5 unchanged sentences
This summary should be read in conjunction with the full risk factors contained below .
−Removed: Investment Risks
−Removed: • There is no public market for the shares of our common stock.
−Removed: 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 have paid, and may continue to pay, a portion of distributions from the net proceeds of the initial offering and borrowings or from other sources.
−Removed: 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: • The estimated per share NAV 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.
−Removed: • We may not effect a liquidity event within any targeted time frame, or at all.
−Removed: If we do not effect a liquidity event, our stockholders may have to hold their investment in shares of our common stock indefinitely.
−Removed: • We may not complete the contemplated underwritten offering of our common stock or be successful in listing our common stock on the NYSE.
−Removed: Similarly, there can be no assurance that any public offering price per share of common stock in any offering or subsequent trading price per share of our common stock on the NYSE, if we are successful in listing our common stock thereon, will exceed our current NAV per share.
Risks Related to Our Business and Financial Results
−Removed: • The COVID-19 pandemic has adversely impacted, and could continue to adversely impact, our business and financial results.
+Added: • We are dependent on tenants for our revenue, and lease terminations could reduce our ability to make distributions to our stockholders.
+Added: • The financial deterioration, insolvency or bankruptcy of one or more of our major tenants, operators, borrowers or other obligors could have a material adverse effect on us.
• We have experienced net losses in the past and we may experience additional losses in the future.
7 unchanged sentences
• Our high concentrations of properties in particular geographic areas magnify the effects of negative conditions affecting those geographic areas.
−Removed: • Our real estate investments may be concentrated in MOBs, senior housing, SNFs, hospitals or other healthcare-related facilities, making us more vulnerable to negative factors affecting these classes than if our investments were diversified beyond the healthcare industry.
+Added: • Our real estate investments may be concentrated in OM buildings, senior housing, SNFs or other healthcare-related facilities, making us more vulnerable to negative factors affecting these classes than if our investments were diversified beyond the healthcare industry.
• Our business, tenants, residents and operators may face litigation and experience rising liability and insurance costs, which may materially and adversely affect us.
4 unchanged sentences
• The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us or adversely affect our operators’ ability to operate facilities held in RIDEA structures.
−Removed: • Reductions in reimbursement from third-party payors could adversely affect our tenants’ operations and ability to make rental payments to us or our operators’ ability to operate facilities held in RIDEA structures.
+Added: • Reimbursement rates from third-party payors, including Medicare and Medicaid, that do not rise as quickly, or at all, compared to the rate of inflation, could adversely affect our tenants’ operations and ability to make rental payments to us or our profitability from operating facilities held in RIDEA structures.
• If seniors delay moving to senior housing facilities until they require greater care or forgo moving to senior housing facilities altogether, such action could have a material adverse effect on us.
−Removed: • We, our tenants and our operators for our senior housing facilities and SNFs may be subject to various government reviews, audits and investigations that could materially and adversely affect us, including an obligation to refund amounts previously paid to us.
+Added: • We, our tenants and our operators for our senior housing facilities and SNFs may be subject to various government reviews, audits and investigations that could materially and adversely affect us, 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.
Risks Related to Joint Ventures
4 unchanged sentences
Rising interest rates will also increase our interest expense on future fixed-rate debt.
−Removed: • Lenders may require us to enter into restrictive covenants relating to our business.
+Added: • Lenders may require us to enter into restrictive covenants that could adversely affect our business.
Risks Related to Our Corporate Structure and Organization
−Removed: • Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect our stockholders.
+Added: • Our charter imposes a limit on the percentage of shares of our common stock or capital stock that any person may own, and such limit may discourage a takeover or business combination that may have benefited our stockholders.
Risks Related to Taxes and Our REIT Status
1 unchanged sentence
federal income tax purposes would subject us to U.S.
−Removed: federal income tax on our REIT taxable income at the regular corporate rate, which would substantially reduce our ability to make distributions to our stockholders.
+Added: federal income tax on our REIT taxable income at the regular corporate rate, which would substantially increase our income tax expenses and reduce our distributions to our stockholders.
• We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability or reduce our operating flexibility.
−Removed: • If the REIT Merger does not qualify as a tax-free reorganization, there may be adverse tax consequences.
−Removed: Risks Related to Tax Exempt Investors
−Removed: • If a stockholder that is a benefit plan or IRA fails to meet the fiduciary and other standards under ERISA or the Code as a result of an investment in shares of our common stock, such stockholder could be subject to civil and, if the failure is willful, criminal penalties.
−Removed: Investment Risks
−Removed: There is no public market for the shares of our common stock.
−Removed: 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: 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 may not occur in the near future or at all.
−Removed: 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.
−Removed: Our charter provides that no person may own more than 9.9% in value of our issued and outstanding shares of capital stock or more than 9.9% in value or in number of shares, whichever is more restrictive, of the issued and outstanding shares of our common stock.
−Removed: 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 except with respect to requests resulting from the death or qualifying disability of stockholders.
−Removed: As such, it will be difficult for our stockholders to sell their shares of our common stock promptly or at all.
−Removed: 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 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.
−Removed: We also were required to use gross offering proceeds to pay acquisition fees, acquisition expenses and asset management fees.
−Removed: Unless our aggregate investments increase in value to compensate for these fees and expenses, which may not occur, it is unlikely that our stockholders will be able to sell their shares of our common stock, whether pursuant to our share repurchase plan or otherwise, without incurring a substantial loss.
−Removed: We cannot assure our stockholders that their shares of our common stock will ever appreciate in value to equal the price our stockholders paid for their shares of our common stock.
−Removed: 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 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.
−Removed: 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 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.
−Removed: 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 the initial offering.
−Removed: 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:
−Removed: (i) cause us to be unable to pay our debts as they become due in the usual course of business;
−Removed: or (ii) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences.
−Removed: The actual amount and timing of distributions is determined by our board, in its sole discretion, and typically depends on the amount of funds available for distribution, which depend on items such as our financial condition, current and projected capital expenditure requirements, tax considerations and annual distribution requirements needed to maintain our qualification as a REIT.
−Removed: 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, 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.
−Removed: 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 common stock 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 common stock pursuant to the DRIP offerings, only from legally available funds.
−Removed: 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.
−Removed: 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.
−Removed: On October 4, 2021, our board reinstated the DRIP.
−Removed: 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
−Removed: in shares of our common stock pursuant to the terms of the DRIP, instead of cash distributions.
−Removed: See our Current Report on Form 8-K filed with the SEC on October 5, 2021 for more information.
−Removed: In connection with a proposed public offering by us of our shares of common stock in conjunction with a contemplated listing of our common stock on the NYSE, on November 14, 2022, our board approved the suspension of the AHR DRIP Offering beginning with the distributions declared for the quarter ending December 31, 2022.
−Removed: Consequently, until such time as our board approves the reinstatement of the AHR DRIP Offering, if at all, any future distributions to be paid to stockholders will be payable 100% in cash.
−Removed: See our Current Report on Form 8-K filed with the SEC on November 16, 2022.
−Removed: The estimated per share NAV 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.
−Removed: On March 15, 2023, 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 Class T common stock and Class I common stock of $31.40 as of December 31, 2022.
−Removed: We provide this updated estimated per share NAV to assist broker-dealers in connection with their obligations under 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 IPA in April 2013, in addition to guidance from the SEC.
−Removed: In the event we list on a national securities exchange in the future, we would not plan to continue publishing these valuations.
−Removed: 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.
−Removed: FINRA rules provide no guidance on the methodology an issuer must use to determine its estimated per share NAV.
−Removed: As with any valuation methodology, our independent valuation firm’s methodology was based upon a number of estimates and assumptions that may not have been accurate or complete.
−Removed: Different parties with different assumptions and estimates could derive a different estimated per share NAV, and these differences could be significant.
−Removed: The updated estimated per share NAV was not audited or reviewed by our independent registered public accounting firm and did not represent the fair value of our assets or liabilities according to accounting principles generally accepted in the United States, or GAAP.
−Removed: In addition, the updated estimated per share NAV was an estimate as of a given point in time and the value of shares of our common stock will fluctuate over time as a result of, among other things, the number of shares of our common stock outstanding, developments related to individual assets and changes in the real estate and capital markets.
−Removed: Accordingly, with respect to the updated estimated per share NAV, we can give no assurance that:
−Removed: • a stockholder would be able to resell his, her or its 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 our company;
−Removed: • our shares of common stock would trade at our updated estimated per share NAV on a national securities exchange;
−Removed: • 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, or ERISA, the Code, other applicable law, or the applicable provisions of a retirement plan or individual retirement account, or IRA.
−Removed: Further, our board has ultimately been 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 assets and liabilities taking into consideration such estimate provided by the independent valuation firm.
−Removed: After any particular valuation, there are likely to be changes in the value of our assets that would not be reflected in the published estimated per share NAV.
−Removed: 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, 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, inflation, prevailing interest rates and movements in capitalization rates that may impact the value of our portfolio between valuations, or to obtain timely or complete information regarding any such events.
−Removed: 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.
−Removed: For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of the updated estimated per share NAV, see our Current Report on Form 8-K filed with the SEC on March 17, 2023.
−Removed: We may not effect a liquidity event within any targeted time frame, or at all.
−Removed: 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: 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.
−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 fully reinstated by our board.
−Removed: 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.
−Removed: 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.
−Removed: For example, if our shares are listed on a national securities exchange, the trading p rice of the shares may be significantly lower than the most recent estimated per share NAV of our common stock of $31.40 as of December 31, 2022.
−Removed: No assurance can be given that we will complete the contemplated underwritten offering by us of our common stock or that we will be successful in listing our common stock on the NYSE.
−Removed: Similarly, there can be no assurance that the public offering price per share of common stock in any offering that we may complete or that the subsequent trading price per share of our common stock on the NYSE, if we are successful in listing our common stock thereon, will exceed our current NAV per share.
−Removed: In September 2022, we filed a registration statement with the SEC relating to a proposed public offering by us of shares of our common stock in conjunction with the contemplated listing of our common stock on the NYSE.
−Removed: Completing a public offering will require the SEC to declare the registration statement effective, and listing on the NYSE will require approval by the NYSE.
−Removed: Moreover, in addition to required regulatory actions, a decision to proceed with an offering and listing depends on our evaluation of market conditions and other factors, many of which are beyond our control.
−Removed: Accordingly, there can be no assurance as to when, or even if, we will be able to complete the public offering or successfully list our common stock on the NYSE.
−Removed: We do not know the terms, including the public offering price per share, on which the contemplated underwritten public offering of common stock may be completed.
−Removed: The initial public offering price of the common stock sold in any such offering will be discussed between us and the representatives of the underwriters of such offering.
−Removed: Among the factors that we expect to consider in determining the initial public offering price, in addition to prevailing market conditions, will be our historical performance, estimates of our business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.
−Removed: Thereafter, the market price of shares of our common stock on the NYSE will depend on numerous factors and may be volatile, and an active trading market may not develop or be maintained.
−Removed: There can be no assurance that the public offering price per share of common stock will equal or exceed our NAV per share, which our Board deter mined on March 15, 2023 to be $31.40 as of December 31, 2022, and the subsequent trading price may be below the public offering price per share.
−Removed: Prior to suspension of the AHR DRIP Offering in November 2022, the purchase price per share of common stock sold under the AHR DRIP was the most recently published estimated NAV per share.
−Removed: No assurance can be given that the public offering price per share of common stock sold in any underwritten offering or that the trading price per share of our common stock on the NYSE will equal or exceed the price at which shares of common stock were sold under the AHR DRIP.
−Removed: The public offering price per share of common stock sold in any underwritten offering or the subsequent trading price per share of our common stock on the NYSE could be below our NAV per share and the price per share that investors purchased shares in the AHR DRIP O ffering.
−Removed: If we do complete the contemplated underwritten offering by us, shares of Class T common stock and Class I common stock held by current stockholders might not be listed initially on the NYSE.
−Removed: It is contemplated that we will list our common stock sold in the potential underwritten public offering on the NYSE in conjunction with any such offering.
−Removed: Currently, our stockholders own either Class T common stock or Class I common stock, and we do not intend to list our Class T common stock or Class I common stock on the NYSE.
−Removed: However, it is contemplated that on the six-month anniversary of any listing of our common stock on the NYSE, outstanding shares of Class T common stock and Class I common stock will automatically be converted into shares of our NYSE-listed common stock.
−Removed: Accordingly, if we do complete the contemplated underwritten offering by us, current stockholders are not expected to be able to sell their Class T common stock or Class I common stock on the NYSE until such conversion occurs, and such shares would be less liquid than our listed common stock until such time as the automatic conversion occurs.
+Added: Risks Related to Our Common Stock
+Added: • An active trading market for our common stock may not be maintained.
+Added: • The market price and trading volume of shares of our common stock may be volatile.
+Added: • Because we have a large number of stockholders and shares of our common stock have not been listed on a national securities exchange until recently, there may be significant pent-up demand to sell shares of our common stock (including our Class T common stock and Class I common stock).
+Added: Significant sales of shares of our common stock, or the perception that significant sales of such shares could occur, may cause the price of shares of our common stock to decline significantly.
+Added: • Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect our stockholders.
+Added: • We may be unable to raise additional capital on favorable terms, or at all, needed to grow our business.
+Added: • Prior to our recent NYSE listing, we had no operating history as a publicly traded company and may not be able to successfully operate as a publicly traded company.
Risks Related to Our Business and Financial Results
−Removed: The COVID-19 pandemic has adversely impacted, and could continue to adversely impact, our business and financial results, and the ultimate impact will depend on future developments including the extent of changes in policies and funding resulting from the expiration of the COVID-19 public health emergency declaration, which are highly uncertain and cannot be predicted.
−Removed: Our residents, tenants, operating partners and managers, our industry and the U.S.
−Removed: economy continue to be adversely affected by the COVID-19 pandemic and related supply chain disruptions and labor shortages.
−Removed: While the COVID 19 pandemic is subsiding, the timing and extent of the economic recovery from the COVID-19 pandemic is dependent upon many factors, including the emergence and severity of COVID-19 variants, the effectiveness and frequency of booster vaccinations and the duration and implications of restrictions and safety measures.
−Removed: As the lasting effect of the COVID-19 pandemic is still impacting the healthcare system to a certain extent, it continues to present challenges for us as an owner and operator of healthcare facilities, making it difficult to ascertain the long-term impact the COVID-19 pandemic will have on real estate markets in which we own and/or operate properties and our portfolio of investments.
−Removed: The COVID-19 pandemic resulted in a significant decline in resident occupancies at our leased senior housing facilities and SNFs, SHOP and integrated senior health campuses and an increase in COVID-19 related operating expenses with more costly short-term hires due to the shortage of healthcare personnel.
−Removed: Therefore, our focus at such properties continues to be on resident occupancy recovery and operating expense management.
−Removed: Resident occupancies at our senior housing and SNFs have been gradually improving.
−Removed: We believe the operational recovery of such classes from the impact of the COVID-19 pandemic will generally continue and that such recovery over time towards pre-pandemic levels will drive our overall portfolio performance.
−Removed: As a result of the federal government's COVID-19 public health emergency declaration in January 2020, certain federal and state pandemic-related relief measures, such as funding, procedural waivers and/or reimbursement increases, became available to some of our tenants and operators.
−Removed: On January 30, 2023, the Biden Administration announced that the COVID-19 public health emergency declaration will expire on May 11, 2023, creating uncertainty as to how widespread these measures will continue to be and to what extent they may be distributed to and benefit our tenants and operators.
−Removed: The lasting effect of the COVID-19 pandemic and pace of recovery will largely depend on future developments, which cannot be predicted with confidence at this time.
+Added: We are dependent on tenants for our revenue, and lease terminations could reduce our ability to make distributions to our stockholders.
+Added: The successful performance of our real estate investments is materially dependent on the financial stability of our tenants.
+Added: Lease payment defaults by tenants would cause us to lose the revenue associated with such leases and could reduce our ability to make distributions to our stockholders.
+Added: If a property is subject to a mortgage, a default by a significant tenant on its lease payments to us may result in a foreclosure on the property if we are unable to find an alternative source of revenue to meet our mortgage payments.
+Added: In the event of a tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property.
+Added: 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.
+Added: The financial deterioration, insolvency or bankruptcy of one or more of our major tenants, operators, borrowers or other obligors could have a material adverse effect on us.
+Added: A downturn in any of our tenants’, operators’, borrowers’ or other obligors’ businesses could ultimately lead to voluntary or involuntary bankruptcy or similar insolvency proceedings, including but not limited to assignment for the benefit of creditors, reorganization, liquidation or winding-up.
+Added: Bankruptcy and insolvency laws afford certain rights to a defaulting tenant, operator or borrower that has filed for bankruptcy or reorganization that may render certain of our remedies unenforceable or, at the least, delay our ability to pursue such remedies and realize any related recoveries.
+Added: A debtor has the right to assume, or to assume and assign to a third party, or to reject its executory contracts and unexpired leases in a bankruptcy proceeding.
+Added: If a debtor were to reject its leases with us, obligations under such rejected leases would cease.
+Added: The claim against the rejecting debtor would be an unsecured claim, which would be limited by the statutory cap set forth in the U.S.
+Added: Bankruptcy Code, and there may be insufficient assets to satisfy all unsecured claims, even ones limited by the statutory cap.
+Added: This statutory cap may be substantially less than the remaining rent actually owed under the lease.
+Added: In addition, a debtor may also assert in bankruptcy proceedings that leases should be re-characterized as financing agreements, which could result in our being deemed a lender instead of a landlord.
+Added: A lender’s rights and remedies, as compared to a landlord’s, generally are materially less favorable, and our rights as a lender may be subordinated to other creditors’ rights.
+Added: Furthermore, the automatic stay provisions of the U.S.
+Added: Bankruptcy Code would preclude us from enforcing our remedies unless we first obtain relief from the court having jurisdiction over the bankruptcy case.
+Added: This would effectively limit or delay our ability to collect unpaid rent or interest payments, and we may ultimately not receive any payment at all.
+Added: In addition, we would likely be required to fund certain expenses and obligations to preserve the value of our properties, avoid the imposition of liens on our properties or transition our properties to a new tenant or operator.
+Added: Additionally, we lease many of our properties to healthcare providers who provide long-term custodial care to the elderly.
+Added: Evicting operators for failure to pay rent while the property is occupied typically involves specific procedural or regulatory requirements and may not be successful.
+Added: Even if eviction is possible, we may determine not to do so due to reputational or other risks.
+Added: Bankruptcy or insolvency proceedings typically also result in increased costs to the operator, significant management distraction and performance declines.
+Added: If we are unable to transition affected properties, they would likely experience prolonged operational disruption, leading to lower occupancy rates and further depressed revenues.
+Added: Publicity about the operator’s financial troubles and bankruptcy or insolvency proceedings may also negatively impact their and our reputations, decreasing customer demand and revenues.
+Added: Any or all of these risks could have a material adverse effect on us.
We have experienced net losses in the past and we may experience additional losses in the future.
Historically, we have experienced net losses (calculated in accordance with GAAP), and we may not be profitable or realize growth in the value of our investments.
−Removed: Many of our losses can be attributed to start-up costs, general and administrative expenses, depreciation and amortization, as well as acquisition expenses incurred in connection with purchasing properties or making other investments.
+Added: Many of our losses can be attributed to general and administrative expenses, depreciation and amortization, as well as acquisition expenses incurred in connection with purchasing properties or making other investments.
For a further discussion of our operational history and the factors affecting our net 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 that are a part of this Annual Report on Form 10-K.
4 unchanged sentences
Therefore, to be successful in this market, we must, among other things:
−Removed: • identify and acquire investments that further our business objectives and growth strategies;
+Added: • successfully manage our assets;
• attract, integrate, motivate and retain qualified personnel to manage our day-to-day operations;
• respond to competition both for investment opportunities and potential investors’ investment in us.
−Removed: • 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 materially and adversely affect us and our stockholders could lose all or a portion of their investment.
+Added: We cannot guarantee that we will succeed in achieving these goals, and our failure to do so could materially and adversely affect us and the market price of our common stock could be highly volatile and decline significantly and our stockholders could lose all or a portion of their investment.
Our success is dependent on the performance and continued contributions of certain of our key personnel, and, in the event they are no longer employed by us, we could be materially and adversely affected.
1 unchanged sentence
In particular, Danny Prosky would be difficult to replace.
−Removed: Prosky currently serves as our Chief Executive Officer and one of
−Removed: our directors.
+Added: Prosky currently serves as our Chief Executive Officer and one of our directors.
In the event that Mr.
1 unchanged sentence
If we were to lose the benefit of the experience, efforts and abilities of one or more of our executives or other key officers, we could be materially and adversely affected.
−Removed: Our financial results, our ability to make distributions to our stockholders and our ability to dispose of our investments are subject to international, national and local market conditions we cannot control or predict.
+Added: Our financial results and our ability to make distributions to our stockholders are subject to international, national and local market conditions we cannot control or predict.
We are subject to the risks of an international or national economic slowdown or downturn and other changes in international, national and local market conditions.
−Removed: The following factors may have affected, and may continue to affect, income from our properties, our ability to acquire and dispose of properties, and our overall financial results and ability to make distributions to our stockholders:
+Added: The following factors may have affected, and may continue to affect, income from our properties, our ability to acquire and develop properties, and our overall financial results and ability to make distributions to our stockholders:
• poor economic times may result in defaults by tenants of our properties due to bankruptcy, lack of liquidity or operational failures.
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Consequently, we may not be able to recover the carrying amount of our properties, which may require us to recognize an impairment charge or record a loss on sale in our financial results;
−Removed: • reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain or maintain debt financing secured by our properties and may reduce the availability of unsecured loans;
+Added: • reduced values of our properties may limit our ability to obtain or maintain debt financing secured by our properties and may reduce the availability of unsecured loans;
• constricted access to credit may result in tenant defaults or non-renewals under leases;
• layoffs may lead to a lower demand for medical services and cause vacancies to increase and a lack of future population and job growth may make it difficult to maintain or increase occupancy levels;
−Removed: • disruptions in the financial markets, deterioration in economic conditions or a public health crisis, such as the COVID-19 pandemic, have resulted, and may continue to result, in lower occupancy in our facilities, increased vacancy rates for commercial real estate due to generally lower demand for rentable space, as well as an oversupply of rentable space;
+Added: • disruptions in the financial markets, deterioration in economic conditions or a public health crisis, such as the COVID-19 pandemic, have resulted in the past, and may result in the future, in lower occupancy in our facilities, increased vacancy rates for commercial real estate due to generally lower demand for rentable space, as well as an oversupply of rentable space;
• governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses;
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We 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.
−Removed: We face significant competition for the acquisition and disposition of MOBs, senior housing, SNFs, hospitals and other healthcare-related facilities, which may impede our ability to take, and increase the cost of, such actions, which may materially and adversely affect us.
−Removed: We face significant competition from other entities engaged in real estate investment activities for acquisitions and dispositions of MOBs, senior housing, SNFs, hospitals and other healthcare-related facilities, some of whom may have greater resources, lower costs of capital and higher risk tolerances than we do.
+Added: We face significant competition for the acquisition and disposition of OM buildings, senior housing, SNFs and other healthcare-related facilities, which may impede our ability to take, and increase the cost of, such actions, which may materially and adversely affect us.
+Added: We face significant competition from other entities engaged in real estate investment activities for acquisitions and dispositions of OM buildings, senior housing, SNFs and other healthcare-related facilities, some of whom may have greater resources, lower costs of capital and higher risk tolerances than we do.
Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our business objectives and could improve the bargaining power of our counterparties, 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, senior housing, SNFs, hospitals or other healthcare-related facilities as a result of such competition, we may be materially and adversely affected.
−Removed: Our investments in, and acquisitions of, MOBs, senior housing, SNFs, hospitals and other healthcare-related facilities may be unsuccessful or fail to meet our expectations.
+Added: If we pay higher prices per property or receive lower prices for dispositions of our OM buildings, senior housing, SNFs or other healthcare-related facilities as a result of such competition, we may be materially and adversely affected.
+Added: Our investments in, and acquisitions of, OM buildings, senior housing, SNFs and other healthcare-related facilities may be unsuccessful or fail to meet our expectations.
Some of our acquisitions may not prove to be successful.
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Such expenditures may negatively affect our results of operations.
−Removed: Investments in and acquisitions of MOBs, senior housing, SNFs, hospitals and other healthcare-
−Removed: related facilities entail risks associated with real estate investments generally, including risks that the investment will not achieve expected returns, that the cost estimates for necessary property improvements will prove inaccurate or that the tenant or operator will fail to meet performance expectations.
−Removed: Furthermore, there can be no assurance that our anticipated acquisitions and investments, the completion of which is subject to various conditions, will be consummated in accordance with anticipated timing, on anticipated terms, or at all.
−Removed: In addition, we may not be able to identify off-market investment opportunities or investment opportunities that are strategically marketed to a limited number of investors at the rate that we anticipate or at all.
+Added: Investments in and acquisitions of OM buildings, senior housing, SNFs and other healthcare-related facilities entail risks associated with real estate investments generally, including risks that the investment will not achieve expected returns, that the cost estimates for necessary property improvements will prove inaccurate or that the tenant or operator will fail to meet performance expectations.
+Added: In addition, we may not be able to identify off-market or other investment opportunities or investment opportunities that are strategically marketed to a limited number of investors at the rate that we anticipate or at all.
We may be unable to obtain or assume financing for acquisitions on favorable terms or at all.
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We have not identified all of our sources of debt or equity for funding, and such sources of funding may not be available to us on favorable terms or at all.
−Removed: If we do not have access to sufficient funding on favorable terms in the future, we may not be able to acquire, and make necessary capital improvements to, properties, pay other expenses, or expand our business when desired, or at all, which could have a material adverse effect on us.
−Removed: We are dependent on tenants for our revenue, and lease terminations could reduce our ability to make distributions to our stockholders.
−Removed: The successful performance of our real estate investments is materially dependent on the financial stability of our tenants.
−Removed: Lease payment defaults by tenants would cause us to lose the revenue associated with such leases and could reduce our ability to make distributions to our stockholders.
−Removed: If a property is subject to a mortgage, a default by a significant tenant on its lease payments to us may result in a foreclosure on the property if we are unable to find an alternative source of revenue to meet our mortgage payments.
−Removed: In the event of a tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property.
−Removed: 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.
+Added: If we do not have access to sufficient funding on favorable terms in the future, we may not be able to acquire new properties, make necessary capital improvements to our existing properties, pay other expenses, exercise our option to purchase the remaining 24.0% minority membership interest held by our joint venture partner in Trilogy REIT Holdings (the purchase price of which must include at least a minimum cash consideration as defined in Note 13, Equity — Noncontrolling Interests in Total Equity — Membership Interest in Trilogy REIT Holdings, or the Minimum Cash Consideration) or expand our business when desired, or at all, which would have a material adverse effect on us.
All of our integrated senior health campuses are managed by the Trilogy Manager and account for a significant portion of our revenues and operating income.
Adverse developments in the Trilogy Manager’s business or financial strength could have a material adverse effect on us.
−Removed: As of March 17, 2023, the Trilogy Manager managed all of the day-to-day operations for all of our integrated senior health campuses pursuant to a long-term management agreement.
−Removed: These integrated senior health campuses accounted for approximately 41.1% of our portfolio (based on aggregate contract purchase price) as of December 31, 2022 and contributed approximately 46.8% of our annualized base rent/annualized NOI as of such date.
+Added: The Trilogy Manager manages all of the day-to-day operations for all of our integrated senior health campuses pursuant to a long-term management agreement.
+Added: These integrated senior health campuses accounted for approximately 43.6% of our portfolio (based on aggregate contract purchase price) as of December 31, 2023 and contributed approximately 51.0% of our annualized base rent/annualized net operating income, or NOI, as of such date.
Although we have various rights as the joint venture owner of these integrated senior health campuses under our management agreement, we rely on the Trilogy Manager’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.
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As such, any adverse developments in the Trilogy Manager’s business or financial strength, 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.
−Removed: In addition, if the Trilogy Manager 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
−Removed: of insolvency proceedings by or against it under the U.S.
+Added: In addition, if the Trilogy Manager 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 U.S.
Bankruptcy Code.
Any one or a combination of these risks could have a material adverse effect on us.
+Added: If we exercise our option to purchase the remaining 24.0% minority membership interest held by our joint venture partner in Trilogy REIT Holdings, our indirect ownership of the assets managed by the Trilogy Manager would increase from 74.1% to 97.5% (in all cases assuming that there are no changes in the equity capitalization of Trilogy prior to consummation of the purchase).
In the event that our management agreement with the Trilogy Manager is terminated or not renewed, we may be unable to replace the Trilogy Manager with another suitable operator, or, if we were successful in locating such an operator, we cannot guarantee that it would manage the integrated senior health campuses efficiently and effectively or that any such transition would be completed timely, which may have a material adverse effect on us.
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Moreover, the transition to a replacement operator may require approval by the applicable regulatory authorities and, in most cases, one or more of our lenders, including the mortgage lenders for certain of the integrated senior health campuses, and we cannot provide any assurance that such approvals would be granted on a timely basis, if at all.
−Removed: Any inability to replace, or delay in replacing the Trilogy Manager as the operator of integrated senior health campuses with a highly qualified successor on favorable terms could have a material adverse effect on us.
−Removed: The financial deterioration, insolvency or bankruptcy of one or more of our major tenants, operators, borrowers or other obligors could have a material adverse effect on us.
−Removed: A downturn in any of our tenants’, operators’, borrowers’ or other obligors’ businesses could ultimately lead to voluntary or involuntary bankruptcy or similar insolvency proceedings, including but not limited to assignment for the benefit of creditors, reorganization, liquidation or winding-up.
−Removed: Bankruptcy and insolvency laws afford certain rights to a defaulting tenant, operator or borrower that has filed for bankruptcy or reorganization that may render certain of our remedies unenforceable or, at the least, delay our ability to pursue such remedies and realize any related recoveries.
−Removed: A debtor has the right to assume, or to assume and assign to a third party, or to reject its executory contracts and unexpired leases in a bankruptcy proceeding.
−Removed: If a debtor were to reject its leases with us, obligations under such rejected leases would cease.
−Removed: The claim against the rejecting debtor would be an unsecured claim, which would be limited by the statutory cap set forth in the U.S.
−Removed: Bankruptcy Code, and there may be insufficient assets to satisfy all unsecured claims, even ones limited by the statutory cap.
−Removed: This statutory cap may be substantially less than the remaining rent actually owed under the lease.
−Removed: In addition, a debtor may also assert in bankruptcy proceedings that leases should be re-characterized as financing agreements, which could result in our being deemed a lender instead of a landlord.
−Removed: A lender’s rights and remedies, as compared to a landlord’s, generally are materially less favorable, and our rights as a lender may be subordinated to other creditors’ rights.
−Removed: Furthermore, the automatic stay provisions of the U.S.
−Removed: Bankruptcy Code would preclude us from enforcing our remedies unless we first obtain relief from the court having jurisdiction over the bankruptcy case.
−Removed: This would effectively limit or delay our ability to collect unpaid rent or interest payments, and we may ultimately not receive any payment at all.
−Removed: In addition, we would likely be required to fund certain expenses and obligations to preserve the value of our properties, avoid the imposition of liens on our properties or transition our properties to a new tenant or operator.
−Removed: Additionally, we lease many of our properties to healthcare providers who provide long-term custodial care to the elderly.
−Removed: Evicting operators for failure to pay rent while the property is occupied typically involves specific procedural or regulatory requirements and may not be successful.
−Removed: Even if eviction is possible, we may determine not to do so due to reputational or other risks.
−Removed: Bankruptcy or insolvency proceedings typically also result in increased costs to the operator, significant management distraction and performance declines.
−Removed: If we are unable to transition affected properties, they would likely experience prolonged operational disruption, leading to lower occupancy rates and further depressed revenues.
−Removed: Publicity about the operator’s financial troubles and bankruptcy or insolvency proceedings may also negatively impact their and our reputations, decreasing customer demand and revenues.
−Removed: Any or all of these risks could have a material adverse effect on us.
+Added: Any inability to replace or delay in replacing the Trilogy Manager as the operator of our integrated senior health campuses with a highly qualified successor on favorable terms could have a material adverse effect on us.
We may incur additional costs in re-leasing properties with specialized uses, which could materially and adversely affect us.
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If we or our tenants terminate the leases for these properties or our tenants default on their lease obligations or 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.
−Removed: Alternatively, we may be
−Removed: required to spend substantial amounts to adapt the properties to other uses or incur other significant re-leasing costs.
+Added: Alternatively, we may be required to spend substantial amounts to adapt the properties to other uses or incur other significant re-leasing costs.
Any loss of revenues or additional capital expenditures required as a result may have a material adverse effect on us.
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Such tenant improvements have required, and may continue to require, us to incur substantial capital expenditures.
−Removed: 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: If we have not established capital reserves for such tenant or other capital improvements, we will have to obtain financing from other sources.
We may also have future financing needs for other capital improvements to refurbish or renovate our properties.
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We also maintain confidential financial and business information regarding us and persons and entities with which we do business on our information technology systems.
+Added: While we have enhanced our information technology systems in response to the general cybersecurity threat environment in recent years, we are not aware of any specific cybersecurity threat, including as a result of any previous cybersecurity or information security incident or breach, that has had a material effect on us, including our business strategy, results of operation or financial condition.
+Added: However, there can be no assurances that a cybersecurity threat or incident that could have a material impact on us has not occurred or will not occur in the future.
While we and our tenants and operators take steps to protect the security of the information maintained in our information technology systems, including the use of commercially available systems, software, tools and monitoring to provide security for processing, transmitting and storing of the information, it is possible that such security measures will not be able to prevent human error or the systems’ improper functioning, or the loss, misappropriation, disclosure or corruption of personally identifiable information or other confidential or sensitive information, including information about our tenants and employees.
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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 materially and adversely affect us.
−Removed: Additionally, as increased regulatory compliance for cybersecurity protocols and disclosures are required by state or federal authorities, the increased amount of resources, both time and expense, could also materially and adversely affect us.
+Added: Additionally, as increased regulatory compliance for cybersecurity protocols and disclosures, including rules requiring prompt disclosure of any material cybersecurity breaches or incidents, are required by state or federal authorities, the increased amount of resources, both time and expense, could also materially and adversely affect us, and we may be subject to regulatory action and lawsuits, should we fail to comply with such obligations.
Risks Related to Investments in Real Estate
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Our remaining leases are generally modified gross, or base year, leases, which only provide for recoveries of operating expenses above the operating expenses from the initial year within each lease.
−Removed: During inflationary periods, we expect to recover increases in operating expenses from our triple-net leases and our modified gross, or base year, leases.
−Removed: 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: During inflationary periods such as those prevailing in recent years, we have historically been able to and expect to recover increases in operating expenses from our triple-net leases and our gross leases.
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 materially and adversely affect us.
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Annually, our employee compensation is adjusted to reflect merit increases;
−Removed: however, to maintain our ability to successfully compete for the best talent, rising inflation rates has required and may continue to require us to provide compensation increases beyond historical annual merit increases, which may significantly increase our compensation costs.
+Added: however, in order for us to maintain our ability to successfully compete for the best talent, rising inflation rates in recent years have required, and may continue to require, us to provide compensation increases beyond historical annual merit increases, which may significantly increase our compensation costs.
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.
Consequently, inflation is expected to increase our general and administrative expenses over time and may materially and adversely affect us.
−Removed: Also, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense of our borrowings.
+Added: Also, during inflationary periods, interest rates have historically increased, which in recent years have increased the interest expense of our borrowings and could do so again.
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.
−Removed: As of December 31, 2022, our outstanding variable-rate borrowings aggregated to $1,651,221,000, all of which was unhedged.
−Removed: In January 2023, we entered into an interest rate swap contract to hedge $275,000,000 of our floating rate term loan under our existing credit facility.
−Removed: Rising interest rates will also increase our interest expense on future fixed-rate borrowings.
−Removed: Therefore, a significant increase in inflation rates would have a material adverse impact on our financing costs and interest expense.
+Added: During 2023, we entered into interest rate swap contracts to hedge $750,000,000 of our variable-rate credit facilities.
+Added: As of December 31, 2023, our outstanding debt aggregated to $2,551,036,000, of which 31.8% was unhedged variable-rate debt.
+Added: The rise in interest rates has also increased our interest expense on future fixed-rate borrowings.
+Added: Therefore, a significant increase in inflation or interest rates would have a material adverse impact on our financing costs and interest expense.
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.
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.
−Removed: However, it is possible that during higher inflationary periods like the one existing in 2021 and 2022, the impact of
−Removed: inflation will not be adequately offset by the resetting of rents from our renewal and re-leasing activities and our annual rent escalations.
−Removed: As a result, during periods when the impact of inflation exceeds the annual rent escalation percentages in our current leases and the percentage increase in rents in new leases, our financial results will be impaired, potentially significantly.
−Removed: 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: In addition, our leases often obligate the tenants to pay a pro rata share of any increase in operating expenses.
+Added: However, it is possible that during higher inflationary periods, the impact of inflation will not be adequately offset by the
+Added: resetting of rents from our renewal and re-leasing activities, our annual rent escalations or the tenants’ pro rata payment of the increase in operating expenses.
+Added: As a result, during periods when the impact of inflation exceeds the annual rent escalation percentages in our current leases and the percentage increase in rents in new leases, our financial results may be impaired.
+Added: Additionally, inflationary pricing may have a negative effect on the acquisition 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.
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.
Any of these matters may materially and adversely affect us over time.
−Removed: Our real estate assets may decline in value and be subject to significant impairment losses, which may reduce our net income.
−Removed: We periodically evaluate long-lived assets, primarily consisting of investments in real estate that are carried at historical cost less accumulated depreciation, for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
−Removed: In our evaluation of impairment, we consider indicators such as significant negative industry or economic trends, significant underperformance relative to historical or projected future operating results and a significant change in the extent or manner in which the asset is used or significant physical change in the asset.
−Removed: If indicators of impairment of long-lived assets are present, we evaluate the carrying value of the related real estate investment in relation to the future undiscounted cash flows of the underlying operations.
−Removed: In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset.
−Removed: If we determine that an impairment has occurred, we would be required to make a downward adjustment to the net book value of the property, which could have a material adverse effect on us in the period in which the impairment charge is recorded.
−Removed: We have recorded impairment charges related to certain properties in the year ended December 31, 2022, and may record future impairments based on actual results and changes in circumstances.
−Removed: Negative developments in the real estate market may cause management to reevaluate the business and macro-economic assumptions used in its impairment analysis.
−Removed: Changes in management’s assumptions based on actual results may have a material impact on our Consolidated Financial Statements and the notes thereto that are a part of this Annual Report on Form 10-K.
Our high concentrations of properties in particular geographic areas magnify the effects of negative conditions affecting those geographic areas.
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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 17, 2023, properties located in Indiana, Ohio and Michigan accounted for approximately 37.8%, 11.9% and 10.7%, respectively, of our total property portfolio’s annualized base rent or annualized NOI.
+Added: As of December 31, 2023, properties located in Indiana and Michigan accounted for approximately 35.3% and 10.4%, respectively, of our total property portfolio’s annualized base rent or annualized NOI.
Accordingly, there is a geographic concentration of risk subject to fluctuations in each such state’s economy, real estate and other market conditions.
−Removed: Our real estate investments may be concentrated in MOBs, senior housing, SNFs, hospitals or other healthcare-related facilities, making us more vulnerable to negative factors affecting these classes than if our investments were diversified beyond the healthcare industry.
+Added: Our real estate investments may be concentrated in OM buildings, senior housing, SNFs or other healthcare-related facilities, making us more vulnerable to negative factors affecting these classes than if our investments were diversified beyond the healthcare industry.
As a REIT, we invest primarily in real estate.
−Removed: Within the real estate industry, we have acquired, and may continue to acquire, or selectively develop and own MOBs, senior housing, SNFs, hospitals and other healthcare-related facilities.
+Added: Within the real estate industry, we have acquired, developed and owned, and may continue to acquire, or selectively develop and own, OM buildings, senior housing, SNFs and other healthcare-related facilities.
+Added: As of December 31, 2023, our three major asset class concentrations (based on aggregate contract purchase price) were senior housing 37.6%, SNFs 29.9% and OM buildings 27.5%.
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 operators’ ability to manage our properties efficiently and effectively.
−Removed: These matters could materially and adversely affect us and 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, senior housing, SNFs, hospitals or healthcare-related facilities.
+Added: These matters could materially and adversely affect us and 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 OM buildings, senior housing, SNFs or healthcare-related facilities.
+Added: Our buildings that are subject to ground leases could restrict our use of such facilities.
+Added: Our buildings that are subject to ground leases could restrict our use of such facilities.
+Added: As of December 31, 2023, we own fee simple interests in all of our land, buildings and campuses, except for the following properties that are located on land that is subject to ground leases:
+Added: (a) 19 OM buildings;
+Added: (b) five integrated senior health campuses;
+Added: and (c) one SNF, in each case, for which we own fee simple interests in the building and other improvements on such properties.
+Added: Additionally, we operate 20 integrated senior health campuses that were leased to Trilogy by third parties.
+Added: These ground leases contain certain restrictions.
+Added: These restrictions include limits on our use of the facilities and ability to lease, sell or obtain mortgage financing secured by the facilities.
+Added: There can be no assurance that the ground leases can be extended beyond the stated terms.
+Added: These restrictions and term limitations could affect our returns on these facilities, which, in turn, could materially and adversely affect us.
+Added: As a ground lessee, we are also exposed to the risk of reversion of the property upon expiration of the ground lease term or an earlier breach of the ground lease, which could materially and adversely affect us.
+Added: Our use of property-level rent coverages to measure our tenant’s ability to make rent payments may not be accurate.
+Added: We evaluate a lease’s property-level rent coverage ratio.
+Added: Our calculations of rent coverage ratios are unaudited and are based on financial information provided to us by our tenants without independent verification on our part, and we must assume the appropriateness of estimates and judgments that were made by the party preparing the financial information.
+Added: Our review of rent coverages may not adequately assess the risk of an investment, and, if our calculations are not accurate, we may be unaware that we have tenants that may be unable to make payments under their leases.
+Added: If our assessment is inaccurate, our revenues could be materially and adversely affected.
Terrorist attacks, acts of violence or war, political protests and unrest or public health crises have affected and may affect the markets in which we operate and have a material adverse effect on us.
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We have acquired, and may continue to acquire, real estate assets located in areas that are susceptible to terrorist attacks, acts of violence or war, political protests or public health crises.
−Removed: These events may directly impact the value of our assets through
−Removed: damage, destruction, loss or increased security costs.
−Removed: Although we may obtain terrorism insurance, we may not be able to obtain sufficient coverage to fund any losses we may incur.
−Removed: Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims.
+Added: These events may directly impact the value of our assets through damage, destruction, loss or increased security costs.
+Added: Although we may obtain insurance to mitigate such risks, we may not be able to obtain sufficient coverage to fund any losses we may incur.
Further, certain losses resulting from these types of events are uninsurable or not insurable at reasonable costs.
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Our business, tenants, residents and operators may face litigation and experience rising liability and insurance costs, which may materially and adversely affect us.
−Removed: 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.
−Removed: 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.
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 SHOP and integrated senior health campuses, we may be directly adversely impacted by potential litigation or investigations 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.
−Removed: 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.
−Removed: Our exposure to COVID-19 related litigation or investigation risk may be further increased if our operators or residents of such facilities are subject to bankruptcy or insolvency.
−Removed: Any of these matters could materially and adversely affect us.
+Added: Inaccuracies in our underwriting assumptions and/or delays in the selection, acquisition, expansion or development of real properties may materially and adversely affect us.
+Added: Inaccuracies in our underwriting assumptions and/or delays we encounter in the selection, acquisition, expansion and development of real properties could materially and adversely affect us.
+Added: In deciding whether to acquire, expand or develop a particular property, we make assumptions regarding the expected future performance of that property.
+Added: In particular, we estimate the return on our investment based on expected construction costs, lease up velocity, occupancy, rental rates, operating expenses, capital costs and future competition.
+Added: If our financial projections with respect to a new property are inaccurate, the property may fail to perform as we expected in analyzing our investment.
+Added: Our development/expansion and construction projects are vulnerable to the impact of material shortages and inflation.
+Added: For example, shortages and fluctuations in the price of lumber or in other important raw materials could result in delays in the start or completion of, or increase the cost of, developing one or more of our projects.
+Added: Pricing for labor and raw materials can be affected by various national, regional, local, economic and political factors, including changes to immigration laws that impact the availability of labor or tariffs on imported construction materials.
+Added: In connection with our development, expansion and related construction activities, we may be unable to obtain, or suffer delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, or satisfactory tax rates, incentives or abatements.
+Added: Operators of new facilities we construct may need to obtain Medicare and Medicaid certification and enter into Medicare and Medicaid provider agreements and/or third-party payor contracts.
+Added: In the event that the operator is unable to obtain the necessary licensure, certification, provider agreements or contracts after the completion of construction, there is a risk that we will not be able to earn any revenues on the facility until either the initial operator obtains a license or certification to operate the new facility and the necessary provider agreements or contracts or we find and contract with a new operator that is able to obtain a license to operate the facility for its intended use and the necessary provider agreements or contracts.
+Added: One of our growth strategies is to develop new and expand existing clinical healthcare real estate;
+Added: we may do this directly or indirectly through joint ventures, including through Trilogy.
+Added: Expanding and, in particular, developing properties exposes us to increased risks beyond those associated with investing in stabilized, cash flowing real estate.
+Added: For example, actual costs could significantly exceed estimates (particularly during periods of rapid inflation), construction and stabilization (i.e., substantial lease-up) could take longer than expected, and occupancy and/or rental rates could prove to be lower than expected or property operating expenses could be higher.
+Added: Any of these events could materially reduce any returns we achieve, or result in losses, on expansion or development projects.
+Added: For the developments we have completed to date, the time to stabilization has varied, in some cases significantly, and certain developments have not yet stabilized.
+Added: There can be no assurance that our current
+Added: or any future development or expansion projects will be completed in accordance with our budgeted expectations, that they will achieve our underwritten returns or result in yields on cost similar to those achieved on past investments, that they will be stabilized in accordance with our expectations or at all or that, if stabilization is achieved, such stabilization will be maintained.
+Added: In addition, development and expansion projects undertaken indirectly through Trilogy are primarily overseen by the Trilogy Manager, and we do not have the same level of day-to-day involvement or control over such projects that we do in a project we undertake directly.
+Added: Accordingly, with respect to projects undertaken through Trilogy, we rely on the development expertise of the Trilogy Manager.
+Added: Where properties are acquired prior to the start of construction or during the early stages of construction or when an existing property is expanded, it will typically take several months to complete construction and lease available space.
+Added: Development and other construction projects, subject us to uncertainties associated with re-zoning for development, environmental concerns of governmental entities and/or community groups and our builder’s ability to build in conformity with plans, specifications, budgeted costs and timetables.
+Added: If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance.
+Added: A builder’s performance may also be affected or delayed by conditions beyond the builder’s control.
+Added: Delays in completion of construction could give tenants the right to terminate preconstruction leases for space at a newly developed project.
+Added: We may incur additional risks if we make periodic progress payments or other advances to builders prior to completion of construction.
+Added: These and other such factors can result in increased costs of a project or loss of our investment.
+Added: In addition, we will be subject to normal lease-up risks relating to newly constructed projects.
+Added: We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a price at the time we acquire the property.
+Added: If our projections are inaccurate, we may pay too much for a property, and our return on our investment could suffer or result in a loss.
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.
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When we decide to sell one of our properties, we may provide financing to the purchasers.
−Removed: 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
−Removed: impact cash flows from operations.
+Added: 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.
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.
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Operators of competing properties may provide superior services than those provided by our operators, which could reduce the competitiveness of our properties, which could have a material adverse effect on us.
−Removed: Similarly, our MOB and senior housing—leased tenants face competition from other medical practices in nearby hospitals and other medical facilities and their failure to compete successfully with these other practices could adversely affect their ability to make rental payments to us, which could materially and adversely affect us.
+Added: Similarly, our OM building and senior housing — leased tenants face competition from other medical practices in nearby hospitals and other medical facilities, and their failure to compete successfully with these other practices could adversely affect their ability to make rental payments to us, which could materially and adversely affect us.
Further, from time to time and for reasons beyond our control, referral sources, including physicians and managed care organizations, may change their lists of hospitals or physicians to which they refer patients or that are permitted to participate in the payor program.
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Ownership of property outside the United States may subject us to different or greater risks than those associated with our domestic operations.
−Removed: As of December 31, 2022, we had $68,085,000 invested in the United Kingdom, or UK, and the Isle of Man, or 1.4% of our portfolio, based on our aggregate purchase price of real estate investments.
International development, ownership and operating activities involve risks that are different from those we face with respect to our domestic development, ownership and operating activities.
For example, we have limited investing experience in international markets.
−Removed: If we are unable to
−Removed: successfully manage the risks associated with international expansion and operations, we may be materially and adversely affected.
+Added: As of December 31, 2023, we have investments in the United Kingdom, or the UK, and the Isle of Man that represent 1.4% of our portfolio, based on our aggregate purchase price of real estate investments.
+Added: If we are unable to successfully manage the risks associated with international expansion and operations, we may be adversely affected.
Additionally, our ownership of properties in the UK and the Isle of Man currently subjects us to fluctuations in the exchange rates between U.S.
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Therefore, any investments we make outside the United States will subject us to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S.
−Removed: dollar, and there can be no assurance that any attempt to mitigate foreign currency risk through hedging transactions or otherwise will be successful.
+Added: dollar, and there can be no
+Added: assurance that any attempt to mitigate foreign currency risk through hedging transactions or otherwise will be successful.
As a result, changes in exchange rates of any such foreign currency to U.S.
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The effects of such events on our properties may include increased operational costs, including energy costs, delays and cost increases in our construction projects, damage to our facilities and periods when impacted facilities may be partially or wholly unoccupied, power outages and reputational damage.
−Removed: Additionally, international, governmental, and societal responses to climate change may materially and adversely affect us or our operators’, including through shifts in fuel sources leading to short or long-term increases in energy costs and new and more stringent building codes pertaining to energy efficiency, reduced emissions, or weather resistance that may be more costly to comply with, any of which could increase our building costs and our and our operators’ capital expenditures, maintenance, and operating costs.
−Removed: These and other changes in federal, state, or local regulation or in societal expectations could materially and adversely affect us directly or indirectly through the impact on our operators.
+Added: Additionally, we are subject to transition risk from international, governmental and societal responses to climate change that may materially and adversely affect us or our operators, including through shifts in fuel sources leading to short- or long-term increases in energy costs and new and more stringent building codes pertaining to energy efficiency, reduced emissions or weather resistance that may be more costly to comply with, any of which could increase our building costs and our and our operators’ capital expenditures, maintenance and operating costs.
+Added: Also, we are or may become subject to new laws and market expectations with respect to disclosure requirements, and this may result in additional investments and implementation of new practices and reporting processes, all entailing additional compliance costs and risk.
+Added: For example, the EU recently adopted the Corporate Sustainability Reporting Directive that will impose disclosure of the risks and opportunities arising from social and environmental issues and of the impact of companies’ activities on people and the environment.
+Added: Similarly, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that will impose broad climate-related disclosure obligations on companies doing business in California.
+Added: The SEC has included in its regulatory agenda potential rulemaking on climate change disclosures that, if adopted, could significantly increase compliance burdens and associated regulatory costs and complexity.
+Added: These and other changes in international, federal, state, or local regulation or in societal expectations could materially and adversely affect us directly or indirectly through the impact on our operators.
Risks Related to Real Estate-Related Investments
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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.
−Removed: 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: Additionally, in the event of
+Added: 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.
The commercial mortgage-backed securities in which we have invested, and may continue to invest, are subject to several types of risks.
1 unchanged sentence
Accordingly, the commercial mortgage-backed securities in which we have invested, and may continue to invest, are subject to all the risks of the underlying mortgage loans.
−Removed: In a rising interest rate environment, the value of commercial mortgage-backed securities may be adversely affected when payments on underlying mortgages loan(s) 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: In a rising interest rate environment like the one that has prevailed in recent years, the value of commercial mortgage-backed securities may be adversely affected when payments on underlying mortgages loan(s) 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.
The value of commercial mortgage-backed securities may also change due to shifts in the market’s perception of securitization sponsors and borrower sponsors and regulatory or tax changes adversely affecting the mortgage securities markets as a whole.
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For example, such non-compliance could materially and adversely affect a tenant’s ability to make rent payments to us.
−Removed: Similarly, were an operator of a facility held in a RIDEA structure (where we are entitled to participate in any positive operating performance of the facility) to fail to comply with a regulatory obligation, it could adversely affect the operating performance of the facility and our participation therein.
+Added: Similarly, were an operator of a facility held in a RIDEA structure (where we benefit from positive operating performance, if any, at such facilities) to fail to comply with a regulatory obligation, it could adversely affect the operating performance of the facility and our participation therein.
Many of our healthcare facilities and their tenants and operators require a license or CON.
1 unchanged sentence
These events could materially and adversely affect a tenant’s ability to make rent payments to us or for an operator to operate a facility held in a RIDEA structure efficiently, either of which could have a material adverse effect on us.
−Removed: Similarly, state and local laws also may regulate expansion, including the addition of new beds or services or the acquisition of medical equipment at a facility, and the construction of healthcare-related facilities, by requiring a CON or other similar approval.
+Added: Similarly, state and local laws also may regulate expansion, including the addition of new beds/units or services or the acquisition of medical equipment at a facility, and the construction of healthcare-related facilities, by requiring a CON or other similar approval.
State CON laws and other similar laws are not uniform throughout the United States and are subject to change.
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As a result, the value of the facility may be reduced, which could materially and adversely affect us.
−Removed: Reductions in reimbursement from third-party payors, including Medicare and Medicaid, could adversely affect the operations of our tenants and their ability to make rental payments to us or our operators’ ability to operate facilities held in RIDEA structures, either of which could materially and adversely affect us.
+Added: Reimbursement rates from third-party payors, including Medicare and Medicaid, that do not rise as quickly, or at all, compared to the rate of inflation, could adversely affect our tenants’ operations and ability to make rental payments to us or our profitability from operating facilities held in RIDEA structures.
Sources of revenue for our tenants and operators may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others.
−Removed: Efforts by such payors to reduce healthcare costs will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants and operators, which could have a material adverse effect on us.
+Added: Efforts by such payors to reduce healthcare costs will likely continue, which may result in the slower growth in reimbursement rates for certain services provided by some of our tenants and operators, which could have a material adverse effect on us.
In addition, the healthcare billing rules and regulations are complex, and the failure of any of our tenants or operators to comply with various laws and regulations could jeopardize their ability to continue participating in Medicare, Medicaid, and other government sponsored payment programs.
−Removed: Moreover, the state and federal governmental healthcare payment programs are subject to reductions by state and federal legislative actions, and changes in reimbursement models may reduce our tenants’ and operators’ revenues and adversely affect our tenants’ ability to make rent payments to us or our operators’ ability to operate facilities held in RIDEA structures efficiently, either of which could have a material adverse effect on us.
+Added: Moreover, the state and federal governmental healthcare payment programs are subject to state and federal legislative actions, and changes in reimbursement models may reduce our tenants’ and operators’ revenues and adversely affect our tenants’ ability to make rent payments to us or our operators’ ability to operate facilities held in RIDEA structures efficiently, either of which could have a material adverse effect on us.
The healthcare industry continues to face various challenges, including increased government and private payor pressure on healthcare providers to control or reduce costs.
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Supreme Court dismissed this lawsuit without specifically ruling on the constitutionality of the law.
+Added: In addition, President Biden issued an executive order initiating a special enrollment period as a result of the pandemic from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace.
+Added: The executive order also instructed federal agencies to review and reconsider their existing policies and rules that limit access to healthcare.
However, challenges to the Healthcare Reform Act may continue.
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The financial impact on our tenants and operators could adversely affect a tenant’s ability to make rent payments to us or an operator’s ability to operate facilities held in RIDEA structures efficiently, either of which could have a material adverse effect on us.
+Added: In addition, other legislative changes have been proposed and adopted since the ACA was enacted.
+Added: These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and, due to subsequent legislative amendments to the statute, some of which have changed the 2% amount for specific years or suspended the 2% for specific years, will remain in effect through 2032, unless additional Congressional action is taken.
+Added: The financial impact on our tenants and operators could adversely affect a tenant’s ability to make rent payments to us or an operator’s ability to operate facilities efficiently, either of which could have a material adverse effect on us.
We cannot predict the ultimate content, timing or effect of any further healthcare reform legislation or the impact of potential legislation on us.
1 unchanged sentence
If seniors delay moving to senior housing facilities until they require greater care or forgo moving to senior housing facilities altogether, such action could have a material adverse effect on us.
−Removed: Seniors have been increasingly delaying their moves to senior housing facilities, including to our senior housing—leased facilities and SHOP, until they require greater care and are increasingly forgoing moving to senior housing facilities altogether.
−Removed: Further, rehabilitation therapy and other services are increasingly being provided to seniors on an outpatient basis or in seniors’ personal residences in response to market demand and government regulation, which may increase the trend for seniors to delay moving to senior housing facilities.
+Added: Some seniors have been delaying their moves to senior housing facilities, including to our triple-net leased properties and SHOP, until they require greater care and are increasingly forgoing moving to senior housing facilities altogether.
+Added: Further, rehabilitation therapy and other services that have become available to seniors as alternative options on an outpatient basis or in seniors’ personal residences in response to market demand and government regulation may increase the trend for seniors to delay moving to senior housing facilities.
Such delays may cause decreases in occupancy rates and increases in resident turnover rates at our senior housing facilities.
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Additionally, states in which the facilities are located may have similar fraud and abuse laws.
−Removed: 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 or operators could materially and adversely affect a tenant’s ability to make rent payments to us or an operator’s ability to operate a facility held in a RIDEA structure efficiently, either of which could have a material adverse effect on us.
+Added: 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 or operators or a settlement relating to such matters could materially and adversely affect a tenant’s ability to make rent payments to us or an operator’s ability to operate a facility held in a RIDEA structure efficiently, either of which could have a material adverse effect on us.
Efforts to ensure compliance with applicable healthcare laws and regulations may cause our tenants and operators to incur substantial costs that could materially and adversely affect a tenant’s ability to make rent payments to us or an operator’s ability to operate a facility held in a RIDEA structure efficiently, either of which could have a material adverse effect on us.
13 unchanged sentences
Additionally, in connection with the COVID-19 pandemic, many governmental entities relaxed certain licensure and other regulatory requirements relating to telemedicine, allowing more patients to virtually access care without having to visit a healthcare facility.
−Removed: If governmental and regulatory authorities continue to allow for increased virtual healthcare, this may affect the demand for some of our properties, such as MOBs.
+Added: Despite the end of the COVID-19 public health emergency, if governmental and regulatory authorities continue to allow for increased virtual healthcare, this may affect the demand for some of our properties, such as OM buildings.
These factors may negatively affect the economic performance of some or all of our tenants and operators, which could have a material adverse effect on us.
8 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 our tenants and operators due to state law prohibitions or limitations of availability.
−Removed: As a result, tenants and operators of our MOBs, senior housing, SNFs, hospitals 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, tenants and operators of our OM buildings, senior housing, SNFs 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 regulatory or other 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.
Insurance may not always be available to cover such losses.
−Removed: Any adverse determination in a legal proceeding or regulatory or other governmental investigation, whether currently asserted or arising in the future, could negatively affect a tenant’s or operator’s business and financial strength.
−Removed: If a tenant or
−Removed: operator is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if uninsured punitive damages are required to be paid, or if an uninsurable government enforcement action is brought, the tenant or operator could be exposed to substantial additional liabilities, which may affect the tenant’s ability to pay rent to us or the operator’s ability to manage our properties efficiently and effectively, which could have a material adverse effect on us.
+Added: Any adverse determination or settlement in a legal proceeding or regulatory or other governmental investigation, whether currently asserted or arising in the future, could negatively affect a tenant’s or operator’s business and financial strength.
+Added: If a tenant or operator is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if uninsured punitive damages are required to be paid, or if an uninsurable government enforcement action is brought, the tenant or operator could be exposed to substantial additional liabilities, which may affect the tenant’s ability to pay rent to us or the operator’s ability to manage our properties efficiently and effectively, which could have a material adverse effect on us.
We, our tenants and our operators for our senior housing facilities and SNFs may be subject to various government reviews, audits and investigations that could materially and adversely affect us, 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.
9 unchanged sentences
While we, our tenants and our operators for our senior housing facilities and SNFs 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 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, our tenants and operators might face potential criminal charges and/or civil claims, administrative sanctions and penalties for amounts that could be material to us.
−Removed: In addition, other key personnel and our tenants and operators and their other key personnel could be temporarily or permanently excluded from future participation in state and federal healthcare reimbursement programs such as Medicaid and Medicare.
+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, our officers and our tenants and operators and their officers might face potential criminal charges and/or civil claims, administrative sanctions and penalties for amounts that could be material to us.
+Added: In addition, we, our officers and other key personnel and our tenants and operators and their officers and other key personnel could be temporarily or permanently excluded from future participation in state and federal healthcare reimbursement programs such as Medicaid and Medicare.
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 and could materially and adversely affect us during and after any such investigation or proceedings.
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The Healthcare Reform Act and similar foreign laws impose additional requirements regarding compliance and disclosure.
−Removed: The Healthcare Reform Act 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.
−Removed: Department of Health and
−Removed: 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: The Healthcare Reform Act 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 as a condition of participation in Medicare and Medicaid.
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 patients and residents could be adversely affected, which could have a material adverse effect on us.
10 unchanged sentences
Our joint ventures, and joint ventures we may enter into in the future, may involve risks not present with respect to our wholly-owned properties, including the following:
−Removed: • we may share with, or even delegate decision-making authority to, our joint venture partners regarding certain major decisions affecting the ownership or operation of the joint venture and the joint venture property, such as, but not limited to, (1) additional capital contribution requirements, (2) obtaining, refinancing or paying off debt and (3) obtaining consent prior to the sale or transfer of our interest in the joint venture to a third party, which may prevent us from taking actions that are opposed by our joint venture partners;
+Added: • we may share with, or even delegate decision-making authority to, our joint venture partners regarding certain major decisions affecting the ownership or operation of the joint venture and the joint venture property, such as, but not limited to, (i) additional capital contribution requirements, (ii) obtaining, refinancing or paying off debt and (iii) obtaining consent prior to the sale or transfer of our interest in the joint venture to a third party, which may prevent us from taking actions that are opposed by our joint venture partners;
+Added: • our joint venture partners might become bankrupt and such proceedings could have an adverse impact on the operations of the joint venture;
• our joint venture partners may have business interests or goals with respect to the joint venture 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;
−Removed: • in some instances, we may enter into arrangements with our joint venture partners that may (1) require an acquisition opportunity to be allocated to the joint venture when we otherwise may have acquired the asset ourselves or (2) cause the joint venture to sell an asset at a time when we otherwise may not have initiated such a transaction;
+Added: • in some instances, we may enter into arrangements with our joint venture partners that may (i) require an acquisition opportunity to be allocated to the joint venture when we otherwise may have acquired the asset ourselves or (ii) cause the joint venture to sell an asset at a time when we otherwise may not have initiated such a transaction;
• disputes may develop with our joint venture partners over decisions affecting the joint venture 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, have an adverse impact on the operations and profitability of the joint venture and possibly force a sale of the property if the dispute cannot be resolved;
2 unchanged sentences
As of December 31, 2023, we indirectly own a 74.1% interest in Trilogy, a consolidated joint venture representing approximately 43.6% of our portfolio (based on aggregate contract purchase price) and contributing approximately 51.0% of our annualized base rent / annualized NOI as of such date.
−Removed: Approximately 23.1% of Trilogy is indirectly owned by NorthStar Healthcare Income, Inc., or NorthStar, with the remaining 3.8% primarily owned by affiliates of the Trilogy Manager, an eligible independent contractor, or EIK, that manages the day-to-day operations of the joint venture.
+Added: Approximately 23.4% of Trilogy is indirectly owned by NHI, with the remaining 2.5% primarily owned by affiliates of the Trilogy Manager, an eligible independent contractor, or EIK, that manages the day-to-day operations of the joint venture.
In addition to relying on the Trilogy Manager to manage the joint venture effectively, our investment in Trilogy exposes us to many of the risks described above with respect to joint venture investments generally.
For example, other parties with interests in Trilogy have certain rights that could affect our investment in Trilogy.
−Removed: There are certain decisions that are deemed “major decisions” with respect to Trilogy’s business (such as terminating the management agreement with the Trilogy Manager, taking certain actions under the management agreement, making certain sales of the Trilogy properties, and taking certain other actions with respect
−Removed: to the Trilogy portfolio) that require the approval of NorthStar.
−Removed: It is possible that NorthStar will have interests that differ from ours, and our ability to pursue our interests we may be limited by their rights under the joint venture arrangements.
+Added: There are certain decisions that are deemed “major decisions” with respect to Trilogy’s business (such as terminating the management agreement with the Trilogy Manager, taking certain actions under the management agreement, making certain sales of the Trilogy properties, and taking certain other actions with respect to the Trilogy portfolio) that require the approval of NorthStar.
+Added: It is possible that NorthStar will have interests that differ from ours, and our ability to pursue our interests may be limited by their rights under the joint venture arrangements.
Additionally, if we seek to transfer our indirect ownership interests in Trilogy, we are required to first offer such interests to NorthStar, which could delay our ability to sell such interests or adversely affect the price we receive in connection with a sale.
1 unchanged sentence
This could cause us to increase our investment in Trilogy or result in the sale of Trilogy at a time when we would not to choose to effect a sale.
+Added: We have the option to purchase the remaining 24.0% minority membership interest held by our joint venture partner in Trilogy REIT Holdings.
+Added: Many factors, such as the historical and projected performance of the assets held by Trilogy REIT Holdings, our expectations for the future performance of the assets held by Trilogy REIT Holdings, our financial condition, results of operations and cash flows, and our access to attractive capital, among other factors, will influence whether or not we elect to exercise this option, the consideration mix we would select in connection with any such exercise and how we would finance the cash portion of the purchase price for any such exercise.
+Added: Accordingly, no assurance can be given as to when, or if, we will exercise this option, or, if we do exercise this option, that we will consummate the purchase on the terms we expect or at all or that we will achieve the anticipated benefit from acquiring the remaining 24.0% minority membership interest held by our joint venture partner in Trilogy REIT Holdings.
+Added: We may structure our joint venture relationships in a manner which limits the amount we participate in the cash flows or appreciation of an investment.
+Added: We have entered, and may continue to enter, into joint venture agreements, the economic terms of which may provide for the distribution of income to us otherwise than in direct proportion to our ownership interest in the joint venture.
+Added: For example, while we and another joint venture party may invest an equal amount of capital in an investment, the investment may be structured such that one joint venture partner has a right to priority distributions of cash flows up to a certain target return while another joint venture partner may receive a disproportionately greater share of cash flows once such target return has been achieved.
+Added: This type of investment structure may result in our joint venture partner receiving more of the cash flows, including any from appreciation, of an investment than we receive.
+Added: 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 make distributions to our stockholders.
If we serve as a managing member, general partner or controlling party with respect to investments or joint ventures, we may be subject to risks and liabilities that we would not otherwise face.
5 unchanged sentences
• our subsidiaries that would be the general partner or managing member of the investment or venture could be generally liable, under applicable law or the governing agreement of a venture, for the debts and obligations of the investment or venture, subject to certain exculpation and indemnification rights pursuant to the terms of the governing agreement.
−Removed: We may structure our joint venture relationships in a manner which limits the amount we participate in the cash flows or appreciation of an investment.
−Removed: We have entered, and may continue to enter, into joint venture agreements, the economic terms of which may provide for the distribution of income to us otherwise than in direct proportion to our ownership interest in the joint venture.
−Removed: For example, while we and another joint venture party may invest an equal amount of capital in an investment, the investment may be structured such that one joint venture partner has a right to priority distributions of cash flows up to a certain target return while another joint venture partner may receive a disproportionately greater share of cash flows once such target return has been achieved.
−Removed: This type of investment structure may result in our joint venture partner receiving more of the cash flows, including any from appreciation, of an investment than we receive.
−Removed: 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 make distributions to our stockholders.
Risks Related to Debt Financing
1 unchanged sentence
We have substantial indebtedness and may incur additional indebtedness in the future, which could materially and adversely affect us.
−Removed: As of December 31, 2022, we had indebtedness of $2,537,113,000, which comprises $1,282,634,000 in unsecured debt (lines of credit and term loans) and $1,254,479,000 in mortgage loans payable.
−Removed: Though we anticipate that our overall leverage will not exceed 50.0% of the combined fair market value of all of our properties and other real estate-related investments, as determined at the end of each calendar year, our organizational documents do not place a limitation on the amount of leverage that we may incur, and we could incur leverage substantially in excess of this amount.
+Added: As of December 31, 2023, we had indebtedness of $2,551,036,000, which comprises $914,900,000 in unsecured debt under our 2022 Credit Agreement and $1,636,136,000 in secured mortgage loans payable and under the secured 2019 Trilogy Credit Agreement.
+Added: As of December 31, 2023, we had $268,722,000 of total liquidity, comprised of $225,277,000 of undrawn capacity under our lines of credit and $43,445,000 of cash and cash equivalents.
+Added: This represented approximately 5.7% of the combined fair market value of all of our properties and other real estate-related investments as of December 31, 2023.Though we anticipate that our overall leverage will approximate 50.0% of the combined fair market value of all of our properties and other real estate-related investments, as determined at the end of each calendar year, our organizational documents do not place a limitation on the amount of leverage that we may incur, and we could incur leverage substantially in excess of this amount.
We expect to fund a portion of our cash needs, including funding investment activity, with additional indebtedness.
+Added: If we exercise our option to purchase the remaining 24.0% minority membership interest held by our joint venture partner in Trilogy REIT Holdings, we may consummate the purchase transaction entirely in cash or in a combination of at least the Minimum Cash Consideration and newly issued shares of our convertible preferred stock as defined in Note 13, Equity — Noncontrolling Interests in Total Equity — Membership Interest in Trilogy REIT Holdings, or Convertible Preferred Stock.
+Added: If we elect to pay
+Added: for the purchase entirely in cash, the all cash purchase price would be $240,500,000 if we consummate the purchase on or before March 31, 2024, would increase to $247,000,000 if we consummate the purchase from April 1, 2024 to and including December 31, 2024 and would further increase to $260,000,000 if we consummate the purchase on or after January 1, 2025.
+Added: If, for example, we elect to pay for the purchase using only the Minimum Cash Consideration, we would pay for the remaining portion of the purchase price consideration by issuing to NorthStar 9,360,000 shares of our Convertible Preferred Stock.
+Added: In all cases, an amount of cash will be required, and we may source our cash need from the proceeds of issuances of additional debt and equity (including preferred stock other than our Convertible Preferred Stock) and/or a hybrid of debt and equity.
+Added: Also, if we exercise our option and elect to issue shares of our Convertible Preferred Stock, we would not be permitted to pay cash dividends on junior securities (such as our common stock) unless we were then current on all accumulated dividends owed on our Convertible Preferred Stock for past quarterly dividend periods.
+Added: This means that we may have additional cash needs so long as our Convertible Preferred Stock is outstanding.
+Added: We may also have cash needs in order to satisfy the redemption option that a holder of shares of our Convertible Preferred Stock may exercise after a fundamental change transaction (such as a change-in-control transaction involving us), which exercise would require us to repurchase that holder’s shares of our Convertible Preferred Stock or to exercise our option to redeem our Convertible Preferred Stock if financially advantageous to do so.
+Added: As such, the credit rating agencies and our investors may view our Convertible Preferred Stock as effectively similar to debt or “mezzanine” financing.
Our ability to access additional debt capital and the cost of other terms thereof will be significantly influenced by our creditworthiness and any rating assigned by a rating agency, as well as by general economic and market conditions.
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Additionally, interest rates have significantly increased, and may continue to significantly increase, our interest costs.
−Removed: Expensive debt could reduce or limit our available cash flow to fund working capital, capital expenditures, acquisitions and
−Removed: development projects, hinder our ability to meet certain debt service ratios under our credit agreements or impose restrictions on our ability to incur additional debt for so long as certain debt service ratios are not met.
+Added: Expensive debt could reduce or limit our available cash flow to fund working capital, capital expenditures, acquisitions and development projects, reduce cash available for distributions to stockholders, hinder our ability to meet certain debt service ratios under our credit agreements or impose restrictions on our ability to incur additional debt for so long as certain debt service ratios are not met.
We may also incur mortgage debt and other property-level debt on properties that we already own in order to obtain funds to acquire additional properties or make other capital investments.
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Whenever we incur variable-rate debt, increases in interest rates would increase our interest expense unless fully hedged.
+Added: During 2023, we entered into interest rate swap contracts to hedge $750,000,000 of our variable-rate credit facilities.
As of December 31, 2023, our outstanding debt aggregated $2,551,036,000, of which 31.8% was unhedged variable-rate debt.
−Removed: In January 2023, we entered into an interest rate swap contract to hedge $275,000,000 of our floating rate term loan under our existing credit facility.
Rising interest rates will also increase our interest expense on future fixed-rate debt .
−Removed: If we need to repay existing debt during periods of rising interest rates, which is currently the case, we could be required to sell one or more of our properties at times which may not permit realization of the maximum return on such investments, which could result in losses.
+Added: If we need to repay existing debt during periods of rising interest rates, which has been the case in recent years , we could be required to sell one or more of our properties at times which may not permit realization of the maximum return on such investments, which could result in losses.
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.
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We have and may also continue to enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument.
−Removed: Therefore, 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.
+Added: Therefore, 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 in the future below our borrowing rates.
Hedging activity may expose us to risks.
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If we are unable to manage these risks effectively, we could be materially and adversely affected.
−Removed: Lenders may require us to enter into restrictive covenants relating to our business.
+Added: Lenders may require us to enter into restrictive covenants that could adversely affect our business.
When providing financing, a lender may impose restrictions on us that affect our ability to incur additional debt, make distributions to our stockholders and operate our business.
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At the time such a balloon payment is due, we may or may not be able to refinance the balloon payment on terms as favorable as the original loan or sell the particular property at a price sufficient to make the balloon payment.
−Removed: Furthermore, these required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan.
+Added: Furthermore, these required principal or balloon payments will
+Added: increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan.
If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments would likely increase at a time of rising interest rates, depending upon the adjustment terms.
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Any of these results could have a material adverse effect on us.
−Removed: 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, we could be materially and adversely affected.
−Removed: In obtaining certain nonrecourse loans, we have provided, and may continue to 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).
−Removed: 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 was made against us under a “bad boy” carve-out guaranty following foreclosure on mortgages or related loans, and such claim was successful, we could be materially and adversely affected.
−Removed: We may be adversely affected by the transition away from LIBOR and the use of SOFR or other alternative benchmark rates.
−Removed: London Interbank Offered Rate, or LIBOR, the Secured Overnight Financing Rate, or SOFR, and other indices which are deemed “benchmarks” are the subject of recent national, international and other regulatory guidance and proposals for reform.
−Removed: The Financial Conduct Authority ceased publishing one-week and two-month LIBOR after December 31, 2021 and intends to cease publishing all remaining LIBOR index maturities after June 30, 2023.
−Removed: It currently appears that U.S.
−Removed: dollar LIBOR will likely be replaced by SOFR, though it is not certain whether or when SOFR or other alternative reference rates will attain market traction as replacements for LIBOR.
−Removed: SOFR and SOFR-based rates have a limited history, and there is no assurance that SOFR, or rates derived from SOFR, will perform in the same or a similar way as LIBOR would have performed at any time, and there is no assurance that SOFR-based rates will ultimately prove to be a suitable substitute for LIBOR.
−Removed: SOFR-based reference rates cannot be predicted based on SOFR’s history, and future levels of SOFR may bear little or no relation to historical levels of SOFR, LIBOR or other rates.
−Removed: Additionally, SOFR has been more volatile than other benchmark or market rates, such as three-month LIBOR.
−Removed: Accordingly, there can be no assurance that our transition to term SOFR in connection with our floating rate or future fixed-rate borrowings will not result in increased volatility in our cost of borrowing or increased interest expense compared to our historical experience.
−Removed: Additionally, the inability or any inefficiency in market participants’ ability to hedge SOFR-based transactions or the illiquidity or relative illiquidity in the market for SOFR-based instruments may increase the costs associated with SOFR-based debt instruments or our ability to hedge our exposure to floating interest rates.
−Removed: Any of these changes could have a material adverse effect on the value of financial assets and liabilities based on or linked to SOFR or another benchmark, including our own.
Risks Related to Our Corporate Structure and Organization
−Removed: Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect our stockholders.
−Removed: We may in the future attempt to increase our capital resources by offering debt or equity securities, including notes and classes of preferred or common stock.
−Removed: Debt securities or shares of preferred stock will generally be entitled to receive interest payments or distributions, both current and in connection with any liquidation or sale, prior to the holders of our common stock.
−Removed: We are not required to offer any such additional debt or preferred stock to existing common stockholders on a preemptive basis.
−Removed: Therefore, issuances of common stock or other equity securities will generally dilute the holdings of our existing stockholders.
−Removed: Because we may generally issue any such debt or preferred stock in the future without obtaining the approval of our stockholders, you will bear the risk of our future issuances reducing the market price of our common stock and diluting your proportionate ownership.
−Removed: Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the form amount, timing or nature of our future issuances.
−Removed: In addition, subject to any limitations set forth under Maryland law, our board may amend our charter to increase or decrease the number of authorized shares of stock, or the number of shares of any class or series of stock designated, or reclassify any unissued shares into other classes or series of stock without the necessity of obtaining stockholder approval.
−Removed: All such shares may be issued in the sole discretion of our board.
−Removed: In addition, we have granted, and expect to grant in the future, equity awards under our incentive plan to our independent directors and certain of our employees, including our executive officers, which to date have consisted of our restricted stock and restricted share units, which are exchangeable into shares of our common stock subject to satisfaction of certain conditions.
−Removed: Finally, we have OP units outstanding which are redeemable for cash or, at our election, exchangeable into shares of our common stock.
−Removed: Therefore, existing stockholders will experience dilution of their equity investment in us as we (1) sell additional shares of our common stock in the future, (2) sell securities that are convertible into or exchangeable for shares of our common stock, including OP units, (3) issue restricted shares of our common stock, restricted stock units or other equity-based securities under the AHR Incentive Plan or (4) issue shares of our common stock in a merger or to sellers of properties acquired by us in connection with an exchange of OP units.
−Removed: Because the OP units may, at our election, be exchanged for shares of our common stock, any merger, exchange or conversion between our operating partnership and another entity ultimately could result in the issuance of a substantial number of shares of our common stock, thereby diluting the percentage ownership interest of other stockholders.
−Removed: Because of these and other reasons, our stockholders may experience substantial dilution in their equity investment in us.
−Removed: Our ability to issue preferred stock may include a preference in distributions superior to our common stock and also may deter or prevent a sale of shares of our common stock in which our stockholders could profit.
−Removed: Our charter authorizes our board to issue up to 200,000,000 shares of preferred stock.
−Removed: Our board has the discretion to establish the preferences and rights, including a preference in distributions superior to our common stockholders, of any issued preferred stock.
−Removed: If we authorize and issue preferred stock with a distribution preference over our common stock, payment of any distribution preferences of outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock.
−Removed: Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount our common stockholders would otherwise receive upon such an occurrence.
−Removed: In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage:
−Removed: • a merger, tender offer or proxy contest;
−Removed: • assumption of control by a holder of a large block of our securities;
−Removed: • removal of incumbent management.
−Removed: We may be unable to raise additional capital needed to grow our business.
−Removed: We may not be able to increase our capital resources by engaging in additional debt or equity financings.
−Removed: Even if we complete such financings, they may not be on favorable terms.
−Removed: These circumstances could materially and adversely affect our financial results and impair our ability to achieve our business objectives.
−Removed: Additionally, we may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions (including terms that require us to maintain specified liquidity or other ratios) that would otherwise be in the best interests of our stockholders.
−Removed: The limit on the percentage of shares of our common stock that any person may own may discourage a takeover or business combination that may have benefited our stockholders.
+Added: Our charter imposes a limit on the percentage of shares of our common stock or capital stock that any person may own, and such limit may discourage a takeover or business combination that may have benefited our stockholders.
Our charter restricts the direct or indirect ownership by one person or entity to no more than 9.9% of the value of shares of our then outstanding capital stock (which includes common stock and any preferred stock we may issue) and no more than 9.9% of the value or number of shares, whichever is more restrictive, of our then outstanding common stock.
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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 growth strategies and achievement of our business strategies.
−Removed: 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.
−Removed: 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.
−Removed: Certain provisions of the Maryland General Corporation Law, or the MGCL, such as the business combination statute and the control share acquisition statute, are designed to prevent, or have the effect of preventing, someone from acquiring control of us.
−Removed: The MGCL prohibits “business combinations” between a Maryland corporation and:
−Removed: • any person who beneficially owns, directly or indirectly, 10.0% or more of the voting power of the corporation’s outstanding voting stock, which is referred to as an “interested stockholder”;
+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.
+Added: Certain provisions of Maryland law 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.
+Added: Certain provisions of the Maryland General Corporation Law, or MGCL, such as the business combination statute and the control share acquisition statute, are designed to prevent, or have the effect of preventing, someone from acquiring control of us.
+Added: The MGCL prohibits “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder.
+Added: An “interested stockholder” is defined generally as:
+Added: • any person who beneficially owns, directly or indirectly, 10.0% or more of the voting power of the corporation’s outstanding voting stock;
• an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was an interested stockholder.
−Removed: • an affiliate of an interested stockholder.
These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder.
−Removed: Thereafter, any business combination with the interested stockholder or an affiliate of the interested stockholder must be recommended by the corporation’s board and approved by the affirmative vote of at least 80.0% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation, and two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares of voting stock held by the interested stockholder.
−Removed: These requirements could have the effect of inhibiting a change in control even if a change in control were in our stockholders’ best interests.
−Removed: Pursuant to the MGCL, our bylaws exempt us from the control share acquisition statute, which eliminates voting rights for certain levels of shares that could exercise control over us, and our board has adopted a resolution providing that any business combination between us and any other person is exempted from the business combination statute, provided that such business combination is first approved by our board.
−Removed: However, if the bylaws provision exempting us from the control share acquisition statute or our board resolution opting out of the business combination statute were repealed in whole or in part at any time, these provisions of the MGCL could delay or prevent offers to acquire us and increase the difficulty of consummating any such offers, even if such a transaction would be in our stockholders’ best interest.
+Added: Thereafter, any business combination with the interested stockholder or an affiliate of the interested stockholder must be recommended by the corporation’s board and approved by the affirmative vote of at least 80.0% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder.
+Added: These requirements could have the effect of inhibiting a change in control even if a change in control were in the best interests of our stockholders.
+Added: The control share acquisition statute of the MGCL provides that, subject to certain exceptions, holders of “control shares” of a Maryland corporation (defined as voting shares of stock that, if aggregated with all other such shares of stock owned by the acquiror or in respect of which the acquiror can exercise or direct voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within specified ranges of voting power) acquired in a “control share acquisition” (defined as the acquisition of issued and outstanding control shares) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter.
+Added: Shares of stock owned by the acquiror, by our officers or by our employees who are also our directors are excluded from shares entitled to vote on the matter.
+Added: Pursuant to the MGCL, our bylaws contain a provision exempting from the control share acquisition provisions of the MGCL any and all acquisitions by any person of shares of our stock, which eliminates voting rights for certain levels of shares that could exercise control over us, and our board has adopted a resolution providing that any business combination between us and any other person is exempted from the business combination statute, provided that such business combination is first approved by our board.
+Added: However, if the bylaws provision exempting us from the control share acquisition statute or our board resolution opting out of the business combination statute were repealed in whole or in part at any time, these provisions of the MGCL could delay or prevent offers to acquire us and increase the difficulty of consummating any such offers, even if such a transaction would be in the best interests of our stockholders.
The MGCL and our organizational documents limit our stockholders’ right to bring claims against our officers and directors.
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In addition, we may be obligated to fund the defense costs incurred by our directors and officers in some cases, which would decrease the cash otherwise available for distribution to our stockholders.
−Removed: Our stockholders’ investment return may be reduced if we are required to register as an investment company under the Investment Company Act.
−Removed: If we become subject to registration under the Investment Company Act, we may not be able to continue our business.
−Removed: We do not intend to register as an investment company under the Investment Company Act.
−Removed: We monitor our operations and our assets on an ongoing basis in order to ensure that neither we, nor any of our subsidiaries, meet the definition of “investment company” under Section 3(a)(1) of the Investment Company Act.
−Removed: If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act imposing, among other things:
−Removed: limitations on capital structure;
−Removed: restrictions on specified investments;
−Removed: prohibitions on transactions with affiliates;
−Removed: compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations;
−Removed: and potentially, compliance with daily valuation requirements.
−Removed: To maintain compliance with our Investment Company Act exemption, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain.
−Removed: Similarly, we may have to acquire additional income- or loss-generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy.
−Removed: Accordingly, our board may not be able to change our investment policies as our board may deem appropriate if such change would cause us to meet the definition of an “investment company.” In addition, a change in the value of any of our assets could negatively affect our ability to avoid being required to register as an investment company.
−Removed: If we were required to register as an investment company under the Investment Company Act, but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us.
−Removed: 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 result in our stockholders’ losing all of their investment in us.
Our structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders.
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Additionally, the partnership agreement expressly limits our liability by providing that we and our officers, directors, stockholders, trustees, representatives, agents and employees will not be liable or accountable to our operating partnership for (i) any act or omission performed or failed to be performed, or for any losses, claims, costs, damages, or liabilities arising from any such act or omission, (ii) any tax liability imposed on our operating partnership or (iii) any losses due to the misconduct, negligence (gross or ordinary), dishonesty or bad faith of any agents of our operating partnership, if we or any such person acted consistent with the obligation of good faith and fair dealing and with applicable duties of care and loyalty.
−Removed: In addition, our operating partnership is required to indemnify us and our officers, directors, employees and designees to the extent permitted by applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that:
+Added: In addition, our operating partnership is required to indemnify us and our officers, directors, employees and designees to the extent permitted by
+Added: applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that:
(i) the act or omission was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty;
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federal income tax purposes would subject us to U.S.
−Removed: federal income tax on our REIT taxable income at the regular corporate rate, which would substantially reduce our ability to make distributions to our stockholders.
+Added: federal income tax on our REIT taxable income at the regular corporate rate, which would substantially increase our income tax expenses and reduce our distributions to our stockholders.
We have elected to be taxed as a REIT under the Code commencing with our taxable year ended December 31, 2016.
We believe that we have been, and, through the time of the REIT Merger, GAHR III was, organized and operated, and we intend to continue to operate in conformity with the requirements for qualification and taxation as a REIT under the Code.
−Removed: 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 stockholders.
+Added: To continue to maintain our qualification as a REIT, we, and our subsidiary REIT, Trilogy Real Estate Investment Trust, or Trilogy REIT, must meet various requirements set forth in the Code concerning, among other things, the ownership of our, or Trilogy REIT’s, outstanding common stock, the nature of our, or Trilogy REIT’s, assets, the sources of our, or Trilogy REIT’s, income, and the amount of our, or Trilogy REIT’s, distributions to stockholders.
In addition, if it is determined that GAHR III lost, in any year prior to the REIT Merger, its qualification as a REIT without being entitled to any relief under the statutory provisions to preserve REIT status, we, as a “successor” to GAHR III under the REIT rules, will not be able to qualify as a REIT to the extent we are unable to avail ourselves of any relief under the statutory provisions to preserve REIT status.
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In addition, the determination of various factual matters and circumstances not entirely within our control may affect our ability to continue to qualify as a REIT.
−Removed: Accordingly, we cannot be certain that we will be successful in operating in compliance with the REIT rules in such manner as to allow us to maintain our qualification as a REIT.
+Added: Accordingly, we cannot be certain that we, or Trilogy REIT, will be successful in operating in compliance with the REIT rules in such manner as to allow us to maintain our qualification as a REIT.
At any time, new laws, interpretations or court decisions may change the U.S.
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federal income tax consequences of, qualification as a REIT.
−Removed: It is possible that future economic, market, legal, tax or other considerations may cause our board to determine that it
−Removed: is not in our best interest to maintain our qualification as a REIT, and to revoke our REIT election, which it may do without stockholder approval.
+Added: It is possible that future economic, market, legal, tax or other considerations may cause our board to determine that it is not in our best interests to maintain our qualification as a REIT, and to revoke our REIT election, which it may do without stockholder approval.
If we fail to maintain our qualification as a REIT for any taxable year, we will be subject to U.S.
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If our “qualified health care properties” are not properly leased to a TRS or the operators of those “qualified health care properties” do not qualify as EIKs, we could fail to qualify as a REIT.
+Added: To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” Rent paid by TRSs pursuant to the lease of our “qualified health care properties” will constitute a substantial portion of our gross income.
+Added: For that rent to qualify as “rents from real property” for purposes of the REIT gross income tests, the leases must be respected as true leases for U.S.
+Added: federal income tax purposes and not be treated as service contracts, joint ventures or some other type of arrangement.
+Added: If our leases are not respected as true leases for U.
+Added: federal income tax purposes, we may fail to qualify as a REIT.
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.
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If a healthcare facility operator at one of our properties that uses the RIDEA structure was determined to not be an EIK, any rental income we receive from the TRS with respect to such property would likely not be qualifying income for purposes of the two gross income tests applicable to REITs.
−Removed: If our leases with TRSs are not respected as true leases for U.S.
−Removed: federal income tax purposes, we likely would fail to qualify as a REIT.
−Removed: To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” Rent paid by TRSs pursuant to the lease of our “qualified health care properties” will constitute a substantial portion of our gross income.
−Removed: For that rent to qualify as “rents from real property” for purposes of the REIT gross income tests, the leases must be respected as true leases for U.S.
−Removed: federal income tax purposes and not be treated as service contracts, joint ventures or some other type of arrangement.
−Removed: If our leases are not respected as true leases for U.
−Removed: federal income tax purposes, we may fail to qualify as a REIT.
We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability or reduce our operating flexibility.
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We may also decide to retain capital gains we earn from the sale or other disposition of our property and pay income tax directly on such income.
−Removed: In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly.
+Added: In that event, our
+Added: stockholders would be treated as if they earned that income and paid the tax on it directly.
However, our stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability.
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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 our 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 U.S.
+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 our 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 U.S.
federal income tax as unrelated business taxable income under the Code.
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established securities market and the foreign investor did not own at any time during the 1-year period ending on the date of such distribution more than 10.0% of such class of common stock.
−Removed: If the REIT Merger does not qualify as a tax-free reorganization, there may be adverse tax consequences.
−Removed: The REIT Merger was intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code.
−Removed: The closing of the REIT Merger was conditioned on the receipt by us and GAHR III of an opinion of counsel to the effect that the REIT Merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code.
−Removed: However, these legal opinions will not be binding on the IRS or on the courts.
−Removed: 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 materially and adversely affect us.
−Removed: Empl oyee Benefit Plan, IRA, and Other Tax-Exempt Investor Risks
−Removed: If a stockholder that is a benefit plan or IRA fails to meet the fiduciary and other standards under ERISA or the Code as a result of an investment in shares of our common stock, such stockholder could be subject to civil and, if the failure is willful, criminal penalties.
−Removed: There are special considerations that apply to benefit plans and IRAs investing in shares of our common stock.
−Removed: Stockholders that are benefit plans and IRAs should consider whether, among other things:
−Removed: • their investment is consistent with their fiduciary obligations under ERISA and the Code;
−Removed: • their investment is made in accordance with the documents and instruments governing the benefit plan or IRA, including any investment policy;
−Removed: • their investment satisfies the prudence and diversification requirements of ERISA;
−Removed: • their investment will not impair the liquidity of the benefit plan or IRA;
−Removed: • their investment will not produce UBTI for the benefit plan or IRA;
−Removed: • they will be able to value the assets of the benefit plan or IRA annually in accordance with ERISA, the Code and the applicable provisions of the benefit plan or IRA.
−Removed: ERISA and Section 4975 of the Code prohibit certain transactions that involve (i) benefit plans or IRAs, and (ii) any person who is a “party-in-interest” or “disqualified person” with respect to such a benefit plan or IRA.
−Removed: Consequently, the fiduciary or owner of a benefit plan or an IRA contemplating an investment in our common stock should consider whether we, any other person associated with the issuance of the common stock, or any of our or their affiliates is or might become a “party-in-interest” or “disqualified person” with respect to the benefit plan or IRA and, if so, whether an exemption from such prohibited transaction rules is applicable.
−Removed: In addition, the U.S.
−Removed: Department of Labor plan asset regulations provide that, subject to certain exceptions, the assets of an entity in which a plan holds an equity interest may be treated as assets of the investing plan, in which event investment made by and certain other transactions entered into by such entity would be subject to the prohibited transaction rules.
−Removed: To avoid our assets from being considered “plan assets,” our charter prohibits “benefit plan investors” from owning 25% or more of the shares of our common stock prior to the time that the common stock qualifies as a class of publicly-offered securities, within the meaning of the plan assets regulation.
−Removed: However, we cannot assure our stockholders that those provisions in our charter will be effective in limiting benefit plan investors’ ownership to less than the 25% limit.
−Removed: Due to the complexity of these rules and the potential penalties that may be imposed, it is important that stockholders that are benefit plans and IRAs consult with their own advisors regarding the potential applicability of ERISA, the Code and any similar applicable law.
−Removed: Stockholders that are benefit plans and IRAs may be limited in their ability to withdraw required minimum distributions as a result of an investment in shares of our common stock.
−Removed: If benefit plans or IRAs invest in our common stock, the Code may require such plan or IRA to withdraw required minimum distributions in the future.
−Removed: Our stock will be highly illiquid, and our share repurchase plan only offers limited liquidity.
−Removed: If a benefit plan or IRA requires liquidity, it may generally sell its shares, but such sale may be at a price less than the price at which such plan or IRA initially purchased its shares of our common stock.
−Removed: If a benefit plan or IRA fails to make required minimum distributions, it may be subject to certain taxes and tax penalties.
−Removed: Specific rules apply to foreign, governmental and church plans.
−Removed: As a general rule, certain employee benefit plans, including foreign pension plans, governmental plans established or maintained in the United States (as defined in Section 3(32) of ERISA), and certain church plans (as defined in Section 3(33) of ERISA), are not subject to ERISA’s requirements and are not “benefit plan investors” within the meaning of the plan assets regulation.
−Removed: Any such plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code may nonetheless be subject to the prohibited transaction rules set forth in Section 503 of the Code and, under certain circumstances in the case of church plans, Section 4975 of the Code.
−Removed: Also, some foreign plans and governmental plans may be subject to foreign, state, or local laws which are, to a material extent, similar to the provisions of ERISA or Section 4975 of the Code.
−Removed: Each fiduciary of a plan subject to any such similar law should make its own determination as to the need for, and the availability of, any exemption relief.
−Removed: Unresolved Staff Comments.
−Removed: Not applicable.
+Added: Risks Related to Our Common Stock
+Added: An active trading market for our common stock may not be maintained.
+Added: Our common stock only recently began trading on the NYSE, and we cannot assure our stockholders that an active trading market will be sustained.
+Added: Whether an active public market for shares of our common stock will be maintained depends on a number of actors, including the extent of institutional investor interest in us, the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate-based companies), our financial performance and general stock and bond market conditions.
+Added: If an active trading market for shares of our common stock does not develop or is maintained, our stockholders may have difficulty selling shares of our common stock, which could adversely affect the price that our stockholders receive for such shares.
+Added: The market price and trading volume of shares of our common stock may be volatile.
+Added: stock markets, including the NYSE, on which our common stock recently began trading, have experienced significant price and volume fluctuations.
+Added: As a result, the market price of shares of our common stock is likely to be similarly volatile, and investors in shares of our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.
+Added: We cannot assure our stockholders that the market price of shares of our common stock will not fluctuate or decline significantly in the future.
+Added: In addition to the risks listed in this “Risk Factors” section, a number of factors could negatively affect the share price of our common stock or result in fluctuations in the price or trading volume of shares of our common stock, including:
+Added: • the annual yield from distributions on shares of our common stock as compared to yields on other financial instruments;
+Added: • equity issuances by us, or future sales of substantial amounts of shares of our common stock by our existing or future stockholders or the perception that such issuances or future sales may occur;
+Added: • increases in market interest rates or a decrease in our distributions to stockholders that lead purchasers of shares of our common stock to demand a higher yield;
+Added: • changes in market valuations of similar companies;
+Added: • fluctuations in stock market prices and volumes;
+Added: • additions or departures of key management personnel;
+Added: • our operating performance and the performance of other similar companies;
+Added: • actual or anticipated differences in our quarterly operating results;
+Added: • changes in expectations of future financial performance or changes in estimates of securities analysts;
+Added: • publication of research reports about us or our industry by securities analysts;
+Added: • failure to qualify as a REIT;
+Added: • adverse market reaction to any indebtedness we incur in the future;
+Added: • strategic decisions by us or our competitors, such as acquisitions, divestments, spin offs, joint ventures, strategic investments or changes in business strategy;
+Added: • the passage of legislation or other regulatory developments that adversely affect us or our industry;
+Added: • speculation in the press or investment community;
+Added: • changes in our earnings;
+Added: • failure to satisfy the listing requirements of NYSE;
+Added: • failure to comply with the requirements of the Sarbanes-Oxley Act of 2002;
+Added: • actions by institutional stockholders;
+Added: • changes in accounting principles;
+Added: • general market conditions, including factors unrelated to our performance.
+Added: In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock.
+Added: This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on our cash flows, our ability to execute our business strategy and our ability to make distributions to our stockholders.
+Added: Because we have a large number of stockholders and shares of our common stock have not been listed on a national securities exchange until recently, there may be significant pent-up demand to sell shares of our common stock (including our Class T common stock and Class I common stock).
+Added: Significant sales of shares of our common stock, or the perception that significant sales of such shares could occur, may cause the price of shares of our common stock to decline significantly.
+Added: As of March 15, 2024, we had (i) an aggregate of 131,597,967 shares of our common stock, Class T common stock and Class I common stock issued and outstanding, (ii) 972,222 shares of unvested restricted common stock issued and outstanding, (iii) 145,993 shares of unvested restricted Class T common stock issued and outstanding, (iv) 156,604 shares of Class T common stock underlying unvested time-based restricted stock units, or RSUs, (v) 141,503 shares of Class T common stock underlying unvested performance-based RSUs (such number of shares assumes that we issue shares of our common stock underlying such unvested performance-based awards at maximum levels for performance and market conditions that have not yet been achieved;
+Added: to the extent that performance or market conditions do not meet maximum levels, the actual number of shares of our common stock issued under our incentive plan would be less than the amount reflected above) and (vi) 3,501,976 shares of our common stock that may be issued for redeeming OP units.
+Added: In addition, we have the right to issue an additional 2,434,654 shares of our common stock under our incentive plan.
+Added: Prior to our recent offering, our common stock, Class T common stock and Class I common stock were not listed on any national securities exchange, and the ability of a stockholder to sell his, her or its shares was limited.
+Added: Although shares of our Class T common stock and Class I common stock were not listed on a national securities exchange at the same time as our common stock, these shares are not subject to transfer restrictions (other than the restrictions on ownership and transfer of stock set forth in our charter);
+Added: therefore, such stock will be freely tradable, to extent that a market exists for such stock.
+Added: As a result, it is possible that a market may develop for shares of our Class T common stock and Class I common stock, and sales of such shares, or the perception that such sales could occur, could have a material adverse effect on the per share trading price of shares of our common stock.
+Added: Our Class T common stock and Class I common stock will automatically convert into our listed common stock on August 5, 2024.
+Added: As a result, there may be significant pent-up demand to sell shares of our common stock.
+Added: Holders of shares of our Class T common stock and Class I common stock seeking to immediately sell his, her or its shares of our common stock could engage in immediate short sales of shares of our common stock prior to the date on which the shares of our Class T common stock and Class I common stock convert into shares of our common stock and use the shares of our common stock that they receive upon conversion of their Class T common stock and Class I common stock to cover these short sales in the future.
+Added: Additionally, if we exercise our option to purchase the remaining 24.0% minority membership interest held by our joint venture partner in Trilogy REIT Holdings, we may consummate the purchase transaction entirely in cash or in a combination of cash and newly issued shares of our Convertible Preferred Stock.
+Added: If we issue shares of our Convertible Preferred Stock as part of the purchase price consideration, a holder thereof, on or after July 1, 2026, may elect to convert those shares of our Convertible Preferred Stock into shares of our common stock.
+Added: This conversion right may result in our issuing a substantial number of new shares of our common stock.
+Added: We may also issue shares of our common stock or other equity or hybrid equity securities to fund our cash needs for any exercise of our option to purchase the remaining 24.0% minority membership interest held by our joint venture partner in Trilogy REIT Holdings.
+Added: Our issuance of common stock upon a holder’s conversion of shares of our Convertible Preferred Stock, or our issuance of our Convertible Preferred Stock itself and/or the issuance of common stock or other equity or hybrid equity securities to fund the cash needs for any exercise of the option, or the mere perception that we may issue such securities, may adversely affect the market price of our common stock.
+Added: A large volume of sales of shares of our common stock could decrease the market price of shares of our common stock significantly and could impair our ability to raise additional capital through the sale of equity or hybrid securities in the future.
+Added: Even if a substantial number of sales of shares of our common stock are not effected, the mere perception of the possibility of these sales could decrease the market price of shares of our common stock significantly and have a negative effect on our ability to raise capital in the future.
+Added: Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect our stockholders.
+Added: We may in the future attempt to increase our capital resources by offering debt or equity securities, including notes and classes of preferred or common stock.
+Added: Debt securities or shares of preferred stock will generally be entitled to receive interest payments or distributions, both current and in connection with any liquidation or sale, prior to the holders of our common stock.
+Added: We are not required to offer any such additional debt or preferred stock to existing common stockholders on a preemptive basis.
+Added: Therefore, issuances of common stock or other equity securities will generally dilute the holdings of our existing stockholders.
+Added: Because we may generally issue any such debt or preferred stock in the future without obtaining the approval of our stockholders, our stockholders will bear the risk of our future issuances reducing the market price of our common stock and diluting their proportionate ownership.
+Added: Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the form, amount, timing or nature of our future issuances.
+Added: If we exercise our option to purchase the remaining 24.0% minority membership interest held by our joint venture partner in Trilogy REIT Holdings, we may consummate the purchase transaction entirely in cash or in a combination of at least the Minimum Cash Consideration and newly issued shares of our Convertible Preferred Stock.
+Added: If we elect to pay for the purchase entirely in cash, the all cash purchase price would be $240,500,000 if we consummate the purchase on or before March 31, 2024, would increase to $247,000,000 if we consummate the purchase from April 1, 2024 to and including December 31, 2024 and would further increase to $260,000,000 if we consummate the purchase on or after January 1, 2025.
+Added: If, for example, we elect to pay for the purchase using only the Minimum Cash Consideration, we would pay for the remaining portion of the purchase price consideration by issuing NorthStar 9,360,000 shares of our Convertible Preferred Stock.
+Added: We may finance all or any portion of the cash purchase price associated with any exercise of this purchase option with new debt, and, in such case, principal and interest payments on such debt would be senior to the rights of holders of our common stock.
+Added: Similarly, if we elect to issue shares of our new Convertible Preferred Stock in connection with our exercise of this purchase option, holders of such shares will be entitled to receive dividends as well as liquidation payments prior to holders of our common stock.
+Added: Specifically, unless we are current on all accumulated dividends owed on shares of our Convertible Preferred Stock for past quarterly dividend periods, we may not pay any dividends on, or repurchase, any shares of our common stock or other junior securities, subject in each case only to limited exceptions.
+Added: Additionally, we may be required to issue a significant number of shares of our common stock in connection with any future conversion of such Convertible Preferred Stock, and we may issue common stock or other equity or hybrid equity securities to fund all or a portion of the cash purchase price for our option exercise.
+Added: In both cases, this would result in dilution of our stockholders’ equity investment in us.
+Added: In addition, subject to any limitations set forth under Maryland law, our board may amend our charter to increase or decrease the number of authorized shares of stock, the number of shares of any class or series of stock designated or reclassify any unissued shares into other classes or series of stock without the necessity of obtaining stockholder approval.
+Added: All such shares may be issued in the sole discretion of our board.
+Added: In addition, we have granted, and expect to grant in the future, equity awards under our incentive plan to our independent directors and certain of our employees, including our executive officers, which to date have consisted of our restricted stock and RSUs, which are exchangeable into shares of our common stock subject to satisfaction of certain conditions.
+Added: Finally, we have OP units outstanding which are redeemable for cash or, at our election, exchangeable into shares of our common stock.
+Added: Therefore, existing stockholders will experience dilution of their equity investment in us as we (i) sell additional shares of our common stock in the future, (ii) sell securities that are convertible into or exchangeable for shares of our common stock, including OP units, (iii) issue restricted shares of our common stock, RSUs or other equity-based securities under our incentive plan or (iv) issue shares of our common stock in a merger or to sellers of properties acquired by us in connection with an exchange of OP units.
+Added: Because the OP units may, at our election, be exchanged for shares of our common stock, any merger, exchange or conversion between the operating partnership and another entity ultimately could result in the issuance of a substantial number of shares of our common stock, thereby diluting the percentage ownership interest of other stockholders.
+Added: Because of these and other reasons, our stockholders may experience substantial dilution in their equity investment in us.
+Added: We may be unable to raise additional capital on favorable terms, or at all, needed to grow our business.
+Added: We may not be able to increase our capital resources by engaging in additional debt or equity financings.
+Added: Even if we complete such financings, they may not be on favorable terms.
+Added: These circumstances could materially and adversely affect our financial results and impair our ability to achieve our business objectives.
+Added: Additionally, we may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions (including terms that require us to maintain specified liquidity or other ratios) that would otherwise be in the best interests of our stockholders.
+Added: If we pay distributions from sources other than our cash flows from operations, we may not be able to sustain our distribution rate, we may have fewer funds available for investment in real estate and other assets and our stockholders’ overall returns may be reduced.
+Added: Our organizational documents permit us to pay distributions from any source without limit (other than those limits set forth under Maryland law).
+Added: To the extent we fund distributions from borrowings, we will have fewer funds available for investment in real estate and other real estate-related assets, and our stockholders’ overall returns may be reduced.
+Added: At times, we may need to borrow funds to pay distributions, which could increase the costs to operate our business.
+Added: Furthermore, if we cannot cover our distributions with cash flows from operations, we may be unable to sustain our distribution rate.
+Added: Our distributions to stockholders may change, which could adversely affect the market price of shares of our common stock.
+Added: All distributions will be at the sole discretion of our board and will depend on our actual and projected financial condition, results of operations, cash flows, liquidity, maintenance of our REIT qualification and such other matters as our board may deem relevant from time to time.
+Added: We intend to evaluate distributions throughout 2024, and it is possible that stockholders may not receive distributions equivalent to those previously paid by us for various reasons, including:
+Added: (i) we may not have enough cash to pay such distributions due to changes in our cash requirements, indebtedness, capital spending plans, operating cash flows or financial position;
+Added: (ii) decisions on whether, when and in what amounts to make any future distributions will remain at all times entirely at the discretion of the board, which reserves the right to change our distribution practices at any time and for any reason;
+Added: (iii) our board may elect to retain cash for investment purposes, working capital reserves or other purposes, or to maintain or improve our credit ratings;
+Added: and (iv) the amount of distributions that our Subsidiaries may distribute to us may be subject to restrictions imposed by state law, state regulators and/or the terms of any current or future indebtedness that these subsidiaries may incur.
+Added: Stockholders have no contractual or other legal right to distributions that have not been authorized by our board and declared by us.
+Added: We may not be able to make distributions in the future or may need to fund such distributions from external sources, as to which no assurances can be given.
+Added: In addition, as noted above, we may choose to retain operating cash flow, and those retained funds, although increasing the value of our underlying assets, may not correspondingly increase the market price of shares of our common stock.
+Added: Our failure to meet the market's expectations with regard to future cash distributions likely would adversely affect the market price of shares of our common stock.
+Added: If we fail to maintain an effective system of internal control over financial reporting and disclosure controls, we may not be able to accurately and timely report our financial results.
+Added: Effective internal control over financial reporting and disclosure controls are necessary for us to provide reliable financial reports, effectively prevent fraud and operate successfully as a public company.
+Added: If we cannot provide reliable financial reports or prevent fraud, it could have a material adverse effect on us.
+Added: We are currently required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our
+Added: internal control over financial reporting, and we will be required to have our independent registered public accounting firm attest to the same, as required by Section 404 of the Sarbanes-Oxley Act of 2002.
+Added: To date, the audit of our consolidated financial statements by our independent registered public accounting firm has included a consideration of internal control over financial reporting as a basis of designing their audit procedures, but not for the purpose of expressing an opinion (as will be required pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002) on the effectiveness of our internal control over financial reporting.
+Added: If a material weakness or significant deficiency was to be identified in the effectiveness of our internal control over financial reporting, we may also identify deficiencies in some of our disclosure controls and procedures that we believe require remediation.
+Added: If we or our independent registered public accounting firm discover control issues, we will make efforts to improve our internal control over financial reporting and disclosure controls.
+Added: However, there is no assurance that we will be successful.
+Added: Any failure to maintain effective controls or timely effect any necessary improvement of our internal control over financial reporting and disclosure controls could harm operating results or cause us to fail to meet our reporting obligations, which could affect the listing of our common stock on NYSE.
+Added: Ineffective internal control over financial reporting and disclosure controls could also cause investors to lose confidence in our reported financial information.
+Added: Any of these matters could cause a significant decline in the market price of our common stock.
+Added: Prior to our recent NYSE listing, we had no operating history as a publicly traded company and may not be able to successfully operate as a publicly traded company.
+Added: Prior to our recent listing on the NYSE, we had no operating history as a publicly traded company.
+Added: We cannot assure our stockholders that the past experience of our senior management team will be sufficient for us to successfully operate as a publicly traded company.
+Added: Upon completion of our recent listing on the NYSE, we were required to comply with the NYSE listing standards, and this transition could place a significant strain on our management systems, infrastructure and other resources.
+Added: Failure to operate successfully as a publicly traded company would have an adverse effect on our financial condition, results of operations, cash flow, and per share trading price of our common stock.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.