Item 1A. Risk Factors
Item 1A. RISK FACTORS
The additional risk factors below should be read in conjunction with the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Changes in federal, state, or local laws limiting REIT investments in the health care sector may adversely impact our ability to participate in the ownership of and investment in health care real estate.
Legislation potentially impacting REIT ownership and investment in the health care sector has recently been introduced or is under discussion at the federal and state level. These legislative proposals range from additional oversight to prohibitions on investors acquiring or increasing ownership, or operational or financial control, in a nursing home. Such legislation or similar laws or regulations, if enacted, may limit our opportunities to participate in the ownership of, or investment in, health care real estate. Changes in federal, state, or local laws or regulations limiting REIT investment in the health care sector, reducing health care related benefits for REITs, or requiring additional approvals for health care entities to do business with REITs, could have a material adverse effect on our financial condition and operations.
We are responsible for, and our financial performance will be impacted by, additional operational and legal risks and liabilities under our new SHOP segment.
During the second quarter of 2025, we began utilizing a structure, as authorized by the REIT Investment Diversification and Empowerment Act of 2007, commonly referred to as “RIDEA”. Under RIDEA, a REIT may lease a qualified healthcare property on an arm's-length basis to a taxable REIT subsidiary ("TRS") if the property is operated on behalf of such TRS by a person/entity who qualifies as an “eligible independent operator.” Under this structure, the eligible operator receives a management fee from our TRS for operating the property as an independent third party.
Properties in our new RIDEA structure are included in our seniors housing operating portfolio (“SHOP”) segment. During the second quarter of 2025, we terminated the Anthem Memory Care, LLC and New Perspective Senior Living, LLC triple-net master leases and converted 12 memory care and one independent and assisted living communities covered under the master leases to our new SHOP segment.
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Additionally, during the third quarter of 2025, we acquired eight seniors housing communities within our SHOP segment. We may in the future acquire or transition other properties to a third-party manager using the RIDEA structure in our SHOP segment. There can be no assurance these transitions will improve performance of the properties, and they will also increase our exposure to risks associated with operating in this structure.
As the owner of a property under a RIDEA structure, we are responsible for, and our financial performance is impacted by, operational and legal risks and liabilities of the property. Although we have some general oversight approval rights and the right to review operational and financial reporting information with respect to a typical RIDEA structure, our independent third-party operators ultimately control of the day-to-day business of the property. We rely on the personnel, expertise, technical resources and information systems, proprietary information, good faith, and judgment of our independent third party operators to set appropriate resident fees, provide accurate property-level financial results for our properties in a timely manner and to otherwise operate properties in our SHOP segment in compliance with the terms of our management agreements and all applicable laws and regulations. The income we generate from RIDEA structures in our SHOP segment is subject to a number of operational risks including fluctuations in occupancy levels and resident fee levels, increases in the cost of food, materials, energy, labor or other services, national and regional economic conditions, the imposition of new or increased taxes and regulation, capital expenditure requirements, professional and general liability claims, and the availability and cost of professional and general liability insurance.
Except as described in this Item 1A, there have been no other known material changes from the risk factors since December 31, 2024 .
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Ite m 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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