsequently replaced in June 2021, as described below;

•as consideration for these share issuances, we provided Five Star with $75,000 of additional consideration by assuming certain of Five Star's working capital liabilities and through cash payments, resulting in a gain on lease termination of

•pursuant to a guaranty agreement dated as of January 1, 2020 made by Five Star in favor of our applicable subsidiaries, Five Star has guaranteed the payment and performance of each of its applicable subsidiary's obligations under our applicable management agreements with Five Star.

Effective January 1, 2020, we determined that Five Star was not a VIE and we continue to account for our 33.7% investment in Five Star using the equity method of accounting because we are deemed to exert significant influence, but not control, over Five Star's most significant activities. We have elected to use the fair value option to account for our investment in Five Star.

•that we no longer have the right to sell up to an additional $682,000 of senior living communities currently managed by Five Star and terminate Five Star's management of those communities without our payment of a fee to Five Star upon sale;

•that Five Star is continuing to manage 120 of our senior living communities with approximately 18,000 living units, and that the skilled nursing units in all of our continuing care retirement communities that Five Star is continuing to manage, which then included approximately 1,500 living units, have been closed and are in the process of being evaluated and repositioned;

•that beginning in 2025, we will have the right to terminate up to 10% of the senior living communities that Five Star is continuing to manage, based on total revenues per year for failure to meet 80% of a target earnings before interest, taxes, depreciation and amortization, or EBITDA, for the applicable period;

•that the incentive fee that Five Star may earn in any calendar year for the senior living communities that Five Star is continuing to manage is no longer subject to a cap and that any senior living communities that are undergoing a major renovation or repositioning are excluded from the calculation of the incentive fee;

Pursuant to these changes, we and Five Star entered into an amended and restated master management agreement, or the Master Management Agreement, for the senior living communities that Five Star is continuing to manage and interim management agreements for the senior living communities that we and Five Star agreed to transition to new operators. These agreements replaced our prior management and omnibus agreements with Five Star. In addition, Five Star delivered to us a related amended and restated guaranty agreement pursuant to which Five Star is continuing to guarantee the payment and performance of each of its applicable subsidiary's obligations under the applicable management agreements.

As of September 30, 2021, we transitioned 69 of the 108 senior living communities containing 4,755 living units to new third party managers. From September 30, 2021 to November 3, 2021, we completed the transition of 30 senior living communities containing 1,845 living units to new third party managers. As of November 3, 2021, we have entered into agreements to transition eight of the remaining nine senior living communities to be transitioned containing 819 living units to new third party managers. We expect to complete the transition of 107 senior living communities from Five Star by December 31, 2021 and we currently intend to close the remaining senior living community that we and Five Star agreed to transition and are assessing opportunities to redevelop that community. We lease our senior living communities that have been transitioned to new managers to our taxable REIT subsidiaries, or TRSs. We have incurred and expect to continue to incur costs related to

retention and other transition costs for these communities. For the three and nine months ended September 30, 2021, we recorded $3,123 and $15,037, respectively, of these costs to acquisition and certain other transaction related costs in our condensed consolidated statements of comprehensive income (loss).

Pursuant to the terms of the management agreements with the new third party managers, the terms are generally as follows: the new third party managers will receive a management fee equal to 5% to 6% of the gross revenues realized at the applicable senior living communities plus reimbursement for direct costs and expenses related to such communities. These agreements generally also provide for the new third party managers to earn a minimum base fee for a portion of the term of the agreement. Additionally, the new third party managers have the ability to earn incentive fees equal to 15% to 25% of the amount by which EBITDA of the communities exceeds the target EBITDA. The new third party managers can also earn a construction supervision fee ranging between 3% and 5% of construction costs.

The initial terms of the management agreements with the new third party managers are generally five years, subject to automatic extensions of successive terms of two years each unless earlier terminated or timely notice of nonrenewal is delivered. The management agreements with the new third party managers also generally provide us with the right to terminate the management agreements for communities that do not earn 70% to 80% of the target EBITDA for such communities, after an agreed upon stabilized period.

Our Senior Living Communities Managed by Five Star. Five Star managed 159 and 239 of our senior living communities as of September 30, 2021 and 2020, respectively. We lease our senior living communities that are managed by Five Star to our TRSs.

We incurred management fees payable to Five Star of $11,220 and $15,182 for the three months ended September 30, 2021 and 2020, respectively, and $37,997 and $47,937 for the nine months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, $10,518 and $14,609, respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $702 and $573, respectively, were capitalized in our condensed consolidated balance sheets. For the nine months ended September 30, 2021 and 2020, $35,746 and $46,458, respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $2,251 and $1,479, respectively, were capitalized in our condensed consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.

We incurred fees of $1,508 and $5,972 for the three months ended September 30, 2021 and 2020, respectively, and $9,579 and $19,843 for the nine months ended September 30, 2021 and 2020, respectively, with respect to rehabilitation services Five Star provided at senior living communities that are payable by us. These amounts are included in property operating expenses in our condensed consolidated statements of comprehensive income (loss).

As a result of routine monitoring protocols that are a part of Five Star's compliance program activities related to Medicare billing, Five Star discovered potentially inadequate documentation at one of our senior living communities that Five Star manages. This monitoring was not initiated in response to any specific complaint or allegation but rather was of the type that Five Star periodically undertakes to test its compliance with applicable Medicare billing rules. We and Five Star voluntarily disclosed this matter to the United States Department of Health and Human Services, Office of the Inspector General, or the OIG, pursuant to the OIG’s Provider Self-Disclosure Protocol. In January 2021, we and Five Star settled this matter with the OIG and we agreed to pay approximately $5,763 in exchange for a customary release, but we and Five Star did not admit any liability. We recognized that amount in our consolidated statement of comprehensive income (loss) during the year ended December 31, 2020 and paid that amount to the OIG in January 2021. Five Star refunded to us approximately $115 of management fees it previously received relating to the Medicare payments we refunded to the OIG.

Since January 1, 2020, we sold certain senior living communities that were then managed by Five Star. We and Five Star terminated our management agreements for these senior living communities in connection with these sales. See Note 3 to the consolidated financial statements contained in our Annual Report for further information regarding these sales.

We lease to Five Star space at certain of our senior living communities, which it uses to provide certain outpatient rehabilitation and wellness services. We recorded $399 and $393 for the three months ended September 30, 2021 and 2020, respectively, and $1,194 and $1,175 for the nine months ended September 30, 2021 and 2020, respectively, with respect to these leases.


	Three Months Ended September 30,				Nine Months Ended September 30,
Revenue from contracts with customers:	2021		2020		2021		2020
Basic housing and support services	$	188,381	$	208,941	$	564,579	$	659,240
Medicare and Medicaid programs	18,948		38,882		79,803		131,460
Private pay and other third party payer SNF services	28,684		42,278		95,544		135,474
Total residents fees and services	$	236,013	$	290,101	$	739,926	$	926,174