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Senior Living Community Management Agreements | 12 Months Ended
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Dec. 31, 2024
Risks and Uncertainties [Abstract] |
Senior Living Community Management Agreements | Senior Living Community Management Agreements Our managed senior living communities are operated by third parties pursuant to management agreements. Five Star Senior Living, or Five Star, which is an operating division of AlerisLife, manages 118 of our SHOP communities, and we lease nearly all of our senior living communities managed by third party managers, to our TRSs. Management Arrangements with Five Star. We and Five Star are parties to an amended and restated master management agreement, or the Master Management Agreement, for the senior living communities that Five Star manages for us. Pursuant to an amended and restated guaranty agreement, AlerisLife guarantees the payment and performance of each of its applicable subsidiary’s obligations under the applicable management agreements. Pursuant to the Master Management Agreement, Five Star receives a management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for its direct costs and expenses related to such communities. Five Star may receive an annual incentive fee equal to 15% of the amount by which the annual EBITDA of all communities on a combined basis exceeds the target EBITDA for all communities on a combined basis for such calendar year. The target EBITDA for those senior living communities on a combined basis is increased annually based on the greater of the annual increase of the consumer price index, or CPI, or 2%, plus 6% of any capital investments funded at the managed senior living communities on a combined basis in excess of the target capital investment. Unless otherwise agreed, the target capital investment increases annually based on the greater of the annual increase of CPI or 2%. Any senior living communities that are undergoing a major renovation or repositioning are excluded from the calculation of the incentive fee. The Master Management Agreement expires in 2036, subject to Five Star's right to extend for two consecutive five year terms if Five Star achieves certain performance targets for the combined managed communities portfolio, unless earlier terminated. Pursuant to the Master Management Agreement, beginning in 2025, we 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 EBITDA for the applicable period. In connection with ABP Trust’s acquisition of AlerisLife on March 20, 2023, we amended the Master Management Agreement to eliminate any change of control default or event of default provisions effective upon the consummation of the AlerisLife acquisition by ABP Trust. See Note 8 for further information regarding ABP Trust’s acquisition of AlerisLife. In 2021, we completed the transition of 107 of the 108 senior living communities, containing 7,340 living units, from Five Star to other third party managers. In January 2025, we sold a closed senior living community that had previously been managed by Five Star. We recorded $2,096 of costs that we incurred related to retention and other transition costs for the year ended December 31, 2022 to acquisition and certain other transaction related costs in our consolidated statements of comprehensive income (loss). Our Senior Living Communities Managed by Five Star. Five Star managed 118, 119 and 119 of our senior living communities as of December 31, 2024, 2023 and 2022, respectively. We lease our senior living communities that are managed by Five Star to our TRSs, and Five Star manages these communities pursuant to the Master Management Agreement. Effective October 31, 2022, Five Star ceased managing an active adult community we own located in Plano, TX, and RMR assumed management of that community pursuant to our property management agreement with RMR. We paid Five Star a termination fee of $350 in connection with the termination of Five Star's management of this community. We incurred management fees payable to Five Star of $42,474, $40,119 and $37,037 for the years ended December 31, 2024, 2023 and 2022, respectively. For the years ended December 31, 2024, 2023 and 2022, $40,212, $37,436 and $33,737, respectively, of the total management fees were expensed to property operating expenses in our consolidated statements of comprehensive income (loss) and $2,262, $2,683 and $3,300, respectively, were capitalized in our consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets. Prior to the sale of their Ageility business to Fox Rehabilitation on June 17, 2024, Five Star also provided certain other services to residents at some of the senior living communities it manages for us, such as rehabilitation services. At senior living communities Five Star manages for us where Five Star provided rehabilitation services on an outpatient basis, the residents, third party payers or government programs paid Five Star for those rehabilitation services. At senior living communities Five Star manages for us where Five Star provided both inpatient and outpatient rehabilitation services, we generally paid Five Star for those rehabilitation services and charges for these services were included in amounts charged to residents, third party payers or government programs. During 2023, Five Star closed all inpatient clinics and as such we do not expect to incur these fees to Five Star in the future. We incurred fees of $0, $1,213 and $6,289 for the years ended December 31, 2024, 2023 and 2022, respectively, with respect to rehabilitation services Five Star provided at our senior living communities that are payable by us. These amounts are included in property operating expenses in our consolidated statements of comprehensive income (loss). Since January 1, 2022, 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 for further information regarding these sales. We lease space to Five Star at certain of our senior living communities, which, prior to June 17, 2024, Five Star used to provide certain outpatient rehabilitation and wellness services through the Ageility branded business. Beginning on June 17, 2024, Five Star subleases this space to a subsidiary of Fox Rehabilitation, which acquired the Ageility branded business from AlerisLife on that date. Our Senior Living Communities Managed by Other Third Party Managers. As of December 31, 2024, 2023 and 2022, respectively, our other third party managers managed 114, 113 and 111 of our senior living communities. The terms of the management agreements with the other third party managers are generally as follows: the other 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 other third party managers to earn a minimum base fee for a portion of the term of the agreement. Additionally, the other third party managers have the ability to earn incentive fees equal to 15% to 25% of the amount by which EBITDA of the applicable communities exceeds the target EBITDA for the applicable communities. The other 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 other 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 other 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. In March 2024, we terminated our management agreement with one of our third party managers which managed 13 of our communities located in Wisconsin and Illinois and transitioned these communities to another third party manager with which we have an existing relationship. The terms of the management agreement for these communities are generally consistent with the terms of the existing management agreements with our other third party managers. We paid transition costs, including termination and other fees, of $2,228 related to the transition of these communities for the year ended December 31, 2024. We incurred management fees payable to our other third party managers of $23,283, $21,863 and $20,739 for the years ended December 31, 2024, 2023 and 2022, respectively. Additionally, we incurred incentive fees to certain of our other third party operators of $241 during the year ended December 31, 2024. These amounts are included in property operating expenses in our consolidated statements of comprehensive income (loss). The following table presents residents fees and services revenue from all of our managed senior living communities disaggregated by the type of contract and payer:
|  | Year Ended December 31,
Revenue from contracts with customers: |  | 2024 |  | 2023 |  | 2022
Basic housing and support services |  | $ | 972,307 |  |  | $ | 915,528 |  |  | $ | 806,500 |
Medicare and Medicaid programs |  | 100,341 |  |  | 89,613 |  |  | 82,106 |
Private pay and other third party payer SNF services |  | 171,741 |  |  | 146,767 |  |  | 134,220 |
Total residents fees and services |  | $ | 1,244,389 |  |  | $ | 1,151,908 |  |  | $ | 1,022,826 |

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