Item 1A. Risk Factors
Item 1A. Risk Factors.
Our business is subject to risks and uncertainties , a number of which are described under the caption “Risk Factors” in our Annual Report. The risks described in our Annual Report and below may not be the only risks we face but are risks we believe may be material at this time. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results. If any of the events or circumstances described in the risk factors contained in our Annual Report or included below occurs, our business, financial condition, liquidity, results of operations or ability to pay distributions to our shareholders could be adversely impacted and the value of an investment in our securities could decline. Investors and prospective investors should consider the risks described in our Annual Report and below and the information contained under the caption “Warning Concerning Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q before deciding whether to invest in our securities.
Risks Relating to Going Concern
We have concluded that there is substantial doubt about our ability to continue as a going concern.
The senior living industry has been adversely affected by the slow recovery from the COVID-19 pandemic as well as current economic and market conditions. These conditions continue to have a significant negative impact on our results of operations, financial condition and cash flows. Our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit agreement and our public debt covenants as of September 30, 2023. We cannot be certain how long this ratio will remain below 1.5x, and we are unable to refinance existing or maturing debt or issue new debt until this ratio is at or above 1.5x on a pro forma basis. As of September 30, 2023, we had $278.1 million of cash and cash equivalents, $450.0 million in outstanding borrowings under our credit facility which matures on January 15, 2024 and $250.0 million of senior notes that mature on May 1, 2024. Our credit facility is secured by 62 properties which had an appraised value of approximately $1.1 billion based on appraisals completed in 2023.
As discussed in Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, based on these challenges and upcoming debt maturities, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of the financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Our continuation as a going concern is dependent upon many factors, including our ability to meet our debt covenants and repay our debts and other obligations when due. While we believe raising permissible new capital, including proceeds from our planned asset sales, and the possible extension of our credit facility, will alleviate the substantial doubt about our ability to continue as a going concern, we cannot provide assurance that any new capital raised, including proceeds from our planned asset sales, will be available to us or sufficient to repay our upcoming maturing debt, or that our lenders will agree to an extension of the maturity date of our credit facility. We cannot be sure that we will be able to obtain any future debt financing, and any such debt financing we may obtain may not be sufficient to repay our upcoming maturing debt. If we are unable to obtain sufficient funds, we may be unable to continue as a going concern.