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What changed in Community Healthcare Trust Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Community Healthcare Trust Inc's 2023 and 2024 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 2024 report.

+248 added−243 removedSource: 10-K (2025-02-18) vs 10-K (2024-02-13)

Top changes in Community Healthcare Trust Inc's 2024 10-K

248 paragraphs added · 243 removed · 199 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

30 edited+3 added−8 removed86 unchanged
Biggest changeExamples of significant legislation currently under consideration, recently enacted or in the process of implementation, include: • the Affordable Care Act and proposed amendments and any further repeal measures and related actions at the federal and state level; • the 2019 repeal of a portion of the Affordable Care Act for the mandate that all individuals purchase health insurance or pay a tax penalty; • mandatory expansion of healthcare services and increased access to individual healthcare insurance through legislative initiatives, including the Inflation Reduction Act of 2022; • quality control, cost containment, and payment system reforms for Medicaid, Medicare and other public funding, such as expansion of pay-for-performance criteria and value-based purchasing programs, bundled provider payments, accountable care organizations, increased patient cost-sharing, geographic payment variations, comparative effectiveness research, and lower payments for hospital readmissions; • implementation of health insurance exchanges and regulations governing their operation, whether run by the state or by the federal government, whereby individuals and small businesses purchase health insurance, including government-funded plans, many assisted by federal subsidies that are under ongoing legal challenges; • equalization of Medicare payment rates across different facility-type settings (i.e., the Bipartisan Budget Act of 2015, Section 603, lowered Medicare payment rates, effective January 1, 2017, for services provided in off-campus, provider-based outpatient departments to the same level of rates for physician-office settings for those facilities not grandfathered-in under the current Medicare rates as of the law’s date of enactment, November 2, 2015 and beginning January 1, 2019, CMS implemented site neutral changes in Medicare reimbursement for clinic visits provided in off-campus locations that were previously exempted from payment reductions); • the continued adoption by providers of federal standards for, and the associated audits of, the meaningful-use of electronic health records and the transition to ICD-10 coding; • the continued effort to expand the utilization of telehealth services; • implementation of federal rules requiring healthcare providers and third party payors to comply with electronic health system interoperability rules intended to allow for more efficient sharing of healthcare data; • changes made by the Biden Administration to reverse actions taken by the Trump Administration that impacted enrollment in health insurance exchanges and Medicaid; • a continuing trend of provider consolidation and associated antitrust scrutiny; • tax law changes affecting non-profit providers, including the Tax Cuts and Jobs Act of 2017's effect on charitable contributions; • regulatory changes designed to address health equity and disparities as a critical aspect of health and health care; and • regulatory and legislative changes related to the use of artificial intelligence in healthcare. 13 Environmental Matters As an owner of real estate, we are subject to various federal, state and local environmental laws, regulations and ordinances and also could be liable to third parties as a result of environmental contamination or noncompliance at our properties even if we no longer own such properties.
Biggest changeExamples of significant legislation currently under consideration, recently enacted or in the process of implementation, include: • the Affordable Care Act and proposed amendments and any further repeal measures and related actions at the federal and state level; • the 2019 repeal of a portion of the Affordable Care Act for the mandate that all individuals purchase health insurance or pay a tax penalty; • mandatory expansion of healthcare services and increased access to individual healthcare insurance through legislative initiatives, including the Inflation Reduction Act of 2022; • quality control, cost containment, and payment system reforms for Medicaid, Medicare and other public funding, such as expansion of pay-for-performance criteria and value-based purchasing programs, bundled 12 provider payments, accountable care organizations, increased patient cost-sharing, geographic payment variations, comparative effectiveness research, and lower payments for hospital readmissions; • implementation of health insurance exchanges and regulations governing their operation, whether run by the state or by the federal government, whereby individuals and small businesses purchase health insurance, including government-funded plans, many assisted by federal subsidies that are under ongoing legal challenges; • equalization of Medicare payment rates across different facility-type settings (i.e., the Bipartisan Budget Act of 2015, Section 603, lowered Medicare payment rates, effective January 1, 2017, for services provided in off-campus, provider-based outpatient departments to the same level of rates for physician-office settings for those facilities not grandfathered-in under the current Medicare rates as of the law’s date of enactment, November 2, 2015 and beginning January 1, 2019, CMS implemented site neutral changes in Medicare reimbursement for clinic visits provided in off-campus locations that were previously exempted from payment reductions); • the continued adoption by providers of federal standards for, and the associated audits of, the meaningful-use of electronic health records and the transition to ICD-10 coding; • federal and sate legislative changes requiring advance notice and approval of health care provider material change transactions, including sale or transfers of assets involving equity investors, and otherwise limiting or prohibiting arrangements between health care providers and private equity investors, including REITs; • the continued effort to expand the utilization of telehealth services; • implementation of federal rules requiring healthcare providers and third party payors to comply with electronic health system interoperability rules intended to allow for more efficient sharing of healthcare data; • changes made by the Trump Administration to reverse actions taken by the Biden Administration that impacted enrollment in health insurance exchanges and Medicaid; • a continuing trend of provider consolidation and associated antitrust scrutiny; • tax law changes affecting non-profit providers; • legislation modifying the rules for determining Medicare coverage, including efforts to promote home health care services; • regulatory changes designed to address health equity and disparities as a critical aspect of health and health care; and • regulatory and legislative changes related to the use of artificial intelligence in healthcare.
In addition, we believe that healthcare-related real estate rents and valuations are less susceptible to changes in the general economy than many other types of commercial real 7 estate due to favorable demographic trends and the need-based rise in healthcare expenditures, even during economic downturns. • Extensive Relationships with Healthcare Providers, Intermediaries and Property Owners.
In addition, we believe that healthcare-related real estate rents and valuations are less susceptible to changes in the general economy than many other types of commercial real estate due to favorable demographic trends and the need-based rise in healthcare expenditures, even during 7 economic downturns. • Extensive Relationships with Healthcare Providers, Intermediaries and Property Owners.
See the discussion under Item 1A, “Risk Factors,” under the caption “Environmental compliance costs and liabilities associated with owning and leasing our properties may affect our results of operations.” We have adopted a Corporate Environmental Policy, which sets forth our commitment to implementing environmentally sustainable best practices for our own operations, and to assist our tenants in their efforts to address their environmental concerns.
See the discussion under Item 1A, “Risk Factors,” under the caption “Environmental compliance costs and liabilities associated with owning and leasing our properties may affect our results of operations.” We have adopted a Corporate Environmental Policy, which sets forth our commitment to implementing environmentally sustainable best practices for our own operations, and to assist our tenants in their efforts to address 13 their environmental concerns.
Section 603 reflects movement by the Congress and CMS toward “site-neutral reimbursement” where Medicare rates across different facility-type settings are equalized. CMS implemented these changes beginning January 1, 2017. Beginning January 1, 2019, CMS also implemented site neutral changes in Medicare reimbursement for clinic visits provided in off-campus locations that were previously exempted from payment reductions.
Section 603 reflects movement by the Congress and CMS toward “site-neutral reimbursement” where Medicare rates across different facility-type settings are equalized. CMS implemented these changes beginning January 1, 2017. Beginning January 1, 2019, CMS also implemented site neutral changes in Medicare reimbursement for clinic visits provided in off-campus locations that 11 were previously exempted from payment reductions.
We intend for our investment portfolio to be diversified among healthcare facility type and segments such as medical office buildings, physician clinics, surgical centers and hospitals, specialty centers, behavioral facilities, inpatient rehabilitation facilities and long-term acute care hospitals, as well as being diverse both geographically and with respect to our tenant base.
We intend for our investment portfolio to be diversified among healthcare facility type such as medical office buildings, physician clinics, surgical centers and hospitals, specialty centers, behavioral facilities, inpatient rehabilitation facilities and long-term acute care hospitals, as well as being diverse both geographically and with respect to our tenant base.
We believe that our board and management team receiving restricted stock subject to long-term cliff-vesting periods as a material component of their total compensation effectively aligns the interests of our board and management with those of our stockholders, creating significant incentives to maximize returns for our stockholders.
We believe that our board and management team receiving restricted stock and restricted stock units subject to long-term cliff-vesting periods as a material component of their total compensation effectively aligns the interests of our board and management with those of our stockholders, creating significant incentives to maximize returns for our stockholders.
Different tenants may be more or less subject to certain types of regulation, some of which are specific to the type of facility or provider. We cannot predict the degree to which these changes, or changes to the federal healthcare programs in general, may affect the economic performance of some or all of our tenants, positively or negatively.
Different tenants may be more or less subject to certain types of regulation, some of 10 which are specific to the type of facility or provider. We cannot predict the degree to which these changes, or changes to the federal healthcare programs in general, may affect the economic performance of some or all of our tenants, positively or negatively.
These laws and regulations are wide-ranging and complex, may vary or overlap from jurisdiction to jurisdiction, and are subject frequently to change. Healthcare facilities may also be affected by changes in accreditation standards or in the procedures of the accrediting agencies that are recognized by 10 governments in the certification process.
These laws and regulations are wide-ranging and complex, may vary or overlap from jurisdiction to jurisdiction, and are subject frequently to change. Healthcare facilities may also be affected by changes in accreditation standards or in the procedures of the accrediting agencies that are recognized by governments in the certification process.
The Company’s internet website address is www.chct.reit. Corporate Governance Guidelines The Company has adopted Corporate Governance Guidelines relating to the conduct and operations of the Board of Directors. The Corporate Governance Guidelines are posted on the Company’s website (www.chct.reit) and are available in print to any stockholder who requests a copy.
The Company’s internet website address is www.chct.reit. Corporate Governance Guidelines The Company has adopted Corporate Governance Guidelines relating to the conduct and operations of the Board of 14 Directors. The Corporate Governance Guidelines are posted on the Company’s website (www.chct.reit) and are available in print to any stockholder who requests a copy.
Through Executive Orders issued January 28, 2021, the Biden Administration signaled its strong support for the Affordable Care Act by taking steps to reverse various actions by the Trump Administration and to strengthen Medicaid and the Affordable Care Act.
Through Executive Orders issued January 28, 2021, the Biden Administration signaled its strong support for the Affordable Care Act by taking steps to reverse various actions by the first Trump Administration and to strengthen Medicaid and the Affordable Care Act.
These efforts have resulted in more than 16 million Americans enrolling in ACA health plans and an additional 14 million low-income Americans being enrolled in the ACA’s Medicaid expansion coverage from a pre-ACA baseline. Other Biden Administration legislative initiatives and policies have been implemented in an attempt to expand access to health care coverage.
These efforts have resulted in more than 16 million Americans enrolling in ACA health plans and an additional 14 million low-income Americans being enrolled in the ACA’s Medicaid expansion coverage from a pre-ACA baseline. Other Biden Administration legislative initiatives and policies were implemented in an attempt to expand access to health care coverage.
These proposals, individually or in the aggregate, could significantly 12 change the delivery of healthcare services, either nationally or at the state level, if implemented.
These proposals, individually or in the aggregate, could significantly change the delivery of healthcare services, either nationally or at the state level, if implemented.
We believe that our management team has a strong reputation among, and a deep understanding of the real estate needs of, healthcare providers in our target submarkets. In addition, we have strategic relationships which we believe gives us the ability to meet the needs of healthcare providers by structuring transactions that are mutually advantageous to sellers, our tenants and us.
We believe that our management team has a strong reputation among, and a deep understanding of the real estate needs of, healthcare providers in our target submarkets. In addition, we have strategic relationships which we believe give us the ability to meet the needs of healthcare providers by structuring transactions that are mutually advantageous to sellers, our tenants and us.
We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code and that our manner of operations will enable us to continue to meet the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes for the year ending December 31, 2024.
We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code and that our manner of operations will enable us to continue to meet the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes for the year ending December 31, 2025.
If an employee desires to raise a concern in a confidential or anonymous manner, the concern may be directed to the whistleblower officer at the Company’s whistleblower hotline. During the year ended December 31, 2023, the whistleblower officer received no whistleblower complaints.
If an employee desires to raise a concern in a confidential or anonymous manner, the concern may be directed to the whistleblower officer at the Company’s whistleblower hotline. During the year ended December 31, 2024, the whistleblower officer received no whistleblower complaints.
Tax Status We have qualified as a REIT for U.S. federal income tax purposes since 2015, the year we began operations, and we expect that we will remain qualified as a REIT for U.S. federal income tax purposes for the year ending December 31, 2024.
Tax Status We have qualified as a REIT for U.S. federal income tax purposes since 2015, the year we began operations, and we expect that we will remain qualified as a REIT for U.S. federal income tax purposes for the year ending December 31, 2025.
Number of Properties Annualized Rent (%) Medical Office Building (MOB) 93 37.0 % Inpatient Rehabilitation Facilities (IRF) 8 18.8 % Acute Inpatient Behavioral (AIB) 5 14.2 % Specialty Centers (SC) 37 11.2 % Physician Clinics (PC) 30 7.8 % Behavioral Specialty Facilities (BSF) 9 5.1 % Surgical Centers and Hospitals (SCH) 10 4.3 % Long-term Acute Care Hospitals (LTACH) 1 1.6 % Total real estate investments 193 100.0 % Customer Concentrations The Company's real estate portfolio is leased to a diverse tenant base.
Number of Properties Annualized Rent (%) Medical Office Building (MOB) 93 36.9 % Inpatient Rehabilitation Facilities (IRF) 9 19.2 % Acute Inpatient Behavioral (AIB) 5 13.0 % Specialty Centers (SC) 37 10.3 % Physician Clinics (PC) 35 8.3 % Behavioral Specialty Facilities (BSF) 12 6.2 % Surgical Centers and Hospitals (SCH) 7 4.0 % Long-term Acute Care Hospitals (LTACH) 2 2.1 % Total real estate investments 200 100.0 % Customer Concentrations The Company's real estate portfolio is leased to a diverse tenant base.
Upon acquisition, the properties were 99.2% leased in the aggregate with lease expirations through 2038. Human Capital Resource Management As of December 31, 2023, we had 37 employees. All of our employees work at our corporate office in Franklin, Tennessee. Our employees are not members of any labor union, and we consider our relations with our employees to be excellent.
Upon acquisition, the properties were 99.3% leased in the aggregate with lease expirations through 2039. Human Capital Resource Management As of December 31, 2024, we had 36 employees. All of our employees work at our corporate office in Franklin, Tennessee. Our employees are not members of any labor union, and we consider our relations with our employees to be excellent.
We have a stable, but growing workforce with an average tenure of 3.7 years and voluntary employee turnover of approximately 15% during the year ended December 31, 2023. At December 31, 2023, 35% of our employees, 33% of our management team, and 33% of our board of directors were female.
We have a stable, but growing workforce with an average tenure of 3.9 years and voluntary employee turnover of approximately 3% during the year ended December 31, 2024. At December 31, 2024, 39% of our employees, 33% of our management team, and 33% of our board of directors were female.
Real Estate Investments As of December 31, 2023, we had gross investments of approximately $1.1 billion in 193 real estate properties (including a portion of one property accounted for as a sales-type lease with a gross amount totaling approximately $3.0 million and two properties classified as held for sale with an aggregate amount totaling approximately $7.5 million).
Real Estate Investments As of December 31, 2024, we had gross investments of approximately $1.2 billion in 200 real estate properties (including a portion of one property accounted for as a sales-type lease with a gross amount totaling approximately $3.0 million and two properties classified as held for sale with an aggregate amount totaling approximately $6.8 million).
The properties are located in 34 states, totaling approximately 4.3 million square feet in the aggregate and were approximately 91.1% leased, excluding real estate assets held for sale, at December 31, 2023 with a weighted average remaining lease term of approximately 6.9 years.
The properties are located in 36 states, totaling approximately 4.4 million square feet in the aggregate and were approximately 90.9% leased, excluding real estate assets held for sale, at December 31, 2024 with a weighted average remaining lease term of approximately 6.7 years.
Our tenants include many nationally recognized healthcare providers, such as Adventist HealthCare, Inc., Hospital Corporation of America, Fresenius Medical Care AG & Co, Davita, Inc., Tenet Healthcare Corporation, Catholic Healthcare Initiatives, and Lifepoint Health. Lifepoint Health accounted for 11.9% of annualized revenues as of December 31, 2023 .
Our tenants include many nationally recognized healthcare providers, such as Adventist HealthCare, Inc., Hospital Corporation of America, Fresenius Medical Care AG & Co, Davita, Inc., Tenet Healthcare Corporation, Catholic Healthcare Initiatives, and Lifepoint Health. Lifepoint Health accounted for 8.7% of annualized revenues and US Healthvest accounted for 7.5% of annualized revenues as of December 31, 2024.
See each of the discussions under Item 1A, "Risk Factors," under the captions "Adverse economic or other conditions in the geographic markets in which we conduct business 6 could negatively affect our occupancy levels and rental rates and have a material adverse effect on our operating results," and "A large percentage of our properties are located in Texas, Ohio, and Illinois, and changes in these markets may materially adversely affect us." 2023 Real Estate Investments During the year ended December 31, 2023, the Company acquired 19 real estate properties and one land parcel adjacent to an existing property in our portfolio, in fourteen separate transactions, as detailed in Note 4 – Real Estate Acquisitions and Dispositions to the Consolidated Financial Statements.
See each of the discussions under Item 1A, "Risk Factors," under the captions "Adverse economic or other conditions in the geographic markets in which we conduct business could negatively affect our occupancy levels and rental rates and have a material adverse effect on our operating 6 results," and " A large percentage of our properties are located in Texas, Illinois, and Ohio , and changes in these markets may materially adversely affect us." 2024 Real Estate Investments During the year ended December 31, 2024, the Company acquired nine real estate properties, in seven separate transactions, as detailed in Note 4 – Real Estate Acquisitions, Disposition, and Assets Held for Sale to the Consolidated Financial Statements.
Seasonality Our business has not been, and we do not expect it to become, subject to material seasonal fluctuations. 14 Available Information The Company makes available to the public free of charge through its internet website the Company’s Definitive Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such reports with, or furnishes such reports to, the Securities and Exchange Commission ("SEC").
Available Information The Company makes available to the public free of charge through its internet website the Company’s Definitive Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such reports with, or furnishes such reports to, the Securities and Exchange Commission ("SEC").
At December 31, 2023, we had $50.0 million outstanding on our revolving credit facility and had $350.0 million outstanding on our term loans under our first amendment to the third amended and restated credit agreement, dated as of December 14, 2022, by and among Community Healthcare Trust Incorporated, as borrower, the several banks and financial institutions party thereto as lenders, and Truist Bank, as administrative agent (collectively, our "Credit Facility") with a 36.1% debt-to-total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation).
At December 31, 2024, we had $212.0 million outstanding on our revolving credit facility and had $275.0 million outstanding on our term loans under our second amendment to the third amended and restated credit agreement, dated as of October 16, 2024, by and among Community Healthcare Trust Incorporated, as borrower, the several banks and financial institutions party thereto as lenders, and Truist Bank, as administrative agent (collectively, our "Credit Facility") with a 40.3% debt-to-total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation).
We have structured the compensation of our board and management team to closely align their interests with the interests of our stockholders. From our IPO in May 2015 through 2023, our executive officers elected each year to take 100% of their total compensation in restricted stock, subject to an eight-year cliff-vesting period.
We have structured the compensation of our board and management team to closely align their interests with the interests of our stockholders. Since our IPO in May 2015, our executive officers have elected each year to take a significant portion of their total compensation in restricted stock or restricted stock units, subject to three-year to eight-year cliff-vesting periods.
Geographic Concentrations The Company's portfolio is currently located in 34 states with 39.6% of our annualized rent as of December 31, 2023 derived from properties located in Texas (16.5%), Illinois (11.9%), and Ohio (11.2%).
Geographic Concentrations The Company's portfolio is currently located in 36 states with 38.4% of our annualized rent as of December 31, 2024 derived from properties located in Texas (16.7%), Illinois (11.6%), and Ohio (10.1%).
Beginning in 2024, our executive officers are permitted to take up to 50% of their total compensation in restricted stock. The Company's board of directors have elected to tak e 91% o f their total compensation in restricted stock since the Company's IPO, subject to a three-year cliff-vesting period.
The Company's board of directors have also elected to tak e a significant portion o f their total compensation in restricted stock since the Company's IPO, subject to a three-year cliff-vesting period.
In addition, tenants under long-term single-tenant net leases are required to carry property insurance covering our interest in the buildings.
In addition, tenants under long-term single-tenant net leases are required to carry property insurance covering our interest in the buildings. Seasonality Our business has not been, and we do not expect it to become, subject to material seasonal fluctuations.
Previously, health coverage affordability and adequacy had been measured solely for the employee, but not for coverage of the employee’s family. The Biden Administration estimates that this policy change will provide coverage for an additional 200,000 individuals, and nearly 1 million people will have access to lower premiums. The U.S.
Previously, health coverage affordability and adequacy had been measured solely for the employee, but not for coverage of the employee’s family. The U.S.
Removed
See Government Regulation and Legislative Developments below for a discussion of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act” or "ACA") for a discussion of th e Tax Cuts and Jobs Act ("TCJA"), enacted on December 22, 2017, which reduced the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018.
Added
While the Biden Administration supported the Affordable Care Act through legislation and Executive Orders, the Trump Administration may continue its previous legislative and regulatory efforts to limit various aspects of the ACA as indicated by its January 20, 2025 Executive Order immediately rescinding several Biden Administration health care-related Executive Orders, including Executive Order 14009 (Strengthening Medicaid and the Affordable Care Act, January 28, 2021); the Affordable Care Act (January 28, 2021); Executive Order 14070 (Continuing to Strengthen Americans’ Access to Affordable, Quality Health Coverage, April 5, 2022); Executive Order 14087 (Lowering Prescription Drug Costs for Americans, October 14, 2022).
Removed
Under the Affordable Care Act prior to the Trump Administration, individuals were required to obtain coverage or pay a penalty resulting in millions of more Americans obtaining coverage, usually through the healthcare exchanges (called the Marketplace) established to provide coverage in each state. The Trump Administration and Congress removed this mandate beginning in 11 2019.
Added
It is unclear what legislative and regulatory changes will result from these initial executive actions, and we cannot predict the nature of any future legislative or regulatory actions of the current Trump Administration.
Removed
The Trump Administration had also loosened rules to allow greater flexibility among insurers in the benefits offered, both lowering the costs of some plans but also limiting the coverage such plans offer.
Added
Environmental Matters As an owner of real estate, we are subject to various federal, state and local environmental laws, regulations and ordinances and also could be liable to third parties as a result of environmental contamination or noncompliance at our properties even if we no longer own such properties.
Removed
It is unclear at this time if increased competition from low-cost plans will damage the Marketplace, and how these changes will affect coverage rates in any particular state or locale. While the Trump Administration had decreased its focus on repealing the Affordable Care Act, a December 2018 federal court ruled the law unconstitutional. This decision was appealed to the U.S.
Removed
Court of Appeals for the 5th Circuit, which issued a decision in December 2019 finding the insurance mandate unconstitutional and remanded the case to the District Court to consider the constitutionality of the rest of the law. The case was appealed to the U.S. Supreme Court, which heard oral arguments in November 2020.
Removed
The Court issued a decision in June 2021 dismissing the case for lack of standing. The decision did not address the merits of the lawsuit and the legality of the ACA, but the decision effectively ends the case.
Removed
Both the Biden Administration and Congress are considering ways to strengthen coverage under the Affordable Care Act by increasing the subsidies available to purchasers of health plans through the insurance exchanges created by the Affordable Care Act.
Removed
While we expect that the Biden Administration will continue efforts to expand access to healthcare, we cannot predict the effect on us and/or our tenants of any future action by the Biden Administration and/or Congress with respect to the Affordable Care Act and other aspects of the healthcare system.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

81 edited+16 added−21 removed365 unchanged
Biggest changeThese risks are discussed more fully below in the section titled “Risk Factors.” These risks and uncertainties include, but are not limited to, the following: • General economic conditions can have a material adverse effect on our business, financial conditions and results of operations. 15 • Failure to implement strategies to enhance our performance could have a material adverse effect on our business, results of operations and financial conditions. • Our success depends, in part, on our ability to continue to make successful real estate acquisitions at fair prices and to integrate these acquisitions into our operations, and the failure to do so can have a material adverse effect on our business, financial conditions and results of operations. • If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flows. • Our ability to perform depends on keeping and hiring exceptionally talented management and employees, and our failure to do so could have a material adverse effect on our business, revenues, results of operations and financial condition. • Risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the COVID-19 pandemic's impact on global markets, may adversely affect our revenues, results of operations and financial condition. • Our tenants are subject to significant regulatory oversight, and changes in any of the laws and regulations applicable to their business could adversely impact our tenants’ ability to make rent payments to us, which, in turn, could have a material adverse effect on our business, revenues, results of operations and financial conditions. • Climate change may adversely affect our business due to new weather patterns or the occurrence of significant weather events which could impact economic activity or the value of our properties in specific markets. • Our properties generate rent revenue, and any adverse impacts on our properties, including, but not limited to, inability to secure funds for future tenant or other capital improvements or payment of leasing commissions, a requirement to make rent or other concessions and significant capital expenditures to improve our properties in order to retain and attract tenants, property vacancies, increases in property taxes, uninsured damages to or total losses of our properties, or health and safety or environmental violations, could have a material adverse effect on our properties, revenues, results of operations and financial condition. • We primarily fund our acquisitions through our Credit Facility and equity offerings, and any inability to utilize our Credit Facility or access capital markets at favorable terms and rates could have a material adverse effect on our business, results of operations and financial conditions. • We qualify as a REIT under the Code, and the failure to remain qualified as a REIT would have a material adverse effect on our business, cash flows, ability to pay distributions and the market price of our common stock.
Biggest changeThese risks are discussed more fully below in the section titled “Risk Factors.” These risks and uncertainties include, but are not limited to, the following: • General economic conditions can have a material adverse effect on our business, financial conditions and results of operations. • Failure to implement strategies to enhance our performance could have a material adverse effect on our business, results of operations and financial conditions. • Our success depends, in part, on our ability to continue to make successful real estate acquisitions at fair prices and to integrate these acquisitions into our operations, and the failure to do so can have a material adverse effect on our business, financial conditions and results of operations. • If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flows. 15 • Our ability to perform depends on keeping and hiring exceptionally talented management and employees, and our failure to do so could have a material adverse effect on our business, revenues, results of operations and financial condition. • Our tenants are subject to significant regulatory oversight, and changes in any of the laws and regulations applicable to their business could adversely impact our tenants’ ability to make rent payments to us, which, in turn, could have a material adverse effect on our business, revenues, results of operations and financial conditions. • Climate change may adversely affect our business due to new weather patterns or the occurrence of significant weather events which could impact economic activity or the value of our properties in specific markets. • Our properties generate rent revenue, and any adverse impacts on our properties, including, but not limited to, inability to secure funds for future tenant or other capital improvements or payment of leasing commissions, a requirement to make rent or other concessions and significant capital expenditures to improve our properties in order to retain and attract tenants, property vacancies, increases in property taxes, uninsured damages to or total losses of our properties, or health and safety or environmental violations, could have a material adverse effect on our properties, revenues, results of operations and financial condition. • We primarily fund our acquisitions through our Credit Facility and equity offerings, and any inability to utilize our Credit Facility or access capital markets at favorable terms and rates could have a material adverse effect on our business, results of operations and financial conditions. • Risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the COVID-19 pandemic's impact on global markets, may adversely affect our revenues, results of operations and financial condition. • We qualify as a REIT under the Code, and the failure to remain qualified as a REIT would have a material adverse effect on our business, cash flows, ability to pay distributions and the market price of our common stock.
In addition, if such events lead to a significant or prolonged impact on capital or 19 credit markets or economic growth, then our business, financial condition and results of operations could be adversely affected. The bankruptcy, insolvency or weakened financial position of our tenants, and particularly our largest tenants, could materially and adversely affect our operating results and financial condition.
In addition, if such events lead to a significant or prolonged impact on capital or credit markets or economic growth, then our business, financial condition and results of operations could be adversely affected. 19 The bankruptcy, insolvency or weakened financial position of our tenants, and particularly our largest tenants, could materially and adversely affect our operating results and financial condition.
The availability of equity capital to us will depend, in part, upon the market price of our common stock, which, in turn, will depend upon various market conditions and other factors that may change from time to time, including: • the extent of investor interest in our Company and our assets; • our ability to satisfy the distribution requirements applicable to REITs; 24 • the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • our financial performance and that of our tenants; • analyst reports about us and the REIT industry; • macroeconomic conditions generally and conditions affecting the healthcare and real estate industry in particular; • general stock and bond market conditions, including changes in interest rates on fixed income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future distributions; • a failure to maintain or increase our dividend which is dependent, in large part, upon funds from operations, or FFO, which, in turn, depends upon increased revenue from additional acquisitions and rental increases; and • other factors such as governmental regulatory action and changes in REIT tax laws.
The availability of equity capital to us will depend, in part, upon the market price of our common stock, which, in turn, will depend upon various market conditions and other factors that may change from time to time, including: • the extent of investor interest in our Company and our assets; • our ability to satisfy the distribution requirements applicable to REITs; • the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • our financial performance and that of our tenants; • analyst reports about us and the REIT industry; 24 • macroeconomic conditions generally and conditions affecting the healthcare and real estate industry in particular; • general stock and bond market conditions, including changes in interest rates on fixed income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future distributions; • a failure to maintain or increase our dividend which is dependent, in large part, upon funds from operations, or FFO, which, in turn, depends upon increased revenue from additional acquisitions and rental increases; and • other factors such as governmental regulatory action and changes in REIT tax laws.
To the extent that we consummate development opportunities, our investment in these projects could be subject to the following risks: • we may be unable to obtain financing for development projects on favorable terms or at all; • we may not complete development projects on schedule or within budgeted amounts; • we may encounter delays in obtaining or fail to obtain all necessary zoning, land use, building, occupancy, environmental and other governmental permits and authorizations, or underestimate the costs necessary to develop the property to market standards; • development or construction delays may provide tenants the right to terminate preconstruction leases or cause us to incur additional costs; • volatility in the price of construction materials or labor may increase our development costs; 25 • hospitals or health systems may maintain significant decision-making authority with respect to the development schedule; • we may incorrectly forecast risks associated with development in new geographic regions; • tenants may not lease space at the quantity or rental rate levels projected; • demand for our development project may decrease prior to completion, including due to competition from other developments; and • lease rates and rents at newly developed properties may fluctuate based on factors beyond our control, including market and economic conditions.
To the extent that we consummate development opportunities, our investment in these projects could be subject to the following risks: • we may be unable to obtain financing for development projects on favorable terms or at all; • we may not complete development projects on schedule or within budgeted amounts; • we may encounter delays in obtaining or fail to obtain all necessary zoning, land use, building, occupancy, environmental and other governmental permits and authorizations, or underestimate the costs necessary to develop the property to market standards; • development or construction delays may provide tenants the right to terminate preconstruction leases or cause us to incur additional costs; • volatility in the price of construction materials or labor may increase our development costs; • hospitals or health systems may maintain significant decision-making authority with respect to the development schedule; • we may incorrectly forecast risks associated with development in new geographic regions; • tenants may not lease space at the quantity or rental rate levels projected; 25 • demand for our development project may decrease prior to completion, including due to competition from other developments; and • lease rates and rents at newly developed properties may fluctuate based on factors beyond our control, including market and economic conditions.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distribution to our stockholders because: • we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates; • we could be subject to the federal alternative minimum tax and increased state and local taxes; and • unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distribution to our stockholders because: • we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates; • we could be subject to the federal corporate alternative minimum tax and increased state and local taxes; and • unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: • actual or anticipated variations in our quarterly operating results or dividends; • changes in our FFO or earnings estimates; • publication of research reports about us or the real estate industry; • increases in market interest rates that lead purchasers of our shares to demand a higher yield; • changes in market valuations of similar companies; 46 • adverse market reaction to any additional debt we incur in the future; • additions or departures of key management personnel; • actions by institutional stockholders; • speculation in the press or investment community; • the realization of any of the other risk factors presented in this report; • the extent of investor interest in our securities; • the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • our underlying asset value; • investor confidence in the stock and bond markets generally; • changes in tax laws; • future equity issuances by us; • failure to meet earnings estimates; • failure to meet and maintain REIT qualification; • changes in our credit ratings; • the impact of a pandemic, epidemic or outbreak of a contagious disease on our business, financial condition, results of operations, cash flows, and global financial markets; and • general market and economic conditions.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: • actual or anticipated variations in our quarterly operating results or dividends; • changes in our FFO or earnings estimates; • publication of research reports about us or the real estate industry; • increases in market interest rates that lead purchasers of our shares to demand a higher yield; • changes in market valuations of similar companies; • adverse market reaction to any additional debt we incur in the future; • additions or departures of key management personnel; • actions by institutional stockholders; • speculation in the press or investment community; • the realization of any of the other risk factors presented in this report; 46 • the extent of investor interest in our securities; • the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • our underlying asset value; • investor confidence in the stock and bond markets generally; • changes in tax laws; • future equity issuances by us; • failure to meet earnings estimates; • failure to meet and maintain REIT qualification; • changes in our credit ratings; • the impact of a pandemic, epidemic or outbreak of a contagious disease on our business, financial condition, results of operations, cash flows, and global financial markets; and • general market and economic conditions.
Our level of debt and any limitations imposed upon us by our debt agreements could have adverse consequences, including the following: • our cash flow may be insufficient to meet required principal and interest payments; • we may be unable to borrow additional funds as needed or on favorable terms, including to make acquisitions; • we may be unable to refinance indebtedness at maturity or the refinancing terms may be less favorable than the terms of the original indebtedness; • because a portion of our debt bears interest at variable rates, an increase in interest rates could materially increase our interest expense; • we may fail to effectively hedge against interest rate volatility; • we may be forced to dispose of properties, possibly on disadvantageous terms if we are able to do so at all, in order to repay indebtedness; • after debt service, the amount available for distributions to our stockholders may be reduced; • we may default on our debt obligations, which could restrict our ability to make any distributions to our stockholders; • our ability to make distributions to our stockholders could be restricted by our debt agreements; • our leverage could place us at a competitive disadvantage compared to our competitors who have less debt; • we may experience increased vulnerability to economic and industry downturns, reducing our ability to respond to changing business and economic conditions; • we may default on our obligations and the lenders may foreclose on properties that secure their loans and receive an assignment of rents and leases; • we may violate financial covenants, which would cause a default on our obligations and result in the acceleration of our payment obligations; • we may inadvertently violate non-financial restrictive covenants in our loan documents, such as covenants that require us to maintain the existence of entities, maintain insurance policies and provide financial statements, which would entitle the lenders to accelerate our debt obligations; and 37 • our default under any loan with cross-default or cross-collateralization provisions could result in default on other indebtedness or result in the foreclosures of other properties.
Our level of debt and any limitations imposed upon us by our debt agreements could have adverse consequences, including the following: • our cash flow may be insufficient to meet required principal and interest payments; • we may be unable to borrow additional funds as needed or on favorable terms, including to make acquisitions; • we may be unable to refinance indebtedness at maturity or the refinancing terms may be less favorable than the terms of the original indebtedness; • because a portion of our debt bears interest at variable rates, an increase in interest rates could materially increase our interest expense; • we may fail to effectively hedge against interest rate volatility; • we may be forced to dispose of properties, possibly on disadvantageous terms if we are able to do so at all, in order to repay indebtedness; • after debt service, the amount available for distributions to our stockholders may be reduced; • we may default on our debt obligations, which could restrict our ability to make any distributions to our stockholders; • our ability to make distributions to our stockholders could be restricted by our debt agreements; • our leverage could place us at a competitive disadvantage compared to our competitors who have less debt; • we may experience increased vulnerability to economic and industry downturns, reducing our ability to respond to changing business and economic conditions; • we may default on our obligations and the lenders may foreclose on properties that secure their loans and receive an assignment of rents and leases; • we may violate financial covenants, which would cause a default on our obligations and result in the acceleration of our payment obligations; • we may inadvertently violate non-financial restrictive covenants in our loan documents, such as covenants that require us to maintain the existence of entities, maintain insurance policies and provide financial statements, which would entitle the lenders to accelerate our debt obligations; and • our default under any loan with cross-default or cross-collateralization provisions could result in default on other indebtedness or result in the foreclosures of other properties.
Other laws that impact how our tenants conduct their operations include: state and local licensure laws; laws protecting consumers against deceptive practices; laws generally affecting our tenants’ management of property and equipment and how our tenants generally conduct their operations, such as fire, health and safety and environmental laws (including medical waste disposal); federal and state laws affecting various types of facilities, including assisted living facilities mandating quality of services and care, mandatory reporting requirements regarding the 29 quality of care and quality of food service; resident rights (including abuse and neglect laws); and health standards set by the federal Occupational Safety and Health Administration.
Other laws that impact how our tenants conduct their operations include: state and local licensure laws; laws protecting consumers against deceptive practices; laws generally affecting our tenants’ management of property and equipment and how our tenants generally conduct their operations, such as fire, health and safety and environmental laws (including medical waste disposal); federal and state laws affecting various types of facilities, including assisted living facilities mandating quality of services and care, mandatory reporting requirements regarding the quality of care and quality of food service; resident rights (including abuse and neglect laws); and health standards set by the federal Occupational Safety and Health Administration.
If we are unable to complete any potential acquisitions, we 18 would still incur the costs associated with pursuing those investments but would not generate the revenues and net operating income that we currently anticipate, which would adversely affect our ability to make distributions to our stockholders and could have a material adverse impact on our financial condition, results of operations and the market price of our common shares.
If we are unable to complete any potential acquisitions, we would still incur the costs associated with pursuing those investments but would not generate the revenues and net operating income that we currently anticipate, which would adversely affect our ability to make distributions to our stockholders and could have a material adverse impact on our financial condition, results of operations and the market price of our common shares.
In some cases, we may 32 receive initial down payments in cash and other property in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to make distributions to you.
In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to make distributions to you.
Imposition of any of these penalties upon one of our tenants or strategic partners could jeopardize that tenant’s ability to operate or to make rent payments or affect the level of occupancy in our healthcare properties, which may have a material adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock.
Imposition of any of these penalties upon one of our tenants or strategic partners could jeopardize that tenant’s ability to operate or to make rent payments or affect the level of occupancy in our healthcare properties, which may have a material adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our 29 common stock.
Further, we enter into leases and other financial relationships with healthcare delivery systems that are subject to or impacted by these laws. Our tenants may be subject to compliance issues and cyber-attack associated with the protection of personal information. Security incidents and data breaches of personal information can result from deliberate attacks or unintentional events.
Further, we enter into leases and other financial relationships with healthcare delivery systems that are subject to or impacted by these laws. Our tenants may be subject to compliance issues and cyber-attacks associated with the protection of personal information. Security incidents and data breaches of personal information can result from deliberate attacks or unintentional events.
Any such delays, limitations and expenses could adversely impact our ability to collect rent, obtain possession of leased properties or otherwise exercise remedies for tenant default and could have a material adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock.
Any such delays, limitations and 20 expenses could adversely impact our ability to collect rent, obtain possession of leased properties or otherwise exercise remedies for tenant default and could have a material adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock.
Additionally, failure to close acquisitions under contract or in our investment pipeline could restrict our growth opportunities. In addition, there is no assurance that we will fully realize the potential benefits of any past or future acquisition or strategic transaction. We are exposed to the risk that our future acquisitions may not prove to be successful.
Additionally, failure to close acquisitions under contract or in our investment pipeline could restrict our growth opportunities. 18 In addition, there is no assurance that we will fully realize the potential benefits of any past or future acquisition or strategic transaction. We are exposed to the risk that our future acquisitions may not prove to be successful.
A reduction in reimbursements to our tenants from third-party payers for any reason could adversely affect our tenants’ ability to make rent payments to us which may have a material adverse effect on our businesses, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock.
A reduction in reimbursements to our tenants from third-party payers for any reason could adversely affect our tenants’ ability to make rent payments to us which 28 may have a material adverse effect on our businesses, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock.
Further there are significant costs associated with a breach including investigation costs, remediation and mitigation 30 costs, notification costs, attorney fees and the potential for reputational harm and lost revenues due to a loss in confidence in the provider. Plaintiff attorneys are increasingly developing class action litigation strategies designed to obtain settlements from healthcare providers.
Further there are significant costs associated with a breach including investigation costs, remediation and mitigation costs, notification costs, attorney fees and the potential for reputational harm and lost revenues due to a loss in confidence in the provider. Plaintiff attorneys are increasingly developing class action litigation strategies designed to obtain settlements from healthcare providers.
Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants, vendors or other 36 persons dealing with the entities prior to this report (including those that had not been asserted or threatened prior to this report), tax liabilities, and accrued but unpaid liabilities incurred in the ordinary course of business.
Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants, vendors or other persons dealing with the entities prior to this report (including those that had not been asserted or threatened prior to this report), tax liabilities, and accrued but unpaid liabilities incurred in the ordinary course of business.
As we expect to compete with many national, regional and local acquirers of healthcare properties, properties that are acquired in off-market or lightly marketed transactions are typically more attractive to us as a purchaser because of the absence of a formal sales process, which could lead to higher prices.
As we expect to compete with 17 many national, regional and local acquirers of healthcare properties, properties that are acquired in off-market or lightly marketed transactions are typically more attractive to us as a purchaser because of the absence of a formal sales process, which could lead to higher prices.
The occurrence of any of the situations described above could have a material adverse effect on our financial condition, results of operations, cash flows, or the market price of our common stock. 17 We may be unable to source off-market or lightly marketed deal flow in the future, which may have a material adverse effect on our growth.
The occurrence of any of the situations described above could have a material adverse effect on our financial condition, results of operations, cash flows, or the market price of our common stock. We may be unable to source off-market or lightly marketed deal flow in the future, which may have a material adverse effect on our growth.
We believe that our operating partnership should be treated either as an entity disregarded from us or, after the admission of additional partners, if any, as a “partnership” for U.S. federal income tax purposes. As a disregarded 42 entity or a partnership, our operating partnership will not be subject to U.S. federal income tax on its income.
We believe that our operating partnership should be treated either as an entity disregarded from us or, after the admission of additional partners, if any, as a “partnership” for U.S. federal income tax purposes. As a disregarded entity or a partnership, our operating partnership will not be subject to U.S. federal income tax on its income.
The impact of climate change on weather patterns or the occurrence of significant weather events could impact economic activity or the value of our properties in specific markets. 22 We rely on a limited number of vendors to provide key services, including, but not limited to, utilities and construction services, at certain of our properties.
The impact of climate change on weather patterns or the occurrence of significant weather events could impact economic activity or the value of our properties in specific markets. We rely on a limited number of vendors to provide key services, including, but not limited to, utilities and construction services, at certain of our properties.
In order to maintain our status as a REIT under the Code, we are required, among other things, to distribute each year to our stockholders at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains.
In order to maintain our status as a REIT under the Code, we are required, among other things, to distribute each year to our stockholders at least 90% of our REIT taxable income, without regard to the deduction for dividends paid 23 and excluding net capital gains.
Instead, each of its partners will be allocated, and may be required to pay tax with respect to, its share of our operating partnership’s income. We cannot assure you that the IRS will not challenge the status of our operating partnership, or that a court would not sustain such a challenge.
Instead, each of its partners will be allocated, and may be required to pay tax with respect to, its share of our operating partnership’s income. We cannot assure you that the IRS will not challenge the status of our operating 42 partnership, or that a court would not sustain such a challenge.
In addition, our ability to locate suitable replacement tenants could be 20 impaired by the specialized healthcare uses or contractual restrictions on use of the properties, and we may be required to spend substantial amounts to adapt the properties to other uses.
In addition, our ability to locate suitable replacement tenants could be impaired by the specialized healthcare uses or contractual restrictions on use of the properties, and we may be required to spend substantial amounts to adapt the properties to other uses.
Our fiduciary duties and obligations as the general partner of our 35 operating partnership may come into conflict with the duties of our directors and officers to our company. There are currently no limited partners of our operating partnership other than a wholly-owned subsidiary of the Company.
Our fiduciary duties and obligations as the general partner of our operating partnership may come into conflict with the duties of our directors and officers to our company. There are currently no limited partners of our operating partnership other than a wholly-owned subsidiary of the Company.
We also may be unable to complete renovation of a property or tenant space on schedule due to supply chain disruptions or labor shortages, which could result in increased debt service expense or construction costs.
We also may be unable to complete renovation of a 21 property or tenant space on schedule due to supply chain disruptions or labor shortages, which could result in increased debt service expense or construction costs.
Our business and property operations may be adversely affected if these vendors fail to adequately provide key services at our properties as a result of unanticipated events, including those resulting from climate change.
Our business and property operations may be adversely affected if 22 these vendors fail to adequately provide key services at our properties as a result of unanticipated events, including those resulting from climate change.
However, there are certain losses, including losses from floods, earthquakes, wildfires, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so.
However, there are certain losses, including losses from floods, earthquakes, wildfires, acts of war, acts of terrorism 32 or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so.
As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation.
As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation 33 program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation.
In addition, because we are a holding company, your claims as stockholders will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed 41 money) of our subsidiaries.
In addition, because we are a holding company, your claims as stockholders will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our subsidiaries.
Although we are generally not engaged in large-scale development projects, small-scale construction projects, such as building renovations and maintenance and tenant improvements required under leases are a routine and necessary part of our 21 business.
Although we are generally not engaged in large-scale development projects, small-scale construction projects, such as building renovations and maintenance and tenant improvements required under leases are a routine and necessary part of our business.
Moreover, the release of hazardous substances or materials, or the failure to properly remediate such substances or materials, may adversely affect the owner’s or tenant’s ability to lease, sell, develop or 34 rent such property or to borrow by using such property as collateral.
Moreover, the release of hazardous substances or materials, or the failure to properly remediate such substances or materials, may adversely affect the owner’s or tenant’s ability to lease, sell, develop or rent such property or to borrow by using such property as collateral.
Even where subsurface investigation is performed, it can be very difficult to ascertain the full extent of environmental contamination or the costs that are likely to flow from such contamination.
Even where subsurface investigation is performed, it can be very difficult to ascertain the full extent of 34 environmental contamination or the costs that are likely to flow from such contamination.
In some cases, private 28 insurers rely upon all or portions of the Medicare payment systems to determine payment rates which may result in decreased reimbursement from private insurers.
In some cases, private insurers rely upon all or portions of the Medicare payment systems to determine payment rates which may result in decreased reimbursement from private insurers.
The Affordable Care Act and associated regulations continue to encourage increasing enrollment in plans offered by private insurers who choose to participate in state-run exchanges, but recent changes by the Trump Administration affecting Medicaid and the availability of lower cost, lower coverage plans creates uncertainty around private insurer costs and, thereby, payment rates to providers.
The Affordable Care Act and associated regulations continue to encourage increasing enrollment in plans offered by private insurers who choose to participate in state-run exchanges, but potential changes by the Trump Administration affecting Medicaid and the availability of lower cost, lower coverage plans creates uncertainty around private insurer costs and, thereby, payment rates to providers .
After the expiration of any applicable transfer restrictions imposed by our 2014 Incentive Plan, stock purchase agreements or lockup agreements with us, our executive officers and directors will have the ability to sell all of any portion of the applicable common stock which could cause the market price of our common stock to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
After the expiration of any applicable transfer restrictions imposed by our 2024 Incentive Plan, stock purchase agreements or lockup agreements with us, our executive officers and directors will have the ability to sell all of any portion of the applicable common stock which could cause the market price of our common stock to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Mortgage notes in which we may invest in may be impacted by unfavorable real estate market conditions, which could decrease their value. Investments in mortgage notes involve special risks relating to the particular borrower, and we could be at risk of loss on that investment, including losses as a result of a default on the mortgage note.
Notes receivable in which we may invest in may be impacted by unfavorable real estate market conditions, which could decrease their value. Investments in notes receivable involve special risks relating to the particular borrower, and we could be at risk of loss on that investment, including losses as a result of a default on the note.
For example, California maintains one of the more extensive laws in this area. California recently enacted the California Consumer Privacy Act, whose effects on our tenant's businesses vary and add to the risk profiles of those in California or who otherwise meet the law's requirements regarding revenue or California personal information metrics.
For example, California maintains one of the more extensive laws in this area. California recently enacted the California Consumer Privacy Act, whose effects on our tenants' businesses vary and add to the risk profiles of those in California or who otherwise meet the law's requirements regarding revenue or California personal information metrics.
These transfer restrictions would impede our ability to sell a property even if we deem it necessary 31 or appropriate.
These transfer restrictions would impede our ability to sell a property even if we deem it necessary or appropriate.
We may change our business, investment and financing strategies without stockholder approval. We may change our business, investment and financing strategies without a vote of, or notice to, our stockholders, which could result in our making investments and engaging in business activities that are different from, and possibly riskier than, the investments and businesses described in this report.
We may change our business, investment and financing strategies without a vote of, or notice to, our stockholders, which could result in our making investments and engaging in business activities that are different from, and possibly riskier than, the investments and businesses described in this report.
Each executive officer has significant experience in the healthcare and/or real estate industry and have all developed significant relationships with various healthcare providers and real estate brokers throughout the United States.
Each executive officer has significant experience in the healthcare and/or real estate industry and has developed significant relationships with various healthcare providers and real estate brokers throughout the United States.
Certain provisions of the Maryland General Corporation Law, or MGCL, applicable to Maryland corporations may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-prevailing market price of our shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our shares at any time within the two-year period immediately prior to the date in question) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes certain minimum price and/or supermajority stockholder voting requirements on these combinations; and • “control share” provisions that provide that holders of “control shares” of our company (defined as shares that, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding 39 “control shares,” subject to certain exceptions) have no voting rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Certain provisions of the Maryland General Corporation Law, or MGCL, applicable to Maryland corporations may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-prevailing market price of our shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our shares at any time within the two-year period immediately prior to the date in question) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes certain minimum price and/or supermajority stockholder voting requirements on these combinations; and • “control share” provisions that provide that holders of “control shares” of our company (defined as shares that, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. 39 Our bylaws, however, contain provisions exempting us from the business combination and control share acquisition provisions of the MGCL and we will not be permitted to opt into either of these provisions in the future without the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote.
As of December 31, 2023, the Company had 17 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $350.0 million. The Company may enter into additional swap agreements in the future to manage some of its exposure to interest rate volatility.
As of December 31, 2024, the Company had 15 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $350.0 million. The Company may enter into additional swap agreements in the future to manage some of its exposure to interest rate volatility.
Increases in interest rates may increase our interest expense and adversely affect our cash flows and our ability to service our indebtedness and to make distributions to our shareholders. As of December 31, 2023, we had $50.0 million of variable-rate indebtedness outstanding that had not been swapped for a fixed interest rate.
Increases in interest rates may increase our interest expense and adversely affect our cash flows and our ability to service our indebtedness and to make distributions to our shareholders. As of December 31, 2024, we had $137.0 million of variable-rate indebtedness outstanding that had not been swapped for a fixed interest rate.
Restricted stock or restricted stock units granted to our directors, executive officers and other employees under our 2014 Incentive Plan, as amended, (the "2014 Incentive Plan"), and our various compensation plans, or the issuance 47 of our common stock or OP Units in connection with future property, portfolio or business acquisitions and other issuances of our common stock could have an adverse effect on the market price of our common stock.
Restricted stock or restricted stock units granted to our directors, executive officers and other employees under our 2024 Incentive Plan, and our various compensation plans, or the issuance of our common stock or OP Units in connection with future property, portfolio or business acquisitions and other issuances of our common stock could have an adverse effect on the market price of our common stock.
The risk of security incidents has generally increased as the number, intensity and sophistication of attacks and intrusions from around the world have increased. In some cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause.
The risk of security incidents has generally increased as the number, intensity and sophistication of attacks (including through the use of artificial intelligence) and intrusions from around the world have increased. In some cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause.
The capital and credit markets have experienced extreme volatility and disruption as a result of the conflict between Russia and Ukraine, new and ongoing hostilities between Israel and Hamas, and the recent rise in inflation, as well as the resulting governmental policies. We believe that such volatility and disruption are likely to continue into the foreseeable future.
The capital and credit markets have experienced extreme volatility and disruption as a result of the conflict between Russia and Ukraine, the conflict in the Middle East , and the recent rise in inflation, as well as the resulting governmental policies. We believe that such volatility and disruption are likely to continue into the foreseeable future.
Moreover, interest rate hedging could fail to protect us or adversely affect us because, among other things: • available interest rate hedging may not correspond directly with the interest rate risk for which we seek protection; • the duration of the hedge may not match the duration of the related liability; • the party owing money in the hedging transaction may default on its obligation to pay; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value, such as downward adjustments, or “mark-to-market losses,” which would reduce our stockholders’ equity. 38 In addition, we may be limited in the type and amount of hedging transactions that we may use in the future by our need to satisfy the REIT income tests under the Code.
Moreover, interest rate hedging could fail to protect us or adversely affect us because, among other things: • available interest rate hedging may not correspond directly with the interest rate risk for which we seek protection; • the duration of the hedge may not match the duration of the related liability; • the party owing money in the hedging transaction may default on its obligation to pay; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value, such as downward adjustments, or “mark-to-market losses,” which would reduce our stockholders’ equity.
The construction and building industry, similar to many other industries, is experiencing worldwide supply chain disruptions due to a multitude of factors that are beyond our control. Materials, parts and labor have also increased in cost over the past year or earlier, sometimes significantly and over a short period of time.
The construction and building industry, similar to many other industries, has experienced worldwide supply chain disruptions due to a multitude of factors that are beyond our control. Materials, parts and labor have also increased in cost over the recent past, sometimes significantly and over a short period of time.
A large percentage of our properties are located in Texas, Illinois, and Ohio, and changes in these markets may materially adversely impact our business and financial condition. Of our investments in 193 properties, the properties located in Texas, Illinois, and Ohio provide, in the aggregate, approximately 39.6% of our annualized rent as of December 31, 2023.
A large percentage of our properties are located in Texas, Illinois, and Ohio, and changes in these markets may materially adversely impact our business and financial condition. Of our investments in 200 properties, the properties located in Texas, Illinois, and Ohio provide, in the aggregate, approximately 38.4% of our annualized rent as of December 31, 2024.
As of December 31, 2023, we had $400.0 million outstanding under our Credit Facility, including our term loans.
As of December 31, 2024, we had $487.0 million outstanding under our Credit Facility, including our term loans.
We have no control over these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our shares or our industry, or the stock of any of our competitors, the market price of our common stock could decline.
Furthermore, if one or more of the analysts who do cover us downgrades our shares or our industry, or the stock of any of our competitors, the market price of our common stock could decline.
Further, any action or failure to act on our part or on the part of our directors that gives priority to the interests of the company or our stockholders and does not result in a violation of our partnership agreement does not violate the duty of loyalty or any other duty that we, in our capacity as the general partner of our operating partnership, owe to our operating partnership and its limited partners or violate the obligation of good faith and fair dealing.
Our partnership agreement provides that, in the event of a conflict between the interests of our operating partnership or any limited partner, on the one hand, and the company or our stockholders, on the other hand, we, as the general partner of our operating partnership, may give priority to the separate interests of the company or our stockholders (including with respect to tax consequences). 35 Further, any action or failure to act on our part or on the part of our directors that gives priority to the interests of the company or our stockholders and does not result in a violation of our partnership agreement does not violate the duty of loyalty or any other duty that we, in our capacity as the general partner of our operating partnership, owe to our operating partnership and its limited partners or violate the obligation of good faith and fair dealing.
Also, the existence of common stock issuable under our 2014 Incentive Plan may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities. In addition, future issuances of our common stock may be dilutive to existing stockholders.
Also, the existence of common stock issuable under our 2024 Incentive Plan may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.
Therefore, we may not be able to vary our portfolio promptly in response to economic or other conditions or on favorable terms, which may adversely affect our cash flows, our ability to make distributions to our stockholders and the market price of our common stock. We may suffer reduced or delayed revenues for, or have difficulty selling, properties with vacancies.
Therefore, we may not be able to vary our portfolio 31 promptly in response to economic or other conditions or on favorable terms, which may adversely affect our cash flows, our ability to make distributions to our stockholders and the market price of our common stock.
These provisions include, among others: • redemption rights of qualifying parties; • a requirement that we may not be removed as the general partner of our operating partnership without our consent; • transfer restrictions on OP units; and • our ability, as general partner, in some cases, to amend the partnership agreement and to cause our operating partnership to issue additional partnership interests with terms that could delay, defer or prevent a merger or other change of control of us or our operating partnership without the consent of our stockholders or the limited partners. 40 Our charter and bylaws, the partnership agreement of our operating partnership and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.
These provisions include, among others: • redemption rights of qualifying parties; • a requirement that we may not be removed as the general partner of our operating partnership without our consent; • transfer restrictions on OP units; and • our ability, as general partner, in some cases, to amend the partnership agreement and to cause our operating partnership to issue additional partnership interests with terms that could delay, defer or prevent a merger or other change of control of us or our operating partnership without the consent of our stockholders or the limited partners.
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price. 16 Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
In that event, the market price of our common stock could decline, and you could lose part or all of your investment. 16 The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results.
The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results.
We cannot predict the effect of additional costs on tenants to comply with these laws nor the costs associated with a potential breach of protected health information or personally identifiable information by a tenant and what effect they might have on the expenses of our tenants and their ability to meet their obligations to us, which in turn could have a material adverse effect on our business, financial condition and results of operations, our ability to pay distributions to our stockholders and the market price of our common stock.
We cannot predict the effect of additional costs on tenants to comply with these laws nor the costs associated with a potential breach of protected health information or personally identifiable information by a tenant and what effect they might have on the expenses of our tenants and their ability to meet their obligations to us, which in turn could have a material adverse effect on our business, financial condition and results of operations, our ability to pay distributions to our stockholders and the market price of our common stock. 30 Our healthcare-related tenants may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us, and we could be subject to healthcare industry violations.
We could alter the balance between our total outstanding indebtedness and the value of our properties at any time. If we become more highly leveraged, the resulting increase in outstanding debt could adversely affect our ability to make debt service payments, to pay our anticipated distributions and to make the distributions required to qualify as a REIT.
If we become more highly leveraged, the resulting increase in outstanding debt could adversely affect our ability to make debt service payments, to pay our anticipated distributions and to make the distributions required to qualify as a REIT.
Environmental, social and governance matters may cause us to incur additional costs, make personnel changes, and affect the attractiveness of our stock to investors. Shareholder, public and governmental expectations have been increasing with respect to corporate responsibility, sustainability, diversity and inclusion and related ESG matters.
Environmental, social and governance matters may cause us to incur additional costs, make personnel changes, and affect the attractiveness of our stock to investors. Increased scrutiny and changing expectations from shareholders, the public and governmental entities with respect to corporate responsibility, sustainability, diversity and inclusion and related ESG matters could expose us to additional risks.
We acquire, own, manage, operate and selectively develop properties for lease primarily to physicians and healthcare delivery systems. We are subject to risks inherent in concentrating investments in real estate, and the risks resulting from a lack of diversification is even greater as a result of our business strategy to concentrate our investments in the healthcare sector.
We are subject to risks inherent in concentrating investments in real estate, and the risks resulting from a lack of diversification is even greater as a result of our business strategy to concentrate our investments in the healthcare sector.
If any of the events or circumstances described in the following risk factors actually occur, our business, operating results, financial condition, cash flows, and prospects could be materially and adversely affected.
If any of the events or circumstances described in the following risk factors actually occur, our business, operating results, financial condition, cash flows, and prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Delays in liquidating defaulted mortgage note investments could reduce our investment returns. Delays in liquidating defaulted mortgage note investments could reduce our investment returns. If there are defaults under mortgage note investments, we may not be able to foreclose on or obtain a suitable remedy with respect to such investments.
If there are defaults under mortgage note investments, we may not be able to foreclose on or obtain a suitable remedy with respect to such investments. Specifically, we may not be able to repossess and sell the underlying properties quickly, which could reduce the value of our investment.
Required payments of principal and interest on our Credit Facility may leave us with insufficient cash to operate our properties or to pay the distributions currently contemplated or necessary to qualify as a REIT and may expose us to the risk of default under our debt obligations.
Depending upon the amount or nature of such liabilities, our business, financial condition and results of operations, our ability to make distributions to our shareholders and the market price of our shares may be adversely affected. 36 Required payments of principal and interest on our Credit Facility may leave us with insufficient cash to operate our properties or to pay the distributions currently contemplated or necessary to qualify as a REIT and may expose us to the risk of default under our debt obligations.
The realization of any or all of these risks may have an adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock.
The realization of any or all of these risks may have an adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock. 37 We could become highly leveraged in the future because our organizational documents contain no limitations on the amount of debt that we may incur.
Our operating partnership may issue additional OP units to third parties without the consent of our stockholders, which would reduce our ownership percentage in our operating partnership and would have a dilutive effect on the amount of distributions made to us by our operating partnership and, therefore, the amount of distributions we can make to our stockholders.
Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our subsidiaries will be available to satisfy the claims of our stockholders only after all of our and our subsidiaries’ liabilities and obligations have been paid in full. 41 Our operating partnership may issue additional OP units to third parties without the consent of our stockholders, which would reduce our ownership percentage in our operating partnership and would have a dilutive effect on the amount of distributions made to us by our operating partnership and, therefore, the amount of distributions we can make to our stockholders.
Some legislatures, government agencies and listing exchanges have mandated or proposed, and others may in the future further mandate, certain ESG disclosure or performance. For example, board diversity and inclusion is an ESG topic that is receiving heightened attention from lawmakers and listing exchanges.
Some legislatures, government agencies and listing exchanges have mandated or proposed, and others may in the future further mandate, certain ESG disclosure or performance.
In the event of negative economic or other changes in these markets, our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock may be materially and adversely affected. 23 We will rely upon external sources of capital to fund future capital needs, and, if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.
We will rely upon external sources of capital to fund future capital needs, and, if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.
If the property taxes we pay increase, our cash flow would be adversely impacted to the extent that we are not reimbursed by tenants for those taxes, and our ability to pay any expected dividends to our stockholders could be materially adversely affected. 33 Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation.
If the property taxes we pay increase, our cash flow would be adversely impacted to the extent that we are not reimbursed by tenants for those taxes, and our ability to pay any expected dividends to our stockholders could be materially adversely affected.
In response to inflationary pressures, the Federal Reserve raised interest rates in 2022 and 2023, and these increases may continue in 2024 and beyond. Increases in interest rates will increase interest cost on existing variable rate debt, including our Credit Facility. Such increases in the cost of capital could adversely impact our ability to finance operations and acquire properties.
Increases in interest rates will increase interest cost on existing variable rate debt, including our Credit Facility. Such increases in the cost of capital could adversely impact our ability to finance operations and acquire properties. Increased interest rates may also result in less liquid property markets, limiting our ability to sell existing assets.
We cannot predict whether our tenants will renew existing leases beyond their current terms. At December 31, 2023, we had 69 leases scheduled to expire in 2024 and 54 leases scheduled to expire in 2025 , which represent 6.9% and 9.2% of our total annualized lease revenue, respectively, for the year ended December 31, 2023.
At December 31, 2024, we had 68 leases scheduled to expire in 2025 and 72 leases scheduled to expire in 2026 , which represent 9.6% and 11.3% of our total annualized lease revenue, respectively, for the year ended December 31, 2024.
Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions.
Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions.
Both the Biden Administration and Congress strengthened coverage under the ACA by increasing the subsidies available to purchasers of health plans through the insurance Exchanges created by the ACA. Efforts by payers to reduce healthcare costs will likely continue which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants.
Efforts by payers to reduce healthcare costs will likely continue which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants.
If securities analysts do not publish research or reports about our industry or if they downgrade our common stock or the healthcare-related real estate sector, the price of our common stock could decline. The trading market for our common stock relies in part upon the research and reports that industry or financial analysts publish about us or our industry.
In addition, future issuances of our common stock may be dilutive to existing stockholders. 47 If securities analysts do not publish research or reports about our industry or if they downgrade our common stock or the healthcare-related real estate sector, the price of our common stock could decline.
Failure to hedge effectively against interest rate changes may have an adverse effect on our business, financial condition, results of operations, our ability to make distributions to our shareholders and the market price of our common shares.
Failure to hedge effectively against interest rate changes may have an adverse effect on our business, financial condition, results of operations, our ability to make distributions to our shareholders and the market price of our common shares. 38 Our use of OP units in our operating partnership as currency to acquire properties could result in stockholder dilution and/or limit our ability to sell such properties, which could have a material adverse effect on us.
We may also face reputational damage in the event our corporate responsibility initiatives or objectives, including with respect to board diversity, do not meet the standards or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other constituencies, or if we are unable to achieve acceptable ESG ratings from third party rating services.
We may face reputational damage or regulatory scrutiny in the event our corporate responsibility initiatives or objectives do not meet the standards or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other constituencies.
Our current financing policy prohibits aggregate debt (secured or unsecured) in excess of 40% of the Company's total capitalization, except for short-term transitory periods. However, this debt limitation policy can be changed by our board of directors without stockholder approval and there are no provisions in our bylaws that limit our ability to incur indebtedness.
However, this debt limitation policy can be changed by our board of directors without stockholder approval and there are no provisions in our bylaws that limit our ability to incur indebtedness. We could alter the balance between our total outstanding indebtedness and the value of our properties at any time.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants.
Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time.
Our recourse with respect to such liabilities may be limited. Depending upon the amount or nature of such liabilities, our business, financial condition and results of operations, our ability to make distributions to our shareholders and the market price of our shares may be adversely affected.
In the event of negative economic or other changes in these markets, our business, financial condition and results of operations, our ability to make distributions to our stockholders and the market price of our common stock may be materially and adversely affected.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur collaboration with these third-parties includes real-time Company endpoint scanning, detection, prevention, and remediation; regular audits; threat assessments; and consultation on security enhancements. 48 Oversee Third-party Risk Because we are aware of the risks associated with third-party service providers, the Company implements stringent processes to oversee and manage these risks.
Biggest changeOversee Third-party Risk Because we are aware of the risks associated with third-party service providers, the Company implements stringent processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing review to ensure compliance with our cybersecurity standards.
The Vice President of Information Technology implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to 49 identify potential vulnerabilities. In the event of a cybersecurity incident, the Vice President of Information Technology is equipped with a well-defined incident response plan.
The Vice President of Information Technology implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity incident, the Vice President of Information Technology is equipped with a well-defined incident response plan.
Board of Directors Oversight As mentioned above, management has formed an IT Committee consisting of the Chief Executive Officer, Chief Financial Officer, and the Vice President of Information Technology to review and discuss information security matters and cyber security risks. The committee meets at least twice a year and reports to the Board of Directors as needed.
Board of Directors Oversight Management has formed an IT Committee consisting of the Chief Executive Officer, Chief Financial Officer, and the Vice President of Information Technology to review and discuss information security matters and cyber security risks. The committee meets at least twice a year and reports to the Board of Directors as needed.
Governance The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats. The Board has established robust oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats because we recognize the significance of these threats to our operational integrity and stakeholder confidence.
The Board has established robust oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats because we recognize the significance of these threats to our operational integrity and stakeholder confidence.
We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing review to ensure compliance with our cybersecurity standards. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third-parties. Risks from Cybersecurity Threats We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.
This 48 approach is designed to mitigate risks related to data breaches or other security incidents originating from third-parties. Risks from Cybersecurity Threats We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing. Governance The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats.
These partnerships enable us to leverage specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain at the forefront of industry best practices.
These partnerships enable us to leverage specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain at the forefront of industry best practices. Our collaboration with these third-parties includes real-time Company endpoint scanning, detection, prevention, and remediation; regular audits; threat assessments; and consultation on security enhancements.
This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents. Reporting to Board of Directors The Vice President of Information Technology, in his capacity, regularly informs the Chief Executive Officer and Chief Financial Officer of all aspects related to cybersecurity risks and incidents.
Since its inception, the Company has not had a security breach, and has not incurred any resulting expenses, penalties or settlements. 49 Reporting to the Board of Directors The Vice President of Information Technology, in his capacity, regularly informs the Chief Executive Officer and Chief Financial Officer of all aspects related to cybersecurity risks and incidents.
Added
This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents. As part of the managed monitoring and remediation platform, the Company benefits from a $100,000 breach prevention warranty.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeTotal Leased Square Footage Annualized Lease Revenue Year Number of Leases Expiring Amount (in thousands) Percent (%) Amount (in thousands) Percent (%) 2024 69 316 8.3 % $ 6,667 6.9 % 2025 54 338 8.8 % 8,910 9.2 % 2026 65 541 14.2 % 11,029 11.4 % 2027 50 304 8.0 % 6,476 6.7 % 2028 58 327 8.5 % 5,938 6.1 % 2029 25 272 7.1 % 6,489 6.7 % 2030 16 115 3.0 % 3,219 3.3 % 2031 23 347 9.1 % 9,331 9.6 % 2032 11 133 3.5 % 1,877 1.9 % 2033 12 75 2.0 % 1,503 1.5 % Thereafter 38 1,032 27.0 % 35,059 36.2 % Month-to-Month 10 20 0.5 % 449 0.5 % Totals 431 3,820 100.0 % $ 96,947 100.0 %
Biggest changeTotal Leased Square Footage Annualized Lease Revenue Year Number of Leases Expiring Amount (in thousands) Percent (%) Amount (in thousands) Percent (%) 2025 68 402 10.0 % $ 10,312 9.6 % 2026 72 554 13.7 % 12,162 11.3 % 2027 63 371 9.2 % 7,870 7.3 % 2028 58 386 9.6 % 8,187 7.6 % 2029 42 352 8.7 % 8,775 8.1 % 2030 20 159 3.9 % 4,148 3.8 % 2031 27 367 9.1 % 10,024 9.3 % 2032 14 148 3.7 % 2,227 2.1 % 2033 13 79 2.0 % 1,656 1.5 % 2034 23 327 8.1 % 12,151 11.3 % Thereafter 29 870 21.6 % 29,912 27.8 % Month-to-Month 7 18 0.4 % 314 0.3 % Totals 436 4,033 100.0 % $ 107,738 100.0 %
ITEM 2. PROPERTIES In addition to the information provided below, see Item 1, "Business," Note 2 – Real Estate Investments to the Consolidated Financial Statements in Item 8 "Financial Statements and Supplementary Data," and Schedule III of Item 15 of this Annual Report on Form 10-K for more detailed information about the Company's properties as of December 31, 2023.
ITEM 2. PROPERTIES In addition to the information provided below, see Item 1, "Business," Note 2 – Real Estate Investments to the Consolidated Financial Statements in Item 8 "Financial Statements and Supplementary Data," and Schedule III of Item 15 of this Annual Report on Form 10-K for more detailed information about the Company's properties as of December 31, 2024.
Scheduled Lease Expirations As of December 31, 2023, the weighted average remaining years to maturity pursuant to the leases with our tenants was approximately 6.9 years, with expirations through 2039. The table below details scheduled lease expirations, as of December 31, 2023, for our properties for the periods indicated.
Scheduled Lease Expirations As of December 31, 2024, the weighted average remaining years to maturity pursuant to the leases with our tenants was approximately 6.7 years, with expirations through 2044. The table below details scheduled lease expirations, as of December 31, 2024, for our properties for the periods indicated.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe will not make or endorse any predictions as to future stock performance Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Community Healthcare Trust Incorporated $ 100.00 $ 154.94 $ 176.94 $ 184.17 $ 146.02 $ 114.62 Russell 3000 Index $ 100.00 $ 131.02 $ 158.39 $ 199.03 $ 160.80 $ 202.54 NAREIT All Equity REIT Index $ 100.00 $ 128.66 $ 122.07 $ 172.49 $ 129.45 $ 144.16 The information provided under the heading “Stock Performance Graph” shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to its proxy regulations or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, other than as provided in Item 201 of Regulation S-K.
Biggest changePeriod Ending Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Community Healthcare Trust Incorporated $ 100.00 $ 114.20 $ 118.86 $ 94.24 $ 73.98 $ 58.09 Russell 3000 Index $ 100.00 $ 120.89 $ 151.91 $ 122.73 $ 154.59 $ 191.39 NAREIT All Equity REIT Index $ 100.00 $ 94.88 $ 134.06 $ 100.62 $ 112.04 $ 117.56 The information provided under the heading “Stock Performance Graph” shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to its proxy regulations or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, other than as provided in Item 201 of Regulation S-K.
The performance graph assumes that the value of the investment in our common stock, the Russell 3000 Index and the NAREIT All Equity REIT Index was $100 at December 31, 2018 and that all dividends were reinvested.
The performance graph assumes that the value of the investment in our common stock, the Russell 3000 Index and the NAREIT All Equity REIT Index was $100 at December 31, 2019 and that all dividends were reinvested.
Stock Performance Graph The following graph compares, over a measurement period beginning December 31, 2018 and ending on December 31, 2023, the cumulative total return on our common stock with the cumulative total return on the stocks included in (i) the Russell 3000 Index and (ii) the NAREIT All Equity REIT Index.
Stock Performance Graph The following graph compares, over a measurement period beginning December 31, 2019 and ending on December 31, 2024, the cumulative total return on our common stock with the cumulative total return on the stocks included in (i) the Russell 3000 Index and (ii) the NAREIT All Equity REIT Index.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of the Company's common stock are traded on the New York Stock Exchange under the symbol "CHCT." At February 8, 2024, there were 45 stockholders of record. Future dividends will be declared and paid at the discretion of the Board of Directors.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of the Company's common stock are traded on the New York Stock Exchange under the symbol "CHCT." At February 11, 2025, there were 47 stockholders of record. Future dividends will be declared and paid at the discretion of the Board of Directors.
There can be no assurance that our common stock performance will continue in the future with the same or similar trends depicted in the stock performance graph below.
There can be no assurance that our common stock performance will continue in the future with the same or similar trends depicted in the stock performance graph below. We will not make or endorse any predictions as to future stock performance.

Item 7. Management's Discussion & Analysis

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

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Biggest changeGeneral and administrative expenses increased approximately $12.5 million, or 84.3%, for the year ended December 31, 2023 compared to the same period in 2022 due mainly to the following: • Non-cash accelerated amortization of deferred compensation for non-vested restricted common shares held by former CEO and President Timothy Wallace at the time of his passing in March 2023 accounted for an increase of approximately $11.8 million; • Compensation-related expenses increased approximately $0.8 million related to new employees and $0.3 million related to the payment of employer taxes due upon the accelerated vesting of Mr.
Biggest changeGeneral and administrative expenses decreased approximately $8.3 million, or 30.3%, for the year ended December 31, 2024 compared to the same period in 2023 due mainly to the following: • The Company recorded an $11.8 million non-cash charge in 2023 due to the acceleration of unamortized deferred compensation for non-vested restricted common shares held by the Company's former CEO upon his passing; partially offset by 54 • An increase in the non-cash amortization of deferred compensation in 2024 compared to 2023 of approximately $1.8 million due to the issuance of additional restricted shares and from the impact of adopting the new executive compensation program in during 2024, and cash compensation of approximately $1.7 million due mainly to adopting the new executive compensation program which limited the maximum elective deferral percentages of salary and bonus for the executives as described in more detail in Note 9 – Stock Incentive Plan to the Condensed Consolidated Financial Statements.
The ability of the Company to pay dividends is dependent upon its ability to generate cash flows and to make accretive new investments. 59 Non-GAAP Financial Measures and Key Performance Indicators Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance.
The ability of the Company to pay dividends is dependent upon its ability to generate cash flows and to make accretive new investments. Non-GAAP Financial Measures and Key Performance Indicators Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance.
If management determines that the carrying value of the Company’s assets may not be fully recoverable based on the existence of any of the factors above, or others, management would measure and record an impairment charge based on the estimated fair value of the property or the estimated fair value less costs to sell the property. 64 Revenue Recognition The primary source of revenue for the Company is generated through its leasing arrangements with its tenants which is accounted for under Accounting Standards Codification Topic 842 ("ASC Topic 842"), or through notes with its borrowers which is covered under ASC 310.
If management determines that the carrying value of the Company’s assets may not be fully recoverable based on the existence of any of the factors above, or others, management would measure and record an impairment charge based on the estimated fair value of the property or the estimated fair value less costs to sell the property. 63 Revenue Recognition The primary source of revenue for the Company is generated through its leasing arrangements with its tenants which is accounted for under Accounting Standards Codification Topic 842 ("ASC Topic 842"), or through notes with its borrowers which is covered under ASC 310.
The shares of common stock may be sold from time to time through or to one or more of the Agents, as may be determined by the Company in its sole discretion, subject to the terms and conditions of the agreement and 57 applicable law.
The shares of common stock may be sold from time to time through or to one or more of the Agents, as may be determined by the Company in its sole discretion, subject to the terms and conditions of the agreement and applicable law.
Use of Estimates in the Consolidated Financial Statements Preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may materially differ from those estimates.
Use of Estimates in the Consolidated Financial Statements Preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may materially differ from those estimates. 64
The Company expects to meet its liquidity needs through cash on hand, cash flows from operations and cash flows from sources discussed above. The Company believes that its liquidity and sources of capital are adequate to satisfy 56 its cash requirements.
The Company expects to meet its liquidity needs through cash on hand, cash flows from operations and cash flows from sources discussed above. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements.
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") FFO is an operating performance measure adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”).
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") FFO is an operating performance measure adopted by the National Association of Real Estate Investment Trusts, 59 Inc. (“NAREIT”).
Untimely or inaccurate financial information provided to the Company or deficiencies in the VIE's internal controls over financial reporting could impact the Company's Consolidated Financial Statements and its internal control over financial reporting. 63 Accounting for Acquisitions of Real Estate Properties Real estate property acquisitions are accounted for as a business combination or an asset acquisition.
Untimely or inaccurate financial information provided to the Company or deficiencies in the VIE's internal controls over financial reporting could impact the Company's Consolidated Financial Statements and its internal control over financial reporting. 62 Accounting for Acquisitions of Real Estate Properties Real estate property acquisitions are accounted for as a business combination or an asset acquisition.
Management's judgement is necessary if or when it determines that collection of substantially all of a lessee’s payments is not probable, upon which time, the Company will revert to recognizing such lease payments on a cash basis and will reverse any recorded receivables related to that lease.
Management's judgment is necessary if or when it determines that collection of substantially all of a lessee’s payments is not probable, upon which time, the Company will revert to recognizing such lease payments on a cash basis and will reverse any recorded receivables related to that lease.
Ground Leases At December 31, 2023, the Company was obligated, as the lessee, under four non-prepaid ground leases accounted for as operating leases with expiration dates through 2076, including renewal options, and two non-prepaid ground leases accounted for as a financing lease with an expiration date through 2109, including renewal options.
Ground Leases At December 31, 2024, the Company was obligated, as the lessee, under four non-prepaid ground leases accounted for as operating leases with expiration dates through 2076, including renewal options, and two non-prepaid ground leases accounted for as a financing lease with an expiration date through 2109, including renewal options.
(2) Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share. Net Operating Income ("NOI") NOI is a key performance indicator.
(3) Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share. 60 Net Operating Income ("NOI") NOI is a key performance indicator.
Cash flows provided by operating activities for the years ended December 31, 2023, 2022 and 2021 were generally provided by contractual rents and interest on notes receivables, net of property operating expenses not reimbursed by the tenants and general and administrative expenses.
Cash flows provided by operating activities for the years ended December 31, 2024, 2023 and 2022 were generally provided by contractual rents and interest on notes receivables, net of property operating expenses not reimbursed by the tenants and general and administrative expenses.
We consider EBITDA re and Adjusted EBITDA re important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt. 62 The table below reconciles net income to EBITDA re and Adjusted EBITDA re for the years ended December 31, 2023, 2022, and 2021.
We consider EBITDA re and Adjusted EBITDA re important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt. 61 The table below reconciles net income to EBITDA re and Adjusted EBITDA re for the years ended December 31, 2024, 2023, and 2022.
Under the ATM Program, the Company may issue and sell shares of its common stock, having an aggregate gross sales price of up to $500.0 million, exclusive of shares of Common Stock sold under its prior agreements with our Agents.
Under the amended ATM Program, the Company may issue and sell shares of its common stock, having an aggregate gross sales price of up to $300.0 million, exclusive of shares of Common Stock sold under its prior agreements with our Agents.
Note 5 – Debt, net to the Consolidated Financial Statements provides more details on the Credit Facility and Note 6 – Derivative Financial Instruments provides more detail on interest rate swaps entered into on the Term Loans. At December 31, 2023, the Company had borrowing capacity remaining under the Revolving Credit Facility of approximately $100.0 million.
Note 5 – Debt, net to the Consolidated Financial Statements provides more details on the Credit Facility and Note 6 – Derivative Financial Instruments provides more detail on interest rate swaps entered into on the Term Loans. At December 31, 2024, the Company had borrowing capacity remaining under the Revolving Credit Facility of approximately $188.0 million.
The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs. Operating Activities Cash flows provided by operating activities for the years ended December 31, 2023, 2022 and 2021 were approximately $61.4 million, $60.3 million, and $56.3 million, respectively.
The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs. Operating Activities Cash flows provided by operating activities for the years ended December 31, 2024, 2023 and 2022 were approximately $58.9 million, $61.4 million, and $60.3 million, respectively.
Any rental increases related to the Company's ground leases are generally either stated or based on the Consumer Price Index. At December 31, 2023, the Company's aggregate obligation under these ground leases was approximately $8.9 million. See Note 3 – Real Estate Leases to the Consolidated Financial Statements.
Any rental increases related to the Company's ground leases are generally either stated or based on the Consumer Price Index. At December 31, 2024, the Company's aggregate obligation under these ground leases was approximately $8.7 million. See Note 3 – Real Estate Leases to the Consolidated Financial Statements.
Further in 2023, the Company withheld shares and paid taxes totaling approximately $1.0 million upon the vesting of stock-based awards for certain employees. Automatic Shelf Registration Statement On November 2, 2022, the Company filed an automatic shelf registration statement on Form S-3 with the SEC.
During 2024 and 2023, the Company withheld shares and paid taxes totaling approximately $0.8 million and $1.0 million upon the vesting of stock-based awards for certain employees. Automatic Shelf Registration Statement On November 2, 2022, the Company filed an automatic shelf registration statement on Form S-3 with the SEC.
Year Ended December 31, 2022 Compared to December 31, 2021 See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” in our 2022 Annual Report on Form 10-K for a comparison of the year ended December 31, 2022 compared to December 31, 2021, which is incorporated by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” in our 2023 Annual Report on Form 10-K for a comparison of the year ended December 31, 2023 compared to December 31, 2022, which is incorporated by reference.
To the extent additional resources are needed, the Company will fund its investment activity generally through equity or debt issuances, including our at-the-market equity offering program, either in the public or private markets or through proceeds from our Credit Facility.
To the extent additional resources are needed, the Company will fund its investment activity generally with net proceeds from equity or debt issuances, including our at-the-market equity offering program, either in the public or private markets, from our Credit Facility, or from asset sales.
Deferred income tax expense Deferred income tax expense increased approximately $0.3 million for the year ended December 31, 2023 compared to the same period in 2022. During 2023, the Company fully reserved its deferred tax asset.
Deferred income tax expense Deferred income tax expense decreased approximately $0.3 million for the year ended December 31, 2024 compared to the same period in 2023. During 2023, the Company fully reserved its deferred tax asset.
Also, during 2023, the Company received insurance proceeds from a casualty loss of approximately $2.3 million, and the Company funded capital expenditures, including tenant improvements, during 2023, 2022 and 2021 totaling approximately $19.0 million, $10.4 million, and $7.2 million, respectively.
Also, during 2023, the Company received insurance proceeds from a casualty loss of approximately $2.3 million, and the Company funded capital expenditures, including tenant improvements, during 2024, 2023 and 2022 totaling approximately $24.6 million, $19.0 million, and $10.4 million, respectively.
During 2023, 2022 and 2021, the Company completed equity offerings under its at-the-market program, resulting in net proceeds, net of underwriters' discount and offering costs, of approximately $44.0 million, $20.2 million and $38.2 million, respectively.
During 2024, 2023 and 2022, the Company completed equity offerings under its at-the-market program, resulting in net proceeds, net of underwriters' discount and offering costs, of approximately $7.3 million, $44.0 million and $20.2 million, respectively.
During the year ended December 31, 2023, we had expiring or terminated leases related to approximately 462,000 square feet, and we leased or renewed leases related to approximately 334,000 square feet. Purchase Option Provisions Certain of the Company's leases provide the lessee with a purchase option or a right of first refusal to purchase the leased property.
During the year ended December 31, 2024, we had expiring or terminated leases related to approximately 551,000 square feet, and we leased or renewed leases related to approximately 517,000 square feet. Purchase Option Provisions Certain of the Company's leases provide the lessee with a purchase option or a right of first refusal to purchase the leased property.
During 2023, the Company borrowed, on a net basis, approximately $50.0 million, and in 2022 and 2021, the Company repaid, on a net basis, approximately $12.0 million and $21.0 million respectively, on its Revolving Credit Facility.
During 2024 and 2023, the Company borrowed, on a net basis, approximately $162.0 million and $50.0 million, respectively, and in 2022, the Company repaid, on a net basis, approximately $12.0 million respectively, on its Revolving Credit Facility.
Financing Activities Cash flows provided by financing activities for the years ended December 31, 2023, 2022 and 2021 were approximately $44.9 million, $62.7 million, and $48.1 million, respectively. During 2023, 2022 and 2021, the Company paid dividends totaling approximately $48.1 million, $44.5 million and $42.4 million, respectively.
Financing Activities Cash flows provided by financing activities for the years ended December 31, 2024, 2023 and 2022 were approximately $33.5 million, $44.9 million, and $62.7 million, respectively. During 2024, 2023 and 2022, the Company paid dividends totaling approximately $51.7 million, $48.1 million and $44.5 million, respectively.
The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings. Tenant Improvements and Capital Improvements The Company may provide tenant improvement allowances in new or renewal leases for the purpose of refurbishing or renovating tenant space.
The Company anticipates funding these investments with cash from operations, or with net proceeds from equity or debt issuances, from our Credit Facility, or from asset sales. Tenant Improvements and Capital Improvements The Company may provide tenant improvement allowances in new or renewal leases for the purpose of refurbishing or renovating tenant space.
See Note 4 – Real Estate Acquisitions and Dispositions in the Consolidated Financial Statements for more details. 52 Leased square footage As of December 31, 2023, our real estate portfolio was approximately 91.1% lease d, excluding real estate assets held for sale.
See Note 4 – Real Estate Acquisitions, Disposition, and Assets Held for Sale in the Consolidated Financial Statements for more details. 52 Leased square footage As of December 31, 2024, our real estate portfolio was approximately 90.9% lease d, excluding real estate assets held for sale.
The Company had an aggregate gross investment of approximately $37.2 million in ten real estate properties as of December 31, 2023 that were subject to exercisable purchase options. Lease Expirations Approximately 6.1% to 11.4% of our leases (based on annualized rent) will expire in each of the next 5 years.
The Company had an aggregate gross investment of approximately $31.5 million in nine real estate properties as of December 31, 2024 that were subject to exercisable purchase options. Lease Expirations Approximately 7.3% to 11.3% of our leases (based on annualized rent) will expire in each of the next 5 years.
In addition, during 2023, 2022 and 2021, the Company funded notes receivable of approximately $2.0 million, $9.7 million, and $14.4 million, respectively, and received payments in 2023, 2022 and 2021 on notes of approximately $3.9 million, $3.0 million, and $4.0 million, respectively.
In addition, 56 during 2024, 2023 and 2022, the Company funded notes receivable of approximately $3.1 million, $2.0 million, and $9.7 million, respectively, and received payments in 2024, 2023 and 2022 on notes receivable of approximately $5.1 million, $3.9 million, and $3.0 million, respectively.
Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation, including annual rent increases based on stated increases or CPI increases. In response to inflationary pressures, the Federal Reserve raised interest rates in 2022 and 2023, and these increases may continue in 2024 and beyond.
Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation, including annual rent increases based on stated increases or CPI increases. In response to inflationary pressures, the Federal Reserve began raising interest rates in 2022.
The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, losses and impairment of incidental assets, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO, AFFO, FFO per share and AFFO per share can facilitate comparisons of operating performance between periods. 60 The table below reconciles net income to FFO and AFFO for the years ended December 31, 2023, 2022, and 2021.
The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, losses and impairment of incidental assets, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO, AFFO, FFO per share and AFFO per share can facilitate comparisons of operating performance between periods.
Depreciation and amortization expense increased approximately $7.4 million, or 22.7%, for the year ended December 31, 2023 compared to the same period in 2022 due mainly to the following: • Depreciation and amortization related to properties acquired during 2023 and 2022 accounted for an increase of approximately $6.6 million; • Real estate intangible assets acquired prior to 2022 that became fully depreciated resulted in a decrease of approximately $1.8 million; • Accelerated amortization of lease intangibles on the two GenesisCare properties where the leases have been rejected totaled approximately $1.5 million; and • Depreciation related to tenant and other improvements accounted for an increase of approximately $1.1 million. 55 Impairment of real estate asset During the third quarter of 2023, the Company recorded an impairment on an asset held for sale of approximately $0.1 million.
Depreciation and amortization expense increased approximately $3.1 million, or 7.8%, for the year ended December 31, 2024 compared to the same period in 2023 due mainly to the following: • Depreciation and amortization related to properties acquired during 2024 and 2023 accounted for an increase of approximately $5.0 million; • Depreciation related to tenant and other improvements accounted for an increase of approximately $4.7 million; offset partially by • Real estate intangible assets acquired prior to 2023 that became fully depreciated resulted in a decrease of approximately $3.5 million; and • Depreciation and amortization on the properties classified as held for sale during 2023 and 2024 resulted in a decrease of approximately $1.6 million; and • Accelerated amortization of lease intangibles on the two GenesisCare properties where the leases were rejected in their 2023 bankruptcy resulted in a decrease of approximately $1.5 million.
Year Ended December 31, (In thousands) 2023 2022 2021 Net income $ 7,714 $ 22,019 $ 22,492 Interest expense 17,792 11,873 10,542 Depreciation and amortization 39,693 32,339 30,401 Deferred income tax expense 306 41 167 Gain on sale of depreciable real estate — — (237) Impairment of real estate asset 102 — — EBITDA re $ 65,607 $ 66,272 $ 63,365 Non-cash stock-based compensation expense (1) 8,166 9,415 7,164 Accelerated amortization of deferred compensation 11,799 — — Net gain from insurance recovery on casualty loss (706) — — Adjusted EBITDA re $ 84,866 $ 75,687 $ 70,529 ____________________________ (1) 2023 excludes accelerated amortization of stock-based compensation shown separately below.
Year Ended December 31, (In thousands) 2024 2023 2022 Net income $ (3,181) $ 7,714 $ 22,019 Interest expense 23,706 17,792 11,873 Depreciation and amortization 42,778 39,693 32,339 Deferred income tax expense — 306 41 Impairments, net of net gains on the sales of depreciable real estate assets 121 102 — EBITDA re $ 63,424 $ 65,607 $ 66,272 Non-cash stock-based compensation expense (1) 9,987 8,166 9,415 Credit loss reserve 11,000 — — Accelerated amortization of deferred compensation — 11,799 — Net gain from insurance recovery on casualty loss — (706) — Adjusted EBITDA re $ 84,411 $ 84,866 $ 75,687 ____________________________ (1) 2023 excludes accelerated amortization of stock-based compensation shown separately below.
As of December 31, 2023, the Company had approximately $5.8 million in commitments for capital improvement projects. Six of the projects included above, with remaining obligations totaling $3.5 million as of December 31, 2023, represent redevelopment projects of the buildings into different healthcare uses backed by long term leases.
As of December 31, 2024, the Company had approximately $2.0 million in commitments for capital improvement projects; four of these projects totaling $0.3 million, represent redevelopment projects of the buildings into different healthcare uses backed by long-term leases.
Investing Activities Cash flows used in investing activities for the years ended December 31, 2023, 2022 and 2021 were approximately $113.7 million, $113.8 million, and $104.4 million, respectively. During 2023, the Company invested in 19 real estate properties and one land parcel for cash consideration of approximately $98.9 million.
Investing Activities Cash flows used in investing activities for the years ended December 31, 2024, 2023 and 2022 were approximately $92.7 million, $113.7 million, and $113.8 million, respectively. During 2024, the Company invested in nine real estate properties for cash consideration of approximately $72.4 million, and sold two properties and a land parcel, for net proceeds of approximately $2.3 million.
Contractual interest due under the Credit Facility increased $5.9 million due to refinancings in the fourth quarter of 2022, a higher weighted average balance on the Revolving Credit Facility, along with a rise in interest rates during 2023 as compared to 2022. See Note 5 – Debt, net to the Consolidated Financial Statements.
Contractual interest due under the Credit Facility increased $5.5 million due to a pricing grid increase on hedged debt in the fourth quarter of 2024 due to increased leverage ratio, a higher weighted average balance on the Revolving Credit Facility, along with a rise in interest rates during 2024 as compared to 2023.
During 2022 and 2021, the Company amended its Credit Facility and borrowed $150.0 million and $125.0 million, respectively, in Term Loans under its Credit Facility and incurred $0.8 million and $1.6 million, respectively, in additional debt issuance costs, and in each of 2022 and 2021, repaid $50.0 million in Term Loans under its Credit Facility.
In 2022, the Company amended its Credit Facility and borrowed $150.0 million in Term Loans under its Credit Facility and incurred $0.8 million in additional debt issuance costs, and repaid $50.0 million in Term Loans under its Credit Facility. During 2024, 2023 and 2022, the Company had mortgage note repayments totaling approximately $4.8 million, $0.1 million and $0.1 million, respectively.
Expenses Property operating expenses increased approximately $4.1 million, or 24.5%, for the year ended December 31, 2023 compared to the same period in 2022 due mainly to the following: • Property operating expenses on properties acquired during 2023 and 2022 resulted in an increase of approximately $3.0 million; • Repairs and maintenance expenses increased approximately $0.4 million; • Security monitoring service expenses increased approximately $0.2 million; • The amortization of leasing commissions increased approximately $0.2 million; and • Property insurance expense increased approximately $0.1 million.
Expenses Property operating expenses increased approximately $2.1 million, or 10.2%, for the year ended December 31, 2024 compared to the same period in 2023 due mainly to the following: • Property operating expenses on properties acquired during 2024 and 2023 resulted in an increase of approximately $1.7 million; • Property insurance expense increased approximately $0.2 million; and • Landscaping and snow plow expense increased approximately $0.2 million.
Real estate acquisitions During the year ended December 31, 2023, the Company acquired 19 real estate properties and one land parcel for an aggregate purchase price of approximately $97.8 million. Upon acquisition, the properties, totaling approximately 463,000 square feet, were 99.2% leased in the aggregate with lease expirations through 2038.
Real estate acquisitions During the year ended December 31, 2024, the Company acquired nine real estate properties for an aggregate purchase price of approximately $72.1 million. Upon acquisition, the properties, totaling approximately 261,000 square feet, were 99.3% leased in the aggregate with lease expirations through 2039.
ATM Program The Company has an at-the-market offering program ("ATM Program"), with Piper Sandler & Co., Evercore Group L.L.C., Truist Securities, Inc., Regions Securities LLC, Fifth Third Securities, Inc., Janney Montgomery Scott LLC, and Robert W. Baird & Co. Incorporated, as Sales Agents (each, an “Agent”, and, collectively, the “Agents”).
ATM Program The Company has an at-the-market offering program ("ATM Program"), with Piper Sandler & Co., Piper Sandler Financial Products II Inc., Evercore Group L.L.C., Fifth Third Securities, Inc., Huntington Securities, Inc., Janney Montgomery Scott LLC, KeyBanc Capital Markets Inc., Regions Securities LLC, Truist Bank, and Truist Securities, Inc. in their capacities as Sales Agents, Forward Purchasers and/or Forward Sellers (each, an “Agent”, and, collectively, the “Agents”).
Credit Facility The Company's third amended and restated credit agreement, as amended (the "Credit Facility") provides for a $150.0 million revolving credit facility (the "Revolving Credit Facility") that matures on March 19, 2026 and includes one 12-month option to extend the maturity date, and $350.0 million in term loans (the "Term Loans"), as well as an accordion feature which allows borrowings up to a total of $700.0 million, including the ability to add and fund additional term loans.
Credit Facility The Company's third amended and restated credit agreement, as amended (the "Credit Facility") provides for a $400.0 million revolving credit facility (the "Revolving Credit Facility") and $275.0 million in term loans (the "Term Loans"), as well as an accordion feature which allows borrowings up to a total of $875.0 million, including the ability to add and fund additional term loans.
Year Ended December 31, (In thousands) 2023 2022 2021 Net income $ 7,714 $ 22,019 $ 22,492 General and administrative (1) 15,539 14,837 12,113 Accelerated amortization of deferred compensation 11,799 — — Depreciation and amortization 39,693 32,339 30,401 Gain on sale of depreciable real estate — — (237) Impairment of real estate asset 102 — — Interest expense 17,792 11,873 10,542 Deferred income taxes 306 41 167 Interest and other income, net (813) (66) (57) NOI $ 92,132 $ 81,043 $ 75,421 ____________________________ (1) 2023 excludes accelerated amortization of stock-based compensation shown separately below.
Year Ended December 31, (In thousands) 2024 2023 2022 Net (loss) income $ (3,181) $ 7,714 $ 22,019 General and administrative (1) 19,058 15,539 14,837 Accelerated amortization of deferred compensation — 11,799 — Depreciation and amortization 42,778 39,693 32,339 Credit loss reserve 11,000 — — Impairments, net of net gains on the sales of depreciable real estate assets 121 102 — Interest expense 23,706 17,792 11,873 Deferred income taxes — 306 41 Interest and other income, net (530) (813) (66) NOI $ 92,952 $ 92,132 $ 81,043 ____________________________ (1) 2023 excludes accelerated amortization of stock-based compensation shown separately below.
Security Deposits As of December 31, 2023, the Company held approximately $3.7 million in security deposits, included in other liabilities, on the Consolidated Statement of Income, for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease.
As of December 31, 2024, the Company had a $500.0 million ATM program, of which approximately $426.3 million remained available to be issued. 57 Security Deposits As of December 31, 2024, the Company held approximately $2.9 million in security deposits, included in other liabilities, on the Consolidated Statement of Operations, for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease.
The Company's expected returns on these investments are approximately 9.1% to 9.75%. The Company anticipates closing on two of these properties in 2024 with the remainder throughout 2025 and 2026; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.
The Company anticipates closing on one of these properties in the first quarter of 2025 with the remainder throughout 2025, 2026 and 2027; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually clos e.
The Company's expected returns on these investments are approximately 9.1% to 9.75%. The Company anticipates closing on two of these properties in 2024 with the remainder throughout 2025 and 2026 ; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.
The Company anticipates closing on one of these properties in the first quarter of 2025 with the remainder throughout 2025, 2026 and 2027; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually clos e.
The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings. Note Receivable The Company had entered into a note with a tenant with a maximum commitment remaining to fund totaling approximately $5.0 million at December 31, 2023.
The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings. Notes Receivable The Company has two notes with a tenant with unfunded commitments remaining totaling approximately $6.0 million at December 31, 2024. See Note 10 – Other Assets, net to the Consolidated Financial Statements.
During 2022, the Company invested in 18 real estate properties for an aggregate cash consideration of approximately $96.7 million. During 2021, the Company invested in 13 real estate properties for an aggregate cash consideration of approximately $88.1 million and sold one property for net proceeds of approximately $1.3 million.
During 2023, the Company invested in 19 real estate properties and one land parcel for an aggregate cash consideration of approximately $98.9 million. During 2022, the Company invested in 18 real estate properties for an aggregate cash consideration of approximately $96.7 million.
The Company may also assume tenant improvement obligations included in leases acquired in its real estate acquisitions. As of December 31, 2023, the Company had approximately $10.9 million in commitments for tenant improvements. The Company has entered into contracts with various vendors for various capital improvement projects related to its portfolio.
The Company may also assume tenant improvement obligations included in leases acquired in its real estate acquisitions. As of December 31, 2024, the Company had approximately $26.5 million in commitments for tenant improvements.
Assets Held for Sale The Company currently has plans to dispose of two properties with an aggregate carrying balance of $7.5 million during 2024.
Assets Held for Sale The Company has two properties with an aggregate carrying balance of $6.8 million classified as held for sale.
We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not associated with management of the properties.
We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not associated with management of the properties. The Company's use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing NOI.
See Note 4 – Real Estate Acquisitions and Dispositions to the Consolidated Financial Statements. Interest expense Interest expense increased approximately $5.9 million, or 49.9%, for the year ended December 31, 2023 compared to the same period in 2022.
Interest expense Interest expense increased approximately $5.9 million, or 33.2%, for the year ended December 31, 2024 compared to the same period in 2023.
The registration statement is for an indeterminate number of securities and is effective for three years. Under this registration statement, the Company has the capacity to offer and sell from time to time various types of securities, including common stock, preferred stock, depository shares, rights, debt securities, warrants and units.
Post-Effective Amendment No. 1 included disclosure required for registrants other than a well-known seasoned issuer and made certain other amendments. Under this registration statement, the Company has the capacity to offer and sell from time to time various types of securities, including common stock, preferred stock, depository shares, rights, debt securities, warrants and units.
Year Ended December 31, (Amounts in thousands, except per share amounts) 2023 2022 2021 Net income $ 7,714 $ 22,019 $ 22,492 Real estate depreciation and amortization 40,103 32,602 30,624 Gain on sale of depreciable real estate — — (237) Impairment of real estate asset 102 — — Total adjustments 40,205 32,602 30,387 FFO $ 47,919 $ 54,621 $ 52,879 Straight-line rent (3,052) (3,444) (3,569) Stock-based compensation 8,166 9,415 7,164 Accelerated amortization of stock-based compensation (1) 11,799 — — Net gain from insurance recovery on casualty loss (706) — — AFFO $ 64,126 $ 60,592 $ 56,474 FFO per diluted common share $ 1.86 $ 2.24 $ 2.20 AFFO per diluted common share $ 2.49 $ 2.49 $ 2.35 Weighted Average Common Shares Outstanding-Diluted (2) 25,752 24,379 24,012 ____________________________ (1) Upon the passing of our former CEO and President in the first quarter of 2023, the Company accelerated the amortization of stock-based compensation totaling $11.8 million, impacting FFO per diluted share by $0.46 for the year ended December 31, 2023 .
Year Ended December 31, (Amounts in thousands, except per share amounts) 2024 2023 2022 Net (loss) income $ (3,181) $ 7,714 $ 22,019 Real estate depreciation and amortization 43,277 40,103 32,602 Credit loss reserve (1) 11,000 — — Impairments, net of net gains on the sales of depreciable real estate assets 121 102 — Total adjustments 54,398 40,205 32,602 FFO $ 51,217 $ 47,919 $ 54,621 Straight-line rent (1,942) (3,052) (3,444) Stock-based compensation 9,987 8,166 9,415 Accelerated amortization of stock-based compensation (2) — 11,799 — Net gain from insurance recovery on casualty loss — (706) — AFFO $ 59,262 $ 64,126 $ 60,592 FFO per diluted common share $ 1.91 $ 1.86 $ 2.24 AFFO per diluted common share $ 2.21 $ 2.49 $ 2.49 Weighted Average Common Shares Outstanding-Diluted (3) 26,843 25,752 24,379 ____________________________ (1) During the second quarter of 2024, the Company recorded an $11.0 million credit loss reserve on notes receivable with a geriatric inpatient behavioral hospital tenant where collectibility was not reasonably assured.
Interest and other income Interest and other income increased approximately $0.7 million for the year ended December 31, 2023 compared to the same period in 2022. During 2023, the Company recognized a net casualty gain relating to a property totaling $0.7 million. See Note 4 – Real Estate Acquisitions and Dispositions to the Consolidated Financial Statements.
Interest and other income for 2023 included a net casualty gain relating to a property totaling $0.7 million. 55 Year Ended December 31, 2023 Compared to December 31, 2022 See “Item 7.
The Company expects to close on these properties during the first half of 2024; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company also has seven properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $166.5 million.
The Company also has seven properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of ap proximately $169.5 million. The Company's expected returns on these investments are approximately 9.1% to 9.75%.
The Company expects to close on these properties during the first half of 2024; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company also has seven properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $166.5 million.
The Company also has seven properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of ap proximately $169.5 million. The Company's expected returns on these investments are approximately 9.1% to 9.75%.
See Note 10 – Other Assets, net to the Consolidated Financial Statements. Dividends The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to maintain its qualification as a REIT.
Dividends The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to maintain its qualification as a REIT. During 2024, 2023 and 2022, the Company paid cash dividends in the amounts of $1.845 per share, $1.805 per share and $1.765 per share, respectively.
The Company uses these indicators and others to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention. Sources and Uses of Cash The Company derives most of its revenues from its real estate properties, collecting rental income and operating expense reimbursements based on contractual arrangements with its tenants.
At December 31, 2024, our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately 40.3%. Sources and Uses of Cash The Company derives most of its revenues from its real estate properties, collecting rental income and operating expense reimbursements based on contractual arrangements with its tenants.
The Company was in compliance with its financial covenants under its Credit Facility as of December 31, 2023. Also, the Company’s current financing policy prohibits aggregate debt (secured or unsecured) in excess of 40% of the Company's total capitalization, except for short-term, transitory periods.
The Company uses these indicators and others to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention. Financing Policy The Company’s current financing policy prohibits aggregate debt (secured or unsecured) in excess of 40% of the Company's total capitalization, except for short-term, transitory periods.
Revenues Rental income increased approximately $14.6 million, or 15.5%, for the year ended December 31, 2023 compared to the same period in 2022 mainly due to the following: • Income on properties acquired during 2023 and 2022 increased rental income by approximately $15.4 million; • Lease rejections related to one bankruptcy during 2023 decreased rental income in 2023 compared to 2022 by approximately $0.3 million; and 54 • During 2023 the Company increased its allowance for bad debts by approximately $0.3 million.
Yea r Ended December 31, 2024 Compared to December 31, 2023 Revenues Rental income increased approximately $5.9 million, or 5.4%, for the year ended December 31, 2024 compared to the same period in 2023 due mainly to the following: • Income on properties acquired during 2024 and 2023 increased rental income by approximately $11.0 million; partially offset by • A reduction in rental income related to tenants on cash basis during 2024 and 2023 totaling approximately $4.0 million (including $0.7 million of straight-line rent); and • A reduction in rental income of $1.1 million due mainly to lease terminations, including two Genesis Care leases with the Company that were rejected in 2023 as part of the Genesis Care bankruptcy.
The Company's use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing NOI. 61 The table below reconciles net income to NOI for the years ended December 31, 2023, 2022, and 2021.
The table below reconciles net income to NOI for the years ended December 31, 2024, 2023, and 2022.
Year Ended December 31, 2023 Compared to December 31, 2022 The table below shows our results of operations for the year ended December 31, 2023 compared to the same period in 2022 and the effect of changes in those results from period to period on our net income.
The table below reconciles net income to FFO and AFFO for the years ended December 31, 2024, 2023, and 2022.
During 2023, 2022 and 2021, the Company paid cash dividends in the amounts of $1.805 per share, $1.765 per share and $1.725 per share, respectively. On February 8, 2024, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.4575 per share.
On February 13, 2025, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.4675 per share. The dividend is payable on March 5, 2025 to stockholders of record on February 24, 2025.
Acquisition pipeline The Company has three properties under definitive purchase agreements for an expected aggregate purchase price of approximately $27.9 million. The Company's expected aggregate return on these investments ranges from approximately 9.08% to 9.20%.
Acquisition pipeline The Company has entered into a definitive purchase agreement for a residential treatment campus consisting of five buildings with an expected purchase price of approximately $9.5 million and an expected return of 9.5%.
Other operating interest increased approximately $0.6 million, or 16.4%, for the year ended December 31, 2023 compared to the same period in 2022 due to interest earned on our notes receivable, which are discussed in more detail in Note 10 – Other Assets, net to the Consolidated Financial Statements.
Interest and other income Interest and other income decreased approximately $0.3 million for the year ended December 31, 2024 compared to the same period in 2023.
Removed
Subsequent acquisition Subsequent to December 31, 2023, the Company acquired one long term acute care hospital (LTACH) for a purchase price of approximately $6.5 million and cash consideration of approximately $6.6 million. Upon acquisition, the property was 100.0% leased with a lease expiration in 2039.
Added
Real estate dispositions During the year ended December 31, 2024, the Company disposed of two properties in Texas and a land parcel adjacent to a property in Georgia. The Company received net proceeds of approximately $2.3 million and recognized an immaterial gain in the aggregate on the dispositions.
Removed
Higher interest rates imposed by the Federal Reserve to address inflation may adversely impact real estate asset values and increase our interest expense on our variable-rate borrowings under our revolving credit facility. 53 Results of Operations Our results of operations are most significantly impacted each year by our acquisitions in and funding of our real estate investments, as well as expenses related to our employees, professional fees and other costs related to operating the REIT and its related subsidiaries.
Added
The Company expects to close on this investment during the first quarter of 2025; however, the Company cannot provide assurance as to the timing of when, or whether, the transaction will actually close.
Removed
For the Year Ended December 31, Increase (Decrease) to Net Income (Dollars in thousands) 2023 2022 $ % REVENUES Rental income $ 108,682 $ 94,103 $ 14,579 15.5 % Other operating interest 4,163 3,576 587 16.4 % 112,845 97,679 15,166 15.5 % EXPENSES Property operating 20,713 16,636 (4,077) (24.5) % General and administrative (1) 27,338 14,837 (12,501) (84.3) % Depreciation and amortization 39,693 32,339 (7,354) (22.7) % 87,744 63,812 (23,932) (37.5) % OTHER INCOME (EXPENSE) Impairment of real estate asset (102) — (102) n/m Interest expense (17,792) (11,873) (5,919) (49.9) % Deferred income tax expense (306) (41) (265) n/m Interest and other income, net 813 66 747 n/m (17,387) (11,848) (5,539) 46.8 % NET INCOME $ 7,714 $ 22,019 $ (14,305) (65.0) % n/m - not meaningful _____________________ (1) General and administrative expenses for the year ended December 31, 2023 included the accelerated amortization of stock-based compensation totaling $11.8 million recognized upon the passing of our former CEO and President.
Added
Though these higher interest rates have just begun to decline, these higher rates may adversely impact real estate asset values and increase our interest expense on our variable-rate borrowings under our revolving credit facility. Interest Expense During the first quarter of 2024, two interest rates swaps related to Term Loans matured and were replaced with two previously forward-starting swaps.
Removed
Wallace's shares; • The non-cash amortization of stock-based compensation decreased approximately $1.2 million in 2023 compared to 2022; and • Legal fees increased approximately $0.5 million and accounting and auditing fees increased approximately $0.2 million in 2023 compared to 2022.
Added
Also, during the fourth quarter of 2024, the Company amended its Credit Facility to (i) increase the Revolving Credit Facility commitments, (ii) decrease pricing on the Revolving Credit Facility, (iii) extend maturity of the Revolving Credit Facility, and (iv) repay the $75.0 million A-3 Term loan with proceeds from the Revolving Credit Facility.
Removed
As of December 31, 2023, the Company had approximately $433.9 million remaining that may be issued under the ATM Program.
Added
Also, with the repayment of the A-3 Term loan, the interest rate swaps that previously hedged the A-3 Term Loan were reassigned to hedge $75.0 million of the Revolving Credit Facility through the swaps maturity date in 2026.
Removed
The Company has entered into interest rate swaps to fix the interest rates on the Term Loans. In March 2024, two swaps will mature and will be replaced by two forward-starting swaps currently in place and will increase the fixed weighted average interest rate under the swaps from approximately 4.3% to approximately 4.4%.
Added
During the fourth quarter of 2024, the Company's leverage ratio increased resulting in higher pricing on the Term Loans based on the pricing grid in our Credit Facility.
Removed
At December 31, 2023, our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately 36.1%. Mortgage Note Payable The Company also had outstanding at December 31, 2023, a $4.8 million mortgage note payable, secured by one of our properties that had a $7.2 million carrying value at December 31, 2023.
Added
Executive Compensation The Alignment of Interest Program was amended by the Board in the first quarter of 2024 to establish a maximum elective deferral percentage amount of 50% (previously 100%) of compensation allowed to be deferred and applied to the acquisition of restricted stock for certain participants in the program, and limit the duration of the restriction period election depending on each individual's retirement eligibility date.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−4 removed1 unchanged
Biggest changeThe Company has entered into interest rate swaps to fix the interest rates on its Term Loans. 65 The following table provides information regarding the sensitivity of certain of the Company’s financial instruments, as described above, to market conditions and changes resulting from changes in interest rates.
Biggest changeThe following table provides information regarding the sensitivity of certain of the Company’s financial instruments, reflecting the effect of hedging instruments, as described above, to market conditions and changes resulting from changes in interest rates. For purposes of this analysis, sensitivity is demonstrated based on hypothetical 10% changes in the underlying market interest rates.
Management uses regular monitoring of market conditions and analysis techniques to manage this risk. As of December 31, 2023, the Company's Revolving Credit Facility and Term Loans were based on variable interest rates while its notes receivable and mortgage note payable bore interest at fixed rates.
Management uses regular monitoring of market conditions and analysis techniques to manage this risk. As of December 31, 2024, the Company's Revolving Credit Facility and Term Loans were based on variable interest rates while its notes receivable bore interest at fixed rates.
Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation, including annual rent increases based on stated increases or CPI increases. In response to inflationary pressures, the Federal Reserve raised interest rates in 2022 and 2023, and these increases may continue in 2024 and beyond.
Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation, including annual rent increases based on stated increases or CPI increases. In response to inflationary pressures, the Federal Reserve raised interest rates in 2022 and 2023, however, the Federal Reserve lowered interest rates in 2024 and may provide additional rate cuts during 2025.
Impact on Earnings and Cash Flows (Dollars in thousands) Outstanding Principal Balance at December 31, 2023 Calculated Annual Interest Expense Assuming 10% Increase in Market Interest Rates Assuming 10% Decrease in Market Interest Rates Variable Rate Debt: Revolving Credit Facility $ 50,000 $ 3,534 $ (353) $ 353 A-3 Term Loan (1) $ 75,000 $ 3,218 $ — $ — A-4 Term Loan (1) $ 125,000 $ 4,181 $ — $ — A-5 Term Loan (1) $ 150,000 $ 7,661 $ — $ — ___________ (1) The Company has interest rate swaps that fix the interest rates of the A-3 Term Loan, the A-4 Term Loan, and the A-5 Term Loan; therefore, changes in the interest rates will not impact our earnings or cash flows.
Impact on Earnings and Cash Flows (Dollars in thousands) Outstanding Principal Balance at December 31, 2024 Calculated Annual Interest Expense Assuming 10% Increase in Market Interest Rates Assuming 10% Decrease in Market Interest Rates Variable Rate Debt: Revolving Credit Facility, unhedged $ 137,000 $ 8,790 $ (879) $ 879 Revolving Credit Facility, hedged (1) $ 75,000 $ 3,406 $ — $ — A-4 Term Loan (1) $ 125,000 $ 4,494 $ — $ — A-5 Term Loan (1) $ 150,000 $ 8,423 $ — $ — ___________ (1) The Company has interest rate swaps that fix the interest rates for $75 million of the Revolving Credit Facility and all of the A-4 Term Loan and the A-5 Term Loan; therefore, changes in the interest rates will not impact our earnings or cash flows.
Fair Value (Dollars in thousands) Outstanding Principal Balance at December 31, 2023 December 31, 2023 Assuming 10% Increase in Market Interest Rates Assuming 10% Decrease in Market Interest Rates December 31, 2022 Fixed Rate Receivables/Payable: Notes Receivable (1) $ 30,775 $ 31,199 $ 30,893 $ 31,511 $ 32,716 Mortgage Note Payable (1) $ 4,821 $ 4,791 $ 4,782 $ 4,801 $ 4,761 ___________ (1) Level 2 - Fair value based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets.
Fair Value (Dollars in thousands) Outstanding Principal Balance at December 31, 2024 December 31, 2024 Assuming 10% Increase in Market Interest Rates Assuming 10% Decrease in Market Interest Rates December 31, 2023 Fixed Rate Receivables/Payable: Notes Receivable, Level 2 (1) $ 7,180 $ 7,248 $ 7,208 $ 7,281 $ 13,161 Notes Receivable (2) $ 21,547 $ 10,547 $ 10,547 $ 10,547 $ 22,435 Mortgage Note Payable (1) $ — $ — $ — $ — $ 4,821 ___________ (1) Level 2 - Fair value based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets.
Higher interest rates imposed by the Federal Reserve to address inflation may adversely impact real estate asset values and increase our interest expense on our variable-rate borrowings under our revolving credit facility. 66
Higher interest rates may adversely impact real estate asset values and increase our interest expense on our variable-rate borrowings under our revolving credit facility. 65
See the discussion under Item 1A, "Risk Factors," under the caption "The replacement of LIBOR with SOFR may adversely affect interest expense related to outstanding debt." Inflation Inflation has significantly increased during the past couple of years and a prolonged period of high and persistent inflation could cause an increase in our expenses, capital expenditures, and cost of our variable-rate borrowings which could have a material impact on our financial position or results of operations.
Inflation Inflation has significantly increased during the past couple of years and a prolonged period of high and persistent inflation could cause an increase in our expenses, capital expenditures, and cost of our variable-rate borrowings which could have a material impact on our financial position or results of operations.
Removed
For purposes of this analysis, sensitivity is demonstrated based on hypothetical 10% changes in the underlying market interest rates.
Added
The Company has entered into interest rate swaps to fix the interest rates on its Term Loans and $75.0 million of the $212.0 million Revolver Credit Facility borrowings outstanding as of December 31, 2024.
Removed
On December 14, 2022, the Company amended its Credit Facility to replace LIBOR as a benchmark interest rate for loans under the Credit Facility with SOFR.
Added
(2) Calculated using Level 3 inputs at December 31, 2024 and Level 2 inputs at December 31, 2023. At December 31, 2024, the carrying amount, net of credit loss reserve, was $10,547.
Removed
The Company's Credit Facility debt shown in the table above and discussed in Note 5 – Debt, net to the Consolidated Financial Statements was transitioned from being indexed to USD LIBOR to SOFR effective December 14, 2022 for Term Loan A-5 and Revolving Credit Facility, and effective December 30, 2022 for Term Loans A-3 and A-4.
Removed
In January 2023, the Company transitioned its interest rate swaps from LIBOR to SOFR rates.

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