What changed in this filing

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Item 1A. Risk Factors

2024-02-21 compared with 2023-02-22 · 93 added, 117 removed, 313 unchanged (40% of the section changed)

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If any of these risks actually occurs, our business, financial condition, results of operations, cash flow, liquidity, stock price, and future prospects could be materially and adversely affected.

COVID-19 Pandemic

The COVID-19 pandemic has adversely impacted, and likely will continue to adversely impact, our business, results of operations, cash flow, liquidity, and stock price, and such impacts may be material.

The pandemic, including the response efforts of federal, state, and local government authorities, businesses, individuals, and us, has adversely impacted our business, results of operations, cash flow, and liquidity.

We expect this adverse impact to continue into 2023.

We cannot predict with reasonable certainty the impacts that COVID-19 ultimately will have on our business, results of operations, cash flow, liquidity, and stock price, and such impacts may be material and persist for some time.

Further, our response efforts may delay or negatively impact our strategic initiatives, including plans for future growth.

Due to the average age and prevalence of chronic medical conditions among our residents, they generally are at disproportionately higher risk of becoming severely ill from COVID-19.

Upon confirmation of positive COVID-19 exposure at a community, we take actions intended to minimize further exposure, including enhanced personal protection protocols, temporarily isolating residents or finding placement in an alternate care setting to best address their care needs, and in some cases, restricting new resident admissions as directed by authorities having jurisdiction.

We may also restrict visitors at our communities, screen associates and permitted visitors, suspend group outings or programming, and modify communal dining as necessary to comply with regulatory requirements or at the direction of authorities having jurisdiction.

We may revert to more restrictive measures at our communities, including restrictions on visitors and move-ins as a result of infections at a community, as necessary to comply with regulatory requirements, or at the direction of authorities having jurisdiction.

We believe potential residents and their families have been more cautious, or temporarily delayed their decision, regarding moving into senior living communities during the pandemic, and such caution may persist for some time.

From March 2020 through February 2021, we lost 1,330 basis points of weighted average consolidated senior housing occupancy.

We continue to execute on key initiatives to rebuild occupancy lost due to the pandemic.

By December 31, 2022, we had recovered 760 basis points of weighted average consolidated senior housing occupancy.

We cannot predict with reasonable certainty when our occupancy will return to pre-COVID-19 pandemic levels or the extent to which the pandemic’s effect on occupancy may adversely affect the amount of resident fees we are able to collect from our residents.

Our efforts to adapt our sales and marketing efforts to meet demand may not be successful.

In addition, expanded use of telemedicine and home healthcare by seniors, for which regulatory barriers have been relaxed during the pandemic, may result in less demand for our services.

In the aggregate, for the three years ended December 31, 2022, we estimate the pandemic resulted in $1.0 billion of lost resident fee revenue in our consolidated senior housing portfolio and former Health Care Services segment compared to our pre-pandemic expectations, including an estimated $0.4 billion of lost resident fee revenue for the year ended December 31, 2022.

In the aggregate, for the three years ended December 31, 2022, we have incurred $190.6 million of facility operating expense for incremental direct costs to respond to the pandemic, including $17.4 million for the year ended December 31, 2022.

The direct costs include those for:

acquisition of additional personal protective equipment, medical equipment, and cleaning and disposable food service supplies;

enhanced cleaning and environmental sanitation;

increased employee-related costs, including labor, workers' compensation, and health plan expense;

and COVID-19 testing of residents and associates where not otherwise covered by government payor or third-party insurance sources.

We are not able to reasonably predict the total amount of costs we will incur related to the pandemic, and such costs may continue to be substantial.

We have taken, and may take in future periods, significant impairment charges related to COVID-19 due to lower than expected operating performance at communities.

We continue to seek opportunities to preserve and enhance our liquidity, including through increasing our RevPAR, maintaining expense discipline, continuing to evaluate our financing structure and the state of debt markets, monetizing non-strategic or underperforming owned assets, and seeking further government-sponsored financial relief related to the COVID-19 pandemic.

There is no assurance that debt financing will continue to be available on terms consistent with our expectations or at

all, or that our efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief.

The pandemic has also caused substantial volatility in the market prices and trading volumes in the equity markets, including our stock.

Our stock price and trading volume may continue to be subject to wide fluctuations as a result of the pandemic and may decline in the future.

The ultimate impacts of COVID-19 on our business, results of operations, cash flow, liquidity, and stock price will depend on many factors, some of which cannot be foreseen, including the duration, severity, and breadth of the pandemic and any resurgence or variants of the disease;

the impact of COVID-19 on the nation’s economy and debt and equity markets and the local economies in our markets;

the development, availability, utilization, and efficacy of COVID-19 testing, therapeutic agents, and vaccines and the prioritization of such resources among businesses and demographic groups;

government financial and regulatory relief efforts that may become available to business and individuals, including our ability to qualify for and satisfy the terms and conditions of financial relief;

restrictions on visitors and move-ins at our communities as a result of infections at a community or as necessary to comply with regulatory requirements or at the direction of authorities having jurisdiction;

perceptions regarding the safety of senior living communities during and after the pandemic;

changes in demand for senior living communities and our ability to adapt our sales and marketing efforts to meet that demand;

the impact of COVID-19 on our residents’ and their families’ ability to afford our resident fees, including due to changes in unemployment rates, consumer confidence, housing markets, and equity markets caused by COVID-19;

changes in the acuity levels of our new residents;

the disproportionate impact of COVID-19 on seniors generally and those residing in our communities;

the duration and costs of our response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, health plan, and other expenses;

greater use of contract labor and other premium labor due to COVID-19 and general labor market conditions;

the impact of COVID-19 on our ability to complete financings and refinancings of various assets or other transactions or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in our debt and lease documents;

increased regulatory requirements, including the costs of unfunded, mandatory testing of residents and associates and provision of test kits to our health plan participants;

increased enforcement actions resulting from COVID-19;

government action that may limit our collection or discharge efforts for delinquent accounts;

and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or our response efforts.

The ordering of the risk factors below is not intended to reflect an indication of priority or likelihood.

Business, Operations, and Strategy

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Costs to seniors associated with independent living, assisted living, and memory care communities are not generally reimbursable under government reimbursement programs such as Medicare and Medicaid.

For the year ended December 31, 2022, we generated 93.5% of our consolidated resident fee revenue from private pay customers.

For the year ended December 31, 2023, we generated 93.7% of our consolidated resident fee revenue from private pay residents.

Only seniors with income or assets meeting or exceeding the comparable median in the regions where our communities are located typically can afford to pay our monthly resident fees.

Economic downturns, increased inflation, softness in the housing market, higher levels of unemployment among resident family members, lower levels of consumer confidence, stock market volatility, and changes in demographics could adversely affect the ability of seniors to afford our resident fees.

If we are unable to retain and attract seniors with sufficient income, assets, or other resources required to pay the fees associated with independent and assisted living services and other service offerings, our occupancy, revenues, results of operations, and cash flow could decline.

If we are unable to retain and attract seniors with sufficient income, assets, or other resources required to pay the fees associated with independent living, assisted living, and memory care services and other service offerings, our occupancy, revenues, results of operations, and cash flow could decline.

We have recently made the annual rate adjustment effective January 1, 2024 for our in-place private pay residents.

The increase was higher than our typical annual rate adjustment in order to help offset our recent increased costs as a result of labor pressures, high inflation, and increased interest rates.

Due to the competitive environment for new residents in our recovering industry, the higher rate adjustment could slow our occupancy recovery progress or result in a decrease in occupancy in our communities.

The average increase was lower than the prior year increase and was again higher than our typical annual rate adjustment in order to help offset our increased costs as a result of labor pressures, high inflation, and increased interest rates.

Due to the competitive environment for new residents in our industry, the adjustment could slow our occupancy recovery progress or result in a decrease in occupancy in our communities.

Any use of promotional or other discounting would offset a portion of such rate adjustments in our RevPAR and RevPOR results.

In addition, the rate adjustment may not be sufficient to offset our increased costs.

The higher rate increase we implemented in January 2023 (and any rate increases that we implement in future years) could also result in a higher amount of attrition among our residents, which could negatively impact our occupancy, revenues, results of operations and cash flows.

The increase we implemented in January 2024 (and any rate increases that we implement in future years) could also result in a higher amount of attrition among our residents, which could negatively impact our occupancy, revenues, results of operations and cash flows.

Changes in the reimbursement rates, methods, or timing of payment from government reimbursement programs could adversely affect our revenues, results of operations, and cash flow.

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In general, regulatory and other barriers to competitive entry in the independent living, assisted living, and memory care sectors of the senior living industry are not substantial.

The industry has attracted additional investment resulting in increased construction and development of new senior housing supply over the last several years.

In addition, the COVID-19 pandemic has resulted in additional occupancy pressure for our industry, and industry data shows that nearly all markets had fallen to record low occupancy by the first quarter of 2021.

While the industry recovers occupancy, certain competitors may price aggressively in order to capture market share.

The industry has attracted additional investment resulting in increased construction and development of new senior housing supply in the last decade, prior to the start of the COVID-19 pandemic.

In addition, the COVID-19 pandemic resulted in additional occupancy pressure for our industry, and industry data shows that nearly all markets had fallen to record low occupancy by the first quarter of 2021.

the industry recovers occupancy, certain competitors may price aggressively in order to capture market share.

In addition, advances in technology and at-home services may permit more seniors to age-in-place at home and could have an impact on the demand for senior living communities.

Consequently, we may encounter competition that could limit our ability to attract and retain residents and associates, raise or maintain resident fees, and expand our business, which could have a material adverse effect on our occupancy, revenues, results of operations, and cash flow.

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Our independent living resident agreements generally provide for termination of the lease upon death or allow a resident to terminate his or her lease upon the need for a higher level of care not provided at the community.

If multiple residents terminate their resident agreements at or around the same time, including as a result of the COVID-19 pandemic, our occupancy, revenues, results of operations, and cash flow could be adversely affected.

In addition, because of the demographics of our typical residents, including age and

health, resident turnover rates in our communities are difficult to predict.

If multiple residents terminate their resident agreements at or around the same time, our occupancy, revenues, results of operations, and cash flow could be adversely affected.

In addition, because of the demographics of our typical residents, including age and health, resident turnover rates in our communities are difficult to predict.

As a result, the living spaces we lease may be unoccupied for a period of time, which could adversely affect our occupancy, revenues, results of operations, and cash flow.

Failure to maintain the security and functionality of our information systems and data, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA, could adversely affect our business, reputation, and relationships with our residents, employees, and referral sources and subject us to remediation costs, government inquiries, and liabilities, any of which could materially and adversely impact our revenues, results of operations, cash flow, and liquidity.

We are dependent on the proper function and availability of our information systems, including hardware, software, applications, and electronic data storage, to store, process, and transmit our business information, including proprietary business information and personally identifiable information of our residents and employees.

Failure to maintain the security and functionality of our information systems and data, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA, could adversely affect our business, reputation, and relationships with our residents, associates, and referral sources and subject us to remediation costs, government inquiries, and liabilities, any of which could materially and adversely impact our revenues, results of operations, and cash flow.

Though we have taken steps to protect the cybersecurity and physical security of our information systems and have implemented policies and procedures to comply with HIPAA and other privacy laws, rules, and regulations, there can be no assurance that our security measures and disaster recovery plan will prevent damage to, or interruption or breach of, our information systems or other unauthorized access to proprietary or private information.

Because the techniques used to obtain unauthorized access to systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures.

Because the techniques used to obtain unauthorized access to systems change frequently and may be difficult to detect for long periods of time, including from emerging technologies, such as advanced forms of artificial intelligence and quantum computing, we may be unable to anticipate these techniques or implement adequate preventive measures.

Components of our information systems that we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise the security or functionality of our information systems.

Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud or other forms of deceiving our employees or contractors such as email phishing attacks.

Unauthorized parties

may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud or other forms of deceiving our associates or contractors such as email phishing attacks.

As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our cybersecurity or to investigate and remediate any cybersecurity vulnerabilities, attacks, or incidents.

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Failure to maintain the security and functionality of our information systems, to prevent a cybersecurity attack or other unauthorized access to our information systems, or to comply with applicable privacy and consumer protection laws, including HIPAA, could expose us to a number of adverse consequences, many of which are not insurable, including:

(i) interruptions to our business, (ii) the theft, destruction, loss, misappropriation, or release of sensitive information, including proprietary business information and personally identifiable information of our residents and employees, (iii) significant remediation costs;

(iv) negative publicity which could damage our reputation and our relationships with our residents, employees, and referral sources, (v) litigation and potential liability under privacy, security, and consumer protection laws, including HIPAA, or other applicable laws, rules, or regulations, and (vi) government inquiries which may result in sanctions and other criminal or civil fines or penalties.

Any of the foregoing could materially and adversely impact our revenues, results of operations, cash flow, and liquidity.

(iv) negative publicity which could damage our reputation and our relationships with our residents, associates, and referral sources, (v) litigation and potential liability under privacy, security, and consumer protection laws, including HIPAA, or other applicable laws, rules, or regulations, and (vi) government inquiries which may result in sanctions and other criminal or civil fines or penalties.

Any of the foregoing could materially and adversely impact our revenues, results of operations, and cash flow.

Failure to complete our capital expenditures in accordance with our plans may adversely affect our anticipated revenues, results of operations, and cash flow.

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Our capital projects are in various stages of planning and development and are subject to a number of factors over which we may have little or no control.

These factors include work restrictions at our communities due to COVID-19, the necessity of arranging separate leases, mortgage loans, or other financings to provide the capital required to complete these projects;

These factors include the necessity of arranging separate leases, mortgage loans, or other financings to provide the capital required to complete these projects;

difficulties or delays in obtaining zoning, land use, building, occupancy, licensing, certificate of need, and other required governmental permits and approvals;

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adverse weather conditions that could delay completion of projects;

increased costs resulting from general economic conditions or increases in the cost of materials or labor

(including as a result of inflation and general labor market conditions);

increased costs resulting from general economic conditions or increases in the cost of materials or labor (including as a result of inflation and general labor market conditions);

and increased costs as a result of changes in laws and regulations.

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Partially as a result of tax law changes enacted through RIDEA, we now compete more directly with the various publicly-traded healthcare REITs for the acquisition of senior housing properties.

Pending disposition transactions are, and any future disposition transactions will be, subject to various closing conditions, including the receipt of regulatory approvals where applicable, likely will result in reductions to our revenue, and may negatively impact our results of operations and cash flow.

In the near term, we expect to close on the disposition of one owned community planned for sale.

Over the longer term, we may dispose of owned or leased communities through asset sales and lease terminations and expirations.

Any future disposition transactions will be, subject to various closing conditions, including the receipt of regulatory approvals where applicable, likely will result in reductions to our revenue, and may negatively impact our results of operations and cash flow.

We may dispose of owned or leased communities through asset sales and lease terminations and expirations.

The closings of any such transactions, or those that we identify in the future, generally are or will be subject to closing conditions, which may include the receipt of regulatory approvals, and we cannot provide assurance that any such transactions will close or, if they do, when the actual closings will occur.

The sales price for pending or future dispositions may not meet our expectations due to the underlying performance of such communities or conditions beyond our control, and we may be required to take impairment charges in connection with such sales if the carrying amounts of such assets exceed the proposed sales prices, which could adversely affect our financial condition and results of operations.

The sales price for future dispositions may not meet our expectations due to the underlying performance of such communities or conditions beyond our control, and we may be required to take impairment charges in connection with such sales if the carrying amounts of such assets exceed the proposed sales prices, which could adversely affect our financial condition and results of operations.

Further, we cannot provide assurance that we will be successful in identifying and pursuing disposition opportunities on terms that are acceptable to us, or at all.

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There can be no assurance that our strategy or initiatives undertaken to execute on our strategic priorities will be successful and, as a result, such initiatives may adversely affect our business, financial condition, results of operations, cash flow, and the price of our common stock.

The COVID-19 pandemic has adversely impacted, and while the recovery has continued in 2023, it could continue to adversely impact, our business, results of operations, cash flow, liquidity, and stock price, and such impacts may be material.

The pandemic adversely impacted our business, results of operations, cash flow, and liquidity.

We cannot predict with reasonable certainty the pace and consistency of the recovery from the COVID-19 pandemic for our business, results of operations, cash flow, liquidity, and stock price, and the residual impacts of the pandemic may be material and persist for some time.

Due to the average age and prevalence of chronic medical conditions among our residents, they generally are at disproportionately higher risk of becoming severely ill from COVID-19.

We believe potential residents and their families were more cautious, or temporarily delayed their decision, regarding moving into senior living communities during the pandemic, and while waning, such caution may persist for some time.

From March 2020 through February 2021, we lost 1,330 basis points of weighted average consolidated senior housing occupancy.

We continue to execute on key initiatives to rebuild occupancy lost due to the pandemic.

By December 31, 2023, we had recovered 890 basis points of weighted average consolidated senior housing occupancy.

We cannot predict with reasonable certainty when our occupancy will return to pre-COVID-19 pandemic

levels or the extent to which the pandemic’s effect on occupancy may adversely affect the amount of resident fees we are able to collect from our residents.

Our efforts to adapt our sales and marketing efforts to meet demand may not be successful.

In addition, expanded use of telemedicine and home healthcare by seniors, for which regulatory barriers were relaxed during the pandemic, may result in less demand for our services.

We continue to seek opportunities to preserve and enhance our liquidity, including through increasing our RevPAR, maintaining appropriate expense discipline, continuing to refinance maturing debt, continuing to evaluate our capital structure and the state of debt and equity markets, and monetizing non-strategic or underperforming owned assets.

The pandemic and uneven recovery has also caused substantial volatility in the market prices and trading volumes in the equity markets, including our stock.

Our stock price and trading volume may continue to be subject to wide fluctuations as a result of recovery from the pandemic and may decline in the future.

The ultimate recovery from the COVID-19 pandemic on our business, results of operations, cash flow, liquidity, and stock price will depend on many factors, some of which cannot be foreseen, including any resurgence or variants of the disease;

the impact of the COVID-19 pandemic on the nation’s economy and debt and equity markets and the local economies in our markets;

any return of restrictions on visitors and move-ins at our communities as a result of infections at a community or as necessary to comply with regulatory requirements or at the direction of authorities having jurisdiction;

perceptions regarding the safety of senior living communities after the pandemic;

changes in demand for senior living communities and our ability to adapt our sales and marketing efforts to meet that demand;

the impact of the COVID-19 pandemic on our residents’ and their families’ ability to afford our resident fees;

changes in the acuity levels of our new residents;

the disproportionate impact of the COVID-19 pandemic on seniors;

the costs of our response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, health plan, and other expenses;

greater use of contract labor and other premium labor due to the COVID-19 pandemic and general labor market conditions;

the impact of the COVID-19 pandemic on our ability to complete financings and refinancings of various assets or other transactions or to generate sufficient cash flow to cover required debt, interest, and lease payments and to satisfy financial and other covenants in our debt and lease documents;

and the frequency and magnitude of legal actions and liability claims that may arise due to the COVID-19 pandemic or our response efforts.

Our ability to use net operating loss carryovers to reduce future tax payments may be limited.

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The amount of mortgage financing available for our communities is generally dependent on their appraised values and performance.

Decreases in the appraised values of our communities, including due to adverse changes in real estate market conditions, or their performance, has resulted, and could continue to result, in available mortgage refinancing amounts that are less than the communities' maturing indebtedness.

less than the communities' maturing indebtedness.

In addition, our inability to satisfy underwriting criteria for individual communities may limit our access to our historical lending sources for such communities, including Fannie Mae and Freddie Mac.

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We cannot provide assurance that such non-agency mortgage financing will continue to be available as an alternative to Fannie Mae and Freddie Mac financing.

We have completed the refinancing of all of our debt maturities due in 2023, except for $29.7 million of mortgage debt secured by an asset planned for sale.

We have completed the refinancing of all of our debt maturities due in 2024.

Our inability to obtain refinancing proceeds sufficient to cover 2025 and later maturing indebtedness could adversely impact our liquidity, and may cause us to seek additional alternative sources of financing, which may be less attractive or unavailable.

There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.

In addition, the closing of the planned sale transaction is subject to the satisfaction of various closing conditions, including the receipt of regulatory approvals.

There can be no assurance that the transaction will close or, if it does, when the actual closing will occur.

Disruptions or prolonged downturns in the financial markets may cause us to seek alternative sources of potentially less attractive financing and may require us to further adjust our business plan accordingly.

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Disruptions in the financial markets could have an adverse effect on our business.

that we identify, or investments to support our strategy, which could adversely affect our revenues, results of operations, and cash flow.

If we are not able to obtain additional financing on favorable terms, we also may have to forgo, delay, or abandon some or all of our planned capital expenditures, any potential lease restructuring opportunities that we identify, or investments to support our strategy, which could adversely affect our revenues, results of operations, and cash flow.

If we are unable to generate sufficient cash flow to cover required interest, principal, and lease payments, this could result in defaults of the related debt or leases and cross-defaults under our other debt or lease documents, which would adversely affect our capital structure, financial condition, results of operations, and cash flow.

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Certain of our debt and lease documents contain restrictions and financial covenants, such as those requiring us to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and debt service and lease coverage ratios, and requiring us not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis.

Net worth is generally calculated as stockholders' equity, as calculated in accordance with generally accepted accounting principles in the United States ("GAAP"), and in certain circumstances, reduced by intangible assets or liabilities or increased by deferred gains from sale-leaseback transactions and deferred entrance fee revenue.

Net worth is generally calculated as stockholders' equity, as calculated in accordance with generally accepted accounting principles in the United States ("GAAP"), and in certain circumstances, reduced by intangible assets or liabilities and/or increased by accumulated depreciation and amortization, and/or further adjusted for certain other specified adjustments.

The debt service and lease coverage ratios are generally calculated as revenues less operating expenses, including an implied management fee and a reserve for capital expenditures, divided by the debt (principal and interest) or lease payment.

covenants include a requirement contained in certain of our long-term debt documents for us to maintain liquidity of at least $130.0 million at each quarter-end determination date and a requirement contained in certain of our lease documents for us to maintain stockholders' equity of at least $400.0 million at each quarter-end determination date.

As of December 31, 2022, our liquidity and our stockholders' equity were $452.6 million and $582.6 million, respectively.

These covenants include a requirement contained in certain of our long-term debt documents for us to maintain liquidity of at least $130.0 million at each quarter-end determination date.

As of December 31, 2023, our liquidity was $340.7 million.

In addition, our debt and lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

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In addition, an event of default related to an individual property or limited number of properties within a master lease portfolio could result in a default on the entire master lease portfolio.

Furthermore, our debt and leases are secured by our communities and, in certain cases, a guaranty by us and/or one or more of our subsidiaries.

Furthermore, our mortgage debt is secured by our communities and, in certain cases, our long-term debt and leases are secured by a guaranty by us and/or one or more of our subsidiaries.

Therefore, if an event of default has occurred under any of our debt or lease documents, subject to cure provisions in certain instances, the respective lender or lessor would have the right to declare all the related outstanding amounts of indebtedness or cash lease obligations immediately due and payable, to foreclose on our mortgaged communities, to terminate our leasehold interests, to foreclose on other collateral securing the indebtedness and leases, to discontinue our operation of leased communities, and/or to pursue other remedies available to such lender or lessor.

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Our leases generally provide for renewal or extension options and, in certain cases, purchase options.

We expect to renew, extend, or exercise purchase options with respect to certain leases in the normal course of business;

however, there can be no assurance that these rights will be exercised in the future or that we will be able to satisfy the conditions precedent to exercising any such rights.

The terms of any such purchase options that are based on fair market value are inherently uncertain and could

be unacceptable or unfavorable to us depending on the circumstances at the time of exercise.

If we are not able to renew or extend our existing leases, or purchase the communities subject to such leases, at or prior to the end of the existing lease terms, or if the terms of such options are unfavorable or unacceptable to us, our business, results of operations, and cash flow could be adversely affected.

We expect to renew, extend, or restructure leases or exercise purchase options with respect to certain leases where economically advantageous;

however, there can be no assurance that any renewal, extension, or purchase rights will be exercised in the future, that we will be able to satisfy the conditions precedent to exercising any such renewal, extension, or purchase rights, or that we will be able to successfully negotiate and complete any lease restructuring transactions.

The terms of any such purchase options that are based on fair market value are inherently uncertain and could be unacceptable or unfavorable to us depending on the circumstances at the time of exercise.

If we are not able to renew, extend, or restructure our existing leases, or purchase the communities subject to such leases, at or prior to the end of the existing lease terms, or if the terms of such options are unfavorable or unacceptable to us, our business, results of operations, and cash flow could be adversely affected.

Increases in market interest rates could significantly increase the costs of our debt obligations, which could adversely affect our results of operations and cash flow.

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In the normal course of business, we enter into interest rate agreements with major financial institutions to manage our risk above certain interest rates on variable rate debt.

These agreements only limit our exposure to increases in interest rates above certain levels and generally must be renewed every two to three years.

These agreements only limit our exposure to increases in interest rates above certain levels and generally must be renewed every one to three years.

Increases in prevailing interest rates will increase our payment obligations on our existing variable-rate obligations to the extent they are unhedged and may increase our future borrowing and hedging costs, which would negatively impact our results of operations and cash flow.

The interest rates for a majority of our variable-rate debt obligations are calculated based on LIBOR plus a spread, and our interest rate cap agreements generally are indexed to LIBOR.

The administrator of LIBOR intends to phase out the LIBOR tenors by June 30, 2023.

Substantially all of our variable-rate debt agreements indexed to LIBOR provide that the lender may choose an alternative index based on comparable information, and our interest rate cap agreements provide that the calculation agent may choose an alternative index.

It is unclear whether LIBOR will cease to exist or if new methods of calculating LIBOR will evolve by the applicable phase-out dates, or whether alternative and comparable index rates will be established and adopted by our lenders and other financial institutions.

While we believe the transition away from LIBOR will be substantially rate neutral, uncertainties or volatility regarding the calculation of interest rates on our variable-rate debt obligations while LIBOR is being phased out could adversely affect our results of operations and cash flow.

We may need additional capital to fund our operations, capital expenditure plans, and strategic priorities, and we may not be able to obtain it on terms acceptable to us, or at all.

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Our success depends on our ability to attract and retain qualified management and other associates who are responsible for the day-to-day operations of each of our communities.

We compete with various healthcare service providers, other senior living providers, and hospitality and food services companies in attracting and retaining qualified associates.

We compete with various healthcare service providers, other senior living

providers, and hospitality and food services companies in attracting and retaining qualified associates.

If we fail to attract and retain qualified associates, our ability to conduct our business operations effectively, our overall operating results, and cash flow could be harmed.

During 2021 and 2022, we experienced pressures associated with the intensely competitive labor environment, including increased associate turnover and difficulty in filling open positions timely.

Continued increased competition for, or a shortage of, nurses or other associates, including due to the COVID-19 pandemic, general labor market conditions, low levels of unemployment, or general inflationary pressures, have required and may require that we enhance our pay and benefits package to compete effectively for such associates.

In addition, we have experienced and may continue to

experience wage pressures due to minimum wage and minimum salary threshold increases mandated by state and local laws.

Due to the intensively competitive labor market, our use of more expensive premium labor, primarily contract labor and overtime, to cover existing open positions increased during 2021 and remained elevated in 2022.

In recent years, we experienced pressures associated with the intensely competitive labor environment, including increased associate turnover and difficulty in filling open positions timely.

Continued increased competition for, or a shortage of, nurses or other associates, general labor market conditions, low levels of unemployment, or general inflationary pressures, have required and may require that we enhance our pay and benefits package to compete effectively for such associates.

In addition, we have experienced and may continue to experience wage pressures due to minimum wage and minimum salary threshold increases mandated by state and local laws.

Third-party staffing agencies from which we source contract labor have increased the rates they charge which has resulted in, and may further result in, increases in the cost of contract labor.

If we are unable to fill open positions timely, our reliance on premium labor may continue or increase.

Increases in wages and our increased use of premium labor would result in higher operating costs, and we may not be able to offset the added costs by increasing the rates we charge to our residents or our service charges, which would negatively impact our results of operations and cash flow.

Increases in wages and any further increased use of premium labor would result in higher operating costs, and we may not be able to offset the added costs by increasing the rates we charge to our residents or our service charges, which would negatively impact our results of operations and cash flow.

In addition, efforts by labor unions to organize any of our community personnel could divert management attention, lead to increased costs, and/or reduce our flexibility with respect to certain workplace rules.

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Our communities’ engagement of waste management companies for the proper disposal of all infectious medical waste does not immunize us from alleged violations of such laws for operations for which we are responsible even if carried out by such waste management companies, nor does it immunize us from third-party claims for the cost to cleanup disposal sites at which such wastes have been disposed.

Federal regulations require building owners and those exercising control over a building's management to identify and warn their employees and certain other employers operating in the building of potential hazards posed by workplace exposure to installed asbestos-containing materials and potential asbestos-containing materials in their buildings.

installed asbestos-containing materials and potential asbestos-containing materials in their buildings.

Significant fines can be assessed for violation of these regulations.

Building owners and those exercising control over a building's management may be subject to an increased risk of personal injury lawsuits.

Federal, state, and local laws and regulations also govern the removal, encapsulation, disturbance, handling, and/or disposal of asbestos-containing materials and potential asbestos-containing materials when such materials are in poor condition or in the event of construction, remodeling, renovation, or demolition of a

Such laws may impose liability for improper handling or a release to the environment of asbestos-containing materials and potential asbestos-containing materials and may provide for fines to, and for third parties to seek recovery from, owners or operators of real properties for personal injury or improper work exposure associated with asbestos-containing materials and potential asbestos-containing materials.

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Many of these lawsuits involve large damage claims and significant legal costs.

The frequency and magnitude of such alleged claims and legal costs may increase due to the COVID-19 pandemic or our response efforts.

The frequency and magnitude of such alleged claims and legal costs may increase due to the COVID-19 pandemic or our response efforts and increased turnover and a higher use of contract labor.

Many states continue to consider tort reform and how it will apply to the senior living industry.

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Also, our insurance policies' deductibles, or self-insured retention, are accrued based on an actuarial projection of future liabilities.

If these projections are inaccurate and if there is an unexpectedly large number of successful claims that result in liabilities in excess of our accrued reserves, our operating results could be negatively affected.

Claims against us, regardless of their merit or eventual outcome, also could have a material adverse effect on our ability to attract residents or expand our business and could require our management to devote time to matters unrelated to the day-to-day operation of our business.

If these projections are inaccurate and if there is an unexpectedly large number of successful

claims that result in liabilities in excess of our accrued reserves, our operating results could be negatively affected.

Claims against us, regardless of their merit or eventual outcome, also could have a material adverse effect on our reputation and ability to attract residents or expand our business and could require our management to devote time to matters unrelated to the day-to-day operation of our business.

Negative publicity with respect to any lawsuits, claims, or other legal or regulatory proceedings may also negatively impact our reputation.

We also have to renew our policies every year and negotiate terms for coverage, exposing us to the volatility of the insurance markets, including the possibility of rate increases and changes in coverage and other terms.

can be no assurance that we will be able to obtain liability insurance in the future or, if available, that such coverage will be available on acceptable terms.

We face periodic and routine reviews, audits, and investigations by government agencies, and any adverse findings could negatively impact our business, financial condition, results of operations, and cash flow.

The senior living and healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in reviews, audits, investigations, enforcement actions, or litigation related to regulatory compliance matters.

There can be no assurance that we will be able to obtain liability insurance in the future or, if available, that such coverage will be available on acceptable terms.

We face periodic and routine inquiries, reviews, audits, and investigations by government agencies, and any adverse findings could negatively impact our business, financial condition, results of operations, and cash flow.

The senior living and healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in inquiries, reviews, audits, investigations, enforcement actions, or litigation related to regulatory compliance matters.

In addition, we are subject to various government reviews, audits, and investigations to verify our compliance with Medicare and Medicaid programs and other applicable laws and regulations.

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While we endeavor to comply with all laws that regulate the licensure and operation of our business, it is difficult to predict how our revenues could be affected if we were subject to an action alleging such violations.

In addition, new disclosure standards and rules related to environmental matters have been adopted and may continue to be introduced in various states and other jurisdictions.

In October 2023, California adopted new carbon and climate-related reporting requirements for large public and private companies doing business in the state.

Further, the SEC is expected to finalize a climate change disclosure proposal in 2024.

As the nature, scope and complexity of environmental and climate change reporting, diligence and disclosure requirements expand, significant effort and expenses could be required to comply with the evolving requirements.

As our disclosure obligations increase, third parties may make claims or bring litigation relating to those disclosures which may be costly.

Compliance with the Americans with Disabilities Act and Fair Housing Act, safety and health standards of the Occupational Safety and Health Administration, and other fire, safety, health, and other regulations may require us to make unanticipated expenditures, which could increase our costs and therefore adversely affect our results of operations and financial condition .

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We are subject to a wide variety of federal, state, and local employment-related laws and regulations which govern matters including, but not limited to, wage and hour requirements, equal employment opportunity obligations, leaves of absence and reasonable accommodations, employee benefits, the right of employees to engage in protected concerted activity (including union organizing), and occupational health and safety requirements.

Because labor represents such a large portion of our

operating expenses, changes in federal, state, and local employment-related laws and regulations could increase our cost of doing business.

Because labor represents such a large portion of our operating expenses, changes in federal, state, and local employment-related laws and regulations could increase our cost of doing business.

Furthermore, any failure to comply with these laws can result in significant protracted litigation, government investigation, penalties, or other damages which could have an adverse effect on our financial condition, results of operations, and cash flow.

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General economic conditions, such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits and insurance, interest rates, and tax rates, affect our facility operating, facility lease, general and administrative and other expenses, and we have no control or limited ability to control such factors.

Current global economic conditions and uncertainties, including due to the COVID-19 pandemic, the potential for failures or realignments of financial institutions, and the related impact on available credit may affect us and our business partners, landlords, counterparties, and residents or prospective residents in an adverse manner including, but not limited to, reducing access to liquid funds or credit, increasing the cost of credit, limiting our ability to manage interest rate risk, increasing the risk that certain of our business partners, landlords, or counterparties would be unable to fulfill their obligations to us, and other impacts which we are unable to fully anticipate.

Current global economic conditions and uncertainties, including geopolitical tensions, conflicts, potential recessions or economic downturns, uncertainty surrounding federal elections, the potential for failures or realignments of financial institutions, and the related impact on available credit may affect us and our business partners, landlords, counterparties, and residents or prospective residents in an adverse manner including, but not limited to, reducing access to liquid funds or credit, increasing the cost of credit, limiting our ability to manage interest rate risk, increasing costs and expenses to us, increasing the risk that certain of our business partners, landlords, or counterparties would be unable to fulfill their obligations to us, and other impacts which we are unable to fully anticipate.

In addition to the impact of the COVID-19 pandemic on our occupancy, seasonal contagious illnesses such as cold and flu, which typically more severely impact seniors than the general population may negatively affect our occupancy.

The continued COVID-19 pandemic, severe cold and flu season, or an outbreak of other contagious disease in the markets in which we operate could result in a regulatory ban on admissions, decreased occupancy, and otherwise adversely affect our business.

Severe cold and flu season, or an outbreak of COVID-19 or other contagious disease in the markets in which we operate could result in a regulatory ban on admissions, decreased occupancy, and otherwise adversely affect our business.

The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders.

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If the market price of our common stock declines significantly, stockholders may be unable to resell their shares at or above their purchase price.

The market price

of our common stock may fluctuate or decline significantly in the future.

The market price of our common stock may fluctuate or decline significantly in the future.

Some of the factors that could negatively affect our share price, result in fluctuations in the price, or trading volume of our common stock include:

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Shares of our preferred stock, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock.

Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings.

Because our decision to issue securities in any

future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings.

Thus, holders of our common stock bear the risk of our future offerings reducing the market price of our common stock and diluting their shareholdings in us.

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Any such stockholder activism may have an adverse effect on our business, results of operations, cash flow, and the market price of our common stock.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors