Chiron Real Estate : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

About this update from Chiron Real Estate Inc.

Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our financial statements, including the notes to those financial statements, included elsewhere in this Quarterly Report on Form 10-Q (this "Report"). Some of the statements we make in this section are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section below entitled "Special Note Regarding Forward-Looking Statements." Certain risk factors may cause actual results, performance, or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report"), that was filed with the U.S. Securities and Exchange Commission (the "SEC" or the "Commission") on March 2, 2026 and Item 1A. Risk Factors in this Quarterly Report on Form 10-Q. Unless otherwise indicated, all dollar amounts in the following discussion are presented in thousands. Special Note Regarding Forward-Looking Statements This Report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act")). In particular, statements pertaining to our investment in our Series C Preferred Stock or the terms of the investment agreement by Maewyn Capital Partners and its affiliates, future Board composition, trends, liquidity, capital resources, future dividends, and the healthcare industry and the healthcare real estate markets and opportunity, among others, contain forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology including, but not limited to, "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: ● difficulties in identifying healthcare and seniors housing facilities to acquire (due to increased cost of capital, competition or otherwise) and completing such acquisitions; -24- ● defaults on or non-renewal of leases by tenants; ● our ability to collect rents; ● increases in interest rates and increased operating costs; ● macroeconomic and geopolitical factors, including, but not limited to, inflationary pressures, tariffs and international trade policies, elevated interest rates, distress in the banking sector, global supply chain disruptions and ongoing geopolitical conflicts and war; ● changes in current healthcare and healthcare real estate trends and costs, including wage inflation; ● an epidemic or pandemic (such as the COVID-19 epidemic), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it; ● our ability to satisfy the covenants in our existing and any future debt agreements; ● our ability to refinance our existing debt when needed or on favorable terms; ● decreased rental rates or increased vacancy rates, including expected rent levels on acquired properties; ● adverse economic or real estate conditions or developments, either nationally or in the markets in which our facilities are located; ● our failure to generate sufficient cash flows to service our outstanding obligations; ● our ability to satisfy our short and long-term liquidity requirements; ● our ability to deploy the debt and equity capital we raise; ● our ability to hedge our interest rate risk; ● our ability to raise additional equity and debt capital on attractive terms or at all; ● our ability to make distributions on shares of our common and preferred stock or to redeem our preferred stock; ● expectations regarding the timing and/or completion of any acquisition; ● expectations regarding the timing and/or completion of dispositions, and the expected use of proceeds therefrom; ● our use of joint ventures may limit our returns on and our flexibility with jointly-owned investments; ● general volatility of the market price of our common and preferred stock; ● changes in our business or our investment or financing strategy; ● our dependence upon key personnel, whose continued service is not guaranteed; ● our ability to identify, hire and retain highly qualified personnel in the future; ● the degree and nature of our competition; ● changes in healthcare laws, governmental regulations, tax laws and similar matters; ● changes in expected trends in Medicare, Medicaid and commercial insurance reimbursement trends, including changes in Medicaid reimbursement rates pursuant to the One Big Beautiful Bill Act (the "OBBBA"); ● competition for investment opportunities; ● our failure to achieve the anticipated benefits from, and effectively integrate, our completed or anticipated acquisitions and investments; -25- ● our expected capital and tenant improvement expenditures; ● changes in accounting policies generally accepted in the United States of America ("GAAP"); ● lack of, or insufficient amounts of, insurance; ● other factors affecting the real estate industry generally; ● changes in the tax treatment of our distributions; ● our failure to maintain our qualification as a real estate investment trust ("REIT") for U.S. federal income tax purposes; ● our ability to qualify for the safe harbor from the 100% prohibited transactions tax under the REIT rules with respect to our property dispositions; and ● limitations imposed on our business due to, and our ability to satisfy, complex rules relating to REIT qualification for U.S. federal income tax purposes. ​ See Item 1A. Risk Factors in our 2025 Annual Report and Item 1A. Risk Factors in this Quarterly Report on Form 10-Q for further discussion of these and other risks, as well as the risks, uncertainties and other factors discussed in this Report and identified in other documents we may file with the SEC from time to time. You should carefully consider these risks before making any investment decisions in our company. New risks and uncertainties may also emerge from time to time that could materially and adversely affect us. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes after the date of this Report, except as required by applicable law. You should not place undue reliance on any forward-looking statements that are based on information currently available to us or the third parties making the forward-looking statements. Overview Chiron Real Estate Inc. (the "Company," "us," "we," or "our") is a Maryland corporation and internally managed REIT that acquires (i) healthcare facilities leased to physician groups and regional and national healthcare systems and (ii) seniors housing communities. We hold our facilities and conduct our operations through a Delaware limited partnership subsidiary, Chiron Real Estate LP (the "Operating Partnership"). Our wholly owned subsidiary, Chiron Real Estate GP LLC, is the sole general partner of our Operating Partnership and, as of March 31, 2026, we owned 91.4% of the outstanding common operating partnership units ("OP Units"), with the remaining 8.6% owned by holders of long-term incentive plan units ("LTIP Units") and third-party limited partners who contributed properties or services to the Operating Partnership in exchange for OP Units. Our revenues are derived from the rental and operating expense reimbursement payments we receive from our tenants, and most of our leases are medium to long-term triple net leases with contractual rent escalation provisions. Our primary expenses are depreciation, interest, and general and administrative expenses. We finance our acquisitions with a mixture of debt and equity primarily from our cash from operations, borrowings under our Credit Facility, and stock issuances. On September 19, 2025, the Company completed a one-for-five reverse stock split of its outstanding shares of common stock, with a corresponding adjustment to the outstanding partnership units of the Operating Partnership (the "Reverse Stock Split"). Unless otherwise noted, all common share and unit amounts shown herein are shown on a split-adjusted basis. Business Overview and Strategy Our business strategy is to invest primarily in healthcare properties that provide an attractive rate of return relative to our cost of capital and are operated by profitable physician groups, regional or national healthcare systems or combinations thereof. We believe this strategy allows us to attain our goals of providing stockholders with (i) attractive dividends and (ii) stock price appreciation. To implement this strategy, we seek to invest: ● in off-campus medical facilities and other decentralized components of the healthcare delivery system because we believe that healthcare delivery trends in the U.S. are increasingly moving away from centralized hospital locations; ● in small to mid-sized healthcare facilities located in secondary markets and suburbs of primary markets and that provide services needed for an aging population, such as cardiovascular treatment, rehabilitation, eye surgery, gastroenterology, -26- oncology treatment and orthopedics. We believe these facilities and markets are typically overlooked by larger REITs and other healthcare investors but contain tenant credit profiles that are like those of larger, more expensive facilities in primary markets; and ● active adult and other seniors residential facilities that are located in attractive markets. Most of our healthcare facilities are leased to single-tenants under triple-net leases. Our portfolio also contains some multi-tenant properties with gross lease or modified gross lease structures. In addition, as of March 31, 2026, we had an interest in two unconsolidated joint ventures that own healthcare facilities. ​ Our Properties As of March 31, 2026, we had gross investments of approximately $1.5 billion in real estate, consisting of 189 buildings with an aggregate of approximately 5.1 million leasable square feet and approximately $118.2 million of annualized base rent. This data does not include amounts for properties held in our unconsolidated joint ventures. 2026 Investment Activity On January 6, 2026, the Company entered into a joint venture with a developer to facilitate the development of a 132-unit, active adult residential community in a suburb of Minneapolis, Minnesota (the "Active Adult Joint Venture"). We invested $7.1 million for a 49% equity interest in the Active Adult Joint Venture, with the developer retaining a 51% interest. The Active Adult Joint Venture entered into a construction loan with a principal balance of $31.0 million. The developer is serving as the managing member of the Active Adult Joint Venture. We account for our interest in the Joint Venture using the equity method of accounting. Recent Developments Contracts to Purchase Seniors Housing Communities ​ The Landing Alexandria ​ On May 1, 2026, the Company entered into a purchase agreement with affiliates of Silverstone Senior Living ("SSL") to acquire the Landing Alexandria (the "Landing"), a 163-home, luxury seniors housing community located in Alexandria, Virginia for a purchase price of approximately $130 million. The Landing offers independent living, assisted living and memory care. The Company intends to operate the community as a seniors housing operating property ("SHOP") and to engage an affiliate of Greystone as a third-party manager to manage day-to-day operations. Under this structure, the Company will own the real estate and participate directly in the operating results of the property, including revenues and operating expenses, rather than receiving fixed lease payments from a third-party tenant. It is anticipated that this acquisition will close in the second quarter of 2026. The acquisition is subject to customary closing conditions, including, among other things, the completion of due diligence, licenses and approvals (if any), and other customary conditions. We cannot assure you that the acquisition will be completed on the anticipated terms or timetable, or at all. ​ The Riviera at Alexandria ​ On May 1, 2026, the Company entered into a purchase agreement with affiliates of SSL to acquire the Riviera at Alexandria (the "Riviera"), a 129-home, luxury independent living community located in Alexandria, Virginia for a purchase price of approximately $119 million. The Company intends to operate the community as a SHOP and to engage an affiliate of Greystone as a third-party manager to manage day-to-day operations. Under this structure, the Company will own the real estate and participate directly in the operating results of the property, including revenues and operating expenses, rather than receiving fixed lease payments from a third-party tenant. It is anticipated that this acquisition will close in the second quarter of 2026. The acquisition is subject to customary closing conditions, including, among other things, the completion of due diligence, licenses and approvals (if any), and other customary conditions. We cannot assure you that the acquisition will be completed on the anticipated terms or timetable, or at all. ​ The Pinnacle North Bethesda ​ On May 6, 2026, the Company entered into a purchase agreement to acquire the Pinnacle North Bethesda (the "Pinnacle"), a 175-home, luxury seniors housing community with ground floor retail located in North Bethesda, Maryland for a purchase price of approximately $176 million. The Pinnacle offers independent living, assisted living, and memory care housing. The Company intends to operate the community as a SHOP and to engage an affiliate of Greystone as a third-party manager to manage day-to-day operations. Under this structure, the Company will own the real estate and participate directly in the operating results of the property, including revenues and operating expenses, rather than receiving fixed lease payments from a third-party tenant. It is anticipated that this -27- acquisition will close in the fourth quarter of 2026. The acquisition is subject to customary closing conditions, including, among other things, the completion of due diligence, licenses and approvals (if any), and other customary conditions We cannot assure you that the acquisition will be completed on the anticipated terms or timetable, or at all. ​ $100 Million Strategic Convertible Perpetual Preferred Equity Investment ​ On May 6, 2026 the Company entered into an agreement (the "Investment Agreement") providing for an up to $100 million delayed-draw convertible perpetual preferred equity investment led by Maewyn Capital Partners ("Maewyn"), pursuant to which the Company may sell a total of $100 million of Series C convertible perpetual preferred stock (the "Series C Preferred Stock"), with a liquidation preference of $100 per share, either in full or in multiple tranches within six months from the date of the Investment Agreement. Dividends on the Series C Preferred Stock will accrue at a rate of 6.0% per year and will be payable quarterly in cash. If the Series C Preferred Stock remains outstanding beyond the fourth anniversary of the final draw under the Investment Agreement, the dividend rate will increase by 2.0% annually, up to a maximum of 12.0%. Holders of the Series C Preferred Stock will have the option to convert their shares into shares of the Company's common stock at any time at the then-effective conversion rate (the "Conversion Rate"). The Conversion Rate of the Series C Preferred Stock will initially be set at 2.32558 shares of common stock, based on an implied conversion price of $43.00 per share of common stock. Three years after the final draw, the Company has the option to convert the Series C Preferred Stock to common stock if the volume-weighted average price of its common stock exceeds 120.0% of the conversion price for 45 consecutive trading days. ​ The Company may redeem the Series C Convertible Preferred Stock at par at any time, after the fourth anniversary of the final draw under the Investment Agreement. If the Series C Convertible Preferred Stock is redeemed, the Company will issue a warrant (each, a "Warrant") to each holder of shares of Series C Preferred Stock that is redeemed. Each Warrant will represent a holder's right to purchase, at an exercise price equal to the conversion price for the Series C Preferred Stock as of the business day before the applicable redemption date, a number of shares of common stock equal to the aggregate liquidation preference of the shares of Series C Preferred Stock of such holder to be redeemed divided by the conversion price of the Series C Preferred Stock as of the business day before the applicable redemption date. Each Warrant will be exercisable by the holder thereof, in whole or in part, at any time, or from time to time, prior to the fifth anniversary of the issuance of such Warrant. ​ Additionally, so long as Maewyn or its affiliates beneficially own at least 5.0% of the Company's common stock on a fully-diluted basis, Maewyn will have the right to nominate one designee to be appointed as a member of the Board. The initial designee, Charles Fitzgerald, Managing Partner of Maewyn, will be appointed to the Company's Board following the Company's 2026 Annual Meeting of Stockholders on May 20, 2026. ​ Common Dividend Modification ​ On May 5, 2026, the Board declared a monthly common stock cash dividend of $0.16 per share for each of July, August and September of 2026, representing quarterly cash dividends totaling $0.48 per share. This compares to a monthly common stock cash dividend of $0.25 per share for April, May and June 2026, and represents an approximate 36% reduction. The Company is resizing its dividend to focus on retaining cash flow and to accelerate the Company's acquisition strategy and accelerate the ramp of its SHOP portfolio. ​ Mezzanine Loan ​ On April 1, 2026, the Company closed a $3.0 million mezzanine loan secured by an under-development medical facility located in Fort Myers, Florida. The medical facility is an on-campus outpatient surgical facility that is 100% pre-leased to an investment-grade tenant under a 15-year lease with no termination rights. The loan bears interest at a rate of 12.0% per annum, has an initial term of 24 months, and represents approximately 10% of the total project cost. In connection with the loan, the Company holds a right of first offer and right of first refusal with respect to a sale of the property, which are subject to the pre-leased tenant's corresponding rights. ​ Chapter 11 Reorganization Filing of White Rock Medical Center, LLC ​ On January 20, 2026, White Rock Medical Center LLC, filed for Chapter 11 bankruptcy protection under the United States Bankruptcy Code. At the time of its bankruptcy filing, White Rock operated two hospitals in Texas, including the White Rock Medical Center in Dallas, Texas, an acute-care hospital owned by the Company where White Rock is the sole tenant and has been operating the hospital since October 2023. There are 12 years remaining on this lease. According to the filed bankruptcy documents, the primary reason for the bankruptcy is a dispute with the former operator of the facility related to amounts due to the former operator. Accordingly White Rock plans to (i) restructure indebtedness related to its purchase of the hospital operations at the White Rock Medical Center and a related transition services agreement and (ii) sell its hospital operations to a third party, with the goal of stabilizing its operations and maximizing value to its stakeholders. As a means of assisting White Rock in its stabilization efforts, the Company has funded annual -28- property tax obligations due under the lease and accepted reduced monthly payments. As of May 5, 2026, the Company has a receivable balance, net of security deposits, of approximately $1.5 million (exclusive of late fees and interest thereon). Although we expect White Rock to affirm our lease as part of its reorganization plan, as of May 5, 2026, no reorganization plan has been filed with the courts and there can be no assurance that White Rock will affirm its lease with us or that we will receive any amounts owed to us. Trends Which May Influence Our Results of Operations We believe the following trends may positively impact our results of operations: ● An aging population . The general aging of the population, driven by the large baby boomer generation (born 1946-1964) and increases in life expectancy due to advances in medical technology and services, continues to be a key driver of growth in healthcare expenditures. According to the most recent U.S. Census Bureau estimates, the population age 65 and older grew by over a third during the past decade, and roughly 3.1% from 2023 to 2024. We believe this segment of the U.S. population will utilize many of the services provided at our healthcare facilities such as orthopedics, cardiac, gastroenterology and rehabilitation. ​ ● Seniors housing communities. As occupancy continues to recover in many markets and new supply remains constrained, owners of seniors housing properties have generally seen improving profitability and greater pricing power, including the ability to increase resident fees and reduce concessions. Margin recovery remains influenced by labor availability and wage pressure, as well as elevated insurance and other operating costs; accordingly, community performance tends to be strongest at well-located assets with experienced operators and favorable payer/resident mix. ​ ● A continuing shift towards outpatient care . According to the American Hospital Association, patients are demanding more outpatient operations. We believe this shift in patient preference from inpatient to outpatient facilities will benefit our tenants as most of our properties consist of outpatient facilities. ​ ● Physician practice group and hospital consolidation . We believe the trend towards physician group consolidation will serve to strengthen the credit quality of our tenants if our tenants merge or are consolidated with larger health systems. We believe the following trends may negatively impact our results of operations: ● Interest rates remain at elevated levels. During 2025, the U.S. Federal Reserve (the "Fed") continued lowering the Federal Funds Rate with the most recent cut in December 2025 bringing the target range to 3.50% to 3.75%, a level that remains unchanged through March 31, 2026. The 10-Year U.S. Treasury yield and Secured Overnight Financing Rate ("SOFR") increased modestly during the first quarter of 2026, with the 10-year U.S. Treasury yield and one-month term SOFR at 4.30% and 3.67% as of March 31, 2026, respectively. Although interest rates trended lower during 2025, interest rates are significantly higher than in 2021, when we entered into interest rate swaps with respect to the $350 million Term Loan A component of our Credit Facility. These interest rate swaps fixed the SOFR component of our interest rate on our Term Loan A at 1.36%; however, these swaps expired in April 2026 (the original maturity date of Term Loan A). In October 2025, we entered into $350 million of new forward-starting interest rate swaps that became effective in May 2026 to fully hedge the SOFR components of the new three Term Loan A tranches in the Credit Facility through their respective maturities at rates ranging from 3.24% to 3.32%. The current elevated interest rate environment has already resulted in material increases in our interest expense with respect to our floating-rate indebtedness and, beginning in May 2026, will materially increase our interest expense with respect to our fixed-rate indebtedness. ​ ● Increased Cost of Healthcare Delivery . Healthcare delivery costs continue to increase due to, among other things, increases in labor costs, medical supplies and technology investments. Increases in the cost of healthcare delivery can put stress on our tenants' business, which, if not offset by revenue increases, could negatively affect our tenants' ability to pay rent to us. ​ -29- ● Changes in third party reimbursement methods and policies . The price of healthcare services has been increasing, and, as a result, we believe that third-party payors, such as Medicare and commercial insurance companies, will continue to scrutinize and reduce the types of healthcare services eligible for, and the amounts of, reimbursement under their health insurance plans or increase the portion of premiums for which covered individuals are responsible. In January 2026, CMS announced proposed rate increases for 2027 to Medicare Advantage health plans of less than a tenth of a percent, which was less than market expectations. If finalized, this modest rate increase could result in benefit cuts or higher premiums for Medicare Advantage participants. Additionally, beginning on January 1, 2026, premium tax credits that were intended to assist certain participants on the healthcare insurance exchanges in purchasing health insurance expired, which could result in significant premium increases for these participants. If these trends continue, our tenants' businesses will continue to be negatively affected, which may impact their ability to pay rent to us. Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires our management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Commission on March 2, 2026, for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our condensed consolidated financial statements included in Part I, Item 1 of this Report. Consolidated Results of Operations Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ $ Change ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ ​ Revenue ​ ​ ​ ​ ​ ​ Rental revenue ​ $ 38,021 ​ $ 34,595 ​ $ 3,426 ​ Other income ​ 43 ​ 23 ​ 20 ​ Total revenue ​ 38,064 ​ 34,618 ​ ​ 3,446 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General and administrative ​ 5,089 ​ 3,620 ​ 1,469 ​ Operating expenses ​ 9,250 ​ 7,585 ​ 1,665 ​ Depreciation expense ​ 11,087 ​ 10,307 ​ 780 ​ Amortization expense ​ 3,740 ​ 3,520 ​ 220 ​ Interest expense ​ ​ 7,233 ​ ​ 7,167 ​ ​ 66 ​ Total expenses ​ 36,399 ​ 32,199 ​ 4,200 ​ Income before other income (expense) ​ ​ 1,665 ​ ​ 2,419 ​ ​ (754) ​ Gain on sale of investment properties ​ ​ - ​ ​ 1,358 ​ ​ (1,358) ​ Equity loss from unconsolidated joint ventures ​ ​ (11) ​ ​ (40) ​ ​ 29 ​ Net income ​ $ 1,654 ​ $ 3,737 ​ $ (2,083) ​ ​ Revenue Total Revenue Total revenue for the three months ended March 31, 2026 was $38.1 million, compared to $34.6 million for the same period in 2025, representing an increase of $3.5 million. The increase was primarily driven by rental revenue from properties acquired after March 31, 2025, as well as the recognition of a full three months of rental revenue in 2026 from acquisitions completed during the three months ended March 31, 2025. These increases, together with growth in our existing portfolio, were partially offset by the impact of -30- dispositions completed during the same period. Within that increase, $6.3 million in revenue was recognized from net lease expense recoveries during the three months ended March 31, 2026, compared to $5.2 million for the same period in 2025. Expenses General and Administrative General and administrative expenses for the three months ended March 31, 2026 were $5.1 million, compared to $3.6 million for the same period in 2025, an increase of $1.5 million. The increase was primarily driven by an increase in non-cash LTIP compensation expense of $1.1 million, other compensation and benefits of $0.2 million, and general corporate expenses of $0.2 million. Operating Expenses Operating expenses for the three months ended March 31, 2026 were $9.3 million, compared to $7.6 million for the same period in 2025, an increase of $1.7 million. The increase was primarily attributable to portfolio growth, including operating expenses from facilities acquired after March 31, 2025 and the inclusion of a full three months of operating expenses in 2026 for acquisitions completed during the three months ended March 31, 2025 . Operating expenses in the existing portfolio also increased, reflecting higher property-level costs year over year. These increases were partially offset by the impact of dispositions completed during the same period. Included in these amounts were $6.3 million of recoverable property operating expenses incurred during the three months ended March 31, 2026, compared to $5.2 million for the same period in 2025. Depreciation Expense Depreciation expense for the three months ended March 31, 2026 was $11.1 million, compared to $10.3 million for the same period in 2025, an increase of $0.8 million. The increase was primarily driven by properties acquired after March 31, 2025, as well as the recognition of a full three months of depreciation expense in 2026 from acquisitions completed during the three months ended March 31, 2025, partially offset by dispositions during that same period. Amortization Expense Amortization expense for the three months ended March 31, 2026 was $3.7 million, compared to $3.5 million for the same period in 2025, an increase of $0.2 million. The increase was primarily driven by properties acquired after March 31, 2025, as well as the recognition of a full three months of amortization expense in 2026 from acquisitions completed during the three months ended March 31, 2025, partially offset by dispositions and decreases on the existing portfolio during that same period. Interest Expense Interest expense for the three months ended March 31, 2026 was $7.2 million, compared to $7.2 million for the same period in 2025. While rates declined from 2025 to 2026, the decrease in interest expense was partially offset by increases due to higher average borrowings during the three months ended March 31, 2026, compared to the same period in 2025. The weighted average interest rate of our debt for the three months ended March 31, 2026 was 3.72% compared to 3.83% for the same period in 2025. Additionally, the weighted average interest rate and term of our debt was 3.58% and 3.9 years, respectively, at March 31, 2026, compared to 3.84% and 1.8 years, respectively, at March 31, 2025 . Income Before Other Income (Expense) Income before other income (expense) for the three months ended March 31, 2026 was $1.7 million, compared to $2.4 million for the same period in 2025, a decrease of $0.7 million. Gain on Sale of Investment Properties During the three months ended March 31, 2026, we had no property dispositions . During the three months ended March 31, 2025, we completed two dispositions resulting in an aggregate gain of $1.4 million. -31- Equity Loss from Unconsolidated Joint Ventures ​ Equity Loss from Unconsolidated Joint Ventures for the three months ended March 31, 2026 was $11 thousand, compared to $40 thousand for the same period in 2025, a decrease of $29 thousand. Net Income Net income for the three months ended March 31, 2026 was $1.7 million, compared to net income of $3.7 million for the same period in 2025, a decrease of $2.0 million. Assets and Liabilities As of March 31, 2026 and December 31, 2025 our principal assets consisted of investments in real estate, net, of $1.1 billion and $1.2 billion, respectively. We completed no acquisitions or dispositions during the three months ended March 31, 2026. Our liquid assets consisted primarily of cash and cash equivalents and restricted cash of $10.9 million and $11.9 million, as of March 31, 2026 and December 31, 2025, respectively. The decrease in our cash and cash equivalents and restricted cash balances to $10.9 million as of March 31, 2026, compared to $11.9 million as of December 31, 2025, was primarily due to funds used to invest in the Active Adult Joint Venture , the payment of our first Series B Preferred stock dividend, funds used for capital expenditures on existing real estate investments, and leasing commissions, partially offset by net borrowings on our Credit Facility, and net cash provided by operating activities. The increase in our total liabilities to $717.4 million as of March 31, 2026 compared to $712.4 million as of December 31, 2025, was primarily the result of higher net borrowings outstanding on our Credit Facility, partially offset by a lower accounts payable and accrued expenses. Cash Flow Information Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ $ Change ​ ​ (in thousands) ​ ​ ​ Cash provided by operating activities ​ $ 13,352 ​ $ 12,272 ​ $ 1,080 Cash used in investing activities ​ ​ (9,842) ​ ​ (27,224) ​ ​ 17,382 Cash (used in) provided by financing activities ​ ​ (4,439) ​ ​ 13,598 ​ ​ (18,037) Decrease in cash and cash equivalents and restricted cash ​ $ (929) ​ $ (1,354) ​ $ 425 ​ Net cash provided by operating activities for the three months ended March 31, 2026 was $13.4 million, compared to $12.3 million for the same period in 2025. Net cash provided by operating activities increased primarily due to the impact of our 2025 acquisitions. ​ Net cash used in investing activities for the three months ended March 31, 2026 was $9.8 million, compared to $27.2 million for the same period in 2025. Net cash used in investing activities decreased primarily due to higher acquisition activity in 2025 compared to 2026. ​ Net cash used in financing activities for the three months ended March 31, 2026 was $4.4 million, compared to net cash provided by financing activities of $13.6 million for the same period in 2025. This change in cash flow is primarily due to lower net borrowings on our Credit Facility, and lower dividend payments to common and preferred stockholders as well as holders of OP Units and LTIP Units. -32- Non-GAAP Financial Measures Management considers certain non-GAAP financial measures to be useful supplemental measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. The Company reports non-GAAP financial measures because these measures are observed by management to also be among the most predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these non-GAAP financial measures. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of those measures to the most directly comparable GAAP financial measure. The non-GAAP financial measures presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Condensed Consolidated Financial Statements and other financial data included elsewhere in this Report. Funds from Operations, Core Funds from Operations, and Funds Available for Distribution Funds from operations attributable to common stockholders and noncontrolling interest ("FFO"), and core FFO attributable to common stockholders and noncontrolling interest ("Core FFO") and funds available for distribution attributable to common stockholders and noncontrolling interest ("FAD") are non-GAAP financial measures within the meaning of the rules of the SEC. The Company considers FFO, Core FFO, and FAD to be important supplemental measures of its operating performance and believes FFO is frequently used by securities analysts, investors, and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. In accordance with the National Association of Real Estate Investment Trusts' ("NAREIT") definition, FFO means net income or loss computed in accordance with GAAP before noncontrolling interests of holders of OP Units and LTIP Units, excluding gains (or losses) from sales of property and extraordinary items, property impairment losses, less preferred stock dividends, plus real estate-related depreciation and amortization (excluding amortization of debt issuance costs and the amortization of above and below market leases), and after adjustments for unconsolidated partnerships and joint ventures calculated to reflect FFO on the same basis. Because FFO excludes real estate-related depreciation and amortization (other than amortization of debt issuance costs and above and below market lease amortization expense), the Company believes that FFO provides a performance measure that, when compared period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from the closest GAAP measurement, net income or loss. Core FFO is a non-GAAP measure used by many investors and analysts to measure a real estate company's operating performance by removing the effect of items that do not reflect ongoing property operations. Management calculates Core FFO by modifying the NAREIT computation of FFO by adjusting it for certain cash and non-cash items and certain recurring and non-recurring items. For the Company these items include recurring acquisition and disposition costs, loss on the extinguishment of debt, recurring straight line deferred rental revenue, recurring stock-based compensation expense, recurring amortization of above and below market leases, recurring amortization of debt issuance costs, severance and transition related expense, costs related to our reverse stock split, and other items related to unconsolidated partnerships and joint ventures. We calculate FAD by subtracting from Core FFO capital expenditures, including tenant improvements, leasing commissions and building capital. Management believes FAD is useful in analyzing the portion of cash flow that is available for distribution to stockholders and unitholders. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. Management believes that reporting Core FFO in addition to FFO and FAD is a useful supplemental measure for the investment community to use when evaluating the operating performance of the Company on a comparative basis. -33- A reconciliation of net income to FFO and Core FFO and FAD for the three months ended March 31, 2026 and 2025 is as follows. All per share, per share and unit, and weighted average share and unit amounts have been adjusted to reflect the impact of the Reverse Stock Split. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 1,654 ​ $ 3,737 ​ Less: Preferred stock dividends ​ (2,473) ​ (1,455) ​ Depreciation and amortization expense ​ ​ 14,802 ​ ​ 13,806 ​ Depreciation and amortization expense from unconsolidated joint ventures ​ ​ 73 ​ ​ 49 ​ Gain on sale of investment properties ​ ​ - ​ ​ (1,358) ​ FFO attributable to common stockholders and noncontrolling interest ​ $ 14,056 ​ $ 14,779 ​ Amortization of above market leases, net ​ ​ 146 ​ ​ 452 ​ Straight line deferred rental revenue ​ ​ (204) ​ ​ (57) ​ Stock-based compensation expense ​ ​ 1,229 ​ ​ 151 ​ Amortization of debt issuance costs and other ​ ​ 807 ​ ​ 559 ​ Severance and transition related expense ​ ​ - ​ ​ 104 ​ Other adjustments from unconsolidated joint ventures ​ ​ (19) ​ ​ 31 ​ Core FFO attributable to common stockholders and noncontrolling interest ​ $ 16,015 ​ $ 16,019 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income attributable to common stockholders per share - basic and diluted ​ $ (0.06) ​ $ 0.16 ​ FFO attributable to common stockholders and noncontrolling interest per share and unit ​ $ 0.97 ​ $ 1.02 ​ Core FFO attributable to common stockholders and noncontrolling interest per share and unit ​ $ 1.11 ​ $ 1.11 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Shares and Units Outstanding - basic and diluted ​ ​ 14,429 ​ ​ 14,475 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Shares and Units Outstanding: ​ ​ ​ ​ ​ ​ ​ Weighted Average Common Shares ​ ​ 13,235 ​ ​ 13,375 ​ Weighted Average OP Units ​ ​ 444 ​ ​ 449 ​ Weighted Average LTIP Units ​ ​ 750 ​ ​ 651 ​ Weighted Average Shares and Units Outstanding - basic and diluted ​ 14,429 ​ 14,475 ​ ​ ​ ​ ​ ​ ​ ​ ​ Core FFO attributable to common stockholders and noncontrolling interest ​ $ 16,015 ​ $ 16,019 ​ Tenant improvements ​ ​ (594) ​ ​ (704) ​ Leasing commissions ​ ​ (550) ​ ​ (115) ​ Building capital ​ ​ (1,550) ​ ​ (1,907) ​ FAD attributable to common stockholders and noncontrolling interest ​ $ 13,321 ​ $ 13,293 ​ ​ Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDAre The Company calculates EBITDA re in accordance with standards established by NAREIT and defines EBITDA re as net income or loss computed in accordance with GAAP plus depreciation and amortization, interest expense, gain or loss on the sale of investment properties, property impairment losses, and adjustments for unconsolidated partnerships and joint ventures to reflect EBITDAre on the same basis , as applicable. The Company defines Adjusted EBITDA re as EBITDA re plus loss on extinguishment of debt, non-cash stock compensation expense, non-cash intangible amortization related to above and below market leases, severance and transition related expense, expenses related to our reverse stock split, transaction expense, adjustments related to our investments in unconsolidated joint ventures, and other normalizing items. Management considers EBITDA re and Adjusted EBITDA re important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt. -34- A reconciliation of net income to EBITDA re and Adjusted EBITDA re for the three months ended March 31, 2026 and 2025 is as follows: ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2026 ​ ​ ​ ​ 2025 ​ (unaudited and in thousands) Net income $ 1,654 ​ $ 3,737 Interest expense 7,233 ​ ​ 7,167 Depreciation and amortization expense ​ 14,827 ​ ​ 13,827 Unconsolidated joint venture EBITDAre adjustments ( 1) ​ 111 ​ ​ 85 Gain on sale of investment properties ​ - ​ ​ (1,358) EBITDA re $ 23,825 ​ $ 23,458 Stock-based compensation expense ​ 1,229 ​ ​ 151 Amortization of above market leases, net 146 ​ 452 Severance and transition related expense ​ - ​ ​ 104 Interest rate swap mark-to-market at unconsolidated joint ventures ​ (19) ​ ​ 35 Adjusted EBITDA re $ 25,181 ​ $ 24,200 ​ (1) Includes joint venture interest, depreciation and amortization, and gain on sale of investment properties, if applicable, included in unconsolidated joint ventures net income or loss. ​ Net Operating Income (NOI), Cash NOI, and Same-Property Cash NOI ​ The Company considers net operating income ("NOI") to be an appropriate supplemental measure to net income because it helps both investors and management understand the core operations of our properties. We define NOI as total net (loss) income, plus depreciation and amortization expenses, general and administrative expenses, transaction expenses, impairments, (gain) loss on sale of investment properties, interest expense, and other non-operating items. Cash NOI and Same-Property Cash NOI are key performance indicators. Management considers these to be supplemental measures that allows investors, analysts and Company management to measure unlevered property-level cash operating results. The Company defines Cash NOI as NOI excluding non-cash items such as above and below market lease intangibles and straight-line rent. Cash NOI is historical and not necessarily indicative of future results. Same-Property Cash NOI compares Cash NOI for stabilized properties. Stabilized properties are properties that have been included in operations for the duration of the year-over-year comparison period presented. Accordingly, stabilized properties exclude properties that were recently acquired or disposed of, properties classified as held for sale, properties undergoing redevelopment, and newly redeveloped or developed properties. Same-Property Cash NOI also excludes lease terminations fees and joint ventures and other income in order to remove non-recurring items and joint venture-related income from our NOI. ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2026 ​ ​ ​ 2025 ​ (unaudited and in thousands) Net income $ 1,654 ​ $ 3,737 General and administrative 5,089 ​ 3,620 Depreciation and amortization expense ​ 14,827 ​ ​ 13,827 Interest expense ​ 7,233 ​ ​ 7,167 Gain on sale of investment properties ​ - ​ ​ (1,358) Proportionate share of unconsolidated joint venture adjustments ​ 92 ​ ​ 120 NOI $ 28,895 ​ $ 27,113 Amortization of above market leases, net ​ 146 ​ ​ 452 Straight line deferred rental revenue (204) ​ (57) Proportionate share of unconsolidated joint venture adjustments ​ (2) ​ ​ (5) Cash NOI $ 28,835 ​ $ 27,503 Assets not held for all periods ​ (1,313) ​ ​ (848) Joint ventures and other income ​ (122) ​ ​ (98) Same-Property Cash NOI $ 27,400 ​ $ 26,557 ​ ​ -35- Liquidity and Capital Resources General Our short-term (up to 12 months) liquidity requirements include: ● Interest expense and scheduled principal payments on outstanding indebtedness; ● General and administrative expenses; ● Property operating expenses; ● Property acquisitions; ● Distributions on our common and preferred stock and OP Units and LTIP Units; ● Increased capital requirements for our joint ventures; ● Repurchases of our common stock; and ● Capital and tenant improvements and leasing costs. In 2026, we are contractually obligated to pay, or have capital commitments for, principal and interest payments on our outstanding debt and ground and operating lease expenses. In addition, if we decide to redeem our Series A preferred stock in full, we would have to pay the liquidation preference of $77.6 million plus accrued dividends, fees and expenses. Our long-term (beyond 12 months) liquidity requirements consist primarily of funds necessary to pay for acquisitions, capital and tenant improvements at our properties, scheduled debt maturities, general and administrative expenses, operating expenses, common stock repurchases, and distributions. Beyond 2026, we are contractually obligated to pay, or have capital commitments for, principal and interest payments on our outstanding debt and ground and operating lease expenses. We expect to satisfy our short and long-term liquidity needs through various internal and external sources, including cash flow from operations, debt financing, sales of additional equity securities, the issuance of OP Units in connection with acquisitions of additional properties, proceeds from select property dispositions and recapitalization transactions. Sources of Liquidity ​ Our primary internal sources of liquidity include cash flow from operations and proceeds from select property dispositions and recapitalization transactions. Our primary external sources of liquidity include net proceeds received from equity issuances, including the issuance of OP Units in connection with acquisitions of additional properties, and debt financing, including borrowings under our Credit Facility, secured term loans and Senior Note Facility. ATM Program ​ In January 2024, the Company and the Operating Partnership implemented a $300 million "at-the-market" equity offering program, pursuant to which we may offer and sell (including through forward sales), from time to time, shares of our common stock (the "2024 ATM Program"). No shares were sold under the 2024 ATM Program during the three months ended March 31, 2026 or from April 1, 2026 through May 5, 2026. ​ In February 2026, the Company and the Operating Partnership implemented a $75 million "at-the-market" equity offering program, pursuant to which the Company may offer and sell (including through forward sales), from time-to-time, shares of its 8.00% Series B Cumulative Redeemable Preferred Stock (the "2026 Series B Preferred ATM Program"). No shares were sold under the 2026 Series B Preferred ATM Program during the three months ended March 31, 2026 or from April 1, 2026 through May 5, 2026. ​ Debt Financing Credit Facility. Our Credit Facility consists of (i) the $350 million Term Loan A Tranches, (ii) the $150 million Term Loan B, and (iii) the $400 million Revolver. The Credit Facility also contains a $500 million accordion feature. As of May 5, 2026, we had unutilized borrowing capacity under the Credit Facility of $220.5 million. -36- The Credit Facility is an unsecured facility with a maturity of (i) October 2029 for the Revolver (subject to two, six-month extension options), (ii) October 2029, October 2030, and April 2031 for the Term Loan A Tranches, and (iii) February 2028 for Term Loan B. Interest rates on amounts outstanding under the Credit Facility equal SOFR plus a borrowing spread based on the current pricing grid in the Credit Facility. As of March 31, 2026, we had 16 interest rate swaps (including forward-starting interest rate swaps) that are used to manage our interest rate risk. Five of our interest rate swaps related to Term Loan A with a combined notional value of $350 million that fixed the SOFR component on Term Loan A through April 2026 at 1.36%. Seven of our interest rate swaps are forward-starting swaps that fix the SOFR component of the Term Loan A Tranches at rates between 3.24% to 3.32% and have maturities in October 2029, October 2030, and April 2031. The remaining four of our interest rate swaps relate to our Term Loan B with a combined notional value of $150 million that fix the SOFR component on Term Loan B through January 2028 at 2.54%. We are subject to a number of financial covenants under the Credit Facility, including, among other things, the following as of the end of each fiscal quarter, (i) a maximum consolidated unsecured leverage ratio of less than 60%, (ii) a maximum consolidated secured leverage ratio of less than 30%, (iii) a maximum consolidated secured recourse leverage ratio of less than 10%, (iv) a minimum fixed charge coverage ratio of 1.50:1.00, (v) a minimum unsecured interest coverage ratio of 1.50:1.00, (vi) a maximum consolidated leverage ratio of less than 60%, (vii) a maximum cash investment in joint ventures of 10% of total asset value and (viii) a minimum net worth of $595.6 million plus 75% of all net proceeds raised through equity offerings subsequent to June 30, 2025. As of March 31, 2026, management believed it complied with all of the financial and non-financial covenants contained in the Credit Facility. Total Fixed Debt . Our fixed debt totaled $501.1 million on a gross basis at March 31, 2026, with a weighted average interest rate of 3.06% based on our interest rate swaps and at current leverage. The weighted average maturity of our fixed debt was 3.7 years at March 31, 2026. Other Fixed Debt. We have $1.1 million in gross notes payable as of March 31, 2026. This debt is comprised of one instrument. Senior Note Facility On March 2, 2026, the Company entered into a Master Note and Guaranty Agreement (the "Senior Note Agreement") with NYL Investors LLC and certain of its affiliates (collectively, the "Purchasers") . The Agreement establishes an uncommitted senior unsecured note facility pursuant to which the Company may issue senior unsecured promissory notes ("Notes") from time to time in one or more series to the Purchasers in an aggregate principal amount of up to $150.0 million. The Senior Note Agreement does not obligate the Purchasers to purchase any Notes, and each issuance is subject to the Purchasers' discretion and satisfaction of customary conditions. Notes may be issued under the Senior Note Agreement during a period ending on the earliest of (i) the third anniversary of the effective date of the Senior Note Agreement, (ii) termination of the facility by either party upon written notice, (iii) termination following certain events of default, or (iv) acceleration of the Notes and termination of the facility. Notes issued under the Agreement may have maturities of up to ten years and will bear interest at rates determined at the time of issuance based on spreads over U.S. Treasury securities. As of March 31, 2026, no Notes had been issued or were outstanding under the Senior Note Agreement. ​ Debt Activity During the three months ended March 31, 2026, we borrowed $17.1 million under the Credit Facility and repaid $8.3 million, for a net amount borrowed of $8.8 million. During the three months ended March 31, 2025, we borrowed $44.0 million under the Credit Facility and repaid $13.5 million, for a net amount borrowed of $30.5 million. As of March 31, 2026, the net outstanding Credit Facility balance was $662.3 million and as of May 5, 2026, we had unutilized borrowing capacity under the revolver component of the Credit Facility (the "Revolver") of $220.5 million. Common Stock Repurchase Program In August 2025, the Board approved a $50 million common stock repurchase program (the "Stock Repurchase Program"). Under the Stock Repurchase Program, we may purchase up to $50 million of our outstanding shares of common stock from time to time in the open market, including through block purchases, through privately negotiated transactions or pursuant to any Rule 10b5-1 trading plan, in accordance with applicable securities laws. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions and other considerations. The Stock Repurchase Program does not obligate us to repurchase any dollar amount or number of shares of our common stock and may be suspended or discontinued at any time. No shares were repurchased during the three months ended March 31, 2026 or from April 1, 2026 through May 5, 2026. ​ -37-

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