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What changed in National Healthcare Properties, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of National Healthcare Properties, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+456 added−633 removedSource: 10-K (2025-02-27) vs 10-K (2024-03-15)

Top changes in National Healthcare Properties, Inc.'s 2024 10-K

456 paragraphs added · 633 removed · 348 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

62 edited+19 added−29 removed58 unchanged
Biggest changeHealthcare 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.
Biggest changeWe 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. 6 Table of Contents Financing Strategies and Policies We utilize a combination of debt and equity to fund our investment activity.
The federal laws include, for example, the following: • The Federal Anti-Kickback Statute (42 USC Section 1320a-7b(b) of the Social Security Act) which prohibits the knowing and willful solicitation, offer, payment or acceptance of any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for: (i) referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program; or (ii) purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in party under a federal health care program; • The Stark Law (42 USC Section 1395nn), which prohibits referrals by physicians of Medicare patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or certain other financial arrangements, unless an exception applies, and prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral; • The FCA (31 USC Sections 3729-3733) creates liability for any person who submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government.
The federal laws include, for example, the following: • The Federal Anti-Kickback Statute (42 USC Section 1320a-7b(b) of the Social Security Act) which prohibits the knowing and willful solicitation, offer, payment or acceptance of any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for: (i) referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program; or (ii) purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering any good, facility, service or item for which payment may be made in whole or in party under a federal health care program; • The Stark Law (42 USC Section 1395nn), which prohibits referrals by physicians of Medicare or Medicaid patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or certain other financial arrangements, unless an exception applies, and prohibits the designated health services entity from submitting claims to Medicare or Medicaid for those services resulting from a prohibited referral; • The FCA (31 USC Sections 3729-3733) creates liability for any person who submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government.
“Risk Factors — Risks Related to the Healthcare Industry — Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us” and “A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants.” Other Regulations Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, the Americans with Disabilities Act of 1990, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity.
“Risk Factors — Risks Related to the Healthcare Industry — Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us” and “— A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants.” Other Regulations Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, the Americans with Disabilities Act of 1990, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity.
Reimbursement We and our tenants derive a large portion of our revenues from insurance payments with the remainder coming from Medicare and Medicaid reimbursement and private pay. The reimbursement methodologies for healthcare facilities are constantly changing and federal and state authorities may implement new or modified reimbursement methodologies that may negatively impact healthcare operations.
Reimbursement We and our tenants derive a portion of our revenues from insurance payments with the remainder coming from Medicare and Medicaid reimbursement and private pay. The reimbursement methodologies for healthcare facilities are constantly changing and federal and state authorities may implement new or modified reimbursement methodologies that may negatively impact healthcare operations.
The business and operations of our tenants and operators and therefore our business could be materially impacted by, among other things, a significant expansion of applicable federal, state or local laws and regulations, legislative changes or new judicial challenges to the Patient Protection and Affordable Care Act (the “Affordable Care Act” or “ACA”), future attempts to reform healthcare, new interpretations of existing laws and regulations, and changes or increased emphasis on certain enforcement priorities.
The business and operations of our tenants and operators and therefore our business could be materially impacted by, among other things, a significant expansion of applicable federal, state or local laws and regulations, legislative changes or new judicial challenges to the Patient Protection and Affordable Care Act (the “ACA”), future attempts to reform healthcare, new interpretations of existing laws and regulations, and changes or increased emphasis on certain enforcement priorities.
We believe that the aging population, improved chronic disease management, technological advances and healthcare reform will positively affect the demand for MOBs, seniors housing properties and other healthcare-related facilities and generate attractive investment opportunities. The first wave of Baby Boomers, the largest segment of the U.S. population, began turning 65 in 2011. According to the U.S.
We believe that the aging population, improved chronic disease management, technological advances and healthcare reform will positively affect the demand for OMFs, seniors housing properties and other healthcare-related facilities and generate attractive investment opportunities. The first wave of Baby Boomers, the largest segment of the U.S. population, began turning 65 in 2011. According to the U.S.
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 OMF 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.
In addition, MOBs are often built to accommodate higher structural loads for certain equipment and may contain specialized construction such as cancer radiation therapy vaults for cancer treatment. Hospitals can include general acute care hospitals, inpatient rehabilitation hospitals, long-term acute care hospitals and surgical and specialty hospitals.
In addition, OMFs are often built to accommodate higher structural loads for certain equipment and may contain specialized construction such as cancer radiation therapy vaults for cancer treatment. Hospitals can include general acute care hospitals, inpatient rehabilitation hospitals, long-term acute care hospitals and surgical and specialty hospitals.
The website contains reports, proxy statements and information statements, and other information, which one may obtain free of charge. In addition, copies of our filings with the SEC may be obtained from our website www.healthcaretrustinc.com . Access to these filings is free of charge.
The website contains reports, proxy statements and information statements, and other information, which one may obtain free of charge. In addition, copies of our filings with the SEC may be obtained from our website www.nhpreit.com . Access to these filings is free of charge.
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.
This could adversely impact the medical properties that house these physicians and medical technology providers. 10 Table of Contents 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.
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.
We did not make any material capital expenditures in connection with these regulations during the year ended December 31, 2024 and we do not expect that we will be required to make any such material capital expenditures during 2025. We believe that we have all permits and approvals necessary under current law to operate our investments.
To continue to qualify as a REIT, we must, among other things, distribute at least 90% of our REIT taxable income, which does not equal net income as calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), determined without regard to the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational requirements.
To continue to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”)), determined without regard to the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational requirements.
In addition, we may invest in facilities leased to hospitals, including rehabilitation hospitals, long-term acute care centers, surgery centers, inpatient rehabilitation facilities, special medical and diagnostic service providers, laboratories, research firms, pharmaceutical and medical supply manufacturers and health insurance firms. Our SHOP investments are held through a structure permitted under the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA").
In addition, we may invest in facilities leased to hospitals, including rehabilitation hospitals, long-term acute care centers, surgery centers, inpatient rehabilitation facilities, special medical and diagnostic service providers, laboratories, research firms, pharmaceutical and medical supply manufacturers and health insurance firms. Our SHOP investments are held through a structure permitted using the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”).
All of these changes could impact our tenants’ ability to pay rent or other obligations to us. Licensure, Certification and Certificate of Need Our tenants operate hospitals, assisted living facilities, a skilled nursing facility and other healthcare entities and providers that receive reimbursement for services from third-party payors, including the government sponsored Medicare and Medicaid programs and private insurance carriers.
All of these changes could impact our tenants’ ability to pay rent or other obligations to us. Licensure, Certification and Certificate of Need Our tenants operate hospitals, assisted living facilities and other healthcare entities and providers that receive reimbursement for services from third-party payors, including the government sponsored Medicare and Medicaid programs and private insurance carriers.
These 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.
These 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, and • other facilities. 5 Table of Contents Certain of our properties are 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.
Available Information We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all amendments to those filings with the Securities and Exchange Commission (“SEC”). One may read and copy any materials we file with the SEC at the SEC’s Internet address located at https://www.sec.gov .
Available Information We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all amendments to those filings with the SEC. One may read and copy any materials we file with the SEC at the SEC’s Internet address located at https://www.sec.gov .
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.
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, 2024, we owned 44 SHOPs which we lease to our TRS.
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.
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. 4 Table of Contents We have invested, and expect to continue investing, primarily in OMFs and seniors housing properties, primarily structured as SHOPs.
In our SHOP segment, only one property receives payments from Medicare and Medicaid, and a small percentage of our assisted living revenue is derived from Medicaid. For our MOB segment, our tenants and operators could be effected, which could impact our tenants’ ability to pay rent.
In our SHOP segment, only one property receives payments from Medicare and Medicaid, and a small percentage of our assisted living revenue is derived from Medicaid. For our OMF segment, our tenants and operators could be affected, which could impact our tenants’ ability to pay rent.
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.
In addition, these same entities seek financing through similar channels. Overview The healthcare industry is one of the most regulated industries in the United States and is currently experiencing rapid regulatory change and uncertainty.
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.
According to the National Health Expenditures Projections, 2023 - 2032 report prepared by the Centers for Medicare and Medicaid Services (“CMS”): (i) national health expenditures are projected to grow on average 5.6% per year for 2023 through 2032 which is expected to exceed average projected GDP growth during those periods of 4.3%, and (ii) the healthcare industry projected share of GDP is projected to increase from 17.3% of U.S.
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.
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 residential care facilities in 2023.
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.
Our seniors housing properties as of December 31, 2024 primarily consist of assisted living facilities (2,058 units), memory care facilities (968 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 include these types of assets in our MOB and other health care related segment when the property is leased to a tenant that operates the property. There are a variety of types of MOBs: on campus, off campus, affiliated and non-affiliated. On campus MOBs are physically located on a hospital’s campus, often on land leased from the hospital.
We include these types of assets in our OMF and other health care related segment when the property is leased to a tenant that operates the property. There are also a variety of types of OMFs, including on campus and off campus. On campus OMFs are physically located on a hospital’s campus, often on land leased from the hospital.
In granting and renewing these licenses and certifications, the state regulatory agencies consider numerous factors relating to a facility’s operations, including, but not limited to, the plant and physical structure, admission and discharge standards, staffing, training, patient and consumer rights, medication guidelines and other rules.
In granting and renewing these licenses and certifications, the state regulatory agencies consider numerous factors relating to a facility’s operations, including, but not limited to, the plant and physical structure, admission and discharge standards, staffing, training, patient and consumer rights, medication guidelines, the operational history of tenants and/or operators and their affiliated entities and other rules.
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.
We intend to continue to operate in such a manner, but we can provide no assurances that we will be able to operate in a manner so as to remain qualified for taxation as a REIT.
Individuals have tremendous potential financial gain in bringing whistleblower claims as the statute provides that the individual will receive a portion of the money recouped. Additionally, violations of the FCA can result in treble damages.
Individuals have tremendous potential financial gain in bringing whistleblower claims as the statute provides that the individual will receive a portion of the money recouped.
Violations of federal or state law or FCA actions against a tenant or operator of our properties could have a material adverse effect on the tenant’s and operator’s liquidity, financial condition or results of operations.
Additionally, violations of the FCA can result in treble damages. 9 Table of Contents Violations of federal or state law or FCA actions against a tenant or operator of our properties could have a material adverse effect on the tenant’s and operator’s liquidity, financial condition or results of operations.
In November 2020, CMS announced its successes in reducing the 2020 Medicare improper payment rate and specifically called out the successes of its actions to address improper payments in home health and SNF claims. In 2021, CMS again successfully reduced the 2021 Medicare improper payment rate.
In November 2020, CMS announced its successes in reducing the 2020 Medicare improper payment rate and specifically called out the successes of its actions to address improper payments in home health and skilled nursing facility claims.
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.
GDP in 2022 to 19.7% by 2032. The increase in expenditures is projected to lead to significant growth in healthcare employment. According to the U.S.
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.
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.
We intend to publish Estimated Per-Share NAV periodically at the discretion of our board of directors (the “Board”), provided that such estimates will be made at least once annually.
We intend to publish Estimated Per-Share NAV periodically at the discretion of our Board, provided that such estimates will be made at least once annually unless we list our common stock on a national securities exchange.
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.
Impairment charges are reflected within gross asset value. (2) As of December 31, 2024, we had 3,939 rentable units in our SHOP segment. The SHOP segment excludes one closed facility. (3) Excludes one land parcel with a gross asset value of $0.6 million. In constructing our portfolio, we are committed to diversifying our assets by geographic region.
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.
According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare and social assistance sector) is projected to grow 10.0% from 2023 to 2033, adding approximately 2.3 million new jobs, representing job growth higher than any other sector and over a third of all the projected job gains from 2023 to 2033.
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.
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 23 million seasonally adjusted jobs as of December 31, 2024, and the healthcare industry is expected to have the largest growth and be the fastest growing industry sector.
A loss of licensure or certification could adversely affect a facility’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with, the terms of the tenant’s leases or the operator’s contractual obligation with us.
A loss of licensure, certification or accreditation could adversely affect a facility’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with, the terms of the tenant’s leases or the operator’s contractual obligation with us. 8 Table of Contents In some states, healthcare facilities are subject to various state CON laws requiring governmental approval prior to the development or expansion of healthcare facilities and services.
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.
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, 2024 and do not expect that we will be required to make any such material capital expenditures during 2025.
We have and may continue to acquire properties through a joint venture or the acquisition of substantially all of the interests of an entity which in turn owns the real property.
We have and may continue to acquire properties through a joint venture or the acquisition of substantially all of the interests of an entity which in turn owns the real property. We also may make preferred equity investments in an entity. In addition, we may sell assets from time to time to recycle capital and manage our leverage.
Item 1. Business We are an externally managed real estate investment trust for U.S. federal income tax purposes (“REIT”), that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate, focused on medical office and other healthcare-related buildings (“MOBs”), and senior housing operating properties (“SHOPs”).
Item 1. Business We are a real estate investment trust (“REIT”) for U.S. federal income tax purposes. We acquire, own and manage a diversified portfolio of healthcare-related real estate focused on outpatient medical facilities (“OMF”) and senior housing operating properties (“SHOP”).
Our tenants and operators must comply with a wide range of complex federal, state, and local laws and regulations, and the healthcare industry, in general, is the subject to increased enforcement and penalties in all areas.
The regulatory uncertainty and the potential impact on our tenants and operators could have an adverse material effect on their ability to satisfy their contractual obligations. 7 Table of Contents Our tenants and operators must comply with a wide range of complex federal, state and local laws and regulations, and the healthcare industry, in general, is subject to increased enforcement and penalties in all areas.
The employees of the Advisor, Property Manager, and their respective affiliates perform a full range of services for us, including acquisitions, property management, accounting, legal, asset management, investor relations and all general administrative services. We depend on the Advisor and the Property Manager for services that are essential to us.
Prior to the Internalization, we retained the Advisor pursuant to a long-term advisory contract to manage our affairs on a day-to-day basis and the employees of the Advisor, Property Manager and their respective affiliates performed a full range of services for us, including acquisitions, property management, accounting, legal, asset management, investor relations and all general administrative services.
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.
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 will increase when dividends paid in stock are issued; however, because each stockholder will receive the same number of new shares, the total value of our common stockholder’s investment, all things equal, will not change assuming no sales or other transfers.
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.
This growth is expected due to an aging population, the growing prevalence of chronic conditions and high levels of mental health and behavioral disorders. We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for OMFs and other facilities that serve the healthcare industry.
In some states, healthcare facilities are subject to various state CON laws requiring governmental approval prior to the development or expansion of healthcare facilities and services. The approval process in these states generally requires a facility to demonstrate the need for additional or expanded healthcare facilities or services.
The approval process in these states generally requires a facility to demonstrate the need for additional or expanded healthcare facilities or services.
Census Bureau, the U.S. population over 65 will grow to 94.7 million in 2060, up from 49.2 million in 2016. This group will grow more rapidly than the overall population. Thus, its share of the population will increase to 23% in 2060, from 15% in 2016.
Census Bureau, the U.S. population over 65 will grow to 88.8 million in 2060, up from 57.8 million as of July 2022. This group is projected to grow more rapidly than the overall population. Thus, its share of the population will increase to 24.4% in 2060, up from 17.3% as of July 2022.
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.
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, 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.
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.
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.
Outpatient Medical Facilities As of December 31, 2024, we owned 148 OMFs and other health care related buildings under lease totaling 4.7 million square feet.
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 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.
MACRA established a new payment framework, called the Quality Payment Program, which modified certain Medicare payments to “eligible clinicians,” including physicians, dentists, and other practitioners. MACRA represents a fundamental change in physician reimbursement. The implications of MACRA continue to be uncertain and will depend on future regulatory activity and physician activity in the marketplace.
Starting in 2026, participants in the Alternative Payment Models will receive a 0.75% update, with all other payment models receiving a 0.25% update. MACRA established a new payment framework, called the Quality Payment Program, which modified certain Medicare payments to “eligible clinicians,” including physicians, dentists, and other practitioners. MACRA represents a fundamental change in physician reimbursement.
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.
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.
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.
The following table details the geographic distribution, by region, of our portfolio as of December 31, 2024: Geographic Region Number of Properties Annualized Rental Income (1) Rentable Square Feet Rentable Units in SHOP Segment (In thousands) Northeast 26 $ 43,160 1,648,564 289 South 57 115,890 2,656,728 1,436 Midwest 77 121,687 2,690,458 1,806 West 33 42,836 1,405,148 408 Total Portfolio 193 $ 323,573 8,400,898 3,939 __________ (1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2024, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs for the fourth quarter of 2024.
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”).
Healthcare is the single largest industry in the United States based on contribution to Gross Domestic Product (“GDP”).
Financing Strategies and Policies We utilize a combination of debt and equity to fund our investment activity. Our debt and equity levels are determined by management in consultation with the Board.
Our debt and equity levels are determined by management in consultation with our Board of Directors (the “Board”).
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.
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. We may invest in properties subject to existing mortgage indebtedness, which we assume as part of the acquisition.
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 Estimated Per-Share NAV published on March 27, 2024 has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV.
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).
The following table summarizes our portfolio of properties as of December 31, 2024: Asset Type Number of Properties Rentable Square Feet Gross Asset Value (1) (In thousands) Outpatient Medical Facilities 148 4,716,949 $ 1,381,166 Seniors Housing Operating Properties (2) 44 (3) 3,683,949 1,082,353 Total Portfolio 192 8,400,898 $ 2,463,519 __________ (1) Gross asset value represents total real estate investments, at cost ($2.5 billion total at December 31, 2024), net of gross market lease intangible liabilities ($22.8 million total at December 31, 2024).
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.
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. Tax Status We elected to be taxed as a REIT under Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ended December 31, 2013.
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.
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.
A hospital typically creates strong tenant demand which leads to high tenant retention. Off campus properties are located independent of a hospital’s location. Affiliated MOBs may be located on campus or off campus, but are affiliated with a hospital or health system.
A hospital typically creates strong tenant demand which leads to high tenant retention. Off campus OMFs are located independent of a hospital’s location. Seniors Housing Operating Properties As of December 31, 2024, we owned 44 seniors housing properties under the RIDEA structure in our SHOP segment.
(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, Healthcare Trust Properties, LLC (the “Property Manager”). Our Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us.
Prior to September 27, 2024, the Advisor and Property Manager were under common control with AR Global Investments, LLC (the “Advisor Parent”) and these related parties received compensation and fees for providing services to us.
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.
As of December 31, 2024, 26.9% of our employees identified as minorities and 38.5% were females. Estimate of Net Asset Value On March 27, 2024, we published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) equal to $13.00 as of December 31, 2023 (or $52.00 after reflecting the Reverse Stock Split).
Removed
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.
Added
As described in further details herein, we operate in two reportable business segments for management and internal financial reporting purposes: OMFs and SHOPs. Prior to September 27, 2024, our former advisor, Healthcare Trust Advisors, LLC (the “Advisor”), managed our day-to-day business with the assistance of our property manager, Healthcare Trust Properties, LLC (the “Property Manager”).
Removed
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.
Added
On September 27, 2024, we internalized our advisory and property management functions with our own dedicated workforce (“Internalization”) (see Note 1 — Organization and Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Annual Report on Form 10-K (the “Consolidated Financial Statements”) for additional information).
Removed
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.
Added
On September 30, 2024, we also effected a reverse stock split of our common stock (the “Reverse Stock Split”). Upon the effectiveness of the Reverse Stock Split, every four shares of our issued and outstanding common stock automatically combined and was reclassified into one issued and outstanding share of common stock.
Removed
In some respects, affiliated MOBs are similar to on campus MOBs because the hospital relationship drives tenant demand and retention. Finally, non-affiliated MOBs are not affiliated with any hospital or health system, but may contain physician offices and other healthcare services.
Added
All share and per share data in this Annual Report on Form 10-K have been adjusted for all periods presented to reflect the Reverse Stock Split. As of December 31, 2024, we owned 193 properties located in 31 states, comprising 8.4 million rentable square feet.
Removed
We favor affiliated MOBs versus non-affiliated MOBs because of the relationship and synergy with the sponsoring hospital or health system and buildings not affiliated with the hospital or health system but anchored or entirely occupied by a long-tenured physician practice.
Added
However, independent living facilities on their own are not treated as qualified health care properties eligible to be leased to a taxable REIT subsidiary (a “TRS”).
Removed
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.
Added
Organizational Structure Substantially all of our business is conducted through National Healthcare Properties Operating Partnership, L.P. (the “OP”), a Delaware limited partnership, and its wholly owned subsidiaries, including TRSs.
Removed
Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by an independent qualifying management company, which we also refer to as an operator who qualifies as an eligible independent contractor.
Added
For expedited financing needs, we may borrow under our loan agreement, dated as of December 22, 2023 (the “OMF Warehouse Facility”), by and among Capital One, National Association (“Capital One”) and certain of the wholly-owned subsidiaries of the OP, which provides up to $50.0 million of variable-rate financing, by including additional unencumbered properties subject to the terms and conditions of the OMF Warehouse Facility and, subject to our compliance with the collateral pool and restrictive covenant requirements contained therein, also utilize our Fannie Mae Master Credit Facilities, which include a secured credit facility with KeyBank National Association (“KeyBank”) (the “KeyBank Facility”), pursuant to that certain Master Credit Facility Agreement, dated as of October 31, 2016, as amended, by and among KeyBank and certain of the OP’s wholly-owned subsidiaries, and a secured credit facility with Capital One Multifamily Finance, LLC, an affiliate of Capital One (the “Capital One Facility” and, together with the KeyBank Facility, the “Fannie Mae Master Credit Facilities”), pursuant to that certain Master Credit Facility Agreement, dated as of October 31, 2016, as amended, by and among Capital One Multifamily Finance, LLC, and certain of the OP’s wholly-owned subsidiaries.
Removed
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.
Added
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.
Removed
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.
Added
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur properties may be adversely affected by economic cycles and risks inherent to those states. • 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. • Inflation will have an adverse effect on our investments and results of operations. • Our real estate investments are concentrated in healthcare-related facilities, and we may be negatively impacted by adverse trends in the healthcare industry. • The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us. • If a tenant or lease guarantor declares bankruptcy or becomes insolvent, we may be unable to collect balances due under relevant leases. • We assume additional operating risks and are subject to additional regulation and liability because we depend on eligible independent contractors to manage some of our facilities. • 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. • We may be unable to renew leases or re-lease space as leases expire. • Our level of indebtedness may increase our business risks. • Our financing arrangements have restrictive covenants, which may limit our ability to pursue strategic alternatives and react to changes in our business and industry or pay dividends. 13 T able of Contents • We depend on our Advisor and Property Manager to provide us with executive officers, key personnel and all services required for us to conduct our operations and our operating performance may be impacted by any adverse changes in the financial health or reputation of our Advisor and Property Manager. • All of our executive officers, some of our directors and the key real estate and other professionals assembled by our Advisor and Property Manager face conflicts of interest related to their positions or interests in entities related to AR Global, which could hinder our ability to implement our business strategy. • We may terminate our advisory agreement in only limited circumstances, which may require payment of a termination fee. • 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. • Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders. • 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. • Our failure to remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax. • Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities.
Biggest changeOur properties may be adversely affected by economic cycles and risks inherent to those states. • We may be unable to enter into contracts for and complete property acquisitions or dispositions on advantageous terms and our property acquisitions may not perform as we expect. • We may be unable to realize the anticipated synergies and other benefits of the Internalization or do so within the anticipated time frame. • 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. • Rising expenses could reduce cash flow. • Inflation may have an adverse effect on our investments and results of operations. • Damage from catastrophic weather and other natural events and climate change could result in losses to us. • We may suffer uninsured losses relating to real property or have to pay expensive premiums for insurance coverage. • Our success is dependent on the continued contributions of certain key personnel. • We have experienced net losses in the past and may experience additional losses in the future. 12 Table of Contents • Our real estate investments are concentrated in healthcare-related facilities, and we may be negatively impacted by adverse trends in the healthcare industry. • The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us. • If a tenant or lease guarantor declares bankruptcy or becomes insolvent, we may be unable to collect balances due under relevant leases. • We may be unable to secure funds for future tenant improvements or capital needs. • We assume additional operating risks and are subject to additional regulation and liability because we depend on eligible independent contractors to manage some of our facilities. • 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. • We may be unable to renew leases or re-lease space as leases expire. • Events that adversely affect the ability of seniors and their families to afford daily resident fees at our SHOPs could cause our occupancy rates and resident fee revenues to decline. • Tenants and operators of our healthcare-related assets may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us. • Our properties have been and may continue to be subject to impairment charges. • We are subject to risks associated with public health crises, such as pandemics and epidemics, which may have a material adverse effect on our business. • Our business and operations could suffer if our operations experiences system failures or cyber incidents or a deficiency in cybersecurity. • Our level of indebtedness may increase our business risks. • Our financing arrangements have restrictive covenants, which may limit our ability to pursue strategic alternatives and react to changes in our business and industry or pay distributions. • 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. • Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders. • 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. • Our failure to remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax. • Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities. 13 Table of Contents Risks Related to Our Properties and Operations Our property portfolio has a high concentration of properties located in certain states.
Furthermore, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in future years will fail to result in fair market rental rates during those years. Moreover, inflation could erode the value of long-term leases that do not contain indexed escalation provisions.
Furthermore, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in future years will fail to result in market rental rates during those years. Moreover, inflation could erode the value of long-term leases that do not contain indexed escalation provisions.
Events that adversely affect the ability of seniors and their families to afford daily resident fees at our SHOPs could cause our occupancy rates and resident fee revenues to decline. Assisted and independent living services generally are not reimbursable under as Medicare and our facilities have limited participation in Medicaid.
Events that adversely affect the ability of seniors and their families to afford daily resident fees at our SHOPs could cause our occupancy rates and resident fee revenues to decline. Assisted and independent living services generally are not reimbursable under Medicare and our facilities have limited participation in Medicaid.
All of these changes could impact the ability of our tenants’ to pay rent or our operator’s ability to meet their obligations to us. In addition, tenants and operators in certain states have experienced delays; some of which are, have been, and may be late in receiving reimbursements, which have adversely affected their ability to make rent payments to us.
All of these changes could impact the ability of our tenants to pay rent or our operator’s ability to meet their obligations to us. In addition, tenants and operators in certain states have experienced delays; some of which are, have been, and may be late in receiving reimbursements, which have adversely affected their ability to make rent payments to us.
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.
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 improvements would adversely impact the value of the applicable property or our ability to lease the applicable property on favorable terms, if at all.
These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). Leases with fixed or no escalation provisions may not keep pace with current rates of inflation, whereas leases with indexed escalations may provide more protection against inflation.
These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index (“CPI”) or other measures). Leases with fixed or no escalation provisions may not keep pace with current rates of inflation, whereas leases with indexed escalations may provide more protection against inflation.
We may not be able to negotiate leases on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs.
We may not be able to negotiate leases or renewals on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs.
The income we generate from SHOPs is subject to a number of operational risks including fluctuations in occupancy levels and resident fee levels, increases in the cost of food, materials, energy, labor (as a result of unionization or otherwise) or other services, rent control regulations, national and regional economic conditions, the imposition of new or increased taxes, capital expenditure requirements, professional and general liability claims, and the availability and cost of professional and general liability insurance.
The income we generate from SHOPs is subject to a number of operational risks including fluctuations in occupancy levels and resident fee levels, increases in the cost of food, materials, energy, labor (as a result of unionization, labor shortage, inflation or otherwise) or other services, rent control regulations, national and regional economic conditions, the imposition of new or increased taxes, capital expenditure requirements, professional and general liability claims, and the availability and cost of professional and general liability insurance.
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.
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 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.
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.
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, discontinue insurance coverage, merge with another company, and create, incur or assume liens.
The IRS has issued Revenue Procedures authorizing elective cash/stock distributions to be made by “publically offered REITs,” like us, in order to satisfy this requirement, provided that at least 20% of the aggregate amount of a distribution to stockholders is paid in cash and certain other parameters detailed in the Revenue Procedures are satisfied.
The IRS has issued Revenue Procedures authorizing elective cash/stock distributions to be made by “publicly offered REITs,” like us, in order to satisfy this requirement, provided that at least 20% of the aggregate amount of a distribution to stockholders is paid in cash and certain other parameters detailed in the Revenue Procedures are satisfied.
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 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, 2024 in late March 2025.
These laws include the Federal Anti-Kickback Statute, which prohibits, among other things, the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, the referral of any item or service reimbursed by Medicare or Medicaid; the Federal Physician Self-Referral Prohibition (commonly referred to as the “Stark Law”), which, subject to specific exceptions, restricts physicians from making referrals for specifically designated health services for which payment may be made under Medicare or Medicaid programs to an entity with which the physician, or an immediate family member, has a financial relationship; the FCA, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government, including claims paid by the Medicare and Medicaid programs; and the CMPL, which authorizes the U.S.
These laws include the Federal Anti-Kickback Statute, which prohibits, among other things, the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, the referral of any item or service reimbursed by Medicare or Medicaid; the Federal Physician Self-Referral Prohibition (commonly referred to as the “Stark Law”), which, subject to specific exceptions, restricts physicians from making referrals for specifically designated health services for which payment may be made under Medicare or Medicaid programs to an entity with which the physician, or an immediate family member, has a financial relationship; the FCA, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government, including claims paid by the Medicare and Medicaid programs, and which can result in treble damages; and the CMPL, which authorizes the U.S.
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.
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 2024 may not be indicative of any future period.
Although the valuations of our real estate assets by the independent valuer are reviewed by our Advisor and approved by the independent directors of the Board, neither our Advisor nor the independent directors of the Board will independently verify the appraised value of our properties and valuations do not necessarily represent the price at which we would be able to sell any asset.
Although the valuations of our real estate assets by the independent valuer are reviewed by us and approved by the independent directors of the Board, neither we nor the independent directors of the Board will independently verify the appraised value of our properties and valuations do not necessarily represent the price at which we would be able to sell any asset.
If the operators of our SHOPs are unable to attract and retain seniors that have sufficient income, assets or other resources to pay the fees associated with assisted and independent living services, the occupancy rates, resident fee revenues and results of operations of our SHOPs could decline. 25 T able of Contents Termination of SHOP leases by residents pursuant to state law mandated contractual provisions could have an adverse effect on our business, financial condition and results of operations.
If the operators of our SHOPs are unable to attract and retain seniors that have sufficient income, assets or other resources to pay the fees associated with assisted and independent living services, the occupancy rates, resident fee revenues and results of operations of our SHOPs could decline. 25 Table of Contents Termination of SHOP leases by residents pursuant to state law mandated contractual provisions could have an adverse effect on our business, financial condition and results of operations.
Furthermore, transitioning to a new tenant and/or operator could cause disruptions at the operations of the properties and, if there is a delay in the new tenant or operator obtaining its ability to receive reimbursement from third-party payors. 24 T able of Contents A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants.
Furthermore, transitioning to a new tenant and/or operator could cause disruptions at the operations of the properties and, if there is a delay in the new tenant or operator obtaining its ability to receive reimbursement from third-party payors. 24 Table of Contents A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants.
Risks Related to the Healthcare Industry Our real estate investments are concentrated in healthcare-related facilities, and we may be negatively impacted by adverse trends in the healthcare industry. We own and seek to acquire a diversified portfolio of healthcare-related assets including MOBs, SHOPs and other healthcare-related facilities.
Risks Related to the Healthcare Industry Our real estate investments are concentrated in healthcare-related facilities, and we may be negatively impacted by adverse trends in the healthcare industry. We own and seek to acquire a diversified portfolio of healthcare-related assets including OMFs, SHOPs and other healthcare-related facilities.
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.
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.
However, these upgrades, processes, new technology and training may not be sufficient to protect us from all risks. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques and technologies used in attempted attacks and intrusions evolve and generally are not recognized until launched against a target.
However, these upgrades, processes, new technology and training may not be sufficient to protect us from all risks. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques and technologies (including artificial intelligence) used in attempted attacks and intrusions evolve and generally are not recognized until launched against a target.
We may in the future, transition other MOB facilities, which may or may not be experiencing declining performance, to third-party managed facilities using the RIDEA structure, in connection with which they would also transition from our MOB segment to our SHOP segment.
We may in the future, transition other OMF facilities, which may or may not be experiencing declining performance, to third-party managed facilities using the RIDEA structure, in connection with which they would also transition from our OMF segment to our SHOP segment.
We have acquired and expect to continue to acquire a diversified portfolio of healthcare-related assets including MOBs, SHOPs and other healthcare-related facilities. However, the Board may change our investment policies in its sole discretion.
We have acquired and expect to continue to acquire a diversified portfolio of healthcare-related assets including OMFs, SHOPs and other healthcare-related facilities. However, the Board may change our investment policies in its sole discretion.
As a result, unless a stockholder is a tax-exempt entity, it may have to use funds from other sources to pay its tax liability on the distributions reinvested in shares of our common stock pursuant to the DRIP. Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities.
As a result, unless a stockholder is a tax-exempt entity, it may have to use funds from other sources to pay its tax liability on the distributions reinvested in shares of our common stock pursuant to the DRIP. 37 Table of Contents Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities.
Our tenants and operators of our healthcare-related assets may often become subject to claims that their services have resulted in patient injury or other adverse effects. The insurance coverage maintained by these tenants and operators may not cover all claims made against them or continue to be available at a reasonable cost, if at all.
Our tenants and operators of our healthcare-related assets from time to time become subject to claims that their services have resulted in patient injury or other adverse effects. The insurance coverage maintained by these tenants and operators may not cover all claims made against them or continue to be available at a reasonable cost, if at all.
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. Damage from catastrophic weather and other natural events and climate change could result in losses to us.
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. 17 Table of Contents Damage from catastrophic weather and other natural events and climate change could result in losses to us.
These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our revenues and cash flows. 22 T able of Contents The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us.
These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our revenues and cash flows. 22 Table of Contents The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us.
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.
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. 38 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.
Healthcare facilities in general and MOBs in particular tend to be specifically suited for the particular needs of their tenants and we may not be able to locate suitable replacement tenants to lease the property for their specialized uses.
Healthcare facilities in general and OMFs in particular tend to be specifically suited for the particular needs of their tenants and we may not be able to locate suitable replacement tenants to lease the property for their specialized uses.
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.
Risks Related to our Indebtedness Our level of indebtedness may increase our business risks. As of December 31, 2024, we had total outstanding indebtedness of $1.2 billion. We may incur additional indebtedness in the future for various purposes.
In addition, the Affordable Care Act expands reporting requirements and responsibilities related to facility ownership and management, patient safety and care quality. In the ordinary course of their businesses, our tenants and operators may be regularly subjected to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations.
In addition, the ACA expands reporting requirements and responsibilities related to facility ownership and management, patient safety and care quality. In the ordinary course of their businesses, our tenants and operators may be regularly subjected to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations.
A shortage of nurses or other trained personnel or general inflationary pressures have forced the operator to enhance pay and benefit packages to compete effectively for personnel, but it may not be able to offset these added costs by increasing the rates charged to residents.
A shortage of nurses or other trained personnel or general inflationary pressures in recent years have forced the operator to enhance pay and benefit packages to compete effectively for personnel, but it may not be able to offset these added costs by increasing the rates charged to residents.
However, the repeal of the individual mandate penalty included in the Tax Cuts and Jobs Act of 2017, recent actions to increase the availability of insurance policies that do not include Affordable Care Act minimum benefit standards, and support for Medicaid work requirements will likely impact the market.
However, the repeal of the individual mandate penalty included in the Tax Cuts and Jobs Act of 2017, recent actions to increase the availability of insurance policies that do not include ACA minimum benefit standards, and support for Medicaid work requirements will likely impact the market.
Accordingly, our business, financial condition and results of operations may be particularly susceptible to downturns or changes in the local Florida economies where we operate.
Accordingly, our business, financial condition and results of operations may be particularly susceptible to downturns or changes in the local Florida, Pennsylvania and Georgia economies where we operate.
The independent directors of the Board rely on our Advisor’s input, including its view of the estimate and the appraisals performed by the independent valuer, but the independent directors of the Board may, in their discretion, consider other factors.
The independent directors of the Board rely on our input, including our view of the estimate and the appraisals performed by the independent valuer, but the independent directors of the Board may, in their discretion, consider other factors.
Our one SNF has, and may continue to experience, limited increases or reductions in Medicare payments and aspects of certain of these government initiatives, such as further reductions in funding of the Medicare and Medicaid programs, additional changes in reimbursement regulations by CMS, enhanced pressure to contain healthcare costs by Medicare, Medicaid and other payors, and additional operational requirements may adversely affect their ability to make rental payments.
Our one skilled nursing facility has, and may continue to experience, limited increases or reductions in Medicare payments and aspects of certain of these government initiatives, such as further reductions in funding of the Medicare and Medicaid programs, additional changes in reimbursement regulations by CMS, enhanced pressure to contain healthcare costs by Medicare, Medicaid and other payors, and additional operational requirements may adversely affect their ability to make rental payments.
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.
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.
The repeal of CON laws could allow competitors to freely operate in previously closed markets. This could negatively affect the ability of our tenants’ to make rental payments to us.
The repeal of CON laws could allow competitors to freely operate in previously closed markets. This could negatively affect the ability of our tenants to make rental payments to us.
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.
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. 33 Table of Contents Furthermore, a security breach or other significant disruption involving our information technology networks 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.
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.
We incurred $1.5 million, $1.2 million and $3.2 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, 2024, 2023 and 2022, 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. 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.
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.
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.
The Estimated Per-Share NAV reflected stock dividends actually issued as of December 31, 2023, 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 2025.
Even if not suspended, our SRP includes numerous restrictions that limit a stockholder’s ability to sell shares of common stock to us, including limiting repurchases only to stockholders that have died or become disabled, limiting the total value of repurchases pursuant to our SRP to the amount of proceeds received from issuances of common stock pursuant to the DRIP and limiting repurchases in any fiscal semester to 2.5% of the average number of shares outstanding during the previous fiscal year.
Even if not suspended, our SRP includes numerous restrictions that limit a stockholder’s ability to sell shares of common stock to us, including limiting repurchases only to stockholders that have died or become disabled, limiting the total value of repurchases pursuant to our SRP to the amount of proceeds received from issuances of common stock pursuant to our distribution reinvestment plan (“DRIP”) and limiting repurchases in any fiscal semester to 2.5% of the average number of shares outstanding during the previous fiscal year.
If (a) we are a “pension-held REIT,” (b) a tax-exempt stockholder has incurred (or is deemed to have incurred) debt to purchase or hold shares of our stock, or (c) a holder of shares of our stock is a certain type of tax-exempt stockholder, dividends on, and gains recognized on the sale of, shares of our stock by such tax-exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Code.
If (a) we are a “pension-held REIT,” (b) a tax-exempt stockholder has incurred (or is deemed to have incurred) debt to purchase or hold shares of our stock, or (c) a holder of shares of our stock is a certain type of tax-exempt stockholder, dividends on, and gains recognized on the sale of, shares of our stock by such tax-exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Code. 39 Table of Contents Item 1B.
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.
Such distributions are not taxable to our stockholders. 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.
Our properties and tenants may be unable to compete successfully. The properties we have acquired and will acquire may face competition from nearby hospitals, senior housing properties and other medical office buildings and medical facilities that provide comparable services.
Our properties and tenants may be unable to compete successfully. The properties we have acquired and will acquire may face competition from nearby hospitals, senior housing properties and other outpatient medical facilities that provide comparable services.
Leases with residents at our SHOPs typically do not have rent escalations, however, we are able to renew leases at market rates as they mature due to their short-term nature. As inflation rates increase, the cost of providing medical care at our SHOPs, particularly labor costs, will increase.
Leases with residents at our SHOPs typically do not have rent escalations; however, we are able to renew leases at market rates as they mature due to their short-term nature. As inflation rates increase, the cost of providing medical care at our SHOPs, particularly labor costs and insurance premiums, will continue to increase.
Our Advisor reviews the valuation provided by the independent valuer for consistency with our valuation guidelines and the reasonableness of the independent valuer’s conclusions. The independent directors of the Board oversee and review the appraisals and valuations and make a final determination of the Estimated Per-Share NAV.
We review the valuation provided by the independent valuer for consistency with our valuation guidelines and the reasonableness of the independent valuer’s conclusions. The independent directors of the Board oversee and review the appraisals and valuations and make a final determination of the Estimated Per-Share NAV.
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.
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.
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.
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. U.S.
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.
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.
These risks could be mitigated by our limited participation in governmental-sponsored payor programs. The Affordable Care Act includes program integrity provisions that both create new authorities and expand existing authorities for federal and state governments to address fraud, waste and abuse in federal health programs.
These risks could be mitigated by our limited participation in governmental-sponsored payor programs. The ACA includes program integrity provisions that both create new authorities and expand existing authorities for federal and state governments to address fraud, waste and abuse in federal health programs.
In limited circumstances, loss of state licensure or certification or closure of a facility could ultimately result in loss of authority to operate the facility and require new CON authorization to re-institute operations. Furthermore, uncertainty surrounding the implementation of the Affordable Care Act may adversely affect our tenants.
In limited circumstances, loss of state licensure or certification or closure of a facility could ultimately result in loss of authority to operate the facility and require new CON authorization to re-institute operations. Furthermore, uncertainty surrounding the implementation of the ACA may adversely affect our tenants.
Some of our properties are contiguous to other parcels of real property, comprising part of the same commercial center. In connection with such properties, there are significant covenants, conditions and restrictions restricting the operation of such properties and any improvements on such properties, and related to granting easements on such properties.
Some of our properties are subject to ground leases or are contiguous to other parcels of real property, comprising part of the same commercial center. In connection with such properties, there are significant covenants, conditions and restrictions restricting the operation of such properties and any improvements on such properties, and related to granting easements on such properties.
This could adversely affect the ability of our tenants to make rental payments, which could have a material adverse impact on us. 16 T able of Contents We may be unable to secure funds for future tenant improvements or capital needs.
This could adversely affect the ability of our tenants to make rental payments, which could have a material adverse impact on us. We may be unable to secure funds for future tenant improvements or capital needs.
Accordingly, if our tenants fail to comply with the Affordable Care Act’s requirements, they may be subject to significant monetary penalties and excluded from participation in Medicare and Medicaid, which could materially and adversely affect their ability to pay rent and satisfy other financial obligations to us. 23 T able of Contents Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements, could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us.
Accordingly, if our tenants fail to comply with the ACA’s requirements, they may be subject to significant monetary penalties and excluded from participation in Medicare and Medicaid, which could materially and adversely affect their ability to pay rent and satisfy other financial obligations to us. 23 Table of Contents Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements, could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us.
As of December 31, 2023, we had one designated interest rate swap with a notional amount of $378.5 million, which effectively fixes a portion of our variable-rate debt, and we had seven interest rate caps with a notional amount of $364.2 million, which, while not designated as hedges for accounting purposes, do economically limit our exposure to increasing variable rates, but such interest rate swap and caps may not be effective in reducing our exposure to interest rate changes.
As of December 31, 2024, we had one designated interest rate swap with a notional amount of $378.5 million, which effectively fixes a portion of our variable-rate debt, and we had eight interest rate caps with a notional amount of $369.2 million, which, while not designated as hedges for accounting purposes, do economically limit our exposure to increasing variable rates, but such interest rate swap and caps may not be effective in reducing our exposure to interest rate changes.
Accordingly, our one SNF and limited assisted living facilities that participate in Medicaid could be subject to the potential negative effects of decreased reimbursement rates or other changes in reimbursement policy or programs offered through such reimbursement programs.
Accordingly, our one skilled nursing facility and limited assisted living facilities that participate in Medicaid could be subject to the potential negative effects of decreased reimbursement rates or other changes in reimbursement policy or programs offered through such reimbursement programs.
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.
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 Affordable Care Act has faced ongoing legal challenges, including litigation seeking to invalidate some or all of the law or the manner in which it has been interpreted. The legal challenges and legislative initiatives to roll back the Affordable Care Act continues and the outcomes are uncertain.
The ACA has faced ongoing legal challenges, including litigation seeking to invalidate some or all of the law or the manner in which it has been interpreted. The legal challenges and legislative initiatives to roll back the ACA continues and the outcomes are uncertain.
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.
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, have impacted and, may continue to impact, our investments and results of operations.
The scope and duration of any future public health crisis, including the potential emergence of new variants of the COVID-19 virus, the pace at which government restrictions are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, the speed and extent to which global markets fully recover from the disruptions caused by such a public health crisis, and the impact of these factors on our business, financial condition and results of operations, will depend on future developments that are highly uncertain and cannot be predicted with confidence.
The scope and duration of any future public health crisis, the pace at which government restrictions are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, the speed and extent to which global markets fully recover from the disruptions caused by such a public health crisis, and the impact of these factors on our business, financial condition and results of operations, will depend on future developments that are highly uncertain and cannot be predicted with confidence.
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 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.
As the primary vehicle for comprehensive healthcare reform in the United States, the Affordable Care Act was designed to reduce the number of individuals in the United States without health insurance and change the ways in which healthcare is organized, delivered and reimbursed.
As the primary vehicle for comprehensive healthcare reform in the United States, the ACA was designed to reduce the number of individuals in the United States without health insurance and change the ways in which healthcare is organized, delivered and reimbursed.
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.
Over the longer term, we expect to continue acquiring additional properties; 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 or dispose of properties at prices less than we originally contemplated; • 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.
Coverage expansions under the Affordable Care Act through the Medicaid expansion and health insurance exchanges may be scaled back or eliminated in the future due to ongoing legal challenges and the future status of the Affordable Care Act is unknown.
Coverage expansions under the ACA through the Medicaid expansion and health insurance exchanges may be scaled back or eliminated in the future due to ongoing legal challenges and the future status of the ACA is unknown.
Any such event of default or acceleration could have a material adverse effect on our business, financial condition and results of operations. 28 T able of Contents Changes in the debt markets could have a material adverse impact on our earnings and financial condition.
Any such event of default or acceleration could have a material adverse effect on our business, financial condition and results of operations. Changes in the debt markets could have a material adverse impact on our earnings and financial condition.
We may lease some of our seniors housing properties that are “qualified health care properties” to one or more TRSs which, in turn, contract with independent third-party management companies to operate those qualified health care properties on behalf of those TRSs.
We lease our SHOPs that are “qualified health care properties” to one or more TRSs which, in turn, contract with independent third-party management companies to operate those qualified health care properties on behalf of those TRSs.
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.
We have incurred impairment charges, which have an immediate direct impact on our net loss for GAAP purposes, including $24.9 million, during the year ended December 31, 2024. There can be no assurance that we will not take additional charges in the future.
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.
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 ACA also requires the reporting and return of overpayments.
Medicare Access and CHIP Reauthorization Act (“MACRA”) has also established a new payment framework, which modified certain Medicare payments to eligible clinicians, representing a fundamental change to physician reimbursement. These changes could have a material adverse effect on the financial condition of some or all of our tenants in our properties.
MACRA has also established a new payment framework, which modified certain Medicare payments to eligible clinicians, representing a fundamental change to physician reimbursement. These changes could have a material adverse effect on the financial condition of some or all of our tenants in our properties.
Our Advisor is continuously working, including with the aid of third-party service providers, to install new, and to upgrade existing, network and information technology systems, to create processes for risk assessment, testing, prioritization, remediation, risk acceptance, and reporting, and to provide awareness training around phishing, malware and other cyber risks to ensure that our Advisor and other parties that provide us with services essential to our operations are protected against cyber risks and security breaches and that we are also therefore so protected.
We are continuously working, including with the aid of third-party service providers, to install new, and to upgrade existing, network and information technology systems, to create processes for risk assessment, testing, prioritization, remediation, risk acceptance, and reporting, and to provide awareness training around phishing, malware and other cyber risks to ensure that our operations are protected against cyber risks and security breaches.
We have mortgages, credit facilities and derivative agreements that have terms that are based on the Secured Overnight Financing Rate (“SOFR”). As of December 31, 2023, 62.5% of our total gross debt bore interest at variable rates.
We have mortgages, credit facilities and derivative agreements that have terms that are based on the Secured Overnight Financing Rate (“SOFR”). As of December 31, 2024, 63.0% of our total gross debt bore interest at variable rates.
Our Advisor has engaged an independent valuer to perform appraisals of our real estate assets in accordance with valuation guidelines established by the Board.
We have engaged an independent valuer to perform appraisals of our real estate assets in accordance with valuation guidelines established by the Board.
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.
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; • 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, 2024. 30 Table of Contents Moreover, although shares of Series A Preferred Stock and Series B Preferred Stock are listed on The Nasdaq Global Market, there can be no assurance that the trading volume for shares will provide sufficient liquidity for holders to sell their shares at the time of their choosing or that the trading price for shares will equal or exceed the price paid for the shares.
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.
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.
Similarly, if we were to fail an income test (and did not lose our REIT status because such failure was due to reasonable cause and not willful neglect), we would be subject to tax on the income that does not meet the income test requirements.
We may not make sufficient distributions to avoid excise taxes applicable to REITs. Similarly, if we were to fail an income test (and did not lose our REIT status because such failure was due to reasonable cause and not willful neglect), we would be subject to tax on the income that does not meet the income test requirements.
In addition, we may in certain circumstances be liable for the actions of our co-venturers. Net leases may not result in fair market lease rates over time.
In addition, we may in certain circumstances be liable for the actions of our co-venturers. 20 Table of Contents Net leases may not result in market rental rates over time.
Thus, we may be unable to realize our investment objectives by selling or otherwise disposing of a property, or refinancing debt secured by the property, at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy.
Thus, we may be unable to realize our investment objectives by selling or otherwise disposing of a property, or refinancing debt secured by the property, at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy. Our success is dependent on the continued contributions of certain key personnel.
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.
We last published an Estimated Per-Share NAV on March 27, 2024. The estimate was as of December 31, 2023 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 2025.
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.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+4 added−0 removed3 unchanged
Biggest changeTo manage our material risks from cybersecurity threats and to protect against, detect, and prepare to respond to cybersecurity incidents, we undertake the below listed activities: • Monitor emerging data protection laws and implement changes to our processes to comply; • Conduct periodic data handling and use requirement training for our employees; • Conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; and • Conduct regular phishing email simulations for all employees Our incident response plan coordinates the activities that we and our third-party cybersecurity providers take to prepare to respond and recover from cybersecurity incidents, which include processes to triage, assess severity, investigate, escalate, contain, and remediate an incident, as well as to comply with potentially applicable legal obligations. 43 T able of Contents As part of the above processes, we engage with third party providers to review our cybersecurity program and help identify areas for continued focus, improvement, and compliance.
Biggest changeTo manage our material risks from cybersecurity threats and to protect against, detect and prepare to respond to cybersecurity incidents, we undertake the below listed activities: • monitor emerging data protection laws and implement changes to our processes to comply; • conduct periodic data handling and use requirement training for our employees; • conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; and • conduct regular phishing email simulations for all employees.
In addition, we assess cybersecurity considerations in the selection and oversight of our third-party services providers, including due diligence on the third parties that have access to our systems and facilities that house systems and data. Our Audit Committee of the Board of Directors is responsible for oversight of our risk assessment, risk management, disaster recovery procedures and cybersecurity risks.
In addition, we assess cybersecurity considerations in the selection and oversight of our third-party services providers, including due diligence on the third parties that have access to our systems and facilities that house systems and data. Our Audit Committee of the Board is responsible for oversight of our risk assessment, risk management, disaster recovery procedures and cybersecurity risks.
On a regular basis we implement into our operations these cybersecurity processes, technologies, and controls to assess, identify, and manage material risks. Specifically, we engage a third-party cybersecurity firm to assist with network and endpoint monitoring, cloud system monitoring and assessment of our incident response procedures.
On a regular basis we implement into our operations these cybersecurity processes, technologies and controls to assess, identify and manage material risks. Specifically, we engage a third-party information technology and cybersecurity firm to assist with network and endpoint monitoring, cloud system monitoring and assessment of our incident response procedures.
As of the date of this Annual Report on Form 10-K, we have not encountered risks from cybersecurity threats that have materially affected us, or are reasonably likely to materially affect, our business strategy, results of operations or financial position.
As of the date of this Annual Report on Form 10-K, we have not encountered risks from cybersecurity threats that have materially affected us, or are reasonably likely to materially affect, our business strategy, results of operations or financial position. 40 Table of Contents
Members of the Board regularly engage in discussions with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.
Members of the Board regularly engage in discussions with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs. Our management is responsible for assessing and managing our material risks from cybersecurity threats.
Added
Our incident response plan coordinates the activities that we and our third-party information technology and cybersecurity providers take to prepare to respond and recover from cybersecurity incidents, which include processes to triage, assess severity, investigate, escalate, contain and remediate an incident, as well as to comply with potentially applicable legal obligations.
Added
As part of the above processes, we engage with third party providers to review our cybersecurity program and help identify areas for continued focus, improvement and compliance.
Added
Management has primary responsibility for our overall cybersecurity risk management program and supervises both our internal information technology and cybersecurity personnel and our third-party vendors.
Added
Our management team supervises efforts to prevent, detect and mitigate cybersecurity risks and incidents through various means, which may include briefings from both internal and external information technology and cybersecurity personnel, threat intelligence and other information obtained from governmental, public or private sources as well as alerts and reports produced by security tools deployed in our information technology environment.

Item 2. Properties

Properties — owned and leased real estate

7 edited+2 added−4 removed1 unchanged
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.
Biggest changeN/A Not applicable. 41 Table of Contents The following table details the geographic distribution, by state, of our portfolio as of December 31, 2024: 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 — $ — — % — — % — Arizona 14 10,170 3.1 % 509,806 6.1 % — Arkansas 3 15,315 4.7 % 248,783 3.0 % 299 California 7 14,874 4.6 % 366,613 4.4 % 156 Colorado 3 1,771 0.5 % 67,133 0.8 % — Florida 22 68,754 21.2 % 1,099,729 13.1 % 812 Georgia 16 33,502 10.4 % 802,179 9.5 % 624 Idaho — — — % — — % — Illinois 16 19,601 6.1 % 530,955 6.3 % 317 Indiana 11 5,672 1.8 % 225,861 2.7 % — Iowa 11 29,175 9.0 % 505,781 6.0 % 583 Kansas 1 3,471 1.1 % 49,360 0.6 % 71 Louisiana 1 — — % 17,830 0.2 % — Maryland 1 1,046 0.3 % 36,260 0.4 % — Massachusetts 3 948 0.3 % 36,563 0.4 % — Michigan 11 18,133 5.6 % 404,434 4.8 % 291 Minnesota 1 1,098 0.3 % 36,375 0.4 % — Mississippi 3 1,515 0.5 % 73,859 0.9 % — Missouri 2 8,934 2.8 % 96,016 1.1 % 146 Nevada 2 3,291 1.0 % 86,342 1.0 % — New Jersey 1 734 0.2 % 25,164 0.3 % — New York 5 2,908 0.9 % 136,982 1.6 % — North Carolina 3 1,737 0.5 % 90,650 1.1 % — Ohio 5 7,934 2.5 % 172,085 2.0 % — Oklahoma 2 1,084 0.3 % 47,407 0.6 % — Oregon 6 10,699 3.3 % 322,354 3.8 % 252 Pennsylvania 16 37,524 11.6 % 1,413,595 16.8 % 289 South Carolina 2 1,103 0.3 % 52,527 0.6 % — Tennessee 3 3,473 1.1 % 175,669 2.1 % — Texas 6 4,173 1.3 % 282,120 3.4 % — Virginia 1 1,633 0.3 % 62,165 0.7 % — Washington 1 2,031 0.6 % 52,900 0.6 % — Wisconsin 13 11,270 3.5 % 373,401 4.4 % 79 Total 192 $ 323,573 100 % 8,400,898 100 % 3,919 __________ (1) Includes one land parcel located in Iowa.
(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.
(2) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2024, 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 2024. 42 Table 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, 2024.
(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).
(2) Weighted-average remaining lease term in years is calculated based on square feet as of December 31, 2024. (3) Gross asset value represents total real estate investments, at cost ($2.5 billion total as of December 31, 2024), net of gross market lease intangible liabilities ($22.8 million total as of December 31, 2024).
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.
Cumulative impairment charges are already reflected within gross asset value. (4) Includes one parcel of land with a total gross asset value of $0.6 million. (5) Weighted by unit count as of December 31, 2024. As of December 31, 2024, we had 3,919 rentable units in our SHOP segment.
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.
Property Financings See Note 4 — Mortgage Notes Payable, Net and Note 5 — Credit Facilities to our Consolidated Financial Statements for property financings as of December 31, 2024 and 2023. 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.
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.
Properties The following table presents certain additional information about the properties we owned as of December 31, 2024: Portfolio Number of Properties Rentable Square Feet Percent Leased (1)(6) Weighted Average Remaining Lease Term (2) Gross Asset Value (3) (In thousands) Outpatient Medical Facilities 148 4,716,949 89.7% 6.5 $ 1,381,166 Seniors Housing Operating Properties 45 (4) 3,683,949 78.5% (5) N/A 1,082,953 Total Portfolio 193 8,400,898 $ 2,464,119 __________ (1) Inclusive of leases signed but not yet commenced as of December 31, 2024.
(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.
(In thousands) Future Minimum Base Rent Payments 2025 $ 102,490 2026 98,736 2027 89,887 2028 76,345 2029 66,636 2030 60,069 2031 54,372 2032 47,926 2033 37,945 2034 34,844 Thereafter 80,678 $ 749,928 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, 2024: 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) 2025 59 $ 6,068 7.2% 231,301 6.9% 2026 77 8,019 9.5% 393,347 11.8% 2027 101 12,972 15.4% 547,366 16.4% 2028 61 12,478 14.8% 472,066 14.2% 2029 53 7,460 8.9% 308,304 9.2% 2030 42 6,387 7.6% 259,910 7.8% 2031 16 4,871 5.8% 188,948 5.7% 2032 33 13,975 16.6% 467,067 14.0% 2033 10 2,675 3.2% 106,787 3.2% 2034 65 9,303 11.0% 360,758 10.8% Total 517 $ 84,208 100.0% 3,335,854 100.0% __________ (1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2024, which includes tenant concessions such as free rent, as applicable.
Removed
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.
Added
The SHOP segment excludes one closed SHOP with 39 rentable units, one SHOP with 20 units under renovation and one land parcel. (6) Percentage leased for the OMF segment is presented as of the end of the period shown; percentage leased for the SHOP segment is presented for the duration of the period shown.
Removed
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).
Added
Mine Safety Disclosures Not applicable. 43 Table of Contents PART II
Removed
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.
Removed
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

12 edited+4 added−29 removed2 unchanged
Biggest changeEstimated 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.
Biggest changeEstimated Per-Share Net Asset Value On March 27, 2024, we published a new Estimated Per-Share NAV equal to $13.00 as of December 31, 2023 (the “Valuation Date”) (and $52.00 after reflecting the Reverse Stock Split), which was unanimously adopted by the independent directors of the Board.
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.
As a REIT, we are required to distribute annually 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.
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 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.
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, our financial condition, provisions in our agreements that may restrict our ability to pay dividends and other distributions, capital expenditure requirements, as applicable, requirements of Maryland law and annual dividends and other distribution requirements needed to maintain our status as a REIT under the Code.
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.
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, 2024, 2023 and 2022.
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.
Tax Characteristics of Dividends All common dividends in the years ended December 31, 2024, 2023 and 2022 were issued as stock dividends, which do not represent taxable dividends to shareholders for U.S. federal income tax purposes.
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.
The Estimated Per-Share NAV of $13.00 fell within the range of the values reported by Kroll, LLC (“Kroll”), an independent third-party real estate advisory firm engaged by us.
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.
In determining the Estimated Per-Share NAV of $13.00, 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 2024 and the fact that properties under contract for sale at December 31, 2023 were valued based on their contract sale prices and without giving consideration to the reinvestment of the sale proceeds.
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 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 the number of shares of our common stock outstanding as of December 31, 2023.
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.
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.
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.
We did not repurchase any shares of our common stock during the year ended December 31, 2024. For additional information on the SRP, see Note 8 — Stockholders’ Equity to our Consolidated Financial Statements. Item 6. [Reserved]
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.
Sales of Unregistered Securities None. 44 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers The Board suspended repurchases under the SRP effective August 14, 2020. No further repurchase requests under the SRP may be made unless and until the SRP is reactivated.
The method used by Kroll to appraise the Real Estate Assets in the report furnished to the Advisor and the Board by Kroll (the “Kroll Report”) complies with the Institute of Portfolio Alternatives (formerly known as the Investment Program Association) Practice Guideline 2013-01 titled “Valuations of Publicly Registered Non-Listed REITs,” issued April 29, 2013.
The valuation was performed in compliance with the Institute of Portfolio Alternatives Practice Guideline 2013-01 titled “Valuations of Publicly Registered Non-Listed REITs,” issued April 29, 2013.
Removed
The common stock outstanding amount used to calculate the Estimated Per-Share NAV as of December 31, 2021 included the dividends declared and issued entirely in shares of our common stock through December 31, 2021, but did not include any other dividend declared and payable in whole or in part in shares of our common stock subsequent to December 31, 2021.
Added
There is a limited public market for our common stock. Shares of our common stock trade on the over-the-counter market and are quoted on the OTC Pink tier of the OTC Markets under the symbol “HLTC,” which quotations are limited and sporadic.
Removed
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.
Added
Quotations on the OTC Pink reflect inter-dealer prices, without retail markup, mark-down, or commission and may not necessarily represent actual transactions.
Removed
Process Consistent with our valuation guidelines, we engaged Kroll to perform appraisals of our real estate assets (each asset individually, a “Real Estate Asset” and collectively, the “Real Estate Assets”) as of the Valuation Date and provided a valuation range for each Real Estate Asset.
Added
See our Current Report on Form 8-K filed with the SEC on March 29, 2024 for more information on the methodologies and assumptions used to determine, and the limitations and risks of, our updated Estimated Per-Share NAV. Holders As of February 21, 2025 we had 28,296,439 shares of common stock outstanding held by a total of 44,877 stockholders of record.
Removed
In addition, Kroll was engaged to review, and incorporate in its report, our market value estimate regarding other assets, liabilities, and the liquidation value of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock as of the Valuation Date. Kroll has extensive experience estimating the fair value of commercial real estate.
Added
Other information concerning the dividends called for by this item is incorporated herein by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Dividends and Other Distributions.”.
Removed
Also, Kroll advised that the scope of work performed was conducted in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. We have engaged Kroll for the past six years to assist in determining our Estimated Per-Share NAV.
Removed
For preparing the Kroll Report, we paid Kroll a customary fee for services of this nature, no part of which was contingent relating to the provision of services or specific findings.
Removed
Other than its engagement as described herein and its engagements to provide certain purchase price allocation and other real estate valuation services, Kroll does not have any direct interests in any transaction with us.
Removed
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.
Removed
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.
Removed
These approaches are commonly used in the commercial real estate industry.
Removed
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.
Removed
In determining the Estimated Per-Share NAV, the independent directors of the Board also considered the impact of other factors described herein that were not specifically quantified.
Removed
Shares of common stock outstanding for these purposes is the sum of shares of common stock outstanding, including vested and unvested restricted shares, and partnership units of our operating partnership designated as “Common OP Units,” excluding performance-based restricted partnership units of our operating partnership designated as “Class B Units” because the Advisor concluded that, in a hypothetical liquidation at such Estimated Per-Share NAV, it may not be entitled to any incentive fees or Class B Units.
Removed
The Advisor determined the Estimated Per-Share NAV in a manner consistent with the definition of fair value under U.S. generally accepted accounting principles set forth in FASB’s Topic ASC 820, Fair Value Measurements and Disclosures.
Removed
Limitations of the Estimated Per-Share NAV The Estimated Per-Share NAV does not represent the: (i) the price at which shares of our common stock would trade at on a national securities exchange or a third party would pay for them, (ii) the amount stockholders would obtain if they tried to sell their shares of common stock or (iii) the amount stockholders would receive if we liquidated our assets and distributed the proceeds after paying all of our expenses and liabilities.
Removed
Also, there is no assurance that the methodology used to establish the Estimated Per-Share NAV would be acceptable to the Financial Industry Regulatory Authority for use on customer account statements, or that the Estimated Per-Share NAV will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”) with respect to employee benefit plans subject to ERISA and other retirement plans or accounts subject to Section 4975 of the Code.
Removed
Further, the Estimated Per-Share NAV was calculated as of a specific date, and the value of shares of common stock will fluctuate over time as a result of, among other things, developments related to individual assets, changes in the real estate and capital markets, acquisitions or dispositions of assets and the distribution of proceeds from the sale of real estate to stockholders.
Removed
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.
Removed
The independent directors of the Board based their conclusions on their review of the Advisor’s analysis and recommendation, the Kroll Report, estimates and calculations and the fundamentals of the Real Estate Assets. The Board is ultimately and solely responsible for the Estimated Per-Share NAV.
Removed
Estimated Per-Share NAV was determined at a moment in time and will likely change over time as a result of changes to the value of individual assets as well as changes and developments in the real estate and capital markets, including changes in interest rates.
Removed
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
Distributions were generally paid by the 5th day following each month end to stockholders of record at the close of business each day during the prior month. On August 13, 2020, the Board changed our common stock distribution policy in order to preserve our liquidity and maintain additional financial flexibility.
Removed
Under the revised policy, distributions authorized by the Board on our shares of common stock, if and when declared, are paid on a quarterly basis in arrears in shares of our common stock valued at our estimated per share net asset value of common stock in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter.
Removed
The following table details each stock dividend issued since October 1, 2020. The Board may further change our common stock distribution policy at any time, further reduce the amount of distributions paid or suspend distribution payments at any time, and therefore distribution payments are not assured.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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] .

Item 7. Management's Discussion & Analysis

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

103 edited+49 added−142 removed33 unchanged
Biggest changeThe increase in property operating and maintenance expenses from our Same Store properties is primarily the result of the impacts of inflation on utility and maintenance costs as well as increased property insurance and property tax expenses, which are largely reimbursed by tenants. 58 Table of Contents Segment Results — Seniors Housing Operating Properties The following table presents the revenue and property operating and maintenance expense and the period to period change within our SHOP segment for the years ended December 31, 2023 and 2022: Segment Same Store (1) Acquisitions (2) Dispositions (3) Segment Total Year Ended December 31, Increase (Decrease) Year Ended December 31, Increase (Decrease) Year Ended December 31, Increase (Decrease) Year Ended December 31, Increase (Decrease) (In thousands) 2023 2022 $ 2023 2022 $ 2023 2022 $ 2023 2022 $ Revenue from tenants $ 207,707 $ 196,749 $ 10,958 $ — $ — $ — $ 2,769 $ 7,653 $ (4,884) $ 210,476 $ 204,402 $ 6,074 Less: Property operating and maintenance 176,745 167,064 9,681 — — — 3,093 10,435 (7,342) 179,838 177,499 2,339 Segment income $ 30,962 $ 29,685 $ 1,277 $ — $ — $ — $ (324) $ (2,782) $ 2,458 $ 30,638 $ 26,903 $ 3,735 __________ (1) Our SHOP segment included 48 Same Store Properties, including two land parcels.
Biggest changeSegment Results — Seniors Housing Operating Properties The following table presents the revenue and property operating and maintenance expense and the period to period change within our SHOP segment for the years ended December 31, 2024 and 2023: Year Ended December 31, Increase (Decrease) to NOI (In thousands) 2024 2023 $ % Revenue from tenants $ 216,477 $ 210,476 $ 6,001 2.9 % Less: Property operating and maintenance 181,947 179,838 2,109 1.2 % NOI $ 34,530 $ 30,638 $ 3,892 12.7 % 50 Table of Contents Number of Properties at December 31, Average Unit Occupancy for the Years Ended December 31, 2024 2023 2024 2023 Total communities 45 48 77.4 % 74.4 % Revenues from tenants within our SHOP segment are generated in connection with rent and services offered to residents depending on the level of care required, as well as fees associated with other ancillary services.
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 and 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.
Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction.
Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction.
The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with the tenant.
The aggregate value of intangible assets related to customer relationships, as applicable, is measured based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with the tenant.
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.
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, 2024 and 2023.
In addition to base rent, depending on the specific lease, MOB tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases.
In addition to base rent, depending on the specific lease, OMF tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases.
Dividends on our Series B Preferred Stock are declare quarterly in an amount equal to $1.78125 per share each year ($0.445313 per share per quarter) to Series B Preferred Stock holders, which is equivalent to 7.125% of per annum in the $25.00 liquidation preference per share of Series B Preferred Stock.
Dividends on our Series B Preferred Stock are declared quarterly in an amount equal to $1.78125 per share each year ($0.445313 per share per quarter) to holders of Series B Preferred Stock, which is equivalent to 7.125% of per annum in the $25.00 liquidation preference per share of Series B Preferred Stock.
We continually review receivables related to rent and unbilled rents receivable and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
We continually review receivables related to rent and unbilled rent and determine collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
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.
These leases are reflected on the consolidated balance sheets as of December 31, 2024 and 2023, 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, 2024, 2023 and 2022.
Property operating and maintenance expenses relates to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third party operators, and costs associated with maintaining the physical site.
Property operating and maintenance expenses relate to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third-party operators and costs associated with maintaining the physical site.
Inflation We may be adversely impacted by inflation on the leases with tenants in our MOB segment that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates.
Inflation We may be adversely impacted by inflation on the leases with tenants in our OMF segment that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates.
The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.
The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and AFFO, and the adjustments to GAAP in calculating FFO and AFFO.
We utilize various estimates, processes and information to determine the as-if vacant property value. We estimate the fair value using data from appraisals, comparable sales, discounted cash flow analysis and other methods. Fair value estimates are also made using significant assumptions such as capitalization rates, fair market lease rates and land values per square foot.
We utilize various estimates, processes and information to determine the as-if vacant property value. We estimate the fair value using data from appraisals, comparable sales, discounted cash flow analysis and other methods. Fair value estimates are also made using significant assumptions such as capitalization rates, market rental rates, discount rates and land values per square foot.
As a lessor of real estate, we elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating and maintenance expenses) as a single lease component as an operating lease because (a) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (b) the lease component, if accounted for separately, would be classified as an operating lease.
As a lessor of real estate, we have elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating and maintenance expenses) as a single lease component as an operating lease because (i) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (ii) the lease component, if accounted for separately, would be classified as an operating lease.
This review is based on an estimate of the future undiscounted cash flows expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.
This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.
As such, this excludes all other items of expense and income included in the financial statements in calculating net loss (each item discussed separately in “Other Results of Operations” below). We use segment income to assess and compare property level performance and to make decisions concerning the operation of our properties.
As such, this excludes all other items of expense and income included in the financial statements in calculating net loss (each item discussed separately in “Other Results of Operations” below). We use net operating income (“NOI”) to assess and compare property level performance and to make decisions concerning the operation of our properties.
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.
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 to meet our financial obligations for at least the next twelve months.
No cash distributions were made to common stockholders, restricted shareholders, holders of Common OP Units or holders of Class B Units in the year ended December 31, 2023.
No cash distributions were made to common stockholders, restricted shareholders, holders of Common OP Units or holders of Class B Units in the year ended December 31, 2024.
In our MOB operating segment, we own, manage, and lease single and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. Our Property Manager or third party managers manage our MOBs.
In our OMF operating segment, we own, manage and lease single and multi-tenant OMFs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. Our Property Manager or third-party managers manage our OMFs.
If an impairment exists, due to the inability to recover the carrying value of a property, we would recognize an impairment loss in the consolidated statement of operations and comprehensive loss to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used.
If an impairment exists, due to the inability to recover the carrying value of a property, we would recognize an impairment loss in the consolidated statements of operations and comprehensive loss to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held for use.
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.
There were no significant write-offs related to previously disposed properties during the year ended December 31, 2024 and 2023. 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.
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.
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 facilities, which would impact availability thereunder.
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.
We believe that NOI is useful 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 consolidated loss before income taxes.
Our 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.
Gross asset value totaled $2.5 billion, which represents total real estate investments, at cost ($2.5 billion), net of gross market lease intangible liabilities ($22.8 million). Cumulative impairment charges are reflected within gross asset value.
Unencumbered real estate investments, at cost as of December 31, 2023 was $635.9 million. There can be no assurance as to the amount of liquidity we would be able to generate from leveraging these unencumbered real estate investments , if we are able to leverage them at all.
Unencumbered real estate investments, at cost as of December 31, 2024 was $533.1 million. There can be no assurance as to the amount of liquidity we would be able to generate from leveraging these unencumbered real estate investments , if we are able to leverage them at all.
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.
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, 2024, 2023 and 2022 were asset acquisitions. We acquired four properties during the year ended December 31, 2024.
We expect to fund our future short-term operating liquidity requirements, including dividends to holders of Series A Preferred Stock and holders of Series B Preferred Stock, through a combination of current cash on hand, net cash provided by our property operations, potential future advances under our Fannie Mae Master Credit Facilities and MOB Warehouse Facility, net cash provided by our property dispositions and potential new financings utilizing certain of our currently unencumbered properties.
We expect to fund our future short-term operating liquidity requirements, including distributions to holders of Series A Preferred Stock and Series B Preferred Stock, through a combination of current cash on hand, net cash provided by our operating activities, potential future advances under our Fannie Mae Master Credit Facilities and OMF Warehouse Facility, net cash provided by our property dispositions (as discussed below) and potential new financings utilizing certain of our currently unencumbered properties.
These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). Although most of our leases with tenants in our MOB segment contain rent escalation provisions, these escalation rates are generally below the rate of inflation.
These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on CPI or other measures). Although most of our leases with tenants in our OMF segment contain rent escalation provisions, these rates are generally below the current rate of inflation.
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.
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, 2024 and 2023, we had no leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.
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.
Our future liquidity requirements and available liquidity, however, depend on many factors, such as recent and continuing increases in inflation, labor shortages, supply chain disruptions and higher property insurance, property tax and interest rates, all of which have and may continue to have adverse impacts on our results of operations and thus ultimately our liquidity.
For additional information and disclosures related to our operating leases, see Note 16 — Commitments and Contingencies to the consolidated financial statements included in this Annual Report on Form 10-K. Impairment of Long-Lived Assets When circumstances indicate the carrying value of a property may not be recoverable, we review the property for impairment.
For additional information and disclosures related to our operating leases, see Note 16 — Commitments and Contingencies to our Consolidated Financial Statements. Impairment of Long-Lived Assets When circumstances indicate the carrying value of a property may not be recoverable, we review the property for impairment.
As of December 31, 2023, we had total gross borrowings of $1.2 billion, at a weighted-average interest rate of 5.59% and a weighted-average remaining term of 5.1 years. As of December 31, 2022, we had total gross borrowings of $1.1 billion at a weighted average interest rate of 4.83%.
As of December 31, 2024, we had total gross borrowings of $1.2 billion, at a weighted-average interest rate of 5.40% and a weighted-average remaining term of 4.1 years.
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.
During the years ended December 31, 2024, 2023 and 2022, we recorded reductions in revenue of $1.5 million, $1.2 million and $3.2 million, respectively, related to uncollectible accounts. Approximately $1.3 million of bad debt expense recorded in the year ended December 31, 2022, related to previously disposed properties.
Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. Please see “Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K for a description of these risks and uncertainties.
Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. See “Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K for a description of these risks and uncertainties. Overview We are a REIT for U.S. federal income tax purposes.
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.
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.
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.
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 market rental 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.
Partial reserves, or the ability to assume partial recovery are no longer permitted. If we determine that it is probable it will collect virtually all of the lease payments (rent and common area maintenance), the lease will continue to be accounted for on an accrual basis (i.e. straight-line).
If we determine that it is probable it will collect virtually all of the lease payments (rent and common area maintenance), the lease will continue to be accounted for on an accrual basis (i.e. straight-line).
The loss recorded in the year ended December 31, 2023 was due to decreases in forward-interest rate curves, and represents the decrease in fair value as well as $5.6 million of cash received from our interest rate caps.
The loss recorded in the year ended December 31, 2023 was due to decreases in forward-interest rate curves, and represents the decrease in fair value as well as $5.6 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.
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.
Gain (Loss) on Non-Designated Derivatives Gain on non-designated derivative instruments for the years ended December 31, 2024 and 2023 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 OMF Warehouse Facility, which have variable interest rates.
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.
Pursuant to many of our lease agreements in our OMFs, 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 $0.3 million and $0.2 million for the years ended December 31, 2023 and 2022, respectively.
We recorded income tax expense of $0.3 million for both years ended December 31, 2024 and 2023.
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).
Financings As of December 31, 2024, our Net Debt to Gross Asset Value ratio (net debt divided by gross asset value) was approximately 45.9%. Net debt totaled $1.1 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($21.7 million).
Non-Designated Interest Rate Caps Our interest rate caps are used to limit our exposure to interest rate movements on our credit facilities for economic purposes, however, we do not elect to apply hedge accounting to these instruments.
For additional information on our credit facilities, see Note 5 — Credit Facilities to our Consolidated Financial Statements. Non-Designated Interest Rate Caps Our interest rate caps are used to limit our exposure to interest rate movements on our Fannie Mae Master Credit Facilities for economic purposes; however, we do not elect to apply hedge accounting to these instruments.
Credit Facilities As of December 31, 2023, we had $361.0 million in total amounts outstanding under our credit facilities at a weighted-average interest rate of 7.90% and a weighted-average remaining term of 2.8 years. Inclusive of our non-designated interest rate caps, the economic interest rate on our credit facilities was 5.94% as of December 31, 2023.
Credit Facilities As of December 31, 2024, we had $362.2 million outstanding under our credit facilities, which bore interest at a weighted-average annual rate of 7.23% and had a weighted-average remaining term of 1.8 years. Inclusive of our non-designated interest rate caps, the weighted average economic interest rate on our credit facilities was 5.94% as of December 31, 2024.
Dividends and Other Distributions Dividends on our Series A Preferred Stock are declared quarterly in an amount equal to $1.84375 per share each year ($0.460938 per share per quarter) to Series A Preferred Stock holders, which is equivalent to 7.375% per annum on the $25.00 liquidation preference per share of Series A Preferred Stock.
(6) Includes labor, supplies and evacuation expenses from natural disasters not covered by insurance. 56 Table of Contents Dividends and Other Distributions Dividends on our Series A Preferred Stock are declared quarterly in an amount equal to $1.84375 per share each year ($0.460938 per share per quarter) to holders of Series A Preferred Stock, which is equivalent to 7.375% of per annum in the $25.00 liquidation preference per share of Series A Preferred Stock.
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.
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. Allocation for Preferred Stock Allocation for preferred stock was $13.8 million for the years ended December 31, 2024 and 2023.
As of December 31, 2023 and 2022, we had $46.4 million and $53.7 million of cash and cash equivalents, respectively, and our ability to use this cash on hand is restricted. The Barclays MOB Loan Agreement requires us to maintain a minimum balance of cash and cash equivalents of $12.5 million at all times.
As of December 31, 2024 and 2023, we had $21.7 million and $46.4 million of cash and cash equivalents, respectively. The Barclays OMF Loan Agreement requires us to maintain a minimum balance of cash and cash equivalents of $12.5 million at all times.
Significant Accounting Estimates and Critical Accounting Policies Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our consolidated financial statements.
Critical Accounting Policies and Estimates Set forth below is a summary of the critical accounting policies and estimates that management believes are important to the preparation of our Consolidated Financial Statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management.
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.
Recently Issued Accounting Pronouncements See Note 2 — Summary of Significant Accounting Policies — Recent Accounting Pronouncements to our Consolidated Financial Statements for further discussion. 48 Table of Contents Results of Operations Below is a discussion of our results of operations for the years ended December 31, 2024 and 2023.
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 that the use of FFO provides a more complete understanding of our operating performance to investors and to management, and when compared year-over-year, 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. 55 Table of Contents Adjusted Funds from Operations We also believe that AFFO is a meaningful supplemental non-GAAP measure of our operating results.
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.
As of December 31, 2024, these leases had a weighted average remaining lease term of 6.5 years. Rent from tenants in our OMF 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.
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.
The following table shows the sources for the payment of distributions to preferred stockholders, including distributions on unvested restricted shares and Common OP Units, but excluding distributions related to Class B Units as these distributions are recorded as an expense in our consolidated statements of operations and comprehensive loss, for the periods indicated.
Dispositions — Year Ended December 31, 2023 During the year ended December 31, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million.
These dispositions resulted in an aggregate gain on sale of $9.3 million in the year ended December 31, 2024. 51 Table of Contents During the year ended December 31, 2023, we disposed of four SHOPs and one OMF for an aggregate contract sales price of $13.8 million.
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.
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.
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 adverse economic impacts from increases in the rate of inflation in recent years on the results of operations of our SHOP assets, we are not able to conclude that it is more likely than not that we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance; thus we have recorded a 100% valuation allowance on our net deferred tax assets through December 31, 2024.
Our revenues also include resident services and fee income primarily related to rent derived from lease contracts with residents in the Company’s SHOP segment, held using a structure permitted under RIDEA and to a lesser extent, fees for ancillary services performed for SHOP residents, which are generally variable in nature.
Our revenues also include resident services and fee income primarily related to rent derived from lease contracts with residents in our SHOP segment, held using a structure permitted under RIDEA. Rental income from residents in our SHOP segment is recognized as earned when services are provided.
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.
Cost recoveries from tenants are included in operating revenue from tenants in accordance with current accounting rules, on the accompanying consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.
Three Months Ended Year Ended March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 December 31, 2023 (In thousands) Amounts Percentage of Distributions Amounts Percentage of Distributions Amounts Percentage of Distributions Amounts Percentage of Distributions Amounts Percentage of Distributions Distributions: Dividends paid to holders of Series A Preferred Stock $ 1,833 52.4% $ 1,833 52.4% $ 1,834 52.5% $ 1,834 52.4% $ 7,334 52.4% Dividends paid to holders of Series B Preferred Stock 1,616 46.2% 1,617 46.3% 1,616 46.2% 1,617 46.2% 6,466 46.2% Distributions paid to holders of Series A Preferred Units 46 1.3% 46 1.3% 46 1.3% 47 1.3% 185 1.3% Total cash distributions $ 3,495 100.0% $ 3,496 100.0% $ 3,496 100.0% $ 3,498 100.0% $ 13,985 100.0% Source of distribution coverage: Cash flows provided by operations (1) $ 3,495 100.0 % $ 3,496 100.0 % $ 3,496 100.0 % $ 3,498 100.0 % $ 13,985 100.0 % Total source of distribution coverage $ 3,495 100.0 % $ 3,496 100.0 % $ 3,496 100.0 % $ 3,498 100.0 % $ 13,985 100.0 % Cash flows provided by operations (in accordance with GAAP) $ 4,989 $ 5,688 $ 5,681 $ 5,266 $ 21,624 Net loss (in accordance with GAAP) $ (14,068) $ (17,332) $ (16,125) $ (24,855) $ (72,380) __________ (1) Assumes the use of available cash flows from operations before any other sources.
Three Months Ended Year Ended March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 December 31, 2024 (In thousands) Amounts Percentage of Distributions Amounts Percentage of Distributions Amounts Percentage of Distributions Amounts Percentage of Distributions Amounts Percentage of Distributions Distributions: Dividends paid to holders of Series A Preferred Stock $ 1,834 52.5% $ 1,834 52.5% $ 1,833 52.4% $ 1,832 52.4% $ 7,333 52.4% Dividends paid to holders of Series B Preferred Stock 1,616 46.2% 1,616 46.2% 1,617 46.2% 1,617 46.3% 6,466 46.2% Distributions paid to holders of Series A Preferred Units 46 1.3% 46 1.3% 47 1.3% 45 1.3% 184 1.3% Total cash distributions $ 3,496 100.0% $ 3,496 100.0% $ 3,497 100.0% $ 3,494 100.0% $ 13,983 100.0% Source of distribution coverage: Cash flows provided by operations (1) $ 2,543 72.7 % $ 3,496 100.0 % $ — — % $ 3,494 100.0 % $ — — % Available cash on hand (2) 953 27.3 % — — % 3,497 100.0 % — — % 13,983 100.0 % Total source of distribution coverage $ 3,496 100.0 % $ 3,496 100.0 % $ 3,497 — % $ 3,494 100.0 % $ 13,983 — % Cash flows provided by operations (in accordance with GAAP) $ 2,543 $ 8,395 $ (97,778) $ 6,994 $ (79,846) Net loss (in accordance with GAAP) $ (15,550) $ (116,918) $ (40,769) $ (17,026) $ (190,263) __________ (1) Assumes the use of available cash flows from operations before any other sources.
Please see the “Results of Operations” section located on page 49 under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our results of operations for the year ended December 31, 2022 and comparisons between December 31, 2022 and 2021. 56 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 Net loss attributable to common stockholders was $86.1 million and $93.3 million for the years ended December 31, 2023 and 2022, respectively.
See the “Results of Operations” section located under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our results of operations for the year ended December 31, 2023 and comparisons between December 31, 2023 and 2022.
If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets. See the “ Purchase Price Allocation” section below for a discussion of the initial accounting for investments in real estate.
If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets.
Rental income from residents in our SHOP segment is recognized as earned when services are provided. Residents pay monthly rent that covers occupancy of their unit and basic services, including utilities, meals and some housekeeping services. The terms of the leases are short term in nature, primarily month-to-month.
Residents pay monthly rent that covers occupancy of their unit and basic services, including utilities, meals and some housekeeping services. The terms of the leases are short term in nature, primarily month-to-month. We defer the revenue related to lease payments received from tenants and residents in advance of their due dates.
Capitalized below-market ground lease values are amortized as an increase to property operating expense over the remaining terms of the respective leases and expected below-market renewal option periods. Equity-Based Compensation The Company has a stock-based incentive award program for its directors, which is accounted for under the guidance of share based payments.
Capitalized below-market ground lease values are amortized as an increase to property operating expense over the remaining terms of the respective leases and expected below-market renewal option periods.
Our ability to pay dividends on our Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units and other distributions depends on our ability to increase the amount of cash we generate from property operations which in turn depends on a variety of factors, including our ability to complete acquisitions of new properties and our ability to improve operations at our existing properties, some of which have recently been impacted by the adverse effects of inflation, labor shortages, and supply chain disruptions.
As shown in the table above, we funded distributions to holders of Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units with cash flows provided by operations and available cash on hand. 57 Table of Contents Our ability to pay distributions on our Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units and other distributions depends on our ability to increase the amount of cash we generate from property operations which in turn depends on a variety of factors, including, but not limited to, our ability to complete acquisitions of new properties and our ability to improve operations at our existing properties.
Other Results of Operations Impairment Charges We incurred $4.7 million of impairment charges for the year ended December 31, 2023 related to one held-for-use SHOP property and one held-for-use MOB property.
We incurred $4.7 million of impairment charges for the year ended December 31, 2023 related to one held-for-use SHOP property and one held-for-use OMF property. See Note 3 — Real Estate Investments to our Consolidated Financial Statements for additional information on impairment charges.
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.
See the “ Purchase Price Allocation” section below for a discussion of the initial accounting for investments in real estate. 46 Table of Contents 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.
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.
Moreover, these adverse impacts may also impact our tenant and residents’ ability to pay rent and thus our cash flows. For more information about the risks and uncertainties associated with inflation, labor shortages and labor costs, see the Inflation section below and Part I – Item 1A. Risk Factors section of this Annual Report on Form 10-K.
The increase in revenue from our Same Store Properties was primarily attributable from increased operating expense reimbursement revenue from increased property, operating and maintenance expenses. Property Operating and Maintenance Property operating and maintenance relates to the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third party property management fees.
Property operating and maintenance expenses reflect the costs associated with our OMFs, including real estate taxes, utilities, repairs, maintenance and unaffiliated third-party property management fees.
These significant accounting estimates and critical accounting policies include: Revenue Recognition Our revenues, which are derived primarily from lease contracts, include rent received from tenants in our MOB segment. As of December 31, 2023 these leases had a weighted average remaining lease term of 4.7 years.
As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates and critical accounting policies include: 45 Table of Contents Revenue Recognition Our revenues, which are derived primarily from lease contracts, include rent received from tenants in our OMF segment.
Two of the four disposed SHOPs were impaired by $15.1 million in the year ended December 31, 2022 (see above). As a result, the Company recorded an aggregate loss on sale of $0.3 million in the year ended December 31, 2023.
Two of the four disposed SHOPs were previously impaired by $15.1 million in the year ended December 31, 2022. These dispositions resulted in an aggregate loss on sale of $0.3 million in the year ended December 31, 2023. See Note 3 — Real Estate Investments, Net to our Consolidated Financial Statements for additional information on the dispositions noted above.
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.
The gain recorded in the year ended December 31, 2024 was due to increases in forward-interest rate curves, and represents the increase in fair value as well as $6.8 million of cash received from our interest rate caps.
To help mitigate the adverse impact of inflation, most of our leases with our tenants in our MOB segment contain rent escalation provisions which increase the cash that is due under these leases over their respective terms.
As of December 31, 2024, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 3.2%. To help mitigate the adverse impact of inflation, most of our leases with our tenants in our OMF segment contain rent escalation provisions which increase the cash that is due under these leases over time.
The following table shows our results of operations for the years ended December 31, 2023 and 2022 and the year to year change by line item of the consolidated statements of operations: Year Ended December 31, Increase (Decrease) (in thousands) 2023 2022 $ Revenue from tenants $ 345,925 $ 335,846 $ 10,079 Operating expenses: Property operating and maintenance 217,792 213,444 4,348 Impairment charges 4,676 27,630 (22,954) Operating fees to related parties 25,527 25,353 174 Acquisition and transaction related 545 1,484 (939) General and administrative 18,928 17,287 1,641 Depreciation and amortization 82,873 82,064 809 Total expenses 350,341 367,262 (16,921) Operating loss before loss on sale of real estate investments (4,416) (31,416) 27,000 Loss on sale of real estate investments (322) (125) (197) Operating loss (4,738) (31,541) 26,803 Other income (expense): Interest expense (66,078) (51,740) (14,338) Interest and other income 734 27 707 (Loss) gain on non-designated derivatives (1,995) 3,834 (5,829) Total other expenses (67,339) (47,879) (19,460) Loss before income taxes (72,077) (79,420) 7,343 Income tax expense (303) (201) (102) Net loss (72,380) (79,621) 7,241 Net loss attributable to non-controlling interests 82 135 (53) Allocation for preferred stock (13,799) (13,799) — Net loss attributable to common stockholders $ (86,097) $ (93,285) $ 7,188 Segment Income We evaluate the performance of the combined properties in each segment based on total revenues from tenants, less property operating costs.
The following table shows our results of operations for the years ended December 31, 2024 and 2023 and the year-to-year change by line item of the consolidated statements of operations: Year Ended December 31, Increase (Decrease) (in thousands) 2024 2023 $ % Revenue from tenants $ 353,794 $ 345,925 $ 7,869 2.3 % Operating expenses: Property operating and maintenance 221,148 217,792 3,356 1.5 % Impairment charges 24,881 4,676 20,205 NM Termination fees to related parties 106,650 — 106,650 NM Operating fees to related parties 19,203 25,527 (6,324) (24.8) % Acquisition and transaction related 7,949 545 7,404 NM General and administrative 22,744 18,928 3,816 20.2 % Depreciation and amortization 84,067 82,873 1,194 1.4 % Total expenses 486,642 350,341 136,301 38.9 % Operating loss before loss on sale of real estate investments (132,848) (4,416) (128,432) NM Gain (loss) on sale of real estate investments 9,307 (322) 9,629 NM Operating loss (123,541) (4,738) (118,803) NM Other (expense) income: Interest expense (69,447) (66,078) (3,369) (5.1) % Interest and other income 1,051 734 317 43.2 % Gain on extinguishment of debt 392 — 392 NM Gain (loss) on non-designated derivatives 1,544 (1,995) 3,539 NM Total other expenses, net (66,460) (67,339) 879 1.3 % Loss before income taxes (190,001) (72,077) (117,924) (163.6) % Income tax expense (262) (303) 41 13.5 % Net loss (190,263) (72,380) (117,883) (162.9) % Net loss attributable to non-controlling interests 567 82 485 NM Allocation for preferred stock (13,799) (13,799) — NM Net loss attributable to common stockholders $ (203,495) $ (86,097) $ (117,398) (136.4) % 49 Table of Contents Net Operating Income We, through our chief operating decision maker (“CODM”), evaluate the performance of the combined properties in each segment based on total revenues from tenants, less property operating costs.
Acquisition and Transaction Related Expenses Acquisition and transaction related expenses were $0.5 million for the year ended December 31, 2023 and $1.5 million for the year ended December 31, 2022.
See Note 1 — Organization to our Consolidated Financial Statements for additional details regarding the Internalization. Acquisition and Transaction Related Expenses Acquisition and transaction related expenses were $7.9 million for the year ended December 31, 2024 and $0.5 million for the year ended December 31, 2023.
As of December 31, 2023, we had seven SOFR-based interest rate caps with an aggregate notional amount of $364.2 million, which limits 30-day SOFR to 3.50% and have varying maturities through January 2027. As 30-day SOFR has increased beyond 3.50%, we have received cash payments of $5.6 million in the year ended December 31, 2023.
As SOFR has increased beyond 3.50%, we received cash payments of $6.8 million in the year ended December 31, 2024 and $5.6 million in the year ended December 31, 2023. We paid total premiums of $1.5 million to renew one cap with an aggregate notional amount of $58.1 million which matured during the year ended December 31, 2024.
We evaluate new leases originated after the adoption date (by us or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant.
A lease is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant.
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.
Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on our total gross borrowings was 5.0% as of both December 31, 2024 and 2023. 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.
Inclusive of the effect of our non-designated hedging instruments, our total portfolio economic interest rate was 5.00% and 4.47% as of December 31, 2023 and 2022, respectively. 64 Table of Contents As of December 31, 2023, the carrying value of our real estate investments, at cost was $2.6 billion, with $1.3 billion of this amount secured as collateral for mortgage notes payable, $614.0 million of this amount pledged to secure advances under the Fannie Mae Master Credit Facilities and $23.0 million of this amount was pledged to secure advances under the MOB Warehouse Facility.
As of December 31, 2024, the carrying value of our real estate investments, at cost was $2.5 billion, with $1.3 billion of this asset value pledged as collateral for mortgage notes payable, $619.0 million of this asset value pledged to secure advances under our credit facilities.
Mortgage Notes Payable As of December 31, 2023, we had $821.4 million in gross mortgage notes payable outstanding with a weighted-average interest rate of 4.58% and a weighted-average remaining term of 6.1 years. Future scheduled principal payments on our mortgage notes payable for 2024 are $1.2 million.
Mortgage Notes Payable As of December 31, 2024, we had $789.6 million in mortgage notes payable outstanding, all of which is either fixed-rate or effectively fixed through our interest rate swap at a weighted-average annual interest rate of 4.56% and a weighted-average remaining term of 5.2 years.
Our Advisor and Property Manager are under common control with AR Global and these related parties receive compensation and fees for providing services to us. We also reimburse these entities for certain expenses they incur in providing these services to us.
Prior to the Internalization, the Advisor and Property Manager were under common control with the Advisor Parent and these related parties received compensation and fees for providing services to us.
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.
We did not record any intangible asset amounts related to customer relationships during the years ended December 31, 2024 and 2023. 47 Table of Contents Accounting for Leases Lessor Accounting We evaluate new leases (by us or by a predecessor lessor/owner) pursuant to ASC 842: Leases to determine lease classification.

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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 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.
Biggest changeAs of December 31, 2023, all of our mortgages were either fixed-rate ($442.9 million) or variable-rate ($378.5 million), before consideration of interest rate swaps. 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.
To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars, and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We will not hold or issue these derivative contracts for trading or speculative purposes.
To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, caps, collars and treasury rate lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We will not hold or issue these derivative contracts for trading or speculative purposes.
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.
The information presented above includes only those exposures that existed as of December 31, 2024 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 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).
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, 2024, 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).
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.
Sensitivity As of December 31, 2024, 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 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.
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 $6.6 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.
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.
This interest rate swap effectively hedges all of our variable rate debt with the exception of our Fannie Mae Master Credit Facilities and OMF Warehouse Facility discussed below.
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.
The sensitivity analysis related to our debt assumes an immediate 100 basis point move in interest rates from their December 31, 2024 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 $20.5 million.
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%.
Interest Rate Caps We also have entered into eight SOFR-based, non-designated interest rate cap contracts with a current notional amount of $369.2 million as of December 31, 2024, which limits SOFR exposure on our Fannie Mae Master Credit Facilities and OMF Warehouse Facility to 3.50%.
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.
A 100 basis point decrease in market interest rates would result in an increase in the fair value of our debt by $22.2 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 $6.4 million.
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.
Credit Facilities Our Fannie Mae Master Credit Facilities and OMF Warehouse Facility are variable-rate. Our Fannie Mae Master Credit Facilities and OMF Warehouse Facility had a gross aggregate carrying amount of $362.2 million and a fair value of $363.0 million as of December 31, 2024.
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.
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.
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.
As of December 31, 2024, we had entered into eight SOFR-based non-designated interest rate caps with a current notional amount of approximately $369.2 million and one SOFR-based designated interest rate swap with a notional amount of $378.5 million. We do not have any foreign operations and thus we are generally not directly exposed to foreign currency fluctuations.
Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.
Our long-term debt, which consists of secured financings, the Fannie Mae Master Credit Facilities and the OMF Warehouse Facility, bear interest at fixed rates and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.
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.
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. 58 Table of Contents Sensitivity Analysis - Interest Expense Interest rate volatility associated with all of our variable-rate borrowings affects interest expense incurred and cash flow to the extent they are not fixed via interest rate swap or capped via interest rate cap contracts.
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Sensitivity Analysis - Interest Expense Interest rate volatility associated with all of our variable-rate borrowings affects interest expense incurred and cash flow to the extent they are not fixed via interest rate swap or capped via interest rate cap contracts.
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Mortgage Notes Payable As of December 31, 2024, all of our mortgages were either fixed-rate ($425.7 million) or variable-rate ($364.0 million), before consideration of interest rate swaps. Our mortgages had a gross aggregate carrying value of $789.6 million and a fair value of $747.5 million as of December 31, 2024.

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