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What changed in UNIVERSAL HEALTH REALTY INCOME TRUST's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of UNIVERSAL HEALTH REALTY INCOME TRUST'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.

+277 added−342 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-27)

Top changes in UNIVERSAL HEALTH REALTY INCOME TRUST's 2024 10-K

277 paragraphs added · 342 removed · 228 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+14 added−30 removed77 unchanged
Biggest changeThe aggregate revenues generated from UHS-related tenants comprised approximately 37% of our consolidated revenue for the five years ended December 31, 2023 (approximately 41%, 40% and 37% for the years ended December 31, 2023, 2022 and 2021, respectively). 3 On December 31, 2021, we entered into an asset purchase and sale agreement with UHS and certain of its affiliates, which was amended during the first quarter of 2022, pursuant to the terms of which: • a wholly-owned subsidiary of UHS purchased from us, the real estate assets of the Inland Valley Campus of Southwest Healthcare System located in Wildomar, California, at its fair market value of $79.6 million. • two wholly-owned subsidiaries of UHS transferred to us, the real estate assets of the following properties: o Aiken Regional Medical Center, (“Aiken”), located in Aiken, South Carolina (which includes an acute care hospital and a behavioral health pavilion), at its fair-market value of approximately $57.7 million, and; o Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas, at its fair-market value of approximately $26.0 million. • in connection with this transaction, since the fair-market value of Aiken and Canyon Creek, which totaled approximately $83.7 million in the aggregate, exceeded the $79.6 million fair-market value of the Inland Valley Campus of Southwest Healthcare System, we paid approximately $4.1 million in cash to UHS.
Biggest changePursuant to the terms of the transaction, in addition to $4.1 million in cash paid by us to UHS, a wholly-owned subsidiary of UHS purchased from us, the real estate assets of an acute care hospital located in California (at its fair market value) and two wholly-owned subsidiaries of UHS transferred to us (at their fair market values), the real estate assets of Aiken Regional Medical Center (“Aiken”), located in Aiken, South Carolina (which includes an acute care hospital and a behavioral health pavilion), and Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas.
She had served as Vice President and Treasurer of UHS since 2003 and as its Assistant Treasurer since 1994. Ms. Karla J. Peterson was appointed Vice President of Acquisitions and Development upon the commencement of her employment with UHS in 2022.
She had served as Vice President and Treasurer of UHS since 2003 and as its Assistant Treasurer since 1994. Ms. Karla J. Peterson was appointed Vice President of Acquisitions and Development upon the commencement of her employment with UHS in 2022. Ms.
Bell (E) Phoenix, AZ MOB 100% -- Lake Pointe Medical Arts Building (E) Rowlett, TX MOB 100% -- Forney Medical Plaza (E) Forney, TX MOB 100% -- Tuscan Professional Building (E) Irving, TX MOB 100% -- Emory at Dunwoody Building (E) Atlanta, GA MOB 100% -- PeaceHealth Medical Clinic (E) Bellingham, WA MOB 100% -- Forney Medical Plaza II (C) Forney, TX MOB 95% -- Northwest Texas Professional Office Tower (E) Amarillo, TX MOB 100% -- 5004 Poole Road MOB (A) Denison, TX MOB 100% -- Ward Eagle Office Village (E) Farmington Hills, MI MOB 100% -- The Northwest Medical Center at Sugar Creek (E) Bentonville, AR MOB 100% -- Hanover Emergency Center (E) Mechanicsville, VA FED 100% Henrico Doctors' Hospital South Texas ER at Weslaco (A) Weslaco, TX FED 100% -- South Texas ER at Mission (A) Mission, TX FED 100% -- Haas Medical Office Park (E) Ottumwa, IA MOB 100% Regional Hospital Partners Piedmont - Roswell Physician Center (E) Sandy Springs, GA MOB 100% -- Piedmont - Vinings Physician Center (E) Vinings, GA MOB 100% -- Madison Professional Office Building (E) Madison, AL MOB 100% -- Chandler Corporate Center III (E) Chandler, AZ MOB 100% -- Frederick Crestwood MOB (E) Frederick, MD MOB 100% -- 2704 North Tenaya Way (E) Las Vegas, NV MOB 100% -- Henderson Medical Plaza (D) Henderson, NV MOB 100% -- Health Center at Hamburg (E) Hamburg, PA MOB 100% -- Las Palmas Del Sol Emergency Center-West (E) El Paso, TX FED 100% -- Beaumont Medical Sleep Center Building (E) Southfield, MI MOB 100% -- Bellin Health Family Medicine Center (E) Escanaba, MI MOB 100% -- Texoma Medical Plaza II (H) Denison, TX MOB 95% -- Sand Point Medical Properties Escanaba, MI MOB 100% Fresenius Medical Care Holdings, Inc.
Bell (E) Phoenix, AZ MOB 100% -- Lake Pointe Medical Arts Building (E) Rowlett, TX MOB 100% -- Forney Medical Plaza (E) Forney, TX MOB 100% -- Tuscan Professional Building (E) Irving, TX MOB 100% -- Emory at Dunwoody Building (E) Atlanta, GA MOB 100% -- PeaceHealth Medical Clinic (E) Bellingham, WA MOB 100% -- Forney Medical Plaza II (C) Forney, TX MOB 95% -- Northwest Texas Professional Office Tower (E) Amarillo, TX MOB 100% -- 5004 Poole Road MOB (A) Denison, TX MOB 100% -- Ward Eagle Office Village (E) Farmington Hills, MI MOB 100% -- The Northwest Medical Center at Sugar Creek (E) Bentonville, AR MOB 100% -- Hanover Emergency Center (E) Mechanicsville, VA FED 100% Henrico Doctors' Hospital South Texas ER at Weslaco (A) (L) Weslaco, TX FED 100% -- South Texas ER at Mission (A) (L) Mission, TX FED 100% -- Haas Medical Office Park (E) Ottumwa, IA MOB 100% Regional Hospital Partners Piedmont - Roswell Physician Center (E) Sandy Springs, GA MOB 100% -- Piedmont - Vinings Physician Center (E) Vinings, GA MOB 100% -- Madison Professional Office Building (E) Madison, AL MOB 100% -- Chandler Corporate Center III (E) Chandler, AZ MOB 100% -- Frederick Crestwood MOB (E) Frederick, MD MOB 100% -- 2704 North Tenaya Way (E) Las Vegas, NV MOB 100% -- Henderson Medical Plaza (D) Henderson, NV MOB 100% -- Health Center at Hamburg (E) Hamburg, PA MOB 100% -- Las Palmas Del Sol Emergency Center-West (E) El Paso, TX FED 100% -- Beaumont Medical Sleep Center Building (E) Southfield, MI MOB 100% -- Bellin Health Family Medicine Center (E) Escanaba, MI MOB 100% -- Texoma Medical Plaza II (H) Denison, TX MOB 95% -- Sand Point Medical Properties (E) Escanaba, MI MOB 100% Fresenius Medical Care Holdings, Inc.
Pursuant to the terms of the master leases among us and certain subsidiaries of UHS, dated December 24, 1986 and December 31, 2021 (the “Master Leases”), which govern the leases of McAllen Medical Center, Wellington Regional Medical Center (governed by the Master Lease dated December 24, 1986), Aiken Regional Medical Center and Canyon Creek Behavioral Health (governed by the Master Lease dated December 31, 2021, as amended), all of which are hospital properties that are wholly-owned subsidiaries of UHS, UHS has the option, among other things, to renew the leases at the lease terms described below by providing notice to us at least 90 days prior to the termination of the then current term.
Pursuant to the terms of the master leases by and among us and certain subsidiaries of UHS, dated December 24, 1986 and December 31, 2021 (the “Master Leases”), which govern the leases of McAllen Medical Center, Wellington Regional Medical Center (governed by the Master Lease dated December 24, 1986), Aiken Regional Medical Center and Canyon Creek Behavioral Health (governed by the Master Lease dated December 31, 2021, as amended), all of which are hospital properties that are wholly-owned subsidiaries of UHS, UHS has the option, among other things, to renew the leases at the lease terms described below by providing notice 3 to us at least 90 days prior to the termination of the then current term.
The joint venture also has the right to purchase the leased facility from us at its appraised fair market value upon either of the following: (i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or; (ii) upon 30 days’ notice anytime within 12 months of a 4 change of control of the Trust (UHS also has this right should the joint venture decline to exercise its purchase right).
The joint venture also has the right to purchase the leased facility from us at its appraised fair market value upon either of the following: (i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or; (ii) upon 30 days’ notice anytime within 12 months of a change of control of the Trust (UHS also has this right should the joint venture decline to exercise its purchase right).
The master flex-lease agreement has a ten-year term scheduled to expire on March 31, 2033 and covers approximately 68% of the rentable square feet of the MOB, subject to reduction based upon the execution of third-party leases. The initial minimum rent pursuant to the master lease is $1.3 million annually, plus a pro-rata share of the common area maintenance expenses.
The master flex-lease agreement has a ten-year term scheduled to expire on March 31, 2033 and covers approximately 68% of the rentable square feet of the MOB, subject to reduction based upon the execution of third-party leases. The initial minimum rent pursuant to the master lease was $1.3 million annually, plus a pro-rata share of the common area maintenance expenses.
In accordance with Section 303A.12(a) of The New York Stock Exchange Listed Company Manual, we submitted our CEO’s Certification to the New York Stock Exchange in 2023. Additionally, contained in Exhibits 31.1 and 31.2 of this Annual Report are our CEO’s and CFO’s certifications regarding the quality of our public disclosure under Section 302 of the Sarbanes-Oxley Act of 2002.
In accordance with Section 303A.12(a) of The New York Stock Exchange Listed Company Manual, we submitted our CEO’s Certification to the New York Stock Exchange in 2024. Additionally, contained in Exhibits 31.1 and 31.2 of this Annual Report are our CEO’s and CFO’s certifications regarding the quality of our public disclosure under Section 302 of the Sarbanes-Oxley Act of 2002.
Please see the heading “ If we fail to maintain our REIT status, we will become subject to federal income tax on our taxable income at regular corporate rates” under “Risk Factors” for more information. 6 Competition We compete for the acquisition, leasing and financing of health care related facilities.
Please see the heading “ If we fail to maintain our REIT status, we will become subject to federal income tax on our taxable income at regular corporate rates” under “Risk Factors” for more information. 5 Competition We compete for the acquisition, leasing and financing of health care related facilities.
Aiken Regional Medical Center (A) (K) Aiken, SC Acute Care 100% Universal Health Services, Inc. Aurora Pavilion Behavioral Health Services (A) (K) Aiken, SC Behavioral Health 100% Universal Health Services, Inc. Canyon Creek Behavioral Health (A) (K) Temple, TX Behavioral Health 100% Universal Health Services, Inc.
Aiken Regional Medical Center (A) Aiken, SC Acute Care 100% Universal Health Services, Inc. Aurora Pavilion Behavioral Health Services (A) Aiken, SC Behavioral Health 100% Universal Health Services, Inc. Canyon Creek Behavioral Health (A) Temple, TX Behavioral Health 100% Universal Health Services, Inc.
(“UHS”) Leases: We commenced operations in 1986 by purchasing certain properties from subsidiaries of UHS and immediately leasing the properties back to the respective subsidiaries. The base rentals and lease and renewal terms for each of the hospitals leased to subsidiaries of UHS as of January 1, 2024, are provided below. The base rents are paid monthly.
(“UHS”) Leases: We commenced operations in 1986 by purchasing certain properties from subsidiaries of UHS and immediately leasing the properties back to the respective subsidiaries. The base rentals and lease and renewal terms for each of the hospitals leased to subsidiaries of UHS as of January 1, 2025, are provided below. The base rents are paid monthly.
Share Ownership: As of December 31, 2023 and 2022, UHS owned 5.7% of our outstanding shares of beneficial interest. SEC reporting requirements of UHS: UHS is subject to the reporting requirements of the Securities and Exchange Commission (“SEC”) and is required to file annual reports containing audited financial information and quarterly reports containing unaudited financial information.
Share Ownership: As of December 31, 2024 and 2023, UHS owned 5.7% of our outstanding shares of beneficial interest. SEC reporting requirements of UHS: UHS is subject to the reporting requirements of the Securities and Exchange Commission (“SEC”) and is required to file annual reports containing audited financial information and quarterly reports containing unaudited financial information.
The combined revenues generated from the leases on the three acute care and three behavioral health care hospital facilities leased to subsidiaries of UHS at December 31, 2023 and 2022, accounted for approximately 25% and 26% of our consolidated revenues for the years ended December 31, 2023 and 2022, respectively.
The combined revenues generated from the leases on the three acute care and three behavioral health care hospital facilities leased to subsidiaries of UHS at December 31, 2024, 2023 and 2022, accounted for approximately 24%, 25% and 26% of our consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively.
Officers and Employees: Our officers are all employees of a wholly-owned subsidiary of UHS and although as of December 31, 2023 we had no salaried employees, our officers do typically receive annual stock-based compensation awards in the form of restricted stock or restricted stock units.
Officers and Employees: Our officers are all employees of a wholly-owned subsidiary of UHS and although as of December 31, 2024 we had no salaried employees, our officers do typically receive annual stock-based compensation awards in the form of restricted stock or restricted stock units.
The Advisory Agreement was renewed for 2024 with the same terms as the Advisory Agreement in place during 2023, 2022 and 2021. Our advisory fee for 2023, 2022 and 2021 was computed at 0.70% of our average invested real estate assets, as derived from our consolidated balance sheet.
The Advisory Agreement was renewed for 2025 with the same terms as the Advisory Agreement in place during 2024, 2023 and 2022. Our advisory fee for 2024, 2023 and 2022 was computed at 0.70% of our average invested real estate assets, as derived from our consolidated balance sheet.
Based upon a review of our advisory fee and other general and administrative expenses, as compared to an industry peer group, the advisory fee computation remained unchanged for 2023, as compared to 2022 and 2021.
Based upon a review of our advisory fee and other general and administrative expenses, as compared to an industry peer group, the advisory fee computation remained unchanged for 2024, as compared to 2023 and 2022.
Regulation and Other Factors During each of the years of 2023, 2022 and 2021, approximately 27%, 29% and 28%, respectively, of our revenues were earned pursuant to leases with operators of acute care hospitals, behavioral health care hospitals and free-standing emergency departments (“FEDs”), the substantial majority of which are subsidiaries of UHS.
Regulation and Other Factors During each of the years of 2024, 2023 and 2022, approximately 27%, 27% and 29%, respectively, of our revenues were earned pursuant to leases with operators of acute care hospitals, behavioral health care hospitals and free-standing emergency departments (“FEDs”), the substantial majority of which are subsidiaries of UHS.
As of January 1, 2024, leases on the six acute and behavioral health care hospitals have fixed terms with an average of 8.6 years remaining and include renewal options ranging from one to seven, five or ten-year terms. The remaining lease terms for each hospital, which vary by hospital, are included herein in Item 2. Properties .
As of January 1, 2025, leases 2 on the six acute and behavioral health care hospitals have fixed terms with an average of 7.6 years remaining and include renewal options ranging from one to seven, five or ten-year terms. The remaining lease terms for each hospital, which vary by hospital, are included herein in Item 2. Properties .
The various factors and government regulation related to the healthcare industry, such as those outlined above, affect us because: • The financial ability of lessees to make rent payments to us may be affected by governmental regulations such as licensure, certification for participation in government programs, and government reimbursement, and; • Our bonus rent on the acute care hospitals operated by a subsidiary of UHS is based on the lessee’s net revenue which in turn is affected by the amount of reimbursement the lessee receives from the government.
The various factors and government regulation related to the healthcare industry, such as those outlined above, affect us because: • The financial ability of lessees to make rent payments to us may be affected by governmental regulations such as licensure, certification for participation in government programs, and government reimbursement, and; • Our bonus rent on McAllen Medical Center, the acute care hospital operated by a subsidiary of UHS, is based on the lessee’s net revenue which in turn is affected by the amount of reimbursement the lessee receives from the government.
Since the aggregate revenues generated from UHS-related tenants comprised approximately 37% of our consolidated revenue for the five years ended December 31, 2023 (approximately 41%, 40% and 37% for the years ended December 31, 2023, 2022 and 2021, respectively), and since a subsidiary of UHS is our Advisor, you are encouraged to obtain the publicly available filings for Universal Health Services, Inc. from the SEC’s website.
Since the aggregate revenues generated from UHS-related tenants comprised approximately 38% of our consolidated revenue for the five years ended December 31, 2024 (approximately 40%, 41% and 40% for the years ended December 31, 2024, 2023 and 2022, respectively), and since a subsidiary of UHS is our Advisor, you are encouraged to obtain the publicly available filings for Universal Health Services, Inc. from the SEC’s website.
Overview of Facilities As of February 27, 2024, we have investments in seventy-six facilities located in twenty-one states and consisting of the following: Facility Name Location Type of Facility Ownership Guarantor McAllen Medical Center (A) McAllen, TX Acute Care 100% Universal Health Services, Inc. Wellington Regional Medical Center (A) W. Palm Beach, FL Acute Care 100% Universal Health Services, Inc.
Overview of Facilities As of February 26, 2025, we have investments in seventy-six facilities located in twenty-one states and consisting of the following: Facility Name Location Type of Facility Ownership Guarantor McAllen Medical Center (A) McAllen, TX Acute Care 100% Universal Health Services, Inc. Wellington Regional Medical Center (A) W. Palm Beach, FL Acute Care 100% Universal Health Services, Inc.
Clive Behavioral Health (D) (J) Clive, IA Behavioral Health 100% Universal Health Services, Inc. and Catholic Health Initiatives-Iowa, Corp. 4058 W. Melrose Land (L) Chicago, IL Vacant Land 100% -- Evansville Facility (G) Evansville, IN Specialty 100% -- Family Doctor’s Medical Office Bldg.
Clive Behavioral Health (J) Clive, IA Behavioral Health 100% Universal Health Services, Inc. and Catholic Health Initiatives-Iowa, Corp. 4058 W. Melrose Land (K) Chicago, IL Vacant Land 100% -- Evansville Facility (G) Evansville, IN Specialty 100% -- Family Doctor’s Medical Office Bldg.
(b) UHS has one 5-year renewal option at fair market value lease rates (through 2031; see additional disclosure below). The annual rental will increase by 2.5% on an annual compounded basis on each January 1 st through 2026. (c) UHS has seven 5-year renewal options at fair market value lease rates (2034 through 2068).
(b) UHS has one 5-year renewal option at fair market value lease rates (through 2031). The annual rental will increase by 2.5% on an annual compounded basis on each January 1 st through 2026. (c) UHS has seven 5-year renewal options at fair market value lease rates (2034 through 2068).
Fire Mesa (A) (M) Las Vegas, NV Office Building 100% Universal Health Services, Inc. 140 Thomas Johnson Drive (N) Frederick, MD MOB 100% -- Beaumont Heart and Vascular Center (P) Dearborn, MI MOB 100% -- Sierra Medical Plaza I (I) Reno, NV MOB 100% -- McAllen Doctor's Center (A)(F) McAllen, TX MOB 100% Universal Health Services, Inc.
Fire Mesa (A) Las Vegas, NV Office Building 100% Universal Health Services, Inc. 140 Thomas Johnson Drive (B) Frederick, MD MOB 100% -- Beaumont Heart and Vascular Center (B) Dearborn, MI MOB 100% -- Sierra Medical Plaza I (I) Reno, NV MOB 100% -- McAllen Doctor's Center (A)(F) McAllen, TX MOB 100% Universal Health Services, Inc.
The table below details the existing lease terms and renewal options for each of the hospital leases that are related to UHS as of January 1, 2024, consisting of three acute care hospitals and three behavioral health hospitals: Hospital Name Annual Minimum Rent End of Lease Term Renewal Term (years) McAllen Medical Center $ 5,485,000 December, 2026 5 (a) Wellington Regional Medical Center $ 6,639,000 December, 2026 5 (b) Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services $ 4,072,000 December, 2033 35 (c) Canyon Creek Behavioral Health $ 1,841,000 December, 2033 35 (c) Clive Behavioral Health $ 2,775,000 December, 2040 50 (d) (a) UHS has one 5-year renewal option at existing lease rates (through 2031).
The table below details the existing lease terms and renewal options for each of the hospital leases that are related to UHS as of January 1, 2025, consisting of three acute care hospitals and three behavioral health hospitals: Hospital Name Annual Minimum Rent End of Lease Term Renewal Term (years) McAllen Medical Center $ 5,485,000 December, 2026 5 (a) Wellington Regional Medical Center $ 6,805,000 December, 2026 5 (b) Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services $ 4,164,000 December, 2033 35 (c) Canyon Creek Behavioral Health $ 1,882,000 December, 2033 35 (c) Clive Behavioral Health $ 2,851,000 December, 2040 50 (d) (a) UHS has one 5-year renewal option at existing lease rates (through 2031).
Additionally, UHS has rights of first refusal to: (i) purchase the respective leased facilities during and for 180 days after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased facility at the end of, and for 180 days after, the lease term at the same terms and conditions pursuant to any third-party offer.
Additionally, UHS has rights of first refusal to: (i) purchase the respective leased facilities during and for a specified period after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased facility at the end of, and for a specified period after, the lease term at the same terms and conditions pursuant to any third-party offer.
The triple-net master lease is for twelve years and is scheduled to expire on August 31, 2035. The initial annual base rent is approximately $624,000. (G) The facility is vacant and being marketed. (H) Real estate assets owned by an LLC or an LP in which we have a noncontrolling ownership interest and include tenants who are subsidiaries of UHS.
The triple-net master lease is for twelve years and is scheduled to expire on August 31, 2035. (G) The facility is vacant and being marketed. (H) Real estate assets owned by an LLC or an LP in which we have a noncontrolling ownership interest and include tenants who are subsidiaries of UHS.
Advisory fees incurred and paid (or payable) to UHS amounted to $5.3 million during 2023, $5.1 million during 2022 and $4.4 million during 2021, and were based upon average invested real estate assets of $757 million, $728 million and $629 million during 2023, 2022 and 2021, respectively.
Advisory fees incurred and paid (or payable) to UHS amounted to $5.5 million during 2024, $5.3 million during 2023 and $5.1 million during 2022, and were based upon average invested real estate assets of $783 million, $757 million and $728 million during 2024, 2023 and 2022, respectively.
The annual aggregate lease payments on these properties were approximately $571,000 for the year ended 2023 and expected to be $571,000 for each of the years ended 2024, 2025, 2026 and 2027, and an aggregate of $31.9 million thereafter. See Note 4 to the consolidated financial statements-Lease Accounting for further disclosure around our lease accounting.
The annual aggregate lease payments on these properties were approximately $571,000 for the year ended 2024 and expected to be $571,000 for each of the years ended 2025 through 2028, and an aggregate of $31.3 million thereafter. See Note 4 to the consolidated financial statements-Lease Accounting for further disclosure around our lease accounting.
Our competitors include, but are not limited to, other REITs, private investors and firms, banks and other companies, including UHS. Some of these competitors are larger and may have a lower cost of capital than we do.
Our competitors include, but are not limited to, other REITs, private investors and firms, banks, for profit and nonprofit hospitals and healthcare systems, and other companies, including UHS. Some of these competitors are larger and may have a lower cost of capital than we do.
The cost of the MOB is estimated to be approximately $35 million, approximately $29 million of which was incurred as of December 31, 2023. In connection with this MOB, we entered into a ground lease and master flex-lease agreement with a wholly-owned subsidiary of UHS.
The cost of the MOB is estimated to be approximately $35 million, approximately $30 million of which was incurred as of December 31, 2024. In connection with this MOB, we entered into a ground lease and master flex-lease agreement with a wholly-owned subsidiary of UHS both of which commenced during March, 2023.
During the first quarter of 2023, construction was substantially completed on Sierra Medical Plaza I, a multi-tenant MOB located in Reno, Nevada, consisting of approximately 86,000 rentable square feet.
The initial annual base rent is approximately $624,000. 4 During the first quarter of 2023, construction was substantially completed on Sierra Medical Plaza I, a multi-tenant MOB located in Reno, Nevada, consisting of approximately 86,000 rentable square feet.
The triple-net master lease is for twelve years scheduled to expire on August 31, 2035. McAllen Hospitals, L.P. has the option to renew the lease term for three consecutive ten-year terms. The initial annual base rent is approximately $624,000.
The triple-net master lease is for twelve years scheduled to expire on August 31, 2035. McAllen Hospitals, L.P. has the option to renew the lease term for three consecutive ten-year terms.
We can provide no assurance that reductions to Medicaid revenues earned by operators of certain of our facilities, particularly our hospital operators in the above-mentioned states, will not have a material adverse effect on the future operating results of those operators which, in turn, could have a material adverse effect on us. 8 Executive Officers of the Registrant Name Age Position Alan B.
We can provide no assurance that reductions to Medicaid revenues earned by operators of certain of our facilities, particularly our hospital operators in the 7 above-mentioned states, will not have a material adverse effect on the future operating results of those operators which, in turn, could have a material adverse effect on us.
As of February 27, 2024, we have seventy-six real estate investments or commitments located in twenty-one states in the United States consisting of: (i) six hospital facilities including three acute care and three behavioral health care; (ii) sixty medical/office buildings; (iii) four free-standing emergency departments (“FEDs”); (iv) four preschool and childcare centers; (v) one specialty facility that is currently vacant, and; (vi) one property comprised of vacant land located in Chicago, Illinois (demolition of the previously existing building on this land was completed during 2023).
As of February 26, 2025, we have seventy-six real estate investments or commitments located in twenty-one states in the United States consisting of: (i) six hospital facilities including three acute care and three behavioral health care; (ii) sixty medical/office buildings; (iii) four free-standing emergency departments (“FEDs”); (iv) four preschool and childcare centers; (v) one specialty facility located in Evansville, Indiana, that is currently vacant, and; (vi) one property comprised of vacant land located in Chicago, Illinois.
We are the lessee on thirteen ground leases with subsidiaries of UHS (for consolidated and unconsolidated investments), including one that commenced in March, 2023. The remaining lease terms on the ground leases with subsidiaries of UHS range from approximately 26 years to approximately 75 years.
The ground lease has a 75-year term scheduled to expire on March 2, 2098. We are the lessee on thirteen ground leases with subsidiaries of UHS (for consolidated and unconsolidated investments), including one that commenced in March, 2023. The remaining lease terms on the ground leases with subsidiaries of UHS range from approximately 25 years to approximately 74 years.
In addition, a wholly-owned subsidiary of UHS is the managing, majority member in a joint-venture with an unrelated third-party that operates, and leases from us, Clive Behavioral Health. This 100-bed behavioral health care facility is located in Clive, Iowa and was completed and opened in late December, 2020 and the hospital lease commenced on December 31, 2020.
In addition, a wholly-owned subsidiary of UHS is the managing, majority member in a joint-venture with an unrelated third-party that operates, and leases from us, Clive Behavioral Health, a 100-bed behavioral health care facility located in Clive, Iowa.
Miller 86 Chairman of the Board, Chief Executive Officer and President Charles F. Boyle 64 Senior Vice President and Chief Financial Officer Cheryl K. Ramagano 61 Senior Vice President - Operations, Treasurer and Secretary Karla J. Peterson 64 Vice President, Acquisitions and Development Mr. Alan B.
Executive Officers of the Registrant Name Age Position Alan B. Miller 87 Chairman of the Board, Chief Executive Officer and President Charles F. Boyle 65 Senior Vice President and Chief Financial Officer Cheryl K. Ramagano 62 Senior Vice President - Operations, Treasurer and Secretary Karla J. Peterson 65 Vice President, Acquisitions and Development Mr. Alan B.
The portion of the lease payments that is included in our consolidated statements of income, and reflected as interest income on financing leases, was approximately $5.5 million for each of the years ended December 31, 2023 and 2022. There is no bonus rental component applicable to either of these leases.
The portion of the lease payments that is included in our consolidated statements of income, and reflected as interest income on financing leases, was approximately $5.4 million for the year ended December 31, 2024 and $5.5 million for each of the years ended December 31, 2023 and 2022.
The combined revenues generated from the leases on these hospitals comprised approximately 25% and 26% of our consolidated revenues during 2023 and 2022, respectively. During 2021, the combined revenues generated from the leases on the hospitals leased to subsidiaries of UHS was approximately 25% of our consolidated revenues.
The combined revenues generated from the leases on these hospitals comprised approximately 24%, 25% and 26% of our consolidated revenues during 2024, 2023 and 2022, respectively.
In addition to the six UHS hospital facilities, we have twenty-one properties consisting of medical/office buildings (including one newly constructed MOB that was substantially completed during the first quarter of 2023 and one MOB that was acquired during the third quarter of 2023), and FEDs that are either wholly or jointly-owned by us that include tenants that are subsidiaries of UHS.
In addition to the six UHS hospital facilities, we have twenty properties consisting of medical/office buildings and FEDs that are either wholly or jointly-owned by us that include tenants that are subsidiaries of UHS.
Pursuant to the leases, as amended during the first quarter of 2022, the aggregate annual rental rate on the acquired properties, which is payable to us on a monthly basis, was approximately $5.8 million during 2023 ($4.0 million related to Aiken and $1.8 million related to Canyon Creek) and $5.7 million during 2022 ($3.9 million related to Aiken and $1.8 million related to Canyon Creek).
Pursuant to the leases, the aggregate annual rental rate on the acquired properties, which is payable to us on a monthly basis, was $5.9 million during 2024, $5.8 million during 2023 and $5.7 million during 2022.
For the six hospitals owned by us at the end of 2023 (all of which were leased to subsidiaries of UHS), the combined weighted average Coverage Ratio was approximately 5.5 (ranging from -0.4 to 10.0, with one of the behavioral health care hospitals that opened during the fourth quarter of 2020 having a negative Coverage Ratio).
The combined weighted average Coverage Ratio for the six hospitals owned by us, all of which were leased to subsidiaries of UHS, was approximately 8.3 during 2024 (ranging from 0.02 to 13.5) and approximately 5.5 during 2023 (ranging from -0.4 to 10.0).
Please see Note 2 to the consolidated financial statements for further details surrounding this transaction. 2 (L) Demolition of this facility was completed during 2023. We continue to market this vacant land. Please see Note 4 to the consolidated financial statements for further details surrounding this property. (M) This office building was acquired in May, 2021.
(J) This property is leased to a joint venture between a wholly-owned subsidiary of UHS and Catholic Health Initiatives-Iowa, Corp. (K) Demolition of this facility was completed during 2023. We continue to market this vacant land. Please see Note 4 to the consolidated financial statements for further details surrounding this property.
(I) Construction on this UHS-related MOB was substantially completed during March of 2023. The MOB is located on the campus of the Northern Nevada Sierra Medical Center, a newly constructed hospital that is owned and operated by a wholly-owned subsidiary of UHS, which was completed during in April, 2022.
(I) The MOB is located on the campus of the Northern Nevada Sierra Medical Center, an acute care hospital that is owned and operated by a wholly-owned subsidiary of UHS. In connection with this MOB, we entered into a ground lease and master flex-lease agreements with a wholly-owned subsidiary of UHS.
This transaction generated a gain of approximately $68.4 million which is included in our consolidated statement of income for the year ended December 31, 2021. As a result of UHS’ purchase option within the lease agreements of Aiken and Canyon Creek, the transaction is accounted for as a failed sale leaseback in accordance with U.S.
As a result of UHS’ purchase option within the lease agreements of Aiken and Canyon Creek, the transaction is accounted for as a failed sale leaseback in accordance with U.S. GAAP and the properties acquired by us in connection with the asset purchase and sale agreement with UHS were accounted for as financing arrangements.
GAAP and the properties acquired by us in connection with the asset purchase and sale agreement with UHS, as amended, were accounted for as financing arrangements and our consolidated balance sheets as of December 31, 2023 and 2022 include financing receivables related to this transaction of $83.3 million and $83.6 million, respectively.
Our consolidated balance sheets as of December 31, 2024 and 2023 include financing receivables related to this transaction of $82.8 million and $83.3 million, respectively.
Other Information Included in our portfolio at December 31, 2023, are six hospital facilities leased to subsidiaries of UHS comprised of three acute care hospitals and three behavioral health care hospitals (three of which were acquired as part of an asset purchase and sale agreement with UHS on December 31, 2021, as amended, as discussed herein).
(L) During 2024, the tenant exercised their 5-year lease renewal option covering the period on February, 2025, to January, 2030. Other Information Included in our portfolio at December 31, 2024, are six hospital facilities leased to subsidiaries of UHS comprised of three acute care hospitals and three behavioral health care hospitals.
The master flex-lease is subject to a reduction during the term based upon the execution of third-party leases. The ground lease and the master flex lease each commenced during March, 2023.
The master flex lease agreement has a ten-year term scheduled to expire on March 31, 2033. The MOB is 68% leased including the ten-year master flex lease for 34% of the rentable square feet. The master flex-lease agreement is subject to a reduction based upon the execution of third-party leases.
On September 7, 2022, the same Texas Federal District Court judge, in the case of Braidwood Management v. Becerra , ruled that the requirement that certain health plans cover services with an “A” or “B” recommendation from the U.S. Preventive Services Task Force without cost sharing violates the Appointments Clause of the U.S.
On September 7, 2022, the ACA faced its most recent challenge when a Texas Federal District Court judge, in the case of Braidwood Management v. Becerra , ruled that certain provisions violate the Appointments Clause of the U.S. Constitution and the Religious Freedom Restoration Act. The decision was appealed to the U.S.
In addition, possible repeal or replacement of the Legislation may have significant impact on the reimbursement for healthcare services. On December 14, 2018, a Texas Federal District Court declared the Legislation to be unconstitutional in its entirety.
In addition, possible repeal or replacement of the Legislation may have significant impact on the reimbursement for healthcare services. An increasing number of legislative initiatives have been passed into law that may result in major changes in the health care delivery system on a national or state level.
Removed
In connection with this MOB, we entered into a ground lease and master flex-lease agreements (both of which commenced in March, 2023) with a wholly-owned subsidiary of UHS.
Added
The aggregate revenues generated from UHS-related tenants comprised approximately 38% of our consolidated revenue for the five years ended December 31, 2024 (approximately 40%, 41% and 40% for the years ended December 31, 2024, 2023 and 2022, respectively). In December, 2021, we entered into an asset purchase and sale agreement, as amended, with UHS and certain of its affiliates.
Removed
(J) This property is leased to a joint venture between a wholly-owned subsidiary of UHS and Catholic Health Initiatives-Iowa, Corp.
Added
In October, 2024, two wholly-owned subsidiaries of UHS each exercised their 5-year renewal options on two FEDs located in Weslaco and Mission, Texas, covering the period of February 1, 2025 through January 31, 2030.
Removed
(K) On December 31, 2021, pursuant to an asset purchase and sale agreement, as amended, with UHS and certain affiliates, a wholly-owned subsidiary of UHS purchased the real estate assets of the Inland Valley Campus of Southwest Healthcare System from us; and we purchased from two wholly-owned subsidiaries of UHS, the real estate assets of Aiken Regional Medical Center (including a behavioral health pavilion) and Canyon Creek Behavioral Health.
Added
The aggregate annual lease rates on the renewed leases, which are scheduled to increased 2% per year, for the period of February 1, 2025 through January 31, 2026 is approximately $1.1 million.
Removed
In connection with this transaction, we paid approximately $4.1 million in cash to UHS which was the amount by which the fair market values of Aiken Regional Medical Center and Canyon Creek Behavioral Health exceeded the fair market value of the Inland Valley Campus of Southwest Healthcare System.
Added
The wholly-owned subsidiaries of UHS have five, 5-year renewal options remaining on each of these FEDs, with the first three renewal options (covering the years 2030 through 2044) providing for 2% annual increases to the lease rates, and the remaining two, 5-year renewal options (covering the years 2045 through 2054) providing for lease rates at the then fair market value.
Removed
As we no longer have a controlling interest in Inland Valley Campus of Southwest Healthcare System, the transaction generated a gain of approximately $68.4 million which was included in our consolidated statement of income the year ended December 31, 2021.
Added
These leases are cross-defaulted with one another and the wholly-owned subsidiaries of UHS have the option to purchase the leased properties upon the expiration of each five-year extended term at the fair market value at that time.
Removed
(N) This MOB was acquired in January, 2022. (O) During the fourth quarter of 2021, we purchased the 5% minority interest held by a third-party partner in Grayson Properties, LP. As a result of the minority ownership purchase, we now own 100% of the LP. (P) This MOB was acquired in March, 2022.
Added
Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Patient Protection and Affordable Care Act (the “ACA”).
Removed
For the six occupied hospitals owned by us at the end of 2022, all of which were leased to subsidiaries of UHS, the combined weighted average Coverage Ratio was approximately 4.5 (ranging from -1.0 to 9.7, with two behavioral health care hospitals that opened during the fourth quarter of 2020 having negative Coverage Ratios).
Added
The Biden administration had undertaken executive actions to strengthen the ACA, including issuing executive orders implementing a special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the ACA or the Medicaid program.
Removed
Additionally, we structured the purchase and sale of the above-mentioned properties as a like-kind exchange of property under the provisions of Section 1031 of the Internal Revenue Code of 1986, as amended.
Added
The American Rescue Plan Act of 2021's expansion of subsidies to purchase coverage through an exchange, which the Inflation Reduction Act of 2022, passed on August 16, 2022, continues through 2025, has increased exchange enrollment.
Removed
Also on December 31, 2021, Aiken and Canyon Creek (as lessees), entered into a master lease and individual property leases, as amended, (with us as lessor), for initial lease terms on each property of approximately twelve years, ending on December 31, 2033.
Added
However, the prior President Trump administration had taken various steps having the effect of reducing enrollment through the exchange, so the likelihood of subsidy extension and other exchange-expansion activities is questionable.
Removed
Subject to the terms of the master lease, Aiken and Canyon Creek have the right to renew their leases, at the then current fair market rent (as defined in the master lease), for seven, five-year optional renewal terms.
Added
While attempts to repeal the entirety of the ACA have not been successful to date, a key provision of the ACA was eliminated as part of the Tax Cuts and Jobs Act and on December 14, 2018, a federal U.S.
Removed
Lease revenue will not be impacted by the lease payments received related to these two properties. Pursuant to the terms of the lease on the Inland Valley Campus, we earned $4.5 million of lease revenue during the year ended December 31, 2021 (consisting of $2.6 million in base rental and $1.9 million in bonus rental).
Added
District Court Judge in Texas ruled the entire ACA is unconstitutional. 6 That ruling was ultimately appealed to the United States Supreme Court, which decided in California v. Texas that the plaintiffs in the matter lacked standing to bring their constitutionality claims.
Removed
The lease on this facility is triple net and has an initial term of 20 years with five 10-year renewal options. On each January 1 st through 2040 (and potentially through 2070 if the first three of five, 10-year renewal options are exercised), the annual rental will increase by 2.75% on a cumulative and compounded basis.
Added
Court of Appeals for the Fifth Circuit, which on June 21, 2024 affirmed the District Court’s ruling regarding preventive services recommended by United States Preventive Services Task Force being unconstitutional. However, the Fifth Circuit overturned the nationwide injunction imposed by the District Court, preserving access to the majority of preventive services in dispute for now. The U.S.
Removed
The first three of the five 10-year renewal options will provide for annual rental as stipulated in the lease (2041 through 2070) and the two additional 10-year lease renewal options will be at fair market value lease rates (2071 through 2090).
Added
Government appealed and on January 10, 2025, the U.S. Supreme Court agreed to hear the matter. Any future efforts to challenge, replace or replace the ACA or expand or substantially amend its provision is unknown.
Removed
Upon the December 31, 2021 expiration of the lease on Wellington Regional Medical Center located in West Palm Beach, Florida, a wholly-owned subsidiary of UHS exercised its fair market value renewal option and renewed the lease for a 5-year term scheduled to expire on December 31, 2026.
Added
Peterson formerly served as Managing Director of Acquisitions and Asset Management at White Oak Healthcare MOB REIT, LLC from 2020 to 2022. Prior thereto, she served as Executive Vice President of A10 Capital from 2017 to 2020.
Removed
Effective January 1, 2023, the annual fair market value lease rate for this hospital, which was payable to us monthly, was $6.5 million (there is no longer a bonus rental component of the lease payment).
Removed
On January 1, 2024 the annual rent increased to $6.6 million and on each January 1 st thereafter through 2026, the annual rent will increase by 2.50% on a cumulative and compounded basis.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

39 edited+16 added−36 removed156 unchanged
Biggest changeSuch reductions have been delayed several times, most recently under the CAA, which further delays the DSH through 2024. During the reduction period, state Medicaid DSH allotments from federal funds will be reduced by $8 billion annually. Reductions are imposed on states based on percentage of uninsured individuals, Medicaid utilization and uncompensated care.
Biggest changeBeginning in April 2025 and continuing through 2027, the Medicaid disproportionate share hospital (“DSH”) allotment to the states from federal funds will be reduced. Such reductions have been delayed several times, most recently under the American Relief Act, 2025. During the reduction period, state Medicaid DSH allotments from federal funds will be reduced by $8 billion annually.
Conversely, certain facilities will receive reduced reimbursement for failing to meet quality parameters; such hospitals will include those with excessive readmission or hospital-acquired condition rates. A 2012 U.S.
Conversely, certain facilities receive reduced reimbursement for failing to meet quality parameters; such hospitals will include those with excessive readmission or hospital-acquired condition rates. A 2012 U.S.
If their ultimate liability for professional and general liability claims could change materially from current estimates, if such policy limitations should be partially or fully exhausted in the future, or payments of claims exceed estimates or are not covered by insurance, it could have a material adverse effect on the operations of our operators and, in turn, us.
If their ultimate liability for professional and general liability claims could change materially from current estimates, if such policy limitations should be partially or fully exhausted in the future, or payments of claims exceed estimates or are not covered by insurance, it could have a material adverse effect on the operations of our operators and, in turn, on us.
UHS has stated that it is unable to predict the outcome of these matters or to reasonably estimate the amount 13 or range of any such loss; however, the outcome of these lawsuits and the related investigations, publicity and news articles that have been published concerning these matters, could have a material adverse effect on their business, financial condition, results of operations and/or cash flows.
UHS has stated that it is unable to predict the outcome of these matters or to reasonably estimate the amount or range of any such loss; however, the outcome of these lawsuits and the related investigations, publicity and news articles that have been published concerning these matters, could have a material adverse effect on their business, financial condition, results of operations and/or cash flows.
We are unable at this time to predict how this 12 trend will affect the results of operations of the operators of our hospitals, but it could negatively impact their revenues if they are unable to meet or maintain high quality standards established by both governmental and private payers.
We are unable at this time to predict how this trend will affect the results of operations of the operators of our hospitals, but it could negatively impact their revenues if they are unable to meet or maintain high quality standards established by both governmental and private payers.
These filings are the sole responsibility of UHS and are not incorporated by reference herein. Defending itself against the allegations in the lawsuits and governmental investigations, or similar matters and any related publicity, could potentially entail significant costs and could require significant attention from UHS management and UHS’ reputation could suffer significantly.
These filings are the sole responsibility of UHS and are not incorporated by reference herein. 11 Defending itself against the allegations in the lawsuits and governmental investigations, or similar matters and any related publicity, could potentially entail significant costs and could require significant attention from UHS management and UHS’ reputation could suffer significantly.
Although we believe we have been qualified as a REIT since our inception, there can be no assurance that we have been so qualified or will remain qualified in the future. Failure to qualify as a REIT may subject us to income tax liabilities, including federal income tax at regular corporate rates.
Although we believe we have been qualified as a REIT since our inception, there can be no assurance that we have been so qualified or 14 will remain qualified in the future. Failure to qualify as a REIT may subject us to income tax liabilities, including federal income tax at regular corporate rates.
The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure, 17 are costly and at times tenant-specific. A new or replacement operator or tenant may require different features in a property, depending on that operator’s or tenant’s particular operations.
The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure, are costly and at times tenant-specific. A new or replacement operator or tenant may require different features in a property, depending on that operator’s or tenant’s particular operations.
Such competition is experienced in markets including, but not limited to, McAllen, Texas, the site of our McAllen Medical Center, a 370-bed acute care hospital. 14 In addition, the number and quality of the physicians on a hospital’s staff are important factors in determining a hospital’s competitive advantage.
Such competition is experienced in markets including, but not limited to, McAllen, Texas, the site of our McAllen Medical Center, a 370-bed acute care hospital. In addition, the number and quality of the physicians on a hospital’s staff are important factors in determining a hospital’s competitive advantage.
The loss of the services of one or more of our senior executives or of a significant portion of our operators’ local hospital management personnel could significantly undermine our management expertise and our operators’ ability to provide efficient, quality health care services at our facilities, which could harm their business, and in turn, harm our business.
The loss of the services of one or more of our senior executives or of a significant portion of our 15 operators’ local hospital management personnel could significantly undermine our management expertise and our operators’ ability to provide efficient, quality health care services at our facilities, which could harm their business, and in turn, harm our business.
There is a trend among private payers toward value-based purchasing of healthcare services, as well. Many large commercial payers require hospitals to report quality data, and several of these payers will not reimburse hospitals for certain preventable adverse events.
There is a trend among private payers toward value-based purchasing of healthcare services, as well. Many large commercial payers require hospitals to report quality data, and several of these payers will not reimburse hospitals for certain preventable adverse 10 events.
A worsening of economic conditions, including inflation and rising interest rates, may result in a higher unemployment rate which will likely increase the number of individuals without health insurance. As a result, the operators of our 18 facilities may experience a decrease in patient volumes.
A worsening of economic conditions, including inflation and rising interest rates, may result in a higher unemployment rate which will likely increase the number of individuals without health insurance. As a result, the operators of our facilities may experience a decrease in patient volumes.
If we were to sell our interests or underlying property, we may not be able to redeploy the proceeds into assets at the same or greater return as we currently receive.
If we were to sell our interests 13 or underlying property, we may not be able to redeploy the proceeds into assets at the same or greater return as we currently receive.
While Congress had previously revised the intent 10 requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil False Claims Act.
While Congress had previously revised the intent requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil False Claims 9 Act.
In addition, as of December 31, 2023, subsidiaries of UHS leased six hospital facilities owned by us with current lease terms expiring at various times from 2026 to 2040. We cannot assure you that UHS will continue to satisfy its obligations to us or renew existing leases upon their scheduled maturity.
In addition, as of December 31, 2024, subsidiaries of UHS leased six hospital facilities owned by us with current lease terms expiring at various times from 2026 to 2040. We cannot assure you that UHS will continue to satisfy its obligations to us or renew existing leases upon their scheduled maturity.
For the year ended December 31, 2023, 8% of our consolidated and unconsolidated revenues were generated by four jointly-owned LLCs/LPs in which we hold non-controlling equity ownership interests ranging from 33% to 95%. Our level of investment and lack of control exposes us to potential losses of our investments and revenues.
For the year ended December 31, 2024, 8% of our consolidated and unconsolidated revenues were generated by four jointly-owned LLCs/LPs in which we hold non-controlling equity ownership interests ranging from 33% to 95%. Our level of investment and lack of control exposes us to potential losses of our investments and revenues.
In contrast, since we are a REIT, our distributions to individual U.S. shareholders are not eligible for the reduced rates which apply to distributions from regular corporations, and thus may be subject to Federal income tax at a rate as high as 37% for 2023 (subject to certain additional taxes for certain taxpayers).
In contrast, since we are a REIT, our distributions to individual U.S. shareholders are not eligible for the reduced rates which apply to distributions from regular corporations, and thus may be subject to Federal income tax at a rate as high as 37% for 2024 (subject to certain additional taxes for certain taxpayers).
Pursuant to the operating and/or partnership agreements of the four LLCs/LPs in which we continue to hold non-controlling ownership interests, the third-party member and the Trust, at any time, potentially subject to certain conditions, have the right to make an offer (“Offering Member”) to the other member(s) (“Non-Offering Member”) in which it either agrees to: (i) sell the entire ownership interest of the Offering Member to the Non-Offering Member (“Offer to Sell”) at a price as determined by the Offering Member (“Transfer Price”), or; (ii) purchase the entire ownership interest of the Non-Offering Member (“Offer to Purchase”) at the equivalent proportionate Transfer Price.
Pursuant to the operating and/or partnership agreements of the four LLCs/LPs in which we continue to hold non-controlling ownership interests, the third-party member and the Trust, at any time, potentially subject to certain conditions, have the right to make an offer (“Offering Member”) to the other member(s) (“Non-Offering Member”) in which it either agrees to: (i) sell the entire ownership interest of the Offering Member to the Non-Offering Member at a price as determined by the Offering Member (“Transfer Price”), or; (ii) purchase the entire ownership interest of the Non-Offering Member at the equivalent proportionate Transfer Price.
Our hospital operators expect continued third-party efforts to aggressively manage reimbursement levels and cost controls. Reductions in 9 reimbursement amounts received from third party payers could have a material adverse effect on the financial position and results of operations of our hospital operators.
Our 8 hospital operators expect continued third-party efforts to aggressively manage reimbursement levels and cost controls. Reductions in reimbursement amounts received from third party payers could have a material adverse effect on the financial position and results of operations of our hospital operators.
Since UHS comprised approximately 41%, 40% and 37% of our consolidated revenues for the years ended December 31, 2023, 2022 and 2021, respectively, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-K and 10-Q, as publicly filed with the Securities and Exchange Commission.
Since UHS comprised approximately 40%, 41% and 40% of our consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-K and 10-Q, as publicly filed with the Securities and Exchange Commission.
In general, dividends (qualified) paid by a U.S. corporation to individual U.S. shareholders are subject to Federal income tax at a maximum rate of 20% for 2023 (subject to certain additional taxes for certain taxpayers).
In general, dividends (qualified) paid by a U.S. corporation to individual U.S. shareholders are subject to Federal income tax at a maximum rate of 20% for 2024 (subject to certain additional taxes for certain taxpayers).
If UHS experiences financial difficulties, or otherwise fails to make payments to us, or elects not to renew the leases on our three acute care hospitals, our revenues could be materially reduced. For the year ended December 31, 2023, lease payments from UHS comprised approximately 41% of our consolidated revenues.
If UHS experiences financial difficulties, or otherwise fails to make payments to us, or elects not to renew the leases on our three acute care hospitals, our revenues could be materially reduced. For the year ended December 31, 2024, lease payments from UHS comprised approximately 40% of our consolidated revenues.
Initiatives to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions have been persistent. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and legal challenges to the Legislation are unknown.
The impact of the Legislation on hospitals may vary. Initiatives to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions have been persistent. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and legal challenges to the Legislation are unknown.
The Legislation revises reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high quality care and contains a number of incentives and penalties under these programs to achieve these goals.
The Legislation revises reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high quality care and contains a number of incentives and penalties under these programs to achieve these goals. The Legislation implements a value-based purchasing program, which rewards the delivery of efficient care.
Catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in damage to our properties. 19 Many of our properties are located in areas susceptible to revenue loss, cost increase, or damage caused by severe weather conditions or natural disasters such as wildfires, hurricanes, earthquakes, tornadoes and floods.
Many of our properties are located in areas susceptible to revenue loss, cost increase, or damage caused by severe weather conditions or natural disasters such as wildfires, hurricanes, earthquakes, tornadoes and floods.
In addition, the operators of our facilities face competition from other health care providers, including physician owned facilities and other competing facilities, including certain facilities operated by UHS but the real property of which is not owned by us.
The increase in outpatient treatment and diagnostic facilities, outpatient surgical centers and freestanding ambulatory surgical centers also increases competition for our operators. 12 In addition, the operators of our facilities face competition from other health care providers, including physician owned facilities and other competing facilities, including certain facilities operated by UHS but the real property of which is not owned by us.
Certain hospitals that are located in the areas served by our facilities are specialty hospitals that provide medical, surgical and behavioral health services that may not be provided by the operators of our hospitals. The increase in outpatient treatment and diagnostic facilities, outpatient surgical centers and freestanding ambulatory surgical centers also increases competition for our operators.
Certain hospitals that are located in the areas served by our facilities are specialty hospitals that provide medical, surgical and behavioral health services that may not be provided by the operators of our hospitals.
Although we evaluate the financial feasibility of such projects by determining whether the projected cash flow return on investment exceeds our cost of capital, such returns may not be achieved if the cost of construction continues to rise significantly.
Although we evaluate the financial feasibility of such projects by determining whether the projected cash flow return on investment exceeds our cost of capital, such returns may not be achieved if the cost of construction continues to rise significantly. Catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in damage to our properties.
Risks Related to the Market Conditions and Liquidity Continuing inflationary pressures and a worsening of the economic and employment conditions in the United States could materially affect our business and future results of operations of the operators of our facilities which could, in turn, materially reduce our revenues and net income.
While to date no incident had a material impact on our operations or financial results, we cannot guarantee that material incidents will not occur in the future. 16 Risks Related to the Market Conditions and Liquidity Continuing inflationary pressures and a worsening of the economic and employment conditions in the United States could materially affect our business and future results of operations of the operators of our facilities which could, in turn, materially reduce our revenues and net income.
We could experience losses to the extent that such damages exceed insurance coverage, cause an increase in insurance premiums, and/or a decrease in demand for properties located in such areas. In the event that climate change causes such catastrophic weather or other natural events to increase broadly or in localized areas, such costs and damages could increase above historic expectations.
We could experience losses to the extent 17 that such damages exceed insurance coverage, cause an increase in insurance premiums, and/or a decrease in demand for properties located in such areas.
Two primary goals of the Legislation, combined with the Reconciliation Act (collectively referred to as the “Legislation”), are to provide for increased access to coverage for healthcare and to reduce healthcare-related expenses.
The Healthcare and Education Reconciliation Act of 2010 (the “Reconciliation Act”), which contains a number of amendments to the Legislation, was signed into law on March 30, 2010. Two primary goals of the Legislation, combined with the Reconciliation Act (collectively referred to as the “Legislation”), are to provide for increased access to coverage for healthcare and to reduce healthcare-related expenses.
During any such time that we were not able to do so, our ability to increase or maintain our dividend at current levels could be adversely affected which could cause our stock price to decline. 15 The bankruptcy, default, insolvency or financial deterioration of our tenants could significantly delay our ability to collect unpaid rents or require us to find new operators.
During any such time that we were not able to do so, our ability to increase or maintain our dividend at current levels could be adversely affected which could cause our stock price to decline.
The impact of the Legislation on healthcare providers will be subject to implementing regulations, interpretive guidance and possible future legislation or legal challenges. Certain Legislation provisions, such as that creating the Medicare Shared Savings Program create uncertainty in how healthcare may be reimbursed by federal programs in the future.
Certain Legislation provisions, such as that creating the Medicare Shared Savings Program create uncertainty in how healthcare may be reimbursed by federal programs in the future.
The differing treatment of dividends received from REITs and other corporations might cause individual investors to view an investment in REITs as less attractive relative to other corporations, which might negatively affect the value of our shares. 16 Should we be unable to comply with the strict income distribution requirements applicable to REITs utilizing only cash generated by operating activities, we would be required to generate cash from other sources which could adversely affect our financial condition.
Should we be unable to comply with the strict income distribution requirements applicable to REITs utilizing only cash generated by operating activities, we would be required to generate cash from other sources which could adversely affect our financial condition.
We cannot predict the effect these payment policies will have on operators (including UHS), and, thus, our business. The uncertainties of health care reform could materially affect the business and future results of operations of the operators of our facilities, including UHS, which could, in turn, materially reduce our revenues and net income.
The uncertainties of health care reform could materially affect the business and future results of operations of the operators of our facilities, including UHS, which could, in turn, materially reduce our revenues and net income. On March 23, 2010 President Obama signed the Legislation into law.
The Legislation provides that a healthcare provider that retains an overpayment in excess of 60 days is subject to the federal civil False Claims Act, although certain final regulations implementing this statutory requirement remain pending. The Legislation also expands the Recovery Audit Contractor program to Medicaid.
The Legislation provides that a healthcare provider that retains an overpayment in excess of 60 days is subject to the federal civil False Claims Act. The Legislation also expands the Recovery Audit Contractor program to Medicaid. These amendments also make it easier for severe fines and penalties to be imposed on healthcare providers that violate applicable laws and regulations.
Our tenants are unable to predict the effect of recent and future policy changes on their operations.
Our tenants are unable to predict the effect of recent and future policy changes on their operations. Our three acute care hospitals, three behavioral health hospitals and four FEDs, are located in Texas, Florida, Virginia, South Carolina and Iowa.
Accordingly, CMS has recently revoked certain State Medicaid program approvals including work requirements. The various provisions in the Legislation that directly or indirectly affect Medicare and Medicaid reimbursement are scheduled to take effect over a number of years.
The various provisions in the Legislation that directly or indirectly affect Medicare and Medicaid reimbursement are scheduled to take effect over a number of years. The impact of the Legislation on healthcare providers will be subject to implementing regulations, interpretive guidance and possible future legislation or legal challenges.
Failure to comply with such terms and conditions could result in recoupment, False Claims Act liability, or other penalty to our tenants. The trend toward value-based purchasing may negatively impact the revenues of our hospital operators.
The trend toward value-based purchasing may negatively impact the revenues of our hospital operators.
Removed
Three of our acute care hospitals, three of our behavioral health hospitals and two FEDs operated by wholly-owned subsidiaries or joint ventures of UHS, as well as two FEDs operated by unaffiliated third parties are located in Texas, Florida, Virginia, South Carolina and Iowa.
Added
The Budget Control Act of 2011 imposed annual spending limits for most federal agencies and programs aimed at reducing budget deficits including Medicare payment reductions of up to 2% per fiscal year. Current legislation extended those cuts through 2032.
Removed
The Budget Control Act of 2011 (the “Budget Control Act”) mandated significant reductions in federal spending for fiscal years 2012-2021, including a reduction of 2% on all Medicare payments during this period. Subsequent legislation enacted by Congress eliminated the 2% reduction through 2021 but extended these reductions through 2030 in exchange.
Added
We cannot predict whether Congress will restructure the implemented Medicare payment reductions or what other federal budget deficit reduction initiatives may be proposed by Congress going forward. We also cannot predict the effect these enactments will have on the operators of our properties (including UHS), and thus, our business.
Removed
The payment reduction suspension was extended through March 31, 2022, with a 1% payment reduction from then until June 30, 2022 and the full 2% payment reduction thereafter. The most recent legislation extended these reductions through 2032. Beginning in 2024 and continuing through 2027, the Medicaid disproportionate share hospital (“DSH”) allotment to the states from federal funds will be reduced.
Added
Reductions are imposed on states based on percentage of uninsured individuals, Medicaid utilization and uncompensated care. There have been proposals to substantially decrease federal funding for state Medicaid Programs in Fiscal Year commencing October 2026.
Removed
On March 23, 2010 President Obama signed the Legislation into law. The Healthcare and Education Reconciliation Act of 2010 (the “Reconciliation Act”), which contains a number of amendments to the Legislation, was signed into law on March 30, 2010.
Added
Any significant reduction in federal Medicaid funding to states would likely result in reduced Medicaid payments to the operators of our facilities located in the impacted states, which in turn could have a material adverse effect on us. We cannot predict the effect these payment policies will have on our operators (including UHS), and, thus, our business.
Removed
The Legislation provided for decreases in the annual market basket update for federal fiscal years 2010 through 2019, a productivity offset to the market basket update beginning October 1, 2011 for Medicare Part B reimbursable items and services and beginning October 1, 2012 for Medicare inpatient hospital services.
Added
While the Biden Administration had generally expressed disfavor with Medicaid program work requirements, the previous Trump Administration’s section 1115 waiver policy emphasized work requirements, eligibility restrictions on Medicaid, and capped financing and the second Trump administration may, again, take a similar approach.
Removed
The Legislation and subsequent revisions provide for reductions to both Medicare DSH and Medicaid DSH payments. The Medicare DSH reductions began in October, 2013 while Medicaid DSH reimbursements are scheduled to begin in 2024. The Legislation implements a value-based purchasing program, which will reward the delivery of efficient care.
Added
The bankruptcy, default, insolvency or financial deterioration of our tenants could significantly delay our ability to collect unpaid rents or require us to find new operators.
Removed
However, most recently, the Biden Administration has expressed disfavor with Medicaid program work requirements, with the understanding that such requirements pose a substantial risk that many potential demonstration beneficiaries would be prevented from initially enrolling in coverage or that the requirements would lead to a sizable number of eligibility suspensions and eventual disenrollments among beneficiaries who are initially able to enroll.
Added
Changes to U.S. and other countries’ trade policies and other factors beyond our control may adversely impact our business and operating results.
Removed
These amendments also make it easier for severe fines and penalties to be imposed on healthcare providers that violate applicable laws and regulations. The impact of the Legislation on hospitals may vary.
Added
Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from where our tenants import products or raw materials (either directly or through their suppliers) could have an impact on our and our tenants’ competitive position, business operations and financial results.
Removed
COVID-19 and other pandemics, epidemics, or public health threats may adversely affect the business of our tenants, our business, and our results of operations and financial condition. We are subject to risks associated with public health threats and epidemics, including the health concerns relating to the COVID-19 pandemic.
Added
In February 2025, the U.S. government imposed or threatened to impose new tariffs on imported products from Mexico, Canada and China.
Removed
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Although the federal government had previously declared COVID-19 a national emergency, that declaration expired on May 11, 2023 at which time the favorable payment provisions available to healthcare providers during the declared national emergency ended.
Added
The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available.
Removed
Although COVID-19 has not had a material adverse impact on our results of operations through December 31, 2023, we believe that the potentially adverse impact that the pandemic may have on the future operations and financial results of our tenants, and in turn ours, will depend upon many factors, most of which are beyond our, or our tenants’, ability to control or predict.
Added
Significant tariffs or other restrictions imposed on foreign imports by the U.S. and related countermeasures taken by impacted foreign countries may negatively impact our and our tenants’ ability to source products and materials at acceptable prices and other terms that are acceptable to us.
Removed
Since the future volumes and severity of COVID-19 patients remain highly uncertain and subject to change, including potential increases in future COVID-19 11 patient volumes caused by new variants of the virus, as well as related pressures on staffing and wage rates, we are not able to fully quantify the impact that these factors will have on our future financial results.
Added
Despite recent trade negotiations between the U.S. and the Mexican, Canadian and Chinese governments, given the uncertainty regarding the scope and duration of any new tariffs, as well as the potential for additional tariffs or trade barriers by the U.S., Mexico, Canada, China or other countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful.
Removed
Many of the federal and state legislative and regulatory measures allowing for flexibility in delivery of care and various financial supports for healthcare providers were available only for the duration of the public health emergency (“PHE”). Most states have ended their state-level emergency declarations.
Added
The differing treatment of dividends received from REITs and other corporations might cause individual investors to view an investment in REITs as less attractive relative to other corporations, which might negatively affect the value of our shares.
Removed
The end of the PHE status will result in the conclusion of those policies over various designated timeframes.
Added
Although we continue to regularly review and enhance our IT systems and cybersecurity controls, we, UHS and our and their third-party provider have experienced, or may experience in the future, cybersecurity incidents.
Removed
We cannot predict whether the loss of any such favorable conditions available to providers during the declared PHE will ultimately have a negative financial impact on us Pursuant to the lease on McAllen Medical Center, which is leased to wholly-owned subsidiary of UHS, we earn bonus rental revenue which is computed based upon a computation that compares the hospital’s current quarter revenue to the corresponding quarter in the base year.
Added
Our tenants have experienced inflationary pressures, primarily in personnel and certain other costs.
Removed
We could therefore experience significant decline in future bonus rental revenue earned on this property should the hospital experience a significant decline in patient volumes and revenues.
Added
In the event that climate change causes such catastrophic weather or other natural events to increase broadly or in localized areas, such costs and damages could increase above historic expectations.
Removed
Certain factors may result in the inability or unwillingness on the part of some of our tenants to make timely payment of their rent to us at current levels or to seek to amend or terminate their leases which, in turn, would have an adverse effect on our occupancy levels and our revenue and cash flow and the value of our properties, and potentially, our ability to maintain our dividend at current levels.
Removed
Due to COVID-19 restrictions and its impact on the economy, we may experience a decrease in prospective tenants which could unfavorably impact the volume of new leases, as well as the renewal rate of existing leases.
Removed
The COVID-19 pandemic could also impact our indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the COVID-19 pandemic which could impact us from a financing perspective; and changes in general economic conditions nationally and regionally in the markets our properties are located resulting from the COVID-19 pandemic.
Removed
Decreases in cash flows and results of operations may have an impact on the inputs and assumptions used in significant accounting estimates, including potential impairments of intangible and long-lived assets.
Removed
There is a high degree of uncertainty regarding the implementation and impact of the Coronavirus Aid, Relief, and Economic Security Act, the Paycheck Protection Program and Health Care Enhancement Act and the American Rescue Plan Act of 2021, which could impact the total amount and types of assistance and benefits our tenants will receive.
Removed
The federal Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) created a $175 billion “Public Health and Social Services Emergency Fund” to reimburse eligible health care providers for “health care related expenses or lost revenues that are attributable to coronavirus” (the “PHSSEF”).
Removed
The retention of funds from the PHSSEF is conditioned on eligibility and the acceptance of terms and conditions, and other guidelines or requirements that may change from time to time, including with respect to recordkeeping and repayment requirements. Our tenants received payments from the targeted distributions of the PHSSEF.
Removed
The CARES Act also makes other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payment adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which made available accelerated payments of Medicare funds in order to increase cash flow to providers.
Removed
Our tenants received accelerated payments under this program during 2020, and returned early all of those funds during the first quarter of 2021. Our tenants, and other providers, must report healthcare related expenses attributable to COVID-19 that have not been reimbursed by another source, which may include general and administrative or healthcare related operating expenses.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+1 added−0 removed17 unchanged
Biggest changeUHS also has a mature incident response process in place in the event a cybersecurity incident occurs. This process defines roles, responsibilities and action plans designed to contain, eradicate, and restore systems in the event of a major disruption.
Biggest changeUHS also has a mature incident response process in place in the event a cybersecurity incident occurs. This process defines roles, responsibilities and action plans designed to contain and eradicate the issue, and then restore systems in the event of a major disruption.
Based on the information available as of the date of this Form 10-K, during our fiscal year 2023 and through the date of this filing, we did not identify any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Based on the information available as of the date of this Form 10-K, during our fiscal year 2024 and through the date of this filing, we did not identify any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us , including our business strategy, results of operations or financial condition.
These individuals monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan. 21
These individuals monitor the prevention, 19 mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan. 20
Added
UHS maintains a cybersecurity insurance policy that provides coverage in connection with cybersecurity incidents. However, costs and damages associated with cybersecurity incidents may not be fully insured under our insurance policy, and (to the extent otherwise covered) are subject to applicable deductibles.

Item 2. Properties

Properties — owned and leased real estate

34 edited+6 added−3 removed15 unchanged
Biggest changeTenaya Way 44,894 0 % 0 % 0 % 0 % 0 % 0 % 100 % 2700 Fire Mesa 44,424 0 % 0 % 0 % 0 % 100 % 0 % 0 % Southern Crescent Center I 41,897 49 % 0 % 30 % 16 % 0 % 5 % 0 % BRB Medical Office Building 40,733 31 % 4 % 3 % 35 % 0 % 0 % 27 % Cypresswood Professional Center - 8101 10,200 41 % 0 % 0 % 0 % 0 % 0 % 59 % Cypresswood Professional Center - 8111 29,882 41 % 10 % 6 % 43 % 0 % 0 % 0 % Danbury Medical Plaza 36,141 45 % 1 % 0 % 54 % 0 % 0 % 0 % The Sparks Medical Building 35,127 0 % 0 % 21 % 13 % 36 % 11 % 19 % Phoenix Children’s East Valley Care Center 30,960 0 % 0 % 0 % 0 % 0 % 0 % 100 % Forney Medical Plaza II 30,507 18 % 0 % 9 % 17 % 25 % 31 % 0 % Madison Station MOB 30,096 7 % 8 % 34 % 0 % 25 % 26 % 0 % Apache Junction Medical Plaza (a.) 26,901 43 % 0 % 22 % 35 % 0 % 0 % 0 % Santa Fe Professional Plaza 24,832 7 % 4 % 24 % 20 % 14 % 31 % 0 % Professional Bldg at King's Crossing - Bldg A 11,528 100 % 0 % 0 % 0 % 0 % 0 % 0 % 25 Percentage of RSF with lease expirations Total RSF Available for Lease Jan. 1, 2024 2024 2025 2026 2027 2028 2029 and Later Professional Bldg at King's Crossing - Bldg B (a.) 12,790 11 % 33 % 18 % 0 % 0 % 38 % 0 % 140 Thomas Johnson Drive 20,465 0 % 0 % 0 % 0 % 0 % 15 % 85 % Emory at Dunwoody Building 20,366 0 % 0 % 100 % 0 % 0 % 0 % 0 % Piedmont - Roswell Physicians Center 19,927 0 % 0 % 0 % 0 % 0 % 0 % 100 % Bellin Health Family Medical Center 18,600 0 % 0 % 0 % 100 % 0 % 0 % 0 % Beaumont Heart & Vascular 17,621 0 % 0 % 0 % 100 % 0 % 0 % 0 % Piedmont - Vinings Physicians Center 16,790 0 % 0 % 0 % 0 % 0 % 0 % 100 % Ward Eagle Office Village 16,282 0 % 0 % 7 % 0 % 0 % 93 % 0 % Haas Medical Office Park 15,850 0 % 0 % 100 % 0 % 0 % 0 % 0 % Health Center at Hamburg 15,400 0 % 0 % 100 % 0 % 0 % 0 % 0 % Northwest Medical Center at Sugar Creek 13,696 0 % 0 % 0 % 0 % 0 % 38 % 62 % Family Doctor's MOB 12,050 0 % 0 % 0 % 100 % 0 % 0 % 0 % Beaumont Sleep Center 11,556 0 % 0 % 0 % 0 % 100 % 0 % 0 % 701 South Tonopah Building 10,747 0 % 0 % 100 % 0 % 0 % 0 % 0 % Sand Point MOB 9,128 0 % 0 % 0 % 0 % 0 % 0 % 100 % 5004 Pool Road MOB 4,400 0 % 0 % 0 % 0 % 100 % 0 % 0 % Preschool and Childcare Centers: Chesterbrook Academy - New Britain 8,402 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Audubon 8,300 0 % 0 % 100 % 0 % 0 % 0 % 0 % Chesterbrook Academy - Newtown 8,163 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Uwchlan 8,163 0 % 0 % 100 % 0 % 0 % 0 % 0 % Ambulatory Care Centers: Hanover Emergency Center 22,000 0 % 0 % 0 % 0 % 0 % 0 % 100 % South Texas ER at Mission 13,578 0 % 0 % 100 % 0 % 0 % 0 % 0 % South Texas ER at Weslaco 13,578 0 % 0 % 100 % 0 % 0 % 0 % 0 % Las Palmas Del Sol Emergency Center-West 9,395 0 % 0 % 0 % 100 % 0 % 0 % 0 % Sub-total Other Investments 2,963,245 16 % 8 % 15 % 12 % 12 % 5 % 32 % Total 4,155,288 13 % 6 % 10 % 24 % 8 % 4 % 35 % (a) The estimated market rates related to the 2024 expiring RSF are greater than the lease rates on the expiring leases by approximately 0% to 4%.
Biggest changeTenaya Way 44,894 0 % 0 % 0 % 0 % 0 % 100 % 0 % 2700 Fire Mesa 44,424 0 % 0 % 0 % 100 % 0 % 0 % 0 % Southern Crescent Center I (a.) 41,897 49 % 30 % 16 % 0 % 5 % 0 % 0 % BRB Medical Office Building 40,733 27 % 3 % 35 % 0 % 17 % 18 % 0 % Cypresswood Professional Center - 8101 10,200 0 % 0 % 0 % 0 % 0 % 0 % 100 % Cypresswood Professional Center - 8111 29,882 51 % 6 % 43 % 0 % 0 % 0 % 0 % Danbury Medical Plaza 36,141 40 % 0 % 54 % 0 % 0 % 6 % 0 % The Sparks Medical Building (c.) 35,127 0 % 21 % 13 % 36 % 11 % 0 % 19 % Phoenix Children’s East Valley Care Center 30,960 0 % 0 % 0 % 0 % 0 % 0 % 100 % Forney Medical Plaza II 30,507 18 % 9 % 17 % 25 % 31 % 0 % 0 % Madison Station MOB (a.) 30,096 7 % 34 % 0 % 33 % 26 % 0 % 0 % Apache Junction Medical Plaza (c.) 26,901 9 % 13 % 35 % 0 % 0 % 0 % 43 % Santa Fe Professional Plaza (b.) 24,832 7 % 28 % 20 % 14 % 31 % 0 % 0 % Professional Bldg at King's Crossing - Bldg A 11,528 100 % 0 % 0 % 0 % 0 % 0 % 0 % Professional Bldg at King's Crossing - Bldg B (a.) 12,790 11 % 30 % 0 % 0 % 18 % 21 % 20 % 140 Thomas Johnson Drive 20,465 0 % 0 % 0 % 0 % 15 % 0 % 85 % Emory at Dunwoody Building (e.) 20,366 0 % 100 % 0 % 0 % 0 % 0 % 0 % Piedmont - Roswell Physicians Center 19,927 0 % 0 % 0 % 0 % 0 % 0 % 100 % Bellin Health Family Medical Center 18,600 0 % 0 % 100 % 0 % 0 % 0 % 0 % 24 Beaumont Heart & Vascular 17,621 0 % 0 % 100 % 0 % 0 % 0 % 0 % Piedmont - Vinings Physicians Center 16,790 0 % 0 % 0 % 0 % 0 % 0 % 100 % Ward Eagle Office Village 16,282 0 % 7 % 0 % 0 % 93 % 0 % 0 % Haas Medical Office Park (d.) 15,850 0 % 100 % 0 % 0 % 0 % 0 % 0 % Health Center at Hamburg (a.) 15,400 0 % 100 % 0 % 0 % 0 % 0 % 0 % Northwest Medical Center at Sugar Creek 13,696 0 % 0 % 0 % 0 % 38 % 62 % 0 % Family Doctor's MOB 12,050 0 % 0 % 100 % 0 % 0 % 0 % 0 % Beaumont Sleep Center 11,556 0 % 0 % 0 % 100 % 0 % 0 % 0 % 701 South Tonopah Building 10,747 0 % 0 % 0 % 100 % 0 % 0 % 0 % Sand Point MOB 9,128 0 % 0 % 0 % 0 % 0 % 0 % 100 % 5004 Pool Road MOB 4,400 0 % 0 % 0 % 100 % 0 % 0 % 0 % Preschool and Childcare Centers: Chesterbrook Academy - New Britain 8,402 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Audubon 8,300 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Newtown 8,163 0 % 0 % 0 % 0 % 0 % 0 % 100 % Chesterbrook Academy - Uwchlan (g.) 8,163 0 % 100 % 0 % 0 % 0 % 0 % 0 % Ambulatory Care Centers: Hanover Emergency Center 22,000 0 % 0 % 0 % 0 % 0 % 100 % 0 % South Texas ER at Mission 13,578 0 % 0 % 0 % 0 % 0 % 0 % 100 % South Texas ER at Weslaco 13,578 0 % 0 % 0 % 0 % 0 % 0 % 100 % Las Palmas Del Sol Emergency Center-West 9,395 0 % 0 % 100 % 0 % 0 % 0 % 0 % Sub-total Other Investments 2,963,245 16 % 13 % 13 % 14 % 6 % 11 % 27 % Total 4,155,288 13 % 9 % 24 % 10 % 4 % 8 % 32 % (a) The estimated market rates related to the 2025 expiring RSF are greater than the lease rates on the expiring leases by approximately 0% to 4%.
Accordingly, the McAllen Medical Center lease was amended during 2001 to exclude from the bonus rent calculation, the estimated net revenues generated at the Heart Hospital (as calculated pursuant to a percentage-based allocation determined at the time of the 23 merger). During 2000, UHS purchased the South Texas Behavioral Health Center, a behavioral health care facility located in McAllen, Texas.
Accordingly, the McAllen Medical Center lease was amended during 2001 to exclude from the bonus rent calculation, the estimated net revenues generated at the Heart Hospital (as calculated pursuant to a percentage-based allocation determined at the time of the merger). During 2000, UHS purchased the South Texas Behavioral Health Center, a behavioral health care facility located in McAllen, Texas.
The real property of these two FEDs was purchased by us and leased back to STHS. As of December 31, 2023, UHS owns and operates several other FEDs that operate under the STHS license, the real property of which is not owned by us.
The real property of these two FEDs was purchased by us and leased back to STHS. As of December 31, 2024, UHS owns and operates several other FEDs that operate under the STHS license, the real property of which is not owned by us.
The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during 2023 was approximately 0.3% of the future aggregate base rental revenue over the lease terms.
The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during 2024 was approximately 0.3% of the future aggregate base rental revenue over the lease terms.
Set forth below is information detailing the rentable square feet (“RSF”) associated with each of our properties as of December 31, 2023 and the percentage of RSF on which leases expire during the next five years and thereafter.
Set forth below is information detailing the rentable square feet (“RSF”) associated with each of our properties as of December 31, 2024 and the percentage of RSF on which leases expire during the next five years and thereafter.
These amounts include the data related to the unconsolidated LLCs/LPs in which we hold various non-controlling ownership interests at December 31, 2023 and also include the bonus rentals earned on the UHS hospital facilities.
These amounts include the data related to the unconsolidated LLCs/LPs in which we hold various non-controlling ownership interests at December 31, 2024 and also include the bonus rentals earned on the UHS hospital facilities.
During 2023, none of the properties generated revenues that were equal to or greater than 10% of our consolidated revenues. Additionally, none of the properties had net book values greater than 10% of our consolidated assets as of December 31, 2023.
During 2024, none of the properties generated revenues that were equal to or greater than 10% of our consolidated revenues. Additionally, none of the properties had net book values greater than 10% of our consolidated assets as of December 31, 2024.
(2) The percentages of annual rentals reflected above were calculated based upon the annual rentals of the applicable expiring leases (as reflected above) divided by the total annual rentals of all expiring leases in the next ten years and thereafter (as reflected above). 27
(2) The percentages of annual rentals reflected above were calculated based upon the annual rentals of the applicable expiring leases (as reflected above) divided by the total annual rentals of all expiring leases in the next ten years and thereafter (as reflected above). 26
None of our unconsolidated LLCs had revenues (including 100% of the revenues generated at the properties owned by our unconsolidated LLCs) greater than 10% of the combined consolidated and unconsolidated revenues during 2023.
None of our unconsolidated LLCs had revenues (including 100% of the revenues generated at the properties owned by our unconsolidated LLCs) greater than 10% of the combined consolidated and unconsolidated revenues during 2024.
On a combined basis, based upon the aggregate revenues and square footage for the occupied hospital facilities owned as of December 31, 2023 and 2022, the average effective annual rental per square foot was $21.43 and $21.31, respectively.
On a combined basis, based upon the aggregate revenues and square footage for the occupied hospital facilities owned as of December 31, 2024 and 2023, the average effective annual rental per square foot was $21.55 and $21.43, respectively.
The weighted-average leasing commissions on the new and renewed leases commencing during 2023 was approximately 3% of base rental revenue over the term of the leases.
The weighted-average leasing commissions on the new and renewed leases commencing during 2024 was approximately 3% of base rental revenue over the term of the leases.
The estimated average occupied square footage for 2023 was calculated by averaging the unavailable rentable square footage on January 1, 2023 and January 1, 2024. The estimated average occupied square footage for 2022 was calculated by averaging the unavailable rentable square footage on January 1, 2022 and January 1, 2023.
The estimated average occupied square footage for 2024 was calculated by averaging the unavailable rentable square footage on January 1, 2024 and January 1, 2025. The estimated average occupied square footage for 2023 was calculated by averaging the unavailable rentable square footage on January 1, 2023 and January 1, 2024.
Leasing Trends at Our Significant Medical Office Buildings During 2023, we had a total of 73 new or renewed leases related to the medical office buildings indicated above, in which we have significant investments, some of which are accounted for by the equity method.
Leasing Trends at Our Significant Medical Office Buildings During 2024, we had a total of 58 new or renewed leases related to the medical office buildings indicated above, in which we have significant investments, some of which are accounted for by the equity method.
In connection with lease renewals executed during 2023, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 4% during 2023. The weighted-average tenant improvement costs associated with these new or renewed leases was approximately $7 per square foot during 2023.
In connection with lease renewals executed during 2024, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 3% during 2024. The weighted-average tenant improvement costs associated with these new or renewed leases was approximately $7 per square foot during 2024.
None of the properties had book values (including 100% of the book values of the properties owned by our unconsolidated LLCs) greater than 10% of the consolidated and unconsolidated assets. 26 The following table sets forth lease expirations for each of the next ten years for our properties as of December 31, 2023.
None of the properties had book values (including 100% of the book values of the properties owned by our unconsolidated LLCs) greater than 10% of the consolidated and unconsolidated assets. 25 The following table sets forth lease expirations for each of the next ten years for our properties as of December 31, 2024.
For the MOBs that have scheduled lease expirations during 2024 of 10% or greater (of RSF), if any, we have included information regarding estimated market rates relative to lease rates on the expiring leases. 24 Percentage of RSF with lease expirations Total RSF Available for Lease Jan. 1, 2024 2024 2025 2026 2027 2028 2029 and Later Hospital Investments: McAllen Medical Center 422,276 0 % 0 % 0 % 100 % 0 % 0 % 0 % Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services 346,000 0 % 0 % 0 % 0 % 0 % 0 % 100 % Wellington Regional Medical Center 196,489 0 % 0 % 0 % 100 % 0 % 0 % 0 % Clive Behavioral Health 82,138 0 % 0 % 0 % 0 % 0 % 0 % 100 % Canyon Creek Behavioral Health 67,700 0 % 0 % 0 % 0 % 0 % 0 % 100 % Sub-total Hospitals 1,114,603 0 % 0 % 0 % 56 % 0 % 0 % 44 % Specialty Facilities: Evansville Facility 77,440 100 % 0 % 0 % 0 % 0 % 0 % 0 % Sub-total Specialty Facilities 77,440 100 % 0 % 0 % 0 % 0 % 0 % 0 % Medical Office Buildings: Goldshadow - 2010 - 2020 Goldring MOB's (a.) 74,868 4 % 24 % 12 % 9 % 7 % 0 % 44 % Goldshadow - 700 Shadow Lane MOB (a.) 42,060 28 % 23 % 11 % 18 % 20 % 0 % 0 % Texoma Medical Plaza (a.) 115,284 10 % 14 % 5 % 3 % 8 % 9 % 51 % St.
For the MOBs that have scheduled lease expirations during 2025 of 10% or greater (of RSF), if any, we have included information regarding estimated market rates relative to lease rates on the expiring leases. 23 Percentage of RSF with lease expirations Total RSF Available for Lease Jan. 1, 2025 2025 2026 2027 2028 2029 2030 and Later Hospital Investments: McAllen Medical Center 422,276 0 % 0 % 100 % 0 % 0 % 0 % 0 % Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services 346,000 0 % 0 % 0 % 0 % 0 % 0 % 100 % Wellington Regional Medical Center 196,489 0 % 0 % 100 % 0 % 0 % 0 % 0 % Clive Behavioral Health 82,138 0 % 0 % 0 % 0 % 0 % 0 % 100 % Canyon Creek Behavioral Health 67,700 0 % 0 % 0 % 0 % 0 % 0 % 100 % Sub-total Hospitals 1,114,603 0 % 0 % 56 % 0 % 0 % 0 % 44 % Specialty Facility: Evansville Facility 77,440 100 % 0 % 0 % 0 % 0 % 0 % 0 % Medical Office Buildings: Goldshadow - 2010 - 2020 Goldring MOB's (a.) 74,868 2 % 10 % 16 % 23 % 0 % 3 % 46 % Goldshadow - 700 Shadow Lane MOB (a.) 42,060 28 % 34 % 18 % 20 % 0 % 0 % 0 % Texoma Medical Plaza 115,284 3 % 8 % 3 % 11 % 9 % 14 % 52 % St.
On a combined basis, based upon the aggregate consolidated and unconsolidated revenues and the estimated average occupied square footage for our MOBs, FEDs and childcare centers owned as of December 31, 2023 and 2022, the average effective annual rental per square foot was $32.59 and $31.46, respectively.
On a combined basis, based upon the aggregate consolidated and unconsolidated revenues and the estimated average occupied square footage for our MOBs, FEDs and childcare centers owned as of December 31, 2024 and 2023, the average effective annual rental per square foot was $33.73 and $32.59, respectively.
Bell (b.) 80,200 39 % 23 % 6 % 3 % 21 % 4 % 4 % Henderson Union Village MOB 79,599 27 % 3 % 0 % 4 % 34 % 3 % 29 % McAllen Doctor's Center 79,497 0 % 0 % 0 % 0 % 0 % 0 % 100 % Summerlin Hospital Medical Office Building III (a.) 77,713 9 % 18 % 0 % 0 % 34 % 18 % 21 % Texoma Medical Plaza II 74,921 39 % 0 % 0 % 0 % 0 % 0 % 61 % Mid Coast Hospital MOB 74,629 0 % 0 % 0 % 100 % 0 % 0 % 0 % North West Texas Professional Office Tower 72,351 0 % 0 % 100 % 0 % 0 % 0 % 0 % Rosenberg Children's Medical Plaza 66,231 0 % 0 % 0 % 6 % 0 % 24 % 70 % Frederick Crestwood MOB 62,297 0 % 0 % 0 % 42 % 0 % 0 % 58 % Palmdale Medical Plaza 59,405 39 % 9 % 5 % 8 % 10 % 9 % 20 % Sierra San Antonio Medical Plaza (a.) 59,160 20 % 11 % 5 % 6 % 2 % 0 % 56 % Spring Valley Medical Office Building (a.) 57,828 12 % 28 % 27 % 11 % 6 % 3 % 13 % Spring Valley Medical Office Building II (a.) 57,364 5 % 17 % 20 % 0 % 22 % 0 % 36 % Southern Crescent Center II 53,680 46 % 0 % 43 % 0 % 0 % 0 % 11 % Desert Valley Medical Center (b.) 53,625 14 % 25 % 27 % 0 % 5 % 13 % 16 % Tuscan Professional Building (c.) 53,231 54 % 13 % 2 % 0 % 15 % 0 % 16 % Lake Pointe Medical Arts Building 50,974 16 % 0 % 30 % 18 % 7 % 0 % 29 % Forney Medical Plaza 50,947 10 % 5 % 5 % 21 % 5 % 24 % 30 % Vista Medical Terrace 50,921 62 % 4 % 4 % 0 % 14 % 9 % 7 % 2704 N.
Bell 80,200 40 % 8 % 5 % 21 % 4 % 0 % 22 % Henderson Union Village MOB 79,599 27 % 0 % 3 % 34 % 3 % 0 % 33 % McAllen Doctor's Center 79,497 0 % 0 % 0 % 0 % 0 % 0 % 100 % Summerlin Hospital Medical Office Building III 77,713 24 % 0 % 2 % 34 % 18 % 7 % 15 % Texoma Medical Plaza II 74,921 39 % 0 % 0 % 0 % 0 % 0 % 61 % Mid Coast Hospital MOB 74,629 0 % 0 % 100 % 0 % 0 % 0 % 0 % North West Texas Professional Office Tower (f.) 72,351 0 % 100 % 0 % 0 % 0 % 0 % 0 % Rosenberg Children's Medical Plaza 66,231 0 % 0 % 6 % 0 % 24 % 0 % 70 % Frederick Crestwood MOB 62,297 0 % 0 % 42 % 0 % 0 % 0 % 58 % Palmdale Medical Plaza 59,405 39 % 5 % 8 % 10 % 9 % 9 % 20 % Sierra San Antonio Medical Plaza 59,160 9 % 5 % 6 % 2 % 0 % 7 % 71 % Spring Valley Medical Office Building (a.) 57,828 16 % 20 % 16 % 25 % 5 % 13 % 5 % Spring Valley Medical Office Building II 57,364 5 % 0 % 17 % 22 % 20 % 7 % 29 % Southern Crescent Center II (a.) 53,680 46 % 39 % 0 % 0 % 0 % 0 % 15 % Desert Valley Medical Center (b.) 53,625 10 % 25 % 0 % 5 % 13 % 5 % 42 % Tuscan Professional Building 53,231 56 % 7 % 0 % 20 % 0 % 0 % 17 % Lake Pointe Medical Arts Building (a.) 50,974 8 % 35 % 18 % 10 % 0 % 6 % 23 % Forney Medical Plaza 50,947 10 % 5 % 21 % 5 % 24 % 31 % 4 % Vista Medical Terrace 50,921 65 % 4 % 0 % 14 % 9 % 0 % 8 % 2704 N.
On a combined basis, based upon the aggregate consolidated and unconsolidated revenues and estimated average occupied square footage for all of our occupied properties owned as of December 31, 2023 and 2022, the average effective annual rental per square foot was $29.21 and $28.25, respectively.
On a combined basis, based upon the aggregate consolidated and unconsolidated revenues and estimated average occupied square footage for all of our occupied properties owned as of December 31, 2024 and 2023, the average effective annual rental per square foot was $30.03 and $29.21, respectively.
(b) The estimated market rates related to the 2024 expiring RSF are greater than the lease rates on the expiring leases by approximately 5% to 10%. (c) The estimated market rates related to the 2024 expiring RSF are less than the lease rates on the expiring leases by approximately 1% to 5%.
(b) The estimated market rates related to the 2025 expiring RSF are greater than the lease rates on the expiring leases by approximately 5% to 12%. (c) The estimated market rates related to the 2025 expiring RSF are less than the lease rates on the expiring leases by approximately 1% to 5%.
We believe the respective fair values for each of these hospitals equals or exceeds the respective net book values or net financing receivables as of December 31, 2023 amounting to: $13.5 million for McAllen Medical Center, $8.8 million for Wellington Regional Medical Center, $31.0 million for Clive Behavioral Health, $57.4 million for Aiken Regional Medical Center (in terms of financing receivable), and; $25.9 for Canyon Creek Behavioral Health (in terms of financing receivable).
We believe the respective fair values for each of these hospitals equals or exceeds the respective net book values or net financing receivables as of December 31, 2024 amounting to: $12.5 million for McAllen Medical Center, $8.1 million for Wellington Regional Medical Center, $29.6 million for Clive Behavioral Health, $57.0 million for Aiken Regional Medical Center (in terms of financing receivable), and; $25.8 for Canyon Creek Behavioral Health (in terms of financing receivable).
Lease Term Number End of % of RSF of initial under available Average Occupancy(1) Minimum or Renewal lease with Range of Type of beds @ lease renewed term guaranteed guaranteed Hospital Facility Name and Location facility 12/31/2023 2023 2022 2021 2020 2019 revenue (6) term (years) escalators escalation Aiken Regional Medical Center / Aurora Pavilion (2)(5)(7) Aiken, South Carolina Acute Care / Behavioral Health 273 60% 55% N/A N/A N/A 4,072,000 2033 35 100% 2.25% McAllen Medical Center(3)(5)(7) McAllen, Texas Acute Care 370 56% 49% 51% 50% 50% 5,485,000 2026 5 0% — Wellington Regional Medical Center(4)(5)(7) West Palm Beach, Florida Acute Care 155 73% 73% 75% 62% 62% 6,643,000 2026 5 100% 2.50% Canyon Creek Behavioral Health(2)(5)(7) Temple, Texas Behavioral Health Care 102 52% 45% N/A N/A N/A 1,841,000 2033 35 100% 2.25% Clive Behavioral Health(5)(7)(9) Clive, Iowa Behavioral Health Care 100 48% 36% 16% N/A N/A 3,348,000 2040 50 100% 2.75% Specialty Facility Name and Location Evansville Facility(8) Evansville, Indiana Specialty 0 — — — — — — — — 0% — 22 Lease Term End of % of RSF initial under Type Average Occupancy(1) Minimum or Renewal lease with Range of of lease renewed term guaranteed guaranteed Facility Name and Location facility 2023 2022 2021 2020 2019 revenue(6) term (years) escalators escalation Spring Valley MOB I (5) Las Vegas, Nevada MOB 88% 83% 86% 94% 85% $1,170,000 2024-2029 Various 100% 2%-3% Spring Valley MOB II (5) Las Vegas, Nevada MOB 90% 95% 95% 71% 63% 1,189,000 2024-2033 Various 100% 2%-3% Summerlin Hospital MOB I (5) Las Vegas, Nevada MOB 79% 78% 79% 83% 78% 1,662,000 2024-2033 Various 100% 2%-5% Summerlin Hospital MOB II (5) Las Vegas, Nevada MOB 88% 74% 73% 77% 80% 2,038,000 2024-2030 Various 100% 2%-3% Summerlin Hospital MOB III (5) Las Vegas, Nevada MOB 89% 86% 88% 84% 86% 1,919,000 2024-2034 Various 100% 2%-3% Rosenberg Children’s Medical Plaza Phoenix, Arizona MOB 100% 100% 100% 100% 100% 2,486,000 2026-2033 Various 100% 2%-3% Centennial Hills MOB (5) Las Vegas, Nevada MOB 79% 79% 79% 81% 77% 1,924,000 2024-2035 Various 100% 2%-4% PeaceHealth Medical Clinic Bellingham, Washington MOB 100% 100% 100% 100% 100% 2,937,000 2029 10 100% 3% Lake Pointe Medical Arts Building Rowlett, Texas MOB 88% 82% 84% 96% 96% 1,216,000 2025-2034 Various 100% 3% Chandler Corporate Center III Chandler, Arizona MOB 92% 92% 92% 92% 92% 1,426,000 2027 Various 100% 2% Frederick Crestwood MOB Frederick, Maryland MOB 100% 100% 100% 100% 100% 1,696,000 2026-2030 Various 100% 2%-3% Henderson Union Village MOB (5) Henderson, Nevada MOB 72% 68% 61% 52% 38% 1,638,000 2024-2033 Various 100% 2%-3% Midcoast Hospital MOB Brunswick, Maine MOB 100% 100% 100% 100% 100% 1,485,000 2026 Various 100% 2% Texoma Medical Plaza (5) Denison, Texas MOB 91% 93% 96% 100% 100% 2,093,000 2024-2030 Various 92% 3% Forney Medical Plaza Forney, Texas MOB 90% 86% 82% 81% 81% 1,051,000 2024-2033 Various 100% 3% Northwest Texas Prof.
Lease Term Number End of % of RSF of initial under available Average Occupancy(1) Minimum or Renewal lease with Range of Type of beds @ lease renewed term guaranteed guaranteed Hospital Facility Name and Location facility 12/31/2024 2024 2023 2022 2021 2020 revenue (6) term (years) escalators escalation Aiken Regional Medical Center / Aurora Pavilion (2)(5)(7) Aiken, South Carolina Acute Care / Behavioral Health 273 59% 60% 55% N/A N/A 4,164,000 2033 35 100% 2.25% McAllen Medical Center(3)(5)(7) McAllen, Texas Acute Care 370 53% 56% 49% 51% 50% 5,485,000 2026 5 0% — Wellington Regional Medical Center(4)(5)(7) West Palm Beach, Florida Acute Care 155 74% 73% 73% 75% 62% 6,643,000 2026 5 100% 2.50% Canyon Creek Behavioral Health(2)(5)(7) Temple, Texas Behavioral Health Care 102 48% 52% 45% N/A N/A 1,885,000 2033 35 100% 2.25% Clive Behavioral Health(5)(7)(9) Clive, Iowa Behavioral Health Care 100 51% 48% 36% 16% N/A 3,348,000 2040 50 100% 2.75% Specialty Facility Name and Location Evansville Facility(8) Evansville, Indiana Specialty 0 — — — — — — — — 0% — 21 Lease Term End of % of RSF initial under Type Average Occupancy(1) Minimum or Renewal lease with Range of of lease renewed term guaranteed guaranteed Facility Name and Location facility 2024 2023 2022 2021 2020 revenue (6) term (years) escalators escalation Spring Valley MOB I (5) Las Vegas, Nevada MOB 87% 88% 83% 86% 94% $1,131,000 2025-2032 Various 100% 2%-5% Spring Valley MOB II (5) Las Vegas, Nevada MOB 95% 90% 95% 95% 71% 1,357,000 2025-2033 Various 100% 2%-3% Summerlin Hospital MOB I (5) Las Vegas, Nevada MOB 80% 79% 78% 79% 83% 1,583,000 2025-2033 Various 100% 2%-5% Summerlin Hospital MOB II (5) Las Vegas, Nevada MOB 91% 88% 74% 73% 77% 2,211,000 2025-2030 Various 100% 2%-5% Summerlin Hospital MOB III (5) Las Vegas, Nevada MOB 82% 89% 86% 88% 84% 1,760,000 2025-2034 Various 100% 2%-5% Rosenberg Children’s Medical Plaza Phoenix, Arizona MOB 100% 100% 100% 100% 100% 2,491,000 2026-2033 Various 100% 2%-3% Centennial Hills MOB (5) Las Vegas, Nevada MOB 80% 79% 79% 79% 81% 1,985,000 2025-2035 Various 100% 2%-5% PeaceHealth Medical Clinic Bellingham, Washington MOB 100% 100% 100% 100% 100% 2,937,000 2029 10 100% 3% Lake Pointe Medical Arts Building Rowlett, Texas MOB 87% 88% 82% 84% 96% 1,162,000 2025-2034 Various 100% 3% Chandler Corporate Center III Chandler, Arizona MOB 100% 92% 92% 92% 92% 1,459,000 2027 Various 100% 3% Frederick Crestwood MOB Frederick, Maryland MOB 100% 100% 100% 100% 100% 1,694,000 2026-2030 Various 100% 2%-3% Henderson Union Village MOB (5) Henderson, Nevada MOB 73% 72% 68% 61% 52% 1,681,000 2026-2033 Various 100% 2%-3% Midcoast Hospital MOB Brunswick, Maine MOB 100% 100% 100% 100% 100% 1,485,000 2026 Various 100% 2% Texoma Medical Plaza (5) Denison, Texas MOB 92% 91% 93% 96% 100% 2,406,000 2025-2034 Various 100% 3% Forney Medical Plaza Forney, Texas MOB 90% 90% 86% 82% 81% 1,106,000 2025-2033 Various 99% 3% Northwest Texas Prof.
These leases comprised approximately 22% of the aggregate rentable square feet of these properties (19% related to renewed leases and 3% related to new leases).
These leases comprised approximately 13% of the aggregate rentable square feet of these properties (10% related to renewed leases and 3% related to new leases).
Office Tower Amarillo, Texas MOB 100% 100% 100% 100% 100% 1,243,000 2025 Various 100% 3%-5% Desert Valley Medical Center Phoenix, Arizona MOB 89% 94% 98% 100% 98% 1,243,000 2024-2033 Various 100% 2%-3% Gold Shadow - 700 Shadow (5) Las Vegas, Nevada MOB 72% 67% 53% 61% 75% 900,000 2024-2027 Various 100% 2%-3% Gold Shadow - 2010 & 2020 Goldring MOB's (5) Las Vegas, Nevada MOB 96% 91% 85% 81% 80% 1,818,000 2024-2032 Various 86% 2%-5% Madison Professional Office Building Madison, Alabama MOB 87% 90% 100% 100% 100% 719,000 2024-2028 Various 100% 3% Sierra Medical Plaza I Reno, Nevada MOB 44% — — — — 1,987,000 2033-2039 Various 100% 3% St.
Office Tower Amarillo, Texas MOB 100% 100% 100% 100% 100% 1,086,000 2025 Various 100% 3%-5% Desert Valley Medical Center Phoenix, Arizona MOB 86% 89% 94% 98% 100% 1,209,000 2025-2032 Various 100% 3% Gold Shadow - 700 Shadow (5) Las Vegas, Nevada MOB 72% 72% 67% 53% 61% 662,000 2025-2027 Various 100% 2%-3% Gold Shadow - 2010 & 2020 Goldring MOB's (5) Las Vegas, Nevada MOB 97% 96% 91% 85% 81% 2,174,000 2025-2032 Various 100% 2%-3% Madison Professional Office Building Madison, Alabama MOB 93% 87% 90% 100% 100% 654,000 2025-2028 Various 100% 3% Sierra Medical Plaza I Reno, Nevada (5) MOB 67% 44% — — — 1,898,000 2033-2039 Various 100% 3% St.
Matthews Medical Plaza II 103,011 0 % 0 % 46 % 9 % 1 % 6 % 38 % Desert Springs Medical Plaza (c.) 103,000 43 % 41 % 0 % 7 % 7 % 2 % 0 % Peace Health Medical Clinic 98,886 0 % 0 % 0 % 0 % 0 % 0 % 100 % Centennial Hills Medical Office Building (a.) 96,573 20 % 11 % 6 % 15 % 20 % 2 % 26 % Summerlin Hospital Medical Office Building II (a.) 92,313 11 % 18 % 11 % 16 % 10 % 7 % 27 % Summerlin Hospital Medical Office Building I (a.) 89,636 20 % 24 % 23 % 19 % 3 % 4 % 7 % Sierra Medical Plaza I 85,902 32 % 0 % 0 % 0 % 0 % 0 % 68 % Chandler Corporate Center III 81,770 0 % 0 % 0 % 0 % 100 % 0 % 0 % 3811 E.
Matthews Medical Plaza II (a.) 103,011 0 % 36 % 0 % 1 % 6 % 18 % 39 % Desert Springs Medical Plaza 103,000 49 % 8 % 7 % 7 % 2 % 27 % 0 % Peace Health Medical Clinic 98,886 0 % 0 % 0 % 0 % 0 % 100 % 0 % Centennial Hills Medical Office Building 96,573 20 % 3 % 23 % 13 % 9 % 10 % 22 % Summerlin Hospital Medical Office Building II 92,313 9 % 8 % 18 % 17 % 7 % 23 % 18 % Summerlin Hospital Medical Office Building I (a.) 89,636 23 % 31 % 21 % 6 % 4 % 0 % 15 % Sierra Medical Plaza I 85,902 32 % 0 % 0 % 0 % 0 % 0 % 68 % Chandler Corporate Center III 81,770 0 % 0 % 0 % 100 % 0 % 0 % 0 % 3811 E.
The lease on this facility, which was executed with a joint venture between UHS and an unrelated party, is triple net and has an initial term of 20 years with five, 10-year renewal options.
(8) The lease on this facility expired in 2019 and the property remains vacant. We are marketing the property. (9) The lease on this facility, which was executed with a joint venture between UHS and an unrelated party, is triple net and has an initial term of 20 years with five, 10-year renewal options.
There is no bonus rental component applicable to the renewed fair market value lease. (5) The real estate assets of this facility are or were owned by us (either directly or through an LLC in which we hold 100% of the ownership interest) and include tenants who are subsidiaries of UHS or jointly owned by a subsidiary of UHS.
(5) The real estate assets of this facility are or were owned by us (either directly or through an LLC in which we hold 100% of the ownership interest) and include tenants who are subsidiaries of UHS or jointly owned by a subsidiary of UHS. (6) Minimum lease payment amounts contain impact of straight-line rent adjustments, if applicable.
(6) Minimum lease payment amounts contain impact of straight-line rent adjustments, if applicable. (7) See above in Item 1-Relationship with Universal Health Services, Inc. regarding, among other things, UHS’ purchase option as discussed herein.
(7) See above in Item 1-Relationship with Universal Health Services, Inc. regarding, among other things, UHS’ purchase option as discussed herein.
The transferred properties are Aiken Regional Medical Center, (“Aiken”) which includes an acute care hospital and a behavioral health pavilion, and Canyon Creek Behavioral Health (“Canyon Creek”). The occupancy details for Aiken and Canyon Creek from 2019 through 2021 are not relevant since we acquired them on December 31, 2021.
The transferred properties are Aiken Regional Medical Center, (“Aiken”) which includes an acute care hospital and a behavioral health pavilion, and Canyon Creek Behavioral Health (“Canyon Creek”).
Average available beds is the number of beds which are actually in service at any given time for immediate patient use with the necessary equipment and staff available for patient care. A hospital may have appropriate licenses for more beds than are in service for a number of reasons, including lack of demand, incomplete construction and anticipation of future needs.
A hospital may have appropriate licenses for more beds than are in service for a number of reasons, including lack of demand, incomplete construction and anticipation of future needs.
Upon the December 31, 2021 expiration of the lease, Wellington Regional Medical Center exercised its fair market value renewal option and renewed the lease for a 5-year term. The annual fair market value lease rate was $6.3 million on January 1, 2022 and the rent has/will increase by 2.5% on a cumulative compounded basis each January 1st through 2026.
Upon the December 31, 2021 expiration of the lease, Wellington Regional Medical Center exercised its fair market value renewal option and renewed the lease for a 5-year term.
(3) During the first quarter of 2001, UHS purchased the assets and operations of the 60-bed McAllen Heart Hospital located in McAllen, Texas. Upon acquisition by UHS, the Heart Hospital began operating under the same license as McAllen Medical Center (which has 370 available beds as of December 31, 2023).
Upon acquisition by UHS, the Heart Hospital began operating under the same license as McAllen Medical Center (which has 370 available beds as of December 31, 2024). The net revenues of the combined operations included revenues generated by the Heart Hospital, the real property of which is not owned by us.
Expiring Square Feet Number of Tenants Annual Rentals of Expiring Leases(1) Percentage of Annual Rentals(2) Hospital properties 2024 0 $ - 0 % 2025 0 - 0 % 2026 618,765 2 15,082,007 14 % 2027 0 - 0 % 2028 0 - 0 % 2029 0 - 0 % 2030 0 - 0 % 2031 0 - 0 % 2032 0 - 0 % 2033 413,700 2 5,458,061 5 % Thereafter 82,138 1 3,347,556 3 % Subtotal-hospital facilities 1,114,603 5 $ 23,887,624 23 % Other consolidated properties 2024 244,631 70 $ 8,590,503 8 % 2025 379,740 76 11,524,334 11 % 2026 270,989 57 9,424,553 9 % 2027 344,084 46 11,241,425 11 % 2028 140,200 34 5,020,375 5 % 2029 245,627 20 8,060,564 8 % 2030 206,614 23 6,885,577 7 % 2031 18,894 3 676,536 1 % 2032 74,330 5 2,617,042 2 % 2033 134,908 14 4,599,157 4 % Thereafter 171,922 10 3,703,195 4 % Subtotal-other consolidated properties 2,231,939 358 $ 72,343,261 69 % Other unconsolidated properties (MOBs) 2024 0 $ - 0 % 2025 50,464 6 1,704,029 1 % 2026 89,372 12 3,107,454 3 % 2027 8,525 2 373,318 0 % 2028 14,941 3 602,677 1 % 2029 18,318 1 606,019 1 % 2030 5,840 1 196,625 0 % 2031 41,890 3 1,409,039 1 % 2032 18,670 1 617,664 1 % 2033 0 0 - 0 % Thereafter 0 0 - 0 % Subtotal-other unconsolidated properties 248,020 29 $ 8,616,825 8 % Total all properties at December 31, 2023 3,594,562 392 $ 104,847,710 100 % (1) The annual rentals of expiring leases reflected above were calculated based upon each property’s 2023 average rental rate per occupied square foot applied to each property’s scheduled lease expirations (on a square foot basis).
Expiring Square Feet Number of Tenants Annual Rentals of Expiring Leases(1) Percentage of Annual Rentals(2) Hospital properties 2025 0 0 $ 0 0 % 2026 618,765 2 15,235,518 14 % 2027 0 0 0 0 % 2028 0 0 0 0 % 2029 0 0 0 0 % 2030 0 0 0 0 % 2031 0 0 0 0 % 2032 0 0 0 0 % 2033 413,700 2 5,432,207 5 % 2034 0 0 0 0 % Thereafter 82,138 1 3,347,556 3 % Subtotal-hospital facilities 1,114,603 5 $ 24,015,281 22 % Other consolidated properties 2025 342,427 82 $ 10,657,323 10 % 2026 304,232 69 10,916,853 10 % 2027 391,757 59 13,125,596 12 % 2028 164,198 37 6,189,677 6 % 2029 311,366 35 10,801,361 10 % 2030 276,795 33 9,172,325 8 % 2031 34,817 6 1,286,143 1 % 2032 100,189 9 3,473,507 3 % 2033 130,853 14 5,101,168 5 % 2034 37,946 7 1,511,257 1 % Thereafter 147,894 7 3,083,700 3 % Subtotal-other consolidated properties 2,242,474 358 $ 75,318,910 70 % Other unconsolidated properties (MOBs) 2025 40,354 4 $ 1,417,832 1 % 2026 79,944 11 2,789,451 3 % 2027 8,525 2 353,637 0 % 2028 14,941 3 586,541 1 % 2029 18,318 2 633,506 1 % 2030 5,840 1 194,546 0 % 2031 51,318 4 1,724,442 2 % 2032 18,670 1 645,679 1 % 2033 0 0 0 0 % 2034 0 0 0 0 % Thereafter 10,110 2 349,642 0 % Subtotal-other unconsolidated properties 248,020 30 $ 8,695,276 8 % Total all properties at December 31, 2024 3,605,097 393 $ 108,029,467 100 % (1) The annual rentals of expiring leases reflected above were calculated based upon each property’s 2024 average rental rate per occupied square foot applied to each property’s scheduled lease expirations (on a square foot basis).
Matthews Medical Plaza II Louisville, Kentucky MOB 100% 100% 100% 100% 100% 2,841,000 2025-2032 Various 75% 3% N/A – Not applicable. (1) Average occupancy rate for the hospital facilities is based on the average number of available beds occupied during each of the five years ended December 31, 2023.
(1) Average occupancy rate for the hospital facilities is based on the average number of available beds occupied during each of the five years ended December 31, 2024. Average available beds is the number of beds which are actually in service at any given time for immediate patient use with the necessary equipment and staff available for patient care.
Removed
As discussed herein, on December 31, 2021, we entered into an asset purchase and sale agreement, as amended, with certain wholly-owned subsidiaries of UHS pursuant to the terms of which, UHS purchased from us, the real estate assets of Inland Valley Campus of Southwest Healthcare System, and in exchange, UHS transferred to us the real estate assets of Aiken Regional Medical Center (which includes an acute care hospital and a behavioral health pavilion) and Canyon Creek Behavioral Health.
Added
Matthews Medical Plaza II Louisville, Kentucky MOB 100% 100% 100% 100% 100% 2,818,000 2025-2032 Various 75% 3% 2704 North Tenaya Way Las Vegas, Nevada MOB 100% 100% 100% 100% 100% 1,230,000 2029 12 100% 2% Phoenix Children’s East Valley Care Center Phoenix, Arizona MOB 100% 100% 100% 100% 100% 1,205,000 2032 20 — — N/A – Not applicable.
Removed
The net revenues of the combined operations included revenues generated by the Heart Hospital, the real property of which is not owned by us.
Added
The occupancy details for Aiken and Canyon Creek from 2019 through 2021 are not relevant since we acquired them on December 31, 2021. 22 (3) During the first quarter of 2001, UHS purchased the assets and operations of the 60-bed McAllen Heart Hospital located in McAllen, Texas.
Removed
(8) The lease on this facility expired in 2019 and the property remains vacant. We are marketing the property. (9) This UHS-related hospital was completed and opened in December of 2020.
Added
(d) The estimated market rates related to the 2025 expiring RSF are less than the lease rates on the expiring leases by approximately 11% (e) Lease expires on May 31, 2025 and we have been notified by the tenant that they do not intend to renew. The property is being marketed.
Added
The estimated market rates related to the 2025 expiring RSF are less than the lease rates on the expiring leases by approximately 11%. (f) We believe it is likely that the tenants may not renew their leases upon the October 31, 2025 scheduled expirations. The property is being marketed.
Added
The estimated market rates related to the 2025 expiring RSF are greater than the lease rates on the expiring leases by approximately 0% to 4%. (g) We believe it is likely that the tenant may not renew their lease upon the June 30, 2025 scheduled expiration.
Added
The estimated market rate related to the 2025 expiring RSF is greater than the lease rate on the expiring lease by approximately 5%.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed3 unchanged
Biggest changeBase INDEXED RETURNS Period Years Ending Company Name / Index Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 Universal Health Realty Income Trust $ 100 $ 196.94 $ 111.78 $ 108.04 $ 91.56 $ 88.24 S&P 500 Index $ 100 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 Peer Group $ 100 $ 124.36 $ 109.22 $ 132.52 $ 105.76 $ 126.26
Biggest changeBase INDEXED RETURNS Period Years Ending Company Name / Index Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 Dec 24 Universal Health Realty Income Trust $ 100 $ 56.76 $ 54.86 $ 46.49 $ 44.80 $ 41.47 S&P 500 Index $ 100 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 Peer Group $ 100 $ 87.83 $ 106.56 $ 85.04 $ 101.53 $ 135.55
Equity Compensation Refer to Item 12- Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , of this report for information regarding securities authorized for issuance under our equity compensation plan. 28 Stock Price Performance Graph The following graph compares our performance with that of the S&P 500 and a group of peer companies, where performance has been weighted based on market capitalization.
Equity Compensation Refer to Item 12- Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , of this report for information regarding securities authorized for issuance under our equity compensation plan. 27 Stock Price Performance Graph The following graph compares our performance with that of the S&P 500 and a group of peer companies, where performance has been weighted based on market capitalization.
The total cumulative return on investment (change in the year-end stock price plus reinvested dividends) for each of the periods for us, the peer group and the S&P 500 composite is based on the stock price or composite index at the end of fiscal 2018.
The total cumulative return on investment (change in the year-end stock price plus reinvested dividends) for each of the periods for us, the peer group and the S&P 500 composite is based on the stock price or composite index at the end of fiscal 2019.
ITEM 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our shares of beneficial interest are listed on the New York Stock Exchange under the symbol UHT. Holders As of January 31, 2024, there were approximately 242 shareholders of record of our shares of beneficial interest.
ITEM 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our shares of beneficial interest are listed on the New York Stock Exchange under the symbol UHT. Holders As of January 31, 2025, there were approximately 234 shareholders of record of our shares of beneficial interest.

Item 7. Management's Discussion & Analysis

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

84 edited+9 added−35 removed72 unchanged
Biggest changeNet cash used in investing activities Net cash used in investing activities was $19.1 million during 2023 as compared to $36.7 million during 2022. 2023: During 2023, $19.1 million of net cash was used in investing activities as follows: • spent $15.6 million for additions to real estate investments, including construction costs related to the Sierra Medical Plaza I MOB located in Reno, Nevada, that was substantially completed in March, 2023, as well as tenant improvements at various MOBs; • spent $7.6 million, including transaction costs, on the August, 2023 acquisition of the McAllen Doctor's Center medical office building, as discussed in Note 3 to the consolidated financial statements; • spent $4.1 million in equity investments in unconsolidated LLCs; • received $3.9 million of net cash proceeds resulting from the divestiture of a property, as discussed in Note 3 to the consolidated financial statements; • received $757,000 of cash in excess of income from LLCs, and; • received $3.5 million of repayments of an advance we had provided to an unconsolidated LLC during 2021. 2022: During 2022, $36.7 million of net cash was used in investing activities as follows: • spent $22.5 million for additions to real estate investments, including $18.2 million of construction costs related to the Sierra Medical Plaza I located in Reno, Nevada, that was substantially completed in March, 2023, as well as tenant improvements at various MOBs; • spent $13.6 million, including transaction costs, on the acquisitions of the Beaumont Heart and Vascular Center in March, 2022, and; the 140 Thomas Johnson Drive medical office building in January, 2022, as discussed in Note 3 to the consolidated financial statements; 38 • spent $1.3 million as part of the asset purchase and sale agreement, as amended, with UHS, as discussed in Note 2 to the consolidated financial statements; • received $875,000 of cash in excess of income from LLCs, and; • spent $94,000 in equity investments in an unconsolidated LLC.
Biggest changeNet cash used in investing activities Net cash used in investing activities was $13.9 million during 2024 as compared to $19.1 million during 2023. 2024: During 2024, $13.9 million of net cash was used in investing activities as follows: • spent $9.1 million for additions to real estate investments, including tenant improvements at various MOBs; • spent $5.9 million in equity investments in unconsolidated LLCs, and; • received $1.1 million of cash in excess of income from LLCs. 2023: During 2023, $19.1 million of net cash was used in investing activities as follows: • spent $15.6 million for additions to real estate investments, including construction costs related to the Sierra Medical Plaza I MOB located in Reno, Nevada, that was substantially completed in March, 2023, as well as tenant improvements at various MOBs; • spent $7.6 million, including transaction costs, on the August, 2023 acquisition of the McAllen Doctor's Center medical office building, as discussed in Note 3 to the consolidated financial statements; • spent $4.1 million in equity investments in unconsolidated LLCs; • received $3.9 million of net cash proceeds resulting from the divestiture of a property, as discussed in Note 3 to the consolidated financial statements; • received $757,000 of cash in excess of income from LLCs, and; • received $3.5 million of repayments of an advance we had provided to an unconsolidated LLC during 2021. 36 Net cash used in financing activities Net cash used in financing activities was $34.2 million during 2024 as compared to $23.2 million during 2023. 2024: The $34.2 million of cash used in financing activities during 2024 consisted of: • paid $40.4 million of dividends, including $87,000 of previously accrued dividends; • received $22.3 million of net borrowings on our revolving credit agreement; • paid $13.6 million on mortgage notes payable that are non-recourse to us, including a $12.2 million repayment of a fixed rate mortgage loan that matured during the second quarter of 2024; • paid $2.4 million of financing costs, primarily related to the second amendment to our revolving credit agreement, as discussed herein, and; • paid $131,000, net of cash received for the issuance of shares of beneficial interest, in fees related to our ATM Program. 2023: The $23.2 million of cash used in financing activities during 2023 consisted of: • paid $39.8 million of dividends, including $58,000 of previously accrued dividends; • received $28.5 million of net borrowings on our revolving credit agreement; • paid $11.9 million on mortgage notes payable that are non-recourse to us, including a $6.1 million repayment of a fixed rate mortgage loan that matured during the fourth quarter of 2023 and a $4.2 million repayment of a fixed rate mortgage loan that matured during the first quarter of 2023; • paid $222,000 of financing costs related to the amendment of our revolving credit agreement, and; • received $147,000 of net cash from the issuance of shares of beneficial interest.
Borrowings under the Credit Agreement will bear interest at a rate equal to, at our option, at adjusted term SOFR for either one, three, or six months or the Base Rate, plus in either case, a specified margin depending on our total leverage ratio, as determined by the formula set forth in the Credit Agreement.
Borrowings under the Credit Agreement will bear interest at a rate equal to, at our option, the Adjusted Term SOFR for either one, three, or six months or the Base Rate, plus in either case, a specified margin depending on our total leverage ratio, as determined by the formula set forth in the Credit Agreement.
There can be no assurance that we, our third-party property managers, our tenants or our or their service providers, if applicable, will not suffer losses relating to cyber-attacks or other information security breaches in the future or that insurance coverage (if applicable) will be adequate to cover all the costs resulting from such events; • The outcome and effects of known and unknown litigation, government investigations, and liabilities and other claims asserted against us, UHS or the other operators of our facilities.
There can be no assurance that we, our third-party property managers, our tenants or our or their service providers, if applicable, will not suffer losses relating to cyber-attacks or other information security breaches in the future or that insurance coverage (if applicable) will be adequate to cover all the costs resulting from such events. 30 • The outcome and effects of known and unknown litigation, government investigations, and liabilities and other claims asserted against us, UHS or the other operators of our facilities.
We believe that our operating cash flows, cash and cash equivalents, available borrowing capacity under our revolving credit agreement and access to the capital markets provide us with sufficient capital resources to fund our operating, investing and financing requirements for the next twelve months, including providing sufficient capital to allow us to make distributions necessary to enable us to continue to qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986.
We believe that our operating cash flows, cash and cash equivalents, available borrowing capacity under our Credit Agreement and access to the capital markets provide us with sufficient capital resources to fund our operating, investing and financing requirements for the next twelve months, including providing sufficient capital to allow us to make distributions necessary to enable us to continue to qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986.
In addition, while attempts to repeal the entirety of the ACA have not been successful to date, a key provision of the ACA was eliminated as part of the Tax Cuts and Jobs Act and on December 14, 2018, a federal U.S. District Court Judge in Texas ruled the entire ACA is unconstitutional.
While attempts to repeal the entirety of the ACA have not been successful to date, a key provision of the ACA was eliminated as part of the Tax Cuts and Jobs Act and on December 14, 2018, a federal U.S. District Court Judge in Texas ruled the entire ACA is unconstitutional.
The extent of any future impacts from inflation on our tenants’ businesses and results of operations will be dependent upon how long the elevated inflation levels persist and the extent to which the rate of inflation further increases, if at all, neither of which we are able to predict.
However, the extent of any future impacts from inflation on our tenants’ businesses and results of operations will be dependent upon how long the elevated inflation levels persist and the extent to which the rate of inflation further increases, if at all, neither of which we are able to predict.
If elevated levels of inflation were to persist or if the rate of 30 inflation were to accelerate, expenses of our tenants, and our direct operating expenses that are not passed on to our tenants, could increase faster than anticipated and may require utilization of our and our tenants’ capital resources sooner than expected.
If elevated levels of inflation were to persist or if the rate of inflation were to accelerate, expenses of our tenants, and our direct operating expenses that are not passed on to our tenants, could increase faster than anticipated and may require utilization of our and our tenants’ capital resources sooner than expected.
Based 39 upon the information discussed above, as well as consideration of projections and forecasts of our future operating cash flows, management and the Board of Trustees have determined that our operating cash flows have been sufficient to fund our dividend payments.
Based upon the information discussed above, as well as consideration of projections and forecasts of our future operating cash flows, management and the Board of Trustees have determined that our operating cash flows have been sufficient to fund our dividend payments.
Any future efforts to challenge, replace or replace the Legislation or expand or substantially amend its provision is unknown. • There can be no assurance that if any of the announced or proposed changes described above are implemented there will not be negative financial impact on the operators of our hospitals, which material effects may include a potential decrease in the market for health care services or a decrease in the ability of the operators of our hospitals to receive reimbursement for health care services provided which could result in a material adverse effect on the financial condition or results of operations of the operators of our properties, and, thus, our business. • Competition for properties include, but are not limited to, other REITs, private investors and firms, banks and other companies, including UHS.
Any future efforts to challenge, replace or replace the ACA or expand or substantially amend its provision is unknown. 31 • There can be no assurance that if any of the announced or proposed changes described above are implemented there will not be negative financial impact on the operators of our hospitals, which material effects may include a potential decrease in the market for health care services or a decrease in the ability of the operators of our hospitals to receive reimbursement for health care services provided which could result in a material adverse effect on the financial condition or results of operations of the operators of our properties, and, thus, our business. • Competition for properties include, but are not limited to, other REITs, private investors and firms, banks and other companies, including UHS.
(d) Assumes that all debt outstanding as of December 31, 2023, including borrowings under the Credit Agreement, and the loans which are non-recourse to us, remain outstanding until the stated maturity date of the debt agreements at the same interest rates which were in effect as of December 31, 2023.
(d) Assumes that all debt outstanding as of December 31, 2024, including borrowings under the Credit Agreement, and the loans which are non-recourse to us, remain outstanding until the stated maturity date of the debt agreements at the same interest rates which were in effect as of December 31, 2024.
The Credit Agreement, as amended by the first amendment, defines “Base Rate” as the greatest of (a) the Administrative Agent’s prime rate, (b) the federal funds effective rate plus 1/2 of 1% and (c) one month adjusted term SOFR plus 1%.
The Credit Agreement, as amended by the second amendment, defines “Base Rate” as the greatest of (a) the Administrative Agent’s prime rate, (b) the federal funds effective rate plus 1/2 of 1%, and (c) one month Adjusted Term SOFR plus 1%.
(e) Reflects our future minimum operating lease payment obligations outstanding as of December 31, 2023, as discussed in Note 4 to the consolidated financial statements - Lease Accounting, in connection with ground leases at fourteen of our consolidated properties.
(e) Reflects our future minimum operating lease payment obligations outstanding as of December 31, 2024, as discussed in Note 4 to the consolidated financial statements - Lease Accounting, in connection with ground leases at fourteen of our consolidated properties.
The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. 34 In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) estimated fair market lease rates from the perspective of a market participant for the corresponding in-place leases, measured, for above-market leases, over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below market fixed rate renewal periods.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) estimated fair market lease rates from the perspective of a market participant for the corresponding in-place leases, measured, for above-market leases, over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below market fixed rate renewal periods.
UHS and its subsidiaries are subject to legal actions, purported shareholder class actions and shareholder derivative cases, governmental investigations and regulatory actions and the effects of adverse publicity relating to such matters.
From time to time, UHS and its subsidiaries are subject to legal actions, purported shareholder class actions, shareholder derivative cases, governmental investigations and regulatory actions and the effects of adverse publicity relating to such matters.
The weighted-average leasing commissions on the new and renewed leases commencing during each year was approximately 3% of base rental revenue over the term of the leases during each of 2023 and 2022.
The weighted-average leasing commissions on the new and renewed leases commencing during each year was approximately 3% of base rental revenue over the term of the leases during each of 2024 and 2023.
Since UHS comprised approximately 41% of our consolidated revenues during the year ended December 31, 2023, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-Q and 10-K, as publicly filed with the Securities and Exchange Commission.
Since UHS comprised approximately 40% of our consolidated revenues during the year ended December 31, 2024, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-Q and 10-K, as publicly filed with the Securities and Exchange Commission.
This analysis, together with consideration of the Trust’s current balance of revolving credit agreement borrowings, non-recourse mortgage borrowings and equity, assists management in deciding which capital resource to utilize when events such as refinancing of specific debt components occur or additional funds are required to finance the Trust’s growth.
This analysis, together with consideration of the Trust’s current borrowings outstanding under the credit agreement, non-recourse mortgage borrowings and equity, assists management in deciding which capital resource to utilize when events such as refinancing of specific debt components occur or additional funds are required to finance the Trust’s growth.
Many of these factors, which had a material unfavorable impact on the operating results of certain of our tenants during 2022, moderated to a certain degree during 2023. Most of our leases contain provisions designed to mitigate the adverse impact of inflation.
Many of these factors, which had a material unfavorable impact on the operating results of certain of our tenants during 2022, moderated to a certain degree during 2023 and 2024. 35 Most of our leases contain provisions designed to mitigate the adverse impact of inflation.
Additional cash flow and dividends paid information for 2023 and 2022: As indicated on our consolidated statements of cash flows, we generated net cash provided by operating activities of $42.9 million during 2023 and $46.8 million during 2022.
Additional cash flow and dividends paid information for 2024 and 2023: As indicated on our consolidated statements of cash flows, we generated net cash provided by operating activities of $46.9 million during 2024 and $42.9 million during 2023.
This section generally discusses our results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
This section generally discusses our results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during each year was approximately 0.3% and 0.4% of the future aggregate base rental revenue over the lease terms during 2023 and 2022, respectively.
The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during each year was approximately 0.3% of the future aggregate base rental revenue over the lease terms during each of 2024 and 2023.
As of February 27, 2024, we have seventy-six real estate investments or commitments in twenty-one states consisting of: • six hospital facilities consisting of three acute care hospitals and three behavioral health care hospitals; • four free-standing emergency departments (“FEDs”); • sixty medical/office buildings (“MOBs”), including four owned by unconsolidated limited liability companies (“LLCs”)/limited liability partnerships (“LPs”); • four preschool and childcare centers; • one specialty facilities that is currently vacant, and; • one vacant land investment located in Chicago, Illinois.
As of February 26, 2025, we have seventy-six real estate investments or commitments in twenty-one states consisting of: • six hospital facilities consisting of three acute care hospitals and three behavioral health care hospitals; • four free-standing emergency departments (“FEDs”); • sixty medical/office buildings (“MOBs”), including four owned by unconsolidated limited liability companies (“LLCs”)/limited liability partnerships (“LPs”); • four preschool and childcare centers; • one specialty facility located in Evansville, Indiana, that is currently vacant, and; • one vacant land investment located in Chicago, Illinois.
In addition, borrowings under the new facility are secured by first priority security interests in and liens on all equity interests in most of the Trust’s wholly-owned subsidiaries.
Borrowings under the new facility are guaranteed by certain subsidiaries of the Trust. In addition, borrowings under the new facility are secured by first priority security interests in and liens on all equity interests in most of the Trust’s wholly-owned subsidiaries.
During 2023, we had a total of 73 new or renewed leases related to the medical office buildings as indicated in Item 2. Properties , in which we have significant investments, some of which are accounted for by the equity method.
During 2024, we had a total of 58 new or renewed leases related to the medical office buildings as indicated in Item 2. Properties , in which we have significant investments, some of which are accounted for by the equity method.
Property-specific debt is detailed above. (b) Consists of non-recourse debt with an aggregate fair value of approximately $31.2 million as of December 31, 2023. Changes in market rates on our fixed rate debt impacts the fair value of debt, but it has no impact on interest incurred or cash flow.
Property-specific debt is detailed above. (b) Consists of non-recourse debt with an aggregate fair value of approximately $17.7 million as of December 31, 2024. Changes in market rates on our fixed rate debt impacts the fair value of debt, but it has no impact on interest incurred or cash flow.
Liquidity and Capital Resources Year ended December 31, 2023 as compared to December 31, 2022: Net cash provided by operating activities Net cash provided by operating activities was $42.9 million during 2023 as compared to $46.8 million during 2022.
Liquidity and Capital Resources Year ended December 31, 2024 as compared to December 31, 2023: Net cash provided by operating activities Net cash provided by operating activities was $46.9 million during 2024 as compared to $42.9 million during 2023.
In connection with lease renewals executed during each year, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 4% and 2% during 2023 and 2022, respectively. The weighted-average tenant improvement costs associated with new or renewed leases was approximately $7 and $23 per square foot during 2023 and 2022, respectively.
In connection with lease renewals executed during each year, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 3% and 4% during 2024 and 2023, respectively. The weighted-average tenant improvement costs associated with new or renewed leases was approximately $7 per square foot during each of 2024 and 2023.
Excludes $21.2 million of combined third-party debt outstanding as of December 31, 2023, that is non-recourse to us, at the unconsolidated LLCs in which we hold various non-controlling ownership interests (see Note 8 to the consolidated financial statements).
Excludes $15.0 million of combined third-party debt outstanding as of December 31, 2024, that is non-recourse to us, at the unconsolidated LLCs in which we hold various non-controlling ownership interests (see Note 8 to the consolidated financial statements).
We declared and paid dividends of $39.8 million during 2023 and $39.2 million during 2022. During 2023, the $42.9 million of net cash provided by operating activities was approximately $3.2 million greater than the $39.8 million of dividends paid during 2023.
During 2023, the $42.9 million of net cash provided by operating activities was approximately $3.2 million greater than the $39.8 million of dividends paid during 2023.
Additional funds may be obtained through: (i) borrowings under our $375 million revolving credit agreement (which had $45.3 million of available borrowing capacity, net of outstanding borrowings and letters of credit as of December 31, 2023); (ii) borrowings under or refinancing of existing third-party debt pursuant to mortgage loan agreements entered into by our consolidated and unconsolidated LLCs/LPs; (iii) the issuance of equity, and/or; (iv) the issuance of other long-term debt.
Additional funds may be obtained through: (i) borrowings under our $425 million revolving credit agreement (which had $76.1 37 million of available borrowing capacity, net of outstanding borrowings as of December 31, 2024); (ii) borrowings under or refinancing of existing third-party debt pursuant to mortgage loan agreements entered into by our consolidated and unconsolidated LLCs/LPs; (iii) the issuance of other long-term debt, and/or; (iv) the issuance of equity.
In addition, the increased interest rates on our borrowings and/or the increased costs related to new construction could affect our ability to make additional attractive investments.
The increased interest 29 rates on our borrowings and/or the increased costs related to new construction could also affect our ability to make additional attractive investments.
The American Rescue Plan Act of 2021's expansion of subsidies to purchase coverage through an exchange, which the Inflation Reduction Act of 2022, passed on August 16, 2022, continues through 2025, is anticipated to increase exchange enrollment.
The American Rescue Plan Act of 2021's expansion of subsidies to purchase coverage through an exchange, which the Inflation Reduction Act of 2022, passed on August 16, 2022, continues through 2025, has increased exchange enrollment.
To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income. Results of Operations Year ended December 31, 2023 as compared to the year ended December 31, 2022 For the year ended December 31, 2023, net income was $15.4 million as compared to $21.1 million during 2022.
To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income. 33 Results of Operations Year ended December 31, 2024 as compared to the year ended December 31, 2023 For the year ended December 31, 2024, net income was $19.2 million as compared to $15.4 million during 2023.
For discussion of our result of operations and changes in our financial condition for the year ended December 31, 2022, as compared to the year ended December 31, 2021, please refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on February 27, 2023.
For discussion of our result of operations and changes in our financial condition for the year ended December 31, 2023, as compared to the year ended December 31, 2022, please refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on February 27, 2024, which section is incorporated by reference herein.
These leases comprised approximately 22% of the aggregate rentable square feet of these properties (19% related to renewed leases and 3% related to new leases). During 2022, we had a total of 46 new or renewed leases related to the medical office buildings in which we have significant investments, some of which are accounted for by the equity method.
These leases comprised approximately 13% of the aggregate rentable square feet of these properties (10% related to renewed leases and 3% related to new leases). During 34 2023, we had a total of 73 new or renewed leases related to the medical office buildings in which we have significant investments, some of which are accounted for by the equity method.
The Non-Offering Member has 60 to 90 days to either: (i) purchase the entire ownership interest of the Offering Member at the Transfer Price, or; (ii) sell its entire ownership interest to the Offering Member at the equivalent proportionate Transfer Price. The closing of the transfer must occur within 60 to 90 days of the acceptance by the Non-Offering Member.
The Non-Offering Member has 60 to 90 days to either: (i) purchase the entire ownership interest of the Offering Member at the Transfer Price, or; (ii) sell its entire ownership interest to the Offering Member at the equivalent proportionate Transfer Price.
The applicable margin after the first amendment ranges from 1.10% to 1.35% for adjusted term SOFR loans and 0.10% to 0.35% for Base Rate loans.
The applicable margin after the second amendment ranges from 1.10% to 1.35% for SOFR revolving loans and 0.10% to 0.35% for Base Rate revolving loans. The applicable margin ranges from 1.20% to 1.65% for Adjusted Term SOFR loans and 0.20% to 0.65% for Base Rate term loans.
The following table includes a summary of the required compliance ratios at December 31, 2023 and 2022, giving effect to the covenants contained in the Credit Agreements in effect on the respective dates (dollar amounts in thousands): Covenant December 31, 2023 December 31, 2022 Tangible net worth $ 125,000 $ 191,824 $ 219,654 Total leverage % 44.5 % 42.9 % Secured leverage % 4.1 % 5.6 % Unencumbered leverage % 44.2 % 41.8 % Fixed charge coverage > 1.50x 3.1x 4.3x As indicated on the following table, we have various mortgages, all of which are non-recourse to us and are not cross-collateralized, included on our consolidated balance sheet as of December 31, 2023 and 2022 (amounts in thousands): As of 12/31/2023 As of 12/31/2022 Facility Name Interest Rate Maturity Date Outstanding Balance (in thousands)(a.) Outstanding Balance (in thousands) Desert Valley Medical Center fixed rate mortgage loan (b.) 3.62 % January, 2023 $ - $ 4,194 2704 North Tenaya Way fixed rate mortgage loan (c.) 4.95 % November, 2023 - 6,252 Summerlin Hospital Medical Office Building III fixed rate mortgage loan (d.) 4.03 % April, 2024 12,301 12,558 Tuscan Professional Building fixed rate mortgage loan 5.56 % June, 2025 1,060 1,719 Phoenix Children’s East Valley Care Center fixed rate mortgage loan 3.95 % January, 2030 7,930 8,203 Rosenberg Children's Medical Plaza fixed rate mortgage loan 4.42 % September, 2033 11,771 12,027 Total, excluding net debt premium and net financing fees 33,062 44,953 Less net financing fees (199 ) (268 ) Plus net debt premium - 40 Total mortgage notes payable, non-recourse to us, net $ 32,863 $ 44,725 (a.) All mortgage loans require monthly principal payments through maturity and either fully amortize or include a balloon principal payment upon maturity.
The following table includes a summary of the required compliance ratios at December 31, 2024 and 2023, giving effect to the covenants contained in the Credit Agreements in effect on the respective dates (dollar amounts in thousands): Covenant December 31, 2024 December 31, 2023 Tangible net worth $ 125,000 $ 172,216 $ 191,824 Total leverage % 44.4 % 44.5 % Secured leverage % 2.4 % 4.1 % Unencumbered leverage % 45.9 % 44.2 % Fixed charge coverage > 1.50x 3.2x 3.1x As indicated on the following table, we have various mortgages, all of which are non-recourse to us and are not cross-collateralized, included on our consolidated balance sheet as of December 31, 2024 and 2023 (amounts in thousands): As of 12/31/2024 As of 12/31/2023 Facility Name Interest Rate Maturity Date Outstanding Balance (in thousands)(a.) Outstanding Balance (in thousands) Summerlin Hospital Medical Office Building III fixed rate mortgage loan (b.) 4.03 % April, 2024 $ - $ 12,301 Tuscan Professional Building fixed rate mortgage loan (c.) 5.56 % June, 2025 363 1,060 Phoenix Children’s East Valley Care Center fixed rate mortgage loan 3.95 % January, 2030 7,646 7,930 Rosenberg Children's Medical Plaza fixed rate mortgage loan 4.42 % September, 2033 11,503 11,771 Total, excluding net debt premium and net financing fees 19,512 33,062 Less net financing fees (163 ) (199 ) Total mortgage notes payable, non-recourse to us, net $ 19,349 $ 32,863 (a.) All mortgage loans require monthly principal payments through maturity and either fully amortize or include a balloon principal payment upon maturity.
Aggregate borrowings under our Credit Agreement were $78.4 million, $67.0 million and $88.8 million during the years ended December 31, 2023, 2022 and 2021, respectively, and aggregate repayments were $49.9 million, $40.8 million and $53.1 million during the years ended December 31, 2023, 2022 and 2021, respectively.
Aggregate borrowings under our Credit Agreement were $78.3 million, $78.4 million and $67.0 million during the years ended December 31, 2024, 2023 and 2022, respectively, and aggregate repayments were $56.0 million, $49.9 million and $40.8 million during the years ended December 31, 2024, 2023 and 2022, respectively.
We cannot predict whether Congress will restructure the implemented Medicare payment reductions or what other federal budget deficit reduction initiatives may be proposed by Congress going forward.
Current legislation extended those cuts through 2032. We cannot predict whether Congress will restructure the implemented Medicare payment reductions or what other federal budget deficit reduction initiatives may be proposed by Congress going forward.
On May 15, 2023 we entered into the first amendment to our amended and restated revolving credit agreement ("Credit Agreement") dated as of July 2, 2021 among the Trust as borrower, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent.
On September 30, 2024, we entered into a second amendment to our credit agreement, dated as of July 2, 2021, and amended in May, 2023, among the Trust as borrower, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent ("Credit Agreement").
The $3.9 million net decrease was attributable to: • an unfavorable change of $4.3 million due to a decrease in net income plus/minus the adjustments to reconcile net income to net cash provided by operating activities (depreciation and amortization, amortization related to above/below market leases, amortization of debt premium, amortization of deferred financing costs, stock-based compensation expense and loss on divestiture of real estate assets), as discussed above; • a favorable change of $1.6 million in lease receivables; • an unfavorable change of $1.4 million in accrued expenses and other liabilities; • an unfavorable change of $437,000 in tenant reserves, deposits and deferred and prepaid rents, and; • other combined net favorable changes of $685, 000.
The $4.0 million net increase was attributable to: • a favorable change of $3.4 million due to an increase in net income plus/minus the adjustments to reconcile net income to net cash provided by operating activities (depreciation and amortization, amortization related to above/below market leases, amortization of debt premium, amortization of deferred financing costs, stock-based compensation expense and loss on divestiture of real estate assets), as discussed above; • a favorable change of $500,000 in leasing costs paid; • a favorable change of $496,000 in tenant reserves, deposits and deferred and prepaid rents; • an unfavorable change of $247,000 in lease receivables, and; • other combined net unfavorable changes of $155, 000.
To date, the Biden administration has issued executive orders implementing a special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the ACA or the Medicaid program.
The Biden administration had undertaken executive actions to strengthen the ACA, including issuing executive orders implementing a special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the ACA or the Medicaid program.
No assurances can be given that the implementation of these new laws will not have a material adverse effect on the business, financial condition or results of operations of our operators. • A subsidiary of UHS is our Advisor and our officers are all employees of a wholly-owned subsidiary of UHS, which may create the potential for conflicts of interest. • Lost revenues resulting from the exercise of purchase options, lease expirations and renewals and other transactions ( see Note 4 to the condensed consolidated financial statements – Lease Accounting for additional disclosure related to lease expirations 31 and subsequent vacancies that occurred during the second and third quarters of 2019 and the fourth quarter of 2021 on three specialty hospital facilities; one of which was divested in December, 2023, and another on which the demolition was substantially completed during the second quarter of 2023). • Potential unfavorable tax consequences and reduced income resulting from an inability to complete, within the statutory timeframes, anticipated tax deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code, if, and as, applicable from time-to-time. • The potential unfavorable impact on our business of the deterioration in national, regional and local economic and business conditions, including a worsening of credit and/or capital market conditions, which may adversely affect our ability to obtain capital which may be required to fund the future growth of our business and refinance existing debt with near term maturities. • A deterioration in general economic conditions which may result in increases in the number of people unemployed and/or insured and likely increase the number of individuals without health insurance.
No assurances can be given that the implementation of these new laws will not have a material adverse effect on the business, financial condition or results of operations of our operators. • A subsidiary of UHS is our Advisor and our officers are all employees of a wholly-owned subsidiary of UHS, which may create the potential for conflicts of interest. • Potential unfavorable tax consequences and reduced income resulting from an inability to complete, within the statutory timeframes, anticipated tax deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code, if, and as, applicable from time-to-time. • The potential unfavorable impact on our business of the deterioration in national, regional and local economic and business conditions, including a worsening of credit and/or capital market conditions, which may adversely affect our ability to obtain capital which may be required to fund the future growth of our business and refinance existing debt with near term maturities. • A deterioration in general economic conditions which may result in increases in the number of people unemployed and/or insured and likely increase the number of individuals without health insurance.
Below is a reconciliation of our reported net income to FFO for 2023 and 2022 (in thousands): 2023 2022 Net income $ 15,400 $ 21,102 Depreciation and amortization expense on consolidated investments 27,733 26,557 Depreciation and amortization expense on unconsolidated affiliates 1,205 1,184 Loss on divestiture of real estate assets 232 — Funds From Operations $ 44,570 $ 48,843 Weighted average number of shares outstanding - Diluted 13,814 13,795 Funds From Operations per diluted share $ 3.23 $ 3.54 Our FFO decreased by $4.3 million during 2023, as compared to 2022, due to: (i) a net decrease of $5.7 million in net income, as discussed above, partially offset by; (ii) a $1.2 million increase resulting from an increase in depreciation and amortization expense on consolidated and unconsolidated affiliates, and; (iii) a $232,000 increase resulting from the loss recorded during 2023 on the divestiture of real estate assets.
Below is a reconciliation of our reported net income to FFO for 2024 and 2023 (in thousands): 2024 2023 Net income $ 19,234 $ 15,400 Depreciation and amortization expense on consolidated investments 27,421 27,733 Depreciation and amortization expense on unconsolidated affiliates 1,218 1,205 Loss on divestiture of real estate assets — 232 Funds From Operations $ 47,873 $ 44,570 Weighted average number of shares outstanding - Diluted 13,839 13,814 Funds From Operations per diluted share $ 3.46 $ 3.23 Our FFO increased by $3.3 million during 2024, as compared to 2023, due to: (i) an increase of $3.8 million in net income, as discussed above, partially offset by; (ii) a $232,000 decrease resulting from the loss on divestiture of real estate assets recorded during 2023, and; (iii) a $299,000 decrease resulting from a decrease in depreciation and amortization expense incurred by consolidated and unconsolidated affiliates.
The staffing shortage has required certain of our tenants to enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel or required them to hire expensive temporary personnel. Our tenants have also experienced general inflationary cost increases related to medical supplies as well as certain other operating expenses.
In the past, staffing shortages have, at times, required our tenants to hire expensive temporary personnel and/or enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel. Our tenants have also experienced general inflationary cost increases related to certain other operating expenses.
At December 31, 2023, we had $326.6 million of outstanding borrowings and $3.1 million of letters of credit outstanding under our Credit Agreement. We had $45.3 million of available borrowing capacity, net of the outstanding borrowings and letters of credit outstanding as of December 31, 2023.
At December 31, 2023, we had $326.6 million of outstanding borrowings pursuant to the terms of our Credit Agreement in effect at that time, $3.1 million of outstanding letters of credit and $45.3 million of available borrowing capacity.
These leases comprised approximately 13% of the aggregate rentable square feet of these properties (9% related to renewed leases and 4% related to new leases) 36 Rental rates, tenant improvement costs and rental concessions vary from property to property based upon factors such as, but not limited to, the current occupancy and age of our buildings, local overall economic conditions, proximity to hospital campuses and the vacancy rates, rental rates and capacity of our competitors in the market.
Rental rates, tenant improvement costs and rental concessions vary from property to property based upon factors such as, but not limited to, the current occupancy and age of our buildings, local overall economic conditions, proximity to hospital campuses and the vacancy rates, rental rates and capacity of our competitors in the market.
We also believe that we would remain in compliance if, based on the assumption that the majority of the potential new borrowings will be used to fund investments, the full amount of our commitment was borrowed.
We were in compliance with all of the covenants in the Credit Agreement at each of December 31, 2024 and 2023. We also believe that we would remain in compliance if, based on the assumption that the majority of the potential new borrowings will be used to fund investments, the full amount of our commitment was borrowed.
The $5.7 million decrease was primarily attributable to: • $6.2 million decrease due to an increase in interest expense due to increases in our average borrowing rate and average outstanding borrowings; • $1.25 million decrease related to a settlement and release agreement executed during the fourth quarter of 2022 in connection with the specialty hospital located in Chicago, Illinois; • $802,000 decrease resulting from an increase in demolition expenses incurred during 2023 in connection with the property located in Chicago, Illinois (for additional disclosure, please see Note 4 to the consolidated financial statements-Lease Accounting ), and; 35 • $2.6 million net increase resulting from an aggregate net increase in income generated at various properties, including an increase resulting from a $762,000 reduction in the non-demolition related operating expenses incurred in connection with the property located in Chicago, Illinois, partially offset by decrease resulting from a $232,000 loss on the divestiture of real estate assets recorded during the fourth quarter of 2023 in connection with the sale of a specialty facility located in Corpus Christi, Texas (see Note 3 to the consolidated financial statements-Purchase and Sale Transaction, Acquisitions, Divestitures and New Construction) .
The $3.8 million increase was primarily attributable to: • an increase of $3.5 million resulting from an aggregate net increase in the income generated at various properties; • an increase of $2.0 million resulting from a reduction in the expenses related to our property located in Chicago, Illinois, including $1.1 million from demolition expenses incurred during 2023, and $610,000 related to a property tax reduction recorded during 2024 which related primarily to prior periods; • an increase of $232,000 resulting from a loss on divestiture of real estate assets recorded during the fourth quarter of 2023 in connection with the sale of a specialty facility located in Corpus Christ, Texas (see Note 3 to the consolidated financial statements-Purchase and Sale Transaction, Acquisitions, Divestitures and New Construction), and; • a decrease of $1.9 million resulting from an increase in interest expense due primarily to increases in our average borrowing rate (which gives effect to various interest rate swap agreements) and our average outstanding borrowings pursuant to the terms of our revolving credit agreement.
Other Operating Results Interest Expense: Reflected below are the components of our interest expense during the years ended December 31, 2023 and December 31, 2022 (amounts in thousands): 2023 2022 Revolving credit agreement $ 20,504 $ 9,127 Mortgage interest 1,674 2,257 Interest rate swaps income, net (a.) (5,796 ) (970 ) Amortization of financing fees 732 713 Amortization of fair value of debt (41 ) (50 ) Capitalized interest on major projects (149 ) (322 ) Interest expense, net $ 16,924 $ 10,755 (a.) As disclosed below in Quantitative and Qualitative Disclosures About Market Risk-Market Risks Associated with Financial Instruments , on December 1, 2023, we entered into a fourth interest rate swap with a notional amount of $25 million.
Other Operating Results Interest Expense: Reflected below are the components of our interest expense during the years ended December 31, 2024 and December 31, 2023 (amounts in thousands): 2024 2023 Revolving credit agreement $ 22,848 $ 20,504 Mortgage interest 984 1,674 Interest rate swaps income, net (a.) (5,747 ) (5,796 ) Amortization of financing fees 766 732 Amortization of fair value of debt and other interest (10 ) (41 ) Capitalized interest on major projects — (149 ) Interest expense, net $ 18,841 $ 16,924 (a.) Please see below in Quantitative and Qualitative Disclosures About Market Risk-Market Risks Associated with Financial Instruments , for disclosure regarding our various interest rate swap agreements.
The combined outstanding balance of these various mortgages was $45.0 million and these mortgages had a combined fair value of approximately $43.2 million. The fair value of our debt was computed based upon quotes received from financial institutions.
At December 31, 2023, the mortgages outstanding had a combined carrying value of approximately $33.1 million and a combined fair value of approximately $31.2 million. The fair value of our debt was computed based upon quotes received from financial institutions.
Interest expense increased by $6.2 million during 2023, as compared to 2022, due to: (i) a $11.4 million increase in interest expense on our revolving credit agreement primarily resulting from increases in our average cost of borrowings (6.64% average effective rate during 2023 as compared to 3.28% average effective rate during 2022), and in our average outstanding borrowings ($309.3 million during 2023 as compared to $277.9 million during 2022); (ii) a $4.8 million favorable change in interest rate swap income; (iii) a $583,000 decrease in mortgage interest expense; (iv) a $173,000 increase in interest expense due to a decrease capitalized interest on a major project that was substantially completed during the first quarter of 2023, and; (v) a $28,000 increase in amortization of financing fees and fair value of debt.
Interest expense increased by $1.9 million during 2024, as compared to 2023, due to: (i) a $2.3 million increase in interest expense on our revolving credit agreement primarily resulting from increases in our average cost of borrowings (average borrowing rates, including commitment fee, of 6.78% during 2024 as compared to 6.64% during 2023), and in our average outstanding borrowings ($336.9 million during 2024 as compared to $309.3 million during 2023); (ii) a $149,000 increase due to a decrease in capitalized interest on a major project that was substantially completed during the first quarter of 2023; (iii) a $65,000 increase in amortization of financing fees and fair value of debt; (iv) a $49,000 increase due to a decrease in interest rate swap income, partially offset by; (v) a $690,000 decrease in mortgage interest expense due primarily to repayments of various fixed rate mortgages upon maturity during 2024 and 2023 utilizing borrowings under our revolving credit agreement.
The average amount outstanding under 40 our Credit Agreement during the years ended December 31, 2023, 2022 and 2021 was $309.3 million, $277.9 million and $253.5 million, respectively, with corresponding effective interest rates of 4.8%, 2.9% and 2.2%, respectively, including commitment fees and interest rate swaps/caps.
The average amount outstanding under our Credit Agreement during the years ended December 31, 2024, 2023 and 2022 was $336.9 million, $309.3 million and $277.9 million, respectively, with corresponding effective interest rates of 5.1%, 4.8% and 2.9%, respectively, including commitment fees and interest rate swaps. 38 In our consolidated statements of cash flows, we report cash flows pursuant to our Credit Agreement on a net basis.
In addition, if subsidiaries of UHS exercise their options to purchase the respective leased hospital facilities and FEDs, and do not enter into a substitution arrangement upon expiration of the lease terms or otherwise, our future revenues and results of operations could decrease if we were unable to earn a favorable rate of return on the sale proceeds received, as compared to the rental revenue currently earned pursuant to these leases.
In addition, if subsidiaries of UHS exercise their options to purchase the respective leased hospital facilities and FEDs, and do not enter into a substitution arrangement upon expiration of the lease terms or otherwise, our future revenues and results of operations could decrease if we were unable to earn a favorable rate of return on the sale proceeds received, as compared to the rental revenue currently earned pursuant to these leases. • Although interest rates have moderated recently, the increase in interest rates during the past few years has significantly increased our interest expense thereby reducing our net income, cash provided by operating activities and funds from operations, as well as unfavorably impacting our ability to access the capital markets on favorable terms.
Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Patient Protection and Affordable Care Act (the “ACA”). President Biden has undertaken and is expected to undertake executive actions that will strengthen the ACA and may reverse the policies of the prior administration.
Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Patient Protection and Affordable Care Act (the “ACA”).
(c) Consists of $326.6 million of borrowings outstanding as of December 31, 2023 under the terms of our $375 million Credit Agreement which matures on July 2, 2025. The amount outstanding approximates fair value as of December 31, 2023.
(c) Consists of $348.9 million of borrowings outstanding as of December 31, 2024 under the terms of our $425 million Credit Agreement which matures on September 30, 2028. The amount outstanding approximates fair value as of December 31, 2024.
Please see Note 8 to the condensed consolidated financial statements – Summarized Financial Information of Equity Affiliates for additional disclosure related to a fourth quarter, 2021 transaction between us and the minority partner in Grayson Properties, LP. • Fluctuations in the value of our common stock, which, among other things could be affected by the current increasing interest rate environment. • Our business, results of operations, financial condition, or stock price may be adversely affected if we are not able to achieve our environmental, social and governance (“ESG”) goals or comply with emerging ESG regulations, or otherwise meet the expectations of our stakeholders with respect to ESG matters. • Other factors referenced herein or in our other filings with the Securities and Exchange Commission.
The closing of the transfer must occur within 60 to 90 days of the acceptance by the Non-Offering Member. • Fluctuations in the value of our common stock, which, among other things could be affected by the current increasing interest rate environment. • Our business, results of operations, financial condition, or stock price may be adversely affected if we are not able to achieve our environmental, social and governance (“ESG”) goals or comply with emerging ESG regulations, or otherwise meet the expectations of our stakeholders with respect to ESG matters. • Other factors referenced herein or in our other filings with the Securities and Exchange Commission.
Such competition is experienced in markets including, but not limited to, McAllen, Texas, the site of our McAllen Medical Center, a 370-bed acute care hospital. • Changes in, or inadvertent violations of, tax laws and regulations and other factors that can affect REITs and our status as a REIT, including possible future changes to federal tax laws that could materially impact our ability to defer gains on divestitures through like-kind property exchanges. • The individual and collective impact of the changes made by the CARES Act on REITs and their security holders are uncertain and may not become evident for some period of time; it is also possible additional legislation could be enacted in the future as a result of the COVID-19 pandemic which may affect the holders of our securities. • Should we be unable to comply with the strict income distribution requirements applicable to REITs, utilizing only cash generated by operating activities, we would be required to generate cash from other sources which could adversely affect our financial condition. 33 • Our ownership interest in four LLCs/LPs in which we hold non-controlling equity interests.
Such competition is experienced in markets including, but not limited to, McAllen, Texas, the site of our McAllen Medical Center, a 370-bed acute care hospital. • Changes in, or inadvertent violations of, tax laws and regulations and other factors that can affect REITs and our status as a REIT, including possible future changes to federal tax laws that could materially impact our ability to defer gains on divestitures through like-kind property exchanges. • Should we be unable to comply with the strict income distribution requirements applicable to REITs, utilizing only cash generated by operating activities, we would be required to generate cash from other sources which could adversely affect our financial condition. • We hold non-controlling equity interests in four LLCs/LPs, pursuant to the operating and/or partnership agreements of which the third-party member and the Trust, at any time, potentially subject to certain conditions, have the right to make an offer (“Offering Member”) to the other member(s) (“Non-Offering Member”) in which it either agrees to: (i) sell the entire ownership interest of the Offering Member to the Non-Offering Member at a price as determined by the Offering Member (“Transfer Price”), or; (ii) purchase the entire ownership interest of the Non-Offering Member at the equivalent proportionate Transfer Price.
The carrying amount and fair value of borrowings outstanding pursuant to the Credit Agreement was $326.6 million at December 31, 2023. There are no compensating balance requirements.
At December 31, 2024, we had $348.9 million of outstanding borrowings pursuant to the terms of our $425 million Credit Agreement and $76.1 million of available borrowing capacity. The carrying amount and fair value of borrowings outstanding pursuant to the Credit Agreement was $348.9 million at December 31, 2024. There are no compensating balance requirements.
Those filings are the sole responsibility of UHS and are not incorporated by reference herein. • Failure of UHS or the other operators of our hospital facilities to comply with governmental regulations related to the Medicare and Medicaid licensing and certification requirements could have a material adverse impact on our future revenues and the underlying value of the property. • Real estate market factors, including without limitation, the supply and demand of office space and market rental rates, changes in interest rates as well as an increase in the development of medical office condominiums in certain markets. • The impact of property values and results of operations of severe weather conditions, including the effects of hurricanes. • Government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs. • The issues facing the health care industry that affect the operators of our facilities, including UHS, such as: changes in, or the ability to comply with, existing laws and government regulations; unfavorable changes in the levels and terms of reimbursement by third party payers or government programs, including Medicare (including, but not limited to, the potential unfavorable impact of future reductions to Medicare reimbursements resulting from the Budget Control Act of 2011, as discussed in the next bullet point below) and Medicaid (most states have reported significant budget deficits that have, in the past, resulted in the reduction of Medicaid funding to the operators of our facilities, including UHS); demographic changes; the ability to enter into managed care provider agreements on acceptable terms; an increase in uninsured and self-pay patients which unfavorably impacts the collectability of patient accounts; decreasing in-patient admission trends; technological and pharmaceutical improvements that may increase the cost of providing, or reduce the demand for, health care, and; the ability to attract and retain qualified medical personnel, including physicians. 32 • The Budget Control Act of 2011 imposed annual spending limits for most federal agencies and programs aimed at reducing budget deficits by $917 billion between 2012 and 2021, according to a report released by the Congressional Budget Office.
In addition, the United States has recently enacted and proposed to enact significant new tariffs, which could adversely impact our and our tenants’ business, financial condition and results of operations as a result of the increased costs on our and their operations and supply chains due to tariffs. • The issues facing the health care industry that affect the operators of our facilities, including UHS, such as: changes in, or the ability to comply with, existing laws and government regulations; unfavorable changes in the levels and terms of reimbursement by third party payers or government programs, including Medicare (including, but not limited to, the potential unfavorable impact of future reductions to Medicare reimbursements resulting from the Budget Control Act of 2011, as discussed in the next bullet point below) and Medicaid (most states have reported significant budget deficits that have, in the past, resulted in the reduction of Medicaid funding to the operators of our facilities, including UHS); demographic changes; the ability to enter into managed care provider agreements on acceptable terms; an increase in uninsured and self-pay patients which unfavorably impacts the collectability of patient accounts; decreasing in-patient admission trends; technological and pharmaceutical improvements that may increase the cost of providing, or reduce the demand for, health care, and; the ability to attract and retain qualified medical personnel, including physicians. • The Budget Control Act of 2011 imposed annual spending limits for most federal agencies and programs aimed at reducing budget deficits including Medicare payment reductions of up to 2% per fiscal year.
During 2022, the $46.8 million of net cash provided by operating activities was approximately $7.6 million greater than the $39.2 million of dividends paid during 2022.
We declared and paid dividends of $40.4 million during 2024 and $39.8 million during 2023. During 2024, the $46.9 million of cash provided by operating activities was approximately $6.5 million greater than the $40.4 million of dividends paid during 2024.
Revenues increased by $5.0 million, or 5.5%, during 2023, as compared to 2022.
Revenues increased by $3.4 million, or 3.6%, during 2024, as compared to 2023.
This may impact their ability and willingness to make rental payments. • A substantial portion of our revenues are dependent upon one operator, UHS, which comprised approximately 41%, 40% and 37% of our consolidated revenues for the years ended December 31, 2023, 2022 and 2021, respectively.
Such factors include, among other things, the following: • A substantial portion of our revenues are dependent upon one operator, UHS, which comprised approximately 40%, 41% and 40% of our consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively.
Loan premiums, in the case of above market rate assumed loans, or loan discounts, in the case of below market assumed loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate.
Loan premiums, in the case of above market rate assumed loans, or loan discounts, in the case of below market assumed loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate. 32 The fair values of the tangible assets of an acquired property are determined based on comparable land sales for land and replacement costs adjusted for physical and market obsolescence for the improvements.
The margins over adjusted term SOFR, Base Rate and the facility fee are based upon our total leverage ratio. At December 31, 2023, the applicable margin over the adjusted term SOFR rate was 1.20%, the margin over the Base Rate was 0.20% and the facility fee was 0.20%.
At December 31, 2024, the applicable margin over the Adjusted Term SOFR rate for revolving loans was 1.20%, the margin over the Base Rate was 0.20% and the facility fee was 0.20%. At December 31, 2024, the applicable margin over the Adjusted Term SOFR rate for term loans was 1.35% and the margin over the Base Rate was .35%.
(d.) This loan is scheduled to mature within the next twelve months, at which time we will either refinance pursuant to a new mortgage loan or repay the mortgage balance in full utilizing borrowings under our Credit Agreement. The mortgages are secured by the real property of the buildings as well as property leases and rents.
(b.) This fixed rate mortgage loan was fully repaid on April 10, 2024, utilizing borrowings under our Credit Agreement. (c.) This loan is scheduled to mature within the next twelve months, at which time we will either refinance pursuant to a new mortgage loan or repay the mortgage balance in full utilizing borrowings under our Credit Agreement.
That ruling was ultimately appealed to the United States Supreme Court, which decided in California v. Texas that the plaintiffs in the matter lacked standing to bring their constitutionality claims.
That ruling was ultimately appealed to the United States Supreme Court, which decided in California v. Texas that the plaintiffs in the matter lacked standing to bring their constitutionality claims. On September 7, 2022, the ACA faced its most recent challenge when a Texas Federal District Court judge, in the case of Braidwood Management v.
Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related costs.
Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related costs. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases.
Please see Note 4 to the condensed consolidated financial statements - Lease Accounting, for additional information related to this asset purchase and sale transaction between us and UHS. • We cannot assure you that subsidiaries of UHS will renew the leases on the hospital facilities and free-standing emergency departments, upon the scheduled expirations of the existing lease terms.
We cannot assure you that subsidiaries of UHS will renew the leases on the hospital facilities and free-standing emergency departments, upon the scheduled expirations of the existing lease terms.
The increase during 2023, as compared to 2022, was due primarily to: (i) the aggregate net increase generated at various properties, including revenues generated at a newly constructed and recently opened MOB located in Reno Nevada, and the newly acquired MOB located in McAllen, Texas, partially offset by; (ii) a $1.25 million decrease related to a settlement and release agreement executed during the fourth quarter of 2022 in connection with the specialty hospital located in Chicago, Illinois.
The increase during 2024, as compared to 2023, was due primarily to an aggregate net increase generated at various properties, including revenues generated at a newly constructed MOB located in Reno Nevada, that opened during the first quarter of 2023, and the revenues generated at an MOB located in McAllen, Texas, that was acquired during the third quarter of 2023.
FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income determined in accordance with GAAP.
FFO adjusts for the effects of certain items such as gains and losses on the sale of incidental assets that occurred during the periods presented. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income determined in accordance with GAAP.
Disclosures Related to Certain Hospital Facilities Please refer to Note 4 to the consolidated financial statements - Lease Accounting, for additional information regarding certain of our hospital facilities including the lease renewal in December, 2021, for Wellington Regional Medical Center located in West Palm Beach, Florida, information related to a vacant facility located in Evansville, Indiana, and a vacant parcel of land located in Chicago, Illinois, and disclosure regarding the asset purchase and sale agreement, as amended, with wholly-owned subsidiaries of UHS that was completed on December 31, 2021.
Please see Note 5 to the consolidated financial statements - Debt and Financial Instruments, for additional disclosure. Please refer to Note 4 to the consolidated financial statements - Lease Accounting, for additional information regarding certain of our hospital facilities including information related to a vacant facility located in Evansville, Indiana, and a vacant parcel of land located in Chicago, Illinois.
The following table summarizes the schedule of maturities of our outstanding borrowing under our revolving credit facility (“Credit Agreement”), the outstanding mortgages applicable to our properties recorded on a consolidated basis and our other contractual obligations as of December 31, 2023 (amounts in thousands): Payments Due by Period (dollars in thousands) Debt and Contractual Obligation Total Less than 1 Year 2-3 years 4-5 years After 5 years Long-term non-recourse debt-fixed (a) (b) $ 33,062 $ 13,550 $ 1,540 $ 1,279 $ 16,693 Long-term debt-variable (c) 326,600 — 326,600 — — Estimated future interest payments on debt outstanding as of December 31, 2023 (d) 39,039 22,770 12,571 1,472 2,226 Operating leases (e) 39,547 704 1,408 1,408 36,027 Construction commitments (f) 9,370 9,370 — — — Total contractual obligations $ 447,618 $ 46,394 $ 342,119 $ 4,159 $ 54,946 (a) The mortgages are secured by the real property of the buildings as well as property leases and rents.
As of December 31, 2023, we were party to an off balance sheet arrangement consisting of a $3.1 million standby letter of credit related to Grayson Properties II. 39 The following table summarizes the schedule of maturities of our outstanding borrowing under our revolving credit facility (“Credit Agreement”), the outstanding mortgages applicable to our properties recorded on a consolidated basis and our other contractual obligations as of December 31, 2024 (amounts in thousands): Payments Due by Period (dollars in thousands) Debt and Contractual Obligation Total Less than 1 Year 2-3 years 4-5 years After 5 years Long-term non-recourse debt-fixed (a) (b) $ 19,512 $ 939 $ 1,227 $ 1,333 $ 16,013 Long-term debt-variable (c) 348,900 — — 348,900 — Estimated future interest payments on debt outstanding as of December 31, 2024 (d) 80,720 20,894 41,700 16,595 1,531 Operating leases (e) 38,842 704 1,408 1,408 35,322 Construction commitments (f) 8,661 8,661 — — — Total contractual obligations $ 496,635 $ 31,198 $ 44,335 $ 368,236 $ 52,866 (a) The mortgages are secured by the real property of the buildings as well as property leases and rents.
The staffing shortage has required certain of our tenants to enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel or required them to hire expensive temporary personnel. Our tenants have also experienced general inflationary cost increases related to 37 medical supplies as well as certain other operating expenses.
In addition, certain of our tenants have experienced staffing shortages that has, at various times, required the hiring of expensive temporary personnel and/or enhanced wages and benefits to recruit and retain nurses and other clinical staff and support personnel.
Under the terms of the Credit Agreement, we may request that the revolving line of credit be increased by up to an additional $50 million. Borrowings under the new facility are guaranteed by certain subsidiaries of the Trust.
Under the terms of the Credit Agreement, we may request that the revolving line of credit and/or the Term Loan be increased by up to an additional aggregate amount of $50 million, and we have the option to extend the maturity date for up to two additional six-month periods.
Many of these factors, which had a material unfavorable impact on the operating results of certain of our tenants during 2022, moderated to a certain degree during 2023; • Future operations and financial results of our tenants, and in turn ours, may be materially impacted by numerous factors including potential future developments related to COVID-19.
The impact of inflation and/or staffing shortages, which had a material unfavorable impact on the operating results of certain of our tenants during 2022, moderated to a certain degree during 2023 and 2024.
Other operating expenses incurred in connection with these properties totaled $27.8 million (including $1.1 million of demolition expenses incurred as of December 31, 2023) and $25.0 million (including $332,000 of demolition expenses incurred as of December 31, 2022), respectively.
Our other operating expenses include expenses related to the consolidated MOBs as well as the vacant land and the vacant specialty facility (as discussed herein). Other operating expenses incurred in connection with these properties totaled $25.8 million (net of a $610,000 prior period property tax reduction) and $27.8 million (including $1.1 million of demolition expenses) during 2024 and 2023, respectively.
As such, the effects of increased interest rates on our borrowings may unfavorably impact our future expenses and rental revenue and may potentially have a negative impact on future lease renewal terms, the underlying value of our properties, and our ability to grow our portfolio and the value of our common shares. • In 2021, the rate of inflation in the United States began to increase and has since risen to levels not experienced in over 40 years.
The effects of increased interest rates on our borrowings, including the unfavorable impact on the terms of recent and future interest rate swap and/or cap agreements, could unfavorably impact our future rental revenue and expenses, including interest expense, and may potentially have a material unfavorable impact on our future net income, cash provided by operating activities, funds from operations, lease renewal terms, the underlying value of our properties, our ability to grow our portfolio, and the value of our common shares. • During the past few years, our tenants have experienced inflationary pressures, primarily in personnel and certain other costs.
The Trust will also pay a quarterly revolving facility fee ranging from 0.15% to 0.35% (depending on the Trust’s total leverage ratio) on the committed amount of the Credit Agreement. The Credit Agreement also provides for options to extend the maturity date and borrowing availability for two additional six-month periods.
The Trust will also pay a quarterly facility fee on the $300 million revolving loan commitment ranging from 0.15% to 0.35% (depending on the Trust’s total leverage ratio). The margins over Adjusted Term SOFR, Base Rate and the facility fee are based upon our total leverage ratio.

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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 changeIn January 2020, we entered into an interest rate swap agreement on a total notional amount of $35 million with a fixed interest rate of 1.4975% that we designated as a cash flow hedge. The interest rate swap became effective on January 15, 2020 and is scheduled to mature on September 16, 2024.
Biggest changeExpired Interest Rate Swap Agreements in 2024: On September 16, 2024, the following interest rate swap agreements, on an aggregate total notional amount of $85 million, expired on their maturity dates: (i) an interest rate swap on a total notional amount of $35 million, with a fixed interest rate of 1.4975%, that was effective since January, 2020, and; (ii) an interest rate swap on a total notional amount of $50 million, with a fixed interest rate of 1.144%, that was effective since September, 2019.
On May 15, 2023, this interest rate swap agreement was modified to replace the benchmark rate from LIBOR to term SOFR. If one-month term SOFR is above 0.505%, the counterparty pays us, and if one-month term SOFR is less than 0.505%, we pay the counterparty, the difference between the fixed rate of 0.505% and one-month term SOFR.
On May 15, 2023, this interest rate swap agreement was modified to replace the benchmark rate from 40 LIBOR to term SOFR. If one-month term SOFR is above 0.505%, the counterparty pays us, and if one-month term SOFR is less than 0.505%, we pay the counterparty, the difference between the fixed rate of 0.505% and one-month term SOFR.
Financial Instruments In December 2023, we entered into an interest rate swap agreement on a total notional amount of $25 million with a fixed interest rate of 3.9495% that we designated as a cash flow hedge. The interest rate swap became effective on December 1, 2023 and is scheduled to mature on December 1, 2027.
In December, 2023, we entered into an interest rate swap agreement on a total notional amount of $25 million with a fixed interest rate of 3.9495% that we designated as a cash flow hedge. The interest rate swap became effective on December 1, 2023 and is scheduled to mature on December 1, 2027.
In March 2020, we entered into an interest rate swap agreement on a total notional amount of $55 million with a fixed interest rate of 0.565% that we designated as a cash flow hedge. The interest rate swap became effective on March 25, 2020 and is scheduled to mature on March 25, 2027.
In March, 2020, we entered into an interest rate swap agreement on a total notional amount of $55 million with a fixed interest rate of 0.505% that we designated as a cash flow hedge. The interest rate swap became effective on March 25, 2020 and is scheduled to mature on March 25, 2027.
As calculated based upon our variable rate debt outstanding as of December 31, 2023 that is subject to interest rate fluctuations, and giving effect to the above-mentioned interest rate swap, each 1% change in interest rates would impact our net income by approximately $1.6 million.
As calculated based upon our variable rate debt outstanding as of December 31, 2024 that is subject to interest rate fluctuations, and giving effect to the above-mentioned interest rate swap, each 1% change in interest rates would impact our net income by approximately $1.8 million.
During the twelve months of 2023, we received approximately $5.8 million from the counterparties (approximately $3.3 million of which relates to the two swaps that are scheduled to expire on September 16, 2024), adjusted for the previous quarter's accrual, pursuant to the terms of the swaps.
During the twelve months of 2023, we received approximately $5.8 million from the counterparties (approximately $3.3 million of which relates to the two swaps that expired on September 16, 2024), adjusted for the previous quarter's accrual, pursuant to the terms of the swaps.
At December 31, 2023, the fair value of our interest rate swaps was a net asset of $7.3 million which is included in deferred charges and other assets on the accompanying condensed consolidated balance sheet.
At December 31, 2024, the fair value of our interest rate swaps was a net asset of $6.4 million which is included in deferred charges and other assets on the accompanying consolidated balance sheet.
As of December 31, 2023, the fair value and carrying-value of our debt is approximately $357.8 million and $359.7 million, respectively. As of that date, the carrying value exceeds the fair value by approximately $1.8 million. The table below presents information about our financial instruments that are sensitive to changes in interest rates.
As of December 31, 2024, the fair value and carrying-value of our debt is approximately $366.6 million and $368.4 million, respectively. As of that date, the carrying value exceeds the fair value by approximately $1.8 million. The table below presents information about our financial instruments that are sensitive to changes in interest rates.
(c) Includes: (i) a $50.0 million interest rate swap with a fixed interest rate of 1.064% that is scheduled to mature in September, 2024; (ii) a $35 million interest rate swap with a fixed interest rate of 1.410% that is scheduled to mature in September, 2024; (iii) a $55 million interest rate swap with a fixed interest rate of 0.5050% that is scheduled to mature in March, 2027, and; (iv) a $25 million interest rate swap with a fixed interest rate of 3.9495% that is scheduled to mature in December, 2027.
(c) Includes: (i) a $55 million interest rate swap with a fixed interest rate of 0.5050% that is scheduled to mature in March, 2027; (ii) a $25 million interest rate swap with a fixed interest rate of 3.9495% that is scheduled to mature in December, 2027, and; (iii) a $85 million interest rate swap with a fixed interest rate of 3.2725% that is scheduled to mature in September, 2028.
(b) Includes $326.6 million of outstanding borrowings under the terms of our $375 million revolving credit agreement.
(b) Consists of outstanding borrowings under the terms of our $425 million revolving credit agreement.
The interest rate swaps include the $50 million swap agreement entered into during the third quarter of 2019, the $35 million swap agreement entered into in January 2020, the $55 million swap agreement entered into in March, 2020 and the $25 million swap agreement entered into in December, 2023.
The interest rate swaps include the $55 million swap agreement entered into in March, 2020 and the $25 million swap agreement entered into in December, 2023 and the $85 million swap agreement entered into in October, 2024.
For debt obligations, the amounts of which are as of December 31, 2023, the table presents principal cash flows and related weighted average interest rates by contractual maturity dates. 43 Maturity Date, Year Ending December 31 (Dollars in thousands) 2024 2025 2026 2027 2028 Thereafter Total Long-term debt: Fixed rate: Debt(a) $ 13,550 $ 939 $ 601 $ 626 $ 653 $ 16,693 $ 33,062 Average interest rates 4.4 % 4.3 % 4.2 % 4.2 % 4.3 % 4.4 % 4.3 % Variable rate: Debt(b) $ — $ 326,600 $ — $ — $ — $ — $ 326,600 Average interest rates — 6.4 % — — — — 6.4 % Interest rate swaps: Notional amount (c) $ 85,000 $ — $ — $ 80,000 $ — $ — $ 165,000 Interest rates 1.210 % — — 1.580 % — — 1.390 % (a) Consists of non-recourse mortgage notes payable.
Maturity Date, Year Ending December 31 (Dollars in thousands) 2025 2026 2027 2028 2029 Thereafter Total Long-term debt: Fixed rate: Debt (a) $ 939 $ 601 $ 626 $ 653 $ 680 $ 16,013 $ 19,512 Average interest rates 4.3 % 4.2 % 4.2 % 4.3 % 4.3 % 4.4 % 4.3 % Variable rate: Debt (b) $ — $ — $ — $ 348,900 $ — $ — $ 348,900 Average interest rates — — — 6.6 % — — 6.6 % Interest rate swaps: Notional amount (c) $ — $ — $ 80,000 $ 85,000 $ — $ — $ 165,000 Interest rates — — 1.581 % 3.273 % — — 2.453 % (a) Consists of non-recourse mortgage notes payable.
On May 15, 2023, this interest rate swap agreement was modified to replace the benchmark rate from LIBOR to term SOFR. If the one-month term SOFR is above 1.41%, the counterparty pays us, and if the one-month term SOFR is less than 1.41%, we pay the counterparty, the difference between the fixed rate of 1.41% and one-month term SOFR.
The interest rate swap became effective on October 2, 2024 and is scheduled to mature on September 30, 2028. If one-month term SOFR is above 3.2725%, the counterparty pays us, and if one-month term SOFR is less than 3.2725%, we pay the counterparty, the difference between the fixed rate of 3.2725% and one-month term SOFR.
During the third quarter of 2019, we entered into an interest rate swap agreement on a total notional amount of $50 million with a fixed interest rate of 1.144% that we designated as a cash flow hedge. The interest rate swap became effective on September 16, 2019 and is scheduled to mature on September 16, 2024.
ITEM 7A. Quantitative and Qualita tive Disclosures About Market Risk Market Risks Associated with Financial Instruments Financial Instruments Active Interest Rate Swap Agreements: In October, 2024, we entered into an interest rate swap agreement on a total notional amount of $85 million with a fixed interest rate of 3.2725% that we designated as a cash flow hedge.
Removed
ITEM 7A. Quantitative and Qualita tive Disclosures About Market Risk Market Risks Associated with Financial Instruments LIBOR Transition In 2017, the U.K. Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to phase out LIBOR and stop compelling banks to submit rates for its calculation.
Added
This interest rate swap was entered into in replacement of two interest rate swap agreements, on an aggregate total notional amount of $85 million, that expired on September 16, 2024, as discussed below.
Removed
In 2021, the FCA further announced that effective January 1, 2022, the one week and two-month USD LIBOR tenors are no longer being published.
Added
During the twelve months of 2024, we received approximately $5.7 million from the counterparties (approximately $2.5 million of which relates to the two swaps that expired on September 16, 2024), adjusted for the previous quarter's accrual, pursuant to the terms of the swaps.
Removed
Additionally, effective July 1, 2023 all other USD LIBOR tenors are no longer published. 42 The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR in derivatives and other financial contracts.
Added
For debt obligations, the amounts of which are as of December 31, 2024, the table presents principal cash flows and related weighted average interest rates by contractual maturity dates.
Removed
We are not able to predict how the markets will respond to SOFR or any other alternative reference rate as the transition away from LIBOR continues. Any changes adopted by FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR.
Removed
If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.
Removed
At December 31, 2022, we had contracts that were indexed to LIBOR, such as our unsecured revolved credit facility and interest rate derivative.
Removed
On May 15, 2023 we entered into the first amendment to our amended and restated revolving credit agreement ("Credit Agreement") dated as of July 2, 2021 among the Trust as borrower, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent.
Removed
The amendment replaces LIBOR Rate with adjusted term SOFR as an alternative benchmark rate for purposes under the Credit Agreement for settings of benchmark rates the occur on or after the closing date in accordance with the benchmark replacement provisions set forth in the Credit Agreement.
Removed
On May 15, 2023, this interest rate swap agreement was modified to replace the benchmark rate from LIBOR to term SOFR. If one-month term SOFR is above 1.064%, the counterparty pays us, and if one-month term SOFR is less than 1.064%, we pay the counterparty, the difference between the fixed rate of 1.064% and one-month term SOFR.
Removed
During the twelve months of 2022, we paid or accrued approximately $414,000 to the counterparties by us, offset by approximately $1.4 million in receipts from the counterparties, adjusted for accruals, pursuant to the terms of the swaps.

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