−Removed: Risk Factors.
Risk Factor Summary
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• The prior performance of other programs may not accurately predict our ability to achieve our investment objectives or our future results.
−Removed: • Our success is dependent on our co-sponsors;
−Removed: however, our co-sponsors and their key personnel face conflicts of interest for their time and fiduciary duties.
−Removed: • Our advisor may be entitled to receive significant compensation in the event of our liquidation or the termination of the Advisory Agreement.
−Removed: • Even though we have formed a special committee to investigate strategic alternatives, we are not obligated to effectuate a liquidity event;
+Added: • Our success is dependent on our key personnel who face conflicts of interest for their time and fiduciary duties.
+Added: • We are not obligated to effectuate a liquidity event;
therefore, our stockholders may have to hold their investment in shares of our common stock for an indefinite period of time.
+Added: • If we complete a liquidity event, the market value attributed to the shares of our common stock may be significantly lower than the current estimated per share NAV.
+Added: • Competition for the acquisition and disposition of healthcare-related facilities may reduce our profitability.
Risks Related to Our Business
−Removed: • In light of the adverse impact of the COVID-19 pandemic on our business operations and cash flows, we reduced distribution payments to our stockholders and 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, if at all.
−Removed: • Senior housing — RIDEA facilities managed by Meridian Senior Living, LLC, or Meridian, account for a significant portion of our revenues and/or operating income and adverse developments in Meridian’s business or financial condition could have a material adverse effect on us.
−Removed: • We have rights to terminate our management agreements with third-party operators for our senior housing and senior housing — RIDEA facilities under any circumstances;
−Removed: however, any inability to replace or delay in replacing third-party operators as the managers of such facilities could have a material adverse effect on us.
−Removed: • Internalizing our management functions could cause us to incur significant costs.
+Added: • The COVID-19 pandemic has adversely impacted, and will likely continue to adversely impact, our business and financial results.
+Added: • As a result of the recent Merger and AHI Acquisition, we internalized our management functions which could cause us to incur significant costs.
+Added: • Certain campuses managed by Trilogy Management Services, LLC, or TMS, account for a significant portion of our revenues/operating income, and it may be difficult to replace TMS if our management agreements are terminated.
• We may incur additional costs in re-leasing properties, which could adversely affect our cash flows.
−Removed: Risks Related to Conflicts of Interest
−Removed: • We may acquire assets from, or dispose of assets to, affiliates of our advisor, which could result in us entering into transactions on less favorable terms than we would receive from an unaffiliated third party.
−Removed: • We have entered, and may continue to enter, into joint ventures which could cause conflicts of interest or disagreements with our joint venture partners.
Risks Related to Our Organizational Structure
+Added: • The ownership position of our stockholders was diluted by the Merger resulting in reduced stockholder influence over the management and policies of our company.
• Several potential events, our ability to issue preferred stock, and the percentage limit on shares of common stock that any person may own could cause our stockholders’ investment in us to be diluted or prevent a sale of our common stock.
−Removed: • Our stockholders’ ability to control our operations is severely limited.
+Added: • Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may limit or delay our stockholders’ ability to dispose of their shares of our common stock.
• If we become subject to registration under the Investment Company Act, we may not be able to continue our business.
−Removed: • We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.
Risks Related to Investments in Real Estate
• Uncertain market conditions could lead our acquired real estate investments to decrease in value or may cause us to sell our properties at a loss in the future.
−Removed: • Non-renewals, terminations or lease defaults by any tenants that account for more than 10.0% of our total property portfolio’s annualized base rent or annualized net operating income, or NOI, could reduce our net income and have a negative effect on our ability to pay 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.
• Our business, tenants, residents and operators may face litigation and experience rising liability and insurance costs, which may adversely affect our financial condition.
+Added: • Most of our costs are subject to inflation.
• Delays in the acquisition, development, disposition and construction of real properties may have adverse effects on our results of operations and our ability to pay distributions to our stockholders.
+Added: • Our earnest money deposits made to certain development companies may not be fully refunded.
• Our stockholders may not receive any profits resulting from the sale of our properties, and representations made by us in connection with sales of our properties may subject us to liability.
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Risks Related to the Healthcare Industry
−Removed: • New laws or regulations affecting the heavily regulated healthcare industry, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us.
+Added: • Our tenants and operators are subject to regulation and oversight unique to the healthcare industry.
• Our tenants may be unable to make rent payments to us because of reductions in reimbursement from third-party payors and/or changes in the healthcare industry or regulations.
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• Adverse trends in healthcare provider operations may negatively affect our lease revenues.
−Removed: • We, our tenants and our operators for our skilled nursing and senior housing may be subject to various government reviews, audits and investigations that could adversely affect our business, such as identifying potential improper payments under the Medicare and Medicaid programs.
+Added: • We, our tenants and our operators for our skilled nursing, senior housing and integrated senior health campuses may be subject to various government reviews, audits and investigations that could adversely affect our business.
Risks Related to Debt Financing
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• Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to pay distributions to our stockholders.
+Added: • Changes in banks’ inter-bank lending rate reporting practices may adversely affect the value of financial obligations held or issued by us that are linked to LIBOR.
• Interest-only indebtedness may increase our risk of default, adversely affect our ability to refinance or sell properties and eventually may reduce our funds available for distribution to our stockholders.
Risks Related to Real Estate-Related Investments
−Removed: • Unfavorable real estate market conditions and delays in liquidating defaulted mortgage loan investments may negatively impact mortgage loans we may invest in.
−Removed: Federal Income Tax Risks
+Added: • Unfavorable real estate market conditions and delays in liquidating defaulted mortgage loan investments may negatively impact mortgage loans we have invested and may invest in.
+Added: • We expect a portion of our real estate-related investments to be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions.
+Added: • If we liquidate prior to the maturity of our real estate-related investments, we may be forced to sell those investments on unfavorable terms or at a loss.
+Added: Risks Related to Joint Ventures
+Added: • Property ownership through joint ventures could limit our control and the amount we participate in the cash flows of those investments.
+Added: Risks Related to Taxes and Our REIT Status
• Failure to maintain our qualification as a REIT for federal income tax purposes would subject us to federal income tax on our taxable income at regular corporate rates, which would substantially reduce our ability to pay distributions to our stockholders.
• Legislative or regulatory tax changes could adversely affect investors.
+Added: • Failure of the REIT Merger to qualify as a tax-free reorganization would result in adverse tax consequences.
Investment Risks
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Therefore, it will be difficult for our stockholders to sell their shares of our common stock and, if our stockholders are able to sell their shares of our common stock, they will likely sell them at a substantial discount.
−Removed: We commenced a best efforts initial public offering on February 16, 2016 and terminated our initial offering on February 15, 2019.
−Removed: However, there currently is no public market for the shares of our common stock.
−Removed: We do not expect a public market for our stock to develop prior to the listing of the shares of our common stock on a national securities exchange, which we do not expect to occur in the near future and which may not occur at all.
+Added: There currently is no public market for the shares of our common stock.
+Added: We do not expect a public market for our stock to develop prior to the listing of the shares of our common stock on a national securities exchange, which may not occur in the near future or at all.
Additionally, our charter contains restrictions on the ownership and transfer of shares of our stock and these restrictions may inhibit our stockholders’ ability to sell their shares of our common stock.
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Any purported transfer of the shares of our common stock that would result in a violation of either of these limits will result in such shares being transferred to a trust for the benefit of a charitable beneficiary or such transfer being declared null and void.
−Removed: We have adopted a share repurchase plan, but it is limited in terms of the amount of shares of our common stock which may be repurchased annually, is subject to our board’s discretion and is currently suspended.
−Removed: On March 31, 2020, our board 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.
−Removed: Furthermore, in connection with our board’s strategic alternative review process and in order to facilitate a strategic transaction, on March 18, 2021, our board approved the suspension of our share repurchase plan with respect to all repurchase requests received by us after February 28, 2021, including repurchases resulting from the death or qualifying disability of stockholders.
−Removed: Therefore, it will be difficult for our stockholders to sell their shares of our common stock promptly or at all.
+Added: adopted a share repurchase plan, but it is limited in terms of the amount of shares of our common stock which may be repurchased annually, is subject to our board’s discretion and is currently suspended except with respect to requests resulting from the death or qualifying disability of stockholders.
+Added: As such, it will be difficult for our stockholders to sell their shares of our common stock promptly or at all.
If our stockholders are able to sell their shares of our common stock, our stockholders may only be able to sell them to an unrelated third party at a substantial discount from the price they paid.
−Removed: This may be the result, in part, of the fact that, at the time we made our investments, the amount of funds available for investment were reduced by up to 4.0% of the gross offering proceeds (excluding the 2.0% of the gross offering proceeds portion of the dealer manager fee funded by our advisor), which amounts were used to pay selling commissions and a dealer manager fee.
+Added: This may be the result, in part, of the fact that, at the time we made our investments, the amount of funds available for investment were reduced by up to 12.0% of the gross offering proceeds, which amounts were used to pay selling commissions, a dealer manager fee and other organizational and offering expenses.
We also were required to use gross offering proceeds to pay acquisition fees, acquisition expenses and asset management fees.
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Therefore, shares of our common stock should be considered illiquid and a long-term investment and our stockholders must be prepared to hold their shares of our common stock for an indefinite length of time.
−Removed: 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.
+Added: We have paid a portion of distributions from the net proceeds of the 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.
Any such distributions may reduce the amount of capital we ultimately invest in assets and may negatively impact the value of our stockholders’ investment.
−Removed: We have used the net proceeds from our initial offering, borrowings and certain fees payable to our advisor which have been waived, and in the future, may use borrowed funds or other sources, to pay cash distributions to our stockholders, which may reduce the amount of proceeds available for investment and operations, cause us to incur additional interest expense as a result of borrowed funds or cause subsequent investors to experience dilution.
+Added: We have used the net proceeds from the initial offering, borrowings and certain fees payable to our former advisor which have been waived, and in the future, may use borrowed funds or other sources, to pay cash distributions to our stockholders, which may reduce the amount of proceeds available for investment and operations, cause us to incur additional interest expense as a result of borrowed funds or cause subsequent investors to experience dilution.
Further, if the aggregate amount of cash distributed in any given year exceeds the amount of our current and accumulated earnings and profits, the excess amount will be deemed a return of capital.
−Removed: Therefore, distributions payable to our stockholders may partially include a return of capital, rather than a return on capital, and we have paid a portion of our distributions from the net proceeds of our initial offering.
−Removed: We have not established any limit on the amount of net proceeds from our initial offering or borrowings that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would:
+Added: Therefore, distributions payable to our stockholders may partially include a return of capital, rather than a return on capital, and we have paid a portion of our distributions from the net proceeds of the initial offering.
+Added: We have not established any limit on the amount of net proceeds from the initial offering or borrowings that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would:
(i) cause us to be unable to pay our debts as they become due in the usual course of business;
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As a result, our distribution rate and payment frequency have varied, and may continue to vary, from time to time.
−Removed: Prior to March 31, 2020, our board authorized, on a quarterly basis, a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on May 1, 2016 and ending on March 31, 2020.
−Removed: The daily distributions were calculated based on 365 days in the calendar year and are equal to $0.001643836 per share of our Class T and Class I common stock, which is equal to an annualized distribution rate of $0.60 per share.
−Removed: These distributions were aggregated and paid monthly in arrears in cash or shares of our common stock pursuant to our DRIP Offerings, only from legally available funds.
−Removed: In response to the COVID-19 pandemic and its effects to our business and operations, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects.
−Removed: Consequently, on March 31, 2020, our board authorized a daily distribution to our stockholders of record as of the close of business day on each day of the period commencing on April 1, 2020 and ending on April 30, 2021, 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.
−Removed: Such daily distribution is equal to an annualized distribution rate of $0.40 per share.
−Removed: 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.
−Removed: Furthermore, in response to the continued uncertainty of the COVID-19 pandemic and its impact to our portfolio of investments, on March 31, 2020, our board 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.
−Removed: See our Current Report on Form 8-K filed with the SEC on April 3, 2020 for more information.
−Removed: See also our Current Report on Form 8-K filed with the SEC on March 19, 2021 regarding our board’s suspension of the DRIP and share repurchase plan, including repurchase requests resulting from the death or qualifying disability of stockholders.
−Removed: For more information regarding the sources of our distributions for the years ended December 31, 2020 and 2019, please see Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions section of this Annual Report on Form 10-K.
−Removed: 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.
+Added: Prior to March 31, 2020, the GAHR IV board of directors authorized, on a quarterly basis, a daily distribution to its stockholders of record as of the close of business on each day of the period commencing on May 1, 2016 and ending on March 31, 2020.
+Added: The daily distributions were calculated based on 365 days in the calendar year and were equal to $0.001643836 per share of GAHR IV’s Class T and Class I common stock, which is equal to an annualized distribution rate of $0.60 per share.
+Added: These distributions were aggregated and paid monthly in arrears in cash or shares of common stock pursuant to the DRIP Offerings, only from legally available funds.
+Added: In response to the COVID-19 pandemic and its effects on GAHR IV’s business and operations, the GAHR IV board of directors decided to take steps to protect GAHR IV’s capital and maximize GAHR IV’s liquidity in an effort to strengthen GAHR IV’s long-term financial prospects.
+Added: Consequently, on March 31, 2020, the GAHR IV board of directors authorized a reduced distribution to its stockholders which is payable monthly in arrears only from legally available funds and equal to an annualized distribution rate of $0.40 per share, a decrease from the annualized distribution rate of $0.60 per share previously paid by GAHR IV.
+Added: On October 4, 2021, our board reinstated the DRIP.
+Added: As a result of the reinstatement of the DRIP, beginning with the October 2021 distribution, stockholders who previously enrolled as participants in the DRIP will receive distributions in shares of our common stock pursuant to the terms of the DRIP, instead of cash distributions.
+Added: See our Current Report on Form 8-K filed with the SEC on October 5, 2021 for more information.
+Added: The estimated value per share of our common stock may not be an accurate reflection of 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.
Additionally, between valuations it may be difficult to accurately reflect material events that may impact our estimated per share NAV.
−Removed: On March 18, 2021, our board, at the recommendation of the audit committee of our board, which is comprised solely of independent directors, unanimously approved and established an updated estimated per share NAV of our common stock of $9.22.
−Removed: We provided this updated estimated per share NAV to assist broker-dealers in connection with their obligations under Financial Industry Regulatory Authority, or FINRA, Rule 2231 with respect to customer account statements.
−Removed: The valuation was performed in accordance with the methodology provided in the Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs , issued by the Institute for Portfolio Alternatives, or the IPA, in April 2013, in addition to guidance from the SEC.
−Removed: The updated estimated per share NAV was determined after consultation with our advisor and an independent third-party valuation firm, the engagement of which was approved by the audit committee.
+Added: On March 24, 2022, our board, at the recommendation of the audit committee of our board, comprised solely of independent directors, unanimously approved and established an updated estimated per share NAV of our common stock of $9.29.
+Added: We provide this updated estimated per share NAV to assist broker-dealers in connection with their obligations under Financial Industry Regulatory Authority, or FINRA, Rule 2231, with respect to customer account statements.
+Added: The valuation was
+Added: performed in accordance with the methodology provided in the Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives, or the IPA, in April 2013, in addition to guidance from the SEC.
+Added: The updated estimated per share NAV was determined after consultation with an independent third-party valuation firm, the engagement of which was approved by the audit committee of our board.
FINRA rules provide no guidance on the methodology an issuer must use to determine its estimated per share NAV.
5 unchanged sentences
• a stockholder would be able to resell his or her shares at our updated estimated per share NAV;
−Removed: • a stockholder would ultimately realize distributions per share equal to our updated estimated per share NAV upon liquidation of our assets and settlement of our liabilities or a sale of the company;
+Added: • a stockholder would ultimately realize distributions per share equal to our updated estimated per share NAV upon liquidation of our assets and settlement of our liabilities or a sale of our company;
• our shares of common stock would trade at our updated estimated per share NAV on a national securities exchange;
• an independent third-party appraiser or other third-party valuation firm, other than the third-party valuation firm engaged by our board to assist in its determination of the updated estimated per share NAV, would agree with our estimated per share NAV;
−Removed: • the methodology used to estimate our updated 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, or IRA.
+Added: • the methodology used to estimate our updated per share NAV would be acceptable to FINRA or comply with reporting requirements under the Employee Retirement Income Security Act of 1974, or ERISA, the Code, other applicable law, or the applicable provisions of a retirement plan or individual retirement account, or IRA.
Further, our board is ultimately responsible for determining the estimated per share NAV.
−Removed: Our independent valuation firm calculates estimates of the value of our assets, and our board then determines the net value of our assets and liabilities taking into consideration such estimate provided by the independent valuation firm.
−Removed: Since our board determines our estimated per share NAV at least annually, there may be changes in the value of our assets that are not fully reflected in the updated estimated per share NAV.
+Added: Our independent valuation firm calculates estimates of the value of our assets, and our board then determines the net value of assets and liabilities taking into consideration such estimate provided by the independent valuation firm.
+Added: Since our board generally determines our estimated per share NAV at least annually, there may be changes in the value of our assets that are not fully reflected in the updated estimated per share NAV.
As a result, the published estimated per share NAV may not fully reflect changes in value that may have occurred since the prior valuation.
−Removed: Furthermore, our advisor will monitor our portfolio, but it has been, and may continue to be, difficult to reflect changing market conditions or material events, such as the COVID-19 pandemic, that may impact the value of our portfolio between valuations or our ability to obtain timely or complete information regarding any such events.
+Added: Furthermore, we will monitor our portfolio, but it has been, and may continue to be, difficult to reflect changing market conditions or material events, such as the COVID-19 pandemic, that may impact the value of our portfolio between valuations, or to obtain timely or complete information regarding any such events.
Therefore, the estimated per share NAV published before and during the announcement of an extraordinary event may differ significantly from our actual per share NAV until such time as sufficient information is available and analyzed, the financial impact is fully evaluated, and the appropriate adjustment is made to our estimated per share NAV, as determined by our board.
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For a further discussion of our operational history and the factors affecting our losses, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and the notes thereto.
−Removed: The prior performance of other programs sponsored or co-sponsored by American Healthcare Investors and Griffin Capital may not be an accurate predictor of our ability to achieve our investment objectives or our future results.
−Removed: We were formed in January 2015 and did not engage in any material business operations prior to our initial offering.
+Added: Our prior performance may not be an accurate predictor of our ability to achieve our investment objectives or our future results.
+Added: We were formed in January 2015 and did not engage in any material business operations prior to the effective date of the initial offering.
As a result, an investment in shares of our common stock may entail more risks than the shares of common stock of a REIT with a more substantial operating history.
−Removed: In addition, our stockholders should not rely on the past performance of other American Healthcare Investors or Griffin Capital-sponsored or co-sponsored programs to predict our future results.
+Added: In addition, our stockholders should not rely on our past performance to predict our future results.
Our stockholders should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies like ours that do not have a substantial operating history, many of which may be beyond our control.
−Removed: For example, due to challenging
−Removed: economic conditions in the past, distributions to stockholders of several private real estate programs sponsored by Griffin Capital were suspended.
+Added: For example, due to challenging economic conditions in the past, distributions to stockholders were reduced.
Therefore, to be successful in this market, we must, among other things:
3 unchanged sentences
• build and expand our operational structure to support our business.
−Removed: We cannot guarantee that we will succeed in achieving these goals, and our failure to do so could adversely affect our results of operations and cause our stockholders to lose all or a portion of their investment and adversely effect our results of operations.
−Removed: Our success is dependent on the performance of our co-sponsors.
−Removed: Our co-sponsors and certain of their key personnel will face competing demands relating to their time or fiduciary duties and this may cause our operating results to suffer.
−Removed: Our ability to achieve our investment objectives and to conduct our operations is dependent upon the performance of our advisor in identifying and acquiring investments, the determination of any financing arrangements, the asset management of our investments and the management of our day-to-day activities.
−Removed: Our advisor is a joint venture between our two co-sponsors, in which American Healthcare Investors indirectly owns a 75.0% interest and Griffin Capital indirectly owns a 25.0% interest.
−Removed: American Healthcare Investors and its key personnel serve as key personnel and co-sponsor of Griffin-American Healthcare REIT III, Inc., or GA Healthcare REIT III, and may sponsor or co-sponsor additional real estate programs in the future.
−Removed: Griffin Capital and certain of its key personnel and its respective affiliates serve as key personnel, advisors, managers and sponsors or co-sponsors of 11 Griffin Capital-sponsored programs, including GA Healthcare REIT III, Griffin Institutional Access Real Estate Fund and Griffin Institutional Access Credit Fund, and may have other business interests as well.
−Removed: Because these persons have competing demands on their time and resources, they may have conflicts of interest in allocating their time between our business and these other activities.
−Removed: During times of intense activity in other programs and ventures, they may devote less time and fewer resources to our business than is necessary or appropriate.
−Removed: If this occurs, the returns on our stockholders’ investment may suffer.
−Removed: Also, since these individuals owe fiduciary duties to these other entities and their owners, which fiduciary duties may conflict with the duties that they owe to our stockholders and us, their loyalties to these other entities could result in actions or inactions that are detrimental to our business, which could harm the implementation of our investment objectives.
−Removed: Accordingly, competing demands of such key personnel may cause us to be unable to successfully implement our investment objectives or generate cash needed to make distributions to our stockholders, and to maintain or increase the value of our assets.
−Removed: In addition, our success depends to a significant degree upon the continued contributions of our advisor’s officers and certain of the managing directors, officers and employees of American Healthcare Investors, in particular Jeffrey T.
−Removed: Hanson, Danny Prosky and Mathieu B.
+Added: We cannot guarantee that we will succeed in achieving these goals, and our failure to do so could adversely affect our results of operations and cause our stockholders to lose all or a portion of their investment and adversely affect our results of operations.
+Added: Our success is dependent on the performance and continued contributions of certain of our key personnel and, in the event they are no longer affiliated with us, our operating results could suffer.
+Added: Our success depends to a significant degree upon the continued contributions of our executives and key officers, in particular, Danny Prosky and Mathieu B.
Streiff, each of whom would be difficult to replace.
−Removed: Hanson, Prosky and Streiff currently serve as our executive officers and/or directors and Mr.
−Removed: Hanson also serves as Chairman of our board.
−Removed: We currently do not have an employment agreement with any of Messrs.
−Removed: Hanson, Prosky or Streiff.
+Added: Prosky and Streiff currently serve as our executive officers and directors.
In the event that Messrs.
−Removed: Hanson, Prosky or Streiff are no longer affiliated with American Healthcare Investors, for any reason, it could have a material adverse effect on our success and American Healthcare Investors may not be able to attract and hire equally capable individuals to replace Messrs.
−Removed: Hanson, Prosky and/or Streiff.
−Removed: We do not have key man life insurance on any of our co-sponsors’ key personnel.
−Removed: If our advisor or American Healthcare Investors were to lose the benefit of the experience, efforts and abilities of one or more of these individuals, our operating results could suffer.
−Removed: Furthermore, our co-sponsors’ ability to manage our operations successfully is impacted by trends in the general economy, as well as the commercial real estate and credit markets.
−Removed: The current macroeconomic environment may negatively impact the value of commercial real estate assets and contribute to a general slow-down in our industry, which could put downward pressure on our co-sponsors’ revenues and operating results.
−Removed: Since American Healthcare Investors is 47.1% owned by AHI Group Holdings and 45.1% indirectly owned by Colony Capital, our company may not realize the anticipated benefits of the relationship with Colony Capital due to, among other things, the economic and overall conditions of the healthcare real estate industry, conflicts of interests relating to the purchase and leasing of healthcare properties, or American Healthcare Investors and Colony Capital having overlapping interests that could exacerbate other potential conflicts or disputes.
−Removed: To the extent that any of these factors may cause a decline in our co-sponsors’ operating results or revenues, the performance of our advisor may be impacted and in turn, our results of operations and financial condition could also suffer.
−Removed: Our stockholders may be unable to sell their shares of our common stock because our share repurchase plan is subject to significant restrictions and limitations.
−Removed: Our share repurchase plan includes significant restrictions and limitations.
−Removed: Except in cases of death or qualifying disability, our stockholders must hold their shares of our common stock for at least one year.
−Removed: Our stockholders must present at least 25.0% of their shares of our common stock for repurchase and until they have held their shares of our common stock for at least four years, repurchases will be made for less than our stockholders paid for their shares of our common stock.
−Removed: Shares of our common stock may be repurchased quarterly, at our discretion, on a pro rata basis, and are limited during any calendar year to 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year;
−Removed: provided however, that shares of our common stock subject to a repurchase requested upon the death of a stockholder will not be subject to this cap.
−Removed: Funds for the repurchase of shares of our common stock will come exclusively from the cumulative proceeds we receive from the sale of shares of our common stock pursuant to our DRIP Offerings.
−Removed: In addition, our board may reject share repurchase requests in its sole discretion and the terms of the share repurchase plan provide that our board may amend, suspend, or terminate such plan at any time upon 30 days’ written notice.
−Removed: On March 31, 2020, our board 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.
−Removed: Furthermore, in connection with our board’s strategic alternative review process and in order to facilitate a strategic transaction, on March 18, 2021, our board approved the suspension of our share repurchase plan with respect to all repurchase requests received by us after February 28, 2021, including repurchases resulting from the death or qualifying disability of stockholders.
−Removed: Therefore, in making a decision to purchase shares of our common stock, our stockholders should not assume that they will be able to sell any of their shares of our common stock back to us pursuant to our share repurchase plan and our stockholders also should understand that the repurchase price will not necessarily correlate to the value of our real estate holdings or other assets.
−Removed: If our board terminates our share repurchase plan, our stockholders may not be able to sell their shares of our common stock even if our stockholders deem it necessary or desirable to do so.
−Removed: Our advisor may be entitled to receive significant compensation in the event of our liquidation or in connection with a termination of the Advisory Agreement, even if such termination is the result of poor performance by our advisor or as a result of termination of the Advisory Agreement by our advisor.
−Removed: We are externally advised by our advisor pursuant to the Advisory Agreement between us and our advisor which has a one-year term that expires on February 16, 2022 and is subject to successive one-year renewals upon the mutual consent of us and our advisor.
−Removed: In the event of a partial or full liquidation of our assets, our advisor will be entitled to receive an incentive distribution equal to 15.0% of the net proceeds of the liquidation, after we have received and paid to our stockholders the sum of the gross proceeds from the sale of shares of our common stock, and any shortfall in an annual 6.0% cumulative, non-compounded return to stockholders in the aggregate.
−Removed: In the event of a termination of the Advisory Agreement in connection with the listing of our common stock on a national securities exchange, the partnership agreement provides that our advisor will receive an incentive distribution in redemption of its limited partnership units equal to 15.0% of the amount, if any, by which (i) the market value of our outstanding common stock at listing plus distributions paid by us prior to the listing of the shares of our common stock on a national securities exchange, exceeds (ii) the sum of the gross proceeds from the sale of shares of our common stock (less amounts paid to repurchase shares of our common stock) plus an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock.
−Removed: Upon our advisor’s receipt of the incentive distribution in redemption of its limited partnership units, our advisor will not be entitled to receive any further incentive distributions upon sales of our properties.
−Removed: Further, in connection with the termination or non-renewal of the Advisory Agreement other than due to a listing of the shares of our common stock on a national securities exchange, our advisor shall be entitled to receive a distribution in redemption of its limited partnership units equal to the amount that would be payable as an incentive distribution upon sales of properties, which equals 15.0% of the net proceeds if we liquidated all of our assets at fair market value, after we have received and paid to our stockholders the sum of the gross proceeds from the sale of shares of our common stock and an annual 6.0% cumulative, non-compounded return to our stockholders in the aggregate.
−Removed: Such distribution upon termination of the Advisory Agreement is payable to our advisor even upon termination or non-renewal of the Advisory Agreement as a result of poor performance by our advisor or upon termination or non-renewal of the Advisory Agreement by our advisor.
−Removed: Upon our advisor’s receipt of this distribution in redemption of its limited partnership units, our advisor will not be entitled to receive any further incentive distributions upon sales of our properties.
−Removed: Any amounts to be paid to our advisor in connection with the termination of the Advisory Agreement cannot be determined at the present time, but such amounts, if paid, will reduce the cash available for distribution to our stockholders.
−Removed: If our advisor was to terminate the Advisory Agreement, we would need to find another advisor to provide us with day-to-day management services or have employees to provide these services directly to us.
−Removed: There can be no assurances that we would be able to find new advisors or employees or enter into agreements for such services on acceptable terms.
−Removed: Even though we have formed a special committee to investigate strategic alternatives, we may not effect a liquidity event within any targeted time frame, or at all.
+Added: Prosky or Streiff are no longer affiliated with us, for any reason, it could have a material adverse effect on our success and we may not be able to attract and hire equally capable individuals to replace Messrs.
+Added: Prosky and/or Streiff.
+Added: If we were to lose the benefit of the experience, efforts and abilities of one or more of these individuals, our operating results could suffer.
+Added: We may not effect a liquidity event within any targeted time frame, or at all.
If we do not effect a liquidity event, our stockholders may have to hold their investment in shares of our common stock for an indefinite period of time.
−Removed: On a limited basis, our stockholders may be able to sell shares of our common stock to us through our share repurchase plan, if our share repurchase plan is reinstated by our board.
−Removed: However, we have formed a special committee to also consider various forms of strategic alternatives, including but not limited to, the sale of our assets, a listing of our shares on a national securities exchange, or a merger with another entity, including a merger with another unlisted entity that we expect would enhance our value.
−Removed: We are not obligated, through our charter or otherwise, to effectuate a transaction or liquidity event and may not effectuate a transaction or liquidity event within any time frame or at all.
−Removed: If we do not effectuate a transaction or liquidity event, it will be very difficult for our stockholders to have liquidity for their investment in the shares of our common stock other than limited liquidity through our share repurchase plan, if our share repurchase plan is reinstated by our board.
−Removed: 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.
−Removed: Our results of operations are subject to the risks of a national economic slowdown or downturn and other changes in national and local economic conditions.
+Added: Although we are currently positioning our company for a potential future listing on a national securities exchange at an opportune time, we are not obligated, through our charter or otherwise, to effectuate a transaction or liquidity event and may not effectuate a transaction or liquidity event within any time frame or at all.
+Added: If we do not effectuate a transaction or liquidity event, it will be very difficult for our stockholders to have liquidity for their investment in the shares of our common stock other than limited liquidity through our share repurchase plan, if our share repurchase plan is fully reinstated by our board.
+Added: If and when we complete a liquidity event, the market value ascribed to our shares of common stock upon the liquidity event may be significantly lower than the current estimated per share NAV.
+Added: In the event that we complete a liquidity event, such as a listing of our shares on a national securities exchange, a merger in which our stockholders receive securities that are listed on a national securities exchange, or a sale for cash, the market value of our shares upon consummation of such liquidity event may be significantly lower than the current estimated per share NAV of our common stock that may be reflected on the account statements of our stockholders.
+Added: For example, if our shares are listed on a national securities exchange, the trading price of the shares may be significantly lower than the most recent estimated per share NAV of our common stock o f $9.29 as of December 31, 2021.
+Added: Our results of operations, our ability to pay distributions to our stockholders and our ability to dispose of our investments are subject to international, national and local economic factors we cannot control or predict.
+Added: Our results of operations are subject to the risks of an international or national economic slowdown or downturn and other changes in international, national and local economic conditions.
The following factors may have affected, and may continue to affect, income from our properties, our ability to acquire and dispose of properties, and yields from our properties:
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• governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses;
−Removed: • increased insurance premiums, real estate taxes or utilities or other expenses may reduce funds available for distribution or, to the extent such increases are passed through to tenants, may lead to tenant defaults.
+Added: • increased insurance premiums, real estate taxes or utilities or other expenses, such as inflation costs, may reduce funds available for distribution or, to the extent such increases are passed through to tenants, may lead to tenant defaults.
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 with confidence at this time.
−Removed: 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.
−Removed: We face competition for the acquisition and disposition of MOBs, SNFs, senior housing and other healthcare-related facilities, which may impede our ability to take, and increase the cost of, such actions, which may reduce our profitability and cause our stockholders to experience a lower return on their investment.
−Removed: We face significant competition from other entities engaged in real estate investment activities for acquisitions and dispositions of MOBs, SNFs, senior housing and other healthcare-related facilities , some of whom may have greater resources and lower costs of capital than we do.
+Added: Our results of operations, our ability to continue to pay distributions to our stockholders and our ability to dispose of our investments have been, and we expect may continue to be, negatively impacted to the extent an economic slowdown or downturn is prolonged or becomes more severe.
+Added: We face competition for the acquisition and disposition of MOBs, hospitals, SNFs, senior housing and other healthcare-related facilities, which may impede our ability to take, and increase the cost of, such actions, which may reduce our profitability and cause our stockholders to experience a lower return on their investment.
+Added: We face significant competition from other entities engaged in real estate investment activities for acquisitions and dispositions of MOBs, hospitals, SNFs, senior housing and other healthcare-related facilities, some of whom may have greater resources and lower costs of capital than we do.
Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our business goals and could improve the bargaining power of us and other property owners seeking to sell, thereby impeding our investment, acquisition and disposition activities.
−Removed: If we pay higher prices per property or receive lower prices for dispositions of our MOBs, SNFs, senior housing or other healthcare-related facilities as a
−Removed: result of such competition, our business, financial condition, results of operations and our ability to pay distributions to our stockholders may be materially and adversely affected and our stockholders may experience a lower return on their investment.
+Added: If we pay higher prices per property or receive lower prices for dispositions of our MOBs, hospitals, SNFs, senior housing or other healthcare-related facilities as a result of such competition, our business, financial condition, results of operations and our ability to pay distributions to our stockholders may be materially and adversely affected and our stockholders may experience a lower return on their investment.
Risks Related to Our Business
−Removed: 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 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, if at all.
−Removed: 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.
−Removed: 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, and later suspended our share repurchase plan with respect to all repurchase requests received by us after February 28, 2021 in connection with our board’s strategic alternative review process and in order to facilitate a strategic transaction.
−Removed: 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.
−Removed: Our stockholders have no contractual or other legal right to distributions or share repurchases that have not been authorized by our board.
−Removed: 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.
−Removed: Should we fail for any reason to distribute at least 90.0% of our annual taxable income, excluding net capital gains, we would not qualify for the favorable tax treatment accorded to REITs.
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.
−Removed: In December 2019, COVID-19 was identified in Wuhan, China.
−Removed: This virus continues to spread globally including in the United States.
−Removed: 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.
−Removed: In addition, based on preliminary information available to management as of February 26, 2021, we have experienced an approximate 16.0% decline in resident occupancies since February 2020, as well as a significant increase in costs to care for residents, at our senior housing — RIDEA facilities.
−Removed: 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.
−Removed: However, through February 2021, all rents have been collected from such leased, non-RIDEA senior housing and skilled nursing facility tenants.
+Added: As a result of the COVID-19 pandemic and related shelter-in-place, business re-opening and quarantine restrictions, our property values, net operating income, or 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.
+Added: In addition, based on preliminary information available to management as of March 4, 2022, we have experienced an approximate 11.9% decline in resident occupancies at our SHOP since February 2020, as well as a significant increase in costs for residents, at both our SHOP and our integrated senior health campuses.
+Added: Our leased 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.
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.
−Removed: Therefore, information provided regarding February rent collections should not serve as an indication of expected future rent collections.
+Added: Therefore, information provided regarding prior rent collections should not serve as an indication of expected future rent collections.
As such, our immediate focus continues to be on resident occupancy recovery and operating expense management.
−Removed: While restrictions have been at least partially lifted in many states, there remains a risk of reclosures in states where infection rates continue to rise, which may put additional pressure on our operations.
+Added: The emergence of the Delta and Omicron variants and other new variants 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 SNFs, particularly if focused on regions in which our properties are located, may adversely affect our business operations by reducing occupancy demand at our facilities.
−Removed: Furthermore, the COVID-19 pandemic has also adversely impacted, and may continue to adversely impact, the ability of our MOB tenants, many of whom have been restricted in their ability to work and to pay their rent as and when due.
We have also held discussions with our tenants, operating partners and managers and they have expressed that the ultimate impact of the COVID-19 pandemic on their business operations is uncertain.
−Removed: Issues related to financing also are exacerbated in times of significant dislocation in the financial markets, such as those being experienced now related to the COVID-19 pandemic.
−Removed: It is possible our lenders will become unwilling or unable to provide us with financing, and we may not be able to replace the debt financing of such lender on favorable terms, or at all.
−Removed: In addition, if the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us.
−Removed: As a result, our lenders may revise the terms of such financings to us, which could adversely impact our liquidity and our ability to make payments on our existing obligations.
−Removed: Furthermore, we and our co-sponsors and their employees that provide services to us rely on processes and activities that largely depend on people and technology, including access to information technology systems as well as information, applications, payment systems and other services provided by third parties.
−Removed: In response to the COVID-19 pandemic, business practices have been modified with all or a portion of our co-sponsors’ employees working remotely from their homes to have our operations uninterrupted as much as possible.
−Removed: Additionally, technology in such employees’ homes may not be as robust as in our co-sponsors’ offices and could cause the networks, information systems, applications and other tools available to such employees to be more limited or less reliable than in our co-sponsors’ offices.
−Removed: The continuation of these work-from-home measures may introduce increased cybersecurity risk.
−Removed: 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.
−Removed: The information in this Annual Report on Form 10-K is based on data currently available to us and will likely change as the COVID-19 pandemic continues to progress.
−Removed: The extent to which the COVID-19 pandemic continues to impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, 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.
−Removed: 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, including the widespread availability and use of effective vaccines.
−Removed: For instance, government initiatives, such as the Payroll Protection Program and deferral of payroll tax payments program within the Coronavirus Aid, Relief, and Economic Security Act, or 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.
−Removed: 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.
−Removed: Therefore, the ultimate impact of such relief from these programs is not yet clear.
−Removed: Furthermore, we expect the trends discussed above with respect to the impact of the COVID-19 pandemic to continue.
−Removed: 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.
−Removed: 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.
−Removed: The availability and timing of cash distributions to our stockholders is uncertain.
−Removed: If we fail to pay distributions, their investment in shares of our common stock could suffer.
−Removed: We expect to continue to pay distributions to our stockholders monthly.
−Removed: However, we bear all expenses incurred in our operations, which are deducted from cash flows generated by operations prior to computing the amount of cash distributions to our stockholders.
−Removed: In addition, our board, in its discretion, may retain any portion of such funds for working capital.
−Removed: We cannot assure our stockholders that sufficient cash will be available to pay monthly distributions to our stockholders or at all.
−Removed: Should we fail for any reason to distribute at least 90.0% of our annual taxable income, excluding net capital gains, we would not qualify for the favorable tax treatment accorded to REITs.
+Added: Although vaccines for COVID-19 that have been approved for use are generally effective, vaccine boosters may be necessary and there can be no assurance that efforts to vaccinate the public will be successful in ending the pandemic or that vaccines will be effective against current and future COVID-19 variants.
+Added: The rapid development and fluidity of this situation continues to preclude any prediction as to the ultimate adverse impact of the COVID-19 pandemic on economic and market conditions, and, as a result, present material uncertainty and risk with respect to us and the performance of our investments.
+Added: The full extent of the impact and effects of the COVID-19 pandemic will depend on future developments, including, among other factors, the success of efforts to contain or treat COVID-19 and its variants, the use and distribution of effective vaccines and availability of such vaccines and vaccine boosters, potential resurgences of COVID-19, along with the related travel advisories, quarantines and business restrictions, the recovery time of the disrupted supply chains and industries, the impact of the labor market interruptions, the impact of government interventions, and the performance or valuation outlook for healthcare REIT markets and certain property types.
+Added: The COVID-19 pandemic and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk and have had an adverse effect on us and may have a material adverse effect on us in the future.
+Added: As a result of the AHI Acquisition, we are newly self-managed.
+Added: As a result of the Merger and the AHI Acquisition, we are a self-managed REIT.
+Added: We will no longer bear the costs of the various fees and expense reimbursements previously paid to the former external advisors of GAHR III and GAHR IV and their affiliates;
+Added: however, our expenses will include the compensation and benefits of our officers, employees and consultants, as well as overhead previously paid by the former external advisors of GAHR III and GAHR IV and their affiliates.
+Added: Our employees will provide services historically provided by our former external advisors and their affiliates.
+Added: We are now subject to potential liabilities that are commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes, and other employee-related liabilities and grievances, and we will bear the cost of the establishment and maintenance of any employee compensation plans.
+Added: In addition, we have not previously operated as a self-managed REIT and may encounter unforeseen costs, expenses and difficulties associated with providing these services on a self-advised basis.
+Added: If we incur unexpected expenses as a result of our self-management, our results of operations could be lower than they otherwise would have been.
We are uncertain of all of our sources of debt or equity for funding our capital needs.
4 unchanged sentences
We have financed, and will continue to finance, all or a portion of the purchase price of our investments in real estate and real estate-related investments by borrowing funds.
−Removed: We anticipate that our overall leverage will approximate 50.0% of the combined fair market value of our real estate and real estate-related investments, as determined at the end of each calendar year.
−Removed: Under our charter, we have a limitation on borrowing that precludes us from borrowing in excess of 300% of our net assets without the approval of a majority of our independent directors.
−Removed: Net assets for purposes of this calculation are defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation, amortization, bad debt and other non-cash reserves, less total liabilities.
−Removed: Generally speaking, the preceding calculation is expected to approximate 75.0% of the aggregate cost of our real estate and real estate-related investments before depreciation, amortization, bad debt and other similar non-cash reserves.
−Removed: In addition, we may incur mortgage debt and pledge some or all of our real properties as security for that debt to
−Removed: obtain funds to acquire additional real properties or for working capital.
+Added: In addition, we may incur mortgage debt and pledge some or all of our real properties as security for that debt to obtain funds to acquire additional real properties or for working capital.
Furthermore, we may borrow if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes.
2 unchanged sentences
In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions.
−Removed: In that case, we could lose the property securing the loan that is in default, thus reducing the value of their investment.
+Added: In that case, we could lose the property securing the loan that is in default, thus reducing the value of our stockholders’ investment.
In addition, lenders may have recourse to assets other than those specifically securing the repayment of indebtedness.
2 unchanged sentences
We may give full or partial guarantees to lenders of mortgage debt to the entities that own our properties.
−Removed: When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity.
+Added: When we give a guaranty on behalf of an entity that owns one of our properties, we will be
+Added: responsible to the lender for satisfaction of the debt if it is not paid by such entity.
If any mortgage contains cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties.
6 unchanged sentences
Further, we cannot assure our stockholders that we will be able to re-lease the property for the rent previously received, if at all, or that lease terminations will not cause us to sell the property at a loss.
−Removed: The senior housing — RIDEA facilities managed by Meridian account for a significant portion of our revenues and/or operating income.
−Removed: Adverse developments in Meridian’s business or financial condition could have a material adverse effect on us.
−Removed: As of March 26, 2021, Meridian manages the operations for a majority of our senior housing — RIDEA facilities pursuant to long-term management agreements.
−Removed: These senior housing — RIDEA facilities represent a substantial portion of our portfolio, based on their gross revenues.
−Removed: Although we have various rights as the owner of these senior housing — RIDEA facilities under our management agreements, we rely on Meridian’s personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our senior housing — RIDEA facilities operations efficiently and effectively, and to identify and manage development opportunities for new senior housing — RIDEA facilities.
−Removed: We also rely on Meridian to provide accurate facility-level financial results for our senior housing — RIDEA facilities in a timely manner and to otherwise operate our senior housing — RIDEA facilities in compliance with the terms of our management agreements and all applicable laws and regulations.
−Removed: We depend on Meridian’s ability to attract and retain skilled personnel to provide these services.
−Removed: A shortage of trained personnel or general inflationary pressures may force Meridian to enhance its pay and benefits package to compete effectively for such personnel, but it may not be able to offset these added costs by increasing the rates charged to residents.
−Removed: As such, any adverse developments in Meridian’s business or financial condition, including its ability to retain key personnel, could impair its ability to manage our senior housing — RIDEA facilities efficiently and effectively and could have a material adverse effect on us.
−Removed: In addition, if Meridian experiences any significant financial, legal, accounting or regulatory difficulties due to a weak economy, industry downturn or otherwise, such difficulties could result in, among other adverse events, impairment of its continued access to capital, the enforcement of default remedies by its counterparties, or the commencement of insolvency proceedings by or against it under the United States Bankruptcy Code.
+Added: The integrated senior health campuses managed by TMS account for a significant portion of our revenues and/or operating income.
+Added: Adverse developments in TMS’s business or financial condition could have a material adverse effect on us.
+Added: As of March 25, 2022, TMS managed all of the day-to-day operations for our integrated senior health campuses pursuant to long-term management agreements.
+Added: These integrated senior health campuses represent a substantial portion of our portfolio, based on their gross book value, and account for a significant portion of our revenues and/or NOI.
+Added: Although we have various rights as the owner of these integrated senior health campuses under our management agreements, we rely on TMS’s personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our integrated senior health campuses operations efficiently and effectively, and to identify and manage development opportunities for new integrated senior health campuses.
+Added: We also rely on TMS to provide accurate campus-level financial results for our integrated senior health campuses in a timely manner and to otherwise operate our integrated senior health campuses in compliance with the terms of our management agreements and all applicable laws and regulations.
+Added: We depend on TMS’s ability to attract and retain skilled personnel to provide these services.
+Added: A shortage of nurses or other trained personnel or general inflationary pressures may force TMS to enhance its pay and benefits package to compete effectively for such personnel, but it may not be able to offset these added costs by increasing the rates charged to residents.
+Added: As such, any adverse developments in TMS’s business or financial condition, including its ability to retain key personnel, could impair its ability to manage our integrated senior health campuses efficiently and effectively and could have a material adverse effect on us.
+Added: In addition, if TMS experiences any significant financial, legal, accounting or regulatory difficulties due to a weak economy, industry downturn or otherwise, such difficulties could result in, among other adverse events, acceleration of its indebtedness, impairment of its continued access to capital, the enforcement of default remedies by its counterparties, or the commencement of insolvency proceedings by or against it under the United States Bankruptcy Code.
Any one or a combination of these risks could have a material adverse effect on us.
−Removed: We have rights to terminate our management agreements with third-party operators for our senior housing and senior housing — RIDEA facilities under any circumstances;
−Removed: however, we may be unable to replace such third-party operators effectively, or be able to complete any transition timely, in the event that our management agreements are terminated or not renewed.
−Removed: We continually monitor and assess our contractual rights and remedies under our management agreements with third-party operators.
+Added: In the event that our management agreements with TMS are terminated or not renewed, we may be unable to replace TMS with another suitable manager, or, if we were successful in locating such a manager, that it would manage the integrated senior health campuses effectively or that any such transition would be completed timely, which may have a material adverse effect on us.
+Added: We continually monitor and assess our contractual rights and remedies under our management agreements with TMS.
When determining whether to pursue any existing or future rights or remedies under those agreements, including termination rights, we consider numerous factors, including legal, contractual, regulatory, business and other relevant considerations.
−Removed: We have exercised and in the event that we continue to exercise our rights to terminate management agreements with such third-party operators for any reason or such agreements are not renewed upon expiration of their terms, we have and would attempt to reposition the affected senior housing and/or senior housing — RIDEA facilities with another manager.
−Removed: Although we believe that many qualified national and regional operators would be interested in managing our senior housing and senior housing — RIDEA facilities, we cannot provide any assurance that we have been or would be able to locate another suitable manager or, if we were successful in locating such a manager, that it will or would manage the senior housing and/or senior housing — RIDEA facilities effectively or that any such transition would be completed timely.
−Removed: Any such transition has required and would likely continue to require substantial time, incur additional expenses and result in disruption of the operation of such facilities, including matters relating to staffing and reporting.
−Removed: Moreover, the transition to a replacement manager has required and may continue to require approval by the applicable regulatory authorities and, in most cases, one or more of our lenders including the mortgage lenders for the senior housing and senior housing — RIDEA facilities, and we cannot provide any assurance that such approvals have been or would be granted on a timely basis, if at all.
−Removed: Any inability to replace, or delay in replacing third-party operators as the managers of senior housing and senior housing — RIDEA facilities could have a material adverse effect on us.
+Added: In the event that we exercise our rights to terminate management agreements with TMS for any reason or such agreements are not renewed upon expiration of their terms, we would attempt to reposition the affected integrated senior health campuses with another manager.
+Added: Although we believe that many qualified national and regional operators would be interested in managing our integrated senior health campuses, we cannot provide any assurance that we would be able to locate another suitable manager or, if we were successful in locating such a manager, that it would manage the integrated senior health campuses effectively or that any such transition would be completed timely.
+Added: Any such transition would likely result in disruption of the operation of such facilities, including matters relating to staffing and reporting.
+Added: Moreover, the transition to a replacement manager may require approval by the applicable regulatory authorities and, in most cases, one or more of our lenders including the mortgage lenders for the integrated senior health campuses, and we cannot provide any assurance that such approvals would be granted on a timely basis, if at all.
+Added: Any inability to replace, or delay in replacing TMS as the manager of integrated senior health campuses could have a material adverse effect on us.
The financial deterioration, insolvency or bankruptcy of one or more of our major tenants, operators, borrowers, managers and other obligors could have a material adverse effect on our business, results of operations and financial condition.
17 unchanged sentences
Any or all of these risks could have a material adverse effect on our revenues, results of operations and cash flows.
−Removed: If we internalize our management functions, we could incur significant costs associated with being self-managed.
−Removed: Our strategy may involve internalizing our management functions.
−Removed: If we internalize our management functions, we would no longer bear the costs of the various fees and expenses we pay to our advisor under the Advisory Agreement;
−Removed: however, our direct expenses would include general and administrative costs, including legal, accounting, and other expenses related to corporate governance, SEC reporting and compliance.
−Removed: We would also incur the compensation and benefits costs of our officers and other employees and consultants that are now paid by our advisor or its affiliates.
−Removed: In addition, we may issue equity awards
−Removed: to officers, employees and consultants, which awards would decrease net income and funds from operations, or FFO, and may further dilute our stockholders’ investment.
−Removed: We cannot reasonably estimate the amount of fees to our advisor we would save and the costs we would incur if we became self-managed.
−Removed: If the expenses we assume as a result of an internalization are higher than the expenses we no longer pay to our advisor, our net income per share and FFO per share may be lower as a result of the internalization than they otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders.
−Removed: As currently organized, we do not directly have any employees.
−Removed: If we elect to internalize our operations, we would employ personnel and would be subject to potential liabilities commonly faced by employers, such as worker’s disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances.
−Removed: Upon any internalization of our advisor, certain key personnel of our advisor or American Healthcare Investors may not be employed by us, but instead may remain employees of our co-sponsors or their affiliates.
−Removed: If we internalize our management functions, we could have difficulty integrating these functions as a stand-alone entity.
−Removed: Currently, our advisor and its affiliates perform asset management and general and administrative functions, including accounting and financial reporting, for multiple entities.
−Removed: They have a great deal of know-how and can experience economies of scale.
−Removed: We may fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity.
−Removed: An inability to manage an internalization transaction effectively could, therefore, result in our incurring additional costs and/or experiencing deficiencies in our disclosure controls and procedures or our internal control over financial reporting.
−Removed: Such deficiencies could cause us to incur additional costs, and our management’s attention could be diverted from most effectively managing our properties.
We may incur additional costs in re-leasing properties, which could adversely affect the cash available for future distribution to our stockholders.
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Any loss of revenues or additional capital expenditures required as a result may have a material adverse effect on our business, financial condition and results of operations and our ability to pay future distributions to our stockholders.
+Added: We may be unable to secure funds for future tenant or other capital improvements, which could limit our ability to attract, replace or retain tenants and decrease our stockholders’ return on investment.
+Added: When tenants do not renew their leases or otherwise vacate their space, in order to attract replacement tenants, we have expended, and may be required to expend in the future, substantial funds for tenant improvements and leasing commissions related to the vacated space.
+Added: Such tenant improvements have required, and may continue to require, us to incur substantial capital expenditures.
+Added: If we have not established capital reserves for such tenant or other capital improvements, we will have to obtain financing from other sources and we have not identified any sources for such financing.
+Added: We may also have future financing needs for other capital improvements to refurbish or renovate our properties.
+Added: If we need to secure financing sources for tenant improvements or other capital improvements in the future, but are unable to secure such financing or are unable to secure financing on terms we feel are acceptable, we may be unable to make tenant and other capital improvements or we may be required to defer such improvements.
+Added: If this happens, it may cause one or more of our properties to suffer from a greater risk of obsolescence or a decline in value, or a greater risk of decreased cash flows as a result of fewer potential tenants being attracted to the property or our existing tenants not renewing their leases.
+Added: If we do not have access to sufficient funding in the future, we may not be able to make necessary capital improvements to our properties, pay other expenses or pay distributions to our stockholders.
+Added: Our use of derivative financial instruments to hedge against foreign currency exchange rate fluctuations could expose us to risks that may adversely affect our results of operations, financial condition and ability to pay distributions to our stockholders.
+Added: We have used, and may continue to use, derivative financial instruments to hedge against foreign currency exchange rate fluctuations, in which case we would be exposed to credit risk and legal enforceability risks.
+Added: In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract.
+Added: If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us.
+Added: Legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract.
+Added: If we are unable to manage these risks effectively, our results of operations, financial condition and ability to pay distributions to our stockholders will be adversely affected.
A breach of information technology systems on which we rely could materially and adversely impact our business, financial condition, results of operations and reputation.
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There is no guarantee that any processes, procedures and internal controls we have implemented or will implement will prevent cyber intrusions.
−Removed: Any failure to prevent cybersecurity breaches and maintain the proper function, security and availability of our or our third-party vendors’ and other third parties’ information technology systems could interrupt our operations, damage our reputation and brand, damage our competitive position, make it difficult for us to attract
−Removed: and retain tenants, and subject us to liability claims or regulatory penalties, which could adversely affect our business, financial condition and results of operations.
−Removed: Risks Related to Conflicts of Interest
−Removed: We are subject to conflicts of interest arising out of relationships among us, our officers, our co-sponsors, our advisor and its affiliates, including the material conflicts discussed below.
−Removed: Our advisor faces conflicts of interest relating to its compensation structure, including the payment of acquisition fees and asset management fees, which could result in actions that are not necessarily in our stockholders’ long-term best interest.
−Removed: Under the Advisory Agreement and pursuant to the subordinated participation interest our advisor holds in our operating partnership, our advisor will be entitled to fees and distributions that are structured in a manner intended to provide incentives to our advisor to perform in both our and our stockholders’ long-term best interests.
−Removed: The fees to which our advisor or its affiliates will be entitled include acquisition fees, asset management fees, property management fees, disposition fees and other fees as provided for under the Advisory Agreement and agreement of limited partnership of our operating partnership.
−Removed: The distributions our advisor may become entitled to receive would be payable upon distribution of net sales proceeds to our stockholders, the listing of the shares of our common stock on a national securities exchange, certain merger transactions or the termination of the Advisory Agreement.
−Removed: However, because our advisor will be entitled to receive substantial minimum compensation regardless of our performance, our advisor’s interests may not be wholly aligned with theirs.
−Removed: In that regard, our advisor or its affiliates will receive an asset management fee with respect to the ongoing operation and management of properties based on the amount of our initial investment and capital expenditures and not the performance of those investments, which could result in our advisor not having adequate incentive to manage our portfolio to provide profitable operations during the period we hold our investments.
−Removed: On the other hand, our advisor could be motivated to recommend riskier or more speculative investments in order to increase the fees payable to our advisor or for us to generate the specified levels of performance or net sales proceeds that would entitle our advisor to fees or distributions.
−Removed: Furthermore, our advisor or its affiliates will receive an acquisition fee that is based on the contract purchase price of each property acquired or the origination or acquisition price of any real estate-related investment, rather than the performance of those investments.
−Removed: Therefore, our advisor or its affiliates may have an incentive to recommend investments more quickly or with a higher purchase price or investments that may not produce the maximum risk adjusted returns in order to receive such acquisition fees.
−Removed: Our advisor may receive economic benefits from its status as a limited partner without bearing any of the investment risk.
−Removed: Our advisor is a limited partner in our operating partnership.
−Removed: Our advisor is entitled to receive an incentive distribution equal to 15.0% of net sales proceeds of properties after we have received and paid to our stockholders a return of their invested capital and an annual 6.0% cumulative, non-compounded return on the gross proceeds of the sale of shares of our common stock.
−Removed: We bear all of the risk associated with the properties but, as a result of the incentive distributions to our advisor, we are not entitled to all of our operating partnership’s proceeds from property dispositions.
−Removed: The distribution payable to our advisor may influence our decisions about listing the shares of our common stock on a national securities exchange, merging our company with another company and acquisition or disposition of our investments.
−Removed: Our advisor’s entitlement to fees upon the sale of our assets and to participate in net sales proceeds could result in our advisor recommending sales of our investments at the earliest possible time at which sales of investments would produce the level of return which would entitle our advisor to compensation relating to such sales, even if continued ownership of those investments might be in our stockholders’ long-term best interest.
−Removed: The subordinated participation interest may require our operating partnership to make a distribution to our advisor in redemption of its limited partnership units upon the listing of the shares of our common stock on a national securities exchange or the merger of our company with another company in which our stockholders receive shares that are traded on a national securities exchange if our advisor meets the performance thresholds included in our operating partnership’s limited partnership agreement, even if our advisor is no longer serving as our advisor.
−Removed: To avoid making this distribution, our independent directors may decide against listing the shares of our common stock or merging with another company even if, but for the requirement to make this distribution, such listing or merger would be in our stockholders’ best interest.
−Removed: In addition, the requirement to pay these fees could cause our independent directors to make different investment or disposition decisions than they would otherwise make, in order to satisfy our obligation to our advisor.
−Removed: We may acquire assets from, or dispose of assets to, affiliates of our advisor, which could result in us entering into transactions on less favorable terms than we would receive from a third party or that negatively affect the public’s perception of us.
−Removed: We may acquire assets from affiliates of our advisor.
−Removed: Further, we may also dispose of assets to affiliates of our advisor.
−Removed: Affiliates of our advisor may make substantial profits in connection with such transactions and may owe fiduciary and/or other
−Removed: duties to the selling or purchasing entity in these transactions, and conflicts of interest between us and the selling or purchasing entities could exist in such transactions.
−Removed: Because our independent directors would rely on our advisor in identifying and evaluating any such transaction, these conflicts could result in transactions based on terms that are less favorable to us than we would receive from a third party.
−Removed: Also, the existence of conflicts, regardless of how they are resolved, might negatively affect the public’s perception of us.
−Removed: We have entered into a joint venture with another program and may continue to enter into joint venture programs sponsored or advised by one of our co-sponsors or one of their affiliates and may face conflicts of interest or disagreements with our joint venture partners that may not be resolved as quickly or on terms as advantageous to us as would be the case if the joint venture had been negotiated at arm’s-length with an independent joint venture partner.
−Removed: We have entered into a joint venture with another program and may continue to enter into joint venture programs sponsored or advised by one of our co-sponsors or one of their affiliates and may face certain additional risks and potential conflicts of interest.
−Removed: For example, securities issued by the other American Healthcare Investors program may never have an active trading market.
−Removed: Therefore, if we were to become listed on a national securities exchange, we may no longer have similar goals and objectives with respect to the resale of properties in the future.
−Removed: Joint ventures between us and other American Healthcare Investors programs or future American Healthcare Investors programs will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers.
−Removed: Under these joint venture agreements, none of the co-venturers may have the power to control the venture, and an impasse could occur regarding matters pertaining to the joint venture, including determining when and whether to buy or sell a particular property and the timing of a liquidation, which might have a negative impact on the joint venture and decrease returns to our stockholders.
+Added: Any failure to prevent cybersecurity breaches and maintain the proper function, security and availability of our or our third-party vendors’ and other third parties’ information technology systems could interrupt our operations, damage our reputation and brand, damage our competitive position, make it difficult for us to attract and retain tenants, and subject us to liability claims or regulatory penalties, which could adversely affect our business, financial condition and results of operations.
Risks Related to Our Organizational Structure
−Removed: Several potential events could cause our stockholders’ investment in us to be diluted, which may reduce the overall value of their investment.
+Added: Several potential events could cause our stockholders’ investment in us to be diluted, which may reduce the overall value of our stockholders’ investment.
Our stockholders’ investment in us could be diluted by a number of factors, including:
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This ownership restriction may also prohibit business combinations that would have otherwise been approved by our board and our stockholders.
−Removed: In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease their ability to sell their shares of our common stock.
+Added: In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease our stockholders’ ability to sell their shares of our common stock.
Our stockholders’ ability to control our operations is severely limited.
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Our board may amend or revise these and other strategies without a vote of the stockholders.
−Removed: Our charter sets forth the stockholder voting rights required to be set forth therein under the North American Securities Administrators Association.
Under our charter and Maryland law, our stockholders have a right to vote only on the following matters:
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All other matters are subject to the discretion of our board.
+Added: Conflicts of interest could arise as a result of our officers’ other positions and/or interests outside of our company.
+Added: We rely on our management for implementation of our policies and our day-to-day operations.
+Added: Although a majority of their business time is spent working for our company, they may engage in other investment and business activities in which we have no economic interest.
+Added: Their responsibilities to these other entities could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy.
+Added: They may face conflicts of interest in allocating time among us and their other business ventures and in meeting obligations to us and those other entities.
Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may limit or delay our stockholders’ ability to dispose of their shares of our common stock.
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The MGCL and our organizational documents limit our stockholders’ right to bring claims against our officers and directors.
−Removed: The MGCL provides that a director will not have any liability as a director so long as he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interest, and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
−Removed: In addition, our charter provides that, subject to the applicable limitations set forth therein or under the MGCL, no director or officer will be liable to us or our stockholders for monetary damages.
−Removed: Our charter also provides that we will generally indemnify our directors, our officers, our advisor and its affiliates for losses they may incur by reason of their service in those capacities unless:
−Removed: (i) their act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty;
−Removed: (ii) they actually received an improper personal benefit in money, property or services;
−Removed: or (iii) in the case of any criminal proceeding, they had reasonable cause to believe the act or omission was unlawful.
+Added: The MGCL provides that a director has no liability in such capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
+Added: Our charter requires us, subject to certain exceptions, to indemnify and advance expenses to our directors, officers, employees and agents.
+Added: Additionally, our charter limits, subject to certain exceptions, the liability of our directors and officers to us and our stockholders for monetary damages.
Moreover, we have entered into separate indemnification agreements with each of our directors and executive officers and intend to enter into indemnification agreements with each of our future directors and executive officers.
−Removed: As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law.
−Removed: In addition, we may be obligated to fund the defense costs incurred by these persons in some cases.
−Removed: However, our charter also provides that we may not indemnify our directors, our advisor and its affiliates for any loss or liability suffered by them or hold them harmless for any loss or liability suffered by us unless they have determined that the course of conduct that caused the loss or liability was in our best interest, they were acting on our behalf or performing services for us, the liability was not the result of negligence or misconduct by our non-independent directors, our advisor and its affiliates or gross negligence or willful misconduct by our independent directors, and the indemnification is recoverable only out of our net assets or the proceeds of insurance and not from our stockholders.
+Added: Although our charter does not allow us to indemnify our directors for any liability or loss suffered by them or hold harmless our directors for any loss or liability suffered by us to a greater extent than permitted under Maryland law, we and our stockholders may have more limited rights against our directors, officers, employees and agents than might otherwise exist under common law, which could reduce our stockholders’ and our recovery against them.
+Added: In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents in some cases, which would decrease the cash otherwise available for distribution to our stockholders.
Our stockholders’ investment return may be reduced if we are required to register as an investment company under the Investment Company Act.
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In addition, our contracts would be unenforceable unless a court were to require enforcement, and a court could appoint a receiver to take control of us and liquidate our business, which would reduce our stockholders’ investment return.
−Removed: We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.
−Removed: In April 2012, President Obama signed into law the JOBS Act.
−Removed: We are an “emerging growth company,” as defined in the JOBS Act, and are eligible to take advantage of certain exemptions from, or reduced disclosure obligations relating to, various reporting requirements that are normally applicable to public companies.
−Removed: We could remain an “emerging growth company” for up to five fiscal years after our initial public offering, or until the earliest of (i) the last day of the first fiscal year in which we have total annual gross revenue of $1.07 billion or more, (ii) December 31 of the fiscal year that we become a “large accelerated filer,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (which would occur if the market value of our common stock held by non-affiliates exceeds $700 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months), or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.
−Removed: Under the JOBS Act, emerging growth companies are not required to (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) comply with new requirements adopted by the Public Company Accounting Oversight Board, or PCAOB, which may require a supplement to the auditor’s report in which the auditor must provide additional information about the audit and the issuer’s financial statements, (iii) comply with new audit rules adopted by the PCAOB after April 5, 2012 (unless the SEC determines otherwise), (iv) provide certain disclosures relating to executive compensation generally required for larger public companies, or (v) hold stockholder advisory votes on executive compensation.
−Removed: Other than as set forth in the following paragraph, we have not yet made a decision as to whether to take advantage of any or all of the JOBS Act exemptions that are applicable to us.
−Removed: If we do take advantage of any of the remaining exemptions, we do not know if some investors will find our common stock less attractive as a result.
−Removed: Additionally, the JOBS Act provides that an “emerging growth company” may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies.
−Removed: This means that an “emerging growth company” can delay adopting certain accounting standards until such standards are otherwise applicable to private companies.
−Removed: However, we elected to “opt out” of such extended transition period, and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards is required for non-emerging growth companies.
−Removed: Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
Risks Related to Investments in Real Estate
Uncertain market conditions relating to the future acquisition or disposition of properties could lead such acquired real estate investments to decrease in value or may cause us to sell our properties at a loss in the future.
−Removed: Our advisor, subject to the oversight and approval of our board, may exercise its discretion as to whether and when to sell a property, and we will have no obligation to sell properties at any particular time.
+Added: Our management, subject to the oversight of our board, may exercise its discretion as to whether and when to sell a property, and we will have no obligation to sell properties at any particular time.
We cannot predict with any certainty the various market conditions affecting real estate investments that will exist at any particular time in the future.
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Accordingly, the extent to which our stockholders will receive cash distributions and realize potential appreciation on our real estate investments will, among other things, be dependent upon fluctuating market conditions.
−Removed: A significant portion of our annual base rent may be concentrated in a small number of tenants.
−Removed: 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.
−Removed: As of March 16, 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.
−Removed: The success of our investments materially depends upon the financial stability of the tenants leasing the properties we own.
−Removed: 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.
−Removed: These events could cause us to reduce the amount of distributions to our stockholders.
Uninsured losses relating to real estate and lender requirements to obtain insurance may reduce our stockholders’ returns.
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In cases where we are required by mortgage lenders to obtain casualty loss insurance for catastrophic events, effects of climate change or terrorism, such insurance may not be available, or may not be available at a reasonable cost, which could inhibit our ability to finance or refinance our properties.
−Removed: Additionally, if we obtain
−Removed: such insurance, the costs associated with owning a property would increase and could have a material adverse effect on the net income from the property, and, thus, the cash available for distribution to our stockholders.
+Added: Additionally, if we obtain such insurance, the costs associated with owning a property would increase and could have a material adverse effect on the net income from the property, and, thus, the cash available for distribution to our stockholders.
A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area.
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therefore, any adverse situation that disproportionately effects one of those areas would have a magnified adverse effect on our portfolio.
−Removed: As of March 16, 2021, our properties located in Missouri and Michigan accounted for approximately 11.9% and 10.1%, respectively, of our total property portfolio’s annualized base rent or annualized NOI.
−Removed: Accordingly, there is a geographic concentration of risk subject to fluctuations in each state’s economy.
+Added: As of March 25, 2022, properties located in Indiana accounted for approximately 30.9% of our total property portfolio’s annualized base rent or annualized NOI.
+Added: 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 and results of operations.
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Further, certain losses resulting from these types of events are uninsurable or not insurable at reasonable costs.
−Removed: More generally, any terrorist attack, other act of violence or war, political protest and unrest or public health crisis 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 and results of operations.
+Added: More generally, any terrorist attack, other act of violence or
+Added: war, political protest and unrest or public health crisis 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 and results of operations.
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.
−Removed: 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.
+Added: We currently intend to pursue insurance recovery for any losses caused by the COVID-19 pandemic, but there can be no assurance that 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.
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.
−Removed: With respect to our senior housing — RIDEA facilities, we are ultimately responsible for operational risks and other liabilities of the facility, other than those arising out of certain actions by our operator, such as gross negligence or willful misconduct.
+Added: With respect to our SHOP and integrated senior health campuses, we are ultimately responsible for operational risks and other liabilities of the facility, other than those arising out of certain actions by our operator, such as gross negligence or willful misconduct.
As such, operational risks include, and our resulting revenues therefore depend on, the availability and cost of general and professional liability insurance coverage or increases in insurance policy deductibles.
−Removed: Furthermore, because we bear such operational risks and liabilities related to our senior housing — RIDEA facilities, we may be directly adversely impacted by potential litigation related to the COVID-19 pandemic that have occurred or may occur at those facilities, and our insurance coverage may not cover or may not be sufficient to cover any potential losses.
+Added: Furthermore, because we bear such operational risks and liabilities related to our SHOP and integrated senior health campuses, we may be directly adversely impacted by potential litigation related to the COVID-19 pandemic that have occurred or may occur at those facilities, and our insurance coverage may not cover or may not be sufficient to cover any potential losses.
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.
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Combined with the factors above, these trends in insurance coverage may adversely affect our financial condition, results of operations, liquidity or cash flows.
+Added: Most of our costs, such as operating and general and administrative expenses, interest expense, and real estate acquisition and construction costs, are subject to inflation.
+Added: A significant portion of our operating expenses is sensitive to inflation.
+Added: These include expenses for property-related costs such as insurance, utilities and repairs and maintenance.
+Added: Property taxes are also impacted by inflationary changes as taxes are typically regularly reassessed in most states based on changes in the fair value of our properties.
+Added: We also have ground lease expenses in certain of our properties.
+Added: Ground lease costs are contractual, but in some cases, lease payments reset every few years based on changes on consumer price indexes.
+Added: Operating expenses on our non-RIDEA properties, with the exception of ground lease rental expenses, are typically recoverable through our lease arrangements, which allow us to pass through substantially all expenses associated with property taxes, insurance, utilities, repairs and maintenance, and other operating expenses (including increases thereto) to our tenants.
+Added: As of December 31, 2021, the majority of our existing leases were either triple net leases or leases that allow us to recover operating expenses, and also provided for the recapture of capital expenditures.
+Added: Our remaining leases are generally gross leases, which provide for recoveries of operating expenses above the operating expenses from the initial year within each lease.
+Added: During inflationary periods, we expect to recover increases in operating expenses from our triple net leases and our gross leases.
+Added: As a result, we do not believe that inflation would result in a significant adverse effect on our net operating income, results of operations, and operating cash flows at the property level.
+Added: For our RIDEA properties, increases in operating expenses, including labor, that are caused by inflationary pressures will generally be passed through to us and may adversely impact our net operating income, results of operations and operating cash flows.
+Added: Our general and administrative expenses consist primarily of compensation costs, as well as professional and legal fees.
+Added: Annually, our employee compensation is adjusted to reflect merit increases;
+Added: however, to maintain our ability to successfully compete for the best talent, rising inflation rates may require us to provide compensation increases beyond historical annual merit increases, which may significantly increase our compensation costs.
+Added: Similarly, professional and legal fees are also subject to the impact of inflation and expected to increase proportionately with increasing market prices for such services.
+Added: Consequently, inflation is expected to increase our general and administrative expenses over time and may adversely impact our results of operations and operating cash flows.
+Added: Also, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense of our borrowings.
+Added: Our exposure to increases in interest rates is limited to our variable-rate borrowings, which consist of borrowings under our credit facilities and variable-rate mortgage loans payable.
+Added: As of December 31, 2021, our outstanding debt aggregated $2.3 billion, of which 43.4% was unhedged variable-rate debt.
+Added: Therefore, a significant increase in inflation rates would have a material adverse impact on our financing costs and interest expense.
+Added: We have long term lease agreements with our tenants that contain effective annual rent escalations that were either fixed or indexed based on a consumer price index or other index.
+Added: We believe our annual lease expirations allow us to reset these leases to market rents upon renewal or re-leasing and that annual rent escalations within our long-term leases are generally sufficient to offset the effect of inflation on non-recoverable costs, such as general and administrative expenses and interest expense.
+Added: However, it is possible that during higher inflationary periods the impact of inflation will not be adequately offset by the resetting of rents from our renewal and re-leasing activities or our annual rent escalations.
+Added: As a result, during inflationary periods in which the inflation rate exceeds the annual rent escalation percentages within our lease contracts, we may not adequately mitigate the impact of inflation, which may adversely affect to our business, financial condition, results of operations, and cash flows.
+Added: Additionally, inflationary pricing may have a negative effect on the real estate acquisitions and construction costs necessary to complete our development and redevelopment projects, including, but not limited to, costs of construction materials, labor, and services from third-party contractors and suppliers.
+Added: Higher acquisition and construction costs could adversely impact our net investments in real estate and expected yields in our development and redevelopment projects, which may make otherwise lucrative investment opportunities less profitable to us.
+Added: As a result, our financial condition, results of operations, and cash flows, we well as our ability to pay dividends, could be adversely affected over time.
Delays in the acquisition, development and construction of real properties may have adverse effects on our results of operations and our ability to pay distributions to our stockholders.
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A builder’s performance may also be affected or delayed by conditions beyond the builder’s control.
−Removed: Therefore, our stockholders could suffer delays in the receipt of cash distributions attributable to those
−Removed: particular real properties.
+Added: Therefore, our stockholders could suffer delays in the receipt of cash distributions attributable to those particular real properties.
Delays in completion of construction could give tenants the right to terminate preconstruction leases for space at a newly developed project.
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If our projections are inaccurate, we may pay too much for a property, and our return on our investment could suffer.
+Added: If we contract with a development company for newly developed property, our earnest money deposit made to the development company may not be fully refunded.
+Added: We may acquire one or more properties under development.
+Added: We anticipate that if we do acquire properties that are under development, we will be obligated to pay a substantial earnest money deposit at the time of contracting to acquire such properties, and that we will be required to close the purchase of the property upon completion of the development of the property.
+Added: We may enter into such a contract with the development company even if at the time we enter into the contract, we have not yet secured sufficient financing to enable us to close the purchase of such property.
+Added: However, we may not be required to close a purchase from the development company, and may be entitled to a refund of our earnest money, in the following circumstances:
+Added: • the development company fails to develop the property;
+Added: • all or a specified portion of the pre-leased tenants fail to take possession under their leases for any reason;
+Added: • we are unable to secure sufficient financing to pay the purchase price at closing.
+Added: The obligation of the development company to refund our earnest money deposit will be unsecured, and we may not be able to obtain a refund of such earnest money deposit from it under these circumstances since the development company may be an entity without substantial assets or operations.
Our stockholders may not receive any profits resulting from the sale of our properties, or receive such profits in a timely manner, because we may provide financing to the purchaser of such property.
1 unchanged sentence
When we provide financing to purchasers, we will bear the risk that the purchaser may default on its obligations under the financing, which could negatively impact cash flows from operations.
−Removed: Even in the absence of a purchaser default, the distribution of sale proceeds, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of.
+Added: Even in the absence of a purchaser default, the distribution of sale proceeds, or their
+Added: reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of.
In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years.
1 unchanged sentence
Additionally, if any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to pay cash distributions to our stockholders.
+Added: Representations and warranties made by us in connection with sales of our properties may subject us to liability that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders.
+Added: When we sell a property, we have been required, and may continue to be required, to make representations and warranties regarding the property and other customary items.
+Added: In the event of a breach of such representations or warranties, the purchaser of the property may have claims for damages against us, rights to indemnification from us or otherwise have remedies against us.
+Added: In any such case, we may incur liabilities that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders.
We face possible liability for environmental cleanup costs and damages for contamination related to properties we acquire, which could substantially increase our costs and reduce our liquidity and cash distributions to our stockholders.
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In addition, the presence of hazardous substances on a property or the failure to meet environmental regulatory requirements may materially impair our ability to use, lease or sell a property, or to use the property as collateral for borrowing.
−Removed: Our real estate investments may be concentrated in MOBs, SNFs, senior housing or other healthcare-related facilities, making us potentially more vulnerable economically than if our investments were diversified.
+Added: Our real estate investments may be concentrated in MOBs, hospitals, SNFs, senior housing, integrated senior health campuses or other healthcare-related facilities, making us potentially more vulnerable economically than if our investments were diversified.
As a REIT, we invest primarily in real estate.
−Removed: Within the real estate industry, we have acquired and intend to continue to acquire or selectively develop and own MOBs, SNFs, senior housing and other healthcare-related facilities.
+Added: Within the real estate industry, we have acquired, and may continue to acquire, or selectively develop and own MOBs, hospitals, SNFs, senior housing, integrated senior health campuses and other healthcare-related facilities.
We are subject to risks inherent in concentrating investments in real estate.
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A downturn in the healthcare industry could negatively affect our lessees’ ability to make lease payments to us and our ability to pay distributions to our stockholders.
−Removed: These adverse effects could be more pronounced than if we diversified our investments outside of real estate or if our portfolio did not include a substantial concentration in MOBs, SNFs, senior housing and other healthcare-related facilities.
+Added: These adverse effects could be more pronounced than if we diversified our investments outside of real estate or if our portfolio did not include a substantial concentration in MOBs, hospitals, SNFs, senior housing and other healthcare-related facilities.
Certain of our properties may not have efficient alternative uses, so the loss of a tenant may cause us not to be able to find a replacement or cause us to spend considerable capital to adapt the property to an alternative use.
Some of the properties we have acquired and will seek to acquire are healthcare properties that may only be suitable for similar healthcare-related tenants.
−Removed: If we or our tenants terminate the leases for these properties or our tenants lose their regulatory authority to operate such properties, we may not be able to locate suitable replacement tenants to lease the properties
−Removed: for their specialized uses.
+Added: If we or our tenants terminate the leases for these properties or our tenants lose their regulatory authority to operate such properties, we may not be able to locate suitable replacement tenants to lease the properties for their specialized uses.
Alternatively, we may be required to spend substantial amounts to adapt the properties to other uses.
9 unchanged sentences
Any reduction in rental revenues resulting from the inability of our properties and our tenants to compete successfully may have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
−Removed: Representations and warranties made by us in connection with sales of our properties may subject us to liability that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders.
−Removed: When we sell a property, we may be required to make representations and warranties regarding the property and other customary items.
−Removed: In the event of a breach of such representations or warranties, the purchaser of the property may have claims for damages against us, rights to indemnification from us or otherwise have remedies against us.
−Removed: In any such case, we may incur liabilities that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders.
−Removed: Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations.
−Removed: From time to time, we have acquired, and may continue to attempt to acquire, multiple properties in a single transaction.
−Removed: Portfolio acquisitions are more complex and expensive than single property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition.
−Removed: Portfolio acquisitions may also result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio.
−Removed: In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio.
−Removed: In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate or attempt to dispose of these properties.
−Removed: To acquire multiple properties in a single transaction, we may be required to accumulate a large amount of cash.
−Removed: We would expect the returns that we earn on such cash to be less than the ultimate returns on real property;
−Removed: therefore, accumulating such cash could reduce our funds available for distributions to our stockholders.
−Removed: Any of the foregoing events may have an adverse effect on our operations.
+Added: Ownership of property outside the United States may subject us to different or greater risks than those associated with our domestic operations.
+Added: As of December 31, 2021, we had $68,085,000 invested in the United Kingdom, or UK, and the Isle of Man, or 1.6% of our portfolio, based on our aggregate purchase price of real estate investments.
+Added: International development, ownership, and operating activities involve risks that are different from those we face with respect to our domestic properties and operations.
+Added: For example, we have limited investing experience in international markets.
+Added: If we are unable to successfully manage the risks associated with international expansion and operations, our results of operations and financial condition may be adversely affected.
+Added: Additionally, our ownership of properties in the Isle of Man and the UK currently subjects us to fluctuations in the exchange rates between United States dollars, or USD, and the UK Pound Sterling, which may, from time to time, impact our financial condition and results of operations.
+Added: Revenues generated from any properties or other real estate-related investments we acquire or ventures we enter into relating to transactions involving assets located in markets outside the United States likely will be denominated in the local currency.
+Added: Therefore, any investments we make outside the United States may subject us to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the USD.
+Added: As a result, changes in exchange rates of any such foreign currency to USD may affect our revenues, operating margins and distributions and may also affect the book value of our assets and the amount of stockholders’ equity.
+Added: In addition, changes in foreign currency exchange rates used to value a REIT’s foreign assets may be considered changes in the value of the REIT’s assets.
+Added: These changes may adversely affect our status as a REIT.
+Added: Further, bank accounts in a foreign currency which are not considered cash or cash equivalents may adversely affect our status as a REIT.
Risks Related to the Healthcare Industry
3 unchanged sentences
Changes in these laws and regulations or our tenants’ failure to comply with these laws and regulations could negatively affect the ability of our tenants to make lease payments to us and our ability to pay distributions to our stockholders.
−Removed: Many of our healthcare properties and their tenants may require a CON to operate.
+Added: Many of our healthcare properties and their tenants may require a license or CON to operate.
Failure to obtain a license or CON, or loss of a required license or CON, would prevent a facility from operating in the manner intended by the tenant.
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State CON laws and other similar laws are not uniform throughout the United States and are subject to change;
−Removed: therefore, this may adversely impact our tenants’ ability to
−Removed: provide services in different states.
+Added: therefore, this may adversely impact our tenants’ ability to provide services in different states.
We cannot predict the impact of state CON laws or similar laws on our development of facilities or the operations of our tenants.
2 unchanged sentences
This could negatively affect our tenants’ abilities to make rent payments to us.
−Removed: In limited circumstances, loss of state licensure or certification or closure of a facility could ultimately result in loss of authority to operate the facility or provide services at the facility and require new CON authorization licensure and/or authorization or potential authorization from the CMS to re-institute operations.
+Added: In limited circumstances, loss of state licensure or certification or closure of a facility could ultimately result in loss of authority to operate the facility or provide services at the facility and require new CON authorization licensure and/or authorization or potential authorization from CMS to re-institute operations.
As a result, a portion of the value of the facility may be reduced, which would adversely impact our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
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These changes could have a material adverse effect on the financial condition of some of our tenants.
−Removed: On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law and repeals the individual mandate portion of the Healthcare Reform Act beginning in 2019.
−Removed: With the elimination of the individual mandate, several states brought suit seeking to invalidate the entire Affordable Care Act.
+Added: On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law and repealed the individual mandate financial penalty portion of the Healthcare Reform Act beginning in 2019.
+Added: With the elimination of the individual mandate enforcement mechanism, several states brought suit seeking to invalidate the entire Affordable Care Act.
In response, several other states intervened in the suit, seeking to uphold the Healthcare Reform Act.
−Removed: The United States Supreme Court heard oral argument from all sides on the matter in late 2020.
+Added: In 2021, the United States Supreme Court determined that this latest challenge to the Healthcare Reform Act was unreviewable because the plaintiffs in the suit lacked standing.
+Added: However, challenges to the Healthcare Reform Act may continue.
If all or a portion of the Healthcare Reform Act, including the individual mandate, is eventually ruled unconstitutional, our tenants may have more patients and residents who do not have insurance coverage, which may adversely impact the tenants’ collections and revenues.
30 unchanged sentences
Investigation by a federal or state governmental body for violation of fraud and abuse laws or imposition of any of these penalties upon one of our tenants could jeopardize that tenant’s ability to operate or to make rent payments, which may have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
−Removed: In late 2020, the CMS and the United States Health and Human Services Office of Inspector General issued material revisions to rules and regulations relating to the federal Physician Self-Referral Prohibition and the federal Anti-Kickback Statute.
+Added: In late 2020, CMS and the United States Health and Human Services Office of Inspector General issued material revisions to rules and regulations relating to the federal Physician Self-Referral Prohibition and the federal Anti-Kickback Statute.
While these revisions were designed to modernize the regulatory scheme and advance the transition to value-based care, there is little published guidance and interpretation with respect to the new regulations, which may lead to uncertainty for our tenants in trying to comply with the various safe harbors and exceptions to these laws.
7 unchanged sentences
• increased liability insurance expense;
−Removed: • continued pressure by private and governmental payers to reduce payments to providers of services;
+Added: • continued pressure by private and governmental payors to reduce payments to providers of services;
• increased scrutiny of billing, referral and other practices by federal and state authorities;
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The adverse effects on these companies could have a significant impact on the industry as a whole, including but not limited to negative public perception by investors, lenders and consumers.
−Removed: As a result, lessees of healthcare facilities that we own, or may acquire, could experience the damaging financial effects of a weakened industry sector driven by negative headlines, ultimately making them unable to meet their obligations to us, and our business could be adversely affected.
+Added: As a result, lessees of healthcare facilities that we own, or may acquire, could experience the damaging financial effects of a weakened
+Added: industry sector driven by negative headlines, ultimately making them unable to meet their obligations to us, and our business could be adversely affected.
Our healthcare-related tenants may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us.
3 unchanged sentences
In some states, insurance coverage for the risk of punitive damages arising from professional liability and general liability claims and/or litigation may not, in certain cases, be available to these tenants due to state law prohibitions or limitations of availability.
−Removed: As a result, these types of tenants of our MOBs, SNFs, senior housing and other healthcare-related facilities operating in these states may be liable for punitive damage awards that are either not covered or are in excess of their insurance policy limits.
+Added: As a result, these types of tenants of our MOBs, hospitals, SNFs, senior housing and other healthcare-related facilities operating in these states may be liable for punitive damage awards that are either not covered or are in excess of their insurance policy limits.
We also believe that there has been, and will continue to be, an increase in governmental investigations of certain healthcare providers, particularly in the area of Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations.
2 unchanged sentences
If a tenant is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if a tenant is required to pay uninsured punitive damages, or if a tenant is subject to an uninsurable government enforcement action, the tenant could be exposed to substantial additional liabilities, which may affect the tenant’s ability to pay rent, which in turn could have a material adverse effect on our business, financial condition and results of operations and our ability to pay distributions to our stockholders.
−Removed: We, our tenants and our operators for our skilled nursing and senior housing facilities may be subject to various government reviews, audits and investigations that could adversely affect our business, including an obligation to refund amounts previously paid to us, potential criminal charges, the imposition of fines, and/or the loss of the right to participate in Medicare and Medicaid programs.
−Removed: We, our tenants and our operators for our skilled nursing and senior housing facilities are subject to various governmental reviews, audits and investigations to verify compliance with Medicare and Medicaid programs and applicable laws and regulations.
−Removed: We, our tenants and our operators for our skilled nursing and senior housing facilities are also subject to audits under various government programs, including Recovery Audit Contractors, Zone Program Integrity Contractors, Medicaid Integrity Contractors and Unified Program Integrity Contractor programs, in which third-party firms engaged by the CMS, conduct extensive reviews of claims data and medical and other records to identify potential improper payments under the Medicare and Medicaid programs.
+Added: We, our tenants and our operators for our skilled nursing, senior housing and integrated senior health campuses may be subject to various government reviews, audits and investigations that could adversely affect our business, including an obligation to refund amounts previously paid to us, potential criminal charges, the imposition of fines, and/or the loss of the right to participate in Medicare and Medicaid programs.
+Added: We, our tenants and our operators for our skilled nursing, senior housing and integrated senior health campuses are subject to various governmental reviews, audits and investigations to verify compliance with the Medicaid and Medicare programs and applicable laws and regulations.
+Added: We, our tenants and our operators for our skilled nursing, senior housing and integrated senior health campuses are also subject to audits under various government programs, including Recovery Audit Contractors, Unified Program Integrity Contractors, and other third party audit programs, in which third-party firms engaged by CMS conduct extensive reviews of claims data and medical and other records to identify potential improper payments under the Medicare and Medicaid programs.
Private pay sources also reserve the right to conduct audits.
5 unchanged sentences
• damage to our reputation in various markets.
−Removed: While we, our tenants and our operators for our skilled nursing and senior housing facilities have always been subject to post-payment audits and reviews, more intensive “probe reviews” appear to be a permanent procedure with our fiscal intermediaries.
−Removed: If the government or court were to conclude that such errors, deficiencies or disagreements constituted criminal violations, or were to conclude that such errors, deficiencies or disagreements resulted in the submission of false claims to federal healthcare programs, or if the government were to discover other problems in addition to the ones identified by the probe reviews that rose to actionable levels, we and certain of our officers, and our tenants and operators for our skilled nursing, senior housing and integrated senior health campuses and certain of their officers, might face potential criminal charges and/or civil claims, administrative sanctions and penalties for amounts that could be material to our business, results of operations and financial condition.
+Added: While we, our tenants and our operators for our skilled nursing, senior housing and integrated senior health campuses have always been subject to post-payment audits and reviews, more intensive “probe reviews” appear to be a permanent procedure with our fiscal intermediaries.
+Added: If the government or a court were to conclude that such errors, deficiencies or disagreements constituted criminal violations, or were to conclude that such errors, deficiencies or disagreements resulted in the submission of false claims to federal healthcare programs, or if the government were to discover other problems in addition to the ones identified by the probe reviews that rose to actionable levels, we and certain of our officers, and our tenants and operators for our skilled nursing, senior housing and integrated senior health campuses and certain of their officers, might face potential criminal charges and/or civil claims, administrative sanctions and penalties for amounts that could be material to our business, results of operations and financial condition.
In addition, we and/or some of the key personnel of our operating subsidiaries, or those of our tenants and operators for our skilled nursing, senior housing and integrated senior health campuses, could be temporarily or permanently excluded from future participation in state and federal healthcare reimbursement programs such as Medicaid and Medicare.
−Removed: In any event, it is likely that a governmental investigation alone, regardless of its outcome, would divert material time, resources and attention from our management team and our staff, or those of our tenants and our operators for our skilled nursing, senior housing and integrated senior health campuses and could have a materially detrimental impact on our results of operations during and after any such investigation or proceedings.
+Added: In any event, it is likely that a governmental investigation alone, regardless of its outcome,
+Added: would divert material time, resources and attention from our management team and our staff, or those of our tenants and our operators for our skilled nursing, senior housing and integrated senior health campuses and could have a materially detrimental impact on our results of operations during and after any such investigation or proceedings.
In cases where claim and documentation review by any CMS contractor results in repeated poor performance, a facility can be subjected to protracted oversight.
7 unchanged sentences
This uncertainty may create compliance challenges for tenants and operators who accepted relief funds.
−Removed: The Healthcare Reform Law imposes additional requirements on SNFs regarding compliance and disclosure.
+Added: The Healthcare Reform Law imposes additional requirements on skilled nursing facilities regarding compliance and disclosure.
The Health Care and Education and Reconciliation Act of 2010, or the Healthcare Reform Law, requires SNFs to have a compliance and ethics program that is effective in preventing and detecting criminal, civil and administrative violations and in promoting quality of care.
The United States Department of Health and Human Services included in the final rule published on October 4, 2016 the requirement for operators to implement a compliance and ethics program as a condition of participation in Medicare and Medicaid.
−Removed: Long-term care facilities, including SNFs, had until November 28, 2019 to comply.
+Added: Long-term care facilities, including skilled nursing facilities, had until November 28, 2019 to comply.
If our operators fall short in their compliance and ethics programs and quality assurance and performance improvement programs, if and when required, their reputations and ability to attract residents could be adversely affected.
1 unchanged sentence
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.
−Removed: London Interbank Offering Rate, or LIBOR, and other indices which are deemed “benchmarks” are the subject of recent national, international and other regulatory guidance and proposals for reform.
+Added: London Interbank Offered Rate, or 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.
−Removed: It currently appears that, over time, United States dollar LIBOR may be replaced by the Secured Overnight Financing Rate, or SOFR, published by the Federal Reserve Bank of New York.
−Removed: However, the manner and timing of this shift is currently unknown.
+Added: As published by the Federal Reserve Bank of New York, it currently appears that, over time, United States dollar LIBOR may be replaced by the Secured Overnight Financing Rate, or SOFR.
+Added: The Financial Conduct Authority, or FCA, ceased publishing one-week and two-month LIBOR after December 31, 2021 and intends to cease publishing all remaining LIBOR after June 30, 2023.
+Added: At this time, it is not known whether or when SOFR or other alternative reference rates will attain market traction as replacements for LIBOR.
Market participants are still considering how various types of financial instruments and securitization vehicles should react to a discontinuation of LIBOR.
9 unchanged sentences
If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments.
−Removed: In addition, our variable-rate debt instruments use LIBOR as a benchmark for establishing the interest rate.
−Removed: In July 2017, the Financial Conduct Authority, or FCA, that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
−Removed: As a result, the Federal Reserve Board and the Federal Reserve Bank of New York
−Removed: organized the Alternative Reference Rates Committee which identified SOFR as its preferred alternative to United States dollar LIBOR in derivatives and other financial contracts.
−Removed: We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets.
−Removed: 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: 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: The consequences of these developments are uncertain, but could include an increase in the cost of our variable-rate debt instruments.
−Removed: If LIBOR is no longer widely available, or otherwise at our option, we may need to renegotiate with our lenders that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.
−Removed: As such, the potential phase-out of LIBOR may have a material adverse effect on the interest rates on our current and future borrowings.
To the extent we borrow at fixed rates or enter into fixed interest rate swaps, we will not benefit from reduced interest expense if interest rates decrease.
13 unchanged sentences
When providing financing, a lender may impose restrictions on us that affect our ability to incur additional debt and affect our distribution and operating strategies.
−Removed: We may enter into loan documents that contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage, or replace our advisor.
+Added: We have entered into, and may continue to enter into, loan documents that contain covenants that limit our ability to further mortgage the property or discontinue insurance coverage.
These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.
10 unchanged sentences
If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related loans, our business and financial results could be materially adversely affected.
−Removed: In obtaining certain nonrecourse loans, we may provide standard carve-out guaranties.
−Removed: These guaranties are only applicable if and when the borrower directly, or indirectly through agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad boy” guaranties).
+Added: In obtaining certain nonrecourse loans, we have provided, and may continue to provide, standard carve-out guaranties.
+Added: These guaranties are only applicable if and when the borrower directly, or indirectly through agreement with an affiliate, joint
+Added: venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad boy” guaranties).
Although we believe that “bad boy” carve-out guaranties are not guaranties of payment in the event of foreclosure or other actions of the foreclosing lender that are beyond the borrower’s control, some lenders in the real estate industry have recently sought to make claims for payment under such guaranties.
−Removed: In the event such a claim were made against us under a “bad boy” carve-out guaranty following foreclosure on mortgages or related loan, and such claim were successful, our business and financial results could be materially adversely affected.
+Added: In the event such a claim was made against us under a “bad boy” carve-out guaranty following foreclosure on mortgages or related loan, and such claim was successful, our business and financial results could be materially adversely affected.
Risks Related to Real Estate-Related Investments
−Removed: The real estate-related investments in which we may invest and the loans underlying such real estate-related investments may be impacted by unfavorable real estate market conditions, which could decrease their value.
−Removed: If we acquire investments in mortgage or mezzanine loans, or mortgage-backed securities, such investments will involve special risks relating to the particular borrower or issuer of the loans or mortgage-backed securities and we will be at risk of loss on those investments, including losses as a result of defaults on the underlying mortgage loans.
−Removed: Additionally, if we invest in the common and preferred stock of both publicly traded and private unaffiliated real estate companies, such equity securities involve a higher degree of risk than debt securities due to a variety of factors, including the fact that such investments are subordinate to creditors and are not secured by the issuer’s property.
−Removed: The losses on such real estate-related investments may be caused by many conditions beyond our control, including economic conditions affecting real estate values, tenant defaults and lease expirations, interest rate levels, the financial condition and business outlook of the securities issuer and the other economic and liability risks associated with real estate, including risks relating to rising interest rates.
−Removed: We do not know whether the values of the property securing any of our real estate-related investments, including the value of any real estate-related equity securities, will remain at the levels existing on the dates we initially make the related investment.
−Removed: If the values of the underlying properties drop, our risk will increase and the values of our interests in such real estate-related investments may decrease.
+Added: Unfavorable real estate market conditions and delays in liquidating defaulted mortgage loan investments may negatively impact mortgage loans we have invested and may invest in, which could result in losses to us.
+Added: The investment in mortgage loans or mortgage-backed securities we have made, and may continue to make, involve special risks relating to the particular borrower or issuer of the mortgage-backed securities and we will be at risk of loss on those investments, including losses as a result of defaults on mortgage loans.
+Added: These losses may be caused by many conditions beyond our control, including economic conditions affecting real estate values, tenant defaults and lease expirations, interest rate levels and the other economic and liability risks associated with real estate.
+Added: If we acquire property by foreclosure following defaults under our mortgage loan investments, we will have the economic and liability risks as the owner described above.
+Added: We do not know whether the values of the property securing any of our real estate-related investments will remain at the levels existing on the dates we initially make the related investment.
+Added: If the values of the underlying properties drop, our risk will increase and the values of our interests may decrease.
+Added: Furthermore, if there are defaults under our mortgage loan investments, we may not be able to foreclose on or obtain a suitable remedy with respect to such investments.
+Added: Specifically, we may not be able to repossess and sell the underlying properties quickly, which could reduce the value of our investment.
+Added: For example, an action to foreclose on a property securing a mortgage loan is regulated by state statutes and rules and is subject to many of the delays and expenses of lawsuits if the defendant raises defenses or counterclaims.
+Added: Additionally, in the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.
+Added: The commercial mortgage-backed securities in which we have invested, and may continue to invest, are subject to several types of risks.
+Added: Commercial mortgage-backed securities are bonds which evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans.
+Added: Accordingly, the mortgage-backed securities in which we have invested, and may continue to invest, are subject to all the risks of the underlying mortgage loans.
+Added: In a rising interest rate environment, the value of commercial mortgage-backed securities may be adversely affected when payments on underlying mortgages do not occur as anticipated, resulting in the extension of the security’s effective maturity and the related increase in interest rate sensitivity of a longer-term instrument.
+Added: The value of commercial mortgage-backed securities may also change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities markets as a whole.
+Added: In addition, commercial mortgage-backed securities are subject to the credit risk associated with the performance of the underlying mortgage properties.
+Added: Commercial mortgage-backed securities are also subject to several risks created through the securitization process.
+Added: Subordinate commercial mortgage-backed securities are paid interest-only to the extent that there are funds available to make payments.
+Added: To the extent the collateral pool includes a large percentage of delinquent loans, there is a risk that interest payments on subordinate commercial mortgage-backed securities will not be fully paid.
+Added: Subordinate securities of commercial mortgage-backed securities are also subject to greater credit risk than those commercial mortgage-backed securities that are more highly rated.
+Added: The mezzanine loans in which we have invested, and may continue to invest, involve greater risks of loss than senior loans secured by income-producing real estate.
+Added: We have invested, and may continue to invest, in mezzanine loans that take the form of subordinated loans secured by second mortgages on the underlying real estate or loans secured by a pledge of the ownership interests of either the entity owning the real estate or the entity that owns the interest in the entity owning the real estate.
+Added: These types of investments involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real estate because the investment may become unsecured as a result of foreclosure by the senior lender.
+Added: In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan.
+Added: If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt.
+Added: As a result, we may not
+Added: recover some or all of our investment.
+Added: In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real estate and increasing the risk of loss of principal.
+Added: We expect a portion of our real estate-related investments to be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions.
+Added: We may acquire real estate-related investments in connection with privately negotiated transactions which are not registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws.
+Added: As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited.
+Added: The mezzanine and bridge loans we may purchase will be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default.
+Added: If we liquidate prior to the maturity of our real estate-related investments, we may be forced to sell those investments on unfavorable terms or at a loss.
+Added: Our board may choose to effect a liquidity event in which we liquidate our assets, including our real estate-related investments.
+Added: If we liquidate those investments prior to their maturity, we may be forced to sell those investments on unfavorable terms or at a loss.
+Added: For instance, if we are required to liquidate mortgage loans at a time when prevailing interest rates are higher than the interest rates of such mortgage loans, we would likely sell such loans at a discount to their stated principal values.
Risks Related to Joint Ventures
−Removed: Property ownership through joint ventures could limit our control of those investments and restrict our ability to operate the property on our term.
−Removed: In connection with the purchase of real estate, we have entered, and may continue to enter, into joint ventures with third parties, including affiliates of our advisor.
+Added: Property ownership through joint ventures could limit our control of those investments, restrict our ability to operate and finance the property on our term and reduce their expected return.
+Added: In connection with the purchase of real estate, we have entered, and may continue to enter, into joint ventures with third parties.
We may also purchase or develop properties in co-ownership arrangements with the sellers of the properties, developers or other persons.
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• our joint venture partners might become bankrupt and such proceedings could have an adverse impact on the operation of the partnership or joint venture;
+Added: • our joint venture partners may have business interests or goals with respect to the property that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of the property;
+Added: • disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration that would increase our expenses and distract our officers from focusing their time and effort on our business, disrupt the day-to-day operations of the property such as by delaying the implementation of important decisions until the conflict is resolved, and possibly force a sale of the property if the dispute cannot be resolved;
• the activities of a joint venture could adversely affect our ability to maintain our qualification as a REIT.
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For example, while we and a co-venturer may invest an equal amount of capital in an investment, the investment may be structured such that we have a right to priority distributions of cash flows up to a certain target return while the co-venturer may receive a disproportionately greater share of cash flows than we are to receive once such target return has been achieved.
−Removed: investment structure may result in the co-venturer receiving more of the cash flows, including appreciation, of an investment than we would receive.
+Added: This type of investment structure may result in the co-venturer receiving more of the cash flows, including appreciation, of an investment
+Added: than we would receive.
If we do not accurately judge the appreciation prospects of a particular investment or structure the venture appropriately, we may incur losses on joint venture investments or have limited participation in the profits of a joint venture investment, either of which could reduce our ability to pay cash distributions to our stockholders.
−Removed: Federal Income Tax Risks
+Added: Risks Related to Taxes and Our REIT Status
Failure to maintain our qualification as a REIT for federal income tax purposes would subject us to federal income tax on our taxable income at regular corporate rates, which would substantially reduce our ability to pay distributions to our stockholders.
−Removed: We qualified and elected to be taxed as a REIT under the Code beginning with our taxable year ended December 31, 2016.
+Added: GAHR IV qualified and elected to be taxed as a REIT under the Code beginning with its taxable year ended December 31, 2016.
To continue to maintain our qualification as a REIT, we must meet various requirements set forth in the Code concerning, among other things, the ownership of our outstanding common stock, the nature of our assets, the sources of our income and the amount of our distributions to our stockholders.
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As a result of all these factors, our failure to maintain our qualification as a REIT could impair our ability to expand our business and raise capital, and would substantially reduce our ability to pay distributions to our stockholders.
−Removed: Our stockholders may have a current tax liability on distributions they elect to reinvest in shares of our common stock.
−Removed: If our stockholders participate in the DRIP, they will be deemed to have received, and for United States federal income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital.
−Removed: In addition, our stockholders may be treated, for United States federal tax purposes, as having received an additional distribution to the extent the shares are purchased at a discount from fair market value.
+Added: TRSs are subject to corporate-level taxes and our dealings with TRSs may be subject to a 100% excise tax.
+Added: A REIT may own up to 100% of the stock of one or more TRSs.
+Added: Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.
+Added: A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS.
+Added: Overall, no more than 20.0% (25.0% for taxable years beginning prior to January 1, 2018) of the gross value of a REIT’s assets may consist of stock or securities of one or more TRSs.
+Added: A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT, including gross income from operations pursuant to management contracts.
+Added: We lease our properties that are “qualified health care properties” to one or more TRSs which, in turn, contract with independent third-party management companies to operate those “qualified health care properties” on behalf of those TRSs.
+Added: In addition, we may use one or more TRSs generally to hold properties for sale in the ordinary course of a trade or business or to hold assets or conduct activities that we cannot conduct directly as a REIT.
+Added: A TRS is subject to applicable U.S.
+Added: federal, state, local and foreign income tax on its taxable income, as well as limitations on the deductibility of its interest expenses.
+Added: In addition, the Code imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.
+Added: If our “qualified health care properties” are not properly leased to a TRS or the managers of those “qualified health care properties” do not qualify as “eligible independent contractors,” we could fail to qualify as a REIT.
+Added: In general, under the REIT rules, we cannot directly operate any properties that are “qualified health care properties” and can only indirectly participate in the operation of “qualified health care properties” on an after-tax basis by leasing those properties to independent health care facility operators or to TRSs.
+Added: A “qualified health care property” is any real property (and any personal property incident to that real property) which is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facilities, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and is operated by a provider of those services that is eligible for participation in the Medicare program with respect to that facility.
+Added: Furthermore, rent paid by a lessee of a “qualified health care property” that is a “related party tenant” of ours will not be qualifying income for purposes of the two gross income tests applicable to REITs.
+Added: However, a TRS that leases “qualified health care properties” from us will not be treated as a “related party tenant” with respect to our “qualified health care properties” that are managed by an “eligible independent contractor.”
+Added: An “eligible independent contractor” is an independent contractor that, at the time such contractor enters into a management or other agreement with a TRS to operate a “qualified health care property,” is actively engaged in the trade or business of operating “qualified health care properties” for any person not related to us or the TRS.
+Added: Among other requirements to qualify as an independent contractor, a manager must not own, directly or applying attribution provisions of the Code, more than 35% of the shares of our outstanding stock (by value), and no person or group of persons can own more than 35.0% of the shares of our outstanding stock and 35.0% of the ownership interests of the manager (taking into account only owners of more than 5% of our shares and, with respect to ownership interest in such managers that are publicly traded, only holders of more than 5% of such ownership interests).
+Added: The ownership attribution rules that apply for purposes of the 35.0% thresholds are complex.
+Added: There can be no assurance that the levels of ownership of our shares by our managers and their owners will not be exceeded.
+Added: Our stockholders may have a current tax liability on distributions they elected to reinvest in shares of our common stock.
+Added: If our stockholders participated in our DRIP Offerings, they will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital.
+Added: In addition, our stockholders may be treated, for income tax purposes, as having received an additional distribution to the extent the shares are purchased at a discount from fair market value.
As a result, unless our stockholders are a tax-exempt entity, our stockholders may have to use funds from other sources to pay their tax liability on the value of the shares of common stock received.
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Our stockholders are urged to consult with their tax advisor with respect to the impact of recent legislation on their investment in our stock and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.
−Removed: Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for United States federal income tax purposes as a regular corporation.
+Added: Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for income tax purposes as a regular corporation.
As a result, our charter provides our board with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders.
Our board has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interests of our stockholders.
−Removed: In addition, on December 22, 2017, the Tax Cuts and Jobs Act was signed into law.
−Removed: The Tax Cuts and Jobs Act made significant changes to the United States federal income tax rules for taxation of individuals and businesses, generally effective for taxable years beginning after December 31, 2017.
−Removed: In addition to reducing corporate and individual tax rates, the Tax Cuts and Jobs Act eliminates or restricts various deductions.
−Removed: Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017 and before January 1, 2026.
−Removed: The Tax Cuts and Jobs Act made numerous large and small changes to the tax rules that do not affect the REIT qualification rules directly but may otherwise affect us or our stockholders.
−Removed: While the changes in the Tax Cuts and Jobs Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Code may have unanticipated effects on us or our stockholders.
−Removed: We urge stockholders to consult with their own tax advisor with respect to the status of the Tax Cuts and Jobs Act and other legislative regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.
−Removed: We urge stockholders to consult with their own tax advisor with respect to the status of the Tax Cuts and Jobs Act and other legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.
In certain circumstances, we may be subject to federal and state income taxes even if we maintain our qualification as a REIT, which would reduce our cash available for distribution to our stockholders.
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Dividends payable by REITs generally do not qualify for the reduced tax rates on dividend income as compared to regular corporations, which could adversely affect the value of our shares.
−Removed: The maximum United States federal income tax rate for certain qualified dividends payable to domestic stockholders that are individuals, trusts and estates is 20%.
+Added: The federal income tax rate for certain qualified dividends payable to domestic stockholders that are individuals, trusts and estates generally is up to 20.0%.
Dividends payable by REITs, however, are generally not eligible for these reduced rates for qualified dividends.
−Removed: For taxable years beginning after December 31, 2017 and before January 1, 2026, the Tax Cuts and Jobs Act permits a deduction for certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT stockholder that are not designated as capital gain dividends or qualified dividend income), which allows United States individuals, trusts, and estates to deduct up to 20% of such amounts, subject to certain limitations, resulting in an effective maximum United States federal income tax rate of 29.6% on such qualified REIT dividends.
−Removed: Although the reduced United States federal income tax rate applicable to dividend income from regular corporate dividends does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to qualified dividends from C corporations could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our shares.
+Added: For taxable years beginning after December 31, 2017 and before January 1, 2026, the Tax Cuts and Jobs Act permits a deduction for certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT stockholder that are not designated as capital gain dividends or qualified dividend income), which allows United States individuals, trusts, and estates to deduct up to 20% of such amounts, subject to certain limitations.
+Added: Although the reduced United States federal income tax rate applicable to dividend income from regular corporate dividends
+Added: does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to qualified dividends from C corporations could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our shares.
Dividends on, and gains recognized on the sale of, shares by a tax-exempt stockholder may be subject to United States federal income tax as unrelated business taxable income.
−Removed: If (1) we are a “pension-held REIT,” (2) a tax-exempt stockholder has incurred (or is deemed to have incurred) debt to purchase or hold our shares or (3) a holder of shares is a certain type of tax-exempt stockholder, dividends on, and gains recognized on the sale of, shares by such tax-exempt stockholder may be subject to United States federal income tax as unrelated business taxable income under the Code.
+Added: If (i) we are a “pension-held REIT,” (ii) a tax-exempt stockholder has incurred (or is deemed to have incurred) debt to purchase or hold our shares or (iii) a holder of shares is a certain type of tax-exempt stockholder, dividends on, and gains recognized on the sale of, shares by such tax-exempt stockholder may be subject to United States federal income tax as unrelated business taxable income under the Code.
Characterization of our sale-leaseback transactions may be challenged.
We have participated, and may continue to participate, in sale-leaseback transactions in which we purchase real estate investments and lease them back to the sellers of such properties.
−Removed: Our advisor will use its best efforts to structure any of our sale-leaseback transactions such that the lease will be characterized as a “true lease” and so that we will be treated as the owner of the property for federal income tax purposes.
+Added: We will use our best efforts to structure any of our sale-leaseback transactions such that the lease will be characterized as a “true lease” and so that we will be treated as the owner of the property for federal income tax purposes.
However, we cannot assure our stockholders that the IRS will not challenge such characterization.
In the event that any such sale-leaseback transaction is re-characterized as a financing transaction for federal income tax purposes, deductions for depreciation and cost recovery relating to such real estate investment would be disallowed or significantly reduced.
−Removed: If a sale-leaseback transaction is so recharacterized, we might fail to satisfy the REIT asset tests or income tests and, consequently, lose our REIT status.
+Added: If a sale-leaseback transaction is so re-characterized, we might fail to satisfy the REIT asset tests or income tests and, consequently, lose our REIT status.
Complying with the REIT requirements may cause us to forego otherwise attractive opportunities.
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Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
−Removed: If our operating partnership fails to maintain its status as a disregarded entity or as a partnership, its income may be subject to taxation, which would reduce the cash available for distribution to stockholders and likely result in a loss of our REIT status.
−Removed: We intend to maintain the status of the operating partnership as a disregarded entity or as a partnership for United States federal income tax purposes.
−Removed: However, if the IRS were to successfully challenge the status of the operating partnership as a disregarded entity or as a partnership for such purposes, it would be taxable as a corporation.
−Removed: In such event, this would reduce the amount of distributions that the operating partnership could make to us.
−Removed: This would also likely result in our losing REIT status, and, if so, becoming subject to a corporate level tax on our own income.
−Removed: This would substantially reduce any cash available to pay distributions.
−Removed: In addition, if any of the partnerships or limited liability companies through which the operating partnership owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise not disregarded for United States federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to the operating partnership.
−Removed: Such a recharacterization of an underlying property owner could also threaten our ability to maintain our status as a REIT.
Foreign purchasers of shares of our common stock may be subject to FIRPTA tax upon the sale of their shares of our common stock or upon the payment of a capital gains dividend.
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However, these rules do not apply to foreign pension plans and certain publicly traded entities.
−Removed: Employee Benefit Plan, IRA, and Other Tax-Exempt Investor Risks
+Added: If the REIT Merger does not qualify as a tax-free reorganization, there may be adverse tax consequences.
+Added: The REIT Merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code.
+Added: The closing of the REIT Merger was conditioned on the receipt by GAHR IV 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.
+Added: However, these legal opinions will not be binding on the IRS or on the courts.
+Added: If, for any reason, the REIT Merger were to fail to qualify as a tax-free reorganization, then there would be adverse tax implications to us and our stockholders, which could substantially reduce our ability to pay distributions to our stockholders.
+Added: Empl oyee Benefit Plan, IRA, and Other Tax-Exempt Investor Risks
We, and our stockholders that are employee benefit plans, IRAs, annuities described in Sections 403(a) or (b) of the Code, Archer Medical Savings Accounts, health savings accounts, Coverdell education savings accounts, and other arrangements that are subject to ERISA or Section 4975 of the Code (referred to generally as “Benefit Plans and IRAs”) will be subject to risks relating specifically to our having such Benefit Plan and IRA stockholders, which risks are discussed below.
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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.