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What changed in National Healthcare Properties, Inc.'s 10-K — 2022 vs 2023

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

+472 added−677 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-17)

Top changes in National Healthcare Properties, Inc.'s 2023 10-K

472 paragraphs added · 677 removed · 364 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+3 added−17 removed92 unchanged
Biggest changeThese properties are leased to tenants that provide healthcare services that typically consist of: • physicians’ offices and examination rooms, • pharmacies, • hospital ancillary service space and outpatient services such as diagnostic imaging centers, rehabilitation clinics and ambulatory surgery centers, • hospitals, • post-acute care facilities, • skilled nursing facilities (“SNFs”) and; 5 Table of Contents • other facilities.
Biggest changeThese properties are leased to tenants that provide healthcare services that typically consist of: • physicians’ offices and examination rooms, • pharmacies, • hospital ancillary service space and outpatient services such as diagnostic imaging centers, rehabilitation clinics and ambulatory surgery centers, • hospitals, • post-acute care facilities, • skilled nursing facilities (“SNFs”) and • other facilities. 5 T able of Contents Certain of our properties can be located on or near hospital campuses and require significant plumbing, electrical and mechanical systems to accommodate diagnostic imaging equipment such as x-rays or other imaging equipment, and may also have significant plumbing to accommodate physician exam rooms.
Tax Status We elected to be taxed as a REIT under Sections 856 through 860 of Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2013. Commencing with that taxable year, we have been organized and operated in a manner so that we qualify as a REIT under the Code.
Tax Status We elected to be taxed as a REIT under Sections 856 through 860 of Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2013. Commencing with that taxable year, we believe we have been organized and operated in a manner so that we qualify as a REIT under the Code.
We did not make any material capital expenditures in connection with these regulations during the year ended December 31, 2022 and we do not expect that we will be required to make any such material capital expenditures during 2023. We believe that we have all permits and approvals necessary under current law to operate our investments.
We did not make any material capital expenditures in connection with these regulations during the year ended December 31, 2023 and we do not expect that we will be required to make any such material capital expenditures during 2023. We believe that we have all permits and approvals necessary under current law to operate our investments.
Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion), net of gross market lease intangible liabilities ($23.5 million). Cumulative impairment charges are already reflected within gross asset value.
Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion), net of gross market lease intangible liabilities ($23.5 million). Cumulative impairment charges are reflected within gross asset value.
Dividends paid in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding increase when dividends paid in stock are issued.
Dividends paid in the form of additional shares of common stock will, all things being equal, cause the value of each share of common stock to decline because the number of shares outstanding increase when dividends paid in stock are issued.
Our healthcare facilities must meet licensing and Medicare or Medicaid certification requirement, to the extend applicable relating to the type of facility and its equipment, personnel and standard of medical care, as well as comply with other federal, state and local laws and regulations.
Our healthcare facilities must meet licensing and Medicare or Medicaid certification requirement, to the extent applicable relating to the type of facility and its equipment, personnel and standard of medical care, as well as comply with other federal, state and local laws and regulations.
As of December 31, 2022, 2021 and 2020, none of our tenants (together with their affiliates) had annualized rental income on a straight-line basis representing 10% or greater of total annualized rental income on a straight-line basis for the portfolio.
As of December 31, 2023, 2022 and 2021, none of our tenants (together with their affiliates) had annualized rental income on a straight-line basis representing 10% or greater of total annualized rental income on a straight-line basis for the portfolio.
States have also adopted and are enforcing laws that increase the regulatory burden and potential liability of healthcare entities including, but not limited to, patient protections, such as minimum staffing levels, criminal background checks, sanctions for employing excluded providers, restrictions on the use and disclosure of health information, and these state laws have their own penalties which may be in addition to federal penalties. 11 Table of Contents In the ordinary course of their business, the tenants, and potentially operators at our properties are regularly subject to inquiries, audits and investigations conducted by federal and state agencies that oversee applicable laws and regulations.
States have also adopted and are enforcing laws that increase the regulatory burden and potential liability of healthcare entities including, but not limited to, patient protections, such as minimum staffing levels, criminal background checks, sanctions for employing excluded providers, restrictions on the use and disclosure of health information, and these state laws have their own penalties which may be in addition to federal penalties. 10 T able of Contents In the ordinary course of their business, the tenants, and potentially operators at our properties are regularly subject to inquiries, audits and investigations conducted by federal and state agencies that oversee applicable laws and regulations.
Moreover, these increases in the rate of inflation, the ongoing war in Ukraine and related sanctions, supply chain disruptions and increases in interest rates may also impact the ability of our tenants and residents to pay rent and hence our results of operations and liquidity.
Moreover, these increases in the rate of inflation, the ongoing wars in Ukraine, Israel and related sanctions, supply chain disruptions and increases in interest rates may also impact the ability of our tenants and residents to pay rent and hence our results of operations and liquidity.
We intend to continue to operate in such a manner, but can provide no assurance be given that we will operate in a manner so as to remain qualified as a REIT.
We intend to continue to operate in such a manner, but can provide no assurance that we will operate in a manner so as to remain qualified as a REIT.
In addition, if we have to replace an operator, we may experience difficulties in finding a replacement because our ability to replace the operator may be affected by federal and state laws governing changes in control and ownership. 10 Table of Contents Licensing and certification requirements also subject our tenants, and potentially operators, to compliance surveys and audits which are critical to the ongoing operations of the facilities.
In addition, if we have to replace an operator, we may experience difficulties in finding a replacement because our ability to replace the operator may be affected by federal and state laws governing changes in control and ownership. 9 T able of Contents Licensing and certification requirements also subject our tenants, and potentially operators, to compliance surveys and audits which are critical to the ongoing operations of the facilities.
We also may make preferred equity investments in an entity. 4 Table of Contents Healthcare is the single largest industry in the United States based on contribution to Gross Domestic Product (“GDP”).
We also may make preferred equity investments in an entity. 4 T able of Contents Healthcare is the single largest industry in the United States based on contribution to Gross Domestic Product (“GDP”).
In addition to the growth in national health expenditures and corresponding increases in employment in the healthcare sector, the nature of healthcare delivery continues to evolve due to the COVID-19 pandemic, impact of government programs, regulatory changes and consumer preferences.
In addition to the growth in national health expenditures and corresponding increases in employment in the healthcare sector, the nature of healthcare delivery continues to evolve due to the impact of government programs, regulatory changes and consumer preferences.
For short-term purposes, we may borrow from our revolving credit facility (our “Revolving Credit Facility”) and our Fannie Mae Master Credit Facilities, which include a secured credit facility with KeyBank National Association (the “KeyBank Facility”) and a secured credit facility with Capital One Multifamily Finance, LLC, an affiliate of Capital One, National Association (the “Capital One Facility”).
For short-term purposes, we may borrow from our MOB Warehouse Facility and our Fannie Mae Master Credit Facilities, which include a secured credit facility with KeyBank National Association (the “KeyBank Facility”) and a secured credit facility with Capital One Multifamily Finance, LLC, an affiliate of Capital One, National Association (the “Capital One Facility”).
The TRS is a wholly-owned subsidiary of the OP. Competition The market for MOB and SHOP real estate is highly competitive. We compete in all of our markets based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs and the manner in which the property is operated and marketed.
Competition The market for MOB and SHOP real estate is highly competitive. We compete in all of our markets based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs and the manner in which the property is operated and marketed.
The following table lists the states where we had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of December 31, 2022, 2021 and 2020: December 31, State 2022 2021 2020 Florida (1) 19.2% 17.7% 20.6% Pennsylvania * * 10.4% ________ * State’s annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties as of the period specified.
The following table lists the states where we had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of December 31, 2023, 2022 and 2021: December 31, State 2023 2022 2021 Florida 19.9% 19.2% 17.7% Pennsylvania 10.6% * * __________ * State’s annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties as of the period specified.
Investment Strategy Our investment strategy is guided by three core principles: (1) maintaining a balanced, well-diversified portfolio of high-quality assets; (2) pursuing accretive and opportunistic investment opportunities; and (3) maintaining a strong and flexible capital structure. We have invested, and expect to continue investing, primarily in MOBs and seniors housing properties, primarily structured as SHOPs.
Investment Strategy Our investment strategy is guided by three core principles: (i) maintaining a balanced, well-diversified portfolio of high-quality assets; (ii) pursuing accretive and opportunistic investment opportunities; and (iii) maintaining a strong and flexible capital structure. We have invested, and expect to continue investing, primarily in MOBs and seniors housing properties, primarily structured as SHOPs.
Department of Labor’s Bureau of Labor Statistics (the “Bureau of Labor Statistics”), the healthcare industry was one of the largest industries in the United States, providing approximately 21 million seasonally adjusted jobs as of December 31, 2021.
Department of Labor’s Bureau of Labor Statistics (the “Bureau of Labor Statistics”), the healthcare industry was one of the largest industries in the United States, providing approximately 22 million seasonally adjusted jobs as of December 31, 2023.
Our seniors housing properties as of December 31, 2022 primarily consist of assisted living facilities (2,352 units), memory care facilities (1,109 units) and independent living facilities (882 units). These facilities cater to different segments of the elderly population based upon their personal needs and need for assistance with the activities of daily living.
Our seniors housing properties as of December 31, 2023 primarily consist of assisted living facilities (2,177 units), memory care facilities (1,074 units) and independent living facilities (882 units). These facilities cater to different segments of the elderly population based upon their personal needs and need for assistance with the activities of daily living.
We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations during the year ended December 31, 2022 and do not expect that we will be required to make any such material capital expenditures during 2023. 13 Table of Contents Human Capital Resources We are an externally managed company and thus have no employees.
We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations during the year ended December 31, 2023 and do not expect that we will be required to make any such material capital expenditures during 2024. 12 T able of Contents Human Capital Resources We are an externally managed company and thus have no employees.
In our agreements with our lenders, we are subject to 8 Table of Contents restrictions with respect to secured and unsecured indebtedness, including restrictions on permitted investments, distributions and maintenance of a maximum leverage ratio, a minimum fixed charge coverage ratio, among other things. As of December 31, 2022 we were in compliance with these covenants.
In our agreements with our lenders, we are subject to restrictions with respect to secured and unsecured indebtedness, including restrictions on permitted investments, maintenance of a maximum leverage ratio, a minimum fixed charge coverage ratio, among other things. As of December 31, 2023 we were in compliance with these covenants.
In addition, these same entities seek financing through similar channels. 9 Table of Contents Overview The healthcare industry is one of the most regulated industries in the United States and is currently experiencing rapid regulatory change and uncertainty.
In addition, these same entities seek financing through similar channels. 8 T able of Contents Overview The healthcare industry is one of the most regulated industries in the United States and is currently experiencing rapid regulatory change and uncertainty.
If the Advisor and the Property Manager were unable to provide these services to us, we would be required to provide these services ourselves or obtain them from other sources. Estimate of Net Asset Value On April 1, 2022, we published an estimate of per share asset value (“Estimated Per-Share NAV”) equal to $15.00 as of December 31, 2021.
If the Advisor and the Property Manager were unable to provide these services to us, we would be required to provide these services ourselves or obtain them from other sources. Estimate of Net Asset Value On March 31, 2023, we published an estimate of per share asset value (“Estimated Per-Share NAV”) equal to $14.00 as of December 31, 2022.
GDP in 2020 to 19.6% by 2030. The increase in expenditures is projected to lead to significant growth in healthcare employment. According to the U.S.
GDP in 2021 to 19.6% by 2031. The increase in expenditures is projected to lead to significant growth in healthcare employment. According to the U.S.
As described in further detail herein, we operate in two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs. As of December 31, 2022, we owned 202 properties located in 34 states and comprised of 9.1 million rentable square feet.
As described in further detail herein, we operate in two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs. As of December 31, 2023, we owned 204 properties located in 33 states and comprised of 9.0 million rentable square feet.
Medical Office and Other Healthcare-Related Buildings As of December 31, 2022, we owned 150 MOBs and other health care related buildings under lease totaling 5.1 million square feet.
Medical Office and Other Healthcare-Related Buildings As of December 31, 2023, we owned 156 MOBs and other health care related buildings under lease totaling 5.2 million square feet.
Impairment charges are already reflected within gross asset value. (2) As of December 31, 2022, we had 4,374 rentable units in our SHOP segment. (3) Includes two land parcels. In constructing our portfolio, we are committed to diversifying our assets by geographic region.
Impairment charges are already reflected within gross asset value. (2) As of December 31, 2023, we had 4,164 rentable units in our SHOP segment. (3) Excludes two land parcels with a gross asset value of $3.7 million. In constructing our portfolio, we are committed to diversifying our assets by geographic region.
Accordingly, we have formed a TRS that is wholly owned by the OP to lease its SHOPs and the TRS has entered into management contracts with unaffiliated third-party operators to operate the facilities on its behalf. As of December 31, 2022, we owned 52 seniors housing properties, including two land parcels, which we lease to our TRS.
Accordingly, we have formed a TRS that is wholly owned by the OP to lease our SHOPs, and the TRS has entered into management contracts with unaffiliated third-party operators to operate the facilities on its behalf. As of December 31, 2023, we owned 46 SHOPs which we lease to our TRS.
We own our SHOPs through the RIDEA structure, pursuant to which, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” We view this as a structure primarily to be used on properties that present attractive valuation entry points with long term growth prospects or drive growth by: (i) transitioning the asset to a new third-party operator that can bring scale, operating efficiencies, or ancillary services; or (ii) investing capital to reposition the asset.
Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, has an interest in us through ownership of interests in our OP. 7 T able of Contents We own our SHOPs through the RIDEA structure, pursuant to which, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” We view this as a structure primarily to be used on properties that present attractive valuation entry points with long term growth prospects or drive growth by: (i) transitioning the asset to a new third-party operator that can bring scale, operating efficiencies, or ancillary services; or (ii) investing capital to reposition the asset.
As of December 31, 2022, our total debt leverage ratio (net debt divided by gross asset value) was approximately 41.5%. Net debt totaled $1.1 billion, which represents gross debt ($1.1 billion) less cash and cash equivalents ($53.7 million).
As of December 31, 2023, our total debt leverage ratio (net debt divided by gross asset value) was approximately 43.7%. Net debt totaled $1.1 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($46.4 million).
Since the beginning of the COVID-19 pandemic, the senior housing industry has been experiencing ongoing staffing shortages; however, the Bureau of Labor Statistics reported employment increases for nursing and assisted living facilities in 2022.
The senior housing industry has been experiencing ongoing staffing shortages in recent years; however, the Bureau of Labor Statistics reported employment increases for nursing and assisted living facilities in 2023.
We may invest in properties subject to existing mortgage indebtedness, which we assume as part of the acquisition. In addition, we may obtain financing secured by previously unencumbered properties in which we have invested or may refinance properties acquired on a leveraged basis.
We may invest in properties subject to existing mortgage indebtedness, which we assume as part of the acquisition. In addition, we may obtain financing secured by previously unencumbered properties in which we have invested or may refinance properties acquired on a leveraged basis. As of December 31, 2023, we had $635.9 million of unencumbered real estate investments, at cost.
Our previous Estimated Per-Share NAV was equal to $14.50 as of December 31, 2020. The Estimated Per-Share NAV has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in early April 2023.
Our previous Estimated Per-Share NAV was equal to $15.00 as of December 31, 2021. The Estimated Per-Share NAV has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in late March 2024.
The full amounts received were recognized as a reduction of property operating expenses in our consolidated statement of operations for the years ended December 31, 2022, 2021 and 2020, respectively, to offset incurred COVID-19 expenses.
For accounting purposes, we consider these funds as grant contributions from the government. The full amounts received were recognized as reduction of property operating expenses in our consolidated statement of operations for the years ended December 31, 2022 and 2021, respectively, to offset incurred COVID-19 expenses.
During the years ended December 31, 2021 and 2020, we took efforts to divest from SNFs through our property dispositions, and we have also converted many SNF units to memory care units in our existing properties, which have significantly reduced our SNF operations. As of December 31, 2022 our seniors housing properties included 31 SNF units.
Certain facilities provide some of the foregoing services on an outpatient basis. During the years ended December 31, 2021 and 2020, we took efforts to divest from SNFs through our property dispositions, and we have also converted many SNF units to memory care units in our existing properties, which have significantly reduced our SNF operations.
Certain of our facilities are also subject to periodic pre- and post-payment reviews and other audits by governmental authorities, which could result in recoupments, denials, or delay of payments.
This could adversely impact the medical properties that house these physicians and medical technology providers. Certain of our facilities are also subject to periodic pre- and post-payment reviews and other audits by governmental authorities, which could result in recoupments, denials, or delay of payments.
Further, recent and continuing increases in inflation brought about by labor shortages, supply chain disruptions and increases in interest rates have adversely impacted, and may continue to impact, our results of operations.
Further, recent increases in inflation brought about by labor shortages, supply chain disruptions, increases in property insurance and property tax rates and increases in interest rates have had, and may continue to have, adverse impacts on our results of operations.
Independent living facilities are designed to meet the needs of seniors who choose to live in an environment surrounded by their peers with services such as housekeeping, meals and activities.
Independent living facilities are designed to meet the needs of seniors who choose to live in an environment surrounded by their peers with services such as housekeeping, meals and activities. These residents generally do not need assistance with activities of daily living, however, in some of our facilities, residents have the option to contract for these services.
According to the National Health Expenditures Projections, 2021 - 2030 report prepared by the Centers for Medicare and Medicaid Services (“CMS”): (i) national health expenditures are projected to grow on average 5.1% per year for 2021 through 2030 and at an average annual growth rate of 5.3% per year from 2025 through 2030 and (ii) the healthcare industry projected share of GDP is projected to decrease slightly from 19.7% of U.S.
According to the National Health Expenditures Projections, 2022 - 2031 report prepared by the Centers for Medicare and Medicaid Services (“CMS”): (i) national health expenditures are projected to grow on average 5.4% per year for 2022 through 2031 which is expected to exceed average projected GDP growth during those periods of 4.6% and (ii) the healthcare industry projected share of GDP is projected to increase slightly from 18.3% of U.S.
The following table summarizes our portfolio of properties as of December 31, 2022: Asset Type Number of Properties Rentable Square Feet Gross Asset Value (1) (In thousands) Medical Office and Other Healthcare-Related Buildings 150 5,090,957 $ 1,423,804 Seniors Housing — Operating Properties (2) 52 (3) 4,030,413 1,140,608 Total Portfolio 202 9,121,370 $ 2,564,412 ________ (1) Gross asset value represents total real estate investments, at cost ($2.6 billion total at December 31, 2022), net of gross market lease intangible liabilities ($23.5 million total at December 31, 2022).
The following table summarizes our portfolio of properties as of December 31, 2023: Asset Type Number of Properties Rentable Square Feet Gross Asset Value (1) (In thousands) Medical Office and Other Healthcare-Related Buildings 156 5,153,419 $ 1,468,401 Seniors Housing — Operating Properties (2) 46 (3) 3,857,652 1,129,573 Total Portfolio 202 9,011,071 $ 2,597,974 __________ (1) Gross asset value represents total real estate investments, at cost ($2.6 billion total at December 31, 2023), net of gross market lease intangible liabilities ($23.5 million total at December 31, 2023).
For more information about the risks and uncertainties associated with inflation, the ongoing war in Ukraine and related sanctions and labor shortages, please see the sections “Inflation” and “Part II—Item 1A. Risk Factors” below.
For more information about the risks and uncertainties associated with inflation, the ongoing wars in Ukraine, Israel, and related sanctions and labor shortages, please see the sections “Inflation” and “Part II—Item 1A. Risk Factors” below. Adverse Economic Impacts — SHOP Segment In our SHOP segment, occupancy trended downward from March 2020 until June 2021 and has since stabilized.
Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), permanently repealed the Sustainable Growth Rate formula, and provided for an annual rate increase of 0.5% for physicians through 2019, but imposed a six-year freeze on fee updates from 2020 through 2025.
In addition, CMS’s continuing transition of Medicare from a traditional fee for service reimbursement model to a capitated value-based and bundled payment approach, which shifts the financial responsibility of certain patients to providers, will continue to create unprecedented challenges for providers. 11 T able of Contents Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), permanently repealed the Sustainable Growth Rate formula, and provided for an annual rate increase of 0.5% for physicians through 2019, but imposed a six-year freeze on fee updates from 2020 through 2025.
Ancillary revenues and revenues from sub-acute care services are derived from providing services beyond room and board and include occupational, physical, speech, respiratory and intravenous therapy, wound care, oncology treatment, brain injury care and orthopedic therapy, as well as sales of pharmaceutical products and other services. Certain facilities provide some of the foregoing services on an outpatient basis.
However, independent living facilities on their own are not treated as qualified health care properties eligible to be leased to a TRS. 6 T able of Contents Ancillary revenues and revenues from sub-acute care services are derived from providing services beyond room and board and include occupational, physical, speech, respiratory and intravenous therapy, wound care, oncology treatment, brain injury care and orthopedic therapy, as well as sales of pharmaceutical products and other services.
Future developments in the course of the pandemic, increases to inflation, labor shortages and supply chain disruptions may cause further adverse impacts to our occupancy and cost levels, and these trends may continue to impact us and have material adverse effects on our revenues and net income in future quarters.
The persistence of high inflation, labor shortages, supply chain disruptions, and higher interest rates, property insurance rates and property tax rates have caused adverse impacts to our occupancy and cost levels, and these trends may continue to impact us and have material adverse effects on the results of our operations in future periods.
The following table details the geographic distribution, by region, of our portfolio as of December 31, 2022: Geographic Region Number of Properties Annualized Rental Income (1) Rentable Square Feet Rentable Units in SHOP Segment (In thousands) Northeast 25 $ 35,412 1,624,153 289 South 70 125,111 3,211,198 1,849 Midwest 76 106,233 2,799,910 1,642 West 31 46,862 1,486,109 594 Total Portfolio 202 $ 313,618 9,121,370 4,374 ________ (1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2022, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs (as defined below) for the fourth quarter of 2022.
The following table details the geographic distribution, by region, of our portfolio as of December 31, 2023: Geographic Region Number of Properties Annualized Rental Income (1) Rentable Square Feet Rentable Units in SHOP Segment (In thousands) Northeast 26 $ 39,433 1,648,564 289 South 62 109,901 2,784,053 1,436 Midwest 81 121,204 3,037,467 1,845 West 35 50,185 1,540,987 594 Total Portfolio 204 $ 320,723 9,011,071 4,164 __________ (1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2023, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs for the fourth quarter of 2023.
We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for MOBs and other facilities that serve the healthcare industry.
This growth is expected due to an aging population and the projected increase in the number of individuals who will have access to health insurance. We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for MOBs and other facilities that serve the healthcare industry.
The following table reflects the on campus, off campus, affiliated and non-affiliated MOB composition of our portfolio as of December 31, 2022: MOB Classification Number of Properties Rentable Square Feet On Campus 19 1,111,254 Off Campus 131 3,979,703 Total 150 5,090,957 Affiliated 72 2,920,284 Non-affiliated 78 2,170,673 Total 150 5,090,957 Seniors Housing Properties As of December 31, 2022, we owned 52 seniors housing properties under the RIDEA structure in our SHOP segment.
The following table reflects the on campus, off campus, affiliated and non-affiliated MOB composition of our portfolio as of December 31, 2023: MOB Classification Number of Properties Rentable Square Feet On Campus 19 1,109,706 Off Campus 137 4,043,713 Total 156 5,153,419 Affiliated 71 2,890,507 Non-affiliated 85 2,262,912 Total 156 5,153,419 Seniors Housing Properties As of December 31, 2023, we owned 46 seniors housing properties under the RIDEA structure in our SHOP segment.
MACRA reporting requirements and quality metrics may encourage physicians to move from smaller practices to 12 Table of Contents larger physician groups or hospital employment, leading to further consolidation of the industry.
MACRA reporting requirements and quality metrics may encourage physicians to move from smaller practices to larger physician groups or hospital employment, leading to further consolidation of the industry. These and other shifts in payment and risk sharing within an outcome-based model are leading to, among other trends, increasing use of management tools to oversee individual providers and coordinate their services.
The continued trend toward capitated, value-based, and bundled payment approaches has the potential to diminish the market for certain healthcare providers, particularly specialist physicians and providers of particular diagnostic technologies. This could adversely impact the medical properties that house these physicians and medical technology providers.
The focus on utilization puts downward pressure on the number and expense of services provided as payors are moving away from a fee for service model. The continued trend toward capitated, value-based, and bundled payment approaches has the potential to diminish the market for certain healthcare providers, particularly specialist physicians and providers of particular diagnostic technologies.
The KeyBank Facility and Capital One Facility are referred to herein together as the “Fannie Mae Master Credit Facilities”. Our senior secured credit facility with KeyBank National Association (our “Credit Facility”) consists of two components, our Revolving Credit Facility and our term loan (our “Term Loan”).
The KeyBank Facility and Capital One Facility are referred to herein together as the “Fannie Mae Master Credit Facilities”. We may seek and even replace current borrowings with longer-term capital such as senior secured or unsecured notes or other forms of long-term financing.
According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare practitioners and technical occupations and healthcare support) is projected to grow 13% from 2021 to 2031, adding approximately 2 million new jobs. This growth is expected due to an aging population and the projected increase in the number of individuals who will have access to health insurance.
According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare and social assistance sector) is projected to grow 9.7% from 2022 to 2032, adding approximately 2.1 million new jobs, representing job growth higher than any other sector and approximately 45% of all the projected job gains from 2022 to 2031.
Impact of COVID-19 Pandemic During the first quarter of 2020, the global COVID-19 pandemic that has spread around the world and to every state in the U.S. commenced. The COVID-19 pandemic has had, and could continue to have, an adverse impact on economic conditions, including a global economic slowdown and recession that may continue for some time.
As of December 31, 2023 our seniors housing properties included 31 SNF units. Adverse Economic Impacts Since the COVID-19 Pandemic During the first quarter of 2020, the global COVID-19 pandemic commenced. The pandemic and its aftermath have had, and could continue to have, adverse impacts on economic and market conditions.
We also reimburse these entities for certain expenses they incur in providing these services to us. Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, has an interest in us through ownership of interests in our OP.
We also reimburse these entities for certain expenses they incur in providing these services to us.
We received $4.5 million, $5.1 million and $3.6 million in these funds during the years ended December 31, 2022, 2021 and 2020, respectively. For accounting purposes, we consider these funds as grant contributions from the government.
The adverse financial impacts of the COVID-19 pandemic were partially offset by funds received under the CARES Act. We did not receive any funds through the CARES Act in the year ended December 31, 2023. We received $4.5 million and $5.1 million in these funds during the years ended December 31, 2022 and 2021, respectively.
Removed
(1) In May 2021, the Company’s skilled nursing facility in Wellington, Florida, and the Company’s development property in Jupiter, Florida were sold. In December 2020, the Company’s skilled nursing facility in Lutz, Florida was sold.
Added
Our SHOP segment continues to be impacted by the post-pandemic operating environment. Our MOB segment was less impacted, and we believe our MOB segment has returned to its pre-pandemic operating conditions.
Removed
Certain of our properties can be located on or near hospital campuses and require significant plumbing, electrical and mechanical systems to accommodate diagnostic imaging equipment such as x-rays or other imaging equipment, and may also have significant plumbing to accommodate physician exam rooms.
Added
During the year ended December 31, 2022, we relied more on the use of temporary contract labor and agencies than we had historically.
Removed
These residents generally do not need assistance with 6 Table of Contents activities of daily living, however, in some of our facilities, residents have the option to contract for these services. However, independent living facilities on their own are not treated as qualified health care properties eligible to be leased to a TRS.
Added
We have since reduced our reliance on this labor source in the year ended December 31, 2023, however, wage expenses (including overtime, training and bonus wages) incurred from employees of our third party operators has increased due to, among other things, (i) inflation raising the cost of labor generally, (ii) a lack of qualified personnel that our third party operators are able to employ on a permanent basis and (iii) training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor.
Removed
The rapid development and fluidity of the situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions.
Removed
The COVID-19 pandemic had, and another pandemic in the future could have, impacts across many sectors and areas of the global economy and financial markets, leading to significant adverse impacts on economic activity including volatility in financial markets.
Removed
Our MOB tenants and SHOP properties operate businesses that require in-person interactions with their patients and residents, and concern regarding the transmission of COVID-19 impacted the willingness of persons to, among other things, live in or use facilities at our properties, and impacted the revenues generated by our tenants.
Removed
Our ability to lease space and negotiate and maintain favorable rents and the results of operations at our SHOPs could also continue to be negatively impacted by a prolonged recession in the U.S. economy. Moreover, the demand for leasing space at our MOB properties could decline, which could negatively impact occupancy percentage, revenue and net income.
Removed
Additionally, downturns or stagnation of the U.S. housing market as a result of an economic downturn could adversely affect the ability, or perceived ability, of seniors to afford the resident fees and services at our SHOPs.
Removed
Beginning in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect us in a number of ways that vary by operating segment: 7 Table of Contents COVID-19 Impact — MOB Segment The financial stability and overall health of our tenants is critical to our business.
Removed
We took a proactive approach to achieve mutually agreeable solutions with our tenants and in some cases, during the year ended December 31, 2020, we executed lease amendments providing for deferral of rent.
Removed
Since the year ended December 31, 2020, we have not entered into any rent deferral agreements with any of our tenants in this segment, and all amounts previously deferred under prior rent deferral agreements have been collected.
Removed
COVID-19 Impact — SHOP Segment In our SHOP segment, occupancy trended downward from March 2020 until June 2021 and has since stabilized and begun to recover. We also experienced lower inquiry volumes and reduced in-person tours since the onset of the COVID-19 pandemic.
Removed
These cost increases became more prominent throughout the year ended December 31, 2022 from a combination of factors: (i) we were impacted by rising inflation which generally increased the costs of services and supplies, (ii) we relied more on the use of temporary contract labor and agencies due to a shortage of qualified personnel and (iii) the amounts we paid to third party providers for wages, including overtime wages, and bonuses increased.
Removed
While the continued development of COVID-19 vaccines may limit those effects, the effectiveness of vaccines and the willingness to receive vaccines are highly uncertain and cannot be predicted with confidence. The financial impact of the COVID-19 pandemic on us has been partially offset by funds received under the CARES Act.
Removed
Our Credit Facility is secured by a pledged pool of the equity interests and related rights in wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base thereunder. We may seek and even replace current borrowings with longer-term capital such as senior secured or unsecured notes or other forms of long-term financing.
Removed
In addition, CMS’s continuing transition of Medicare from a traditional fee for service reimbursement model to a capitated value-based and bundled payment approach, which shifts the financial responsibility of certain patients to providers, will continue to create unprecedented challenges for providers.
Removed
These and other shifts in payment and risk sharing within an outcome-based model are leading to, among other trends, increasing use of management tools to oversee individual providers and coordinate their services. The focus on utilization puts downward pressure on the number and expense of services provided as payors are moving away from a fee for service model.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

124 edited+49 added−141 removed361 unchanged
Biggest changeAfter the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: • 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and • two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.
Biggest changeAfter the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: • 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and • two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. 34 T able of Contents These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
Real estate markets are subject to economic downturns, as they have been in the past, and we cannot predict how economic conditions will impact this market in both the short and long-term. Declines in the economy or a decline in the real estate market in these states could hurt our financial performance and the value of our properties.
Real estate markets are subject to economic downturns, as they have been in the past, and we cannot predict how economic conditions will impact this market in both the short and long-term. Declines in the economy or a decline in the real estate markets in these states could hurt our financial performance and the value of our properties.
Inflation and continuing increases in the inflation rate may have an adverse effect on our investments and results of operations. Recent increases and continuing increases in the rate of inflation, both real and anticipated, may impact our investments and results of operations.
Inflation may have an adverse effect on our investments and results of operations. Recent increases and continuing increases in the rate of inflation, both real and anticipated, may impact our investments and results of operations.
Provisions contained in our bylaws may deter, delay or prevent a change in control of our board of directors, including, for example, provisions requiring qualifications for an individual to serve as a director and a requirement that certain of our directors be “Managing Directors” and other directors be “Independent Directors”, as defined in our governing documents.
Provisions contained in our bylaws may deter, delay or prevent a change in control of our Board, including, for example, provisions requiring qualifications for an individual to serve as a director and a requirement that certain of our directors be “Managing Directors” and other directors be “Independent Directors”, as defined in our governing documents.
Increases in interest rates may adversely impact our ability to refinance our indebtedness, including the indebtedness secured by our properties, as the loans come due or we otherwise desire to do so on favorable terms, or at all.
Further increases in interest rates may adversely impact our ability to refinance our indebtedness, including the indebtedness secured by our properties, as the loans come due or we otherwise desire to do so on favorable terms, or at all.
Among the factors that could affect the trading price are: • our financial condition, including the level of our indebtedness, and performance; • our ability to grow through property acquisitions, the terms and pace of any acquisitions we may make and the availability and terms of financing for those acquisitions; • the financial condition of our tenants, including tenant bankruptcies or defaults; • actual or anticipated quarterly fluctuations in our operating results and financial condition; • the amount and frequency of our payment of dividends and other distributions; • additional sales of equity securities, including Series A Preferred Stock, Series B Preferred Stock, common stock or any other equity interests, or the perception that additional sales may occur; • the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, and fixed income debt securities; • our reputation and the reputation of AR Global and its affiliates or other entities advised by AR Global and its affiliates; • uncertainty and volatility in the equity and credit markets; • increases in interest rates; • inflation and continuing increases in the real or perceived inflation rate; • changes in revenue or earnings estimates, if any, or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs; • failure to meet analyst revenue or earnings estimates; • strategic actions by us or our competitors, such as acquisitions or restructurings; 38 Table of Contents • the extent of investment in our Series A Preferred Stock and Series B Preferred Stock by institutional investors; • the extent of short-selling of our Series A Preferred Stock and Series B Preferred Stock; • general financial and economic market conditions and, in particular, developments related to market conditions for REITs and other real estate related companies; • failure to maintain our REIT status; • changes in tax laws; • domestic and international economic factors unrelated to our performance; and • all other risk factors addressed elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2022.
Among the factors that could affect the trading price are: • our financial condition, including the level of our indebtedness, and performance; • our ability to grow through property acquisitions, the terms and pace of any acquisitions we may make and the availability and terms of financing for those acquisitions; • the financial condition of our tenants, including tenant bankruptcies or defaults; • actual or anticipated quarterly fluctuations in our operating results and financial condition; • the amount and frequency of our payment of dividends and other distributions; • additional sales of equity securities, including Series A Preferred Stock, Series B Preferred Stock, common stock or any other equity interests, or the perception that additional sales may occur; • the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, and fixed income debt securities; • our reputation and the reputation of AR Global and its affiliates or other entities advised by AR Global and its affiliates; • uncertainty and volatility in the equity and credit markets; • increases in interest rates; • inflation and continuing increases in the real or perceived inflation rate; • changes in revenue or earnings estimates, if any, or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs; • failure to meet analyst revenue or earnings estimates; • strategic actions by us or our competitors, such as acquisitions or restructurings; • the extent of investment in our Series A Preferred Stock and Series B Preferred Stock by institutional investors; • the extent of short-selling of our Series A Preferred Stock and Series B Preferred Stock; • general financial and economic market conditions and, in particular, developments related to market conditions for REITs and other real estate related companies; • failure to maintain our REIT status; • changes in tax laws; • domestic and international economic factors unrelated to our performance; and • all other risk factors addressed elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2023.
Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT and provided we do not meet a safe harbor available under the Code, we will be subject to a 100% penalty tax on the net income from the sale or other disposition of any property (other than 43 Table of Contents foreclosure property) that we own, directly or indirectly through any subsidiary entity, including the OP, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT and provided we do not meet a safe harbor available under the Code, we will be subject to a 100% penalty tax on the net income from the sale or other disposition of any property (other than foreclosure property) that we own, directly or indirectly through any subsidiary entity, including the OP, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
There is no assurance we will continue to collect at the current rates. Our ability to collect rents in future periods may be impacted by issues or events that cannot be determined as present and the amount of cash rent collected during 2022 may not be indicative of any future period.
There is no assurance we will continue to collect at the current rates. Our ability to collect rents in future periods may be impacted by issues or events that cannot be determined as present and the amount of cash rent collected during 2023 may not be indicative of any future period.
Our compliance with the REIT income or quarterly asset requirements also depends on our ability to successfully manage the composition of our income and assets on an ongoing basis. Accordingly, if certain of our operations were to be recharacterized by the IRS, such recharacterization would jeopardize our ability to satisfy all requirements for qualification as a REIT.
Our compliance with the REIT income or quarterly asset requirements also depends on our ability to successfully manage the composition of our income and assets on an ongoing basis. Accordingly, if certain of our operations were to be recharacterized by the IRS, such recharacterization could jeopardize our ability to satisfy all requirements for qualification as a REIT.
Furthermore, the healthcare industry currently is experiencing rapid regulatory changes and uncertainty; changes in the demand for and methods of delivering healthcare services; changes in third-party reimbursement policies; significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas; expansion of insurance providers into patient care; continuing pressure by private and governmental payors to reduce payments 26 Table of Contents to providers of services; and increased scrutiny of billing, referral and other practices by federal and state authorities.
Furthermore, the healthcare industry currently is experiencing rapid regulatory changes and uncertainty; changes in the demand for and methods of delivering healthcare services; changes in third-party reimbursement policies; significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas; expansion of insurance providers into patient care; continuing pressure by private and governmental payors to reduce payments to providers of services; and increased scrutiny of billing, referral and other practices by federal and state authorities.
In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we lose our REIT qualification. Losing our REIT qualification would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability.
In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we lose our REIT qualification. Losing our REIT qualification would reduce our net earnings available for investment or distribution to stockholders because of the additional entity-level tax liability.
Summary Risk Factors • Our operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market in general. • Our property portfolio has a high concentration of properties located in Florida.
Summary Risk Factors • Our operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market. • Our property portfolio has a high concentration of properties located in Florida and Pennsylvania.
Although we intend to make distributions sufficient to meet the annual distribution requirements and to avoid U.S. federal income and excise taxes on our earnings while we qualify as a REIT, it is possible that we might not always be able to do so. Recharacterization of sale-leaseback transactions may cause us to lose our REIT status.
Although we intend to make distributions sufficient to meet the annual distribution requirements and to avoid U.S. federal income and excise taxes on our earnings while we qualify as a REIT, it is possible that we might not always be able to do so. 38 T able of Contents Recharacterization of sale-leaseback transactions may cause us to lose our REIT status.
The price at which shares of our common stock may be sold under the DRIP and the price at which shares of our common stock may be repurchased by us pursuant to the SRP are based on Estimated Per-Share NAV and may not reflect the price that our stockholders would receive for their shares in a market transaction, the proceeds that would be received upon our liquidation or the price that a third-party would pay to acquire us.
The price at which shares of our common stock may be sold under the DRIP, if reinstated, would be the price at which shares of our common stock may be repurchased by us pursuant to the SRP, if reinstated, would be based on Estimated Per-Share NAV and may not reflect the price that our stockholders would receive for their shares in a market transaction, the proceeds that would be received upon our liquidation or the price that a third-party would pay to acquire us.
Dividends issued in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when stock dividends are issued; however, because each common stockholder will receive the same number of new shares, the total value of a common stockholder’s investment, all things equal, will not change assuming no sales or other transfers.
Dividends issued in the form of additional shares of common stock will, all things being equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when stock dividends are issued; however, because each common stockholder will receive the same number of new shares per share of common stock held, the total value of a common stockholder’s investment, all things being equal, will not change assuming no sales or other transfers.
If they do not comply with the additional reporting requirements and responsibilities, the ability of our tenants’ to participate in federal health 27 Table of Contents programs may be adversely affected. Moreover, there may be other comprehensive healthcare reform legislation, which, depending on how they are implemented, could materially and adversely affect our operators.
If they do not comply with the additional reporting requirements and responsibilities, the ability of our tenants’ to participate in federal health programs may be adversely affected. Moreover, there may be other comprehensive healthcare reform legislation, which, depending on how they are implemented, could materially and adversely affect our operators.
The Board has duties to us and could only cause such changes in our tax treatment if it determines that such changes are in our best interests. 46 Table of Contents The share ownership restrictions for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities.
The Board has duties to us and could only cause such changes in our tax treatment if it determines that such changes are in our best interests. The share ownership restrictions for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities.
If the sale-leaseback were recharacterized as a joint venture, our lessee and we could be treated as co-venturers with regard to 19 Table of Contents the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property. Either of these outcomes could adversely affect our cash flow.
If the sale-leaseback were recharacterized as a joint venture, our lessee and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property. Either of these outcomes could adversely affect our cash flow.
The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. 40 Table of Contents Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.
The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.
As with any methodology used to estimate value, the valuation methodologies that will be used by any independent valuer to value our properties involve subjective judgments concerning factors such as comparable sales, rental and operating expense data, capitalization or discount rate, and projections of future rent and expenses. 37 Table of Contents Under our valuation guidelines, our independent valuer estimates the market value of our principal real estate and real estate-related assets, and our Advisor makes a recommendation as to the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimate provided by the independent valuer.
As with any methodology used to estimate value, the valuation methodologies that will be used by any independent valuer to value our properties involve subjective judgments concerning factors such as comparable sales, rental and operating expense data, capitalization or discount rate, and projections of future rent and expenses. 31 T able of Contents Under our valuation guidelines, our independent valuer estimates the market value of our principal real estate and real estate-related assets, and our Advisor makes a recommendation as to the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimate provided by the independent valuer.
Furthermore, this licensing requirement subjects us (through our ownership interest in our TRS) to various regulatory laws, including those described herein. Most states regulate 24 Table of Contents and inspect healthcare facility operations, patient care, construction and the safety of the physical environment.
Furthermore, this licensing requirement subjects us (through our ownership interest in our TRS) to various regulatory laws, including those described herein. Most states regulate and inspect healthcare facility operations, patient care, construction and the safety of the physical environment.
Furthermore, to the extent our TRS holds the healthcare license, it could have exposure to professional liability claims arising out of an alleged breach of the applicable standard of care rules. Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.
Furthermore, to the extent our TRS holds the healthcare license, it could have exposure to professional liability claims arising out of an alleged breach of the applicable standard of care rules. 20 T able of Contents Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.
Accordingly, U.S. stockholders receiving a distribution of shares of our common stock may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution.
Accordingly, U.S. stockholders receiving a distribution partly in cash and partly in shares of our common stock may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution.
Recently proposed regulations would apply special look-through rules to certain U.S. corporate stockholders in determining whether a REIT is domestically controlled. We believe, but there can be no assurance, that we will be a domestically-controlled qualified investment entity.
Recently proposed regulations would apply special look-through rules to certain U.S. corporate stockholders in determining whether a REIT is domestically controlled. We believe that we currently are, but there can be no assurance that we will continue to be, a domestically-controlled qualified investment entity.
We incurred $3.2 million, $1.1 million and $2.7 million of bad debt expense, including straight-line rent write-offs, related to tenants in default under their leases to us during the years ended December 31, 2022, 2021 and 2020, respectively.
We incurred $1.2 million, $3.2 million and $1.1 million of bad debt expense, including straight-line rent write-offs, related to tenants in default under their leases to us during the years ended December 31, 2023, 2022 and 2021, respectively.
This claim could be paid only if funds were available, and then only in the same percentage as that realized on other unsecured claims. A tenant or lease guarantor bankruptcy could delay efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums.
This claim could be paid only if funds were available, and then only in the same percentage as that realized on other unsecured claims. 15 T able of Contents A tenant or lease guarantor bankruptcy could delay efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums.
The agreements governing our borrowings contain provisions that affect or restrict our policies regarding dividends and other distributions and our operations, require us to satisfy financial coverage ratios, and may restrict our ability to, among other things, incur additional indebtedness, make certain investments, replace our Advisor, discontinue insurance coverage, merge with another company, and create, incur or assume liens.
The agreements governing our borrowings contain provisions that affect or restrict our policies regarding dividends and other distributions and our operations, require us to satisfy financial coverage ratios, and may restrict our ability to, among other things, incur additional indebtedness, make certain investments, enter into certain transactions with our affiliates, replace our Advisor, discontinue insurance coverage, merge with another company, and create, incur or assume liens.
Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by these disruptions. 31 Table of Contents As reliance on technology has increased, so have the risks posed to those systems.
Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by these disruptions. As reliance on technology has increased, so have the risks posed to those systems.
Our ability to satisfy the asset tests depends on our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and 42 Table of Contents for which we will not obtain independent appraisals.
Our ability to satisfy the asset tests depends on our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.
If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flows. In some instances, we may sell our properties by providing financing to purchasers.
If we sell properties by providing financing to purchasers, defaults by the purchasers could adversely affect our cash flows. In some instances, we may sell our properties by providing financing to purchasers.
For U.S. federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a 33 Table of Contents purchase price equal to the outstanding balance of the debt secured by the mortgage.
For U.S. federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.
Such a recharacterization of an underlying property owner could also threaten our ability to maintain our REIT qualification. If our qualified health care properties are not properly leased to a TRS or the managers of those qualified health care properties do not qualify as “eligible independent contractors,” we could fail to qualify as a REIT.
Such a recharacterization of an underlying property owner could also threaten our ability to maintain our REIT qualification. 39 T able of Contents If our qualified health care properties are not properly leased to a TRS or the managers of those qualified health care properties do not qualify as “eligible independent contractors,” we could fail to qualify as a REIT.
In addition, losses in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of the TRS. Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities.
In addition, losses in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of the TRS. 41 T able of Contents Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities.
Risks Related to our Indebtedness Our level of indebtedness may increase our business risks. As of December 31, 2022, we had total outstanding indebtedness of $1.1 billion. We may incur additional indebtedness in the future for various purposes.
Risks Related to our Indebtedness Our level of indebtedness may increase our business risks. As of December 31, 2023, we had total outstanding indebtedness of $1.2 billion. We may incur additional indebtedness in the future for various purposes.
The Estimated Per-Share NAV may not reflect the value of shares of our common stock at any given time, and our estimated per-share NAV may differ significantly from our actual per-share net asset value at any given time. The trading price of our Series A Preferred Stock and Series B Preferred Stock may fluctuate significantly.
The Estimated Per-Share NAV may not reflect the value of shares of our common stock at any given time, and our estimated per-share NAV may differ significantly from our actual per-share net asset value at any given time. 32 T able of Contents The trading price of our Series A Preferred Stock and Series B Preferred Stock may fluctuate significantly.
A total of 10% or more of our consolidated annualized rental income on a straight-line basis for the fiscal year ended December 31, 2022 was generated from the state below: State Percentage of Straight-Line Rental Income Florida 19.2% Any adverse situation that disproportionately affects operations or investments in the states listed above may have a magnified adverse effect on our portfolio.
A total of 10% or more of our consolidated annualized rental income on a straight-line basis for the fiscal year ended December 31, 2023 was generated from the state below: State Percentage of Straight-Line Rental Income Florida 19.9% Pennsylvania 10.6% Any adverse situation that disproportionately affects operations or investments in the states listed above may have a magnified adverse effect on our portfolio.
If a tenant or operator is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if a tenant or operator is required to pay uninsured punitive damages, or if a tenant or operator is subject to an uninsurable government enforcement action, the tenant could be exposed to substantial additional liabilities, which may affect the tenant’s or operator’s business, operations and the tenant’s ability to pay rent to us. 30 Table of Contents We may experience adverse effects as a result of potential financial and operational challenges faced by the tenants and operators of any seniors housing facilities and skilled nursing facilities we own or acquire.
If a tenant or operator is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if a tenant or operator is required to pay uninsured punitive damages, or if a tenant or operator is subject to an uninsurable government enforcement action, the tenant could be exposed to substantial additional liabilities, which may affect the tenant’s or operator’s business, operations and the tenant’s ability to pay rent to us, which could have a material adverse effect on us. 26 T able of Contents We may experience adverse effects as a result of potential financial and operational challenges faced by the tenants and operators of any seniors housing facilities and skilled nursing facilities we own or acquire.
Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S. stockholder sells or exchanges shares of our stock, gain arising from such a sale or exchange would not be subject to U.S. taxation as a sale of a USRPI if (a) the shares are of a class of our stock that is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market, and (b) such non-U.S. stockholder owned, actually and constructively, 10% or less of the outstanding shares of our stock of that class at any time during the five-year period ending on the date of the sale.
Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S. stockholder sells or exchanges shares of our stock, gain arising from such a sale or exchange would not be subject to U.S. taxation as a sale of a USRPI if (a) the shares are of a class of our stock that is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market, and (b) such non-U.S. stockholder owned, actually and constructively, 10% or less of the outstanding shares of such class of stock at all times during the shorter of (x) five-year period ending on the date of the sale and (y) the period during which the non-U.S. stockholders held such shares of our stock.
Several government initiatives have resulted in reductions in funding of the Medicare and Medicaid programs and additional changes in reimbursement regulations by the Centers for Medicare & Medicaid Services (“CMS”), contributing to pressure to contain healthcare costs and additional operational requirements, which may impact the ability of our tenant to make rent payments to us.
Several government initiatives have resulted in reductions in funding of the Medicare and Medicaid programs and additional changes in reimbursement regulations by the CMS, contributing to pressure to contain healthcare costs and additional operational requirements, which may impact the ability of our tenant to make rent payments to us.
These types of provisions restrict our ability to sell a property. In addition, applicable provisions of the Code impose restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies.
These types of provisions restrict our ability to sell a property. 21 T able of Contents In addition, applicable provisions of the Code impose restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies.
These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the 23 Table of Contents presence of such hazardous or toxic substances.
These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances.
The Estimated Per-Share NAV of our common stock is based upon subjective judgments, assumptions and opinions about future events, and may not reflect the amount that our stockholders might receive for their shares. We intend to publish an updated Estimated Per-Share NAV as of December 31, 2022 in early April 2023.
The Estimated Per-Share NAV of our common stock is based upon subjective judgments, assumptions and opinions about future events, and may not reflect the amount that our stockholders might receive for their shares. We intend to publish an updated Estimated Per-Share NAV as of December 31, 2023 in late March 2024.
The taxation of distributions can be complex; however, distributions to stockholders that are treated as dividends for U.S. federal income tax purposes generally will be taxable as ordinary income, which may reduce our stockholders’ after-tax anticipated return from an investment in us.
Such distributions are not taxable to our stockholders. 40 T able of Contents The taxation of distributions can be complex; however, distributions to stockholders that are treated as dividends for U.S. federal income tax purposes generally will be taxable as ordinary income, which may reduce our stockholders’ after-tax anticipated return from an investment in us.
Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our OP and its subsidiaries will be available to satisfy the claims of our creditors or to pay dividends and other distributions to our stockholders only after all the liabilities and obligations of our OP and its subsidiaries have been paid in full.
Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our OP and its subsidiaries will be available to satisfy the claims of our creditors or to pay dividends and other distributions to our stockholders only after all the liabilities and obligations of our OP and its subsidiaries have been paid in full. 37 T able of Contents U.S.
In addition, purchase agreements we entered into may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing.
In addition, purchase agreements we entered into in the past, or may enter into in the future, may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing.
Furthermore, the state of the debt markets could have an impact on the overall amount of capital being invested in real estate, which may result in price or value decreases of real estate assets and could negatively impact the value of our assets.
Furthermore, the state of the debt markets could have an impact on the overall amount of capital being invested in real estate, which may result in price or value decreases of real estate assets and could negatively impact the value of our assets, which could have a material adverse effect on us.
One of our goals is to increase assets through acquiring additional properties, and pursuing this investment objective exposes us to numerous risks, including: • competition from other real estate investors with significant capital resources; • we may acquire properties that are not accretive; • we may not successfully integrate, manage and lease the properties we acquire in a fashion that meets our expectations or market conditions may result in future vacancies and lower-than expected rental rates; • we expect to finance future acquisitions primarily with additional borrowings under our Revolving Credit Facility, and there can be no assurance as to how much borrowing capacity will be available for this purpose • we may be unable to assume existing debt financing or obtain property-level debt financing or raise equity required to fund acquisitions from other sources on favorable terms, or at all; • we may need to spend more than budgeted amounts to make necessary improvements or renovations to acquired properties; • agreements for the acquisition of properties are typically subject to customary conditions to closing that may or may not be completed, and we may spend significant time and money on potential acquisitions that we do not consummate; • the process of acquiring or pursuing the acquisition of a new property may divert the attention of our management team from our existing business operations; and • we may acquire properties without recourse, or with only limited recourse, for liabilities, whether known or unknown.
One of our goals is to increase assets through acquiring additional properties, and pursuing this investment objective exposes us to numerous risks, including: • competition from other real estate investors with significant capital resources; • we may acquire properties that are not accretive; • we may not successfully integrate, manage and lease the properties we acquire in a fashion that meets our expectations or market conditions may result in future vacancies and lower-than expected rental rates; • we may be unable to assume existing debt financing or obtain property-level debt financing or raise equity required to fund acquisitions from other sources on favorable terms, or at all; • we may need to spend more than budgeted amounts to make necessary improvements or renovations to acquired properties; • agreements for the acquisition of properties are typically subject to customary conditions to closing that may or may not be completed, and we may spend significant time and money on potential acquisitions that we do not consummate; • the process of acquiring or pursuing the acquisition of a new property may divert the attention of our management team from our existing business operations; and • we may acquire properties without recourse, or with only limited recourse, for liabilities, whether known or unknown.
Furthermore, a security breach or other significant disruption involving the information technology networks and related systems of our Advisor or any other party that provides us with services essential to our operations could: • result in misstated financial reports, violations of loan covenants, missed reporting deadlines or missed permitting deadlines; • affect our ability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information (including information about our tenant operators and other third-party operators of our healthcare facilities, as well as the patients or residents at those facilities), which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; • result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space; • require significant management attention and resources to remedy any damages that result; • subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or • adversely impact our reputation among our tenants, operators and investors generally.
Additionally, any failure to adequately protect against unauthorized or unlawful processing of personal data, or to take appropriate action in cases of infringement may result in significant penalties under privacy law. 36 T able of Contents Furthermore, a security breach or other significant disruption involving the information technology networks and related systems of our Advisor or any other party that provides us with services essential to our operations could: • result in misstated financial reports, violations of loan covenants, missed reporting deadlines or missed permitting deadlines; • affect our ability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information (including information about our tenant operators and other third-party operators of our healthcare facilities, as well as the patients or residents at those facilities), which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; • result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space; • require significant management attention and resources to remedy any damages that result; • subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or • adversely impact our reputation among our tenants, operators and investors generally.
Prolonged vacancies reduce our cash flow. We obtain only limited warranties when we purchase a property and therefore have only limited recourse if our due diligence did not identify any issues that lower the value of our property.
We obtain only limited warranties when we purchase a property and therefore have only limited recourse if our due diligence did not identify any issues that lower the value of our property.
As the owner of the facility, we assume most of the operational risk because we lease our facility to our own partially- or wholly-owned subsidiary rather than a third-party operator. We are therefore responsible for any operating deficits incurred by the facility. As of December 31, 2022, we had four eligible independent contractors operating 52 SHOPs (including two land parcels).
As the owner of the facility, we assume most of the operational risk because we lease our facility to our own partially- or wholly-owned subsidiary rather than a third-party operator. We are therefore responsible for any operating deficits incurred by the facility. As of December 31, 2023, we had four eligible independent contractors operating 46 SHOPs.
The Estimated Per-Share NAV reflected Stock Dividends actually issued as of December 31, 2021, but has not been adjusted to reflect or consider any of the other stock dividends that were issued and will not be adjusted for stock dividends paid or that may be issued in the future until the Board determines a new Estimated Per-Share NAV which is expected in early April 2023.
The Estimated Per-Share NAV reflected stock dividends actually issued as of December 31, 2022, but has not been adjusted to reflect or consider any of the other stock dividends that were issued and will not be adjusted for stock dividends paid or that may be issued in the future until the Board determines a new Estimated Per-Share NAV which is expected in late March 2024.
However, a capital gain distribution will not be treated as effectively connected income if (a) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the U.S. and (b) the non-U.S. stockholder does not own more than 10% of any class of our stock at any time during the one-year period ending on the date the distribution is received.
However, a capital gain distribution will not be treated as effectively connected income if (a) the distribution is received with respect to a class of stock that is “regularly traded,” as defined in applicable Treasury regulations on an established securities market located in the United States and (b) the non-U.S. stockholder does not own more than 10% of such class of our stock at any time during the one-year period ending on the date the distribution is received.
Investigation by a federal or state governmental body for violation of fraud and abuse laws or imposition of any of these penalties upon one of our tenants could jeopardize that tenant’s and operator’s business, reputation, and ability to operate or to make rent payments.
Investigation by a federal or state governmental body for violation of fraud and abuse laws or imposition of any of these penalties upon one of our tenants could jeopardize that tenant’s and operator’s business, reputation, and ability to operate or to make rent payments, which could have a material adverse effect on us.
The limited termination rights will make it difficult for us to renegotiate the terms of the advisory agreement or replace our Advisor even if the terms of the advisory agreement are no longer consistent with the terms generally available to externally-managed REITs for similar services.
The limited termination rights will make it difficult for us to renegotiate the terms of the advisory agreement or replace our Advisor even if the terms of the advisory agreement are no longer consistent with the terms generally available to externally-managed REITs for similar services, could have a material adverse effect on us.
Compliance with covenants, conditions and restrictions may adversely affect our operating costs and reduce the amount of cash flow that we generate. Our operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks.
Moreover, the operation and management of the contiguous properties may impact such properties. Compliance with covenants, conditions and restrictions may adversely affect our operating costs and reduce the amount of cash flow that we generate. Our operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks.
Health insurance coverage under the Affordable Care Act is likely going to continue to expand 2023.
Health insurance coverage under the Affordable Care Act is likely going to continue to expand in 2024.
Payment of yield maintenance premiums in connection with dispositions or refinancings could adversely affect our cash flow. Rising expenses could reduce cash flow. The properties that we own or may acquire are subject to operating risks, any or all of which may negatively affect us.
Payment of yield maintenance premiums in connection with dispositions or refinancings could adversely affect our cash flow, affecting our results of operations and the ability to pay distributions to our stockholders. Rising expenses could reduce cash flow. The properties that we own or may acquire are subject to operating risks, any or all of which may negatively affect us.
These sources of funding may not be available on attractive terms or at all. Failure to procure additional funding for additional funding improvements would impact the value of the applicable property or our ability to lease the applicable property on favorable terms, if at all.
These sources of funding may not be available on attractive terms or at all, including, as a result of rising interest rates. Failure to procure additional funding for additional funding improvements would impact the value of the applicable property or our ability to lease the applicable property on favorable terms, if at all.
This may impact our ability to access capital on favorable terms, in a timely manner, or at all, which could make obtaining funding for our capital needs more challenging or expensive. We also face a heightened level of interest rate risk as the U.S. Federal Reserve Board tapers its quantitative easing program and raises interest rates.
This may impact our ability to access capital on favorable terms, in a timely manner, or at all, which could make obtaining funding for our capital needs more challenging or expensive. We also face a heightened level of interest rate risk as the U.S.
Any future impairment could have a material adverse effect on our results in the period in which the charge is taken. Our real estate investments are relatively illiquid, and therefore we may not be able to dispose of properties when we desire to do so or on favorable terms. Investments in real properties are relatively illiquid.
Any future impairment could have a material adverse effect on our financial position and results of operations and liquidity. Our real estate investments are relatively illiquid, and therefore we may not be able to dispose of properties when we desire to do so or on favorable terms. Investments in real properties are relatively illiquid.
The estimate was as of December 31, 2021 and has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in early April 2023.
The estimate was as of December 31, 2022 and has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in late March 2024.
Our Advisor, AR Global and their officers and employees and certain of our executive officers and other key personnel face competing demands relating to their time, and this may cause our operating results to suffer. 36 Table of Contents Our Advisor, AR Global and their officers and employees and certain of our executive officers and other key personnel and their respective affiliates are key personnel, general partners, sponsors, managers, owners and advisors of other real estate investment programs, including entities advised by affiliates of AR Global, some of which have investment objectives and legal and financial obligations similar to ours and may have other business interests as well.
Our Advisor, AR Global and their officers and employees and certain of our executive officers and other key personnel and their respective affiliates are key personnel, general partners, sponsors, managers, owners and advisors of other real estate investment programs, including entities advised by affiliates of AR Global, some of which have investment objectives and legal and financial obligations similar to ours and may have other business interests as well.
Risks Related to Conflicts of Interest Our Advisor faces conflicts of interest relating to the purchase and leasing of properties and these conflicts may not be resolved in our favor, which could adversely affect our investment opportunities.
If we are unable to manage these risks effectively, we could be materially and adversely affected. Risks Related to Conflicts of Interest Our Advisor faces conflicts of interest relating to the purchase and leasing of properties and these conflicts may not be resolved in our favor, which could adversely affect our investment opportunities.
If we are required to make unanticipated major modifications to any of our properties to comply with the Disabilities Act which are determined not to be the responsibility of our tenants, we could incur unanticipated expenses that could have an adverse impact upon our cash flow. Net leases may not result in fair market lease rates over time.
If we are required to make unanticipated major modifications to any of our properties to comply with the Disabilities Act which are determined not to be the responsibility of our tenants, we could incur unanticipated expenses that could have an adverse impact upon our cash flow.
We have a classified board, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders. The board is divided into three classes of directors.
We may also issue other classes or series of preferred stock that could also have the same effect. We have a classified board, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders. The Board is divided into three classes of directors.
We have incurred impairment charges, which have an immediate direct impact on our net income for GAAP purposes, including $27.6 million, during the year ended December 31, 2022. There can be no assurance that 25 Table of Contents we will not take additional charges in the future.
We have incurred impairment charges, which have an immediate direct impact on our net loss for GAAP purposes, including $4.7 million, during the year ended December 31, 2023. There can be no assurance that we will not take additional charges in the future.
Revenue may also be adversely affected as a result of falling occupancy rates or slow lease-ups for assisted and independent living facilities due to various factors, including the ongoing COVID-19 pandemic and its related effects.
Revenue may also be adversely affected as a result of falling occupancy rates or slow lease-ups for assisted and independent living facilities due to various factors.
Factors that may negatively affect economic conditions include: • business layoffs or downsizing; • industry slowdowns; • relocations of businesses; • climate change; • changing demographics; 15 Table of Contents • increased telecommuting and use of alternative workplaces; • infrastructure quality; • any oversupply of, or reduced demand for, real estate; • concessions or reduced rental rates under new leases for properties where tenants defaulted; • increased insurance premiums; • state budgets and payment to providers under Medicaid or other state healthcare programs; and • changes in reimbursement for healthcare services from commercial insurers.
Other factors that may negatively affect economic conditions include: • business layoffs or downsizing; • industry slowdowns; • relocations of businesses; • climate change; • changing demographics; • increased telecommuting and use of alternative workplaces; • infrastructure quality; • any oversupply of, or reduced demand for, real estate; • concessions or reduced rental rates under new leases for properties where tenants defaulted; • increased insurance premiums; • state budgets and payment to providers under Medicaid or other state healthcare programs; and • changes in reimbursement for healthcare services from commercial insurers. 14 T able of Contents We may be unable to enter into contracts for and complete property acquisitions on advantageous terms or our property acquisitions may not perform as we expect.
Because there is no established trading market for shares of our common stock, stockholders may not be able to sell shares of our common stock to pay taxes owed on dividend income.
Because there is no established trading market for shares of our common stock, stockholders may not be able to sell shares of our common stock to pay taxes owed on dividend income. Our current distribution policy with respect to distributions on shares of our common stock is to pay such distributions solely in shares of our common stock.
This may result in future acquisitions generating lower overall economic returns. Volatility in the debt markets, may negatively impact our ability to borrow monies to finance the purchase of, or other activities related to, our real estate assets may be negatively impacted.
Volatility in the debt markets, may negatively impact our ability to borrow monies to finance the purchase of, or other activities related to, our real estate assets may be negatively impacted.
All of these actions will likely lead to increases in borrowing costs. If our overall cost of borrowings continue to increase, either due to increases in the index rates or due to increases in lender spreads, we will need to factor such increases into pricing and projected returns for any future acquisitions.
If our overall cost of borrowings continue to increase, either due to increases in the index rates or due to increases in lender spreads, we will need to factor such increases into pricing and projected returns for any future acquisitions. This may result in future acquisitions generating lower overall economic returns.
If interest rates are higher when the indebtedness is refinanced, we may not be able to refinance indebtedness secured by the properties and we may be required to obtain equity to repay the loan or to increase the collateral for the loan.
If interest rates are higher when the indebtedness is refinanced, we may not be able to refinance indebtedness secured by the properties and we may be required to obtain equity to repay the loan or to increase the collateral for the loan, which could adversely affect our business, financial condition, results of operations and liquidity.
We may also fully or partially guarantee mortgage debt incurred by the subsidiary entities that own our properties. In those cases, we will be responsible to the lender for repaying the debt if it is not paid by the entity. In the case of mortgages containing cross-collateralization or cross-default provisions, a default on a single mortgage could affect multiple properties.
We may also fully or partially guarantee mortgage debt incurred by the subsidiary entities that own our properties. In those cases, we will be responsible to the lender for repaying the debt if it is not paid by the entity.
In addition, we are typically responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops, even if our leases with tenants may require tenants to pay routine property maintenance costs.
In addition, we are typically responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops, even if our leases with tenants may require tenants to pay routine property maintenance costs, and the impact of such costs on our results of operations may be exacerbated during inflationary periods, such as that experienced in recent years.
Damage from catastrophic weather and other natural events and climate change could result in losses to us. Certain of our properties are located in areas that may experience catastrophic weather and other natural events from time to time, including hurricanes or other severe weather, flooding, fires, snow or ice storms, windstorms or, earthquakes.
Certain of our properties are located in areas that may experience catastrophic weather and other natural events from time to time, including hurricanes or other severe weather, flooding, fires, snow or ice storms, windstorms or, earthquakes. These adverse weather and natural events could cause substantial damages or losses to our properties which could exceed our insurance coverage.
The co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. In addition, our Advisor may face a conflict in structuring the terms of the relationship between our interests and the interest of the affiliated co-venturer and in managing the joint venture.
In addition, our Advisor may face a conflict in structuring the terms of the relationship between our interests and the interest of the affiliated co-venturer and in managing the joint venture.
Increases in interest rates may make it difficult for us to finance or refinance indebtedness secured by our properties. We have borrowed, and may continue to borrow monies, secured and unsecured by our properties.
Increases in interest rates may make it difficult for us to finance or refinance indebtedness secured by our properties. We have borrowed, and may continue to borrow monies, secured and unsecured by our properties. The U.S. Federal Reserve Board significantly increased the federal funds rate in 2022 and 2023.
In addition, vacancies may occur at one or more of our properties due to a default by a tenant on its lease or expiration of a lease.
In addition, vacancies may occur at one or more of our properties due to a default by a tenant on its lease or expiration of a lease. Vacancies may reduce the value of a property as a result of reduced cash flow generated by the property.
In addition to base rent, our net leases require the single-tenant MOB leases to pay all the properties operating expenses and our multi-tenant MOB leases to pay their allocable share of operating expenses, which may include common area maintenance costs, real estate taxes and insurance.
Although most of our leases contain rent escalation provisions, these escalation rates are generally below the rate of inflation. 17 T able of Contents In addition to base rent, our net leases require the single-tenant MOB leases to pay all the properties operating expenses and our multi-tenant MOB leases to pay their allocable share of operating expenses, which may include common area maintenance costs, real estate taxes and insurance.
These factors may result in the weakening of the financial condition of or the bankruptcy or insolvency of a significant tenant or a number of smaller tenants, which would adversely impact their ability to pay rents as they come due.
These factors may also result in the weakening of the financial condition of a significant tenant or a number of smaller tenants, which could adversely impact their ability to timely pay rent.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeN/A Not applicable. 48 Table of Contents The following table details the geographic distribution, by state, of our portfolio as of December 31, 2022: State Number of Properties Annualized Rental Income (1) Annualized Rental Income as a Percentage of the Total Portfolio Rentable Square Feet Percentage of Portfolio Rentable Square Feet Rentable Units in SHOP Segment (In thousands) Alabama 1 $ 176 0.1 % 5,564 0.1 % — Arizona 14 9,743 3.1 % 509,534 5.6 % — Arkansas 3 14,615 4.7 % 248,783 2.7 % 299 California 8 18,580 5.9 % 446,723 4.9 % 247 Colorado 3 1,727 0.6 % 67,016 0.7 % — Florida 23 60,216 19.2 % 1,099,729 12.1 % 812 Georgia 16 27,439 8.7 % 802,691 8.8 % 624 Idaho 1 3,959 1.3 % 55,846 0.6 % 95 Illinois 21 24,855 7.9 % 858,036 9.4 % 356 Indiana 8 4,693 1.5 % 208,672 2.3 % — Iowa 14 29,185 9.3 % 585,667 6.4 % 679 Kansas 1 4,309 1.4 % 49,360 0.5 % 71 Kentucky 2 3,952 1.3 % 92,875 1.0 % 114 Louisiana 1 656 0.2 % 17,830 0.2 % — Maryland 1 1,046 0.3 % 36,260 0.4 % — Massachusetts 3 846 0.3 % 36,563 0.4 % — Michigan 11 14,705 4.7 % 420,298 4.6 % 311 Minnesota 1 1,098 0.4 % 36,375 0.4 % — Mississippi 3 1,716 0.5 % 73,859 0.8 % — Missouri 2 7,715 2.5 % 96,016 1.1 % 146 Nevada 2 3,270 1.0 % 86,342 0.9 % — New Jersey 1 773 0.2 % 25,164 0.3 % — New York 4 2,598 0.8 % 119,602 1.3 % — North Carolina 3 1,555 0.5 % 90,650 1.0 % — Ohio 5 7,863 2.5 % 172,085 1.9 % — Oklahoma 2 1,092 0.3 % 47,407 0.5 % — Oregon 2 7,551 2.4 % 267,748 2.9 % 252 Pennsylvania 17 31,195 9.9 % 1,442,824 15.8 % 289 South Carolina 2 1,103 0.4 % 52,527 0.6 % — Tennessee 3 3,219 1.0 % 177,489 1.9 % — Texas 9 6,693 2.1 % 403,369 4.4 % — Virginia 1 1,633 0.3 % 62,165 0.7 % — Washington 1 2,031 0.6 % 52,900 0.6 % — Wisconsin 13 11,810 3.8 % 373,401 4.1 % 79 Total 202 $ 313,617 100 % 9,121,370 100 % 4,374 49 Table of Contents __________ (1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2022, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs based off the fourth quarter of 2022.
Biggest changeN/A Not applicable. 44 T able of Contents The following table details the geographic distribution, by state, of our portfolio as of December 31, 2023: State Number of Properties (1) Annualized Rental Income (2) Annualized Rental Income % Rentable Square Feet Rentable Square Feet % Rentable Units in SHOP Segment (In thousands) Alabama 1 $ 176 0.1 % 5,564 0.1 % — Arizona 14 10,140 3.2 % 509,806 5.7 % — Arkansas 3 16,274 5.1 % 248,783 2.8 % 299 California 8 20,645 6.4 % 446,723 5.0 % 247 Colorado 3 1,754 0.5 % 67,016 0.7 % — Florida 23 63,883 19.9 % 1,099,729 12.2 % 812 Georgia 16 29,596 9.2 % 802,691 8.9 % 624 Idaho 1 3,480 1.1 % 55,846 0.6 % 95 Illinois 23 22,792 7.1 % 879,289 9.8 % 356 Indiana 8 4,672 1.5 % 208,672 2.3 % — Iowa 12 26,946 8.4 % 505,781 5.6 % 583 Kansas 1 4,695 1.5 % 49,360 0.5 % 71 Louisiana 1 656 0.2 % 17,830 0.2 % — Maryland 1 1,046 0.3 % 36,260 0.4 % — Massachusetts 3 846 0.3 % 36,563 0.4 % — Michigan 11 16,027 5.0 % 420,298 4.7 % 311 Minnesota 1 1,098 0.3 % 36,375 0.4 % — Mississippi 3 1,124 0.4 % 73,859 0.8 % — Missouri 2 8,594 2.7 % 96,016 1.1 % 146 Nevada 2 3,279 1.0 % 86,342 1.0 % — New Jersey 1 734 0.2 % 25,164 0.3 % — New York 5 2,881 0.9 % 136,982 1.5 % — North Carolina 3 1,656 0.5 % 90,650 1.0 % — Ohio 5 7,890 2.5 % 172,085 1.9 % — Oklahoma 2 1,094 0.3 % 47,407 0.5 % — Oregon 6 8,856 2.8 % 322,354 3.6 % 252 Pennsylvania 16 33,926 10.6 % 1,413,595 15.7 % 289 South Carolina 2 1,103 0.3 % 52,527 0.6 % — Tennessee 3 3,445 1.1 % 175,669 1.9 % — Texas 9 6,629 2.1 % 403,369 4.5 % — Virginia 1 1,633 0.3 % 62,165 0.7 % — Washington 1 2,031 0.6 % 52,900 0.6 % — Wisconsin 13 11,122 3.5 % 373,401 4.1 % 79 Total 204 $ 320,723 100 % 9,011,071 100 % 4,164 __________ (1) Includes two land parcels located in Florida and Iowa.
Wellington at Hershey’s Mill, which is leased to our TRS and operated and managed on our behalf by a third-party operator in our SHOP segment, contains 491,710 rentable square feet and consists of 193 units dedicated to independent living patients, 64 units dedicated to assisted living patients and 32 units dedicated to memory care patients.
Wellington at Hershey’s Mill, which is leased to our TRS and operated and managed on our behalf by a third-party operator in our SHOP segment, contains 491,710 rentable square feet and consists of 289 rentable units (193 units dedicated to independent living patients, 64 units dedicated to assisted living patients and 32 units dedicated to memory care patients).
(2) Weighted-average remaining lease term in years is calculated based on square feet as of December 31, 2022. (3) Gross asset value represents total real estate investments, at cost ($2.6 billion total as of December 31, 2022), net of gross market lease intangible liabilities ($23.5 million total as of December 31, 2022).
(2) Weighted-average remaining lease term in years is calculated based on square feet as of December 31, 2023. (3) Gross asset value represents total real estate investments, at cost ($2.6 billion total as of December 31, 2023), net of gross market lease intangible liabilities ($23.5 million total as of December 31, 2023).
Property Financings See Note 4 — Mortgage Notes Payable, Net and Note 5 — Credit Facilities to our consolidated financial statements in this Annual Report on Form 10-K for property financings as of December 31, 2022 and 2021. Item 3. Legal Proceedings.
Property Financings See Note 4 — Mortgage Notes Payable, Net and Note 5 — Credit Facilities to our consolidated financial statements in this Annual Report on Form 10-K for property financings as of December 31, 2023 and 2022. Item 3. Legal Proceedings.
We are not a party to, and none of our properties are subject to, any material pending legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 51 Table of Contents PART II
We are not a party to, and none of our properties are subject to, any material pending legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 47 Table of Contents PART II
As of December 31, 2022, this property represented 5.4% of our total rentable square feet and 4.8% of our total annualized rental income on a straight-line basis.
As of December 31, 2023, this property represented 5.5% of our total rentable square feet and 5.4% of our total annualized rental income on a straight-line basis.
Impairment charges are already reflected within gross asset value. (4) Includes two parcels of land. (5) Weighted by unit count as of December 31, 2022. As of December 31, 2022, we had 4,374 rentable units in our SHOP segment. Excludes land parcels.
Impairment charges are already reflected within gross asset value. (4) Includes two parcels of land with a total gross asset value of $3.7 million. (5) Weighted by unit count as of December 31, 2023. As of December 31, 2023, we had 4,164 rentable units in our SHOP segment.
These amounts exclude tenant reimbursements and contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to performance thresholds and increases in annual rent based on exceeding certain economic indexes, among other items.
The SHOP segment is excluded as the leased units with residents are generally for annual periods or month-to-month. These amounts exclude tenant reimbursements and contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to performance thresholds and increases in annual rent based on exceeding certain economic indexes, among other items.
Significant Portfolio Properties As of December 31, 2022, the rentable square feet or annualized rental income on a straight-line basis of one property represented 5% or more of our total portfolio’s rentable square feet or annualized rental income on a straight-line basis: 50 Table of Contents Wellington at Hershey’s Mill - West Chester, PA In December 2014, we purchased Wellington at Hershey’s Mill, a seniors housing property located in West Chester, Pennsylvania.
Tenant Concentration As of December 31, 2023, we did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or more of total annualized rental income on a straight-line basis for our portfolio. 46 T able of Contents Significant Portfolio Properties As of December 31, 2023, the rentable square feet or annualized rental income on a straight-line basis of one property represented 5% or more of our total portfolio’s rentable square feet or annualized rental income on a straight-line basis: Wellington at Hershey’s Mill - West Chester, PA In December 2014, we purchased Wellington at Hershey’s Mill, a seniors housing property located in West Chester, Pennsylvania.
Properties The following table presents certain additional information about the properties we owned as of December 31, 2022: Portfolio Number of Properties Rentable Square Feet Percent Leased (1) Weighted Average Remaining Lease Term (2) Gross Asset Value (3) (In thousands) Medical Office and Other Healthcare Related Buildings 150 5,090,957 90.4% 4.9 $ 1,423,804 Seniors Housing — Operating Properties 52 (4) 4,030,413 75.1% (5) N/A 1,140,608 Total Portfolio 202 9,121,370 $ 2,564,412 _______________ (1) Inclusive of leases signed but not yet commenced as of December 31, 2022.
Properties The following table presents certain additional information about the properties we owned as of December 31, 2023: Portfolio Number of Properties Rentable Square Feet Percent Leased (1) Weighted Average Remaining Lease Term (2) Gross Asset Value (3) (In thousands) Medical Office and Other Healthcare Related Buildings 156 5,153,419 90.6% 4.7 $ 1,468,401 Seniors Housing — Operating Properties 48 (4) 3,857,652 74.1% (5) N/A 1,133,238 Total Portfolio 204 9,011,071 $ 2,601,639 __________ (1) Inclusive of leases signed but not yet commenced as of December 31, 2023.
(In thousands) Future Minimum Base Rent Payments 2023 $ 106,009 2024 99,507 2025 88,452 2026 80,462 2027 62,175 2028 45,274 2029 38,165 2030 34,468 2031 29,247 2032 22,472 Thereafter 45,649 $ 651,880 Future Lease Expirations Table The following is a summary of lease expirations for the next ten years at the properties we owned (excluding our SHOP segment) as of December 31, 2022: Year of Expiration Number of Leases Expiring Annualized Rental Income (1) Annualized Rental Income as a Percentage of the Total Portfolio Leased Rentable Square Feet Percent of Portfolio Rentable Square Feet Expiring (In thousands) 2023 70 $ 6,249 5.8% 272,362 5.9% 2024 99 12,069 11.2% 543,459 11.9% 2025 71 7,788 7.3% 326,401 7.1% 2026 82 17,801 16.6% 1,000,453 21.8% 2027 95 15,701 14.6% 815,793 17.8% 2028 34 10,457 9.7% 397,495 8.7% 2029 20 3,191 3.0% 140,652 3.1% 2030 23 4,498 4.2% 182,801 4.0% 2031 15 4,820 4.5% 174,374 3.8% 2032 29 13,049 12.2% 435,838 9.5% Total 538 $ 95,623 89.1% 4,289,628 93.6% _____________ (1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2022, which includes tenant concessions such as free rent, as applicable.
(In thousands) Future Minimum Base Rent Payments 2024 $ 109,451 2025 100,230 2026 91,862 2027 72,815 2028 53,918 2029 43,422 2030 38,804 2031 33,371 2032 26,554 2033 15,722 Thereafter 36,460 $ 622,609 Future Lease Expirations Table The following is a summary of lease expirations for the next ten years at the properties we owned (excluding our SHOP segment) as of December 31, 2023: Year of Expiration Number of Leases Expiring Annualized Rental Income (1) Annualized Rental Income as a Percentage of the Total Portfolio Leased Rentable Square Feet Percent of Portfolio Rentable Square Feet Expiring (In thousands) 2024 99 $ 8,842 8.0% 393,361 8.4% 2025 75 9,034 8.2% 367,191 7.9% 2026 98 18,659 16.9% 1,042,517 22.3% 2027 103 16,884 15.3% 863,913 18.5% 2028 64 13,349 12.1% 502,452 10.8% 2029 35 5,759 5.2% 240,317 5.1% 2030 28 4,896 4.4% 198,068 4.2% 2031 16 4,820 4.4% 184,357 3.9% 2032 30 13,336 12.0% 449,248 9.6% 2033 13 3,377 3.1% 128,488 2.8% Total 561 $ 98,956 89.6% 4,369,912 93.5% __________ (1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2023, which includes tenant concessions such as free rent, as applicable.
Future Minimum Lease Payments The following table presents future minimum base rental cash payments due to us (excluding our SHOP segment) over the next ten years and thereafter as of December 31, 2022. The SHOP segment is excluded as the leases of units with residents are generally for annual periods or month to month.
(2) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2023, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs based off the fourth quarter of 2023. 45 T able of Contents Future Minimum Lease Payments The following table presents future minimum base rental cash payments due to us (excluding our SHOP segment) over the next ten years and thereafter as of December 31, 2023.
Removed
Tenant Concentration As of December 31, 2022, we did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or more of total annualized rental income on a straight-line basis for our portfolio.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

22 edited+1 added−4 removed20 unchanged
Biggest changeAs a REIT, we are required to distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard for the deduction for dividends paid and excluding net capital gains. 53 Table of Contents The amount of dividends and other distributions payable to our stockholders is determined by the Board and is dependent on a number of factors, including funds available for dividends and other distribution, financial condition, provisions in our Credit Facility or other agreements that may restrict our ability to pay dividends and other distributions, capital expenditure requirements, as applicable, and annual dividends and other distribution requirements needed to maintain our status as a REIT under the Code.
Biggest changeThe amount of dividends and other distributions payable to our stockholders is determined by the Board and is dependent on a number of factors, including funds available for dividends and other distribution, financial condition, provisions in our agreements that may restrict our ability to pay dividends and other distributions, capital expenditure requirements, as applicable, and annual dividends and other distribution requirements needed to maintain our status as a REIT under the Code.
Dividends on the Series B Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.
Dividends on the Series B Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our Board and declared by us.
Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.
Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our Board and declared by us.
While we and other programs sponsored by affiliates of the Advisor have engaged and may engage Kroll or its affiliates in the future for valuations and real estate-related services of various kinds, we believe that there are no material conflicts of interest with respect to our engagement of Kroll. 52 Table of Contents Valuation Methodology Kroll performed a full valuation of our Real Estate Assets utilizing an income capitalization approach consisting of the Direct Capitalization Method or the Discounted Cash Flow Method and certain other approaches, including the acquisition price, disposition price, and sales comparison approach.
While we and other programs sponsored by affiliates of the Advisor have engaged and may engage Kroll or its affiliates in the future for valuations and real estate-related services of various kinds, we believe that there are no material conflicts of interest with respect to our engagement of Kroll. 48 Table of Contents Valuation Methodology Kroll performed a full valuation of our Real Estate Assets utilizing an income capitalization approach consisting of the Direct Capitalization Method or the Discounted Cash Flow Method and certain other approaches, including the acquisition price, disposition price, and sales comparison approach.
Stock Dividend Declaration Date Stock Dividend Issue Date Dividend Basis (per share) Applicable NAV (per share) Quarterly Stock Dividend Rate (per share) October 1, 2020 October 15, 2020 $ 0.85 $ 15.75 0.013492 January 4, 2021 January 15, 2021 $ 0.85 $ 15.75 0.013492 April 2, 2021 April 15, 2021 $ 0.85 $ 14.50 0.014655 July 1, 2021 July 15, 2021 $ 0.85 $ 14.50 0.014655 October 1, 2021 October 15, 2021 $ 0.85 $ 14.50 0.014655 January 3, 2022 January 15, 2022 $ 0.85 $ 14.50 0.014655 April 1, 2022 April 18, 2022 $ 0.85 $ 15.00 0.014167 July 1, 2022 July 15, 2022 $ 0.85 $ 15.00 0.014167 October 3, 2022 October 17, 2022 $ 0.85 $ 15.00 0.014167 January 3, 2023 January 18, 2023 $ 0.85 $ 15.00 0.014167 Dividends to Series A Preferred Stockholders Dividends on our Series A Preferred Stock are declared quarterly in an amount equal to $1.84 per share each year ($0.46 per share per quarter) to Series A Preferred Stockholders, which is equivalent to 7.375% per annum on the $25.00 liquidation preference per share of Series A Preferred Stock.
Stock Dividend Declaration Date Stock Dividend Issue Date Dividend Basis (per share) Applicable NAV (per share) Quarterly Stock Dividend Rate (per share) October 1, 2020 October 15, 2020 $ 0.85 $ 15.75 0.013492 January 4, 2021 January 15, 2021 $ 0.85 $ 15.75 0.013492 April 2, 2021 April 15, 2021 $ 0.85 $ 14.50 0.014655 July 1, 2021 July 15, 2021 $ 0.85 $ 14.50 0.014655 October 1, 2021 October 15, 2021 $ 0.85 $ 14.50 0.014655 January 3, 2022 January 15, 2022 $ 0.85 $ 14.50 0.014655 April 1, 2022 April 18, 2022 $ 0.85 $ 15.00 0.014167 July 1, 2022 July 15, 2022 $ 0.85 $ 15.00 0.014167 October 3, 2022 October 17, 2022 $ 0.85 $ 15.00 0.014167 January 3, 2023 January 18, 2023 $ 0.85 $ 15.00 0.014167 April 3, 2023 April 17, 2023 $ 0.85 $ 14.00 0.015179 July 3, 2023 July 17, 2023 $ 0.85 $ 14.00 0.015179 October 2, 2023 October 16, 2023 $ 0.85 $ 14.00 0.015179 January 3, 2024 January 16, 2024 $ 0.85 $ 14.00 0.015179 Dividends to Series A Preferred Stockholders Dividends on our Series A Preferred Stock are declared quarterly in an amount equal to $1.84 per share each year ($0.46 per share per quarter) to Series A Preferred Stockholders, which is equivalent to 7.375% per annum on the $25.00 liquidation preference per share of Series A Preferred Stock.
The Estimated Per-Share NAV of $15.00 fell within the range of the values reported by Kroll, LLC ("Kroll"), an independent third-party real estate advisory firm engaged by us.
The Estimated Per-Share NAV of $14.00 fell within the range of the values reported by Kroll, LLC ("Kroll"), an independent third-party real estate advisory firm engaged by us.
Dividends to Series B Preferred Stockholders 54 Table of Contents Dividends on our Series B Preferred Stock are declared quarterly in an amount equal to $1.78 per share each year ($0.45 per share per quarter) to Series B Preferred Stockholders, which is equivalent to 7.125% per annum on the $25.00 liquidation preference per share of Series B Preferred Stock.
Dividends to Series B Preferred Stockholders Dividends on our Series B Preferred Stock are declared quarterly in an amount equal to $1.78 per share each year ($0.45 per share per quarter) to Series B Preferred Stockholders, which is equivalent to 7.125% per annum on the $25.00 liquidation preference per share of Series B Preferred Stock.
Potential conflicts of interest between Kroll, on one hand, and us or the Advisor, on the other hand, may arise as a result of (1) the impact of the findings of Kroll in relation to our Real Estate Assets, or the assets of real estate investment programs sponsored by affiliates of the Advisor, on the value of ownership interests owned by, or incentive compensation payable to, directors, officers or affiliates of us and the Advisor, or (2) Kroll performing valuation services for other programs sponsored by affiliates of the Advisor, as well as other services for us.
Potential conflicts of interest between Kroll, on one hand, and us or the Advisor, on the other hand, may arise as a result of (i) the impact of the findings of Kroll in relation to our Real Estate Assets, or the assets of real estate investment programs sponsored by affiliates of the Advisor, on the value of ownership interests owned by, or incentive compensation payable to, directors, officers or affiliates of us and the Advisor, or (ii) Kroll performing valuation services for other programs sponsored by affiliates of the Advisor, as well as other services for us.
The Estimated Per-Share NAV is generally comprised of (i) the sum of (A) the estimated value of the Real Estate Assets and (B) the estimated value of the other assets, minus (ii) the sum of (C) the estimated value of debt and other liabilities (D) the estimate of the aggregate incentive fees, participations and limited partnership interests held by or allocable to the Advisor, our management or any of the respective affiliates based on our aggregate net asset value and payable in our hypothetical liquidation as of the Valuation Date (which was zero as of December 31, 2021), and (E) the liquidation value of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, divided by (iii) the number of shares of common stock outstanding as of the Valuation Date, which was 99,717,390.
The Estimated Per-Share NAV is generally comprised of (i) the sum of (A) the estimated value of the Real Estate Assets and (B) the estimated value of the other assets, minus (ii) the sum of (C) the estimated value of debt and other liabilities (D) the estimate of the aggregate incentive fees, participations and limited partnership interests held by or allocable to the Advisor, our management or any of the respective affiliates based on our aggregate net asset value and payable in our hypothetical liquidation as of the Valuation Date (which was zero as of December 31, 2022), and (E) the liquidation value of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, divided by (iii) the number of shares of common stock outstanding as of the Valuation Date, which was 105,541,612.
In determining the Estimated Per-Share NAV of $15.00, the independent directors of the Board considered various factors, including the information provided by Kroll, the impact of the stock dividend that was issued in January 2022, the fact that properties held for sale or under contract for sale at December 31, 2021 were valued based on their contract sale prices and without giving consideration to the reinvestment of the sale proceeds, and the impact of the COVID-19 pandemic.
In determining the Estimated Per-Share NAV of $14.00, the independent directors of the Board considered various factors, including the information provided by Kroll, the impact of the stock dividend that was issued in January 2023, the fact that properties held for sale or under contract for sale at December 31, 2022 were valued based on their contract sale prices and without giving consideration to the reinvestment of the sale proceeds.
Conclusion The Estimated Per-Share NAV as of December 31, 2021 of $15.00, a value within the range determined by Kroll, was unanimously adopted by the independent directors of the Board, who comprise a majority of the Board, with Mr. Weil abstaining, on March 28, 2022.
Conclusion The Estimated Per-Share NAV as of December 31, 2022 of $14.00, a value within the range determined by Kroll, was unanimously adopted by the independent directors of the Board, who comprise a majority of the Board, with Mr. Weil abstaining, on March 31, 2023.
Estimated Per-Share Net Asset Value Overview On March 28, 2022, the independent directors of the Board, who comprise a majority of the Board, unanimously approved an estimated per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2021 (the “Valuation Date”) equal to $15.00.
Estimated Per-Share Net Asset Value Overview On March 31, 2023, the independent directors of the Board, who comprise a majority of the Board, unanimously approved an estimated per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2022 (the “Valuation Date”) equal to $14.00.
Tax Characteristics of Dividends All common dividends in the years ended December 31, 2022 and 2021, and a portion of common dividends issued in the year ended December 31, 2020, were issued as stock dividends, which do not represent taxable dividends to shareholders for U.S. federal income tax purposes.
Tax Characteristics of Dividends All common dividends in the years ended December 31, 2023, 2022 and 2021 were issued as stock dividends, which do not represent taxable dividends to shareholders for U.S. federal income tax purposes.
All dividends paid on the Series A Preferred Stock and Series B Preferred Stock (first payment was made in January 2022) were considered 100% return of capital for income for tax purposes for the years ended December 31, 2022, 2021 and 2020. Sales of Unregistered Securities None.
All dividends paid on the Series A Preferred Stock and Series B Preferred Stock (first payment was made in January 2022) were considered 100% return of capital for income for tax purposes for the years ended December 31, 2023, 2022 and 2021.
The range of values provided by Kroll was based on the estimated fair value of our assets less the estimated fair value of our liabilities and the liquidation value of our Series A Preferred Stock and the liquidation value of our Series B Preferred Stock, divided by 99,717,390 shares of common stock outstanding as of December 31, 2021.
The range of values provided by Kroll was based on the estimated fair value of our assets less the estimated fair value of our liabilities and the liquidation value of our Series A Preferred Stock and the liquidation value of our Series B Preferred Stock, divided by 105,541,612 shares of common stock outstanding as of December 31, 2022.
The Estimated Per-Share NAV has not been adjusted for any stock dividend(s) issued subsequent to December 31, 2021 and will not be until a new Estimated Per-Share NAV is published. We intend to publish an Estimated Per-Share NAV as of December 31, 2022 in early April 2023.
The Estimated Per-Share NAV has not been adjusted for any stock dividends issued subsequent to December 31, 2022 and will not be until a new Estimated Per-Share NAV is published. We intend to publish an Estimated Per-Share NAV as of December 31, 2023 in late March 2024.
Holders As of March 14, 2023 we had 106,566,638 shares of common stock outstanding held by a total of 44,527 stockholders of record. Dividends and Other Distributions We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2013.
Holders As of March 13, 2024 we had 113,185,753 shares of common stock outstanding held by a total of 44,774 stockholders of record. Dividends and Other Distributions We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2013.
Number of Common Shares Repurchased Average Price per Share Cumulative repurchases as of December 31, 2021 4,896,620 $ 20.60 Year ended December 31, 2022 — — Cumulative repurchases as of December 31, 2022 4,896,620 20.60 Item 6. [Reserved] .
The following table summarizes our SRP activity for the period presented. Number of Common Shares Repurchased Average Price per Share Cumulative repurchases as of December 31, 2022 4,896,620 $ 20.60 Year ended December 31, 2023 — — Cumulative repurchases as of December 31, 2023 4,896,620 $ 20.60 Item 6. [Reserved] .
No further repurchase requests under the SRP may be made unless and until the SRP is reactivated. For additional information on the SRP, see Note 8 — Stockholders’ Equity to our consolidated financial statements included in this Annual Report on Form 10-K. The following table summarizes our SRP activity for the period presented.
No further repurchase requests under the SRP may be made unless and until the SRP is reactivated. We did not repurchase any shares of our common stock during the year ended December 31, 2023. For additional information on the SRP, see Note 8 — Stockholders’ Equity to our consolidated financial statements included in this Annual Report on Form 10-K.
Thus, we did not satisfy these conditions as of December 31, 2022, and our ability to make future cash distributions on our common stock will depend on our future cash flows and indebtedness and may further depend on our ability to obtain additional liquidity, which may not be available on favorable terms, or at all.
Our ability to make future cash distributions on our common stock will depend on our future cash flows and indebtedness and may further depend on our ability to obtain additional liquidity, which may not be available on favorable terms, or at all. Dividends and other distribution payments are not assured.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In light of the amendment to the Credit Facility on August 10, 2020, which provides that we may not repurchase shares of our common stock until the Commencement Quarter, the Board suspended repurchases under the SRP effective August 14, 2020.
Sales of Unregistered Securities None. 50 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers In light of the amendment to the Prior Credit Facility on August 10, 2020, the Board suspended repurchases under the SRP effective August 14, 2020.
Dividends and other distribution payments are not assured. Any accrued and unpaid dividends payable with respect to our Series A Preferred Stock must be paid upon redemption of those shares.
Any accrued and unpaid dividends payable with respect to our Series A Preferred Stock must be paid upon redemption of those shares. 49 Table of Contents Distributions to Common Stockholders From March 1, 2018 until June 30, 2020, we generally paid distributions on our common stock on a monthly basis at a rate equivalent of $0.85 per annum, per share of common stock.
Removed
Under our Credit Facility, we may not pay cash distributions on our common stock until we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million (giving effect to the aggregate amount of distributions projected to be paid by us during the quarter in which we have elected to commence paying cash distributions on common stock) and our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%.
Added
As a REIT, we are required to distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard for the deduction for dividends paid and excluding net capital gains.
Removed
As of December 31, 2022, our ratio of consolidated total indebtedness to consolidated total asset value for these purposes was 63.2%.
Removed
For further information on provisions in our Credit Facility that restrict the payment of dividends and other distributions, see Note 5 — Credit Facility, Net to our consolidated financial statements included in this Annual Report on Form 10-K and Item 1A “Risk Factors . — We have not paid our distributions on our common stock in cash since 2020, and there can be no assurance we will pay distributions on our common stock in cash in the future.” Distributions to Common Stockholders From March 1, 2018 until June 30, 2020, we generally paid distributions on our common stock on a monthly basis at a rate equivalent of $0.85 per annum, per share of common stock.
Removed
The cash distributions paid to holders of common stock in the first half of the year ended December 31, 2020 were considered 100% return of capital.

Item 7. Management's Discussion & Analysis

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

138 edited+54 added−148 removed86 unchanged
Biggest changeThe acquisition and transaction related expenses incurred during the year ended December 31, 2022 consist of: (i) dead deal costs of $0.8 million, (ii) legal fees related to terminated SHOP operators of $0.5 million and (iii) mortgage repayment penalties of $0.2 million. 67 Table of Contents The acquisition and transaction related expenses incurred during the year ended December 31, 2021 consisted of: (i) the write-off of offering costs relating to the Preferred Stock Equity Line of $1.2 million (see Note 8 — Stockholder’s Equity for additional information), (ii) $0.8 million of litigation costs related to our Michigan dispositions which occurred in the first quarter of 2021, (iii) $0.5 million of dead deal and other miscellaneous costs and (iv) $0.2 million of settlement charges related to our Jupiter, Florida disposition which occurred in the second quarter of 2021.
Biggest changeThe acquisition and transaction related expenses incurred during the year ended December 31, 2022 consisted of dead deal costs of $0.8 million, legal fees related to terminated SHOP operators of $0.5 million and mortgage repayment penalties of $0.2 million.
Dividends on the Series B Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.
Dividends on the Series B Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our Board and declared by us.
Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.
Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our Board and declared by us.
Commencing with that taxable year, we have been organized and operated in a manner so that we qualify as a REIT under the Code. We intend to continue to operate in such a manner but can provide no assurances that we will operate in a manner so as to remain qualified for taxation as a REIT.
Commencing with that taxable year, we believe we have been organized and operated in a manner so that we qualify as a REIT under the Code. We intend to continue to operate in such a manner but can provide no assurances that we will operate in a manner so as to remain qualified for taxation as a REIT.
Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as we pay distributions in stock instead of cash.
Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as we pay distributions solely in stock instead of cash.
Also, on August 13, 2020, the Board changed our common stock distribution policy in order to preserve our liquidity and maintain additional financial flexibility in light of the COVID-19 pandemic and to comply with the Credit Facility at the time.
Also, on August 13, 2020, the Board changed our common stock distribution policy in order to preserve our liquidity and maintain additional financial flexibility in light of the COVID-19 pandemic and to comply with the Prior Credit Facility at the time.
If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive income (loss).
If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of operations and comprehensive loss.
A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net income, are provided below: Funds from Operations and Modified Funds from Operations The historical accounting convention used for real estate assets requires straight-line depreciation of buildings, improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time.
A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net loss, are provided below: Funds from Operations and Modified Funds from Operations The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time.
Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect our proportionate share of FFO attributable to our stockholders. Our FFO calculation complies with NAREIT’s definition.
Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect the proportionate share of FFO attributable to our stockholders. Our FFO calculation complies with NAREIT’s definition.
MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP.
MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisition and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP.
Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor. As of December 31, 2022 and 2021, we did not have any leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.
Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor. As of December 31, 2023 and 2022, we did not have any leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.
Recently Issued Accounting Pronouncements See Note 2 — Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion. Results of Operations Below is a discussion of our results of operations for the years ended December 31, 2022 and 2021.
Recently Issued Accounting Pronouncements See Note 2 — Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion. Results of Operations Below is a discussion of our results of operations for the years ended December 31, 2023 and 2022.
These amounts represent the portion of our net income that is related to the Series A Preferred Units held by third parties (issued in connection with a property acquisition in September, 2021), Common OP Units held by third parties, and other non-controlling interest holders in our subsidiaries that own certain properties.
These amounts represent the portion of our net loss that is related to the Series A Preferred Units held by third parties (issued in connection with a property acquisition in September, 2021), Common OP Units held by third parties, and other non-controlling interest holders in our subsidiaries that own certain properties.
Of the $4.5 million of CARES Act funds received by us in the year ended December 31, 2022, $3.9 million was recognized as a reduction to our Same Store Property operating and maintenance expenses in the table above, with the remainder attributable to our Disposed properties.
Of the $4.5 million of CARES Act funds received by us in the year ended December 31, 2022, $3.7 million was recognized as a reduction to our Same Store Property operating and maintenance expenses in the table above, with the remainder attributable to our Disposed properties.
We did not record any intangible asset amounts related to customer relationships during the years ended December 31, 2022 and 2021. Accounting for Leases Lessor Accounting In accordance with the lease accounting standard, all of our leases as lessor prior to adoption were accounted for as operating leases.
We did not record any intangible asset amounts related to customer relationships during the years ended December 31, 2023 and 2022. Accounting for Leases Lessor Accounting In accordance with the lease accounting standard, all of our leases as lessor prior to adoption were accounted for as operating leases.
These leases are reflected on the consolidated balance sheets as of December 31, 2022 and 2021, and the rent expense is reflected on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2022, 2021 and 2020.
These leases are reflected on the consolidated balance sheets as of December 31, 2023 and 2022, and the rent expense is reflected on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022 and 2021.
There were no significant write-off’s related to previously disposed properties during the year ended December 31, 2021. Investments in Real Estate Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life or improve the productive capacity of the asset. Costs of repairs and maintenance are expensed as incurred.
There were no significant write-off’s related to previously disposed properties during the years ended December 31, 2023 and 2021. Investments in Real Estate Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life or improve the productive capacity of the asset. Costs of repairs and maintenance are expensed as incurred.
We evaluate probability of sale based on specific facts including whether a sales agreement is in place and the buyer has made significant non-refundable deposits. Properties are no longer depreciated when they are classified as held for sale. There were no real estate investments held for sale as of December 31, 2022 or December 31, 2021.
We evaluate probability of sale based on specific facts including whether a sales agreement is in place and the buyer has made significant non-refundable deposits. Properties are no longer depreciated when they are classified as held for sale. There were no real estate investments held for sale as of December 31, 2023 and 2022.
Cost recoveries from tenants are included in operating revenue from tenants in accordance with accounting rules, on the accompanying consolidated statements of operations and comprehensive income (loss) in the period the related costs are incurred, as applicable. Under ASC 842, which was adopted effective on January 1, 2019, uncollectable amounts are reflected as reductions in revenue.
Cost recoveries from tenants are included in operating revenue from tenants in accordance with accounting rules, on the accompanying consolidated statements of operations and comprehensive income (loss) in the period the related costs are incurred, as applicable. 53 Table of Contents Under ASC 842, which was adopted effective on January 1, 2019, uncollectable amounts are reflected as reductions in revenue.
Since that time, our TRS’s operating performance has not significantly improved and thus we have recorded a 100% valuation allowance on our net deferred tax assets through December 31, 2022.
Since that time, our TRS’s operating performance has not significantly improved and thus we have recorded a 100% valuation allowance on our net deferred tax assets through December 31, 2023.
We closely monitor our current and anticipated liquidity position relative to our current and anticipated demands for cash and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next 12 months.
We closely monitor our current and anticipated liquidity position relative to our current and anticipated demands for cash and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next twelve months.
Disposal of real estate investments that represent a strategic shift in operations that will have a major effect on our operations and financial results are required to be presented as discontinued operations in the consolidated statements of operations. No properties were presented as discontinued operations during the years ended December 31, 2022, 2021 or 2020.
Disposal of real estate investments that represent a strategic shift in operations that will have a major effect on our operations and financial results are required to be presented as discontinued operations in the consolidated statements of operations. No properties were presented as discontinued operations during the years ended December 31, 2023, 2022 and 2021.
We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year, both before and after we have deployed all of our offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year, both before and after we have deployed all of our offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net loss as determined by GAAP.
We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs. 74 Table of Contents Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way.
We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs. Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way.
Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT’s definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries.
Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT’s definition of FFO, such as the change to expense as incurred rather than capitalized and depreciated acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries.
Additionally, during the years ended December 31, 2022 and 2021, we recorded reductions in revenue related to bad debt of $3.2 million and $1.1 million, respectively. Approximately $1.3 million of bad debt expense recorded in the years ended December 31, 2022 was related to our Disposed Properties.
Additionally, during the years ended December 31, 2023 and 2022, we recorded reductions in revenue related to bad debt of $1.2 million and $3.2 million, respectively. Approximately $1.3 million of bad debt expense recorded in the year ended December 31, 2022 was related to our Disposed Properties.
Fees for ancillary services are recorded in the period in which the services are performed. 59 Table of Contents We defer the revenue related to lease payments received from tenants and residents in advance of their due dates.
Fees for ancillary services are recorded in the period in which the services are performed. We defer the revenue related to lease payments received from tenants and residents in advance of their due dates.
There were no significant write-off’s related to previously disposed properties during the year ended December 31, 2021.
There were no significant write-off’s related to previously disposed properties during the year ended December 31, 2023.
We also exclude other non-operating items in calculating MFFO, such as transaction-related fees and expenses and capitalized interest.
We also exclude other non-operating items in calculating MFFO, such as transaction-related fees and expenses.
Also, lessees must recognize a 61 Table of Contents right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification.
Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification.
The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding (i) depreciation and amortization related to real estate assets, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from changes in control and (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
Under ASC 840, we recorded such amounts as bad debt expense as part of property operating expenses. During the years ended December 31, 2022, 2021 and 2020 such amounts were $3.2 million, $1.1 million and $2.7 million, respectively. Approximately $1.3 million and $1.0 million in the years ended December 31, 2022 and 2020, respectively, related to previously disposed properties.
Under ASC 840, we recorded such amounts as bad debt expense as part of property operating expenses. During the years ended December 31, 2023, 2022 and 2021 such amounts were $1.2 million, $3.2 million and $1.1 million, respectively. Approximately $1.3 million in the year ended December 31, 2022 related to previously disposed properties.
Risk Factors section of this Annual Report on Form 10-K. 66 Table of Contents The total increase in Same Store Properties operating and maintenance expenses was also impacted by the receipt of $4.5 million of funds through the CARES Act in the year ended December 31, 2022, as compared to $5.1 million during the year ended December 31, 2021, which offset costs incurred from the COVID-19 pandemic.
Risk Factors section of this Annual Report on Form 10-K. 59 Table of Contents The total increase in Same Store Properties operating and maintenance expenses was also impacted by the receipt of $4.5 million of funds through the CARES Act in the year ended December 31, 2022, as compared to no funds received through the CARES Act during the year ended December 31, 2023, which offset costs incurred from the COVID-19 pandemic.
We do not anticipate that any further funds under the CARES Act will be received, and there can be no 62 Table of Contents assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.
We do not anticipate that any further funds under the CARES Act will be received, and there can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.
These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, as applicable, unless the existing indebtedness associated with the property is satisfied or the property is removed from the borrowing base of the Credit Facility, which would impact availability thereunder.
These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, as applicable, unless the existing indebtedness associated with the property is satisfied or the property is removed from the borrowing base of the Fannie Mae Master Credit Facilities or MOB Warehouse Facility, which would impact availability thereunder.
As of December 31, 2022, all deferred amounts have been collected and we have not deferred any additional amounts since the year ended December 31, 2020.
As of December 31, 2021, all deferred amounts had been collected and we have not deferred any additional amounts since the year ended December 31, 2020.
Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).
We believe that segment income is useful as a performance measure because, when compared across periods, segment income reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net loss.
In addition, because we currently believe that concessions granted to our tenants as a result of the COVID-19 pandemic are collectable (see Accounting Treatment of Rent Deferrals below), we have excluded from the increase in straight-line rent for MFFO purposes the amounts recognized under GAAP relating to these deferrals, which is not considered by the Practice Guideline.
In addition, because we have collected all concessions granted to our tenants as a result of the COVID-19 pandemic (see Accounting Treatment of Rent Deferrals below), we have excluded from the increase in straight-line rent for MFFO purposes the amounts recognized under GAAP relating to these deferrals, which is not considered by the Practice Guideline.
As a result of relief granted by the FASB and SEC related to lease modification accounting, rental revenue used to calculate Net Income and NAREIT FFO has not been, and we do not expect it to be, significantly impacted by these types of deferrals.
As a result of relief granted by the FASB and SEC related to lease modification accounting, rental revenue used to calculate net income and NAREIT FFO has not been significantly impacted by these types of deferrals.
In an asset acquisition, the difference between the acquisition price (including capitalized transaction costs) and the fair value of identifiable net assets acquired is allocated to the non-current assets. All acquisitions during the years ended December 31, 2022, 2021 and 2020 were accounted for as asset acquisitions.
In an asset acquisition, the difference between the acquisition price (including capitalized transaction costs) and the fair value of identifiable net assets acquired is allocated to the non-current assets. All acquisitions during the years ended December 31, 2023, 2022 and 2021 were accounted for as asset acquisitions. We acquired seven properties during the year ended December 31, 2023.
We believe that the use of FFO provides a more complete understanding of our operating performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
We believe that FFO provides a more complete understanding of our operating performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net loss as determined by GAAP.
We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance. FFO is not equivalent to our net income or loss as determined under GAAP.
We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance. FFO is not equivalent to our net loss as determined under GAAP, and FFO is not intended to replace financial performance measures determined under GAAP.
Accounting Treatment of Rent Deferrals All of the concessions granted to our tenants as a result of the COVID-19 pandemic are rent deferrals with the original lease term unchanged and collection of deferred rent deemed probable (see the “Overview - Management Update on the Impacts of the COVID-19 Pandemic” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information).
Accounting Treatment of Rent Deferrals All of the concessions granted to our tenants as a result of the COVID-19 pandemic were rent deferrals with the original lease term unchanged and all deferred rent has been collected (see the “Overview - Management Update on the Impacts of the COVID-19 Pandemic” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information).
Interest and other income was approximately $61,000 for the year ended December 31, 2021. 68 Table of Contents Gain on Non-Designated Derivatives Gain on non-designated derivative instruments for the years ended December 31, 2022 and 2021 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our Fannie Mae Master Credit Facilities, which have floating interest rates.
Interest and other income was approximately $27,000 for the year ended December 31, 2022. 61 Table of Contents (Loss) gain on Non-Designated Derivatives (Loss) gain on non-designated derivative instruments for the years ended December 31, 2023 and 2022 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our Fannie Mae Master Credit Facilities and MOB Warehouse Facility, which have variable interest rates.
Our Same Store properties operating and maintenance expenses increased significantly in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily from increased amounts incurred from contract labor and agencies, as well as amounts incurred for wages, including overtime and bonus amounts, paid to employees of our third-party operators.
Our Same Store properties operating and maintenance expenses increased significantly in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily from increased amounts incurred for wages, including overtime and bonus amounts, paid to employees of our third-party operators.
Property Operating and Maintenance During the year ended December 31, 2022, property operating and maintenance expenses increased $6.2 million in our SHOP segment as compared to the year ended December 31, 2021, primarily due to an increase in property operating and maintenance expenses of $15.1 million from our Same Store Properties, partially offset by a decrease in property operating and maintenance expenses of $8.9 million from our Disposed Properties.
Property Operating and Maintenance During the year ended December 31, 2023, property operating and maintenance expenses increased $2.3 million in our SHOP segment as compared to the year ended December 31, 2022, primarily due to an increase in property operating and maintenance expenses of $9.7 million from our Same Store Properties, partially offset by a decrease in property operating and maintenance expenses of $7.3 million from our Disposed Properties.
During the year ended December 31, 2022, property operating and maintenance costs in our MOB segment increased by $1.5 million as compared to the year ended December 31, 2021, primarily as a result of increased costs from our Acquired Properties of $2.2 million and increased costs from our Same Store Properties of $1.8 million.
During the year ended December 31, 2023, property operating and maintenance costs in our MOB segment increased by $2.0 million as compared to the year ended December 31, 2022, primarily as a result of increased costs from our Same Store Properties of $1.7 million and increased costs from our Acquired Properties of $0.3 million.
The decrease in our Same Store depreciation and amortization was partially offset by $1.3 million of accelerated depreciation we recorded in the year ended December 31, 2022 on one MOB property in Florida which incurred damages as a result of Hurricane Ian as well as 15 SHOPs across the Midwest which suffered cold weather-related damages.
The increase to our 2023 Same Store depreciation and amortization includes $1.3 million of accelerated depreciation we recorded in the year ended December 31, 2022 on one MOB property in Florida which incurred damages as a result of Hurricane Ian, as well as 15 SHOPs across the Midwest which suffered cold weather-related damages.
Same Store Properties Information based on Same Store Properties, Acquired Properties and Disposed Properties (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered. As of December 31, 2022, we owned 202 properties.
Same Store Properties Information based on Same Store Properties, Acquired Properties and Disposed Properties (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered. As of December 31, 2023, we owned 204 properties (including two land parcels).
There are no fees earned for stock dividend issuances. Variable asset management fees will further increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the years ended December 31, 2022 or 2021.
Asset management fees were consistent at $21.8 million for the years ended December 31, 2023 and 2022. There are no fees earned for stock dividend issuances. Variable asset management fees will further increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the years ended December 31, 2023 or 2022.
In our SHOP segment, we invest in seniors housing properties using the RIDEA structure. As of December 31, 2022, we had four eligible independent contractors operating 52 SHOPs (including two land parcels). All of our properties across both business segments are located throughout the United States.
In our SHOP segment, we invest in seniors housing properties using the RIDEA structure. As of December 31, 2023, we had four eligible independent contractors operating 46 SHOPs. All of our properties across both business segments are located throughout the United States.
Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases.
We also estimate costs to execute similar leases including leasing commissions, legal and other related expenses. 54 Table of Contents Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases.
The below table presents SHOP occupancy since the onset of the COVID-19 pandemic in March 2020: 57 Table of Contents As of Number of Properties (1) Rentable Units Percentage Leased December 31, 2019 59 4,926 85.1% March 31, 2020 63 5,198 84.4% June 30, 2020 63 5,198 79.2% September 30, 2020 67 5,350 77.4% December 31, 2020 59 4,878 74.5% March 31, 2021 55 4,682 72.0% June 30, 2021 54 4,530 73.2% September 30, 2021 54 4,494 74.3% December 31, 2021 54 4,494 74.1% March 31, 2022 50 4,378 75.9% June 30, 2022 50 4,374 76.3% September 30, 2022 50 4,374 75.8% December 31, 2022 50 4,374 75.1% ________ (1) Exclusive of two land parcels.
The below table presents SHOP occupancy since December 31, 2019, which we consider the last period before the COVID-19 pandemic and its continuing impacts began: As of Number of Properties (1) Rentable Units Percentage Leased December 31, 2019 59 4,926 85.1% March 31, 2020 63 5,198 84.4% June 30, 2020 63 5,198 79.2% September 30, 2020 67 5,350 77.4% December 31, 2020 59 4,878 74.5% March 31, 2021 55 4,682 72.0% June 30, 2021 54 4,530 73.2% September 30, 2021 54 4,494 74.3% December 31, 2021 54 4,494 74.1% March 31, 2022 50 4,378 75.9% June 30, 2022 50 4,374 76.3% September 30, 2022 50 4,374 75.8% December 31, 2022 50 4,374 75.1% March 31, 2023 50 4,374 73.3% June 30, 2023 46 4,164 73.3% September 30, 2023 46 4,164 74.1% December 31, 2023 46 4,164 74.1% __________ (1) Exclusive of two land parcels.
Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, in addition to base rent.
These reimbursements generally increase in proportion with the increase in property operating and maintenance expenses in our MOB segment. Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, in addition to base rent.
We recorded income tax expense of $0.2 million and $0.2 million for the years ended December 31, 2022 and 2021, respectively Because of our TRS’s recent operating history of losses and the impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, in the third quarter of 2020, we were not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance.
Because of our TRS’s recent operating history of losses and the impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, in the third quarter of 2020, we were not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance.
In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at contract rates during the expected lease-up period, which typically ranges from six to 24 months. We also estimate costs to execute similar leases including leasing commissions, legal and other related expenses.
In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at contract rates during the expected lease-up period, which typically ranges from six to 24 months.
For the year ended December 31, 2022, cash flows provided by operations were $28.3 million. We had not historically generated sufficient cash flows from operations to fund the payment of dividends and other distributions at the current rate prior to switching from paying cash dividends to stock dividends on our common stock.
For the year ended December 31, 2023, cash flows provided by operations were $21.6 million. We had not historically generated sufficient cash flows from operations to fund the payment of dividends and other distributions at the current rate prior to switching from paying cash dividends to stock dividends on our common stock, which occurred on October 1, 2020.
Interest and Other Income Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $27,000 for the year ended December 31, 2022.
Interest and Other Income Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $0.7 million for the year ended December 31, 2023.
Revenue from Tenants During the year ended December 31, 2022, revenue from tenants decreased by $2.1 million in our SHOP segment as compared to the year ended December 31, 2021, which was primarily driven by a decrease in revenue from tenants of $10.9 million due to our Disposed Properties, partially offset by an increase in revenue from tenants of $8.8 million from our Same Store Properties.
Revenue from Tenants During the year ended December 31, 2023, revenue from tenants increased by $6.1 million in our SHOP segment as compared to the year ended December 31, 2022, which was primarily driven by an increase in revenue from tenants of $11.0 million from our Same Store Properties, partially offset by a decrease in revenue from tenants of $4.9 million due to our Disposed Properties.
Financings As of December 31, 2022, our total debt leverage ratio (net debt divided by gross asset value) was approximately 41.5%. Net debt totaled $1.1 billion, which represents gross debt ($1.1 billion) less cash and cash equivalents ($53.7 million).
Financings As of December 31, 2023, our total debt leverage ratio (net debt divided by gross asset value) was approximately 43.7%. Our net debt totaled $1.1 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($46.4 million).
Other Results of Operations Impairment Charges We incurred $27.6 million of impairment charges for the year ended December 31, 2022, of which $10.6 million related to seven skilled nursing facilities in our MOB segment located in Illinois, $15.1 million related to six held for use SHOP properties of eight total properties that we are actively marketing for sale and $1.8 million related to an MOB property located in Pennsylvania which we began marketing for sale in the fourth quarter of 2022.
We incurred $27.6 million of impairment charges for the year ended December 31, 2022, of which $10.6 million related to seven skilled nursing facilities in our MOB segment located in Illinois, $15.1 million related to six held-for-use SHOP properties and $1.8 million related to an MOB property located in Pennsylvania.
Year Ended December 31, (In thousands) 2022 2021 2020 Net loss attributable to common stockholders (in accordance with GAAP) $ (93,285) $ (92,942) $ (78,781) Depreciation and amortization (1) 80,063 78,115 79,643 Impairment charges 27,630 40,951 36,446 Loss (gain) on sale of real estate investments 125 (3,648) (5,230) Adjustments for non-controlling interests (2) (490) (529) (526) FFO (as defined by NAREIT) attributable to common stockholders 14,043 21,947 31,552 Acquisition and transaction related 1,484 2,714 173 (Accretion) amortization of market lease and other lease intangibles, net (625) (198) (80) Straight-line rent adjustments (1,523) (780) (2,405) Straight-line rent (rent deferral agreements) (3) — (280) 280 Amortization of mortgage premiums and discounts, net 51 55 60 (Gain) loss on non-designated derivatives (3,834) (37) 102 Cash received from non-designated derivatives 286 — — Deferred tax asset valuation allowance (4) 2,750 (482) 4,641 Adjustments for non-controlling interests (2) 10 1 (9) MFFO attributable to common stockholders $ 12,642 $ 22,940 $ 34,314 ________ (1) Net of non-real estate depreciation and amortization.
Year Ended December 31, (In thousands) 2023 2022 2021 Net loss attributable to common stockholders (in accordance with GAAP) $ (86,097) $ (93,285) $ (92,942) Depreciation and amortization (1) 80,057 80,063 78,115 Impairment charges 4,676 27,630 40,951 Loss (gain) on sale of real estate investments 322 125 (3,648) Adjustments for non-controlling interests (2) (403) (490) (529) FFO (as defined by NAREIT) attributable to common stockholders (1,445) 14,043 21,947 Acquisition and transaction related 545 1,484 2,714 (Accretion) amortization of market lease and other lease intangibles, net (890) (625) (198) Straight-line rent adjustments (1,049) (1,523) (780) Straight-line rent (rent deferral agreements) (3) — — (280) Amortization of mortgage premiums and discounts, net 91 51 55 (Gain) loss on non-designated derivatives 1,995 (3,834) (37) Cash received from non-designated derivatives 5,580 286 — Deferred tax asset valuation allowance (4) 1,165 2,750 (482) Adjustments for non-controlling interests (2) 38 10 1 MFFO attributable to common stockholders $ 6,030 $ 12,642 $ 22,940 ________ (1) Net of non-real estate depreciation and amortization.
(2) Our SHOP segment included zero Acquired Properties. (3) Our SHOP segment included nine Disposed Properties. (4) Our SHOP segment included 52 properties, including two land parcels.
(2) Our SHOP segment included zero Acquired Properties. (3) Our SHOP segment included eight Disposed Properties. (4) Our SHOP segment included 48 total properties, including two land parcels.
As of December 31, 2022 we had total borrowings of $1.1 billion, at a weighted average interest rate of 4.83% per year. As of December 31, 2021, we had total borrowings of $1.1 billion, at a weighted average interest rate of 3.44% per year.
As of December 31, 2023 we had total borrowings of $1.2 billion, at a weighted average interest rate of 5.56% per year. As of December 31, 2022, we had total borrowings of $1.1 billion, at a weighted average interest rate of 4.83% per year.
In calculating MFFO, we follow the Practice Guideline (with the added adjustment for deferred tax asset allowances based on management’s determination as noted above) and exclude acquisition fees and expenses, amortization of above and below market and other intangible lease assets and liabilities, amounts relating to straight-line rent adjustments (in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the lease and rental payments), contingent purchase price consideration, accretion of discounts and amortization of premiums on debt investments, mark-to-market adjustments included in net income, gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and adjustments for unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.
In calculating MFFO, we follow the Practice Guideline (with the added adjustment for deferred tax asset allowances based on management’s determination as noted above) and exclude (i) acquisition fees and expenses, (ii) amortization of above and below-market leases and other intangible lease assets and liabilities, (iii) amounts relating to straight-line rent adjustments (in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the lease and rental payments), (iv) accretion of discounts and amortization of premiums on debt investments, (v) mark-to-market adjustments included in net loss as determined by GAAP, (vi) hedges, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, and (vii) adjustments for unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.
As of December 31, 2022, we owned 202 properties located in 34 states and comprised of 9.1 million rentable square feet. 55 Table of Contents Substantially all of our business is conducted through the OP, a Delaware limited partnership, and its wholly owned subsidiaries. Our Advisor manages our day-to-day business with the assistance of our Property Manager.
As of December 31, 2023, we owned 204 properties (including two land parcels) located in 33 states and comprised of 9.0 million rentable square feet. Substantially all of our business is conducted through the OP, a Delaware limited partnership, and its wholly owned subsidiaries. Our Advisor manages our day-to-day business with the assistance of our Property Manager.
Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings (including current market rates) among other factors. Market interest rates have continued to increase throughout the year ended December 31, 2022 and subsequently thereafter.
Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings (including current market rates) among other factors. Market interest rates continued to increase throughout the year ended December 31, 2023. Our weighted average interest rate as of December 31, 2023 was higher than that as of December 31, 2022.
We acquired four properties during the year ended December 31, 2022. 60 Table of Contents For acquired properties with leases classified as operating leases, we allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed, based on their respective fair values.
For acquired properties with leases classified as operating leases, we allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed, based on their respective fair values.
Revenue from Tenants During the year ended December 31, 2022, revenue from tenants increased by $8.6 million in our MOB segment as compared to the year ended December 31, 2021, primarily as a result of increased revenue from tenants of $11.0 million generated from our Acquired Properties and increased revenue from tenants of $1.5 million from our Same Store Properties, partially offset by a decrease in revenue from tenants of $3.9 million from our Disposed Properties.
Revenue from Tenants During the year ended December 31, 2023, revenue from tenants increased by $4.0 million in our MOB segment as compared to the year ended December 31, 2022, primarily as a result of increased revenue from tenants of $3.3 million generated from our Acquired Properties, increased revenue from tenants of $0.7 million from our Same Store Properties and an increase in revenue from tenants of $0.1 million from our Disposed Properties.
The payment terms of our Credit Facility require interest only amounts payable monthly with all unpaid principal and interest due at maturity. The payment terms of our Fannie Mae Master Credit Facilities required interest only payments through November 2021 and principal and interest payments thereafter. Our loan agreements require us to comply with specific financial and reporting covenants.
Loan Obligations The payment terms of our mortgage notes payable generally require principal and interest amounts payable monthly with all unpaid principal and interest due at maturity. The payment terms of our Fannie Mae Master Credit Facilities required interest only payments through November 2021 and principal and interest payments thereafter.
We do not expect to draw any further amounts on the Fannie Mae Master Credit Facilities. Borrowings under the Fannie Mae Master Credit Facilities bear annual interest at a rate that varies on a monthly basis and is equal to the sum of the current LIBOR for one month U.S. dollar-denominated deposits and 2.62%, with a combined floor of 2.62%.
Borrowings under the Fannie Mae Master Credit Facilities bear annual interest at a rate that varies on a monthly basis and is equal to the sum of the current SOFR for one month U.S. dollar-denominated deposits and a spread (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively) with a combined floor of 2.62%.
The following table shows the sources for the payment of distributions to common stockholders and preferred stockholders, including distributions on restricted shares and Common OP Units, but excluding distributions related to Class B Units because these distributions are recorded as an expense in our consolidated statement of operations and comprehensive loss, for the periods indicated.
Any accrued and unpaid dividends payable with respect to the Series A Preferred Stock or Series B Preferred Stock become part of the liquidation preference thereof. 69 Table of Contents The following table shows the sources for the payment of distributions to common stockholders and preferred stockholders, including distributions on restricted shares and Common OP Units, but excluding distributions related to Class B Units because these distributions are recorded as an expense in our consolidated statement of operations and comprehensive loss, for the periods indicated.
We calculate MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010, except that we adjust for deferred tax asset allowances based on management’s determination.
MFFO is not equivalent to our net loss as determined under GAAP, and MFFO is not intended to replace financial performance measures determined under GAAP. 67 Table of Contents We calculate MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010, except that we adjust for deferred tax asset allowances based on management’s determination.
As of December 31, 2022 these leases had a weighted average remaining lease term of 4.9 years. Rent from tenants in our MOB segment (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease.
Rent from tenants in our MOB segment (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease.
For accounting purposes, the CARES Act funds are treated as a grant contribution from the government. The funding we received was recognized as a reduction of property operating and maintenance expenses in our consolidated statements of operations to offset the negative impacts of COVID-19.
The funding we received was recognized as a reduction of property operating and maintenance expenses in our consolidated statements of operations to offset the negative impacts of COVID-19.
As inflation rates increase or persist at high levels, the cost of providing medical care at our SHOPs, particularly labor costs, will increase. If we are unable to admit new residents or renew resident leases at market rates, while bearing these increased costs from providing services to our residents, our results of operations may be affected.
If we are unable to admit new residents or renew resident leases at market rates, while bearing these increased costs from providing services to our residents, our results of operations may be affected.
For more information about the risks and uncertainties associated with inflation, the ongoing war in Ukraine and related sanctions, and labor shortages and labor costs, please see the Inflation section below and Part I – Item 1A.
For more information about the risks and uncertainties associated with inflation, the ongoing wars in Ukraine, Israel and related sanctions, and labor shortages and labor costs, please see the Inflation section below and Part I – Item 1A. Risk Factors section of this Annual Report on Form 10-K.
The gain recorded in the year ended December 31, 2022 was due to significant increases in interest rates during the period and represents the change in value as well as $0.3 million of cash received from these interest rate caps.
The gain recorded in the year ended December 31, 2022 was due to significant increases to interest rates during the period and represents the increase in fair value as well as $0.3 million of cash received from our interest rate caps. Income Tax Expense Income taxes generally relate to our SHOPs, which are leased to our TRS.
Our future liquidity requirements, and available liquidity, however, depend on many factors, such as the impact of COVID-19 on our tenants and operators. Further, recent and continuing increases in inflation brought about by labor shortages, supply chain disruptions and increases in interest rates may adversely impact our results of operations and thus ultimately our liquidity.
Our future liquidity requirements, and available liquidity, however, depend on many factors, such as recent increases in inflation, labor shortages, supply chain disruptions, and higher property insurance, property tax and interest rates, all of which may adversely impact our results of operations and thus ultimately our liquidity.
We have declared quarterly dividends entirely in shares of our common stock since October 2020 in order to preserve our liquidity in response to the COVID-19 pandemic.
We have declared quarterly dividends entirely in shares of our common stock since October 2020 in order to preserve our liquidity. Management Update on the Adverse Economic Impacts Since the COVID-19 During the first quarter of 2020, the global COVID-19 pandemic commenced.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeMortgage Notes Payable As of December 31, 2022, all of our mortgages are either fixed-rate ($206.7 million) or variable-rate ($378.5 million), before consideration of interest rate swaps. Our mortgages had a gross aggregate carrying value of $585.2 million and a fair value of $550.6 million as of December 31, 2022.
Biggest changeWe do not have any foreign operations and thus we are generally not directly exposed to foreign currency fluctuations. 71 Table of Contents Mortgage Notes Payable As of December 31, 2023, all of our mortgages are either fixed-rate ($442.9 million) or variable-rate ($378.5 million), before consideration of interest rate swaps.
The information presented above includes only those exposures that existed as of December 31, 2022 and does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.
The information presented above includes only those exposures that existed as of December 31, 2023 and does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.
Assuming all other variables besides interest rates remain constant, a 100 basis point decrease in variable interest rates would also not impact our swapped debt, and based on the SOFR/LIBOR rate as of December 31, 2022, a 100 basis point decrease would not have a material impact on our net interest payments (inclusive of cash received from our non-designated derivatives included in gain on non-designated derivatives).
Assuming all other variables besides interest rates remain constant, a 100 basis point decrease in variable interest rates would also not impact our swapped debt, and based on the SOFR rate as of December 31, 2023, a 100 basis point decrease would not have a material impact on our net interest payments (inclusive of cash received from our non-designated derivatives included in (loss) gain on non-designated derivatives).
The active caps began limiting 30-day LIBOR during the fourth quarter of 2022 as 30-day LIBOR rates exceeded the strike price of 3.50% and we are receiving monthly cash payments on these contracts. Because these are non-designated derivatives, the amounts received are included in gain on non-designated derivatives in our statement of operations and comprehensive loss.
The active caps began limiting SOFR during the fourth quarter of 2022 as SOFR rates exceeded the strike price of 3.50% and we are receiving monthly cash payments on these contracts. Because these are non-designated derivatives, the amounts received are included in (loss) gain on non-designated derivatives in our statement of operations and comprehensive loss.
The sensitivity analysis related to our debt assumes an immediate 100 basis point move in interest rates from their December 31, 2022 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our debt by $10.4 million.
The sensitivity analysis related to our debt assumes an immediate 100 basis point move in interest rates from their December 31, 2023 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our debt by $24.5 million.
Sensitivity Table of Contents As of December 31, 2022, we are not currently negatively exposed to rising interest rates. Assuming all other variables besides interest rates remain constant, a 100 basis point increase in variable interest rates would not impact our interest expense due to our interest rate swaps and effective interest rate caps as of December 31, 2022.
Sensitivity As of December 31, 2023, we are not currently negatively exposed to rising interest rates. Assuming all other variables besides interest rates remain constant, a 100 basis point increase in variable interest rates would not impact our net interest payments due to our interest rate swaps and effective interest rate caps.
A 100 basis point decrease in market interest rates would result in a decrease in the fair value of our nine designated interest rate swaps by $15.3 million. These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs, and assuming no other changes in our capital structure.
A 100 basis point decrease in market interest rates would result in a decrease in the fair value of our designated interest rate swap by $10.1 million. These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs, and assuming no other changes in our capital structure.
Interest Rate Swaps As noted above, we have two LIBOR-based designated interest rate swaps with a notional amount of $50.0 million and seven SOFR-based designated interest rate swaps with a notional amount of $528.5 million, which effectively create a fixed interest rate for a portion of our variable-rate debt.
Interest Rate Swaps As noted above, we have one SOFR-based designated interest rate swap with a notional amount of $378.5 million, which effectively create a fixed interest rate for a portion of our variable-rate debt.
A 100 basis point decrease in market interest rates would result in an increase in the fair value of our debt by $11.5 million. A 100 basis point increase in market interest rates would result in an increase in the fair value of our nine designated interest rate swaps by $14.6 million.
A 100 basis point decrease in market interest rates would result in an increase in the fair value of our debt by $26.8 million. A 100 basis point increase in market interest rates would result in an increase in the fair value of our designated interest rate swap by $9.7 million.
These interest rate swaps effectively hedge all of our variable rate debt with the exception of our Fannie Mae Master Credit Facilities discussed below.
This interest rate swap effectively hedges all of our variable rate debt with the exception of our Fannie Mae Master Credit Facilities and MOB Warehouse Facility discussed below.
Interest Rate Caps We also have entered into seven non-designated interest rate cap contracts with a current notional amount of $354.6 million as of December 31, 2022 (of which six caps were active as of December 31, 2022 and one has a forward start date as of April 2023), which limits 30-day LIBOR exposure on our Fannie Mae Master Credit Facilities to 3.50%.
Interest Rate Caps We also have entered into seven SOFR-based, non-designated interest rate cap contracts with a current notional amount of $364.2 million as of December 31, 2023, which limits SOFR exposure on our Fannie Mae Master Credit Facilities and MOB Warehouse Facility to 3.50%.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our long-term debt, which consists of secured financings and the Fannie Mae Master Credit Facilities, bear interest at fixed rates and variable rates.
As of December 31, 2022, we had entered into seven non-designated interest rate caps with a current notional amount of approximately $354.6 million (of which six caps were active as of December 31, 2022 and one has a forward start date as of April 2023), two LIBOR-based designated interest rate swaps with a notional amount of $50.0 million and seven SOFR-based designated interest rate swaps with a notional amount of $528.5 million.
As of December 31, 2023, we had entered into seven SOFR-based non-designated interest rate caps with a current notional amount of approximately $364.2 million and one SOFR-based designated interest rate swap with a notional amount of $378.5 million.
Credit Facilities Our Credit Facilities are variable-rate, before consideration of interest rate swaps, and are comprised of our Revolving Credit Facility, our Term Loan and our Fannie Mae Master Credit Facilities. Our Credit Facilities had a gross aggregate carrying amount of $532.0 million and a fair value of $532.5 million as of December 31, 2022.
Our mortgages had a gross aggregate carrying value of $821.4 million and a fair value of $787.7 million as of December 31, 2023. Credit Facilities Our Fannie Mae Master Credit Facilities and MOB Warehouse Facility are variable-rate.
Removed
Our long-term debt, which consists of secured financings, our Credit Facility (which includes a Revolving Credit Facility and a Term Loan) and the Fannie Mae Master Credit Facilities, bear interest at fixed rates and variable rates.
Added
Our Fannie Mae Master Credit Facilities had a gross aggregate carrying amount of $346.3 million and a fair value of $347.0 million, and our MOB Warehouse Facility had a gross carrying value of $14.7 million and a fair value of $14.8 million as of December 31, 2023.
Removed
Subsequent to December 31, 2022, we terminated our two LIBOR-based designated interest rate swaps with a notional amount of $50.0 million (see Note 17 — Subsequent Events to our consolidated financial statements). We do not have any foreign operations and thus we are generally not directly exposed to foreign currency fluctuations.

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