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What changed in UNIVERSAL HEALTH REALTY INCOME TRUST's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of UNIVERSAL HEALTH REALTY INCOME TRUST's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+332 added−342 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-27)

Top changes in UNIVERSAL HEALTH REALTY INCOME TRUST's 2023 10-K

332 paragraphs added · 342 removed · 260 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

60 edited+13 added−15 removed84 unchanged
Biggest change(H) Real estate assets owned by an LLC or an LP in which we have a noncontrolling ownership interest and include tenants who are subsidiaries of UHS. (I) Construction on this UHS-related MOB began in January, 2022 and a non-related party has been engaged to act as construction manager.
Biggest changeThe triple-net master lease is for twelve years and is scheduled to expire on August 31, 2035. The initial annual base rent is approximately $624,000. (G) The facility is vacant and being marketed. (H) Real estate assets owned by an LLC or an LP in which we have a noncontrolling ownership interest and include tenants who are subsidiaries of UHS.
Pursuant to the terms of the master leases by and among us and certain subsidiaries of UHS, dated December 24, 1986 and December 31, 2021 (the “Master Leases”), which govern the leases of McAllen Medical Center, Wellington Regional Medical Center (governed by the Master Lease dated December 24, 1986), Aiken Regional Medical Center and Canyon Creek Behavioral Health (governed by the Master Lease dated December 31, 2021, as amended), all of which are hospital properties that are wholly-owned subsidiaries of UHS, UHS has the option, among other things, to renew the leases at the lease terms described below by providing notice to us at least 90 days prior to the termination of the then current term.
Pursuant to the terms of the master leases among us and certain subsidiaries of UHS, dated December 24, 1986 and December 31, 2021 (the “Master Leases”), which govern the leases of McAllen Medical Center, Wellington Regional Medical Center (governed by the Master Lease dated December 24, 1986), Aiken Regional Medical Center and Canyon Creek Behavioral Health (governed by the Master Lease dated December 31, 2021, as amended), all of which are hospital properties that are wholly-owned subsidiaries of UHS, UHS has the option, among other things, to renew the leases at the lease terms described below by providing notice to us at least 90 days prior to the termination of the then current term.
The joint venture also has the right to purchase the leased facility from us at its appraised fair market value upon either of the following: (i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or; (ii) upon 30 days’ notice anytime within 12 months of a change of control of the Trust (UHS also has this right should the joint venture decline to exercise its purchase right).
The joint venture also has the right to purchase the leased facility from us at its appraised fair market value upon either of the following: (i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or; (ii) upon 30 days’ notice anytime within 12 months of a 4 change of control of the Trust (UHS also has this right should the joint venture decline to exercise its purchase right).
These filings are the sole responsibility of UHS and are not incorporated by reference herein. 6 Taxation No provision has been made for federal income tax purposes since we qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986, and intend to continue to remain so qualified.
These filings are the sole responsibility of UHS and are not incorporated by reference herein. Taxation No provision has been made for federal income tax purposes since we qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986, and intend to continue to remain so qualified.
Please see the heading “ If we fail to maintain our REIT status, we will become subject to federal income tax on our taxable income at regular corporate rates” under “Risk Factors” for more information. Competition We compete for the acquisition, leasing and financing of health care related facilities.
Please see the heading “ If we fail to maintain our REIT status, we will become subject to federal income tax on our taxable income at regular corporate rates” under “Risk Factors” for more information. 6 Competition We compete for the acquisition, leasing and financing of health care related facilities.
ITEM 1. Business General We are a real estate investment trust (“REIT”) which commenced operations in 1986. We invest in healthcare and human service related facilities currently including acute care hospitals, behavioral health care hospitals, specialty facilities, free-standing emergency departments, childcare centers and medical/office buildings.
ITEM 1. Business General We are a real estate investment trust (“REIT”) which commenced operations in 1986. We invest in healthcare and human-service related facilities currently including acute care hospitals, behavioral health care hospitals, a specialty facility, free-standing emergency departments, childcare centers and medical/office buildings.
The Court concluded that the Individual Mandate is no longer permissible under Congress’s taxing power as a result of the Tax Cut and Jobs Act of 2017 (“TCJA”) reducing the Individual Mandate’s tax to $0 (i.e., it no longer produces revenue, which is an essential feature of a 7 tax), rendering the Legislation unconstitutional.
The Court concluded that the Individual Mandate is no longer permissible under Congress’s taxing power as a result of the Tax Cut and Jobs Act of 2017 (“TCJA”) reducing the Individual Mandate’s tax to $0 (i.e., it no longer produces revenue, which is an essential feature of a tax), rendering the Legislation unconstitutional.
(A) Las Vegas, NV MOB 100% -- Santa Fe Professional Plaza (E) Scottsdale, AZ MOB 100% -- Summerlin Hospital MOB I (D) Las Vegas, NV MOB 100% -- Summerlin Hospital MOB II (D) Las Vegas, NV MOB 100% -- Danbury Medical Plaza (B) Danbury, CT MOB 100% -- Mid Coast Hospital MOB (C) Brunswick, ME MOB 74% -- Rosenberg Children’s Medical Plaza (E) Phoenix, AZ MOB 100% -- 1 Facility Name Location Type of Facility Ownership Guarantor Gold Shadow (D) 700 Shadow Lane MOB Las Vegas, NV MOB 100% -- 2010 & 2020 Goldring MOBs Las Vegas, NV MOB 100% -- Apache Junction Medical Plaza (E) Apache Junction, AZ MOB 100% -- Spring Valley Medical Office Building (D) Las Vegas, NV MOB 100% -- Spring Valley Hospital Medical Office Building II (D) Las Vegas, NV MOB 100% -- Sierra San Antonio Medical Plaza (E) Fontana, CA MOB 100% -- Phoenix Children’s East Valley Care Center (E) Phoenix, AZ MOB 100% -- Centennial Hills Medical Office Building (D) Las Vegas, NV MOB 100% -- Palmdale Medical Plaza (D) Palmdale, CA MOB 100% -- Summerlin Hospital Medical Office Building III (D) Las Vegas, NV MOB 100% -- Vista Medical Terrace (D) Sparks, NV MOB 100% -- The Sparks Medical Building (D) Sparks, NV MOB 100% -- Texoma Medical Plaza (D) (Q) Denison, TX MOB 100% -- BRB Medical Office Building (E) Kingwood, TX MOB 100% -- 3811 E.
(A) Las Vegas, NV MOB 100% -- Santa Fe Professional Plaza (E) Scottsdale, AZ MOB 100% -- Summerlin Hospital MOB I (D) Las Vegas, NV MOB 100% -- Summerlin Hospital MOB II (D) Las Vegas, NV MOB 100% -- Danbury Medical Plaza (B) Danbury, CT MOB 100% -- Mid Coast Hospital MOB (C) Brunswick, ME MOB 74% -- Rosenberg Children’s Medical Plaza (E) Phoenix, AZ MOB 100% -- Gold Shadow (D) 1 Facility Name Location Type of Facility Ownership Guarantor 700 Shadow Lane MOB Las Vegas, NV MOB 100% -- 2010 & 2020 Goldring MOBs Las Vegas, NV MOB 100% -- Apache Junction Medical Plaza (E) Apache Junction, AZ MOB 100% -- Spring Valley Medical Office Building (D) Las Vegas, NV MOB 100% -- Spring Valley Hospital Medical Office Building II (D) Las Vegas, NV MOB 100% -- Sierra San Antonio Medical Plaza (E) Fontana, CA MOB 100% -- Phoenix Children’s East Valley Care Center (E) Phoenix, AZ MOB 100% -- Centennial Hills Medical Office Building (D) Las Vegas, NV MOB 100% -- Palmdale Medical Plaza (D) Palmdale, CA MOB 100% -- Summerlin Hospital Medical Office Building III (D) Las Vegas, NV MOB 100% -- Vista Medical Terrace (D) Sparks, NV MOB 100% -- The Sparks Medical Building (D) Sparks, NV MOB 100% -- Texoma Medical Plaza (D) (O) Denison, TX MOB 100% -- BRB Medical Office Building (E) Kingwood, TX MOB 100% -- 3811 E.
As a result of this minority ownership purchase during the fourth quarter of 2021, we own 100% of the LP and are therefore consolidating this LP effective with the purchase date. There was no material impact on our net income as a result of the consolidation of this LP subsequent to the transaction.
As a result of this minority ownership purchase during the fourth quarter of 2021, we own 100% of the LP and are therefore consolidating this LP effective with the purchase date. There was 5 no material impact on our net income as a result of the consolidation of this LP subsequent to the transaction.
Bell (E) Phoenix, AZ MOB 100% -- Lake Pointe Medical Arts Building (E) Rowlett, TX MOB 100% -- Forney Medical Plaza (E) Forney, TX MOB 100% -- Tuscan Professional Building (E) Irving, TX MOB 100% -- Emory at Dunwoody Building (E) Atlanta, GA MOB 100% -- PeaceHealth Medical Clinic (E) Bellingham, WA MOB 100% -- Forney Medical Plaza II (C) Forney, TX MOB 95% -- Northwest Texas Professional Office Tower (E) Amarillo, TX MOB 100% -- 5004 Poole Road MOB (A) Denison, TX MOB 100% -- Ward Eagle Office Village (E) Farmington Hills, MI MOB 100% -- The Northwest Medical Center at Sugar Creek (E) Bentonville, AR MOB 100% -- Hanover Emergency Center (E) Mechanicsville, VA FED 100% -- South Texas ER at Weslaco (A) Weslaco, TX FED 100% -- South Texas ER at Mission (A) Mission, TX FED 100% -- Haas Medical Office Park (E) Ottumwa, IA MOB 100% Regional Hospital Partners Piedmont - Roswell Physician Center (E) Sandy Springs, GA MOB 100% -- Piedmont - Vinings Physician Center (E) Vinings, GA MOB 100% -- Madison Professional Office Building (E) Madison, AL MOB 100% -- Chandler Corporate Center III (E) Chandler, AZ MOB 100% -- Frederick Crestwood MOB (E) Frederick, MD MOB 100% -- 2704 North Tenaya Way (E) Las Vegas, NV MOB 100% -- Henderson Medical Plaza (D) Henderson, NV MOB 100% -- Health Center at Hamburg (E) Hamburg, PA MOB 100% -- Las Palmas Del Sol Emergency Center-West (E) El Paso, TX FED 100% -- Beaumont Medical Sleep Center Building (E) Southfield, MI MOB 100% -- Bellin Health Family Medicine Center (E) Escanaba, MI MOB 100% -- Texoma Medical Plaza II (H) (K) Denison, TX MOB 95% -- Sand Point Medical Properties (L) Escanaba, MI MOB 100% Fresenius Medical Care Holdings, Inc.
Bell (E) Phoenix, AZ MOB 100% -- Lake Pointe Medical Arts Building (E) Rowlett, TX MOB 100% -- Forney Medical Plaza (E) Forney, TX MOB 100% -- Tuscan Professional Building (E) Irving, TX MOB 100% -- Emory at Dunwoody Building (E) Atlanta, GA MOB 100% -- PeaceHealth Medical Clinic (E) Bellingham, WA MOB 100% -- Forney Medical Plaza II (C) Forney, TX MOB 95% -- Northwest Texas Professional Office Tower (E) Amarillo, TX MOB 100% -- 5004 Poole Road MOB (A) Denison, TX MOB 100% -- Ward Eagle Office Village (E) Farmington Hills, MI MOB 100% -- The Northwest Medical Center at Sugar Creek (E) Bentonville, AR MOB 100% -- Hanover Emergency Center (E) Mechanicsville, VA FED 100% Henrico Doctors' Hospital South Texas ER at Weslaco (A) Weslaco, TX FED 100% -- South Texas ER at Mission (A) Mission, TX FED 100% -- Haas Medical Office Park (E) Ottumwa, IA MOB 100% Regional Hospital Partners Piedmont - Roswell Physician Center (E) Sandy Springs, GA MOB 100% -- Piedmont - Vinings Physician Center (E) Vinings, GA MOB 100% -- Madison Professional Office Building (E) Madison, AL MOB 100% -- Chandler Corporate Center III (E) Chandler, AZ MOB 100% -- Frederick Crestwood MOB (E) Frederick, MD MOB 100% -- 2704 North Tenaya Way (E) Las Vegas, NV MOB 100% -- Henderson Medical Plaza (D) Henderson, NV MOB 100% -- Health Center at Hamburg (E) Hamburg, PA MOB 100% -- Las Palmas Del Sol Emergency Center-West (E) El Paso, TX FED 100% -- Beaumont Medical Sleep Center Building (E) Southfield, MI MOB 100% -- Bellin Health Family Medicine Center (E) Escanaba, MI MOB 100% -- Texoma Medical Plaza II (H) Denison, TX MOB 95% -- Sand Point Medical Properties Escanaba, MI MOB 100% Fresenius Medical Care Holdings, Inc.
(M) On December 31, 2021, pursuant to an asset purchase and sale agreement, as amended, with UHS and certain affiliates, a wholly-owned subsidiary of UHS purchased the real estate assets of the Inland Valley Campus of Southwest Healthcare System from us; and we purchased from two wholly-owned subsidiaries of UHS, the real estate assets of Aiken Regional Medical Center (including a behavioral health pavilion) and Canyon Creek Behavioral Health.
(K) On December 31, 2021, pursuant to an asset purchase and sale agreement, as amended, with UHS and certain affiliates, a wholly-owned subsidiary of UHS purchased the real estate assets of the Inland Valley Campus of Southwest Healthcare System from us; and we purchased from two wholly-owned subsidiaries of UHS, the real estate assets of Aiken Regional Medical Center (including a behavioral health pavilion) and Canyon Creek Behavioral Health.
In accordance with Section 303A.12(a) of The New York Stock Exchange Listed Company Manual, we submitted our CEO’s Certification to the New York Stock Exchange in 2022. Additionally, contained in Exhibits 31.1 and 31.2 of this Annual Report are our CEO’s and CFO’s certifications regarding the quality of our public disclosure under Section 302 of the Sarbanes-Oxley Act of 2002.
In accordance with Section 303A.12(a) of The New York Stock Exchange Listed Company Manual, we submitted our CEO’s Certification to the New York Stock Exchange in 2023. Additionally, contained in Exhibits 31.1 and 31.2 of this Annual Report are our CEO’s and CFO’s certifications regarding the quality of our public disclosure under Section 302 of the Sarbanes-Oxley Act of 2002.
Overview of Facilities As of February 27, 2023, we have investments in seventy-six facilities located in twenty-one states and consisting of the following: Facility Name Location Type of Facility Ownership Guarantor McAllen Medical Center (A) McAllen, TX Acute Care 100% Universal Health Services, Inc. Wellington Regional Medical Center (A) W. Palm Beach, FL Acute Care 100% Universal Health Services, Inc.
Overview of Facilities As of February 27, 2024, we have investments in seventy-six facilities located in twenty-one states and consisting of the following: Facility Name Location Type of Facility Ownership Guarantor McAllen Medical Center (A) McAllen, TX Acute Care 100% Universal Health Services, Inc. Wellington Regional Medical Center (A) W. Palm Beach, FL Acute Care 100% Universal Health Services, Inc.
(“UHS”) Leases: We commenced operations in 1986 by purchasing certain properties from subsidiaries of UHS and immediately leasing the properties back to the respective subsidiaries. The base rentals and lease and renewal terms for each of the hospitals leased to subsidiaries of UHS as of January 1, 2023, are provided below. The base rents are paid monthly.
(“UHS”) Leases: We commenced operations in 1986 by purchasing certain properties from subsidiaries of UHS and immediately leasing the properties back to the respective subsidiaries. The base rentals and lease and renewal terms for each of the hospitals leased to subsidiaries of UHS as of January 1, 2024, are provided below. The base rents are paid monthly.
Share Ownership: As of December 31, 2022 and 2021, UHS owned 5.7% of our outstanding shares of beneficial interest. SEC reporting requirements of UHS: UHS is subject to the reporting requirements of the Securities and Exchange Commission (“SEC”) and is required to file annual reports containing audited financial information and quarterly reports containing unaudited financial information.
Share Ownership: As of December 31, 2023 and 2022, UHS owned 5.7% of our outstanding shares of beneficial interest. SEC reporting requirements of UHS: UHS is subject to the reporting requirements of the Securities and Exchange Commission (“SEC”) and is required to file annual reports containing audited financial information and quarterly reports containing unaudited financial information.
The Advisory Agreement was renewed for 2023 with the same terms as the Advisory Agreement in place during 2022, 2021 and 2020. Our advisory fee for 2022, 2021 and 2020 was computed at 0.70% of our average invested real estate assets, as derived from our consolidated balance sheet.
The Advisory Agreement was renewed for 2024 with the same terms as the Advisory Agreement in place during 2023, 2022 and 2021. Our advisory fee for 2023, 2022 and 2021 was computed at 0.70% of our average invested real estate assets, as derived from our consolidated balance sheet.
This MOB is located on the campus of the Northern Nevada Sierra Medical Center, a newly constructed hospital that is owned and operated by a wholly-owned subsidiary of UHS, which was completed and opened during April of 2022.
This MOB is located on the campus of the Northern Nevada Sierra Medical Center, a newly constructed acute care hospital that is owned and operated by a wholly-owned subsidiary of UHS, which was completed and opened during April of 2022.
Pursuant to the terms of the hospital’s previous lease, we earned aggregate lease revenue of $5.5 million during the year ended December 31, 2021, (consisting of $3.0 million of base rental and $2.5 million of bonus rental) and $5.1 million during the year ended December 31, 2020 (consisting of $3.0 million of base rental and $2.1 million of bonus rental).
Pursuant to the terms of the hospital’s previous lease, we earned aggregate lease revenue of $5.5 million during the year ended December 31, 2021, (consisting of $3.0 million of base rental and $2.5 million of bonus rental).
Pursuant to the leases, as amended during the first quarter of 2022, the aggregate annual rental rate during 2022 on the acquired properties, which is payable to us on a monthly basis, was approximately $5.7 million ($3.9 million related to Aiken and $1.8 million related to Canyon Creek).
Pursuant to the leases, as amended during the first quarter of 2022, the aggregate annual rental rate on the acquired properties, which is payable to us on a monthly basis, was approximately $5.8 million during 2023 ($4.0 million related to Aiken and $1.8 million related to Canyon Creek) and $5.7 million during 2022 ($3.9 million related to Aiken and $1.8 million related to Canyon Creek).
As of January 1, 2023, leases on the six acute and behavioral health care hospitals have fixed terms with an average of 9.6 years remaining and include renewal options ranging from one to seven, five or ten-year terms. The remaining lease terms for each hospital, which vary by hospital, are included herein in Item 2. Properties .
As of January 1, 2024, leases on the six acute and behavioral health care hospitals have fixed terms with an average of 8.6 years remaining and include renewal options ranging from one to seven, five or ten-year terms. The remaining lease terms for each hospital, which vary by hospital, are included herein in Item 2. Properties .
Aiken Regional Medical Center (A) (M) Aiken, SC Acute Care 100% Universal Health Services, Inc. Aurora Pavilion Behavioral Health Services (A) (M) Aiken, SC Behavioral Health 100% Universal Health Services, Inc. Canyon Creek Behavioral Health (A) (M) Temple, TX Behavioral Health 100% Universal Health Services, Inc.
Aiken Regional Medical Center (A) (K) Aiken, SC Acute Care 100% Universal Health Services, Inc. Aurora Pavilion Behavioral Health Services (A) (K) Aiken, SC Behavioral Health 100% Universal Health Services, Inc. Canyon Creek Behavioral Health (A) (K) Temple, TX Behavioral Health 100% Universal Health Services, Inc.
Regulation and Other Factors During each of the years of 2022, 2021 and 2020, approximately 29%, 28% and 25%, respectively, of our revenues were earned pursuant to leases with operators of acute care hospitals, behavioral health care hospitals and free-standing emergency departments (“FEDs”), the substantial majority of which are subsidiaries of UHS.
Regulation and Other Factors During each of the years of 2023, 2022 and 2021, approximately 27%, 29% and 28%, respectively, of our revenues were earned pursuant to leases with operators of acute care hospitals, behavioral health care hospitals and free-standing emergency departments (“FEDs”), the substantial majority of which are subsidiaries of UHS.
The portion of the lease payments that is included in our consolidated statements of income, and reflected as interest income on financing leases, was approximately $5.5 million for the year ended December 31, 2022. There is no bonus rental component applicable to either of these leases.
The portion of the lease payments that is included in our consolidated statements of income, and reflected as interest income on financing leases, was approximately $5.5 million for each of the years ended December 31, 2023 and 2022. There is no bonus rental component applicable to either of these leases.
Based upon a review of our advisory fee and other general and administrative expenses, as compared to an industry peer group, the advisory fee computation remained unchanged for 2022, as compared to 2021, 2020 and 2019.
Based upon a review of our advisory fee and other general and administrative expenses, as compared to an industry peer group, the advisory fee computation remained unchanged for 2023, as compared to 2022 and 2021.
Since the aggregate revenues generated from UHS-related tenants comprised approximately 34% of our consolidated revenue for the five years ended December 31, 2022 (approximately 40%, 37% and 33% for the years ended December 31, 2022, 2021 and 2020, respectively), and since a subsidiary of UHS is our Advisor, you are encouraged to obtain the publicly available filings for Universal Health Services, Inc. from the SEC’s website.
Since the aggregate revenues generated from UHS-related tenants comprised approximately 37% of our consolidated revenue for the five years ended December 31, 2023 (approximately 41%, 40% and 37% for the years ended December 31, 2023, 2022 and 2021, respectively), and since a subsidiary of UHS is our Advisor, you are encouraged to obtain the publicly available filings for Universal Health Services, Inc. from the SEC’s website.
Effective January 1, 2022, the annual fair market value lease rate for this hospital, which was payable to us monthly, was $6.3 million (there is no longer a bonus rental component of the lease payment).
Effective January 1, 2023, the annual fair market value lease rate for this hospital, which was payable to us monthly, was $6.5 million (there is no longer a bonus rental component of the lease payment).
The properties acquired by us in connection with the asset purchase and sale agreement with UHS, as amended, were accounted for as financing arrangements and our consolidated balance sheets as of December 31, 2022 and December 31, 2021 include financing receivables related to this transaction of $83.6 million and $82.4 million, respectively.
GAAP and the properties acquired by us in connection with the asset purchase and sale agreement with UHS, as amended, were accounted for as financing arrangements and our consolidated balance sheets as of December 31, 2023 and 2022 include financing receivables related to this transaction of $83.3 million and $83.6 million, respectively.
The table below details the existing lease terms and renewal options for each of the hospital leases that are related to UHS as of January 1, 2023, consisting of three acute care hospitals and three behavioral health hospitals: Hospital Name Annual Minimum Rent End of Lease Term Renewal Term (years) McAllen Medical Center $ 5,485,000 December, 2026 5 (a) Wellington Regional Medical Center $ 6,477,000 December, 2026 5 (b) Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services $ 3,982,000 December, 2033 35 (c) Canyon Creek Behavioral Health $ 1,800,000 December, 2033 35 (c) Clive Behavioral Health Hospital $ 2,701,000 December, 2040 50 (d) (a) UHS has one 5-year renewal option at existing lease rates (through 2031).
The table below details the existing lease terms and renewal options for each of the hospital leases that are related to UHS as of January 1, 2024, consisting of three acute care hospitals and three behavioral health hospitals: Hospital Name Annual Minimum Rent End of Lease Term Renewal Term (years) McAllen Medical Center $ 5,485,000 December, 2026 5 (a) Wellington Regional Medical Center $ 6,639,000 December, 2026 5 (b) Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services $ 4,072,000 December, 2033 35 (c) Canyon Creek Behavioral Health $ 1,841,000 December, 2033 35 (c) Clive Behavioral Health $ 2,775,000 December, 2040 50 (d) (a) UHS has one 5-year renewal option at existing lease rates (through 2031).
Advisory fees incurred and paid (or payable) to UHS amounted to $5.1 million during 2022, $4.4 million during 2021 and $4.1 million during 2020 and were based upon average invested real estate assets of $728 million, $629 million and $592 million during 2022, 2021 and 2020, respectively.
Advisory fees incurred and paid (or payable) to UHS amounted to $5.3 million during 2023, $5.1 million during 2022 and $4.4 million during 2021, and were based upon average invested real estate assets of $757 million, $728 million and $629 million during 2023, 2022 and 2021, respectively.
(Q) During the fourth quarter of 2021, we purchased the 5% minority interest held by a third-party partner in Grayson Properties, LP. As a result of the minority ownership purchase, we now own 100% of the LP. (R) This MOB was acquired in March, 2022.
(N) This MOB was acquired in January, 2022. (O) During the fourth quarter of 2021, we purchased the 5% minority interest held by a third-party partner in Grayson Properties, LP. As a result of the minority ownership purchase, we now own 100% of the LP. (P) This MOB was acquired in March, 2022.
On December 31, 2021, we entered into an asset purchase and sale agreement with UHS and certain of its affiliates, which was amended during the first quarter of 2022, pursuant to the terms of which: • a wholly-owned subsidiary of UHS purchased from us, the real estate assets of the Inland Valley Campus of Southwest Healthcare System located in Wildomar, California, at its fair market value of $79.6 million. • two wholly-owned subsidiaries of UHS transferred to us, the real estate assets of the following properties: o Aiken Regional Medical Center, (“Aiken”), located in Aiken, South Carolina (which includes an acute care hospital and a behavioral health pavilion), at its fair-market value of approximately $57.7 million, and; o Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas, at its fair-market value of approximately $26.0 million. • in connection with this transaction, since the fair-market value of Aiken and Canyon Creek, which totaled approximately $83.7 million in the aggregate, exceeded the $79.6 million fair-market value of the Inland Valley Campus of Southwest Healthcare System, we paid approximately $4.1 million in cash to UHS.
The aggregate revenues generated from UHS-related tenants comprised approximately 37% of our consolidated revenue for the five years ended December 31, 2023 (approximately 41%, 40% and 37% for the years ended December 31, 2023, 2022 and 2021, respectively). 3 On December 31, 2021, we entered into an asset purchase and sale agreement with UHS and certain of its affiliates, which was amended during the first quarter of 2022, pursuant to the terms of which: • a wholly-owned subsidiary of UHS purchased from us, the real estate assets of the Inland Valley Campus of Southwest Healthcare System located in Wildomar, California, at its fair market value of $79.6 million. • two wholly-owned subsidiaries of UHS transferred to us, the real estate assets of the following properties: o Aiken Regional Medical Center, (“Aiken”), located in Aiken, South Carolina (which includes an acute care hospital and a behavioral health pavilion), at its fair-market value of approximately $57.7 million, and; o Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas, at its fair-market value of approximately $26.0 million. • in connection with this transaction, since the fair-market value of Aiken and Canyon Creek, which totaled approximately $83.7 million in the aggregate, exceeded the $79.6 million fair-market value of the Inland Valley Campus of Southwest Healthcare System, we paid approximately $4.1 million in cash to UHS.
Other Information Included in our portfolio at December 31, 2022, are six hospital facilities leased to subsidiaries of UHS comprised of three acute care hospitals and three behavioral health care hospitals (one of which was substantially completed in late December, 2020, and three of which were acquired as part of an asset purchase and sale agreement with UHS on December 31, 2021, as amended, as discussed herein).
Other Information Included in our portfolio at December 31, 2023, are six hospital facilities leased to subsidiaries of UHS comprised of three acute care hospitals and three behavioral health care hospitals (three of which were acquired as part of an asset purchase and sale agreement with UHS on December 31, 2021, as amended, as discussed herein).
Please see Note 8 for additional disclosure surrounding this transaction. In May, 2021, we acquired the Fire Mesa office building located in Las Vegas, Nevada for a purchase price of approximately $12.9 million. The building is 100% leased under the terms of a triple net lease by a wholly-owned subsidiary of UHS.
Please see Note 5 to the consolidated financial statements-Debt and Financial Instruments for additional disclosure surrounding this transaction. In May, 2021, we acquired the Fire Mesa office building located in Las Vegas, Nevada for a purchase price of approximately $12.9 million. The building is 100% leased under the terms of a triple net lease by a wholly-owned subsidiary of UHS.
We can provide no assurance that reductions to Medicaid revenues earned by operators of certain of our facilities, particularly our hospital operators in the above-mentioned states, will not have a material adverse effect on the future operating results of those operators which, in turn, could have a material adverse effect on us.
We can provide no assurance that reductions to Medicaid revenues earned by operators of certain of our facilities, particularly our hospital operators in the above-mentioned states, will not have a material adverse effect on the future operating results of those operators which, in turn, could have a material adverse effect on us. 8 Executive Officers of the Registrant Name Age Position Alan B.
On January 1, 2023 the annual rent increased and on each January 1 st thereafter through 2026, the annual rent will increase by 2.50% on a cumulative and compounded basis.
On January 1, 2024 the annual rent increased to $6.6 million and on each January 1 st thereafter through 2026, the annual rent will increase by 2.50% on a cumulative and compounded basis.
The combined revenues generated from the leases on these hospitals comprised approximately 26% of our consolidated revenues during 2022. During 2021 and 2020, the combined revenues generated from the leases on the hospitals leased to subsidiaries of UHS during those years comprised approximately 25% and 22%, respectively, of our consolidated revenues.
The combined revenues generated from the leases on these hospitals comprised approximately 25% and 26% of our consolidated revenues during 2023 and 2022, respectively. During 2021, the combined revenues generated from the leases on the hospitals leased to subsidiaries of UHS was approximately 25% of our consolidated revenues.
Clive Behavioral Health (D) (J) Clive, IA Behavioral Health 100% Universal Health Services, Inc. and Catholic Health Initiatives-Iowa, Corp. 4058 W. Melrose Facility (N) Chicago, IL Specialty 100% -- Corpus Christi Facility (F) Corpus Christi, TX Specialty 100% -- Evansville Facility (G) Evansville, IN Specialty 100% -- Family Doctor’s Medical Office Bldg.
Clive Behavioral Health (D) (J) Clive, IA Behavioral Health 100% Universal Health Services, Inc. and Catholic Health Initiatives-Iowa, Corp. 4058 W. Melrose Land (L) Chicago, IL Vacant Land 100% -- Evansville Facility (G) Evansville, IN Specialty 100% -- Family Doctor’s Medical Office Bldg.
The MOB is located on the campus of the Northern Nevada Sierra Medical Center, a newly constructed 158-bed hospital that is owned and operated by a wholly-owned subsidiary of UHS, which was completed during in April, 2022. The MOB is expected to be completed in March, 2023.
(I) Construction on this UHS-related MOB was substantially completed during March of 2023. The MOB is located on the campus of the Northern Nevada Sierra Medical Center, a newly constructed hospital that is owned and operated by a wholly-owned subsidiary of UHS, which was completed during in April, 2022.
See Note 4 for further disclosure around our lease accounting. Officers and Employees: Our officers are all employees of a wholly-owned subsidiary of UHS and although as of December 31, 2022 we had no salaried employees, our officers do typically receive annual stock-based compensation awards in the form of restricted stock or restricted stock units.
Officers and Employees: Our officers are all employees of a wholly-owned subsidiary of UHS and although as of December 31, 2023 we had no salaried employees, our officers do typically receive annual stock-based compensation awards in the form of restricted stock or restricted stock units.
Executive Officers of the Registrant Name Age Position Alan B. Miller 85 Chairman of the Board, Chief Executive Officer and President Charles F. Boyle 63 Senior Vice President and Chief Financial Officer Cheryl K. Ramagano 60 Senior Vice President - Operations, Treasurer and Secretary Karla J. Peterson 63 Vice President, Acquisitions and Development Mr. Alan B.
Miller 86 Chairman of the Board, Chief Executive Officer and President Charles F. Boyle 64 Senior Vice President and Chief Financial Officer Cheryl K. Ramagano 61 Senior Vice President - Operations, Treasurer and Secretary Karla J. Peterson 64 Vice President, Acquisitions and Development Mr. Alan B.
(“UHS”). (B) Real estate assets owned by us and leased to an unaffiliated third-party or parties. (C) Real estate assets owned by a limited liability company (“LLC”) or a limited partnership (“LP”) in which we have a non-controlling ownership interests and include tenants who are unaffiliated third-parties.
(C) Real estate assets owned by a limited liability company (“LLC”) or a limited partnership (“LP”) in which we have a non-controlling ownership interests and include tenants who are unaffiliated third-parties. (D) Real estate assets owned by us or an LLC in which we hold 100% ownership interests and include tenants who are subsidiaries of UHS.
On each January 1 st through 2040 (and potentially through 2070 if the first three of five, 10-year renewal options are exercised), the annual rental will increase by 2.75% on a cumulative and compounded basis.
The lease on this facility is triple net and has an initial term of 20 years with five 10-year renewal options. On each January 1 st through 2040 (and potentially through 2070 if the first three of five, 10-year renewal options are exercised), the annual rental will increase by 2.75% on a cumulative and compounded basis.
Constitution and that the coverage of certain HIV prevention medication violates the Religious Freedom Restoration Act. We are unable to predict the outcome of this litigation or its potential impact at this time.
Constitution and that the 7 coverage of certain HIV prevention medication violates the Religious Freedom Restoration Act. The government has appealed the decision to the U.S. Circuit Court of Appeals for the Fifth Circuit. We are unable to predict the outcome of this litigation or its potential impact at this time.
As of February 27, 2023, we have seventy-six real estate investments or commitments located in twenty-one states in the United States consisting of: (i) six hospital facilities including three acute care and three behavioral health care; (ii) fifty-nine medical/office buildings; (iii) four free-standing emergency departments (“FEDs”); (iv) four preschool and childcare centers, and; (v) three specialty facilities that are currently vacant, one of which is currently in the process of being demolished and demolition is expected to be completed during the second quarter of 2023.
As of February 27, 2024, we have seventy-six real estate investments or commitments located in twenty-one states in the United States consisting of: (i) six hospital facilities including three acute care and three behavioral health care; (ii) sixty medical/office buildings; (iii) four free-standing emergency departments (“FEDs”); (iv) four preschool and childcare centers; (v) one specialty facility that is currently vacant, and; (vi) one property comprised of vacant land located in Chicago, Illinois (demolition of the previously existing building on this land was completed during 2023).
Pursuant to the terms of the previous lease on the Inland Valley Campus of Southwest Healthcare System, we earned $4.5 million of lease revenue during the year ended December 31, 2021 ($2.6 million in base rental and $1.9 million in bonus rental).
Lease revenue will not be impacted by the lease payments received related to these two properties. Pursuant to the terms of the lease on the Inland Valley Campus, we earned $4.5 million of lease revenue during the year ended December 31, 2021 (consisting of $2.6 million in base rental and $1.9 million in bonus rental).
For the four occupied hospitals owned by us at the end of 2021, all of which were leased to subsidiaries of UHS (excluding the three hospitals acquired on December 31, 2021 and including the one hospital that was divested on December 31, 2021), the combined weighted average Coverage Ratio was approximately 7.9 (ranging from -1.4 to 18.4, with one behavioral health care hospital that opened during the fourth quarter of 2020 having a negative Coverage Ratio).
For the six hospitals owned by us at the end of 2023 (all of which were leased to subsidiaries of UHS), the combined weighted average Coverage Ratio was approximately 5.5 (ranging from -0.4 to 10.0, with one of the behavioral health care hospitals that opened during the fourth quarter of 2020 having a negative Coverage Ratio).
The master flex-lease agreement, which is subject to reduction based upon the execution of third-party leases, is for approximately 68% of the rentable square feet of the MOB at an initial minimum rent of $1.3 million annually. 5 During the fourth quarter of 2021, we purchased the 5% minority ownership interest held by a third-party member in Grayson Properties, LP which owns the Texoma Medical Plaza, an MOB located in Denison, Texas for approximately $3.1 million.
During the fourth quarter of 2021, we purchased the 5% minority ownership interest held by a third-party member in Grayson Properties, LP which owns the Texoma Medical Plaza, an MOB located in Denison, Texas for approximately $3.1 million.
Additionally, UHS has rights of first refusal to: (i) purchase the respective leased facilities during and for 180 days after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased facility at the end of, and for 180 days after, the lease term at the same terms and conditions pursuant to any third-party offer. 4 In addition, a wholly-owned subsidiary of UHS is the managing, majority member in a joint-venture with an unrelated third-party that operates, and leases from us, Clive Behavioral Health.
Additionally, UHS has rights of first refusal to: (i) purchase the respective leased facilities during and for 180 days after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased facility at the end of, and for 180 days after, the lease term at the same terms and conditions pursuant to any third-party offer.
The lease for the Clive facility is guaranteed on a several basis by UHS (52%) and Catholic Health Initiatives-Iowa (48%). 3 The combined revenues generated from the leases on the three acute care and three behavioral health care hospital facilities leased to subsidiaries of UHS at December 31, 2022, accounted for approximately 26% of our consolidated revenues for the year ended December 31, 2022.
The combined revenues generated from the leases on the three acute care and three behavioral health care hospital facilities leased to subsidiaries of UHS at December 31, 2023 and 2022, accounted for approximately 25% and 26% of our consolidated revenues for the years ended December 31, 2023 and 2022, respectively.
Fire Mesa (A) (O) Las Vegas, NV Office Building 100% Universal Health Services, Inc. 140 Thomas Jefferson Drive (P) Frederick, MD MOB 100% -- Beaumont Heart and Vascular Center (R.) Dearborn, MI MOB 100% -- Sierra Medical Plaza I (I) Reno, Nevada MOB 100% -- (A) Real estate assets owned by us and leased to subsidiaries of Universal Health Services, Inc.
Fire Mesa (A) (M) Las Vegas, NV Office Building 100% Universal Health Services, Inc. 140 Thomas Johnson Drive (N) Frederick, MD MOB 100% -- Beaumont Heart and Vascular Center (P) Dearborn, MI MOB 100% -- Sierra Medical Plaza I (I) Reno, NV MOB 100% -- McAllen Doctor's Center (A)(F) McAllen, TX MOB 100% Universal Health Services, Inc.
In addition to the six UHS hospital facilities, we have twenty properties consisting of MOBs (including one that is under construction and expected to be completed in March, 2023) and FEDs that are either wholly or jointly-owned by us that include, or will include, tenants which are subsidiaries of UHS.
In addition to the six UHS hospital facilities, we have twenty-one properties consisting of medical/office buildings (including one newly constructed MOB that was substantially completed during the first quarter of 2023 and one MOB that was acquired during the third quarter of 2023), and FEDs that are either wholly or jointly-owned by us that include tenants that are subsidiaries of UHS.
Special payments under the outpatient PPS may be made for certain new technology items and services through transitional pass-through payments and special reimbursement rates. 8 Our three acute care hospitals, three behavioral health care facilities and two FEDs operated by subsidiaries of UHS, as well as two FEDs operated by unaffiliated third-parties are located in Texas, Florida, Virginia, South Carolina and Iowa.
Our three acute care hospitals, three behavioral health care facilities and two FEDs operated by subsidiaries of UHS, as well as two FEDs operated by unaffiliated third-parties are located in Texas, Florida, Virginia, South Carolina and Iowa.
This transaction generated a gain of approximately $68.4 million which is included in our consolidated statement of income for the year ended December 31, 2021.
As we no longer have a controlling interest in Inland Valley Campus of Southwest Healthcare System, the transaction generated a gain of approximately $68.4 million which was included in our consolidated statement of income the year ended December 31, 2021.
The initial lease is scheduled to expire on August 31, 2027 and has two five-year renewal options. As discussed in Note 3, the acquisition of this office building is part of a series of planned tax-deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code, as amended.
As discussed in Note 3 to the consolidated financial statements-Purchase and Sale Transaction, Acquisitions, Divestitures and New Construction , the acquisition of this office building is part of a series of planned tax-deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code, as amended.
(D) Real estate assets owned by us or an LLC in which we hold 100% ownership interests and include tenants who are subsidiaries of UHS. (E) Real estate assets owned by us or an LLC in which we hold 100% ownership interests and include tenants who are unaffiliated third parties.
(E) Real estate assets owned by us or an LLC in which we hold 100% ownership interests and include tenants who are unaffiliated third parties. (F) This property was acquired during the third quarter of 2023 and is 100% master leased to McAllen Hospitals, L.P, a wholly-owned subsidiary of UHS.
During the fourth quarter of 2022, we decided to raze the building which is estimated to be completed during the second quarter of 2023. Please see Note 4 to the consolidated financial statements for further details surrounding this property. (O) This office building was acquired in May, 2021. (P) This MOB was acquired in January, 2022.
Please see Note 2 to the consolidated financial statements for further details surrounding this transaction. 2 (L) Demolition of this facility was completed during 2023. We continue to market this vacant land. Please see Note 4 to the consolidated financial statements for further details surrounding this property. (M) This office building was acquired in May, 2021.
This property is leased to a joint venture between a wholly-owned subsidiary of UHS and Catholic Health Initiatives-Iowa, Corp. (K) Construction on this property was substantially completed in December, 2020. The master lease commenced on December 11, 2020. (L) This property was acquired in late December, 2020.
(J) This property is leased to a joint venture between a wholly-owned subsidiary of UHS and Catholic Health Initiatives-Iowa, Corp.
This 100-bed behavioral health care facility is located in Clive, Iowa and was completed and opened in late December, 2020 and the hospital lease commenced on December 31, 2020. The lease on this facility is triple net and has an initial term of 20 years with five 10-year renewal options.
In addition, a wholly-owned subsidiary of UHS is the managing, majority member in a joint-venture with an unrelated third-party that operates, and leases from us, Clive Behavioral Health. This 100-bed behavioral health care facility is located in Clive, Iowa and was completed and opened in late December, 2020 and the hospital lease commenced on December 31, 2020.
The remaining lease terms on the ground leases with subsidiaries of UHS range from approximately 27 years to approximately 76 years. The annual aggregate lease payments on these properties were approximately $508,000 for the year ended 2022, $508,000 for each of the years ended 2023, 2024, 2025 and 2026, and an aggregate of $28.0 million thereafter.
The annual aggregate lease payments on these properties were approximately $571,000 for the year ended 2023 and expected to be $571,000 for each of the years ended 2024, 2025, 2026 and 2027, and an aggregate of $31.9 million thereafter. See Note 4 to the consolidated financial statements-Lease Accounting for further disclosure around our lease accounting.
In January, 2022, we entered into a ground lease and master flex-lease agreement with a wholly-owned subsidiary of UHS to develop, construct and own the real property of Sierra Medical Plaza I, an MOB located in Reno, Nevada, consisting of approximately 86,000 rentable square feet.
The cost of the MOB is estimated to be approximately $35 million, approximately $29 million of which was incurred as of December 31, 2023. In connection with this MOB, we entered into a ground lease and master flex-lease agreement with a wholly-owned subsidiary of UHS.
Removed
(F) The lease on this facility expired on June 1, 2019. The facility is vacant and being marketed. (G) The lease on this facility expired on May 31, 2019. The facility is vacant and being marketed.
Added
(A) Real estate assets owned by us and leased to subsidiaries of Universal Health Services, Inc. (“UHS”). (B) Real estate assets owned by us and leased to an unaffiliated third-party or parties.
Removed
A wholly-owned subsidiary of UHS has entered into a master flex-lease agreement for approximately 68% of the rentable square feet, subject to reduction based upon the execution of third-party leases. (J) Construction on this UHS-related hospital facility was substantially completed in December, 2020.
Added
In connection with this MOB, we entered into a ground lease and master flex-lease agreements (both of which commenced in March, 2023) with a wholly-owned subsidiary of UHS.
Removed
Please see Note 2 to the consolidated financial statements for further details surrounding this transaction. 2 (N) The lease on this facility expired on December 31, 2021. The facility is vacant and has been marketed to third parties that had potential interest in purchasing or leasing the property in its existing form.
Added
The master flex-lease agreement has a ten-year term scheduled to expire on March 31, 2033 and covers approximately 68% of the rentable square feet of the MOB, subject to reduction based upon the execution of third-party leases. The initial minimum rent pursuant to the master lease is $1.3 million annually, plus a pro-rata share of the common area maintenance expenses.
Removed
Also included in our portfolio at December 31, 2022, are three vacant specialty facilities which were formerly leased to non-related parties. The lease on one of these specialty facilities, located in Chicago, Illinois, expired on December 31, 2021, and the leases on the other two facilities, located in Corpus Christi, Texas and Evansville, Indiana, expired during 2019.
Added
The lease for Clive Behavioral Health is guaranteed on a several basis by UHS (52%) and Catholic Health Initiatives-Iowa (48%).
Removed
The facility located in Chicago, Illinois, has been marketed to third-parties that had potential interest in purchasing or leasing the property in its existing form.
Added
This transaction generated a gain of approximately $68.4 million which is included in our consolidated statement of income for the year ended December 31, 2021. As a result of UHS’ purchase option within the lease agreements of Aiken and Canyon Creek, the transaction is accounted for as a failed sale leaseback in accordance with U.S.
Removed
However, during the fourth quarter of 2022, after evaluation of the most suitable future uses of the property, as well as an effort to reduce its ongoing operating and maintenance expenses, we decided to raze the building.
Added
During the third quarter of 2023, we acquired the McAllen Doctor's Center, an MOB located in McAllen, Texas for a purchase price of approximately $7.6 million, including transaction costs. The building has approximately 79,500 rentable square feet and is 100% master leased to McAllen Hospitals, L.P, a wholly-owned subsidiary of UHS.
Removed
Demolition, which commenced during the fourth quarter of 2022, and is expected to be completed during the second quarter of 2023, is expected to cost approximately $1.4 million ($332,000 of which was incurred as of December 31, 2022). We continue to market these three properties to third parties.
Added
The triple-net master lease is for twelve years scheduled to expire on August 31, 2035. McAllen Hospitals, L.P. has the option to renew the lease term for three consecutive ten-year terms. The initial annual base rent is approximately $624,000.
Removed
The combined revenues generated from the leases on the three acute care and one behavioral health care hospital facilities leased to subsidiaries of UHS at December 31, 2021, (McAllen Medical Center, Wellington Regional Medical Center, Inland Valley Campus of Southwest Healthcare and Clive Behavioral Health), before giving effect to the December 31, 2021 asset purchase and sale agreement with UHS and certain of its affiliates, which was amended during the first quarter of 2022, as discussed below, accounted for approximately 23% of our consolidated revenue for the five years ended December 31, 2021 (approximately 25% and 22% for the years ended December 31, 2021 and 2020, respectively).
Added
During the first quarter of 2023, construction was substantially completed on Sierra Medical Plaza I, a multi-tenant MOB located in Reno, Nevada, consisting of approximately 86,000 rentable square feet.
Removed
The aggregate revenues generated from UHS-related tenants comprised approximately 34% of our consolidated revenue for the five years ended December 31, 2022 (approximately 40%, 37% and 33% for the years ended December 31, 2022, 2021 and 2020, respectively).
Added
The master flex lease agreement has a ten-year term scheduled to expire on March 31, 2033, and covers approximately 68% of the rentable square feet of the MOB at an initial minimum rent of $1.3 million annually plus a pro-rata share of the common area maintenance expenses.
Removed
On January 1, 2023, the annual rent increased and on each January 1 st thereafter through 2033, the annual rental rate will increase by 2.25% on a cumulative and compounded basis.
Added
The master flex-lease is subject to a reduction during the term based upon the execution of third-party leases. The ground lease and the master flex lease each commenced during March, 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur business is subject to risks associated with real estate acquisitions and ownership, including: • general liability, property and casualty losses, some of which may be uninsured; • the illiquid nature of real estate and the real estate market that impairs our ability to purchase or sell our assets rapidly to respond to changing economic conditions; • real estate market factors, such as the supply and demand of office space and market rental rates, changes in interest rates as well as an increase in the development of medical office condominiums in certain markets; • costs that may be incurred relating to maintenance and repair, and the need to make expenditures due to changes in governmental regulations, including the Americans with Disabilities Act; • environmental hazards at our properties for which we may be liable, including those created by prior owners or occupants, existing tenants, mortgagors or other persons; • large-scale fire, earthquake or severe weather-related damage to, or the effect of climate change on, the property and/or its operations, and; • defaults and bankruptcies by our tenants. 16 In addition to the foregoing risks, we cannot predict whether the leases on our properties, including the leases on the six hospitals leased to subsidiaries of UHS, which have options to purchase the respective leased facilities at fair market value, as discussed herein, will be renewed at the rates as stipulated in the lease, or fair market value lease rates, at the end of the current lease terms which expire at various times in 2026 to 2040.
Biggest changeOur business is subject to risks associated with real estate acquisitions and ownership, including: • general liability, property and casualty losses, some of which may be uninsured; • the illiquid nature of real estate and the real estate market that impairs our ability to purchase or sell our assets rapidly to respond to changing economic conditions; • real estate market factors, such as the supply and demand of office space and market rental rates, changes in interest rates as well as an increase in the development of medical office condominiums in certain markets; • costs that may be incurred relating to maintenance and repair, and the need to make expenditures due to changes in governmental regulations, including the Americans with Disabilities Act; • environmental hazards at our properties for which we may be liable, including those created by prior owners or occupants, existing tenants, mortgagors or other persons; • large-scale fire, earthquake or severe weather-related damage to, or the effect of climate change on, the property and/or its operations, and; • defaults and bankruptcies by our tenants.
The Inflation Reduction Act of 2022 (“IRA”) was passed on August 16, 2022, which among 12 other things, allows for CMS to negotiate prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D, beginning with 10 high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond.
The Inflation Reduction Act of 2022 (“IRA”) was passed on August 16, 2022, which among other things, allows for CMS to negotiate prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D, beginning with 10 high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond.
While Congress had previously revised the intent requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil False Claims Act.
While Congress had previously revised the intent 10 requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil False Claims Act.
UHS has stated that it is unable to predict the outcome of these matters or to reasonably estimate the amount or range of any such loss; however, the outcome of these lawsuits and the related investigations, publicity and news articles that have been published concerning these matters, could have a material adverse effect on their business, financial condition, results of operations and/or cash flows.
UHS has stated that it is unable to predict the outcome of these matters or to reasonably estimate the amount 13 or range of any such loss; however, the outcome of these lawsuits and the related investigations, publicity and news articles that have been published concerning these matters, could have a material adverse effect on their business, financial condition, results of operations and/or cash flows.
In September, 2020, UHS had experienced an information technology security incident which led UHS to suspend user access to its information technology applications related to operations located in the United States. While its information technology applications 18 were offline, patient care was delivered safely and effectively at its facilities across the country utilizing established back-up processes, including offline documentation methods.
In September, 2020, UHS had experienced an information technology security incident which led UHS to suspend user access to its information technology applications related to operations located in the United States. While its information technology applications were offline, patient care was delivered safely and effectively at its facilities across the country utilizing established back-up processes, including offline documentation methods.
Although it was expected that the Legislation would result in a reduction in uninsured patients in the U.S., which would reduce the operators’ of our facilities’ expense from uncollectible accounts receivable, the Legislation made a number of other changes to 11 Medicare and Medicaid which we believe may have an adverse impact on the operators of our facilities.
Although it was expected that the Legislation would result in a reduction in uninsured patients in the U.S., which would reduce the operators’ of our facilities’ expense from uncollectible accounts receivable, the Legislation made a number of other changes to Medicare and Medicaid which we believe may have an adverse impact on the operators of our facilities.
The imposition of such penalties could 13 jeopardize that operator’s ability to make lease or mortgage payments to us or to continue operating its facility. In addition, our bonus rent is based on the net revenues of the UHS hospital facility, which in turn is affected by the amount of reimbursement that such lessee receives from the government.
The imposition of such penalties could jeopardize that operator’s ability to make lease or mortgage payments to us or to continue operating its facility. In addition, our bonus rent is based on the net revenues of the UHS hospital facility, which in turn is affected by the amount of reimbursement that such lessee receives from the government.
Pursuant to our Advisory Agreement, as amended and 15 restated effective January 1, 2019, the Advisor is obligated to present an investment program to us, to use its best efforts to obtain investments suitable for such program (although it is not obligated to present any particular investment opportunity to us), to provide administrative services to us and to conduct our day-to-day affairs.
Pursuant to our Advisory Agreement, as amended and restated effective January 1, 2019, the Advisor is obligated to present an investment program to us, to use its best efforts to obtain investments suitable for such program (although it is not obligated to present any particular investment opportunity to us), to provide administrative services to us and to conduct our day-to-day affairs.
The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure, are costly and at times tenant-specific. A new or replacement operator or tenant may require different features in a property, depending on that operator’s or tenant’s particular operations.
The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure, 17 are costly and at times tenant-specific. A new or replacement operator or tenant may require different features in a property, depending on that operator’s or tenant’s particular operations.
Catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in damage to our properties. Many of our properties are located in areas susceptible to revenue loss, cost increase, or damage caused by severe weather conditions or natural disasters such as wildfires, hurricanes, earthquakes, tornadoes and floods.
Catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in damage to our properties. 19 Many of our properties are located in areas susceptible to revenue loss, cost increase, or damage caused by severe weather conditions or natural disasters such as wildfires, hurricanes, earthquakes, tornadoes and floods.
Such competition is experienced in markets including, but not limited to, McAllen, Texas, the site of our McAllen Medical Center, a 370-bed acute care hospital. In addition, the number and quality of the physicians on a hospital’s staff are important factors in determining a hospital’s competitive advantage.
Such competition is experienced in markets including, but not limited to, McAllen, Texas, the site of our McAllen Medical Center, a 370-bed acute care hospital. 14 In addition, the number and quality of the physicians on a hospital’s staff are important factors in determining a hospital’s competitive advantage.
Our hospital operators expect continued third-party efforts to aggressively manage reimbursement levels and cost controls. Reductions in reimbursement amounts received from third party payers could have a material adverse effect on the financial position and results of operations of our hospital operators.
Our hospital operators expect continued third-party efforts to aggressively manage reimbursement levels and cost controls. Reductions in 9 reimbursement amounts received from third party payers could have a material adverse effect on the financial position and results of operations of our hospital operators.
A worsening of economic conditions, including inflation and rising interest rates, may result in a higher unemployment rate which will likely increase the number of individuals without health insurance. As a result, the operators of our facilities may experience a decrease in patient volumes.
A worsening of economic conditions, including inflation and rising interest rates, may result in a higher unemployment rate which will likely increase the number of individuals without health insurance. As a result, the operators of our 18 facilities may experience a decrease in patient volumes.
Both Master Leases by and among us and certain subsidiaries of UHS, which together govern the three acute care hospital properties, three behavioral healthcare hospitals and the freestanding emergency departments leased to subsidiaries of UHS, includes a 20 change of control provision.
Both Master Leases by and among us and certain subsidiaries of UHS, which together govern the three acute care hospital properties, three behavioral healthcare hospitals and the freestanding emergency departments leased to subsidiaries of UHS, includes a change of control provision.
Our future results of operations could be unfavorably impacted by deterioration in general economic conditions which could result in increases in the number of people unemployed and/or uninsured.
Our future results of operations could also be unfavorably impacted by deterioration in general economic conditions which could result in increases in the number of people unemployed and/or uninsured.
Although COVID-19 has not had a material adverse impact on our results of operations through December 31, 2022, we believe that the potentially adverse impact that the pandemic may have on the future operations and financial results of our tenants, and in turn ours, will depend upon many factors, most of which are beyond our, or our tenants’, ability to control or predict.
Although COVID-19 has not had a material adverse impact on our results of operations through December 31, 2023, we believe that the potentially adverse impact that the pandemic may have on the future operations and financial results of our tenants, and in turn ours, will depend upon many factors, most of which are beyond our, or our tenants’, ability to control or predict.
In addition, as of December 31, 2022, subsidiaries of UHS leased six hospital facilities owned by us with current lease terms expiring at various times from 2026 to 2040. We cannot assure you that UHS will continue to satisfy its obligations to us or renew existing leases upon their scheduled maturity.
In addition, as of December 31, 2023, subsidiaries of UHS leased six hospital facilities owned by us with current lease terms expiring at various times from 2026 to 2040. We cannot assure you that UHS will continue to satisfy its obligations to us or renew existing leases upon their scheduled maturity.
For the year ended December 31, 2022, 8% of our consolidated and unconsolidated revenues were generated by four jointly-owned LLCs/LPs in which we hold non-controlling equity ownership interests ranging from 33% to 95%. Our level of investment and lack of control exposes us to potential losses of our investments and revenues.
For the year ended December 31, 2023, 8% of our consolidated and unconsolidated revenues were generated by four jointly-owned LLCs/LPs in which we hold non-controlling equity ownership interests ranging from 33% to 95%. Our level of investment and lack of control exposes us to potential losses of our investments and revenues.
In contrast, since we are a REIT, our distributions to individual U.S. shareholders are not eligible for the reduced rates which apply to distributions from regular corporations, and thus may be subject to Federal income tax at a rate as high as 37% for 2022 (subject to certain additional taxes for certain taxpayers).
In contrast, since we are a REIT, our distributions to individual U.S. shareholders are not eligible for the reduced rates which apply to distributions from regular corporations, and thus may be subject to Federal income tax at a rate as high as 37% for 2023 (subject to certain additional taxes for certain taxpayers).
A cyber security incident could cause a violation of HIPAA, breach of member privacy, or other negative impacts. We and UHS rely extensively on our information technology (“IT”) systems to manage clinical and financial data, communicate with our patients, payers, vendors and other third parties and summarize and analyze operating results.
A cyber security incident could cause a violation of HIPAA, breach of member privacy, or other negative impacts. We, UHS and our third-party property managers rely extensively on our information technology (“IT”) systems to manage clinical and financial data, communicate with our patients, payers, vendors and other third parties and summarize and analyze operating results.
In general, dividends (qualified) paid by a U.S. corporation to individual U.S. shareholders are subject to Federal income tax at a maximum rate of 20% for 2022 (subject to certain additional taxes for certain taxpayers).
In general, dividends (qualified) paid by a U.S. corporation to individual U.S. shareholders are subject to Federal income tax at a maximum rate of 20% for 2023 (subject to certain additional taxes for certain taxpayers).
Since UHS comprised approximately 40%, 37% and 33% of our consolidated revenues for the years ended December 31, 2022, 2021 and 2020, respectively, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-K and 10-Q, as publicly filed with the Securities and Exchange Commission.
Since UHS comprised approximately 41%, 40% and 37% of our consolidated revenues for the years ended December 31, 2023, 2022 and 2021, respectively, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-K and 10-Q, as publicly filed with the Securities and Exchange Commission.
Risks Related to the Market Conditions and Liquidity A worsening of the economic and employment conditions in the United States could materially affect our business and future results of operations of the operators of our facilities which could, in turn, materially reduce our revenues and net income.
Risks Related to the Market Conditions and Liquidity Continuing inflationary pressures and a worsening of the economic and employment conditions in the United States could materially affect our business and future results of operations of the operators of our facilities which could, in turn, materially reduce our revenues and net income.
There is a high degree of uncertainty regarding the implementation and impact of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Paycheck Protection Program and Health Care Enhancement Act (the “PPPHCE Act”) and the American Rescue Plan Act of 2021 (the “ARPA”), which could impact the total amount and types of assistance and benefits our tenants will receive.
There is a high degree of uncertainty regarding the implementation and impact of the Coronavirus Aid, Relief, and Economic Security Act, the Paycheck Protection Program and Health Care Enhancement Act and the American Rescue Plan Act of 2021, which could impact the total amount and types of assistance and benefits our tenants will receive.
If UHS experiences financial difficulties, or otherwise fails to make payments to us, or elects not to renew the leases on our three acute care hospitals, our revenues could be materially reduced. For the year ended December 31, 2022, lease payments from UHS comprised approximately 40% of our consolidated revenues.
If UHS experiences financial difficulties, or otherwise fails to make payments to us, or elects not to renew the leases on our three acute care hospitals, our revenues could be materially reduced. For the year ended December 31, 2023, lease payments from UHS comprised approximately 41% of our consolidated revenues.
We are unable at this time to predict how this trend will affect the results of operations of the operators of our hospitals, but it could negatively impact their revenues if they are unable to meet quality standards established by both governmental and private payers.
We are unable at this time to predict how this 12 trend will affect the results of operations of the operators of our hospitals, but it could negatively impact their revenues if they are unable to meet or maintain high quality standards established by both governmental and private payers.
ARP also increased the amount of financial assistance for people at lower incomes who were already eligible under the Legislation.
ARPA also increased the amount of financial assistance for people at lower incomes who were already eligible under the Legislation.
On March 11, 2021, President Biden signed the American Rescue Plan (“ARP”) into law. The ARP extends eligibility for Legislation health insurance subsidies to people buying their own health coverage on the Marketplace who have household incomes above 400% of the federal poverty level.
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”) into law. The ARPA extends eligibility for Legislation health insurance subsidies to people buying their own health coverage on the Marketplace who have household incomes above 400% of the federal poverty level.
Our IT systems are subject to damage or interruption from power outages, facility damage, computer and telecommunications failures, computer viruses, security breaches including credit card or personally identifiable information breaches, vandalism, theft, natural disasters, catastrophic events, human error and potential cyber threats, including malicious codes, worms, phishing attacks, denial of service attacks, ransomware and other sophisticated cyber-attacks, and our disaster recovery planning cannot account for all eventualities.
Our IT systems, and the networks and information systems of third parties that we rely on, are subject to damage or interruption from power outages, facility damage, computer and telecommunications failures, computer viruses, security breaches including credit card or personally identifiable information breaches, vandalism, theft, natural disasters, catastrophic events, human error and potential cyber threats, including malicious codes, worms, phishing attacks, denial of service attacks, ransomware and other sophisticated cyber-attacks, and our disaster recovery planning cannot account for all eventualities.
In addition, our future results of operations, as well as our reputation, could be adversely impacted by theft, destruction, loss, or misappropriation of public health information, other confidential data or proprietary business information.
In addition, our and our tenants' future results of operations, as well as our reputations, could be adversely impacted by theft, destruction, loss, or misappropriation of public health information, other confidential data or proprietary business information.
If their ultimate liability for professional and general liability claims could change materially from current estimates, if such policy limitations should be partially or fully exhausted in the future, or payments of claims exceed estimates or are not covered by insurance, it could have a material adverse effect on the operations of our operators and, in turn, us. 17 Property insurance rates, particularly for earthquake insurance in California, have also continued to increase.
If their ultimate liability for professional and general liability claims could change materially from current estimates, if such policy limitations should be partially or fully exhausted in the future, or payments of claims exceed estimates or are not covered by insurance, it could have a material adverse effect on the operations of our operators and, in turn, us.
On July 13, 2021, HHS, the Department of Labor and the Department of the Treasury issued an interim final rule, which begins to implement this legislation. The rule would limit health care providers' ability to receive payment for services at usually higher out-of-network rates in certain circumstances and prohibit out-of-network payments in other circumstances.
HHS, the Department of Labor and the Department of the Treasury issued interim final rules, that begin to implement this legislation. The rule would limit health care providers' ability to receive payment for services at usually higher out-of-network rates in certain circumstances and prohibit out-of-network payments in other circumstances.
Failure to comply with these requirements may result in daily monetary penalties. As part of the CAA, Congress passed legislation aimed at preventing or limiting patient balance billing in certain circumstances. The CAA addresses surprise medical bills stemming from emergency services, out-of-network ancillary providers at in-network facilities, and air ambulance carriers.
As part of the CAA, Congress passed legislation aimed at preventing or limiting patient balance billing in certain circumstances. The CAA addresses surprise medical bills stemming from emergency services, out-of-network ancillary providers at in-network facilities, and air ambulance carriers.
In 2021, the FCA further announced that effective January 1, 2022, the one week and two-month USD LIBOR tenors are no longer being published, and all other USD LIBOR tenors will cease to be published after June 30, 2023.
In 2021, the FCA further announced that effective January 1, 2022, the one week and two-month USD LIBOR tenors are no longer being published. Additionally, effective July 1, 2023 all other USD LIBOR tenors are no longer published.
If we are unable to find a suitable replacement tenant or operator upon favorable terms, or at all, we may take possession of a facility, which might expose us to successor liability or require us to indemnify subsequent operators to whom we might transfer the operating rights and licenses, all of which may materially adversely affect our business, results of operations, and financial condition. 14 Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance (“ESG”) matters, that could expose us to numerous risks.
If we are unable to find a suitable replacement tenant or operator upon favorable terms, or at all, we may take possession of a facility, which might expose us to successor liability or require us to indemnify subsequent operators to whom we might transfer the operating rights and licenses, all of which may materially adversely affect our business, results of operations, and financial condition.
Our tenants and operators, including UHS, may be unable to fulfill their insurance, indemnification and other obligations to us under their leases and mortgages and thereby potentially expose us to those risks.
Property insurance rates, particularly for earthquake insurance in California, have also continued to increase. Our tenants and operators, including UHS, may be unable to fulfill their insurance, indemnification and other obligations to us under their leases and mortgages and thereby potentially expose us to those risks.
As cyber criminals continue to become more sophisticated through evolution of their tactics, techniques and procedures, we have taken, and will continue to take, additional preventive measures to strengthen the cyber defenses of our networks and data.
An attack, breach or other system disruption affecting any of these third parties could similarly harm our business. As cyber criminals continue to become more sophisticated through evolution of their tactics, techniques and procedures, we have taken, and will continue to take, additional preventive measures to strengthen the cyber defenses of our networks and data.
A wide variety of market factors can cause interest rates to rise, including central bank monetary policy, an uptick in inflation and changes in general economic conditions.
A wide variety of market factors can cause interest rates to rise, including central bank monetary policy, an uptick in inflation and changes in general economic conditions. The risks associated with increasing rates can have unpredictable effects on the markets and on the price of our common stock.
Pursuant to the lease on McAllen Medical Center, which is leased to wholly-owned subsidiary of UHS, we earn bonus rental revenue which is computed based upon a computation that compares the hospital’s current quarter revenue to the corresponding quarter in the base year.
We cannot predict whether the loss of any such favorable conditions available to providers during the declared PHE will ultimately have a negative financial impact on us Pursuant to the lease on McAllen Medical Center, which is leased to wholly-owned subsidiary of UHS, we earn bonus rental revenue which is computed based upon a computation that compares the hospital’s current quarter revenue to the corresponding quarter in the base year.
Risks Related to the Regulatory Environment The revenues and results of operations of the operators of our hospital facilities, including UHS, and our medical office buildings, are significantly affected by payments received from the government and other third-party payers.
Additional risks and uncertainties that we are not aware of, or that we currently deem to be immaterial, could also impact our business and results of operations. The revenues and results of operations of the operators of our hospital facilities, including UHS, and our medical office buildings, are significantly affected by payments received from the government and other third-party payers.
The ultimate outcomes of legislative attempts to repeal or amend the Legislation and legal challenges to the Legislation are unknown. Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Legislation.
Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Legislation.
During any such time that we were not able to do so, our ability to increase or maintain our dividend at current levels could be adversely affected which could cause our stock price to decline.
During any such time that we were not able to do so, our ability to increase or maintain our dividend at current levels could be adversely affected which could cause our stock price to decline. 15 The bankruptcy, default, insolvency or financial deterioration of our tenants could significantly delay our ability to collect unpaid rents or require us to find new operators.
Should we be unable to comply with the strict income distribution requirements applicable to REITs utilizing only cash generated by operating activities, we would be required to generate cash from other sources which could adversely affect our financial condition.
The differing treatment of dividends received from REITs and other corporations might cause individual investors to view an investment in REITs as less attractive relative to other corporations, which might negatively affect the value of our shares. 16 Should we be unable to comply with the strict income distribution requirements applicable to REITs utilizing only cash generated by operating activities, we would be required to generate cash from other sources which could adversely affect our financial condition.
Additional risks and uncertainties that we are not aware of, or that we currently deem to be immaterial, could also impact our business and results of operations. Risks Related to the COVID-19 Pandemic COVID-19 and other pandemics, epidemics, or public health threats may adversely affect the business of our tenants, our business, and our results of operations and financial condition.
COVID-19 and other pandemics, epidemics, or public health threats may adversely affect the business of our tenants, our business, and our results of operations and financial condition. We are subject to risks associated with public health threats and epidemics, including the health concerns relating to the COVID-19 pandemic.
It has been projected that the Legislation will result in a net reduction in Medicare and Medicaid payments to hospitals totaling $155 billion over 10 years. The Legislation revises reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high quality care and contains a number of incentives and penalties under these programs to achieve these goals.
The Legislation revises reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high quality care and contains a number of incentives and penalties under these programs to achieve these goals.
Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to phase out LIBOR and stop compelling banks to submit rates for its calculation.
The discontinuation of LIBOR and the transition from LIBOR to an alternative reference rate may adversely impact us or our borrowing costs. In 2017, the U.K. Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to phase out LIBOR and stop compelling banks to submit rates for its calculation.
Because Legislation provisions are effective at various times over the next several years, we anticipate that many of the provisions in the Legislation may be subject to further revision. Initiatives to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions have been persistent.
Initiatives to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions have been persistent. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and legal challenges to the Legislation are unknown.
However, if any of our systems are damaged, fail to function properly or otherwise become unavailable, we may incur substantial costs to repair or replace them, and may experience loss or corruption of critical data such as protected health information or other data subject to privacy laws and proprietary business information and interruptions or disruptions and delays in our ability to perform critical functions, which could materially and adversely affect our businesses and results of operations and could result in significant penalties or fines, litigation, loss of customers, significant damage to our reputation and business, and other losses.
Interruptions or disruptions and delays in our or their ability to perform critical functions could materially and adversely affect our or their businesses and results of operations and could result in significant penalties or fines, litigation, loss of customers, significant damage to reputations and businesses, and other losses.
Our inability to obtain financing on terms acceptable to us could have a material unfavorable impact on our results of operations, financial condition and liquidity. The phase-out of LIBOR on January 1, 2022 and June 30, 2023. In 2017, the U.K.
Our inability to obtain financing on terms acceptable to us could have a material unfavorable impact on our results of operations, financial condition and liquidity. We continue to see rising costs in construction materials and labor. Such increased costs could have an adverse effect on the cash flow return on investment relating to our capital projects.
The trend toward value-based purchasing may negatively impact the revenues of our hospital operators.
Failure to comply with such terms and conditions could result in recoupment, False Claims Act liability, or other penalty to our tenants. The trend toward value-based purchasing may negatively impact the revenues of our hospital operators.
If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.
Given the limited history of this rate and potential volatility as compared to other benchmark or market rates, the future performance of this rate cannot be predicted based on historical performance. Using SOFR as the alternative benchmark rate may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available.
The end of the PHE status will result in the conclusion of those policies over various designated timeframes. We cannot predict whether the loss of any such favorable conditions available to providers during the declared PHE will ultimately have a negative financial impact on our tenants (and, in turn, us).
The end of the PHE status will result in the conclusion of those policies over various designated timeframes.
Removed
We are subject to risks associated with public health threats and epidemics, including the health concerns relating to the COVID-19 pandemic. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the federal government declared COVID-19 a national emergency.
Added
On April 26, 2023, CMS announced updated enforcement processes that requires a shortened timeline for coming into compliance when a violation has been identified and the automatic imposition of a civil monetary penalties in certain circumstances of noncompliance. Failure to comply with these requirements may result in daily monetary penalties.
Removed
As a result of various policies implemented by the federal and state governments, and varying by individual state, many non-essential businesses in the nation were closed for varying time periods.
Added
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Although the federal government had previously declared COVID-19 a national emergency, that declaration expired on May 11, 2023 at which time the favorable payment provisions available to healthcare providers during the declared national emergency ended.
Removed
Such factors include, but are not limited to, the length of time and severity of the spread of the pandemic; the volume of canceled or rescheduled elective procedures and the volume of COVID-19 patients treated by the operators of our hospitals and other healthcare facilities; measures our tenants are taking to respond to the COVID-19 pandemic; the impact of government and administrative regulation, including travel bans and restrictions, shelter-in-place or stay-at-home orders, quarantines, the promotion of social distancing, business shutdowns and limitations on business activity; changes in patient volumes at our tenants’ hospitals and other healthcare facilities due to patients’ general concerns related to the risk of contracting COVID-19 from interacting with the healthcare system; the impact of stimulus on the health care industry and our tenants; changes in patient volumes and payer mix caused by deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients as the result of business closings and layoffs); potential disruptions to clinical staffing and shortages and disruptions related to supplies required for our tenants’ employees and patients, including equipment, 9 pharmaceuticals and medical supplies, particularly personal protective equipment, or PPE; potential increases to expenses incurred by our tenants related to staffing, supply chain or other expenditures; the impact of our indebtedness and the ability to refinance such indebtedness on acceptable terms; disruptions in the financial markets and the business of financial institutions as the result of the COVID-19 pandemic which could impact our ability to access capital or increase associated borrowing costs; and changes in general economic conditions nationally and regionally in the markets our properties are located resulting from the COVID-19 pandemic, including increased unemployment and underemployment levels and reduced consumer spending and confidence.
Added
Since the future volumes and severity of COVID-19 patients remain highly uncertain and subject to change, including potential increases in future COVID-19 11 patient volumes caused by new variants of the virus, as well as related pressures on staffing and wage rates, we are not able to fully quantify the impact that these factors will have on our future financial results.
Removed
These factors could have a material adverse effect on the future business, financial position and results of operations of the operators of our facilities, and in turn, ours as a result of its macroeconomic impact, including the risk of a global recession or a recession in one or more of our key markets, or key markets of the operators of our facilities, the impact that may have on us and our tenants and our assessment of that impact, and any disruptions and inefficiencies in the supply chain.
Added
Many of the federal and state legislative and regulatory measures allowing for flexibility in delivery of care and various financial supports for healthcare providers were available only for the duration of the public health emergency (“PHE”). Most states have ended their state-level emergency declarations.
Removed
In addition, the Centers for Medicare and Medicaid Services (“CMS”) issued an Interim Final Rule (“IFR”) effective November 5, 2021 mandating COVID-19 vaccinations for all applicable staff at all Medicare and Medicaid certified facilities.
Added
The federal Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) created a $175 billion “Public Health and Social Services Emergency Fund” to reimburse eligible health care providers for “health care related expenses or lost revenues that are attributable to coronavirus” (the “PHSSEF”).
Removed
Under the IFR, facilities covered by this regulation must establish a policy ensuring all eligible staff have received the first dose of a two-dose COVID-19 vaccine or a one-dose COVID-19 vaccine prior to providing any care, treatment, or other services by December 5, 2021.
Added
The retention of funds from the PHSSEF is conditioned on eligibility and the acceptance of terms and conditions, and other guidelines or requirements that may change from time to time, including with respect to recordkeeping and repayment requirements. Our tenants received payments from the targeted distributions of the PHSSEF.
Removed
All eligible staff must have received the necessary shots to be fully vaccinated – either two doses of Pfizer or Moderna or one dose of Johnson & Johnson – by January 4, 2022. The regulation also provides for exemptions based on recognized medical conditions or religious beliefs, observances, or practices.
Added
The CARES Act also makes other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payment adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which made available accelerated payments of Medicare funds in order to increase cash flow to providers.
Removed
Under the IFR, facilities must develop a similar process or plan for permitting exemptions in alignment with federal law. If facilities fail to comply with the IFR by the deadlines established, they are subject to potential termination from the Medicare and Medicaid program for non-compliance.
Added
Our tenants received accelerated payments under this program during 2020, and returned early all of those funds during the first quarter of 2021. Our tenants, and other providers, must report healthcare related expenses attributable to COVID-19 that have not been reimbursed by another source, which may include general and administrative or healthcare related operating expenses.
Removed
In addition, the Occupational Safety and Health Administration also issued an Emergency Temporary Standard (“ETS”) requiring all businesses with 100 or more employees to be vaccinated by January 4, 2022. Pursuant to the ETS, those employees not vaccinated by that date will need to show a negative COVID-19 test weekly and wear a face mask in the workplace.
Added
Funds may also be applied to lost revenues, represented as a negative change in year-over-year net patient care operating income. The U.S. Department of Health and Human Services (“HHS”) is actively auditing recipients of PHSSEF funds to ensure compliance with the terms and conditions thereof.
Removed
Legal challenges to these rules ensued, and the U.S. Supreme Court upheld a stay of the ETS requirements but permitted the IFR vaccination requirements to go into effect pending additional litigation.
Added
Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance (“ESG”) matters, that could expose us to numerous risks.
Removed
CMS has indicated that hospitals in states not involved in the Supreme Court litigation are expected to be in compliance with IFR vaccination requirements consistent with the dates referenced above.
Added
In addition to the foregoing risks, we cannot predict whether the leases on our properties, including the leases on the six hospitals leased to subsidiaries of UHS, which have options to purchase the respective leased facilities at fair market value, as discussed herein, will be renewed at the rates as stipulated in the lease, or fair market value lease rates, at the end of the current lease terms which expire at various times in 2026 to 2040.
Removed
Hospitals in states that were involved in the Supreme Court litigation were required to come into compliance with first dose requirements by February 13, 2022 and second dose requirements by March 15, 2022. Hospitals in Texas were required to come into compliance with the first dose requirements by February 19, 2022 and the second dose requirements by March 21, 2022.
Added
Our systems, in turn, interface with and rely on third-party systems that we do not control.
Removed
We cannot predict at this time the potential viability or impact of any such additional litigation on us or the operators of our facilities.
Added
Third parties to whom we outsource certain of our functions, or with whom our systems interface and who may, in some instances, store our sensitive and confidential data, are also subject to the risks outlined above and may not have or use controls effective to protect such information.
Removed
Implementation of these rules could have an impact on staffing at the operators of our facilities for those employees that are not vaccinated in accordance with IFR and ETS requirements, and associated loss of revenues and increased costs resulting from staffing issues could have a material adverse effect on our financial results or those of the operators.
Added
However, if any of our, our tenants’, or our or their respective third-party service providers’ systems are damaged, fail to function properly or otherwise become unavailable, we or our tenants may incur substantial costs to repair or replace them.

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Item 2. Properties

Properties — owned and leased real estate

34 edited+4 added−6 removed14 unchanged
Biggest changeTenaya Way 44,894 0 % 0 % 0 % 0 % 0 % 0 % 100 % 2700 Fire Mesa 44,424 0 % 0 % 0 % 0 % 0 % 100 % 0 % Southern Crescent Center I (a.) 41,897 50 % 20 % 0 % 30 % 0 % 0 % 0 % BRB Medical Office Building 40,733 41 % 0 % 0 % 3 % 35 % 0 % 21 % Cypresswood Professional Center - 8101 10,200 100 % 0 % 0 % 0 % 0 % 0 % 0 % Cypresswood Professional Center - 8111 29,882 41 % 0 % 10 % 6 % 43 % 0 % 0 % Danbury Medical Plaza 36,141 45 % 1 % 0 % 0 % 54 % 0 % 0 % The Sparks Medical Building (a.) 35,127 0 % 13 % 0 % 21 % 0 % 36 % 30 % Phoenix Children’s East Valley Care Center 30,960 0 % 0 % 0 % 0 % 0 % 0 % 100 % Forney Medical Plaza II 30,507 36 % 0 % 0 % 9 % 0 % 25 % 30 % Madison Station MOB 30,096 18 % 0 % 8 % 24 % 0 % 25 % 25 % Apache Junction Medical Plaza 26,901 43 % 0 % 0 % 22 % 35 % 0 % 0 % Santa Fe Professional Plaza (a.) 24,832 0 % 11 % 0 % 27 % 17 % 14 % 31 % Professional Bldg at King's Crossing - Bldg A 11,528 100 % 0 % 0 % 0 % 0 % 0 % 0 % Professional Bldg at King's Crossing - Bldg B 12,790 11 % 0 % 33 % 18 % 0 % 0 % 38 % 140 Thomas Johnson Drive 20,465 0 % 0 % 0 % 0 % 0 % 0 % 100 % Emory at Dunwoody Building 20,366 0 % 0 % 0 % 100 % 0 % 0 % 0 % Piedmont - Roswell Physicians Center 19,927 0 % 0 % 0 % 0 % 0 % 0 % 100 % Bellin Health Family Medical Center 18,600 0 % 0 % 0 % 0 % 100 % 0 % 0 % Beaumont Heart & Vascular 17,621 0 % 0 % 0 % 0 % 100 % 0 % 0 % Piedmont - Vinings Physicians Center 16,790 0 % 0 % 0 % 0 % 0 % 0 % 100 % Ward Eagle Office Village 16,282 0 % 0 % 7 % 0 % 0 % 0 % 93 % Haas Medical Office Park 15,850 0 % 0 % 0 % 100 % 0 % 0 % 0 % Health Center at Hamburg 15,400 0 % 0 % 0 % 100 % 0 % 0 % 0 % Northwest Medical Center at Sugar Creek 13,696 0 % 0 % 0 % 0 % 0 % 0 % 100 % Family Doctor's MOB 12,050 0 % 0 % 0 % 0 % 100 % 0 % 0 % 25 Percentage of RSF with lease expirations Total RSF Available for Lease Jan. 1, 2023 2023 2024 2025 2026 2027 2028 and Later Beaumont Sleep Center 11,556 0 % 0 % 0 % 0 % 0 % 100 % 0 % 701 South Tonopah Building (a.) 10,747 0 % 100 % 0 % 0 % 0 % 0 % 0 % Sand Point MOB 9,128 0 % 0 % 0 % 0 % 0 % 0 % 100 % 5004 Pool Road MOB 4,400 0 % 0 % 0 % 0 % 0 % 100 % 0 % Preschool and Childcare Centers: Chesterbrook Academy - New Britain 8,402 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Audubon 8,300 0 % 0 % 0 % 100 % 0 % 0 % 0 % Chesterbrook Academy - Newtown 8,163 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Uwchlan 8,163 0 % 0 % 0 % 100 % 0 % 0 % 0 % Ambulatory Care Centers: Hanover Emergency Center 22,000 0 % 0 % 100 % 0 % 0 % 0 % 0 % South Texas ER at Mission 13,578 0 % 0 % 0 % 100 % 0 % 0 % 0 % South Texas ER at Weslaco 13,578 0 % 0 % 0 % 100 % 0 % 0 % 0 % Las Palmas Del Sol Emergency Center-West 9,395 0 % 0 % 0 % 0 % 100 % 0 % 0 % Sub-total Other Investments 2,883,748 18 % 10 % 11 % 12 % 12 % 11 % 26 % Total 4,145,491 16 % 7 % 7 % 8 % 23 % 8 % 31 % (a) The estimated market rates related to the 2022 expiring RSF are greater than the lease rates on the expiring leases by approximately 0% to 4%.
Biggest changeTenaya Way 44,894 0 % 0 % 0 % 0 % 0 % 0 % 100 % 2700 Fire Mesa 44,424 0 % 0 % 0 % 0 % 100 % 0 % 0 % Southern Crescent Center I 41,897 49 % 0 % 30 % 16 % 0 % 5 % 0 % BRB Medical Office Building 40,733 31 % 4 % 3 % 35 % 0 % 0 % 27 % Cypresswood Professional Center - 8101 10,200 41 % 0 % 0 % 0 % 0 % 0 % 59 % Cypresswood Professional Center - 8111 29,882 41 % 10 % 6 % 43 % 0 % 0 % 0 % Danbury Medical Plaza 36,141 45 % 1 % 0 % 54 % 0 % 0 % 0 % The Sparks Medical Building 35,127 0 % 0 % 21 % 13 % 36 % 11 % 19 % Phoenix Children’s East Valley Care Center 30,960 0 % 0 % 0 % 0 % 0 % 0 % 100 % Forney Medical Plaza II 30,507 18 % 0 % 9 % 17 % 25 % 31 % 0 % Madison Station MOB 30,096 7 % 8 % 34 % 0 % 25 % 26 % 0 % Apache Junction Medical Plaza (a.) 26,901 43 % 0 % 22 % 35 % 0 % 0 % 0 % Santa Fe Professional Plaza 24,832 7 % 4 % 24 % 20 % 14 % 31 % 0 % Professional Bldg at King's Crossing - Bldg A 11,528 100 % 0 % 0 % 0 % 0 % 0 % 0 % 25 Percentage of RSF with lease expirations Total RSF Available for Lease Jan. 1, 2024 2024 2025 2026 2027 2028 2029 and Later Professional Bldg at King's Crossing - Bldg B (a.) 12,790 11 % 33 % 18 % 0 % 0 % 38 % 0 % 140 Thomas Johnson Drive 20,465 0 % 0 % 0 % 0 % 0 % 15 % 85 % Emory at Dunwoody Building 20,366 0 % 0 % 100 % 0 % 0 % 0 % 0 % Piedmont - Roswell Physicians Center 19,927 0 % 0 % 0 % 0 % 0 % 0 % 100 % Bellin Health Family Medical Center 18,600 0 % 0 % 0 % 100 % 0 % 0 % 0 % Beaumont Heart & Vascular 17,621 0 % 0 % 0 % 100 % 0 % 0 % 0 % Piedmont - Vinings Physicians Center 16,790 0 % 0 % 0 % 0 % 0 % 0 % 100 % Ward Eagle Office Village 16,282 0 % 0 % 7 % 0 % 0 % 93 % 0 % Haas Medical Office Park 15,850 0 % 0 % 100 % 0 % 0 % 0 % 0 % Health Center at Hamburg 15,400 0 % 0 % 100 % 0 % 0 % 0 % 0 % Northwest Medical Center at Sugar Creek 13,696 0 % 0 % 0 % 0 % 0 % 38 % 62 % Family Doctor's MOB 12,050 0 % 0 % 0 % 100 % 0 % 0 % 0 % Beaumont Sleep Center 11,556 0 % 0 % 0 % 0 % 100 % 0 % 0 % 701 South Tonopah Building 10,747 0 % 0 % 100 % 0 % 0 % 0 % 0 % Sand Point MOB 9,128 0 % 0 % 0 % 0 % 0 % 0 % 100 % 5004 Pool Road MOB 4,400 0 % 0 % 0 % 0 % 100 % 0 % 0 % Preschool and Childcare Centers: Chesterbrook Academy - New Britain 8,402 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Audubon 8,300 0 % 0 % 100 % 0 % 0 % 0 % 0 % Chesterbrook Academy - Newtown 8,163 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Uwchlan 8,163 0 % 0 % 100 % 0 % 0 % 0 % 0 % Ambulatory Care Centers: Hanover Emergency Center 22,000 0 % 0 % 0 % 0 % 0 % 0 % 100 % South Texas ER at Mission 13,578 0 % 0 % 100 % 0 % 0 % 0 % 0 % South Texas ER at Weslaco 13,578 0 % 0 % 100 % 0 % 0 % 0 % 0 % Las Palmas Del Sol Emergency Center-West 9,395 0 % 0 % 0 % 100 % 0 % 0 % 0 % Sub-total Other Investments 2,963,245 16 % 8 % 15 % 12 % 12 % 5 % 32 % Total 4,155,288 13 % 6 % 10 % 24 % 8 % 4 % 35 % (a) The estimated market rates related to the 2024 expiring RSF are greater than the lease rates on the expiring leases by approximately 0% to 4%.
Accordingly, the McAllen Medical Center lease was amended during 2001 to exclude from the bonus rent calculation, the estimated net revenues generated at the Heart Hospital (as calculated pursuant to a percentage-based allocation determined at the time of the merger). During 2000, UHS purchased the South Texas Behavioral Health Center, a behavioral health care facility located in McAllen, Texas.
Accordingly, the McAllen Medical Center lease was amended during 2001 to exclude from the bonus rent calculation, the estimated net revenues generated at the Heart Hospital (as calculated pursuant to a percentage-based allocation determined at the time of the 23 merger). During 2000, UHS purchased the South Texas Behavioral Health Center, a behavioral health care facility located in McAllen, Texas.
The transferred properties are Aiken Regional Medical Center, (“Aiken”) which includes an acute care hospital and a behavioral health pavilion, and Canyon Creek Behavioral Health (“Canyon Creek”). The occupancy details for Aiken and Canyon Creek from 2017 through 2021 are not relevant since we acquired them on December 31, 2021.
The transferred properties are Aiken Regional Medical Center, (“Aiken”) which includes an acute care hospital and a behavioral health pavilion, and Canyon Creek Behavioral Health (“Canyon Creek”). The occupancy details for Aiken and Canyon Creek from 2019 through 2021 are not relevant since we acquired them on December 31, 2021.
(3) During the first quarter of 2001, UHS purchased the assets and operations of the 60-bed McAllen Heart Hospital located in McAllen, Texas. Upon acquisition by UHS, the Heart Hospital began operating under the same license as McAllen Medical Center (which has 370 available beds as of December 31, 2022).
(3) During the first quarter of 2001, UHS purchased the assets and operations of the 60-bed McAllen Heart Hospital located in McAllen, Texas. Upon acquisition by UHS, the Heart Hospital began operating under the same license as McAllen Medical Center (which has 370 available beds as of December 31, 2023).
The estimated average occupied square footage for 2022 was calculated by averaging the unavailable rentable square footage on January 1, 2022 and January 1, 2023.
The estimated average occupied square footage for 2023 was calculated by averaging the unavailable rentable square footage on January 1, 2023 and January 1, 2024. The estimated average occupied square footage for 2022 was calculated by averaging the unavailable rentable square footage on January 1, 2022 and January 1, 2023.
In 2007, the operations of each of the above-mentioned facilities, as well as the operations of Edinburg Regional Medical Center/Children’s Hospital, a 235-bed facility located in Edinburg, Texas, were merged into one license operating as the South Texas Health System (“STHS”).
In 2007, the operations of each of the above-mentioned facilities, as well as the operations of Edinburg Regional Medical Center/Children’s Hospital, a 251-bed facility located in Edinburg, Texas, were merged into one license operating as the South Texas Health System (“STHS”).
Set forth below is information detailing the rentable square feet (“RSF”) associated with each of our properties as of December 31, 2022 and the percentage of RSF on which leases expire during the next five years and thereafter.
Set forth below is information detailing the rentable square feet (“RSF”) associated with each of our properties as of December 31, 2023 and the percentage of RSF on which leases expire during the next five years and thereafter.
These amounts include the data related to the unconsolidated LLCs/LPs in which we hold various non-controlling ownership interests at December 31, 2022 and also include the bonus rentals earned on the UHS hospital facilities.
These amounts include the data related to the unconsolidated LLCs/LPs in which we hold various non-controlling ownership interests at December 31, 2023 and also include the bonus rentals earned on the UHS hospital facilities.
None of the properties had book values (including 100% of the book values of the properties owned by our unconsolidated LLCs) greater than 10% of the consolidated and unconsolidated assets. The following table sets forth lease expirations for each of the next ten years for our properties as of December 31, 2022.
None of the properties had book values (including 100% of the book values of the properties owned by our unconsolidated LLCs) greater than 10% of the consolidated and unconsolidated assets. 26 The following table sets forth lease expirations for each of the next ten years for our properties as of December 31, 2023.
(b) The estimated market rates related to the 2022 expiring RSF are greater than the lease rates on the expiring leases by approximately 5% to 10%. (c) The estimated market rates related to the 2022 expiring RSF are less than the lease rates on the expiring leases by approximately 1% to 5%.
(b) The estimated market rates related to the 2024 expiring RSF are greater than the lease rates on the expiring leases by approximately 5% to 10%. (c) The estimated market rates related to the 2024 expiring RSF are less than the lease rates on the expiring leases by approximately 1% to 5%.
Leasing Trends at Our Significant Medical Office Buildings During 2022, we had a total of 46 new or renewed leases related to the medical office buildings indicated above, in which we have significant investments, some of which are accounted for by the equity method.
Leasing Trends at Our Significant Medical Office Buildings During 2023, we had a total of 73 new or renewed leases related to the medical office buildings indicated above, in which we have significant investments, some of which are accounted for by the equity method.
The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during 2022 was approximately 0.4% of the future aggregate base rental revenue over the lease terms.
The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during 2023 was approximately 0.3% of the future aggregate base rental revenue over the lease terms.
Average occupancy rate for the multi-tenant medical office buildings is based on the occupied square footage of each building, including any applicable master leases. (2) Please see above in Relationship with UHS , for additional disclosure regarding the asset purchase and sale agreement, as amended, with UHS and certain of its affiliates.
Average occupancy rate for the multi-tenant medical office buildings is based on the occupied square footage of each building, including any applicable master leases. (2) Please see above in Item 1-Relationship with Universal Health Services, Inc., for additional disclosure regarding the asset purchase and sale agreement, as amended, with UHS and certain of its affiliates.
On a combined basis, based upon the aggregate consolidated and unconsolidated revenues and estimated average occupied square footage for all of our occupied properties owned as of December 31, 2022 and 2021, the average effective annual rental per square foot was $28.25 and $28.88, respectively.
On a combined basis, based upon the aggregate consolidated and unconsolidated revenues and estimated average occupied square footage for all of our occupied properties owned as of December 31, 2023 and 2022, the average effective annual rental per square foot was $29.21 and $28.25, respectively.
The weighted-average leasing commissions on the new and renewed leases commencing during 2022 was 23 approximately 3% of base rental revenue over the term of the leases.
The weighted-average leasing commissions on the new and renewed leases commencing during 2023 was approximately 3% of base rental revenue over the term of the leases.
(8) The lease on this facility expired in 2019 and the property remains vacant. We are marketing the property. (9) This newly constructed UHS-related hospital was substantially completed in December of 2020.
(8) The lease on this facility expired in 2019 and the property remains vacant. We are marketing the property. (9) This UHS-related hospital was completed and opened in December of 2020.
On a combined basis, based upon the aggregate consolidated and unconsolidated revenues and the estimated average occupied square footage for our MOBs, FEDs and childcare centers owned as of December 31, 2022 and 2021, the average effective annual rental per square foot was $31.46 and $30.49, respectively.
On a combined basis, based upon the aggregate consolidated and unconsolidated revenues and the estimated average occupied square footage for our MOBs, FEDs and childcare centers owned as of December 31, 2023 and 2022, the average effective annual rental per square foot was $32.59 and $31.46, respectively.
For the MOBs that have scheduled lease expirations during 2023 of 10% or greater (of RSF), if any, we have included information regarding estimated market rates relative to lease rates on the expiring leases. 24 Percentage of RSF with lease expirations Total RSF Available for Lease Jan. 1, 2023 2023 2024 2025 2026 2027 2028 and Later Hospital Investments: McAllen Medical Center 422,276 0 % 0 % 0 % 0 % 100 % 0 % 0 % Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services 346,000 0 % 0 % 0 % 0 % 0 % 0 % 100 % Wellington Regional Medical Center 196,489 0 % 0 % 0 % 0 % 100 % 0 % 0 % Clive Behavioral Health Hospital 82,138 0 % 0 % 0 % 0 % 0 % 0 % 100 % Canyon Creek Behavioral Health Hospital 67,700 0 % 0 % 0 % 0 % 0 % 0 % 100 % Sub-total Hospitals 1,114,603 0 % 0 % 0 % 0 % 56 % 0 % 44 % Specialty Facilities: Evansville Facility 77,440 100 % 0 % 0 % 0 % 0 % 0 % 0 % Corpus Christi Facility 69,700 100 % 0 % 0 % 0 % 0 % 0 % 0 % Sub-total Specialty Facilities 147,140 100 % 0 % 0 % 0 % 0 % 0 % 0 % Medical Office Buildings: Goldshadow - 2010 - 2020 Goldring MOB's 74,868 8 % 7 % 22 % 9 % 21 % 7 % 26 % Goldshadow - 700 Shadow Lane MOB 42,060 28 % 0 % 23 % 23 % 26 % 0 % 0 % Texoma Medical Plaza 115,284 8 % 7 % 13 % 5 % 3 % 8 % 56 % St.
For the MOBs that have scheduled lease expirations during 2024 of 10% or greater (of RSF), if any, we have included information regarding estimated market rates relative to lease rates on the expiring leases. 24 Percentage of RSF with lease expirations Total RSF Available for Lease Jan. 1, 2024 2024 2025 2026 2027 2028 2029 and Later Hospital Investments: McAllen Medical Center 422,276 0 % 0 % 0 % 100 % 0 % 0 % 0 % Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services 346,000 0 % 0 % 0 % 0 % 0 % 0 % 100 % Wellington Regional Medical Center 196,489 0 % 0 % 0 % 100 % 0 % 0 % 0 % Clive Behavioral Health 82,138 0 % 0 % 0 % 0 % 0 % 0 % 100 % Canyon Creek Behavioral Health 67,700 0 % 0 % 0 % 0 % 0 % 0 % 100 % Sub-total Hospitals 1,114,603 0 % 0 % 0 % 56 % 0 % 0 % 44 % Specialty Facilities: Evansville Facility 77,440 100 % 0 % 0 % 0 % 0 % 0 % 0 % Sub-total Specialty Facilities 77,440 100 % 0 % 0 % 0 % 0 % 0 % 0 % Medical Office Buildings: Goldshadow - 2010 - 2020 Goldring MOB's (a.) 74,868 4 % 24 % 12 % 9 % 7 % 0 % 44 % Goldshadow - 700 Shadow Lane MOB (a.) 42,060 28 % 23 % 11 % 18 % 20 % 0 % 0 % Texoma Medical Plaza (a.) 115,284 10 % 14 % 5 % 3 % 8 % 9 % 51 % St.
Bell (a.) 80,200 40 % 14 % 12 % 4 % 0 % 21 % 9 % Henderson Union Village MOB 79,599 32 % 3 % 3 % 0 % 0 % 34 % 28 % Summerlin Hospital Medical Office Building III 77,713 15 % 8 % 42 % 0 % 0 % 17 % 18 % Texoma Medical Plaza II 74,921 39 % 0 % 0 % 0 % 0 % 0 % 61 % Mid Coast Hospital MOB 74,629 0 % 0 % 0 % 0 % 100 % 0 % 0 % Northwest Texas Professional Office Tower (b.) 72,351 0 % 36 % 64 % 0 % 0 % 0 % 0 % Rosenberg Children's Medical Plaza (a.) 66,231 0 % 49 % 0 % 0 % 27 % 0 % 24 % Frederick Crestwood MOB 62,297 0 % 0 % 0 % 0 % 42 % 0 % 58 % Palmdale Medical Plaza (d.) 59,405 39 % 13 % 9 % 0 % 8 % 10 % 21 % Sierra San Antonio Medical Plaza (b.) 59,160 27 % 33 % 18 % 5 % 11 % 2 % 4 % Spring Valley Medical Office Building (b.) 57,828 12 % 18 % 13 % 23 % 13 % 6 % 15 % Spring Valley Medical Office Building II 57,364 5 % 0 % 34 % 20 % 0 % 22 % 19 % Southern Crescent Center II 53,680 35 % 0 % 0 % 54 % 0 % 0 % 11 % Desert Valley Medical Center (a.) 53,625 4 % 38 % 5 % 31 % 0 % 5 % 17 % Tuscan Professional Building (a.) 53,231 55 % 24 % 3 % 2 % 0 % 16 % 0 % Lake Pointe Medical Arts Building (a.) 50,974 12 % 30 % 0 % 15 % 7 % 7 % 29 % Forney Medical Plaza (a.) 50,947 14 % 14 % 5 % 0 % 21 % 5 % 41 % Vista Medical Terrace (d.) 50,921 62 % 11 % 4 % 3 % 0 % 14 % 6 % 2704 N.
Bell (b.) 80,200 39 % 23 % 6 % 3 % 21 % 4 % 4 % Henderson Union Village MOB 79,599 27 % 3 % 0 % 4 % 34 % 3 % 29 % McAllen Doctor's Center 79,497 0 % 0 % 0 % 0 % 0 % 0 % 100 % Summerlin Hospital Medical Office Building III (a.) 77,713 9 % 18 % 0 % 0 % 34 % 18 % 21 % Texoma Medical Plaza II 74,921 39 % 0 % 0 % 0 % 0 % 0 % 61 % Mid Coast Hospital MOB 74,629 0 % 0 % 0 % 100 % 0 % 0 % 0 % North West Texas Professional Office Tower 72,351 0 % 0 % 100 % 0 % 0 % 0 % 0 % Rosenberg Children's Medical Plaza 66,231 0 % 0 % 0 % 6 % 0 % 24 % 70 % Frederick Crestwood MOB 62,297 0 % 0 % 0 % 42 % 0 % 0 % 58 % Palmdale Medical Plaza 59,405 39 % 9 % 5 % 8 % 10 % 9 % 20 % Sierra San Antonio Medical Plaza (a.) 59,160 20 % 11 % 5 % 6 % 2 % 0 % 56 % Spring Valley Medical Office Building (a.) 57,828 12 % 28 % 27 % 11 % 6 % 3 % 13 % Spring Valley Medical Office Building II (a.) 57,364 5 % 17 % 20 % 0 % 22 % 0 % 36 % Southern Crescent Center II 53,680 46 % 0 % 43 % 0 % 0 % 0 % 11 % Desert Valley Medical Center (b.) 53,625 14 % 25 % 27 % 0 % 5 % 13 % 16 % Tuscan Professional Building (c.) 53,231 54 % 13 % 2 % 0 % 15 % 0 % 16 % Lake Pointe Medical Arts Building 50,974 16 % 0 % 30 % 18 % 7 % 0 % 29 % Forney Medical Plaza 50,947 10 % 5 % 5 % 21 % 5 % 24 % 30 % Vista Medical Terrace 50,921 62 % 4 % 4 % 0 % 14 % 9 % 7 % 2704 N.
We believe the respective fair values for each of these hospitals equals or exceeds the respective net book values or net financing receivables as of December 31, 2022 amounting to: $14.4 million for McAllen Medical Center, $9.6 million for Wellington Regional Medical Center, $32.4 million for Clive Behavioral Health, $57.6 million for Aiken Regional Medical Center (in terms of financing receivable), and; $26.0 for Canyon Creek Behavioral Health (in terms of financing receivable).
We believe the respective fair values for each of these hospitals equals or exceeds the respective net book values or net financing receivables as of December 31, 2023 amounting to: $13.5 million for McAllen Medical Center, $8.8 million for Wellington Regional Medical Center, $31.0 million for Clive Behavioral Health, $57.4 million for Aiken Regional Medical Center (in terms of financing receivable), and; $25.9 for Canyon Creek Behavioral Health (in terms of financing receivable).
Lease Term Number End of % of RSF of initial under available Average Occupancy(1) Minimum or Renewal lease with Range of Type of beds @ lease renewed term guaranteed guaranteed Hospital Facility Name and Location facility 12/31/2022 2022 2021 2020 2019 2018 revenue (6) term (years) escalators escalation Aiken Regional Medical Center / Aurora Pavilion (2)(5)(7) Aiken, South Carolina Acute Care / Behavioral Health 273 55% N/A N/A N/A N/A 3,982,000 2033 35 100% 2.25% McAllen Medical Center(3)(5)(7) McAllen, Texas Acute Care 370 49% 51% 50% 50% 44% 5,485,000 2026 5 0% — Wellington Regional Medical Center(4)(5)(7) West Palm Beach, Florida Acute Care 155 73% 75% 62% 62% 59% 6,643,000 2026 5 100% 2.50% Canyon Creek Behavioral Health(2)(5)(7) Temple, Texas Behavioral Health Care 102 45% N/A N/A N/A N/A 1,800,000 2033 35 100% 2.25% Clive Behavioral Health(5)(7)(9) Clive, Iowa Behavioral Health Care 100 36% 16% N/A N/A N/A 3,348,000 2040 50 100% 2.75% Specialty Facility Name and Location Evansville Facility(8) Evansville, Indiana Specialty 0 — — — — 75% — — — 0% — Corpus Christi Facility(8) Corpus Christi, Texas Specialty 0 — — — — 46% — — — 0% — Lease Term End of % of RSF initial under Type Average Occupancy(1) Minimum or Renewal lease with Range of of lease renewed term guaranteed guaranteed Facility Name and Location facility 2022 2021 2020 2019 2018 revenue(6) term (years) escalators escalation Spring Valley MOB I (5) Las Vegas, Nevada MOB 83% 86% 94% 85% 81% $944,000 2023-2029 Various 88% 2%-3% Spring Valley MOB II (5) Las Vegas, Nevada MOB 95% 95% 71% 63% 71% 1,284,000 2024-2030 Various 95% 2%-3% Summerlin Hospital MOB I (5) Las Vegas, Nevada MOB 78% 79% 83% 78% 72% 1,375,000 2023-2028 Various 80% 2%-6% Summerlin Hospital MOB II (5) Las Vegas, Nevada MOB 74% 73% 77% 80% 79% 1,771,000 2023-2030 Various 84% 2%-3% Summerlin Hospital MOB III (5) Las Vegas, Nevada MOB 86% 88% 84% 86% 99% 1,813,000 2023-2029 Various 85% 2%-3% Rosenberg Children’s Medical Plaza Phoenix, Arizona MOB 100% 100% 100% 100% 100% 1,660,000 2023-2028 Various 100% 2%-3% Centennial Hills MOB (5) Las Vegas, Nevada MOB 79% 79% 81% 77% 75% 1,616,000 2023-2035 Various 70% 2%-3% PeaceHealth Medical Clinic Bellingham, Washington MOB 100% 100% 100% 100% 100% 2,937,000 2029 10 100% 3% Lake Pointe Medical Arts Building Rowlett, Texas MOB 82% 84% 96% 96% 95% 1,084,000 2023-2029 Various 88% 3% Chandler Corporate Center III Chandler, Arizona MOB 92% 92% 92% 92% 92% 1,230,000 2027 Various 92% 2% Frederick Crestwood MOB Frederick, Maryland MOB 100% 100% 100% 100% 100% 1,696,000 2026-2030 Various 100% 2%-3% Henderson Union Village MOB (5) Henderson, Nevada MOB 68% 61% 52% 38% 37% 1,484,000 2023-2031 Various 68% 2%-3% Midcoast Hospital MOB Brunswick, Maine MOB 100% 100% 100% 100% 100% 1,480,000 2026 Various 100% 2% Texoma Medical Plaza (5) Denison, Texas MOB 93% 96% 100% 100% 100% 2,026,000 2023-2030 Various 81% 3%-8% Forney Medical Plaza Forney, Texas MOB 86% 82% 81% 81% 88% 968,000 2023-2029 Various 86% 3% Northwest Texas Prof.
Lease Term Number End of % of RSF of initial under available Average Occupancy(1) Minimum or Renewal lease with Range of Type of beds @ lease renewed term guaranteed guaranteed Hospital Facility Name and Location facility 12/31/2023 2023 2022 2021 2020 2019 revenue (6) term (years) escalators escalation Aiken Regional Medical Center / Aurora Pavilion (2)(5)(7) Aiken, South Carolina Acute Care / Behavioral Health 273 60% 55% N/A N/A N/A 4,072,000 2033 35 100% 2.25% McAllen Medical Center(3)(5)(7) McAllen, Texas Acute Care 370 56% 49% 51% 50% 50% 5,485,000 2026 5 0% — Wellington Regional Medical Center(4)(5)(7) West Palm Beach, Florida Acute Care 155 73% 73% 75% 62% 62% 6,643,000 2026 5 100% 2.50% Canyon Creek Behavioral Health(2)(5)(7) Temple, Texas Behavioral Health Care 102 52% 45% N/A N/A N/A 1,841,000 2033 35 100% 2.25% Clive Behavioral Health(5)(7)(9) Clive, Iowa Behavioral Health Care 100 48% 36% 16% N/A N/A 3,348,000 2040 50 100% 2.75% Specialty Facility Name and Location Evansville Facility(8) Evansville, Indiana Specialty 0 — — — — — — — — 0% — 22 Lease Term End of % of RSF initial under Type Average Occupancy(1) Minimum or Renewal lease with Range of of lease renewed term guaranteed guaranteed Facility Name and Location facility 2023 2022 2021 2020 2019 revenue(6) term (years) escalators escalation Spring Valley MOB I (5) Las Vegas, Nevada MOB 88% 83% 86% 94% 85% $1,170,000 2024-2029 Various 100% 2%-3% Spring Valley MOB II (5) Las Vegas, Nevada MOB 90% 95% 95% 71% 63% 1,189,000 2024-2033 Various 100% 2%-3% Summerlin Hospital MOB I (5) Las Vegas, Nevada MOB 79% 78% 79% 83% 78% 1,662,000 2024-2033 Various 100% 2%-5% Summerlin Hospital MOB II (5) Las Vegas, Nevada MOB 88% 74% 73% 77% 80% 2,038,000 2024-2030 Various 100% 2%-3% Summerlin Hospital MOB III (5) Las Vegas, Nevada MOB 89% 86% 88% 84% 86% 1,919,000 2024-2034 Various 100% 2%-3% Rosenberg Children’s Medical Plaza Phoenix, Arizona MOB 100% 100% 100% 100% 100% 2,486,000 2026-2033 Various 100% 2%-3% Centennial Hills MOB (5) Las Vegas, Nevada MOB 79% 79% 79% 81% 77% 1,924,000 2024-2035 Various 100% 2%-4% PeaceHealth Medical Clinic Bellingham, Washington MOB 100% 100% 100% 100% 100% 2,937,000 2029 10 100% 3% Lake Pointe Medical Arts Building Rowlett, Texas MOB 88% 82% 84% 96% 96% 1,216,000 2025-2034 Various 100% 3% Chandler Corporate Center III Chandler, Arizona MOB 92% 92% 92% 92% 92% 1,426,000 2027 Various 100% 2% Frederick Crestwood MOB Frederick, Maryland MOB 100% 100% 100% 100% 100% 1,696,000 2026-2030 Various 100% 2%-3% Henderson Union Village MOB (5) Henderson, Nevada MOB 72% 68% 61% 52% 38% 1,638,000 2024-2033 Various 100% 2%-3% Midcoast Hospital MOB Brunswick, Maine MOB 100% 100% 100% 100% 100% 1,485,000 2026 Various 100% 2% Texoma Medical Plaza (5) Denison, Texas MOB 91% 93% 96% 100% 100% 2,093,000 2024-2030 Various 92% 3% Forney Medical Plaza Forney, Texas MOB 90% 86% 82% 81% 81% 1,051,000 2024-2033 Various 100% 3% Northwest Texas Prof.
Matthews Medical Plaza II 103,011 0 % 0 % 18 % 46 % 9 % 1 % 26 % Desert Springs Medical Plaza (a.) 103,000 42 % 18 % 26 % 0 % 7 % 7 % 0 % Peace Health Medical Clinic 98,886 0 % 0 % 0 % 0 % 0 % 0 % 100 % Centennial Hills Medical Office Building (a.) 96,573 22 % 20 % 6 % 6 % 15 % 20 % 11 % Summerlin Hospital Medical Office Building II 92,313 16 % 9 % 32 % 8 % 14 % 10 % 11 % Summerlin Hospital Medical Office Building I (a.) 89,636 20 % 31 % 10 % 25 % 8 % 3 % 3 % Sierra Medical Plaza I 85,902 32 % 0 % 0 % 0 % 0 % 0 % 68 % Chandler Corporate Center III 81,770 8 % 0 % 0 % 0 % 0 % 92 % 0 % 3811 E.
Matthews Medical Plaza II 103,011 0 % 0 % 46 % 9 % 1 % 6 % 38 % Desert Springs Medical Plaza (c.) 103,000 43 % 41 % 0 % 7 % 7 % 2 % 0 % Peace Health Medical Clinic 98,886 0 % 0 % 0 % 0 % 0 % 0 % 100 % Centennial Hills Medical Office Building (a.) 96,573 20 % 11 % 6 % 15 % 20 % 2 % 26 % Summerlin Hospital Medical Office Building II (a.) 92,313 11 % 18 % 11 % 16 % 10 % 7 % 27 % Summerlin Hospital Medical Office Building I (a.) 89,636 20 % 24 % 23 % 19 % 3 % 4 % 7 % Sierra Medical Plaza I 85,902 32 % 0 % 0 % 0 % 0 % 0 % 68 % Chandler Corporate Center III 81,770 0 % 0 % 0 % 0 % 100 % 0 % 0 % 3811 E.
These leases comprised approximately 13% of the aggregate rentable square feet of these properties (9% related to renewed leases and 4% related to new leases).
These leases comprised approximately 22% of the aggregate rentable square feet of these properties (19% related to renewed leases and 3% related to new leases).
Upon the December 31, 2021 expiration of the lease, Wellington Regional Medical Center exercised its fair market value renewal option and renewed the lease for a 5-year term. Effective January 1, 2022, the annual fair market value lease rate is $6.3 million and the annual rent increased on January 1, 2023 by 2.5%.
Upon the December 31, 2021 expiration of the lease, Wellington Regional Medical Center exercised its fair market value renewal option and renewed the lease for a 5-year term. The annual fair market value lease rate was $6.3 million on January 1, 2022 and the rent has/will increase by 2.5% on a cumulative compounded basis each January 1st through 2026.
(4) In 2014, an 80-bed expansion was added to Wellington Regional Medical Center increasing the hospital’s total available beds from 153 to 233. Pursuant to terms of the Wellington Regional Medical Center lease in effect during 2021, we were entitled to bonus rental on the net revenues generated from the 80-bed expansion.
Pursuant to terms of the Wellington Regional Medical Center lease in effect during 2021, we were entitled to bonus rental on the net revenues generated from the 80-bed expansion.
Additionally, none of the properties had net book values greater than 10% of our consolidated assets as of December 31, 2022. None of our unconsolidated LLCs had revenues (including 100% of the revenues generated at the properties owned by our unconsolidated LLCs) greater than 10% of the combined consolidated and unconsolidated revenues during 2022.
None of our unconsolidated LLCs had revenues (including 100% of the revenues generated at the properties owned by our unconsolidated LLCs) greater than 10% of the combined consolidated and unconsolidated revenues during 2023.
Office Tower Amarillo, Texas MOB 100% 100% 100% 100% 100% 1,074,000 2023-2024 Various 100% 2%-3% N/A – Not applicable. (1) Average occupancy rate for the hospital facilities is based on the average number of available beds occupied during each of the five years ended December 31, 2022.
Matthews Medical Plaza II Louisville, Kentucky MOB 100% 100% 100% 100% 100% 2,841,000 2025-2032 Various 75% 3% N/A – Not applicable. (1) Average occupancy rate for the hospital facilities is based on the average number of available beds occupied during each of the five years ended December 31, 2023.
(5) The real estate assets of this facility are or were owned by us (either directly or through an LLC in which we hold 100% of the ownership interest) and include tenants who are subsidiaries of UHS or jointly owned by a subsidiary of UHS. (6) Minimum lease payment amounts contain impact of straight-line rent adjustments, if applicable.
There is no bonus rental component applicable to the renewed fair market value lease. (5) The real estate assets of this facility are or were owned by us (either directly or through an LLC in which we hold 100% of the ownership interest) and include tenants who are subsidiaries of UHS or jointly owned by a subsidiary of UHS.
Average available beds is the number of beds which are actually in service at any given time for immediate patient use with the necessary equipment and staff available for patient care.
Average available beds is the number of beds which are actually in service at any given time for immediate patient use with the necessary equipment and staff available for patient care. A hospital may have appropriate licenses for more beds than are in service for a number of reasons, including lack of demand, incomplete construction and anticipation of future needs.
(e) The estimated market rates related to the 2022 expiring RSF are greater than the lease rates on the expiring leases by an average of approximately 10% On a combined basis, based upon the aggregate revenues and square footage for the occupied hospital facilities owned as of December 31, 2022 and 2021, the average effective annual rental per square foot was $21.31 and $24.86, respectively.
On a combined basis, based upon the aggregate revenues and square footage for the occupied hospital facilities owned as of December 31, 2023 and 2022, the average effective annual rental per square foot was $21.43 and $21.31, respectively.
In connection with lease renewals executed during 2022, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 2% during 2022.
In connection with lease renewals executed during 2023, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 4% during 2023. The weighted-average tenant improvement costs associated with these new or renewed leases was approximately $7 per square foot during 2023.
No assurance can be given as to the effect, if any, the consolidation of the facilities into one operating license, as mentioned above, had on the underlying value of McAllen Medical Center. Base rental commitments and the guarantee by UHS under the original lease continue for the remainder of the lease terms.
The average occupancy rates reflected above are based upon the combined occupancy and combined number of beds at McAllen Medical Center and McAllen Heart Hospital. No assurance can be given as to the effect, if any, the consolidation of the facilities into one operating license, as mentioned above, had on the underlying value of McAllen Medical Center.
(7) See above in Relationship with UHS , regarding, among other things, UHS’s purchase option as discussed herein.
(6) Minimum lease payment amounts contain impact of straight-line rent adjustments, if applicable. (7) See above in Item 1-Relationship with Universal Health Services, Inc. regarding, among other things, UHS’ purchase option as discussed herein.
The estimated average occupied square footage for 2021 was calculated by averaging the unavailable rentable square footage on January 1, 2021 and January 1, 2022. 26 During 2022, none of the properties generated revenues that were equal to or greater than 10% of our consolidated revenues.
During 2023, none of the properties generated revenues that were equal to or greater than 10% of our consolidated revenues. Additionally, none of the properties had net book values greater than 10% of our consolidated assets as of December 31, 2023.
Removed
A hospital may have appropriate licenses for more beds than are in service for a 22 number of reasons, including lack of demand, incomplete construction and anticipation of future needs.
Added
Office Tower Amarillo, Texas MOB 100% 100% 100% 100% 100% 1,243,000 2025 Various 100% 3%-5% Desert Valley Medical Center Phoenix, Arizona MOB 89% 94% 98% 100% 98% 1,243,000 2024-2033 Various 100% 2%-3% Gold Shadow - 700 Shadow (5) Las Vegas, Nevada MOB 72% 67% 53% 61% 75% 900,000 2024-2027 Various 100% 2%-3% Gold Shadow - 2010 & 2020 Goldring MOB's (5) Las Vegas, Nevada MOB 96% 91% 85% 81% 80% 1,818,000 2024-2032 Various 86% 2%-5% Madison Professional Office Building Madison, Alabama MOB 87% 90% 100% 100% 100% 719,000 2024-2028 Various 100% 3% Sierra Medical Plaza I Reno, Nevada MOB 44% — — — — 1,987,000 2033-2039 Various 100% 3% St.
Removed
The real property of these two FEDs was purchased by us and leased back to STHS. The average occupancy rates reflected above are based upon the combined occupancy and combined number of beds at McAllen Medical Center and McAllen Heart Hospital.
Added
The real property of these two FEDs was purchased by us and leased back to STHS. As of December 31, 2023, UHS owns and operates several other FEDs that operate under the STHS license, the real property of which is not owned by us.
Removed
The rent will increase by 2.5% on a cumulative compounded basis on each January 1st through 2026. T here is no bonus rental component applicable to the renewed fair market value lease.
Added
Base rental commitments and the guarantee by UHS under the original lease continue for the remainder of the lease terms. (4) In 2014, an 80-bed expansion was added to Wellington Regional Medical Center increasing the hospital’s total available beds from 153 to 233.
Removed
The weighted-average tenant improvement costs associated with these new or renewed leases was approximately $23 per square foot during 2022, primarily related to the tenant improvements pursuant to new leases at Sierra Medical Plaza, which is under construction and expected to be completed in March, 2023.
Added
Expiring Square Feet Number of Tenants Annual Rentals of Expiring Leases(1) Percentage of Annual Rentals(2) Hospital properties 2024 0 $ - 0 % 2025 0 - 0 % 2026 618,765 2 15,082,007 14 % 2027 0 - 0 % 2028 0 - 0 % 2029 0 - 0 % 2030 0 - 0 % 2031 0 - 0 % 2032 0 - 0 % 2033 413,700 2 5,458,061 5 % Thereafter 82,138 1 3,347,556 3 % Subtotal-hospital facilities 1,114,603 5 $ 23,887,624 23 % Other consolidated properties 2024 244,631 70 $ 8,590,503 8 % 2025 379,740 76 11,524,334 11 % 2026 270,989 57 9,424,553 9 % 2027 344,084 46 11,241,425 11 % 2028 140,200 34 5,020,375 5 % 2029 245,627 20 8,060,564 8 % 2030 206,614 23 6,885,577 7 % 2031 18,894 3 676,536 1 % 2032 74,330 5 2,617,042 2 % 2033 134,908 14 4,599,157 4 % Thereafter 171,922 10 3,703,195 4 % Subtotal-other consolidated properties 2,231,939 358 $ 72,343,261 69 % Other unconsolidated properties (MOBs) 2024 0 $ - 0 % 2025 50,464 6 1,704,029 1 % 2026 89,372 12 3,107,454 3 % 2027 8,525 2 373,318 0 % 2028 14,941 3 602,677 1 % 2029 18,318 1 606,019 1 % 2030 5,840 1 196,625 0 % 2031 41,890 3 1,409,039 1 % 2032 18,670 1 617,664 1 % 2033 0 0 - 0 % Thereafter 0 0 - 0 % Subtotal-other unconsolidated properties 248,020 29 $ 8,616,825 8 % Total all properties at December 31, 2023 3,594,562 392 $ 104,847,710 100 % (1) The annual rentals of expiring leases reflected above were calculated based upon each property’s 2023 average rental rate per occupied square foot applied to each property’s scheduled lease expirations (on a square foot basis).
Removed
(d) The estimated market rates related to the 2022 expiring RSF are less than the lease rates on the expiring leases by approximately 6% to 10%.
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Expiring Square Feet Number of Tenants Annual Rentals of Expiring Leases(1) Percentage of Annual Rentals(2) Hospital properties 2023 0 - 0 % 2024 0 - 0 % 2025 0 - 0 % 2026 618,765 2 14,929,124 15 % 2027 0 - 0 % 2028 0 - 0 % 2029 0 - 0 % 2030 0 - 0 % 2031 0 - 0 % 2032 0 - 0 % Thereafter 495,838 3 8,821,721 9 % Subtotal-hospital facilities 1,114,603 5 $ 23,750,845 24 % Other consolidated properties 2023 291,116 83 $ 9,120,505 9 % 2024 286,962 62 9,118,361 9 % 2025 284,519 61 8,131,794 8 % 2026 266,514 47 8,894,678 9 % 2027 315,761 42 9,726,076 10 % 2028 109,391 24 3,694,711 4 % 2029 197,255 12 6,115,895 6 % 2030 179,376 19 5,588,482 6 % 2031 17,177 2 596,402 1 % 2032 71,870 5 2,325,943 2 % Thereafter 104,580 7 1,863,557 2 % Subtotal-other consolidated properties 2,124,521 364 $ 65,176,404 67 % Other unconsolidated properties (MOBs) 2023 0 $ - 0 % 2024 18,318 1 596,031 1 % 2025 50,464 6 1,689,276 2 % 2026 84,057 11 2,618,903 3 % 2027 8,525 2 402,420 0 % 2028 14,941 3 634,602 1 % 2029 0 0 - 0 % 2030 5,840 1 202,575 0 % 2031 41,890 3 1,448,129 1 % 2032 18,670 5 607,485 1 % Thereafter 0 0 - 0 % Subtotal-other unconsolidated properties 242,705 32 $ 8,199,421 9 % Total all properties at December 31, 2022 3,481,829 401 $ 97,126,670 100 % (1) The annual rentals of expiring leases reflected above were calculated based upon each property’s 2022 average rental rate per occupied square foot applied to each property’s scheduled lease expirations (on a square foot basis).

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBase INDEXED RETURNS Period Years Ending Company Name / Index Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Universal Health Realty Income Trust $ 100 $ 85.11 $ 167.61 $ 95.14 $ 91.95 $ 77.92 S&P 500 Index $ 100 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 Peer Group $ 100 $ 114.70 $ 142.64 $ 125.28 $ 152.00 $ 121.31
Biggest changeBase INDEXED RETURNS Period Years Ending Company Name / Index Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 Universal Health Realty Income Trust $ 100 $ 196.94 $ 111.78 $ 108.04 $ 91.56 $ 88.24 S&P 500 Index $ 100 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 Peer Group $ 100 $ 124.36 $ 109.22 $ 132.52 $ 105.76 $ 126.26
The total cumulative return on investment (change in the year-end stock price plus reinvested dividends) for each of the periods for us, the peer group and the S&P 500 composite is based on the stock price or composite index at the end of fiscal 2017.
The total cumulative return on investment (change in the year-end stock price plus reinvested dividends) for each of the periods for us, the peer group and the S&P 500 composite is based on the stock price or composite index at the end of fiscal 2018.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , of this report for information regarding securities authorized for issuance under our equity compensation plan. 28 Stock Price Performance Graph The following graph compares our performance with that of the S&P 500 and a group of peer companies, where performance has been weighted based on market capitalization.
Equity Compensation Refer to Item 12- Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , of this report for information regarding securities authorized for issuance under our equity compensation plan. 28 Stock Price Performance Graph The following graph compares our performance with that of the S&P 500 and a group of peer companies, where performance has been weighted based on market capitalization.
ITEM 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our shares of beneficial interest are listed on the New York Stock Exchange under the symbol UHT. Holders As of January 31, 2023, there were approximately 260 shareholders of record of our shares of beneficial interest.
ITEM 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our shares of beneficial interest are listed on the New York Stock Exchange under the symbol UHT. Holders As of January 31, 2024, there were approximately 242 shareholders of record of our shares of beneficial interest.
Our revolving credit facility limits our ability to increase dividends in excess of 95% of cash available for distribution, as defined in our revolving credit agreement, unless additional distributions are required to be made so as to comply with applicable sections of the Internal Revenue Code and related regulations governing REITs. Equity Compensation Refer to Item 12.
Our revolving credit facility limits our ability to increase dividends in excess of 95% of cash available for distribution, as defined in our revolving credit agreement, unless additional distributions are required to be made so as to comply with applicable sections of the Internal Revenue Code and related regulations governing REITs.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet cash used in investing activities Net cash used in investing activities was $36.7 million during 2022 as compared to $24.4 million during 2021. 2022: During 2022, $36.7 million of net cash was used in investing activities as follows: • spent $22.5 million for additions to real estate investments, including $18.2 million of construction costs related to the Sierra Medical Plaza I medical office building located in Reno, Nevada, that is expected to be completed in March, 2023, as well as tenant improvements at various MOBs; • spent $13.6 million, including transaction costs, on the acquisitions of the Beaumont Heart and Vascular Center in March, 2022, and; the 140 Thomas Johnson Drive medical office building in January, 2022, as discussed in Note 3 to the consolidated financial statements; • spent $1.3 million as part of the asset purchase and sale agreement, as amended, with UHS, as discussed in Note 2 to the consolidated financial statements; • received $875,000 of cash in excess of income from LLCs, and; • spent $94,000 in equity investments in an unconsolidated LLC. 2021: During 2021, $24.4 million of net cash was used in investing activities as follows: • spent $14.1 million for additions to real estate investments, including $3.3 million of construction costs related to the 100-bed behavioral health care hospital located in Clive, Iowa, that was substantially completed in late December, 2020; $1.5 million of construction costs paid related to the Sierra Medical Plaza I medical office building located in Reno, Nevada, that is expected to be completed in March, 2023, and tenant improvements at various MOBs; • spent approximately $16.8 million in equity investments in unconsolidated LLCs, including $13.2 million to repay a mortgage loan upon its scheduled maturity in September, 2021; • spent approximately $13.0 million on the acquisition of the Fire Mesa office building in late May, 2021, as discussed in Note 3 to the consolidated financial statements ; • spent $3.5 million to advance a member loan to an unconsolidated LP; • spent approximately $3.1 million to acquire the minority interest in a majority-owned LP, as discussed in Note 2 to the consolidated financial statements ; • spent approximately $2.8 million (of $4.1 million in the aggregate) as part of the asset purchase and sale transaction with UHS, as discussed in Note 2 to the consolidated financial statements ; • spent $200,000 in a deposit on real estate assets; • received approximately $28.1 million of aggregate net cash proceeds, ($15.2 million of which was held by the qualified third-party intermediary utilized for the series of anticipated tax-deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code, as amended) for the divestitures of the Children’s Clinic of Springdale during the second 39 quarter of 2021 and the Auburn Medical Office Building II, during the fourth quarter of 2021, as discussed in Note 3 to the consolidated financial statements ; • received $418,000 of cash in excess of income from LLCs, and; • our cash balance reflected an increase of $528,000 as a result of recording on a consolidated basis, an LP in which we acquired the third-party minority ownership interest, as discussed in Note 2 to the consolidated financial statements .
Biggest changeNet cash used in investing activities Net cash used in investing activities was $19.1 million during 2023 as compared to $36.7 million during 2022. 2023: During 2023, $19.1 million of net cash was used in investing activities as follows: • spent $15.6 million for additions to real estate investments, including construction costs related to the Sierra Medical Plaza I MOB located in Reno, Nevada, that was substantially completed in March, 2023, as well as tenant improvements at various MOBs; • spent $7.6 million, including transaction costs, on the August, 2023 acquisition of the McAllen Doctor's Center medical office building, as discussed in Note 3 to the consolidated financial statements; • spent $4.1 million in equity investments in unconsolidated LLCs; • received $3.9 million of net cash proceeds resulting from the divestiture of a property, as discussed in Note 3 to the consolidated financial statements; • received $757,000 of cash in excess of income from LLCs, and; • received $3.5 million of repayments of an advance we had provided to an unconsolidated LLC during 2021. 2022: During 2022, $36.7 million of net cash was used in investing activities as follows: • spent $22.5 million for additions to real estate investments, including $18.2 million of construction costs related to the Sierra Medical Plaza I located in Reno, Nevada, that was substantially completed in March, 2023, as well as tenant improvements at various MOBs; • spent $13.6 million, including transaction costs, on the acquisitions of the Beaumont Heart and Vascular Center in March, 2022, and; the 140 Thomas Johnson Drive medical office building in January, 2022, as discussed in Note 3 to the consolidated financial statements; 38 • spent $1.3 million as part of the asset purchase and sale agreement, as amended, with UHS, as discussed in Note 2 to the consolidated financial statements; • received $875,000 of cash in excess of income from LLCs, and; • spent $94,000 in equity investments in an unconsolidated LLC.
Such competition is experienced in markets including, but not limited to, McAllen, Texas, the site of our McAllen Medical Center, a 370-bed acute care hospital. • Changes in, or inadvertent violations of, tax laws and regulations and other factors that can affect REITs and our status as a REIT, including possible future changes to federal tax laws that could materially impact our ability to defer gains on divestitures through like-kind property exchanges. • The individual and collective impact of the changes made by the CARES Act on REITs and their security holders are uncertain and may not become evident for some period of time; it is also possible additional legislation could be enacted in the future as a result of the COVID-19 pandemic which may affect the holders of our securities. • Should we be unable to comply with the strict income distribution requirements applicable to REITs, utilizing only cash generated by operating activities, we would be required to generate cash from other sources which could adversely affect our financial condition. • Our ownership interest in four LLCs/LPs in which we hold non-controlling equity interests.
Such competition is experienced in markets including, but not limited to, McAllen, Texas, the site of our McAllen Medical Center, a 370-bed acute care hospital. • Changes in, or inadvertent violations of, tax laws and regulations and other factors that can affect REITs and our status as a REIT, including possible future changes to federal tax laws that could materially impact our ability to defer gains on divestitures through like-kind property exchanges. • The individual and collective impact of the changes made by the CARES Act on REITs and their security holders are uncertain and may not become evident for some period of time; it is also possible additional legislation could be enacted in the future as a result of the COVID-19 pandemic which may affect the holders of our securities. • Should we be unable to comply with the strict income distribution requirements applicable to REITs, utilizing only cash generated by operating activities, we would be required to generate cash from other sources which could adversely affect our financial condition. 33 • Our ownership interest in four LLCs/LPs in which we hold non-controlling equity interests.
Please see Note 4 to the consolidated financial statements - Lease Accounting, for additional information related to this asset purchase and sale transaction between us and UHS. • We cannot assure you that subsidiaries of UHS will renew the leases on the hospital facilities and free-standing emergency departments, upon the scheduled expirations of the existing lease terms.
Please see Note 4 to the condensed consolidated financial statements - Lease Accounting, for additional information related to this asset purchase and sale transaction between us and UHS. • We cannot assure you that subsidiaries of UHS will renew the leases on the hospital facilities and free-standing emergency departments, upon the scheduled expirations of the existing lease terms.
We also cannot predict the effect these enactments will have on the operators of our properties (including UHS), and thus, our business. 33 • An increasing number of legislative initiatives have been passed into law that may result in major changes in the health care delivery system on a national or state level.
We also cannot predict the effect these enactments will have on the operators of our properties (including UHS), and thus, our business. • An increasing number of legislative initiatives have been passed into law that may result in major changes in the health care delivery system on a national or state level.
The Credit Agreement also contains restrictive covenants regarding the Trust’s ratio of total debt to total assets, the fixed charge coverage ratio, the ratio of total secured debt to total asset value, the ratio of total unsecured debt to total unencumbered asset value, and minimum tangible net worth, as well as customary events of default, the occurrence of which may trigger an acceleration of amounts then outstanding 41 under the Credit Agreement.
The Credit Agreement also contains restrictive covenants regarding the Trust’s ratio of total debt to total assets, the fixed charge coverage ratio, the ratio of total secured debt to total asset value, the ratio of total unsecured debt to total unencumbered asset value, and minimum tangible net worth, as well as customary events of default, the occurrence of which may trigger an acceleration of amounts then outstanding under the Credit Agreement.
If elevated levels of inflation were to persist or if the rate of inflation were to accelerate, expenses of our tenants, and our direct operating expenses that are not passed on to our tenants, could increase faster than anticipated and may require utilization of our and our tenants’ capital resources sooner than expected.
If elevated levels of inflation were to persist or if the rate of 30 inflation were to accelerate, expenses of our tenants, and our direct operating expenses that are not passed on to our tenants, could increase faster than anticipated and may require utilization of our and our tenants’ capital resources sooner than expected.
Future dividend levels will be determined based upon the factors outlined above with consideration given to our projected future results of operations. 40 We expect to finance all capital expenditures and acquisitions and pay dividends utilizing internally generated and additional funds.
Future dividend levels will be determined based upon the factors outlined above with consideration given to our projected future results of operations. We expect to finance all capital expenditures and acquisitions and pay dividends utilizing internally generated and additional funds.
The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual 35 results in future periods.
The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods.
Based upon the information discussed above, as well as consideration of projections and forecasts of our future operating cash flows, management and the Board of Trustees have determined that our operating cash flows have been sufficient to fund our dividend payments.
Based 39 upon the information discussed above, as well as consideration of projections and forecasts of our future operating cash flows, management and the Board of Trustees have determined that our operating cash flows have been sufficient to fund our dividend payments.
(d) Assumes that all debt outstanding as of December 31, 2022, including borrowings under the Credit Agreement, and the loans which are non-recourse to us, remain outstanding until the stated maturity date of the debt agreements at the same interest rates which were in effect as of December 31, 2022.
(d) Assumes that all debt outstanding as of December 31, 2023, including borrowings under the Credit Agreement, and the loans which are non-recourse to us, remain outstanding until the stated maturity date of the debt agreements at the same interest rates which were in effect as of December 31, 2023.
(e) Reflects our future minimum operating lease payment obligations outstanding as of December 31, 2022, as discussed in Note 4 to the consolidated financial statements - Lease Accounting, in connection with ground leases at fourteen of our consolidated properties.
(e) Reflects our future minimum operating lease payment obligations outstanding as of December 31, 2023, as discussed in Note 4 to the consolidated financial statements - Lease Accounting, in connection with ground leases at fourteen of our consolidated properties.
Property-specific debt is detailed above. (b) Consists of non-recourse debt with an aggregate fair value of approximately $43.2 million as of December 31, 2022. Changes in market rates on our fixed rate debt impacts the fair value of debt, but it has no impact on interest incurred or cash flow.
Property-specific debt is detailed above. (b) Consists of non-recourse debt with an aggregate fair value of approximately $31.2 million as of December 31, 2023. Changes in market rates on our fixed rate debt impacts the fair value of debt, but it has no impact on interest incurred or cash flow.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) estimated fair market lease rates from the perspective of a market participant for the corresponding in-place leases, measured, for above-market leases, over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below market fixed rate renewal periods.
The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. 34 In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) estimated fair market lease rates from the perspective of a market participant for the corresponding in-place leases, measured, for above-market leases, over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below market fixed rate renewal periods.
On July 2, 2021, we entered into an amended and restated revolving credit agreement (“Credit Agreement”) to amend and restate the previously existing $350 million credit agreement, as amended and dated June 5, 2020 (“Prior Credit Agreement”). Among other things, under the Credit Agreement, our aggregate revolving credit commitment was increased to $375 million from $350 million.
On July 2, 2021, we entered into an amended and restated Credit Agreement to amend and restate the previously existing $350 million credit agreement, as amended and dated June 5, 2020. Among other things, under the Credit Agreement, our aggregate revolving credit commitment was increased to $375 million from $350 million.
Excludes $21.8 million of combined third-party debt outstanding as of December 31, 2022, that is non-recourse to us, at the unconsolidated LLCs in which we hold various non-controlling ownership interests (see Note 8 to the consolidated financial statements).
Excludes $21.2 million of combined third-party debt outstanding as of December 31, 2023, that is non-recourse to us, at the unconsolidated LLCs in which we hold various non-controlling ownership interests (see Note 8 to the consolidated financial statements).
Since UHS comprised approximately 40% of our consolidated revenues during the year ended December 31, 2022, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-Q and 10-K, as publicly filed with the Securities and Exchange Commission.
Since UHS comprised approximately 41% of our consolidated revenues during the year ended December 31, 2023, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-Q and 10-K, as publicly filed with the Securities and Exchange Commission.
The nationwide shortage of nurses and other clinical staff and support personnel has been a significant operating issues facing our healthcare provider tenants, including UHS.
The nationwide shortage of nurses and other clinical staff and support personnel has been a significant operating issue facing our healthcare provider tenants, including UHS.
Forward Looking Statements This report contains “forward-looking statements” that reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities.
Forward Looking Statements and Risk Factors This report contains “forward-looking statements” that reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities.
For discussion of our result of operations and changes in our financial condition for the year ended December 31, 2021 as compared to the year ended December 31, 2020, please refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on February 24, 2022.
For discussion of our result of operations and changes in our financial condition for the year ended December 31, 2022, as compared to the year ended December 31, 2021, please refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on February 27, 2023.
These transactions were approved by the Independent Trustees of our Board, as well as the UHS Board of Directors. The aggregate annual rental rate during 2022 pursuant to the leases, as amended, for the two facilities transferred to us is approximately $5.7 million; there is no bonus rent component applicable to either of these leases.
These transactions were approved by the Independent Trustees of our Board, as well as the UHS Board of Directors. The aggregate annual rental rate during 2023 pursuant to the leases, as amended, for the two facilities transferred to us is approximately $5.8 million; there is no bonus rent component applicable to either of these leases.
Credit facilities and mortgage debt Management routinely monitors and analyzes the Trust’s capital structure in an effort to maintain the targeted balance among capital resources including the level of borrowings pursuant to our revolving credit facility, the level of borrowings pursuant to non-recourse mortgage debt secured by the real property of our properties and our level of equity including consideration of additional equity issuances pursuant to our ATM equity issuance program.
Credit facilities and mortgage debt Management routinely monitors and analyzes the Trust’s capital structure in an effort to maintain the targeted balance among capital resources including the level of borrowings pursuant to our revolving credit facility, the level of borrowings pursuant to non-recourse mortgage debt secured by the real property of our properties and our level of equity including consideration of equity issuances.
This section generally discusses our results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
This section generally discusses our results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during each year was approximately 0.4% and 0.8% of the future aggregate base rental revenue over the lease terms during 2022 and 2021, respectively.
The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during each year was approximately 0.3% and 0.4% of the future aggregate base rental revenue over the lease terms during 2023 and 2022, respectively.
As also indicated on our statements of cash flows, non-cash expenses including depreciation and amortization expense, amortization related to above/below market leases, amortization of debt premium, amortization of deferred financing costs and stock-based compensation expense, as well as gains on divestitures of real estate assets (as applicable), are the primary differences between our net income and net cash provided by operating activities for each year.
As also indicated on our statements of cash flows, non-cash expenses including depreciation and amortization expense, amortization related to above/below market leases, amortization of debt premium, amortization of deferred financing costs and stock-based compensation expense, gains or losses on divestitures of real estate assets (as applicable), as well as changes in certain assets and liabilities, are the primary differences between our net income and net cash provided by operating activities for each year.
Disclosures Related to Certain Hospital Facilities Please refer to Note 4 to the consolidated financial statements - Lease Accounting, for additional information regarding certain of our hospital facilities including the lease renewal for Wellington Regional Medical Center located in West Palm Beach, Florida, information related to vacant facilities located in Evansville, Indiana; Corpus Christi, Texas, and Chicago, Illinois, and disclosure regarding the asset purchase and sale agreement, as amended, with wholly-owned subsidiaries of UHS that was completed on December 31, 2021.
Disclosures Related to Certain Hospital Facilities Please refer to Note 4 to the consolidated financial statements - Lease Accounting, for additional information regarding certain of our hospital facilities including the lease renewal in December, 2021, for Wellington Regional Medical Center located in West Palm Beach, Florida, information related to a vacant facility located in Evansville, Indiana, and a vacant parcel of land located in Chicago, Illinois, and disclosure regarding the asset purchase and sale agreement, as amended, with wholly-owned subsidiaries of UHS that was completed on December 31, 2021.
During 2022, we had a total of 46 new or renewed leases related to the medical office buildings as indicated in Item 2. Properties , in which we have significant investments, some of which are accounted for by the equity method.
During 2023, we had a total of 73 new or renewed leases related to the medical office buildings as indicated in Item 2. Properties , in which we have significant investments, some of which are accounted for by the equity method.
The Trust will also pay a quarterly revolving facility fee ranging from 0.15% to 0.35% (depending on the Trust’s ratio of debt to asset value) on the revolving committed amount of the Credit Agreement. The Credit Agreement also provides for options to extend the maturity date and borrowing availability for two additional six-month periods.
The Trust will also pay a quarterly revolving facility fee ranging from 0.15% to 0.35% (depending on the Trust’s total leverage ratio) on the committed amount of the Credit Agreement. The Credit Agreement also provides for options to extend the maturity date and borrowing availability for two additional six-month periods.
In connection with lease renewals executed during each year, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 2% and 1% during 2022 and 2021, respectively. The weighted-average tenant improvement costs associated with new or renewed leases was approximately $23 and $5 per square foot during 2022 and 2021, respectively.
In connection with lease renewals executed during each year, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 4% and 2% during 2023 and 2022, respectively. The weighted-average tenant improvement costs associated with new or renewed leases was approximately $7 and $23 per square foot during 2023 and 2022, respectively.
The weighted-average leasing commissions on the new and renewed leases commencing during each year was approximately 3% and 2% of base rental revenue over the term of the leases during 2022 and 2021, respectively.
The weighted-average leasing commissions on the new and renewed leases commencing during each year was approximately 3% of base rental revenue over the term of the leases during each of 2023 and 2022.
The weighted-average tenant improvement costs associated with new leases in 2022 are impacted by the tenant improvements pursuant to new leases on the newly constructed Sierra Medical Plaza I, which is expected to be completed in March, 2023.
The weighted-average tenant improvement costs associated with new leases in 2022 are impacted by the tenant improvements pursuant to new leases on the newly constructed Sierra Medical Plaza I, which was substantially completed in March, 2023.
To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income. Results of Operations Year ended December 31, 2022 as compared to the year ended December 31, 2021: For the year ended December 31, 2022, net income was $21.1 million as compared to $109.2 million during 2021.
To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income. Results of Operations Year ended December 31, 2023 as compared to the year ended December 31, 2022 For the year ended December 31, 2023, net income was $15.4 million as compared to $21.1 million during 2022.
Additional funds may be obtained through: (i) borrowings under our $375 million revolving credit agreement (which had $73.8 million of available borrowing capacity, net of outstanding borrowings and letters of credit as of December 31, 2022); (ii) borrowings under or refinancing of existing third-party debt pursuant to mortgage loan agreements entered into by our consolidated and unconsolidated LLCs/LPs; (iii) the issuance of equity pursuant to our at-the-market (“ATM”) equity issuance program, and/or; (iv) the issuance of other long-term debt.
Additional funds may be obtained through: (i) borrowings under our $375 million revolving credit agreement (which had $45.3 million of available borrowing capacity, net of outstanding borrowings and letters of credit as of December 31, 2023); (ii) borrowings under or refinancing of existing third-party debt pursuant to mortgage loan agreements entered into by our consolidated and unconsolidated LLCs/LPs; (iii) the issuance of equity, and/or; (iv) the issuance of other long-term debt.
We are in compliance with all of the covenants in the Credit Agreement at December 31, 2022 and were in compliance with all of the covenants of the Credit Agreement at December 31, 2021.
We were in compliance with all of the covenants in the Credit Agreement at December 31, 2023, and were in compliance with all of the covenants of the Credit Agreement at December 31, 2022.
The ARPA’s expansion of subsidies to purchase coverage through an exchange, which the Inflation Reduction Act of 2022, passed on August 16, 2022, continues through 2025, is anticipated to increase exchange enrollment.
The American Rescue Plan Act of 2021's expansion of subsidies to purchase coverage through an exchange, which the Inflation Reduction Act of 2022, passed on August 16, 2022, continues through 2025, is anticipated to increase exchange enrollment.
In addition, increased interest rates on our borrowings and increased construction costs could affect our ability to make additional attractive investments.
In addition, the increased interest rates on our borrowings and/or the increased costs related to new construction could affect our ability to make additional attractive investments.
Additional cash flow and dividends paid information for 2022 and 2021: As indicated on our consolidated statements of cash flows, we generated net cash provided by operating activities of $46.8 million during 2022 and $47.7 million during 2021.
Additional cash flow and dividends paid information for 2023 and 2022: As indicated on our consolidated statements of cash flows, we generated net cash provided by operating activities of $42.9 million during 2023 and $46.8 million during 2022.
The average amount outstanding under our Credit Agreement during the years ended December 31, 2022, 2021 and 2020 was $277.9 million, $253.5 million and $219.1 million, respectively, with corresponding effective interest rates of 2.9%, 2.2%, and 2.4%, respectively, including commitment fees and interest rate swaps/caps.
The average amount outstanding under 40 our Credit Agreement during the years ended December 31, 2023, 2022 and 2021 was $309.3 million, $277.9 million and $253.5 million, respectively, with corresponding effective interest rates of 4.8%, 2.9% and 2.2%, respectively, including commitment fees and interest rate swaps/caps.
(c) Consists of $298.1 million of borrowings outstanding as of December 31, 2022 under the terms of our $375 million Credit Agreement which matures on July 2, 2025. The amount outstanding approximates fair value as of December 31, 2022.
(c) Consists of $326.6 million of borrowings outstanding as of December 31, 2023 under the terms of our $375 million Credit Agreement which matures on July 2, 2025. The amount outstanding approximates fair value as of December 31, 2023.
As such, the effects of inflation may unfavorably impact our future expenses and rental revenue and may potentially have a negative impact on the future lease renewal terms, the underlying value of our properties, our ability to access the capital markets on favorable terms and to grow our portfolio and the value of our common shares. • Real estate market factors, including without limitation, the supply and demand of office space and market rental rates, changes in interest rates as well as an increase in the development of medical office condominiums in certain markets. • The impact of property values and results of operations of severe weather conditions, including the effects of hurricanes. • Government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs. • The issues facing the health care industry that affect the operators of our facilities, including UHS, such as: changes in, or the ability to comply with, existing laws and government regulations; unfavorable changes in the levels and terms of reimbursement by third party payers or government programs, including Medicare (including, but not limited to, the potential unfavorable impact of future reductions to Medicare reimbursements resulting from the Budget Control Act of 2011, as discussed in the next bullet point below) and Medicaid (most states have reported significant budget deficits that have, in the past, resulted in the reduction of Medicaid funding to the operators of our facilities, including UHS); demographic changes; the ability to enter into managed care provider agreements on acceptable terms; an increase in uninsured and self-pay patients which unfavorably impacts the collectability of patient accounts; decreasing in-patient admission trends; technological and pharmaceutical improvements that may increase the cost of providing, or reduce the demand for, health care, and; the ability to attract and retain qualified medical personnel, including physicians. • The Budget Control Act of 2011 imposed annual spending limits for most federal agencies and programs aimed at reducing budget deficits by $917 billion between 2012 and 2021, according to a report released by the Congressional Budget Office.
Those filings are the sole responsibility of UHS and are not incorporated by reference herein. • Failure of UHS or the other operators of our hospital facilities to comply with governmental regulations related to the Medicare and Medicaid licensing and certification requirements could have a material adverse impact on our future revenues and the underlying value of the property. • Real estate market factors, including without limitation, the supply and demand of office space and market rental rates, changes in interest rates as well as an increase in the development of medical office condominiums in certain markets. • The impact of property values and results of operations of severe weather conditions, including the effects of hurricanes. • Government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs. • The issues facing the health care industry that affect the operators of our facilities, including UHS, such as: changes in, or the ability to comply with, existing laws and government regulations; unfavorable changes in the levels and terms of reimbursement by third party payers or government programs, including Medicare (including, but not limited to, the potential unfavorable impact of future reductions to Medicare reimbursements resulting from the Budget Control Act of 2011, as discussed in the next bullet point below) and Medicaid (most states have reported significant budget deficits that have, in the past, resulted in the reduction of Medicaid funding to the operators of our facilities, including UHS); demographic changes; the ability to enter into managed care provider agreements on acceptable terms; an increase in uninsured and self-pay patients which unfavorably impacts the collectability of patient accounts; decreasing in-patient admission trends; technological and pharmaceutical improvements that may increase the cost of providing, or reduce the demand for, health care, and; the ability to attract and retain qualified medical personnel, including physicians. 32 • The Budget Control Act of 2011 imposed annual spending limits for most federal agencies and programs aimed at reducing budget deficits by $917 billion between 2012 and 2021, according to a report released by the Congressional Budget Office.
Borrowings under the Credit Agreement will bear interest annually at a rate equal to, at our option, at either LIBOR (for one, three, or six months) or the Base Rate, plus in either case, a specified margin depending on our ratio of debt to total capital, as determined by the formula set forth in the Credit Agreement.
Borrowings under the Credit Agreement will bear interest at a rate equal to, at our option, at adjusted term SOFR for either one, three, or six months or the Base Rate, plus in either case, a specified margin depending on our total leverage ratio, as determined by the formula set forth in the Credit Agreement.
The $920,000 net decrease was attributable to: • an unfavorable change of $1.9 million due to a decrease in net income plus/minus the adjustments to reconcile net income to net cash provided by operating activities (depreciation and amortization, amortization related to above/below market leases, amortization of debt premium, amortization of deferred financing costs, stock-based compensation expense and gain on divestitures of real estate assets), as discussed above; • an unfavorable change of $1.2 million in lease receivables; • a favorable change of $1.1 million in tenant reserves, deposits and deferred and prepaid rents; • a favorable change of $1.0 million in accrued expenses and other liabilities; • an unfavorable change of $549,000 in leasing costs paid, and; • other combined net favorable changes of $677, 000.
The $3.9 million net decrease was attributable to: • an unfavorable change of $4.3 million due to a decrease in net income plus/minus the adjustments to reconcile net income to net cash provided by operating activities (depreciation and amortization, amortization related to above/below market leases, amortization of debt premium, amortization of deferred financing costs, stock-based compensation expense and loss on divestiture of real estate assets), as discussed above; • a favorable change of $1.6 million in lease receivables; • an unfavorable change of $1.4 million in accrued expenses and other liabilities; • an unfavorable change of $437,000 in tenant reserves, deposits and deferred and prepaid rents, and; • other combined net favorable changes of $685, 000.
The margins over LIBOR, Base Rate and the facility fee are based upon our total leverage ratio. At December 31, 2022, the applicable margin over the LIBOR rate was 1.20%, the margin over the Base Rate was 0.20% and the facility fee was 0.20%.
The margins over adjusted term SOFR, Base Rate and the facility fee are based upon our total leverage ratio. At December 31, 2023, the applicable margin over the adjusted term SOFR rate was 1.20%, the margin over the Base Rate was 0.20% and the facility fee was 0.20%.
The carrying amount and fair value of borrowings outstanding pursuant to the Credit Agreement was $298.1 million at December 31, 2022. There are no compensating balance requirements.
The carrying amount and fair value of borrowings outstanding pursuant to the Credit Agreement was $326.6 million at December 31, 2023. There are no compensating balance requirements.
The following table includes a summary of the required compliance ratios at December 31, 2022 and 2021, giving effect to the covenants contained in the Credit Agreements in effect on the respective dates (dollar amounts in thousands): Covenant December 31, 2022 December 31, 2021 Tangible net worth $ 125,000 $ 219,654 $ 225,355 Total leverage % 42.9 % 43.1 % Secured leverage % 5.6 % 7.4 % Unencumbered leverage % 41.8 % 41.9 % Fixed charge coverage > 1.50x 4.3x 4.8x As indicated on the following table, we have various mortgages, all of which are non-recourse to us and are not cross-collateralized, included on our consolidated balance sheet as of December 31, 2022 and December 31, 2021 (amounts in thousands): As of 12/31/2022 As of 12/31/2021 Facility Name Interest Rate Maturity Date Outstanding Balance (in thousands)(a.) Outstanding Balance (in thousands) 700 Shadow Lane and Goldring MOBs fixed rate mortgage loan (b.) 4.54 % June, 2022 $ - $ 5,210 BRB Medical Office Building fixed rate mortgage loan (c.) 4.27 % December, 2022 - 5,280 Desert Valley Medical Center fixed rate mortgage loan (d.) 3.62 % January, 2023 4,194 4,356 2704 North Tenaya Way fixed rate mortgage loan (e.) 4.95 % November, 2023 6,252 6,418 Summerlin Hospital Medical Office Building III fixed rate mortgage loan 4.03 % April, 2024 12,558 12,806 Tuscan Professional Building fixed rate mortgage loan 5.56 % June, 2025 1,719 2,343 Phoenix Children’s East Valley Care Center fixed rate mortgage loan 3.95 % January, 2030 8,203 8,466 Rosenberg Children's Medical Plaza fixed rate mortgage loan 4.42 % September, 2033 12,027 12,273 Total, excluding net debt premium and net financing fees 44,953 57,152 Less net financing fees (268 ) (376 ) Plus net debt premium 40 90 Total mortgage notes payable, non-recourse to us, net $ 44,725 $ 56,866 (a.) All mortgage loans require monthly principal payments through maturity and either fully amortize or include a balloon principal payment upon maturity.
The following table includes a summary of the required compliance ratios at December 31, 2023 and 2022, giving effect to the covenants contained in the Credit Agreements in effect on the respective dates (dollar amounts in thousands): Covenant December 31, 2023 December 31, 2022 Tangible net worth $ 125,000 $ 191,824 $ 219,654 Total leverage % 44.5 % 42.9 % Secured leverage % 4.1 % 5.6 % Unencumbered leverage % 44.2 % 41.8 % Fixed charge coverage > 1.50x 3.1x 4.3x As indicated on the following table, we have various mortgages, all of which are non-recourse to us and are not cross-collateralized, included on our consolidated balance sheet as of December 31, 2023 and 2022 (amounts in thousands): As of 12/31/2023 As of 12/31/2022 Facility Name Interest Rate Maturity Date Outstanding Balance (in thousands)(a.) Outstanding Balance (in thousands) Desert Valley Medical Center fixed rate mortgage loan (b.) 3.62 % January, 2023 $ - $ 4,194 2704 North Tenaya Way fixed rate mortgage loan (c.) 4.95 % November, 2023 - 6,252 Summerlin Hospital Medical Office Building III fixed rate mortgage loan (d.) 4.03 % April, 2024 12,301 12,558 Tuscan Professional Building fixed rate mortgage loan 5.56 % June, 2025 1,060 1,719 Phoenix Children’s East Valley Care Center fixed rate mortgage loan 3.95 % January, 2030 7,930 8,203 Rosenberg Children's Medical Plaza fixed rate mortgage loan 4.42 % September, 2033 11,771 12,027 Total, excluding net debt premium and net financing fees 33,062 44,953 Less net financing fees (199 ) (268 ) Plus net debt premium - 40 Total mortgage notes payable, non-recourse to us, net $ 32,863 $ 44,725 (a.) All mortgage loans require monthly principal payments through maturity and either fully amortize or include a balloon principal payment upon maturity.
We declared and paid dividends of $39.2 million during 2022 and $38.5 million during 2021. During 2022, the $46.8 million of net cash provided by operating activities was approximately $7.6 million greater than the $39.2 million of dividends paid during 2022.
During 2022, the $46.8 million of net cash provided by operating activities was approximately $7.6 million greater than the $39.2 million of dividends paid during 2022.
Loan premiums, in the case of above market rate assumed loans, or loan discounts, in the case of below market assumed loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate. Please see additional disclosure below regarding “Financing Assets”.
Loan premiums, in the case of above market rate assumed loans, or loan discounts, in the case of below market assumed loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate.
These leases comprised approximately 13% of the aggregate rentable square feet of these properties (9% related to renewed leases and 4% related to new leases). During 2021, we had a total of 56 new or renewed leases related to the medical office buildings, in which we have significant investments, some of which are accounted for by the equity method.
These leases comprised approximately 22% of the aggregate rentable square feet of these properties (19% related to renewed leases and 3% related to new leases). During 2022, we had a total of 46 new or renewed leases related to the medical office buildings in which we have significant investments, some of which are accounted for by the equity method.
Further, given the complexities of the reimbursement landscape in which our tenants operate, their payers may be unwilling or unable to increase reimbursement rates to compensate for inflationary impacts. This may impact their ability and willingness to make rental payments.
Further, given the complexities of the reimbursement landscape in which our tenants operate, their payers may be unwilling or unable to increase reimbursement rates to compensate for inflationary impacts.
The Credit Agreement defines “Base Rate” as the greatest of (a) the Administrative Agent’s prime rate, (b) the federal funds effective rate plus 1/2 of 1% and (c) one month LIBOR plus 1%.
The Credit Agreement, as amended by the first amendment, defines “Base Rate” as the greatest of (a) the Administrative Agent’s prime rate, (b) the federal funds effective rate plus 1/2 of 1% and (c) one month adjusted term SOFR plus 1%.
At December 31, 2022, we had $298.1 million of outstanding borrowings and $3.1 million of letters of credit outstanding under our Credit Agreement. We had $73.8 million of available borrowing capacity, net of the outstanding borrowings and letters of credit outstanding as of December 31, 2022.
At December 31, 2023, we had $326.6 million of outstanding borrowings and $3.1 million of letters of credit outstanding under our Credit Agreement. We had $45.3 million of available borrowing capacity, net of the outstanding borrowings and letters of credit outstanding as of December 31, 2023.
At December 31, 2021, we had $271.9 million of outstanding borrowings outstanding against our revolving credit agreement that was in effect at that time, $3.2 million of letters of credit outstanding against the agreement and $99.9 million of available borrowing capacity.
At December 31, 2022, we had $298.1 million of outstanding borrowings outstanding against our revolving credit agreement that was in effect at that time, $3.1 million of letters of credit outstanding against the agreement and $73.8 million of available borrowing capacity.
Net cash used in financing activities Net cash used in financing activities was $25.0 million during 2022 as compared to $6.5 million during 2021. 2022: The $25.0 million of cash used in financing activities during 2022 consisted of: • paid $39.2 million of dividends, including $60,000 of previously accrued dividends; • received $26.2 million of net borrowings on our revolving credit agreement; • paid $12.2 million on mortgage notes payable that are non-recourse to us, including a $5.1 million repayment of a fixed rate mortgage loan that matured during the fourth quarter of 2022 and a $5.1 million repayment of a fixed rate mortgage loan that matured during the second quarter of 2022; • received $177,000 of net cash from the issuance of shares of beneficial interest, and; • paid $26,000 of financing costs related to the revolving credit agreement. 2021: The $6.5 million of cash used in financing activities during 2021 consisted of: • paid approximately $38.5 million of dividends; • received $35.7 million of additional net borrowings on our revolving credit agreement; • paid approximately $2.1 million on mortgage notes payable that are non-recourse to us; • paid approximately $1.8 million of financing costs, related primarily to the July, 2021 amended and restated revolving credit agreement, and; • received $215,000 from the issuance of shares of beneficial interest pursuant to our dividend reinvestment plan.
Net cash used in financing activities Net cash used in financing activities was $23.2 million during 2023 as compared to $25.0 million during 2022. 2023: The $23.2 million of cash used in financing activities during 2023 consisted of: • paid $39.8 million of dividends, including $58,000 of previously accrued dividends; • received $28.5 million of net borrowings on our revolving credit agreement; • paid $11.9 million on mortgage notes payable that are non-recourse to us, including a $6.1 million repayment of a fixed rate mortgage loan that matured during the fourth quarter of 2023 and a $4.2 million repayment of a fixed rate mortgage loan that matured during the first quarter of 2023; • paid $222,000 of financing costs related to the amendment of our revolving credit agreement, and; • received $147,000 of net cash from the issuance of shares of beneficial interest. 2022: The $25.0 million of cash used in financing activities during 2022 consisted of: • paid $39.2 million of dividends, including $60,000 of previously accrued dividends; • received $26.2 million of net borrowings on our revolving credit agreement; • paid $12.2 million on mortgage notes payable that are non-recourse to us, including a $5.1 million repayment of a fixed rate mortgage loan that matured during the fourth quarter of 2022 and a $5.1 million repayment of a fixed rate mortgage loan that matured during the second quarter of 2022; • received $177,000 of net cash from the issuance of shares of beneficial interest, and; • paid $26,000 of financing costs related to the revolving credit agreement.
Rental rates, tenant improvement costs and rental concessions vary from property to property based upon factors such as, but not limited to, the current occupancy and age of our buildings, local overall economic conditions, proximity to hospital campuses and the vacancy rates, rental rates and capacity of our competitors in the market.
These leases comprised approximately 13% of the aggregate rentable square feet of these properties (9% related to renewed leases and 4% related to new leases) 36 Rental rates, tenant improvement costs and rental concessions vary from property to property based upon factors such as, but not limited to, the current occupancy and age of our buildings, local overall economic conditions, proximity to hospital campuses and the vacancy rates, rental rates and capacity of our competitors in the market.
The operators of our hospital properties are treating patients with COVID‑19 and, in some areas, the increased demand for care is putting a strain on their resources and staff, which has required them to utilize higher‑cost temporary labor and pay premiums above standard compensation for essential workers.
In some areas, the labor scarcity is putting a strain on the resources of our tenants and their staff, which has required them to utilize higher-cost temporary labor and pay premiums above standard compensation for essential workers.
Effects of Inflation The healthcare industry is very labor intensive and salaries and benefits related to the employees of our tenants are subject to inflationary pressures, as are supply costs, construction costs and medical equipment and other costs. The nationwide shortage of clinical and support personnel has been a significant operating issue facing healthcare providers.
Effects of Inflation The healthcare industry is very labor intensive and salaries and benefits related to the employees of our tenants are subject to inflationary pressures, as are supply costs, construction costs and medical equipment and other costs.
Under these circumstances, the operators of our facilities may experience declines in patient volumes which could result in decreased occupancy rates at our medical office buildings. • A continuation of the worsening of the economic and employment conditions in the United States would likely materially affect the business of our operators, including UHS, which would likely unfavorably impact our future bonus rental revenue (on one UHS hospital facility) and may potentially have a negative impact on the future lease renewal terms and the underlying value of the hospital properties. • In 2021, the rate of inflation in the United States began to increase and has since risen to levels not experienced in over 40 years.
Under these circumstances, the operators of our facilities may experience declines in patient volumes which could result in decreased occupancy rates at our medical office buildings. • A worsening of the economic and employment conditions in the United States would likely materially affect the business of our operators, including UHS, which would likely unfavorably impact our future bonus rental revenue (on one UHS hospital facility) and may potentially have a negative impact on the future lease renewal terms and the underlying value of the hospital properties. • There is a heightened risk of future cybersecurity threats, including ransomware attacks targeting healthcare providers.
Our other operating expenses include expenses related to the consolidated medical office buildings as well as the three specialty facilities during the years in which they were vacant (as discussed herein).
Our other operating expenses include expenses related to the consolidated medical office buildings as well as the vacant land and vacant specialty facilities (as discussed herein).
Interest expense increased by $1.9 million during 2022, as compared to 2021, due to: (i) a $4.8 million increase in interest expense on our revolving credit agreement resulting from an increase in our average cost of borrowings (3.28% average effective rate during 2022 as compared to 1.69% average effective rate during 2021), as well as an increase in our average outstanding borrowings ($277.9 million during 2022 as compared to $253.5 million during 2021); (ii) a $2.3 million favorable change in interest rate swap (income)/expense; (iii) a $248,000 decrease in mortgage interest expense; (iv) a $322,000 decrease in interest expense due to capitalized interest on a major construction project during 2022, and; (v) a $76,000 decrease in amortization of financing fees and fair value of debt.
Interest expense increased by $6.2 million during 2023, as compared to 2022, due to: (i) a $11.4 million increase in interest expense on our revolving credit agreement primarily resulting from increases in our average cost of borrowings (6.64% average effective rate during 2023 as compared to 3.28% average effective rate during 2022), and in our average outstanding borrowings ($309.3 million during 2023 as compared to $277.9 million during 2022); (ii) a $4.8 million favorable change in interest rate swap income; (iii) a $583,000 decrease in mortgage interest expense; (iv) a $173,000 increase in interest expense due to a decrease capitalized interest on a major project that was substantially completed during the first quarter of 2023, and; (v) a $28,000 increase in amortization of financing fees and fair value of debt.
We are required to build these facilities pursuant to agreements. Acquisition and Divestiture Activity Please see Note 3 to the consolidated financial statements for completed transactions.
Acquisition and Divestiture Activity Please see Note 3 to the consolidated financial statements for completed transactions.
We have opted to exclude gains and losses from sales of incidental assets in our calculation of FFO. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income determined in accordance with GAAP.
FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income determined in accordance with GAAP.
As of February 27, 2023, we have seventy-six real estate investments or commitments in twenty-one states consisting of: • six hospital facilities consisting of three acute care hospitals and three behavioral health care hospitals; • four free-standing emergency departments (“FEDs”); • fifty-nine medical/office buildings (“MOBs”), including one under construction that is scheduled to be completed in March, 2023, and also including four owned by unconsolidated limited liability companies (“LLCs”)/limited liability partnerships (“LPs”); • four preschool and childcare centers, and; • three specialty facilities that are currently vacant, one of which is currently in the process of being demolished and the demolition is expected to be completed during the second quarter of 2023.
As of February 27, 2024, we have seventy-six real estate investments or commitments in twenty-one states consisting of: • six hospital facilities consisting of three acute care hospitals and three behavioral health care hospitals; • four free-standing emergency departments (“FEDs”); • sixty medical/office buildings (“MOBs”), including four owned by unconsolidated limited liability companies (“LLCs”)/limited liability partnerships (“LPs”); • four preschool and childcare centers; • one specialty facilities that is currently vacant, and; • one vacant land investment located in Chicago, Illinois.
(b.) This $5.1 million fixed rate mortgage loan was fully repaid on June 1, 2022, utilizing borrowings under our Credit Agreement. (c.) This $5.1 million fixed rate mortgage loan was fully repaid on December 1, 2022, utilizing borrowings under our Credit Agreement.
(b.) This $4.2 million fixed rate mortgage loan was fully repaid on January 3, 2023, utilizing borrowings under our Credit Agreement. (c.) This $6.3 million fixed rate mortgage loan was fully repaid on November 1, 2023, utilizing borrowings under our Credit Agreement.
Our actual results and financial condition, including the operating results of our lessees and the facilities leased to subsidiaries of UHS, could differ materially from those expressed in, or implied by, the forward-looking statements. Forward-looking statements speak only as of the date the statements are made.
Given these uncertainties, risks and assumptions, you are cautioned not to place undue reliance on such forward-looking statements. Our actual results and financial condition, including the operating results of our lessees and the facilities leased to subsidiaries of UHS, could differ materially from those expressed in, or implied by, the forward-looking statements.
Below is a reconciliation of our reported net income to FFO for 2022 and 2021 (in thousands): 2022 2021 Net income $ 21,102 $ 109,166 Depreciation and amortization expense on consolidated investments 26,557 27,478 Depreciation and amortization expense on unconsolidated affiliates 1,184 1,549 Gain on divestitures of real estate assets — (87,314 ) Funds From Operations $ 48,843 $ 50,879 Weighted average number of shares outstanding - Diluted 13,795 13,779 Funds From Operations per diluted share $ 3.54 $ 3.69 Our FFO decreased by $2.0 million during 2022, as compared to 2021 due to: (i) the net decrease in net income of $750,000, excluding the gain on divestitures recorded during 2021 of $88.1 million (which we exclude from our calculation of FFO), as discussed above, and; (ii) a $1.3 million decrease resulting from a decrease in depreciation and amortization expense on consolidated and unconsolidated affiliates.
Below is a reconciliation of our reported net income to FFO for 2023 and 2022 (in thousands): 2023 2022 Net income $ 15,400 $ 21,102 Depreciation and amortization expense on consolidated investments 27,733 26,557 Depreciation and amortization expense on unconsolidated affiliates 1,205 1,184 Loss on divestiture of real estate assets 232 — Funds From Operations $ 44,570 $ 48,843 Weighted average number of shares outstanding - Diluted 13,814 13,795 Funds From Operations per diluted share $ 3.23 $ 3.54 Our FFO decreased by $4.3 million during 2023, as compared to 2022, due to: (i) a net decrease of $5.7 million in net income, as discussed above, partially offset by; (ii) a $1.2 million increase resulting from an increase in depreciation and amortization expense on consolidated and unconsolidated affiliates, and; (iii) a $232,000 increase resulting from the loss recorded during 2023 on the divestiture of real estate assets.
Our operating expenses for 2022 and 2021 include approximately $2.3 million (including $332,000 of demolition expenses) and $737,000 for the years ended December 31, 2022 and 2021, respectively, of aggregate operating expenses related to three vacant specialty facilities located in Chicago, Illinois (currently in the process of being demolished), Corpus Christi, Texas and Evansville, Indiana.
Our operating expenses include approximately $2.3 million (including $1.1 million of demolition expenses) during 2023, and $2.3 million (including $332,000 of demolition expenses) during 2022, of aggregate operating expenses related to the vacant parcel of land located in Chicago, Illinois and the two vacant specialty facilities located in Evansville, Indiana, and Corpus Christi, Texas (which was divested in December, 2023).
The applicable margin ranges from 1.10% to 1.35% for LIBOR loans and 0.10% to 0.35% for Base Rate loans. The initial applicable margin was 1.25% for LIBOR loans and 0.25% for Base Rate loans.
The applicable margin after the first amendment ranges from 1.10% to 1.35% for adjusted term SOFR loans and 0.10% to 0.35% for Base Rate loans.
We assume no obligation to publicly update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except as may be required by law. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
Forward-looking statements speak only as of the date the statements are made. We assume no obligation to publicly update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except as may be required by law.
Revenues increased by $6.4 million, or 7.6%, during 2022 as compared to 2021.
Revenues increased by $5.0 million, or 5.5%, during 2023, as compared to 2022.
At December 31, 2021, we had various mortgages, all of which were non-recourse to us, included in our consolidated balance sheet. The combined outstanding balance of these various mortgages was $57.2 million and these mortgages had a combined fair value of approximately $59.4 million. The fair value of our debt was computed based upon quotes received from financial institutions.
The mortgages outstanding as of December 31, 2023 had a combined carrying value of approximately $33.1 million and a combined fair value of approximately 41 $31.2 million. At December 31, 2022, we had various mortgages, all of which were non-recourse to us, included in our consolidated balance sheet.
No assurances can be given that the implementation of these new laws will not have a material adverse effect on the business, financial condition or results of operations of our operators. • The potential indirect impact of the Tax Cuts and Jobs Act of 2017, signed into law on December 22, 2017, which makes significant changes to corporate and individual tax rates and calculation of taxes, which could potentially impact our tenants and jurisdictions, both positively and negatively, in which we do business, as well as the overall investment thesis for REITs. • A subsidiary of UHS is our Advisor and our officers are all employees of a wholly-owned subsidiary of UHS, which may create the potential for conflicts of interest. • Lost revenues resulting from the exercise of purchase options, lease expirations and renewals and other transactions ( see Note 4 to the consolidated financial statements – Lease Accounting for additional disclosure related to lease expirations and subsequent vacancies that occurred during the second and third quarters of 2019 and the fourth quarter of 2021 on three specialty hospital facilities). • Potential unfavorable tax consequences and reduced income resulting from an inability to complete, within the statutory timeframes, anticipated tax deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code, if, and as, applicable from time-to-time. • Our ability to continue to obtain capital on acceptable terms, including borrowed funds, to fund future growth of our business. • The outcome and effects of known and unknown litigation, government investigations, and liabilities and other claims asserted against us, UHS or the other operators of our facilities.
No assurances can be given that the implementation of these new laws will not have a material adverse effect on the business, financial condition or results of operations of our operators. • A subsidiary of UHS is our Advisor and our officers are all employees of a wholly-owned subsidiary of UHS, which may create the potential for conflicts of interest. • Lost revenues resulting from the exercise of purchase options, lease expirations and renewals and other transactions ( see Note 4 to the condensed consolidated financial statements – Lease Accounting for additional disclosure related to lease expirations 31 and subsequent vacancies that occurred during the second and third quarters of 2019 and the fourth quarter of 2021 on three specialty hospital facilities; one of which was divested in December, 2023, and another on which the demolition was substantially completed during the second quarter of 2023). • Potential unfavorable tax consequences and reduced income resulting from an inability to complete, within the statutory timeframes, anticipated tax deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code, if, and as, applicable from time-to-time. • The potential unfavorable impact on our business of the deterioration in national, regional and local economic and business conditions, including a worsening of credit and/or capital market conditions, which may adversely affect our ability to obtain capital which may be required to fund the future growth of our business and refinance existing debt with near term maturities. • A deterioration in general economic conditions which may result in increases in the number of people unemployed and/or insured and likely increase the number of individuals without health insurance.
That ruling was ultimately appealed to the United States Supreme Court, which decided in California v. Texas that the plaintiffs in the matter lacked standing to bring their constitutionality claims. On September 7, 2022, the Legislation faced its most recent challenge when a Texas Federal District Court judge, in the case of Braidwood Management v.
That ruling was ultimately appealed to the United States Supreme Court, which decided in California v. Texas that the plaintiffs in the matter lacked standing to bring their constitutionality claims.
Please see Note 4 to the consolidated financial statements - Lease Accounting, for additional information related to a lease renewal between us and Wellington Regional Medical Center, a wholly-owned subsidiary of UHS. • In certain of our markets, the general real estate market has been unfavorably impacted by increased competition/capacity and decreases in occupancy and rental rates which may adversely impact our operating results and the underlying value of our properties. • A number of legislative initiatives have recently been passed into law that may result in major changes in the health care delivery system on a national or state level to the operators of our facilities, including UHS.
We cannot predict whether or not there will be future legislation averting a federal government shutdown, however, the operating results and results of operations of certain of our tenants, and therefore potentially ours, could be materially unfavorably impacted by a federal government shutdown. • In certain of our markets, the general real estate market has been unfavorably impacted by increased competition/capacity and decreases in occupancy and rental rates which may adversely impact our operating results and the underlying value of our properties. • A number of legislative initiatives have recently been passed into law that may result in major changes in the health care delivery system on a national or state level to the operators of our facilities, including UHS.
Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related costs. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases.
Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related costs.
FFO adjusts for the effects of certain items, such as gains on transactions that occurred during the periods presented. To the extent a REIT recognizes a gain or loss with respect to the sale of incidental assets, the REIT has the option to exclude or include such gains and losses in the calculation of FFO.
FFO adjusts for the effects of certain items such as gains and losses on the sale of incidental assets that occurred during the periods presented.
During 2021, the $47.7 million of net cash provided by operating activities was approximately $9.2 million greater than the $38.5 million of dividends paid during 2021.
We declared and paid dividends of $39.8 million during 2023 and $39.2 million during 2022. During 2023, the $42.9 million of net cash provided by operating activities was approximately $3.2 million greater than the $39.8 million of dividends paid during 2023.
The $88.1 million decrease was primarily attributable to: • $87.3 million decrease resulting from gains recorded in 2021 on various divestitures of real estate assets including the divestiture of two MOBs, as well as the divestiture of the Inland Valley Campus of Southwest Healthcare System as part of an asset purchase and sale transaction with UHS (for additional disclosure, please see Note 3 to the consolidated financial statements, Purchase and Sale Transaction, Acquisitions, Divestitures and New Construction ); • $3.2 million decrease (including $332,000 of demolition expenses incurred as of December 31, 2022), related to a specialty hospital located in Chicago, Illinois, on which the lease expired on December 31, 2021 (for additional disclosure, please see Note 4 to the consolidated financial statements, Lease Accounting ); • $1.9 million decrease due to an increase in interest expense due primarily to an increase in our average cost of borrowings as well as an increase in our average outstanding borrowings; • $1.25 million increase related to a settlement and release agreement executed during the fourth quarter of 2022 in connection with the specialty hospital located in Chicago, Illinois; • $1.2 million net increase resulting from the asset purchase and sale agreement, as amended, with UHS that occurred on December 31, 2021; • $1.1 million increase resulting from the impact of the fair market lease renewal on Wellington Regional Medical Center, which became effective on January 1, 2022, and; • $763,000 increase resulting from an aggregate net increase in income generated at various properties.
The $5.7 million decrease was primarily attributable to: • $6.2 million decrease due to an increase in interest expense due to increases in our average borrowing rate and average outstanding borrowings; • $1.25 million decrease related to a settlement and release agreement executed during the fourth quarter of 2022 in connection with the specialty hospital located in Chicago, Illinois; • $802,000 decrease resulting from an increase in demolition expenses incurred during 2023 in connection with the property located in Chicago, Illinois (for additional disclosure, please see Note 4 to the consolidated financial statements-Lease Accounting ), and; 35 • $2.6 million net increase resulting from an aggregate net increase in income generated at various properties, including an increase resulting from a $762,000 reduction in the non-demolition related operating expenses incurred in connection with the property located in Chicago, Illinois, partially offset by decrease resulting from a $232,000 loss on the divestiture of real estate assets recorded during the fourth quarter of 2023 in connection with the sale of a specialty facility located in Corpus Christi, Texas (see Note 3 to the consolidated financial statements-Purchase and Sale Transaction, Acquisitions, Divestitures and New Construction) .
The following table summarizes the schedule of maturities of our outstanding borrowing under our revolving credit facility (“Credit Agreement”), the outstanding mortgages applicable to our properties recorded on a consolidated basis and our other contractual obligations as of December 31, 2022 (amounts in thousands): Payments Due by Period (dollars in thousands) Debt and Contractual Obligation Total Less than 1 Year 2-3 years 4-5 years After 5 years Long-term non-recourse debt-fixed (a) (b) $ 44,953 $ 11,892 $ 15,089 $ 1,959 $ 16,013 Long-term debt-variable (c) 298,100 — 298,100 — — Estimated future interest payments on debt outstanding as of December 31, 2022 (d) 49,488 18,259 27,531 2,167 1,531 Operating leases (e) 34,964 618 1,236 1,236 31,874 Construction commitments (f) 18,297 18,297 — — — Equity and debt financing commitments — — — — — Total contractual obligations $ 445,802 $ 49,066 $ 341,956 $ 5,362 $ 49,418 (a) The mortgages are secured by the real property of the buildings as well as property leases and rents.
The following table summarizes the schedule of maturities of our outstanding borrowing under our revolving credit facility (“Credit Agreement”), the outstanding mortgages applicable to our properties recorded on a consolidated basis and our other contractual obligations as of December 31, 2023 (amounts in thousands): Payments Due by Period (dollars in thousands) Debt and Contractual Obligation Total Less than 1 Year 2-3 years 4-5 years After 5 years Long-term non-recourse debt-fixed (a) (b) $ 33,062 $ 13,550 $ 1,540 $ 1,279 $ 16,693 Long-term debt-variable (c) 326,600 — 326,600 — — Estimated future interest payments on debt outstanding as of December 31, 2023 (d) 39,039 22,770 12,571 1,472 2,226 Operating leases (e) 39,547 704 1,408 1,408 36,027 Construction commitments (f) 9,370 9,370 — — — Total contractual obligations $ 447,618 $ 46,394 $ 342,119 $ 4,159 $ 54,946 (a) The mortgages are secured by the real property of the buildings as well as property leases and rents.
(f) Consists of the remaining estimated construction costs related to an MOB located in Denison, Texas, which was substantially completed in late 2020 as well as construction costs for a new 85,000 rentable square foot MOB located in Reno, Nevada which commenced construction in January, 2022 and is expected to be completed in March, 2023.
(f) Consists of the remaining estimated construction costs related to an MOB located in Denison, Texas, which was substantially completed in late 2020 as well as remaining estimated construction costs related to an MOB located in Reno, Nevada which was substantially completed in March, 2023. We are required to build these facilities pursuant to agreements.
Other operating expenses totaled $25.0 million (including $332,000 of demolition expenses incurred as of December 31, 2022), and $20.3 million for the years ended December 31, 2022 and 2021, respectively.
Other operating expenses incurred in connection with these properties totaled $27.8 million (including $1.1 million of demolition expenses incurred as of December 31, 2023) and $25.0 million (including $332,000 of demolition expenses incurred as of December 31, 2022), respectively.
We consider these to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosure in connection with debt instruments.
We consider these to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosure in connection with debt instruments. Changes in market rates on our fixed rate debt impacts the fair value of debt, but it has no impact on interest incurred or cash flow.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

18 edited+5 added−5 removed5 unchanged
Biggest changeIf the one-month LIBOR is above 1.144%, the counterparty pays us, and if the one-month LIBOR is less than 1.144%, we pay the counterparty, the difference between the fixed rate of 1.144% and one-month LIBOR. We measure our interest rate swaps at fair value on a recurring basis.
Biggest changeOn May 15, 2023, this interest rate swap agreement was modified to replace the benchmark rate from LIBOR to term SOFR. If one-month term SOFR is above 1.064%, the counterparty pays us, and if one-month term SOFR is less than 1.064%, we pay the counterparty, the difference between the fixed rate of 1.064% and one-month term SOFR.
During the third quarter of 2019, we entered into an interest rate swap agreement on a total notional amount of $50 million with a fixed interest rate of a 1.144%. that we designated as a cash flow hedge. The interest rate swap became effective on September 16, 2019 and is scheduled to mature on September 16, 2024.
During the third quarter of 2019, we entered into an interest rate swap agreement on a total notional amount of $50 million with a fixed interest rate of 1.144% that we designated as a cash flow hedge. The interest rate swap became effective on September 16, 2019 and is scheduled to mature on September 16, 2024.
If that were to occur, our interest payments could 43 change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.
If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.
Financial Instruments In March 2020, we entered into an interest rate swap agreement on a total notional amount of $55 million with a fixed interest rate of 0.565% that we designated as a cash flow hedge. The interest rate swap became effective on March 25, 2020 and is scheduled to mature on March 25, 2027.
In March 2020, we entered into an interest rate swap agreement on a total notional amount of $55 million with a fixed interest rate of 0.565% that we designated as a cash flow hedge. The interest rate swap became effective on March 25, 2020 and is scheduled to mature on March 25, 2027.
As calculated based upon our variable rate debt outstanding as of December 31, 2022 that is subject to interest rate fluctuations, and giving effect to the above-mentioned interest rate swap, each 1% change in interest rates would impact our net income by approximately $1.6 million.
As calculated based upon our variable rate debt outstanding as of December 31, 2023 that is subject to interest rate fluctuations, and giving effect to the above-mentioned interest rate swap, each 1% change in interest rates would impact our net income by approximately $1.6 million.
During the twelve months of 2022, we paid or accrued approximately $414,000 to the counterparty by us, offset by approximately $1.4 million in receipts from the counterparty, adjusted for accruals, pursuant to the terms of the swaps.
During the twelve months of 2022, we paid or accrued approximately $414,000 to the counterparties by us, offset by approximately $1.4 million in receipts from the counterparties, adjusted for accruals, pursuant to the terms of the swaps.
The interest rate swaps include the $50 million swap agreement entered into during the third quarter of 2019, the $35 million swap agreement entered into in January 2020 and the $55 million swap agreement entered into in March, 2020.
The interest rate swaps include the $50 million swap agreement entered into during the third quarter of 2019, the $35 million swap agreement entered into in January 2020, the $55 million swap agreement entered into in March, 2020 and the $25 million swap agreement entered into in December, 2023.
The fair value of our interest rate swaps is based on quotes from third parties. We consider those inputs to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with derivative instruments and hedging activities.
We measure our interest rate swaps at fair value on a recurring basis. The fair value of our interest rate swaps is based on quotes from third parties. We consider those inputs to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with derivative instruments and hedging activities.
At December 31, 2022, the fair value of our interest rate swaps was a net asset of $12.0 million which is included in deferred charges and other assets on the accompanying consolidated balance sheet.
At December 31, 2023, the fair value of our interest rate swaps was a net asset of $7.3 million which is included in deferred charges and other assets on the accompanying condensed consolidated balance sheet.
As of December 31, 2022, the fair value and carrying-value of our debt is approximately $341.3 million and $343.0 million, respectively. As of that date, the fair value exceeds the carrying-value by approximately $1.7 million. The table below presents information about our financial instruments that are sensitive to changes in interest rates.
As of December 31, 2023, the fair value and carrying-value of our debt is approximately $357.8 million and $359.7 million, respectively. As of that date, the carrying value exceeds the fair value by approximately $1.8 million. The table below presents information about our financial instruments that are sensitive to changes in interest rates.
(b) Includes $298.1 million of outstanding borrowings under the terms of our $375 million revolving credit agreement.
(b) Includes $326.6 million of outstanding borrowings under the terms of our $375 million revolving credit agreement.
If the one-month LIBOR is above 0.565%, the counterparty pays us, and if the one-month LIBOR is less than 0.565%, we pay the counterparty, the difference between the fixed rate of 0.565% and one-month LIBOR.
If one-month term SOFR is above 3.9495%, the counterparty pays us, and if one-month term SOFR is less than 3.9495%, we pay the counterparty, the difference between the fixed rate of 3.9495% and one-month term SOFR.
The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR in derivatives and other financial contracts.
Additionally, effective July 1, 2023 all other USD LIBOR tenors are no longer published. 42 The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR in derivatives and other financial contracts.
(c) Includes: (i) a $50.0 million interest rate swap with a fixed interest rate of 1.144% that is scheduled to mature in September, 2024; (ii) a $35 million interest rate swap with a fixed interest rate of 1.4975% that is scheduled to mature in September, 2024, and; (iii) a $55 million interest rate swap with a fixed interest rate of 0.565% that is scheduled to mature in March, 2027.
(c) Includes: (i) a $50.0 million interest rate swap with a fixed interest rate of 1.064% that is scheduled to mature in September, 2024; (ii) a $35 million interest rate swap with a fixed interest rate of 1.410% that is scheduled to mature in September, 2024; (iii) a $55 million interest rate swap with a fixed interest rate of 0.5050% that is scheduled to mature in March, 2027, and; (iv) a $25 million interest rate swap with a fixed interest rate of 3.9495% that is scheduled to mature in December, 2027.
In 2021, the FCA further announced that effective January 1, 2022, the one week and two-month USD LIBOR tenors are no longer being published, and all other USD LIBOR tenors will cease to be published after June 30, 2023.
In 2021, the FCA further announced that effective January 1, 2022, the one week and two-month USD LIBOR tenors are no longer being published.
For debt obligations, the amounts of which are as of December 31, 2022, the table presents principal cash flows and related weighted average interest rates by contractual maturity dates. 44 Maturity Date, Year Ending December 31 (Dollars in thousands) 2023 2024 2025 2026 2027 Thereafter Total Long-term debt: Fixed rate: Debt(a) $ 11,892 $ 13,550 $ 939 $ 601 $ 626 $ 17,345 $ 44,953 Average interest rates 4.4 % 4.4 % 4.3 % 4.2 % 4.2 % 4.4 % 4.4 % Variable rate: Debt(b) $ — $ — $ 298,100 $ — $ — $ — $ 298,100 Average interest rates — — 5.6 % — — — 5.6 % Interest rate swaps: Notional amount (c) $ — $ 85,000 $ — $ — $ 55,000 $ — $ 140,000 Interest rates — 1.320 % — — 0.565 % — 1.070 % (a) Consists of non-recourse mortgage notes payable.
For debt obligations, the amounts of which are as of December 31, 2023, the table presents principal cash flows and related weighted average interest rates by contractual maturity dates. 43 Maturity Date, Year Ending December 31 (Dollars in thousands) 2024 2025 2026 2027 2028 Thereafter Total Long-term debt: Fixed rate: Debt(a) $ 13,550 $ 939 $ 601 $ 626 $ 653 $ 16,693 $ 33,062 Average interest rates 4.4 % 4.3 % 4.2 % 4.2 % 4.3 % 4.4 % 4.3 % Variable rate: Debt(b) $ — $ 326,600 $ — $ — $ — $ — $ 326,600 Average interest rates — 6.4 % — — — — 6.4 % Interest rate swaps: Notional amount (c) $ 85,000 $ — $ — $ 80,000 $ — $ — $ 165,000 Interest rates 1.210 % — — 1.580 % — — 1.390 % (a) Consists of non-recourse mortgage notes payable.
If the one-month LIBOR is above 1.4975%, the counterparty pays us, and if the one-month LIBOR is less than 1.4975%, we pay the counterparty, the difference between the fixed rate of 1.4975% and one-month LIBOR.
On May 15, 2023, this interest rate swap agreement was modified to replace the benchmark rate from LIBOR to term SOFR. If the one-month term SOFR is above 1.41%, the counterparty pays us, and if the one-month term SOFR is less than 1.41%, we pay the counterparty, the difference between the fixed rate of 1.41% and one-month term SOFR.
At December 31, 2022, we had contracts that are indexed to LIBOR, such as our unsecured revolving credit facility and interest rate derivatives. We are monitoring and evaluating the related risks, which include interest on loans or amounts received and paid on derivative instruments.
At December 31, 2022, we had contracts that were indexed to LIBOR, such as our unsecured revolved credit facility and interest rate derivative.
Removed
These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued.
Added
On May 15, 2023 we entered into the first amendment to our amended and restated revolving credit agreement ("Credit Agreement") dated as of July 2, 2021 among the Trust as borrower, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent.
Removed
For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require negotiation with the respective counterparty. Our unsecured revolving credit facility contains provisions specifying alternative interest rate calculations to be employed when LIBOR ceases to be available as a benchmark.
Added
The amendment replaces LIBOR Rate with adjusted term SOFR as an alternative benchmark rate for purposes under the Credit Agreement for settings of benchmark rates the occur on or after the closing date in accordance with the benchmark replacement provisions set forth in the Credit Agreement.
Removed
We currently expect the LIBOR-indexed rates included in our debt agreements to be available until June 30, 2023. We anticipate managing the transition to a preferred alternative rate using the language set out in our agreements, however, future market conditions may not allow immediate implementation of desired modifications and we may incur significant associated costs in doing so.
Added
Financial Instruments In December 2023, we entered into an interest rate swap agreement on a total notional amount of $25 million with a fixed interest rate of 3.9495% that we designated as a cash flow hedge. The interest rate swap became effective on December 1, 2023 and is scheduled to mature on December 1, 2027.
Removed
From inception of the swap agreements through December 31, 2022 we paid or accrued approximately $2.5 million to the counterparty by us, offset by approximately $1.6 million in receipts from the counterparty, adjusted for accruals, pursuant to the terms of the swap.
Added
On May 15, 2023, this interest rate swap agreement was modified to replace the benchmark rate from LIBOR to term SOFR. If one-month term SOFR is above 0.505%, the counterparty pays us, and if one-month term SOFR is less than 0.505%, we pay the counterparty, the difference between the fixed rate of 0.505% and one-month term SOFR.
Removed
During the twelve months of 2021, we paid or accrued approximately $1.3 million in net payments made to the counterparty by us, adjusted for accruals, pursuant to the terms of the swaps.
Added
During the twelve months of 2023, we received approximately $5.8 million from the counterparties (approximately $3.3 million of which relates to the two swaps that are scheduled to expire on September 16, 2024), adjusted for the previous quarter's accrual, pursuant to the terms of the swaps.

Other UHT 10-K year-over-year comparisons