Item 1A. Risk Factors
Item 1A. Risk Factors.
There were no material changes from the risk factors previously disclosed in our 2023 Annual Report on Form 10-K, as filed with the SEC on March 22, 2024, other than as set forth below.
Our high concentrations of properties in particular geographic areas magnify the effects of negative conditions affecting those geographic areas.
We have a concentration of properties in particular geographic areas; therefore, any adverse situation that disproportionately effects one of those areas would have a magnified adverse effect on our portfolio. As of September 30, 2024, properties located in Indiana, Ohio and Kentucky accounted for approximately 28.7%, 12.5% and 12.3%, 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.
Compliance with new federal minimum staffing requirements may increase operating costs for our skilled nursing tenants and operators, and failure to comply with such requirements may result in financial or other regulatory penalties or reputational harm.
In April 2024, the Centers for Medicare & Medicaid Services of the U.S. Department of Health & Human Services finalized new nursing home staffing rules, including a total nurse staffing standard that requires facilities to provide a minimum number of hours per day of total direct nursing care to residents and a requirement to have a registered nurse onsite 24 hours a day, seven days a week, to provide skilled nursing care. These new requirements have a staggered implementation timeframe based on geographic location. As these new rules are implemented over time, the operating costs of our skilled nursing tenants within our triple-net leased properties segment, as well as our SNF operations within our SHOP and integrated senior health campuses segments, may increase, which will negatively impact the profitability of both our tenants’ businesses and our business. Our skilled nursing tenants and operators may also have difficulty in staffing and maintaining the required staffing at our facilities, and may not qualify for the specified hardship exemptions. If we or our tenants are unable to comply with the new rules, we may face monetary penalties or other regulatory enforcement action as well as reputational harm.
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