What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-08-13 compared with 2021-05-14 · 39 added, 2 removed, 29 unchanged (59% of the section changed)

6 unchanged sentences

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 May 14, 2021, rental payments by our tenant, RC Tier Properties, LLC, accounted for approximately 10.9% of our total property portfolio’s annualized base rent or annualized NOI.

As of August 13, 2021, rental payments by our tenant, RC Tier Properties, LLC, accounted for approximately 11.1% 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.

4 unchanged sentences

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

As of May 14, 2021, our properties located in Missouri and Michigan accounted for approximately 11.9% and 10.2%, respectively, of our total property portfolio’s annualized base rent or annualized NOI.

As of August 13, 2021, our properties locat ed in Missouri and Michigan accounted for approximately 12.1% and 10.4%, respec tively, of our total property portfolio’s annualized base rent or annualized NOI.

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

14 unchanged sentences

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.”

Risks Related to the Merger

Failure to complete the Merger could negatively impact our future business and financial results.

If the Merger is not completed, the ongoing business of our company could be materially adversely affected and we will be subject to a variety of risks associated with the failure to complete the Merger, including the following:

• our being required, under certain circumstances in which the Merger Agreement is terminated, to pay to GAHR III a termination fee of $23,028,000 and reimbursement of expenses incurred by GAHR III in connection with the Merger of up to $4,000,000;

• our having to bear certain costs incurred by us relating to the Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees;

• the diversion of our management’s focus and resources from operational matters and other strategic opportunities while working to implement the Merger.

If the Merger is not completed, these risks could materially affect our business and financial results.

The pendency of the Merger, including as a result of the restrictions on the operation of our and GAHR III’s business during the period between signing the Merger Agreement and the completion of the Merger, could adversely affect our business and operations, the business and operations of GAHR III, or both.

In connection with the pending Merger, some of our business partners or vendors and those of GAHR III may delay or defer decisions, which could negatively impact the revenues, earnings, cash flows and expenses of our company or GAHR III, regardless of whether the Merger is completed.

In addition, due to operating covenants in the Merger Agreement, we and GAHR III may be unable, during the pendency of the Merger, to pursue certain strategic transactions, undertake certain significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business, even if such actions would prove beneficial.

In certain circumstances, either we or GAHR III may terminate the Merger Agreement.

Either we or GAHR III may terminate the Merger Agreement if the REIT Merger has not been consummated by 11:59 p.m.

New York time on March 23, 2022.

Also, the Merger Agreement may be terminated in certain circumstances if a final and non-appealable order is entered prohibiting the transactions contemplated by the Merger Agreement, upon a material uncured breach by the other party that would cause the closing conditions not to be satisfied, or upon the failure to obtain receipt of approvals of the GAHR III stockholders or our stockholders.

In addition, (i) at any time prior to the time GAHR III stockholders approve the Merger and the amendments to the GAHR III charter that are required to consummate the Merger, GAHR III has the right to terminate the Merger Agreement in order to accept a Superior Proposal (as defined in the Merger Agreement), and (ii) at any time prior to the time our stockholders approve the Merger and the amendments to our charter that are required to consummate the Merger, we have the right to terminate the Merger Agreement in order to accept a Superior Proposal.

Finally, (i) at any time prior to the time our stockholders approve the Merger and the amendments to our charter that are required to consummate the Merger, GAHR III has the right to terminate the Merger Agreement upon a GAHR IV Adverse Recommendation Change (as defined in the Merger Agreement) or if we have materially violated any of our obligations regarding the solicitation of and response to Competing Proposals (as defined in the Merger Agreement), and (ii) at any time prior to the time GAHR III stockholders approve the Merger and the amendments to the GAHR III charter that are required to consummate the Merger, we have the right to terminate the Merger Agreement upon a GAHR III Adverse Recommendation Change (as defined in the Merger Agreement) or if GAHR III shall have materially violated any of its obligations regarding the solicitation of and response to Competing Proposals.

We and GAHR III each expect to incur substantial expenses related to the Merger.

We and GAHR III each expect to incur substantial expenses in connection with completing the Merger and integrating our properties and operations.

While we and GAHR III each have assumed that a certain level of transaction expenses would be incurred, there are a number of factors beyond the control of each company that could affect the total amount or the timing of such expenses.

Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time.

As a result, the transaction expenses associated with the Merger could, particularly in the near term, exceed the savings that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings following the completion of the Merger.

The ownership position of our stockholders and the stockholders of GAHR III will be diluted by the REIT Merger .

The REIT Merger will dilute the ownership percentage of our stockholders and result in GAHR III stockholders having an ownership stake in the Combined Company that is smaller than their current stake in GAHR III.

Based on the number of shares of our common stock and GAHR III common stock outstanding on July 9, 2021, our stockholders, on the one hand, and former GAHR III stockholders, on the other hand, will own approximately 31.3% and 68.7%, respectively, of the issued and outstanding shares of our common stock following the REIT Merger.

Consequently, each of our stockholders and each GAHR III stockholder, as a general matter, will have less influence over the management and policies of the Combined Company following the Merger than currently exercisable over our management and policies and the management and policies of GAHR III, as applicable.

If and when the Combined Company completes a liquidity event, the market value ascribed to the shares of common stock of the Combined Company upon the liquidity event may be significantly lower than the estimated per share NAV of GAHR III common stock or our common stock, as applicable, considered by the board of directors of GAHR III and our board in approving and recommending the REIT Merger.

In approving and recommending the REIT Merger, the board of directors of GAHR III, the special committee of the board of directors of GAHR III, our board and our special committee considered, among other things, the most recent estimated per share NAV of GAHR III common stock and our common stock as determined by the board of directors of GAHR III and our board, respectively, with the assistance of their respective third-party valuation experts.

The estimated per share NAV of our common stock may not be immediately determined following the consummation of the Merger.

In the event that the Combined Company completes a liquidity event after consummation of the Merger, such as a listing of its shares on a national securities exchange, a merger in which stockholders of the Combined Company receive securities that are listed on a national securities exchange, or a sale of the Combined Company for cash, the market value of the shares of the Combined Company upon consummation of such liquidity event may be significantly lower than the current estimated values considered by the board of directors of GAHR III, the special committee of the board of directors of GAHR III, our board and our special committee and the estimated per share NAV of our common stock that may be reflected on the account statements of stockholders of the Combined Company after consummation of the Merger.

For example, if the shares of the Combined Company are listed on a national securities exchange at some point after the consummation of the Merger, the trading price of the shares may be significantly lower than the most recent estimated per share NAV of our common stock of $9.22 as of September 30, 2020.

If the REIT Merger does not qualify as a tax-free reorganization, there may be adverse tax consequences.

The REIT Merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code.

The closing of the REIT Merger is conditioned on the receipt by us and GAHR III of an opinion of counsel to the effect that the REIT Merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code.

However, these legal opinions will not be binding on the IRS or on the courts.

If, for any reason, the REIT Merger were to fail to qualify as a tax-free reorganization, then each GAHR III stockholder generally would recognize gain or loss, as applicable, equal to the difference between (1) the merger consideration (i.e.

the fair market value of the shares of our Class I common stock) received by such GAHR III stockholder in the REIT Merger;

and (2) such GAHR III stockholder’s adjusted tax basis in its GAHR III common stock.

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