What changed in this filing

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Item 1A. Risk Factors

2020-11-13 compared with 2020-08-13 · 87 added, 73 removed, 86 unchanged (65% of the section changed)

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There were no material changes from the risk factors previously disclosed in our 2019 Annual Report on Form 10-K, as filed with the SEC on March 19, 2020, except as noted below.

Investment Risks

We have not had sufficient cash available from operations to pay distributions, and therefore, we have paid a portion of distributions from the net proceeds of our initial offering and borrowings, and in the future, may continue to pay distributions from borrowings or from other sources in anticipation of future cash flows.

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Due to the impact the COVID-19 pandemic has had on the United States and globally, and the uncertainty of the severity and duration of the COVID-19 pandemic and its effects, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects by decreasing our distributions to stockholders.

Consequently, our board authorized a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on April 1, 2020 and ending on August 31, 2020, which were or will be calculated based on 365 days in the calendar year and are equal to $0.001095890 per share of our Class T and Class I common stock.

Consequently, our board authorized a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on April 1, 2020 and ending on November 30, 2020, which were or will be calculated based on 365 days in the calendar year and are equal to $0.001095890 per share of our Class T and Class I common stock.

Such daily distribution is equal to an annualized distribution rate of $0.40 per share.

The distributions were or will be aggregated and paid in cash or shares of our common stock pursuant to the DRIP, on a monthly basis, in arrears, only from legally available funds.

The distributions paid for the six months ended June 30, 2020 and 2019, along with the amount of distributions reinvested pursuant to our DRIP Offerings and the sources of distributions as compared to cash flows from operations were as follows:

Six Months Ended June 30,

The distributions paid for the nine months ended September 30, 2020 and 2019, along with the amount of distributions reinvested pursuant to our DRIP Offerings and the sources of distributions as compared to cash flows from operations were as follows:

Nine Months Ended September 30,

Distributions paid in cash $ 13,932,000 $ 15,446,000

Distributions reinvested 15,681,000 19,056,000

$ 29,613,000 $ 34,502,000

Sources of distributions:

Cash flows from operations $ 29,613,000 100 % $ 29,106,000 84.4 %

Proceeds from borrowings

Offering proceeds — — 5,396,000 15.6

As of June 30, 2020 , any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and all or any portion of a distribution to our stockholders may have been paid from net offering proceeds and borrowings.

$ 29,613,000 100 % $ 34,502,000 100 %

As of September 30, 2020, any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and all or any portion of a distribution to our stockholders may have been paid from net offering proceeds and borrowings.

The payment of distributions from our net offering proceeds and borrowings have reduced the amount of capital we ultimately invested in assets and negatively impacted the amount of income available for future distributions.

As of June 30, 2020 , we had an amount payable of $1,015,000 to our advisor or its affiliates primarily for asset management fees, which will be paid from cash flows from operations in the future as it becomes due and payable by us in the ordinary course of business consistent with our past practice.

The distributions paid for the six months ended June 30, 2020 and 2019, along with the amount of distributions reinvested pursuant to our DRIP Offerings and the sources of our distributions as compared to FFO were as follows:

Six Months Ended June 30,

As of September 30, 2020, we had an amount payable of $956,000 to our advisor or its affiliates primarily for asset management fees, which will be paid from cash flows from operations in the future as it becomes due and payable by us in the ordinary course of business consistent with our past practice.

The distributions paid for the nine months ended September 30, 2020 and 2019, along with the amount of distributions reinvested pursuant to our DRIP Offerings and the sources of our distributions as compared to FFO were as follows:

Nine Months Ended September 30,

Distributions paid in cash $ 13,932,000 $ 15,446,000

Distributions reinvested 15,681,000 19,056,000

$ 29,613,000 $ 34,502,000

Sources of distributions:

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Offering proceeds — — 13,053,000 37.8

$ 29,613,000 100 % $ 34,502,000 100 %

The payment of distributions from sources other than FFO may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds.

For a further discussion of FFO, a non-GAAP financial measure, including a reconciliation of our GAAP net income (loss) to FFO, see Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds from Operations and Modified Funds from Operations.

In light of the impact that the COVID-19 pandemic has had on our business operations, we have reduced distribution payments to our stockholders and partially suspended our share repurchase plan, and there is no assurance as to when we will be able to increase the amount of distributions to our stockholders or reinstate our share repurchase plan for additional stockholders, if at all.

In light of the impact that the COVID-19 pandemic has had on our business operations and cash flows, and the uncertainty as to the ultimate severity and duration of the outbreak and its effects, on March 31, 2020, our board reduced our monthly distributions to stockholders from an annualized rate of $0.60 per share to $0.40 per share of our common stock effective with the April 2020 distribution paid in May 2020.

Our board also suspended our share repurchase plan with respect to all repurchase requests other than repurchases resulting from the death or qualifying disability of stockholders, beginning with share repurchase requests submitted for repurchase during the second quarter of 2020.

Our board will continue to evaluate the ongoing and future effects of the COVID-19 pandemic on our financial condition, earnings, debt covenants and other

possible needs for cash, and applicable law, in considering our ability to continue to pay or increase distributions and reinstate our share purchase plan in the future.

Our stockholders have no contractual or other legal right to distributions or share repurchases that have not been authorized by our board.

There can be no assurance when or if distributions and share repurchases will be authorized in the future, and if authorized, whether distributions or share repurchases will be in amounts consistent with our historical levels of distributions and share repurchases.

The estimated value per share of our common stock may not be an accurate reflection of the fair value of our assets and liabilities and likely will not represent the amount of net proceeds that would result if we were liquidated, dissolved or completed a merger or other sale of our company.

On April 2, 2020, our board, at the recommendation of the audit committee, which is comprised solely of independent directors, and after considering the uncertainties presented by the COVID-19 pandemic, unanimously approved and maintained an estimated per share NAV of our common stock of $9.54.

We are providing this estimated per share NAV to assist broker-dealers in connection with their obligations under FINRA Rule 2231 with respect to customer account statements.

We provided this estimated per share NAV to assist broker-dealers in connection with their obligations under FINRA Rule 2231 with respect to customer account statements.

The valuation was performed in accordance with the methodology provided in Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs , issued by the IPA in April 2013, in addition to guidance from the SEC.

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FINRA rules provide no guidance on the methodology an issuer must use to determine its estimated per share NAV.

As with any valuation methodology, our independent valuation firm’s methodology is based upon a number of estimates and assumptions that may not be accurate or complete.

As with any valuation methodology, our independent valuation firm’s methodology was based upon a number of estimates and assumptions that may not have been accurate or complete.

Different parties with different assumptions and estimates could derive a different estimated per share NAV, and these differences could be significant.

The estimated per share NAV was not audited or reviewed by our independent registered public accounting firm and does not represent the fair value of our assets or liabilities according to GAAP.

In addition, the estimated per share NAV is an estimate as of a given point in time and the value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets and changes in the real estate and capital markets.

The estimated per share NAV was not audited or reviewed by our independent registered public accounting firm and did not represent the fair value of our assets or liabilities according to GAAP.

In addition, the estimated per share NAV was an estimate as of a given point in time and the value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets and changes in the real estate and capital markets.

Accordingly, with respect to the estimated per share NAV, we can give no assurance that:

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• the methodology used to estimate our per share NAV would be acceptable to FINRA or comply with reporting requirements under the Employee Retirement Income Security Act of 1974, the Code, other applicable law, or the applicable provisions of a retirement plan or individual retirement account.

Further, the estimated per share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of December 31, 2019, prior to the reported emergence of COVID-19 in the United States.

Further, the estimated per share NAV was based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of December 31, 2019, prior to the reported emergence of COVID-19 in the United States.

A combination of economic factors driven by the COVID-19 pandemic, including the decline in property sales and the temporary closure of non-essential businesses, has drastically impacted the traditional valuation methodologies for almost all types of commercial real estate, including healthcare real estate.

We are continuously monitoring the impact the COVID-19 pandemic is having on our business, residents, tenants, operating partners, managers and on the United States and global economies.

The impact of the COVID-19 pandemic on our portfolio of investments may be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat COVID-19 and reactions by consumers, companies, governmental entities and capital markets.

Therefore, although we intend to publish an updated estimated per share NAV on an annual basis, we may be required to reevaluate the estimated per share NAV sooner if the COVID-19 pandemic has a material adverse impact on our tenants, operators, managers or portfolio of investments or us.

We continue to closely monitor the impact the COVID-19 pandemic is having on our business, residents, tenants, operating partners, managers and on the United States and global economies.

The impact of the COVID-19 pandemic on our portfolio of investments may be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat COVID-19 and reactions by consumers, companies, governmental entities and capital markets.

The estimated per share NAV of our Class T and Class I common stock of $9.54 is within the range of estimated values, but lower than the mid-point of $9.75 provided by the independent third party valuation firm that conducted the valuation, and is the same estimated per share NAV previously determined by the board and calculated as of December 31, 2018.

For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of the estimated per share NAV, see our Current Report on Form 8-K filed with the SEC on April 3, 2020.

A significant portion of our annual base rent may be concentrated in a small number of tenants.

Therefore, non-renewals, terminations or lease defaults by any of these significant tenants could reduce our net income and have a negative effect on our ability to pay distributions to our stockholders.

As of August 13, 2020 , rental payments by our tenant, RC Tier Properties, LLC, accounted for approximately 10.2% of our total property portfolio’s annualized base rent or annualized NOI.

The success of our investments materially depends upon the financial stability of the tenants leasing the properties we own.

Therefore, a non-renewal after the expiration of a lease term, termination, default or other failure to meet rental obligations by significant tenants, such as RC Tier Properties, LLC, would significantly lower our net income.

These events could cause us to reduce the amount of distributions to our stockholders.

A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area.

We have a concentration of properties in particular geographic areas;

therefore, any adverse situation that disproportionately effects one of those areas would have a magnified adverse effect on our portfolio.

As of August 13, 2020 , our properties located in Missouri accounted for approximately 11.2% of our total property portfolio’s annualized base rent or annualized NOI.

Accordingly, there is a geographic concentration of risk subject to fluctuations in such state’s economy.

Our results of operations, our ability to pay distributions to our stockholders and our ability to dispose of our investments are subject to national and local economic factors we cannot control or predict.

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We have provided an insignificant number of rent concessions, and may continue to provide rent concessions, tenant improvement expenditures or reduced rental rates to maintain or increase occupancy levels;

fluctuations in property values as a result of increases or decreases in supply and demand, occupancies and rental rates may cause the properties that we acquire to decrease in value.

• fluctuations in property values as a result of increases or decreases in supply and demand, occupancies and rental rates may cause the properties that we own to decrease in value.

Consequently, we may not be able to recover the carrying amount of our properties, which may require us to recognize an impairment charge or record a loss on sale in earnings;

• reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;

the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, the dislocation of the markets for our short-term investments, increased volatility in market rates for such investment or other factors;

our lenders under our line of credit and term loans could refuse to fund its financing commitment to us or could fail and we may not be able to replace the financing commitment of such lender on favorable terms, or at all;

increases in index rates and lender spreads or other regulatory or market factors affecting the banking and commercial mortgage-backed securities industries may increase overall borrowing costs;

one or more counterparties to our interest rate swaps could default on their obligations to us or could fail, increasing the risk that we may not realize the benefits of these instruments;

• constricted access to credit may result in tenant defaults or non-renewals under leases;

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Also, any such increased expenses may make it difficult to increase rents to tenants on turnover, which may limit our ability to increase our returns.

The length and severity of any economic slowdown or downturn cannot be predicted at this time.

The length and severity of any economic slowdown or downturn cannot be predicted with confidence at this time.

Our results of operations, our ability to pay distributions to our stockholders and our ability to dispose of our investments have been and we expect that we may continue to be negatively impacted to the extent an economic slowdown or downturn is prolonged or becomes more severe.

Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which LIBOR is determined may adversely affect the value of the financial obligations to be held or issued by us that are linked to LIBOR.

LIBOR and other indices which are deemed “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform.

Some of these reforms are already effective while others are still to be implemented.

These reforms may cause such “benchmarks” to perform differently than in the past, or have other consequences which cannot be predicted.

It currently appears that, over time, United States dollar LIBOR may be replaced by the SOFR published by the Federal Reserve Bank of New York.

However, the manner and timing of this shift is currently unknown.

Market participants are still considering how various types of financial instruments and securitization vehicles should react to a discontinuation of LIBOR.

It is possible that not all of our assets and liabilities will transition away from LIBOR at the same time, or to the same alternative reference rate, in each case increasing the difficulty of hedging.

For example, switching existing financial instruments and hedging transactions from LIBOR to SOFR requires calculations of a spread.

Industry organizations are attempting to structure the spread calculation in a manner that minimizes the possibility of value transfer between counterparties, borrowers, and lenders by virtue of the transition, but there is no assurance that the calculated spread will be fair and accurate or that all asset types and all types of securitization vehicles will use the same spread.

We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging, and risk management.

The process of transition involves operational risks.

It is also possible that no transition will occur for many financial instruments.

At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented.

Uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the market for or value of any securities on which the interest or dividend is determined by reference to LIBOR, loans, derivatives and other financial obligations or on our overall financial condition or results of operations.

More generally, any of the above changes or any other consequential changes to LIBOR or any other “benchmark” as a result of international, national or other proposals for reform or other initiatives, or any further uncertainty in relation to the timing and manner of implementation of such changes, could have a material adverse effect on the value of and return on any securities based on or linked to a “benchmark.”

Risk Factors Related to Our Business

Our board will continue to evaluate the ongoing and future effects of the COVID-19 pandemic on our financial condition, earnings, debt covenants and other possible needs for cash, and applicable law, in considering our ability to continue to pay or increase distributions and reinstate our share purchase plan in the future.

Our stockholders have no contractual or other legal right to distributions or share repurchases that have not been authorized by our board.

The COVID-19 pandemic has adversely impacted, and will likely continue to adversely impact, our business and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

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This virus continues to spread globally including in the United States.

As a result of the COVID-19 pandemic and related shelter-in-place restrictions, business re-opening and quarantine restrictions, our property values, net operating income and revenues may decline, and our tenants, operating partners and managers have been and may continue to be limited in their ability to generate income, service patients and residents and/or properly manage our properties.

In addition, based on preliminary information available to management as of July 31, 2020, we have experienced an approximate 9.0% decline in occupancy rates since February 2020, as well as an up to 30.0% increase in costs to care for residents, at our senior housing — RIDEA facilities.

Our leased, non-RIDEA senior housing and skilled nursing facilities are also experiencing and may continue to experience similar pressures related to occupancy declines and expense increases, which may impact their ability to pay rent and have an adverse effect on our operations.

However, through July 2020, all rents have been collected from such leased, non-RIDEA senior housing and skilled nursing facility tenants.

Given the significant uncertainty of the impact of COVID-19, we are unable to predict the impact it will have on such tenants’ continued ability to pay rent.

Therefore, information provided regarding July rent collections should not serve as an indication of expected future rent collections.

As such, we are focused on census recovery and operating expense management for the near term.

As a result of the COVID-19 pandemic and related shelter-in-place, business re-opening and quarantine restrictions, our property values, NOI and revenues may decline, and our tenants, operating partners and managers have been and may continue to be limited in their ability to generate income, service patients and residents and/or properly manage our properties.

In addition, based on preliminary information available to management as of October 31, 2020, we have experienced an approximate 14.4% decline in resident occupancies since February 2020, as well as an up to 30.0% increase in costs to care for residents, at our senior housing — RIDEA facilities.

Such costs have begun to moderate somewhat during the third quarter of 2020.

Our leased, non-RIDEA senior housing and skilled nursing facility tenants have also experienced and may continue to experience similar pressures related to occupancy declines and expense increases, which may impact their ability to pay rent and have an adverse effect on our operations.

However, through October 2020, all rents have been collected from such leased, non-RIDEA senior housing and skilled nursing facility tenants.

Given the significant uncertainty of the impact of the COVID-19 pandemic, we are unable to predict the impact it will have on such tenants’ continued ability to pay rent.

Therefore, information provided regarding October rent collections should not serve as an indication of expected future rent collections.

such, our immediate focus continues to be on resident occupancy recovery and operating expense management.

While restrictions have been at least partially lifted in many states, there remains a risk of reclosures in states where infection rates are on the rise, which may put additional pressure on our operations.

Additionally, the public perception of a risk of a pandemic or media coverage of the COVID-19 pandemic and related deaths or confirmed cases, or public perception of health risks linked to perceived regional healthcare safety in our senior housing or skilled nursing facilities, particularly if focused on regions in which our properties are located, may adversely affect our business operations by reducing occupancy

demand at our facilities.

Furthermore, the COVID-19 pandemic has also adversely impacted and may continue to adversely impact the ability of our medical office building tenants, many of whom have been restricted in their ability to work and to pay their rent as and when due.

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These cybersecurity risks include greater phishing, malware and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, greater risk of a security breach resulting in destruction or misuse of valuable information and potential impairment of our ability to perform certain functions, all of which could expose us to risks of data or financial loss, litigation and liability and could disrupt our operations and the operations of any impacted third-parties.

The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others.

The information in this Quarterly Report on Form 10-Q is based on data currently available to us and will likely change as the COVID-19 pandemic progresses.

The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others.

We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response.

For instance, recent government initiatives enacted to provide substantial financial support to businesses, such as the Payroll Protection Program and deferral of payroll tax payments program within the CARES Act, could provide helpful mitigation for us and certain of our tenants, operating partners and managers.

The ultimate impact of the CARES Act, however, is not yet clear.

We are continuously monitoring the impact of the COVID-19 pandemic on our business, residents, tenants, operating partners, managers, portfolio of investments and on the United States and global economies.

While there were no material adjustments to our condensed consolidated financial statements as of and during the six months ended June 30, 2020 , the prolonged duration and impact of the COVID-19 pandemic could materially disrupt our business operations and impact our financial performance.

For instance, government initiatives enacted to provide substantial financial support to businesses, such as the Payroll Protection Program and deferral of payroll tax payments program within the CARES Act, enacted to provide substantial financial support to businesses could provide helpful mitigation for us and certain of our tenants, operating partners and managers.

However, these government assistance programs are not expected to fully offset the negative financial impact of the COVID-19 pandemic, and there can be no assurance that these programs will continue or the extent to which they will be expanded.

Therefore, the ultimate impact of such relief from these programs is not yet clear.

Furthermore, we expect the trends discussed above with respect to the impact of the COVID-19 pandemic to continue and, in some cases, accelerate.

As such, we are continuously monitoring the impact of the COVID-19 pandemic on our business, residents, tenants, operating partners, managers, portfolio of investments and on the United States and global economies.

While we are not able at this time to estimate the long-term impact of the COVID-19 pandemic on our financial and operational results, it could be material.

Risks Related to Investments in Real Estate

A significant portion of our annual base rent may be concentrated in a small number of tenants.

As of November 13, 2020, rental payments by our tenant, RC Tier Properties, LLC, accounted for approximately 10.6% of our total property portfolio’s annualized base rent or annualized NOI.

The success of our investments materially depends upon the financial stability of the tenants leasing the properties we own.

Therefore, a non-renewal after the expiration of a lease term, termination, default or other failure to meet rental obligations by significant tenants, such as RC Tier Properties, LLC,

would significantly lower our net income.

These events could cause us to reduce the amount of distributions to our stockholders.

A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area.

We have a concentration of properties in particular geographic areas;

therefore, any adverse situation that disproportionately effects one of those areas would have a magnified adverse effect on our portfolio.

As of November 13, 2020, our properties located in Missouri accounted for approximately 11.6% of our total property portfolio’s annualized base rent or annualized NOI.

Accordingly, there is a geographic concentration of risk subject to fluctuations in such state’s economy.

Terrorist attacks, acts of violence or war, political protests and unrest or public health crises may affect the markets in which we operate and have a material adverse effect on our financial condition, results of operations and ability to pay distributions to our stockholders.

Terrorist attacks, acts of violence or war, political protests and unrest or public health crises (including the COVID-19 pandemic) may negatively affect our operations and our stockholders’ investments.

We may acquire real estate assets located in areas that are susceptible to terrorist attacks, acts of violence or war, political protests or public health crises.

These events may directly impact the value of our assets through damage, destruction, loss or increased security costs.

Although we may obtain terrorism insurance, we may not be able to obtain sufficient coverage to fund any losses we may incur.

Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims.

Further, certain losses resulting from these types of events are uninsurable or not insurable at reasonable costs.

More generally, any terrorist attack, other act of violence or war, political protests and unrest or public health crises could result in increased volatility in, or damage to, the United States and worldwide financial markets and economy, all of which could adversely affect our tenants’ ability to pay rent on their leases or our ability to borrow money or issue capital stock at acceptable prices, which could have a material adverse effect on our financial condition, results of operations and ability to pay distributions to our stockholders.

Our business, tenants, residents and operators may face litigation and experience rising liability and insurance costs, which may adversely affect our financial condition, results of operations, liquidity or cash flows.

We currently intend to pursue insurance recovery for any losses caused by the COVID-19 pandemic, but there can be no assurance coverage will be available under our existing policies or if such coverage is available, which and how much of our losses will be covered and what other limitations may apply.

We curre ntly intend to pursue insurance recovery for any losses caused by the COVID-19 pandemic, but there can be no assurance that coverage will be availa ble under our existing policies or if such coverage is available, which and how much of our losses will be covered and what other limitations may apply.

Due to the likely increase in claims as a result of the impact of the COVID-19 pandemic, insurance companies may limit or stop offering coverage to companies like ours for pandemic related claims and/or significantly increase the cost of insurance so that it is no longer available at commercially reasonable rates.

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Additionally, as a result of the COVID-19 pandemic, the cost of insurance for our tenants, operators and residents is expected to increase as well, and such insurance may not cover certain claims related to COVID-19, which could impair their ability to pay rent to us.

Our exposure to COVID-19-related litigation risk may be further increased if our operators or residents

of such facilities are subject to bankruptcy or insolvency.

Our exposure to COVID-19-related litigation risk may be further increased if our operators or residents of such facilities are subject to bankruptcy or insolvency.

Combined with the factors above, these trends in insurance coverage may adversely affect our financial condition, results of operations, liquidity or cash flows.

Risks Related to Debt Financing

LIBOR and other indices which are deemed “benchmarks” are the subject of recent national, international and other regulatory guidance and proposals for reform.

Some of these reforms are already effective while others are still to be implemented.

These reforms may cause such “benchmarks” to perform differently than in the past, or have other consequences which cannot be predicted.

It currently appears that, over time, United States dollar LIBOR may be replaced by the SOFR published by the Federal Reserve Bank of New York.

However, the manner and timing of this shift is currently unknown.

Market participants are still considering how various types of financial instruments and securitization vehicles should react to a

discontinuation of LIBOR.

For example, switching existing financial instruments and hedging transactions from LIBOR to SOFR requires calculations of a spread.

Industry organizations are attempting to structure the spread calculation in a manner that minimizes the possibility of value transfer between counterparties, borrowers and lenders by virtue of the transition, but there is no assurance that the calculated spread will be fair and accurate or that all asset types and all types of securitization vehicles will use the same spread.

The process of transition involves operational risks.

It is also possible that no transition will occur for many financial instruments.

At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented.

More generally, any of the above changes or any other consequential changes to LIBOR or any other “benchmark” as a result of international, national or other proposals for reform or other initiatives, or any further uncertainty in relation to the timing and manner of implementation of such changes, could have a material adverse effect on the value of financial assets and liabilities based on or linked to a “benchmark.”

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors