What changed in this filing

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Item 1A. Risk Factors

2024-03-15 compared with 2023-03-17 · 243 added, 388 removed, 748 unchanged (46% of the section changed)

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Summary Risk Factors

• Our operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market in general.

• Our property portfolio has a high concentration of properties located in Florida.

• Our operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market.

• Our property portfolio has a high concentration of properties located in Florida and Pennsylvania.

Our properties may be adversely affected by economic cycles and risks inherent to those states.

• Our Credit Facility restricts us from paying cash distributions on or repurchasing our common stock until we satisfy certain conditions and there can be no assurance we will be able to resume paying distributions on our common stock, and at what rate, or continue paying dividends on our 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (the “Series A Preferred Stock”) and our 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 par value per share (the “Series B Preferred Stock”).

• Our Credit Facility restricts our ability to use cash that would otherwise be available to us, and there can be no assurance our available liquidity will be sufficient to meet our capital needs.

• We are subject to risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the ongoing global COVID-19 pandemic, including negative impacts on our tenants and operators and their respective businesses.

• Inflation and continuing increases in the inflation rate will have an adverse effect on our investments and results of operations.

• No public market currently exists, or may ever exist, for shares of our common stock and our shares are, and may continue to be, illiquid.

• In owning properties we may experience, among other things, unforeseen costs associated with complying with laws and regulations and other costs, potential difficulties selling properties and potential damages or losses resulting from climate change.

• We focus on acquiring and owning a diversified portfolio of healthcare-related assets located in the United States and are subject to risks inherent in concentrating investments in the healthcare industry.

• The healthcare industry is heavily regulated, and we, our tenants, and operators may be impacted by new or existing laws or regulations, or changes to these laws or regulations, such as the CARES Act and the auditing and reporting requirements instituted by the CARES Act.

• Loss of licensure or failure to obtain licensure could result in the inability of tenants to make lease payments to us.

• We depend on tenants for our rental revenue and, accordingly, our rental revenue depends upon the success and economic viability of our tenants.

Lease terminations, tenant default and bankruptcy have adversely affected and could in the future adversely affect our income and cash flow.

• We have not paid our distributions on our common stock in cash since 2020, and there can be no assurance we will pay distributions on our common stock in cash in the future.

• Inflation will have an adverse effect on our investments and results of operations.

• Our real estate investments are concentrated in healthcare-related facilities, and we may be negatively impacted by adverse trends in the healthcare industry.

• 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.

• If a tenant or lease guarantor declares bankruptcy or becomes insolvent, we may be unable to collect balances due under relevant leases.

• We assume additional operating risks and are subject to additional regulation and liability because we depend on eligible independent contractors to manage some of our facilities.

• We have substantial indebtedness and may be unable to repay, refinance, restructure or extend our indebtedness as it becomes due.

Increases in interest rates could increase the amount of our debt payments.

We will likely incur additional indebtedness in the future.

• We depend on our Advisor and our Property Manager to provide us with executive officers, key personnel and all services required for us to conduct our operations and our operating performance may be impacted by an adverse changes in the financial health or reputation of our Advisor and our Property Manager.

• All of our executive officers face conflicts of interest, such as conflicts created by the terms of our agreements with the Advisor and compensation payable thereunder, conflicts allocating investment opportunities to us, and conflicts in allocating their time and attention to our matters.

Conflicts that arise may not be resolved in our favor and could result in actions that are adverse to us.

• We have long-term agreements with our Advisor and its affiliates that may be terminated only in limited circumstances and may require us to pay a termination fee in some cases.

• Estimated Per-Share NAV may not accurately reflect the value of our assets and may not represent what a stockholder may receive on a sale of the shares, what they may receive upon a liquidation of our assets and distribution of the net proceeds or what a third party may pay to acquire us.

• The stockholder rights plan adopted by our board of directors, our classified board and other aspects of our corporate structure and Maryland law may discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.

• Restrictions on share ownership contained in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities.

• We may fail to continue to qualify as a REIT.

• Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.

• We may be unable to renew leases or re-lease space as leases expire.

• Our level of indebtedness may increase our business risks.

• Our financing arrangements have restrictive covenants, which may limit our ability to pursue strategic alternatives and react to changes in our business and industry or pay dividends.

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• We depend on our Advisor and Property Manager to provide us with executive officers, key personnel and all services required for us to conduct our operations and our operating performance may be impacted by any adverse changes in the financial health or reputation of our Advisor and Property Manager.

• All of our executive officers, some of our directors and the key real estate and other professionals assembled by our Advisor and Property Manager face conflicts of interest related to their positions or interests in entities related to AR Global, which could hinder our ability to implement our business strategy.

• We may terminate our advisory agreement in only limited circumstances, which may require payment of a termination fee.

• The Estimated Per-Share NAV of our common stock is based upon subjective judgments, assumptions and opinions about future events, and may not reflect the amount that our stockholders might receive for their shares.

• Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.

• The share ownership restrictions for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities.

• Our failure to remain qualified as a REIT would subject us to U.S.

federal income tax and potentially state and local tax.

• Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities.

Risks Related to Our Properties and Operations

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Real estate markets are subject to economic downturns, as they have been in the past, and we cannot predict how economic conditions will impact this market in both the short and long-term.

Declines in the economy or a decline in the real estate market in these states could hurt our financial performance and the value of our properties.

Factors that may negatively affect economic conditions include:

Declines in the economy or a decline in the real estate markets in these states could hurt our financial performance and the value of our properties.

Historically, Florida has been at greater risk of acts of nature such as hurricanes and tropical storms, which may have worsened as a result of climate change, and has been subject to more pronounced real estate downturns than other regions.

Accordingly, our business, financial condition and results of operations may be particularly susceptible to downturns or changes in the local Florida economies where we operate.

Other factors that may negatively affect economic conditions include:

• business layoffs or downsizing;

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• changes in reimbursement for healthcare services from commercial insurers.

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We may be unable to enter into contracts for and complete property acquisitions on advantageous terms or our property acquisitions may not perform as we expect.

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• we may not successfully integrate, manage and lease the properties we acquire in a fashion that meets our expectations or market conditions may result in future vacancies and lower-than expected rental rates;

• we expect to finance future acquisitions primarily with additional borrowings under our Revolving Credit Facility, and there can be no assurance as to how much borrowing capacity will be available for this purpose

• we may be unable to assume existing debt financing or obtain property-level debt financing or raise equity required to fund acquisitions from other sources on favorable terms, or at all;

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There can be no assurance that our Advisor will be successful in doing so on financially attractive terms or that our objectives will be achieved.

If our Advisor is unable to timely locate suitable investments, we may be unable to meet our investment objectives.

We have not paid our distributions on our common stock in cash since 2020, and there can be no assurance we will pay distributions on our common stock in cash in the future.

All dividends or other distributions on our common stock are paid in the discretion of our board of directors.

If our Advisor is unable to timely locate suitable investments, or if the terms governing our investments are unfavorable, we may be unable to meet our investment objectives, which could adversely affect our business.

We have not paid any distributions on our common stock in cash since 2020, and there can be no assurance we will pay distributions on our common stock in cash in the future.

All dividends or other distributions on our common stock are paid in the discretion of our Board.

We have not paid cash distributions since 2020.

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There is no assurance we will continue to do so or when or if we will pay dividends or distributions in cash.

We last published an Estimated Per-Share NAV on April 1, 2022.

The estimate was as of December 31, 2021 and has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in early April 2023.

Dividends issued in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when stock dividends are issued;

however, because each common stockholder will receive the same number of new shares, the total value of a common stockholder’s investment, all things equal, will not change assuming no sales or other transfers.

As described herein, we will not be able to pay cash distributions on our common stock until we satisfy certain conditions set forth in our Revolving Credit Facility.

We last published an Estimated Per-Share NAV on March 31, 2023.

The estimate was as of December 31, 2022 and has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in late March 2024.

Dividends issued in the form of additional shares of common stock will, all things being equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when stock dividends are issued;

however, because each common stockholder will receive the same number of new shares per share of common stock held, the total value of a common stockholder’s investment, all things being equal, will not change assuming no sales or other transfers.

Our ability to make future cash distributions on our common stock will depend on our future cash flows and indebtedness and may further depend on our ability to obtain additional liquidity, which may not be available on favorable terms, or at all.

Further, if we do not pay dividends on our Series A Preferred Stock or Series B Preferred Stock, any accrued and unpaid dividends payable with respect to the Series A Preferred Stock or Series B Preferred Stock become part of the liquidation preference thereof, as applicable, and, whenever dividends on the Series A Preferred Stock or Series B Preferred Stock are in arrears, whether or not authorized or declared, for six or more quarterly periods, holders of Series A Preferred Stock or Series B Preferred Stock will have the right to elect two additional directors to serve on our board.

We are subject to risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the COVID-19 pandemic.

The COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across many sectors and areas of the global economy and financial markets, leading to significant adverse impacts on economic activity including volatility in financial markets.

The impact of the COVID-19 pandemic evolved rapidly.

In many states and cities where our properties are located, measures including “shelter-in-place” or “stay-at-home” orders were issued by local, state and federal authorities for much of 2020 and early part of 2021 and social distancing measures that resulted in closure and limitations on the operations of many

businesses and organizations.

Although most of these measures have been lifted, they may be reinstated in the future in response to COVID-19 or other pandemics, endemics or health emergencies.

Our tenants and SHOP properties operate businesses that require in-person interactions with their patients and residents.

COVID-19 has impacted, and will likely continue to impact, the willingness of persons to, among other things, live in or use facilities at our properties, and impact the revenues generated by our tenants which may further impact the ability of our tenants to pay their rent obligations to us when due.

Our ability to lease space and negotiate and maintain favorable rents and the results of operations at our SHOPs could also continue to be negatively impacted by a prolonged recession in the U.S.

Additionally, downturns or stagnation the U.S.

housing market as a result of an economic downturn could adversely affect the ability, or perceived ability, of seniors to afford the resident fees and services at our seniors housing properties.

Moreover, the demand for leasing space at our MOB properties could decline further negatively impacting occupancy percentage, revenue and net income.

Within our MOB portfolio, the transmission of COVID-19 has impacted, and could continue to impact, the willingness of persons to seek medical care for non-urgent issues.

Further, the COVID-19 pandemic adversely impacted, and may continue to impact, the business of our MOB tenants by causing a decline in the number of patients seeking treatment, by disrupting or delaying production and delivery of medical supplies such as necessary pharmaceuticals (including due to a diversion of resources and priorities toward the treatment of COVID-19) or by causing staffing shortages, which disrupted property operations.

The complete or partial closures of, or other operational issues at, one or more of our properties resulting from the impacts of COVID-19, and may continue to increase the risk of rent deferrals or non-payment of contractual obligations by our tenants or operators.

As a result of these and other factors, tenants or operators that experience deteriorating financial conditions as a result of the outbreak of COVID-19 have been, or may, in the future be, unwilling or unable to pay us in full or on a timely basis due to bankruptcy, lack of liquidity, lack of funding, operational failures, or for other reasons.

We reported cash collections of nearly 100% for the MOB facilities segment for the year ended December 31, 2022 as of February 28, 2023.

However, the impact of the COVID-19 pandemic on our tenants and operators and thus our ability to collect rents in future periods cannot be determined as present and the amount of cash rent collected during the past two years may not be indicative of any future period.

Starting in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect us in a number of ways.

In our SHOP portfolio, occupancy has decreased compared to that in March 2020.

During the pandemic, governmental policies and implementation of infection control best practices materially limited or closed communities to new resident move-ins which affected our ability to fill vacancies.

We have also experienced lower inquiry volumes and reduced in-person tours during the pandemic.

In addition, starting in mid-March 2020, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as our tenants and operators took appropriate actions to protect residents and caregivers.

At the SHOP facilities, we generally bear these cost increases.

See below for additional information on the CARES Act.

These trends accelerated beginning in the second quarter of 2020, continued into early 2021, until stabilizing in the third quarter.

Future developments in the course of the pandemic may have adverse impacts on our occupancy and cost levels, and these trends may continue to impact us in the future and have a material adverse effect on our revenues and results of operations.

COVID-19 and its variants have been particularly harmful to seniors and persons with other pre-existing health conditions.

There have been incidences of infection among the residents and staff at our SHOPs.

Further incidences, or the perception that outbreaks may occur, could materially and adversely affect our revenues and net income, as well as cause significant reputational harm to us and our tenants, managers and operators.

Due to the contagious nature of COVID-19, residents at our SHOPSs may decide to leave the community and the workforce at these facilities may similarly shrink .

The tenants and operators may be required, or may otherwise determine that it would be prudent, to impose a quarantine of an indeterminate duration.

We have and may also be required to incur additional costs to identify, contain and remedy the direct or indirect impacts of the COVID-19 pandemic, including costs related to implementing quarantines and vaccinations.

Moreover, if seniors housing properties across the U.S.

experience high levels of residents infected with COVID-19, including its variants, and related deaths, potential residents may delay or forego moving into seniors housing properties.

As a result, our operating results from our SHOPs, and the value of these properties, may be materially adversely affected.

The long-term impact on our tenants and operators in our SHOP segment cannot be determined at present.

We may continue to experience defaults and additional requests for rent deferrals or abatements or other allowances particularly if our tenants continue to experience financial distress and increased operating costs or if healthcare facilities and SHOPs continue to experience downward pressures on occupancy and increased costs.

Furthermore, if we declare any tenants in default for non-payment of rent or other potential breaches of their leases with us, we might not be able to recover and may experience delays and additional costs in enforcing our rights as landlord to recover amounts due to us.

Our ability to recover amounts under the terms of our leases may also be restricted or delayed as a result of any federal, state or local restrictions on tenant evictions for

failure to make contractual rent payments, which may result in higher reserves for bad debt.

If any of our tenants, any guarantor of a tenant’s lease obligations or an operator, files for bankruptcy, we could be further adversely affected due to loss of revenue and a decline in income produced by the property or properties.

Other Impacts

In addition to the impacts on us, our tenants and operators described above, the COVID-19 pandemic has also impacted us in other ways and enhanced certain risks that could have a significant adverse effect on our business, financial condition and results of operations and our ability to pay distributions (including dividends on our Series A Preferred Stock and Series B Preferred Stock) and other distributions to our stockholders including:

• difficulty accessing debt and equity capital on favorable terms, or at all, if global financial markets become disrupted or unstable or credit conditions deteriorate;

• disruption and instability in financial markets or deteriorations in credit and financing conditions could have an impact on the overall amount of capital being invested in real estate and could result in price or value decreases for real estate assets, which could negatively impact the value of our assets and may result in future acquisitions generating lower overall economic returns;

• the volatility in stock markets caused by, among other things, the COVID-19 pandemic or the ongoing war in Ukraine could negatively impact the trading price of our Series A Preferred Stock, our Series B Preferred Stock and the value of our common stock and dilute our stockholders’ interest in us if we sell additional equity securities at prices less than the prices our stockholders paid for their shares;

• limiting the number of properties we may seek to acquire due to capital availability;

• that planned dispositions may not occur within the expected timeframe or at all because of buyer terminations or withdrawals related to the pandemic, capital constraints or other factors relating to the pandemic, including closing conditions that are dependent on the occurrence of events linked to the pandemic;

• until we satisfy certain conditions, our Credit Facility restricts us from paying cash distributions on, or repurchasing, shares of our common stock, and we must use all of the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to prepay amounts outstanding under the revolving portion of the Credit Facility;

• our ability to maintain sufficient availability under our Credit Facility to fund the purchase of properties and meet other capital requirements which may be adversely affected to the extent the decreases in cash rent collected from our tenants and income from our operators cause a decrease in availability of future borrowings under our Credit Facility;

• if we are unable to comply with financial covenants and other obligations under our Credit Facility and other debt agreements we could default under those agreements which could potentially result in an acceleration of our indebtedness and foreclosure on our properties and could otherwise negatively impact our liquidity;

• we have recognized, and may need to recognize further, impairment charges on our assets;

• one or more counterparties to our derivative financial instruments could default on their obligations to us increasing the risk that we may not realize the benefits of utilizing these instruments;

• we may be required to record reserves on previously accrued amounts in cases where it is subsequently concluded that collection is not probable;

• tenants and operators may be subject to lawsuits related to COVID-19 outbreaks that may occur at our properties and insurance coverage may not be sufficient to cover any potential losses further straining their financial condition;

• difficulty in repositioning properties where we or our tenants or operators have terminated or do not renew the leases or management agreements with another tenant or operator may be exacerbated by the COVID-19 pandemic, as new tenants or operators may not be willing to take on the increased exposure, especially while active cases are occurring;

• difficulties completing capital improvements at our properties on a timely basis, on budget or at all, could affect the value of our properties;

• our ability to ensure business continuity in the event our Advisor’s continuity of operations plan is not effective or is improperly implemented or deployed during a disruption;

• increased operating risks resulting from changes to our Advisor’s operations and remote work arrangements, including the potential effects on our financial reporting systems and internal controls and procedures, cybersecurity risks and increased vulnerability to security breaches, information technology disruptions and other similar events;

• increased operating risks resulting from changes to operations of our operators, including their personnel, which may adversely impact the service provided by our operators with respect to our SHOPs;

• complying with REIT requirements during a period of reduced cash flow could cause us to liquidate otherwise attractive investments or borrow funds on unfavorable conditions.

The extent to which the COVID-19 pandemic, or a future pandemic, impacts our operations and those of our tenants and operators will depend on future developments, including the scope, severity and duration of the pandemic, one or more resurgences of the virus, or its variants, which could result in further government restrictions, the efficacy of available vaccines and boosters or other remedies developed, the efficacy of on-going efforts to distribute and administer available vaccines and boosters, the actions taken to contain the pandemic or mitigate its impact, including vaccine mandates and the direct and indirect economic effects of the pandemic and containment measures, among others, which are highly uncertain and cannot be predicted with confidence but could be material.

The situation is rapidly changing and additional impacts to the business may arise that we are not aware of currently.

The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic, but a prolonged or resurgent outbreak as well as related mitigation efforts could continue to have a material adverse effect.

Moreover, many risk factors set forth in this Annual Report on Form 10-K should be interpreted as heightened risks as a result of the COVID-19 pandemic.

There is uncertainty surrounding the administration and effect of the CARES Act and the auditing and reporting requirements instituted by the CARES Act.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, which provided funding to Medicare providers in order to provide financial relief during the COVID-19 pandemic.

Funds provided under the program were to be used for the preparation, prevention, and medical response to COVID-19, and were designated to reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19.

We received $4.5 million, $5.1 million and $3.6 million in these funds during the years ended December 31, 2022, 2021, and 2020, respectively.

We do not anticipate that any further funds under the CARES Act will be received and, there can be no assurance that any further amounts will be received under potential future government programs related to COVID-19.

We consider the funds to be a grant contribution from the government and the full amount was recognized as a reduction of property operating expenses in our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020.

As a condition of the funds received under the CARES Act, we had to attest to certain terms and conditions, and must comply with detailed reporting and auditing requirements.

While we do not anticipate any finding of non-compliance, such a finding could result in consequences including repayment of funds received.

If a tenant or lease guarantor declares bankruptcy or becomes insolvent, we may be unable to collect balances due under relevant leases.

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This claim could be paid only if funds were available, and then only in the same percentage as that realized on other unsecured claims.

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A tenant or lease guarantor bankruptcy could delay efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums.

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If this plan were confirmed by the bankruptcy court, we would be bound by the new terms.

If the sale-leaseback were recharacterized as a joint venture, our lessee and we could be treated as co-venturers with regard to

the property.

If the sale-leaseback were recharacterized as a joint venture, our lessee and we could be treated as co-venturers with regard to the property.

As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property.

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Our ability to collect rents in future periods may be impacted by issues or events that cannot be determined as present and the amount of cash rent collected during 2023 may not be indicative of any future period.

Our operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market.

Our operating results and the value of our properties are subject to risks, including:

• changes in national and market-specific economic conditions;

• changes in supply of or demand for competing properties in our market area;

• changes in interest rates and availability of financing on favorable terms;

• changes in tax, real estate, environmental and zoning laws;

• periods of high interest rates and tight money supply;

• the possibility that one or more of our tenants will not pay their rental obligations.

Properties may have vacancies for a significant period of time.

A property may have vacancies either due to tenant defaults or the expiration of leases.

If vacancies continue for a long period of time, our revenues and net income will be adversely impacted.

In addition, the value of a property depends principally on the cash flow generated by the properties.

Prolonged vacancies reduce our cash flow.

We obtain only limited warranties when we purchase a property and therefore have only limited recourse if our due diligence did not identify any issues that lower the value of our property.

We have acquired and may continue to acquire properties in “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose.

In addition, purchase agreements we entered into may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing.

In addition, purchase agreements we entered into in the past, or may enter into in the future, may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing.

The purchase of properties with limited warranties increases the risk that we may lose some or all our invested capital in the property as well as the loss of rental income from that property if a situation or loss occurs after the fact for which we have limited or no remedy.

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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.

This could adversely affect the ability of our tenants to make rental payments.

This could adversely affect the ability of our tenants to make rental payments, which could have a material adverse impact on us.

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We may be unable to secure funds for future tenant improvements or capital needs.

If a tenant does not renew its lease or otherwise vacates its space, we will likely be required to expend substantial funds to improve and refurbish the vacated space.

In addition, we are typically responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops, even if our leases with tenants may require tenants to pay routine property maintenance costs, and the impact of such costs on our results of operations may be exacerbated during inflationary periods, such as that experienced in recent years.

If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain financing from sources beyond our cash flow from operations, such as borrowings, property sales or future equity offerings to fund these capital requirements.

These sources of funding may not be available on attractive terms or at all.

These sources of funding may not be available on attractive terms or at all, including, as a result of rising interest rates.

Failure to procure additional funding for additional funding improvements would impact the value of the applicable property or our ability to lease the applicable property on favorable terms, if at all.

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In particular, lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control.

Payment of yield maintenance premiums in connection with dispositions or refinancings could adversely affect our cash flow.

Payment of yield maintenance premiums in connection with dispositions or refinancings could adversely affect our cash flow, affecting our results of operations and the ability to pay distributions to our stockholders.

Rising expenses could reduce cash flow.

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Properties may be subject to increases in tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses.

Following the COVID-19 pandemic, we have experienced shortages in qualified labor and supply chain disruptions that have increased our operating costs, particularly in our SHOP segment.

We may not be able to negotiate leases on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs.

Inflation and continuing increases in the inflation rate may have an adverse effect on our investments and results of operations.

If we are unable to lease properties on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs, which could adversely affect our cash flow, affecting our results of operations and ability to pay distributions to our stockholders.

Inflation may have an adverse effect on our investments and results of operations.

Recent increases and continuing increases in the rate of inflation, both real and anticipated, may impact our investments and results of operations.

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For the year ended December 31, 2023, the increase to the 12-month Consumer Price Index for all items, as published by the Bureau of Labor Statistics, was 3.4%.

To help mitigate the adverse impact of inflation, approximately 90% of our leases with tenants in our MOB segment contain rent escalation provisions in their base rent which average 2.3% per year.

To help mitigate the adverse impact of inflation, most of our leases with tenants in our MOB segment contain rent escalation provisions which increase the cash that is due under these leases over their respective terms.

These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures).

Leases with fixed or no escalation provisions may not keep pace with current rates of inflation, whereas leases with indexed escalations may provide more protection against inflation.

Approximately 86% are fixed-rate, 4.1% are based on the Consumer Price Index and 10% do not contain any escalation provisions.

Although most of our leases contain rent escalation provisions, these escalation rates are generally below the rate of inflation.

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In addition to base rent, our net leases require the single-tenant MOB leases to pay all the properties operating expenses and our multi-tenant MOB leases to pay their allocable share of operating expenses, which may include common area maintenance costs, real estate taxes and insurance.

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Leases with residents at our SHOPs typically do not have rent escalations, however, we are able to renew leases at market rates as they mature due to their short-term nature.

As inflation rates increase or persist at high levels, the cost of providing medical care at our SHOPs, particularly labor costs, will increase.

As inflation rates increase, the cost of providing medical care at our SHOPs, particularly labor costs, will increase.

If we are unable to admit new residents or renew resident leases at market rates, while bearing these increased costs from providing services to our residents, our results of operations may be affected.

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We may not have adequate, or any, coverage for the losses.

Actual or threatened terrorist attacks and other acts of violence, civilian unrest or war may affect the markets in which we operate our business and our profitability.

We own properties in densely populated areas that are susceptible to terrorist attack or damage.

Because our properties are generally open to the public, they are exposed to a number of incidents that may take place within or around their premises and that are beyond our control or ability to prevent.

Any actual or threatened act of terror, mass shooting or other violence could have a negative effect on our business, including us losing our tenants or being forced to close one or more of our properties for some time.

If any of these incidents were to occur, the relevant property could face material damage to its image and the revenue generated therefrom.

In addition, we may be exposed to civil liability and be required to indemnify the victims, and our insurance premiums could rise, any of which could adversely affect us.

In addition, actual or threatened terrorist activity or violent criminal acts, including terrorist acts against public institutions or buildings or modes of public transportation (including airlines, trains or buses) could have a negative effect on our business, the value of our properties and our results of operations.

More generally, any terrorist attack, other act of violence or war, including armed conflicts, could result in increased volatility in, or damage to, the worldwide financial markets and economy, including demand for properties and availability of financing.

Increased economic volatility could adversely affect our tenants’ abilities to conduct their operations profitably or our ability to borrow money or issue capital stock at acceptable prices.

Real estate-related taxes may increase and these increases may not be passed on to tenants.

From time to time our property taxes increase as property values or assessment rates change or for other reasons.

An increase in the assessed valuation of a property for real estate tax purposes will result in an increase in the related real estate taxes on that property.

There is no assurance that renewal leases or future leases will be negotiated on a basis that passes such taxes on to the tenant.

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Covenants, conditions and restrictions may impact our ability to operate a property.

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The costs of removing or remediating could be substantial.

These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the

presence of such hazardous or toxic substances.

These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances.

Certain environmental laws and common law principles could be used to impose liability for release of, and exposure to, hazardous substances, including asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances.

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Accordingly, we may incur significant costs to defend against claims of liability, to comply with environmental regulatory requirements, to remediate any contaminated property, or to pay personal injury claims.

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Moreover, environmental laws also may impose liens on property or other restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us or our Property Manager and its assignees from operating such properties.

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Future laws, ordinances or regulations or the discovery of currently unknown conditions or non-compliances may impose material liability under environmental laws.

If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flows.

If we sell properties by providing financing to purchasers, defaults by the purchasers could adversely affect our cash flows.

In some instances, we may sell our properties by providing financing to purchasers.

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We are therefore responsible for any operating deficits incurred by the facility.

As of December 31, 2022, we had four eligible independent contractors operating 52 SHOPs (including two land parcels).

As of December 31, 2023, we had four eligible independent contractors operating 46 SHOPs.

We may in the future, transition other MOB facilities, which may or may not be experiencing declining performance, to third-party managed facilities using the RIDEA structure, in connection with which they would also transition from our MOB segment to our SHOP segment.

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Furthermore, this licensing requirement subjects us (through our ownership interest in our TRS) to various regulatory laws, including those described herein.

Most states regulate

and inspect healthcare facility operations, patient care, construction and the safety of the physical environment.

Most states regulate and inspect healthcare facility operations, patient care, construction and the safety of the physical environment.

If one or more of our healthcare real estate facilities fails to comply with applicable laws, our TRS, if it holds the healthcare license and is the entity enrolled in government health care programs, would be subject to penalties including loss or suspension of license, certification or accreditation, exclusion from government healthcare programs such as Medicare or Medicaid, administrative sanctions, civil monetary penalties, and in certain instances, criminal penalties.

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Furthermore, to the extent our TRS holds the healthcare license, it could have exposure to professional liability claims arising out of an alleged breach of the applicable standard of care rules.

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Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.

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In addition, we may in certain circumstances be liable for the actions of our co-venturers.

We may incur costs associated with complying with the Americans with Disabilities Act.

Our properties must also comply with the Americans with Disabilities Act of 1990 (the “Disabilities Act”).

Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons.

The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services, including restaurants and retail stores, be made accessible and available to people with disabilities.

The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties, or, in some cases, an award of damages.

A determination that a property does not comply with the Disabilities Act could result in liability for both governmental fines and damages.

If we are required to make unanticipated major modifications to any of our properties to comply with the Disabilities Act which are determined not to be the responsibility of our tenants, we could incur unanticipated expenses that could have an adverse impact upon our cash flow.

Net leases may not result in fair market lease rates over time.

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In addition, vacancies may occur at one or more of our properties due to a default by a tenant on its lease or expiration of a lease.

Healthcare facilities in general and MOBs in particular tend to be specifically suited for the particular needs of their tenants and major renovations and expenditures may be required in order for us to re-lease vacant space.

Vacancies may reduce the value of a property as a result of reduced cash flow generated by the property.

Healthcare facilities in general and MOBs in particular tend to be specifically suited for the particular needs of their tenants and we may not be able to locate suitable replacement tenants to lease the property for their specialized uses.

Alternatively, major renovations and expenditures may be required to adapt the properties for other uses in order for us to re-lease vacant space or may be required to decrease the rent we intend to charge or provide other concessions in order to lease the property to another tenant, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to stockholders.

Our properties have been and may continue to be subject to impairment charges.

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There is no assurance that these adverse changes will be reversed in the future and the decline in the impaired property’s value could be permanent.

We have incurred impairment charges, which have an immediate direct impact on our net income for GAAP purposes, including $27.6 million, during the year ended December 31, 2022.

There can be no assurance that

we will not take additional charges in the future.

Any future impairment could have a material adverse effect on our results in the period in which the charge is taken.

We have incurred impairment charges, which have an immediate direct impact on our net loss for GAAP purposes, including $4.7 million, during the year ended December 31, 2023.

There can be no assurance that we will not take additional charges in the future.

Any future impairment could have a material adverse effect on our financial position and results of operations and liquidity.

Our real estate investments are relatively illiquid, and therefore we may not be able to dispose of properties when we desire to do so or on favorable terms.

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These types of provisions restrict our ability to sell a property.

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In addition, applicable provisions of the Code impose restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies.

Thus, we may be unable to realize our investment objectives by selling or otherwise disposing of a property, or refinancing debt secured by the property, at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy.

Geopolitical instability due to the ongoing military conflict between Russia and Ukraine may adversely impact the U.S.

and global economies.

On February 24, 2022, Russian troops invaded Ukraine starting a military conflict, the length and breadth of which is highly unpredictable.

Coupled with existing supply disruptions and changes in Federal Reserve policies on interest rates, this war has exacerbated, and may continue to exacerbate, inflation and significant volatility in commodity prices, credit and capital markets, as well as supply chain disruptions.

Additionally, the U.S., the European Union, and other countries, as well as other public and private actors and companies have imposed sanctions and other penalties on Russia including removing Russian-based financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system and restricting imports of Russian oil, liquefied natural gas and coal.

These sanctions have caused supply disruptions in the oil and gas markets and could continue to cause significant increases in energy prices, which could have a material effect on inflation and may trigger a recession in the U.S., among other areas.

These factors may result in the weakening of the financial condition of or the bankruptcy or insolvency of a significant tenant or a number of smaller tenants, which would adversely impact their ability to pay rents as they come due.

As a result, our financial condition and results of operations may be negatively affected since our revenue is largely dependent on the success and economic viability of our tenants.

These and other sanctions that may be imposed as well as the ongoing conflict could further adversely affect the global economy and financial markets and cause further instability, negatively impacting liquidity in the capital markets and potentially making it more difficult for us to access additional debt or equity financing on attractive terms in the future.

In addition, the U.S.

government has warned of the potential for Russian cyberattacks.

The risk of Russian cyberattacks may also create market volatility and economic uncertainty particularly if these attacks occur and spread to a broad array of countries and networks.

The ongoing Russia-Ukraine conflict and the recent escalation of the Israel-Hamas conflict may adversely impact our business operations and financial performance.

The United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting from the ongoing Russia-Ukraine conflict, as the North Atlantic Treaty Organization (“NATO”) has deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system.

Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine and to Israel, increasing geopolitical tensions among a number of nations.

The invasion of Ukraine by Russia and the escalation of the Israel-Hamas conflict and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries have created global security concerns that could have a lasting impact on regional and global economies.

Although the length and impact of the ongoing conflicts are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions and increased cyber-attacks against U.S.

Additionally, any resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.

These ongoing conflicts and the resulting geopolitical instability can adversely impact our business operations and financial performance.

These factors may also result in the weakening of the financial condition of a significant tenant or a number of smaller tenants, which could adversely impact their ability to timely pay rent.

Our revenues are largely dependent on the success and economic viability of our tenants and, as a result, our financial condition and results of operations may be adversely impacted.

We are subject to risks associated with public health crises, such as pandemics and epidemics, which may have a material adverse effect on our business.

We are subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic.

The COVID-19 pandemic has subsided with the normalization of living with COVID-19 following the increase in accessibility to COVID-19 vaccines and antiviral treatments.

While the U.S.

has removed or reduced the restrictions taken in response to the COVID-19 pandemic, a resurgence of the COVID-19 pandemic could once again impact our operations and the operations of our tenants as a result of quarantines, location closures, illnesses, and travel restrictions.

Any future resurgence of COVID-19 or variants of the virus, and the severity and duration thereof, remain uncertain, however, a substantial and continuous deterioration in the business environment in the U.S.

as a consequence thereof could have a material adverse effect on our business, financial condition and results of operations.

The scope and duration of any future public health crisis, including the potential emergence of new variants of the COVID-19 virus, the pace at which government restrictions are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, the speed and extent to which global markets fully recover from the disruptions caused by such a public health crisis, and the impact of these factors on our business, financial condition and results of operations, will depend on future developments that are highly uncertain and cannot be predicted with confidence.

Risks Related to the Healthcare Industry

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expansion of insurance providers into patient care;

continuing pressure by private and governmental payors to reduce payments

to providers of services;

continuing pressure by private and governmental payors to reduce payments to providers of services;

and increased scrutiny of billing, referral and other practices by federal and state authorities.

These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our revenues and cash flows.

Certain of our properties in our MOB Segment may not have efficient alternative uses, so the loss of a tenant may cause us to not be able to find a replacement or cause us to spend considerable capital to adapt the property to an alternative use.

Some of our properties and the properties we will seek to acquire are healthcare-related assets that may only be suitable for similar healthcare-related tenants.

If we or our tenants terminate the leases for these properties or our tenants 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.

Alternatively, we may be required to spend substantial amounts to adapt the properties to other uses.

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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.

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Further, we are unable to predict the scope of future federal, state and local regulations and legislation, including Medicare and Medicaid statutes and regulations or judicial decisions, or the intensity of enforcement efforts with respect to such regulations and legislation, and any changes in the regulatory or judicial framework may have a material adverse effect on our tenants.

Health insurance coverage under the Affordable Care Act is likely going to continue to expand 2023.

Health insurance coverage under the Affordable Care Act is likely going to continue to expand in 2024.

However, the repeal of the individual mandate penalty included in the Tax Cuts and Jobs Act of 2017, recent actions to increase the availability of insurance policies that do not include Affordable Care Act minimum benefit standards, and support for Medicaid work requirements will likely impact the market.

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In the ordinary course of their businesses, our tenants and operators may be regularly subjected to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations.

If they do not comply with the additional reporting requirements and responsibilities, the ability of our tenants’ to participate in federal health

programs may be adversely affected.

If they do not comply with the additional reporting requirements and responsibilities, the ability of our tenants’ to participate in federal health programs may be adversely affected.

Moreover, there may be other comprehensive healthcare reform legislation, which, depending on how they are implemented, could materially and adversely affect our operators.

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Accordingly, if our tenants fail to comply with the Affordable Care Act’s requirements, they may be subject to significant monetary penalties and excluded from participation in Medicare and Medicaid, which could materially and adversely affect their ability to pay rent and satisfy other financial obligations to us.

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Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements, could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us.

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If we are unable to find a suitable replacement tenant or operator upon favorable terms, or at all, we may take possession of a facility, which could expose us to successor liability, require us to indemnify subsequent entities to whom we transfer the operating rights and licenses, or require us to spend substantial time and funds to preserve the value of the property and adapt the facility to other use.

transitioning to a new tenant and/or operator could cause disruptions at the operations of the properties and, if there is a delay in the new tenant or operator obtaining its ability to receive reimbursement from third-party payors.

Furthermore, transitioning to a new tenant and/or operator could cause disruptions at the operations of the properties and, if there is a delay in the new tenant or operator obtaining its ability to receive reimbursement from third-party payors.

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A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants.

Several government initiatives have resulted in reductions in funding of the Medicare and Medicaid programs and additional changes in reimbursement regulations by the Centers for Medicare & Medicaid Services (“CMS”), contributing to pressure to contain healthcare costs and additional operational requirements, which may impact the ability of our tenant to make rent payments to us.

Several government initiatives have resulted in reductions in funding of the Medicare and Medicaid programs and additional changes in reimbursement regulations by the CMS, contributing to pressure to contain healthcare costs and additional operational requirements, which may impact the ability of our tenant to make rent payments to us.

The Medicare and Medicaid programs have adopted a variety of initiatives which have been incorporated and expanded by private insurance carriers, including health maintenance organizations and other health plans, to extract greater discounts and impose more stringent cost controls upon healthcare provider operations.

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If the review or audit shows a facility is not in compliance with federal and state requirements, previous payments to the facility may be recouped and future payments may be denied or delayed.

Recoupments, denials or delay of payments could adversely affect the profitability of our tenants and hinder their ability to make rent payments to us and the ability of our operators to satisfy their ongoing contractual obligations.

We may incur costs associated with complying with the Americans with Disabilities Act.

Our properties must also comply with the Americans with Disabilities Act of 1990 (the “Disabilities Act”).

Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons.

The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties, or, in some cases, an award of damages.

A determination that a property does not comply with the Disabilities Act could result in liability for both governmental fines and damages.

Events that adversely affect the ability of seniors and their families to afford daily resident fees at our SHOPs could cause our occupancy rates and resident fee revenues to decline.

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If the operators of our SHOPs are unable to attract and retain seniors that have sufficient income, assets or other resources to pay the fees associated with assisted and independent living services, the occupancy rates, resident fee revenues and results of operations of our SHOPs could decline.

Residents in our SHOPs may terminate leases.

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Termination of SHOP leases by residents pursuant to state law mandated contractual provisions could have an adverse effect on our business, financial condition and results of operations.

State regulations generally require assisted living communities to have a written lease agreement with each resident that permits the resident to terminate his or her lease for any reason on reasonable notice, unlike typical apartment lease agreements that have initial terms of one year or longer.

Due to these lease termination rights and the advanced age of the residents, the resident turnover rate in our SHOPs may be difficult to predict.

A large number of resident lease agreements may terminate at or around the same time, and the affected units may remain unoccupied.

A large number of resident lease agreements may terminate at or around the same time, and the affected units may remain unoccupied, which could have an adverse effect on our business, financial condition and results of operations.

Some tenants and operators of our healthcare-related assets must comply with fraud and abuse laws, the violation of which by either may jeopardize the tenant’s ability to make rent payments to us.

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Certain laws, such as the FCA, allow for individuals to bring whistleblower actions on behalf of the government for violations thereof.

Individuals have tremendous potential financial gain in bringing whistleblower claims as the FCA statute provides that the individual will receive between 15% and 30% of the money recouped.

Additionally, violations of the FCA can result in treble damages.

Significant enforcement activity has been the result of actions brought by these individuals.

Additionally, certain states in which the facilities are located also have similar fraud and abuse laws.

Federal and state adoption and enforcement of such laws increase the regulatory burden and costs, and potential liability, of healthcare providers.

Investigation by a federal or state governmental body for violation of fraud and abuse laws, and these state laws have their own penalties which may be in additional to federal penalties.

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 could jeopardize that tenant’s and operator’s business, reputation, and ability to operate or to make rent payments.

Increased funding for investigation and enforcement efforts, accompanied by an increased pressure to eliminate government waste, has led to a significant increase in the number of investigations and enforcement actions over the past several years, a trend which is not anticipated to decrease considerably.

Tenants and operators of our healthcare-related assets may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us.

As is typical in the healthcare industry, certain types of tenants and operators of our healthcare-related assets may often become subject to claims that their services have resulted in patient injury or other adverse effects.

Our tenants and operators of our healthcare-related assets may often become subject to claims that their services have resulted in patient injury or other adverse effects.

The insurance coverage maintained by these tenants and operators may not cover all claims made against them or continue to be available at a reasonable cost, if at all.

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Any adverse determination in a legal proceeding or governmental investigation, whether currently asserted or arising in the future, could have a material adverse effect on a tenant’s or operator’s financial condition.

If a tenant or operator is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if a tenant or operator is required to pay uninsured punitive damages, or if a tenant or operator is subject to an uninsurable government enforcement action, the tenant could be exposed to substantial additional liabilities, which may affect the tenant’s or operator’s business, operations and the tenant’s ability to pay rent to us.

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We may experience adverse effects as a result of potential financial and operational challenges faced by the tenants and operators of any seniors housing facilities and skilled nursing facilities we own or acquire.

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Accordingly, our one SNF and limited assisted living facilities that participate in Medicaid could be subject to the potential negative effects of decreased reimbursement rates or other changes in reimbursement policy or programs offered through such reimbursement programs.

Revenue may also be adversely affected as a result of falling occupancy rates or slow lease-ups for assisted and independent living facilities due to various factors, including the ongoing COVID-19 pandemic and its related effects.

Revenue may also be adversely affected as a result of falling occupancy rates or slow lease-ups for assisted and independent living facilities due to various factors.

In addition, our facility operators may incur additional demands on their existing financial resources as a result of increases in seniors housing facility operator liability, insurance premiums and other operational expenses, which is worsened by the nationwide staffing shortage.

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We may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, initially anticipated by increasing our exposure to, among other things, interest rate risk, default risk and real estate market fluctuations.

If we internalize our management functions, we would be required to pay a transition fee and would not have the right to retain our management or personnel.

We may engage in an internalization transaction and become self-managed in the future.

If we internalize our management functions, under the terms of our advisory agreement we would be required to pay a transition fee to our Advisor upon termination of the advisory agreement in connection with an internalization that could be up to 4.5 times the compensation paid to our Advisor in the previous year, plus expenses.

We also would not have any right to retain our executive officers or other personnel of our Advisor who currently manage our day-to-day operations.

An inability to manage an internalization transaction effectively could thus result in our incurring excess costs and suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting.

These deficiencies could cause us to incur additional costs, and our management’s attention could be diverted from most effectively managing our investments, which could result in litigation and resulting associated costs in connection with the internalization transaction.

We may terminate our advisory agreement in only limited circumstances, which may require payment of a termination fee.

We have limited rights to terminate our Advisor.

The initial term of our advisory agreement expires on February 16, 2027, but is automatically renewed upon expiration for consecutive ten-year terms unless notice of termination is provided by either party 365 days in advance of the expiration of the term.

Further, we may terminate the agreement only under limited circumstances.

In the event of a termination in connection with a change in control of us, we would be required to pay a termination fee that could be up to four times the compensation paid to our Advisor in the previous year, plus expenses.

The limited termination rights will make it difficult for us to renegotiate the terms of the advisory agreement or replace our Advisor even if the terms of the advisory agreement are no longer consistent with the terms generally available to externally-managed REITs for similar services.

Our business and operations could suffer if our Advisor or any other party that provides us with services essential to our operations experiences system failures or cyber incidents or a deficiency in cybersecurity.

The internal information technology networks and related systems of our Advisor and other parties that provide us with services essential to our operations (including our tenants, operators, and other third-party operators of our healthcare facilities) are vulnerable to damage from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures.

Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business.

We may also incur additional costs to remedy damages caused by these disruptions.

As reliance on technology has increased, so have the risks posed to those systems.

Our Advisor and other parties that provide us with services essential to our operations must continuously monitor and develop their networks and information technology to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses, and social engineering, such as phishing.

Our Advisor is continuously working, including with the aid of third-party service providers, to install new, and to upgrade existing, network and information technology systems, to create processes for risk assessment, testing, prioritization, remediation, risk acceptance, and reporting, and to provide awareness training around phishing, malware and other cyber risks to ensure that our Advisor and other parties that provide us with services essential to our operations are protected against cyber risks and security breaches and that we are also therefore so protected.

However, these upgrades, processes, new technology and training may not be sufficient to protect us from all risks.

Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques and technologies used in attempted attacks and intrusions evolve and generally are not recognized until launched against a target.

In some cases, attempted attacks and intrusions are designed not to be detected and, in fact, may not be detected.

The remediation costs and lost revenues experienced by a subject of an intentional cyberattack or other event which results in unauthorized third-party access to systems to disrupt operations, corrupt data or steal confidential information may be significant and significant resources may be required to repair system damage, protect against the threat of future security breaches or to alleviate problems, including reputational harm, loss of revenues and litigation, caused by any breaches.

Additionally, any failure to adequately protect against unauthorized or unlawful processing of personal data, or to take appropriate action in cases of infringement may result in significant penalties under privacy law.

Furthermore, a security breach or other significant disruption involving the information technology networks and related systems of our Advisor or any other party that provides us with services essential to our operations could:

• result in misstated financial reports, violations of loan covenants, missed reporting deadlines or missed permitting deadlines;

• affect our ability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

• result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information (including information about our tenant operators and other third-party operators of our healthcare facilities, as well as the patients or residents at those facilities), which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;

• result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;

• require significant management attention and resources to remedy any damages that result;

• subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements;

• adversely impact our reputation among our tenants, operators and investors generally.

Although our Advisor and other parties that provide us with services essential to our operations intend to continue to implement industry-standard security measures, there can be no assurance that those measures will be sufficient, and any material adverse effect experienced by our Advisor and other parties that provide us with services essential to our operations could, in turn, have an adverse impact on us.

We depend on our Advisor and Property Manager to provide us with executive officers, key personnel and all services required for us to conduct our operations and our operating performance may be impacted by any adverse changes in the financial health or reputation of our Advisor.

We have no employees.

Personnel and services that we require are provided to us under contracts with our Advisor and its affiliates including our Property Manager.

We depend on our Advisor and our Property Manager to manage our operations and acquire and manage certain of our real estate assets.

Our Advisor makes all decisions with respect to the management of our company, subject to the supervision of, and any guidelines established by, the board.

Our success depends to a significant degree upon the contributions of our executive officers and other key personnel of our Advisor and its affiliates, including Edward M.

Weil, Jr., our chief executive officer, and Scott Lappetito, our chief financial officer, treasurer and secretary.

Neither our Advisor nor any of its affiliates has an employment agreement with these key personnel and we cannot guarantee that all, or any particular one, of these individuals will remain employed by our Advisor or one of its affiliates and otherwise available to continue to perform services for us.

Further, we do not maintain key person life insurance on any person.

We believe that our success depends, in large part, upon the ability of our Advisor to hire, retain or contract for services of highly skilled managerial, operational and marketing personnel.

Competition for skilled personnel is intense, and there can be no assurance that our Advisor will be successful in attracting and retaining skilled personnel.

If our Advisor loses or is unable to obtain the services of skilled personnel due to, among other things, an overall labor shortage, lack of skilled labor, increased turnover or labor inflation, our Advisor’s ability to manage our business and implement our investment strategies could be delayed or hindered.

Any adverse changes in the financial condition or financial health of, or our relationship with, our Advisor or Property Manager, including any change resulting from an adverse outcome in any litigation could hinder their ability to successfully manage our operations and our investments.

Additionally, changes in ownership or management practices, the occurrence of adverse events affecting our Advisor or its affiliates or other companies advised by our Advisor or its affiliates could create adverse publicity and adversely affect us and our relationship with lenders, tenants, operators or counterparties.

We may in the future acquire or originate real estate debt or invest in real estate-related securities issued by real estate market participants, which would expose us to additional risks.

We may in the future acquire or originate first mortgage debt loans, mezzanine loans, preferred equity or securitized loans, CMBS, preferred equity and other higher-yielding structured debt and equity investments.

Doing so would expose us not only to the risks and uncertainties we are currently exposed to through our direct investments in real estate but also to additional risks and uncertainties attendant to investing in and holding these types of investments, such as:

• risk of defaults by borrowers in paying debt service on outstanding indebtedness and to other impairments of our loans and investments;

• increased competition from entities engaged in mortgage lending and, or investing in our target assets;

• deterioration in the performance of properties securing our investments may cause deterioration in the performance of our investments and, potentially, principal losses to us;

• fluctuations in interest rates and credit spreads could reduce our ability to generate income on our loans and other investments;

• difficulty in redeploying the proceeds from repayments of our existing loans and investments;

• the illiquidity of certain of these investments;

• lack of control over certain of our loans and investments;

• the potential need to foreclose on certain of the loans we originate or acquire, which could result in losses;

• additional risks, including the risks of the securitization process, posed by investments in CMBS and other similar structured finance investments, as well as those we structure, sponsor or arrange;

use of leverage may create a mismatch with the duration and interest rate of the investments that we finance;

• risks related to the operating performance or trading price volatility of any publicly-traded and private companies primarily engaged in real estate businesses we invest in;

• the need to structure, select and more closely monitor our investments such that we continue to maintain our qualification as a REIT and our exemption from registration under the Investment Company Act of 1940, as amended.

Risks Related to our Indebtedness

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In that case, we could lose the property securing the loan that is in default.

federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a

purchase price equal to the outstanding balance of the debt secured by the mortgage.

federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.

If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds.

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In the case of mortgages containing cross-collateralization or cross-default provisions, a default on a single mortgage could affect multiple properties.

Our Credit Facility contains various covenants that may restrict our ability to take certain actions and may restrict our ability to use our cash and make investments.

Our Credit Facility contains various covenants that may restrict our ability to take certain actions.

For example, we may not pay distributions to holders of common stock in cash or make any other cash distributions (including repurchases of shares of our common stock) on our common stock until we meet certain requirements.

We may, however, pay dividends on the Series A Preferred Stock and Series B Preferred Stock, or any other preferred stock we may issue and any cash distributions necessary to maintain our status as a REIT.

The restrictions on paying cash distributions will no longer apply starting in the quarter in which we make an election and, as of the day prior to the commencement of the applicable quarter, we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by us during the applicable quarter, our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%, and our Fixed Charge Coverage Ratio is not less than 1.50 to 1.00 for the most recently ended four fiscal quarters.

There can be no assurance as to if, or when, we will be able to satisfy these conditions.

Moreover, we will only be permitted to pay cash distributions if the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock, Series B Preferred Stock or any other class of preferred stock that may be issued) for any period of four fiscal quarters do not exceed 95% of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after we make the election and begin paying distributions.

The lenders have reduced the covenant requiring a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges based on the four most recently ended fiscal quarters, from 1.50:1.00 to (a) 1.20:1.00 for the period that commenced with the quarter ended June 30, 2022 through the quarter ending June 30, 2023, (b) 1.35:1.00 for the period commencing with the quarter ending September 30, 2023 through the quarter ending December 31, 2023 and (c) 1.45:1.00 for the period commencing with the quarter ending March 31, 2024 and continuing thereafter;

provided, however, that from and after the Commencement Quarter, we must satisfy a minimum Fixed Charge Coverage Ratio of 1.50:1.00.

Prospectively, based upon our current expectations, we believe our operating results through June 30, 2023 will allow us to comply with these covenants.

However, we believe our operating results may not be sufficient to comply with the increased Fixed Charge Coverage Ratio, which increases from 1.20:1.00 to 1.35:1.00 commencing with the quarter ending September 30, 2023 and thereafter.

Absent a waiver or modification from the lender group, failure to comply with the Fixed Charge Coverage Ratio would constitute an Event of Default and the balance of the Credit Facility would be due and payable.

We have obtained such waivers and modifications from the lender group in the past, but there can be no assurance that such a waiver or modification will be granted in future periods.

Covenants in our Credit Facility also require us to maintain a combination of cash, cash equivalents and availability for future borrowings under our Revolving Credit Facility totaling at least $50.0 million.

As of December 31, 2022, we had $53.7 million of cash and cash equivalents, and $203.4 million was available for future borrowings under our Revolving Credit Facility.

Our Credit Facility also restricts how we may use our sources of liquidity.

Certain restrictions and conditions contained in the Credit Facility will no longer apply starting in the quarter in which we make an election as, as of the day prior to the commencement of the applicable quarter we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by us during the applicable quarter, our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5% and, as revised by the Fourth Amendment, our Fixed Charge Coverage Ratio is not less than 1.50 to 1.00 for the most recently ended four fiscal quarters (the “Commencement Quarter”).

The fiscal quarter ended June 30, 2021 was the first quarter that could have been the Commencement Quarter.

We did not satisfy the conditions during the quarter ended December 31, 2022 in order to elect the quarter ending March 31, 2023 as the Commencement Quarter.

There can be no assurance as to if, or when, we will, or will be able to, elect the Commencement Quarter, including to the extent we may be unable to satisfy these conditions in future periods.

Until the first day of the Commencement Quarter, we must use all of the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to repay amounts outstanding under the Revolving Credit Facility, to the extent there are any such amounts outstanding.

We may borrow additional amounts if all relevant conditions are met, including sufficient availability for future borrowings.

There can be no assurance these conditions will be met.

The availability for future borrowings under the Credit Facility is calculated using the adjusted net operating income of the real estate assets comprising the borrowing base, and availability has been, and may continue to be, adversely affected by the

decreases in net operating income at the properties comprising the borrowing base from the use of contract labor for care providers and, to a lesser extent, the amount we pay in overtime wages and bonuses.

In connection with the Fourth Amendment, the borrowing base advance rate was reduced from 55% to 52.5% (until we elect the Commencement Quarter, after which the borrowing base advance rate would revert back to 55%), which may also impact our availability.

Our ability to increase the amount of cash we generate from property operations depends on a variety of factors as well as our ability to complete acquisitions of new properties on favorable terms and our ability to improve operations at our existing properties.

There can be no assurance that we will complete acquisitions on a timely basis or on favorable terms and conditions, if at all, particularly if we do not have a source of capital available that will allow us to do so.

Our ability to improve operations at our existing properties is also subject to a variety of risks and uncertainties, many of which are beyond our control, and there can be no assurance we will be successful in achieving this objective.

Because shares of common stock are only offered and sold pursuant to our distribution reinvestment plan (“DRIP”) in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as we pay distributions in stock instead of cash, so this source of capital will not be available unless and until we are able to resume paying cash distributions on our common stock.

There is also no assurance that participation in the DRIP will be maintained at current or higher levels if the DRIP becomes a source of capital in the future.

Other financing arrangements have restrictive covenants.

The agreements governing our borrowings contain provisions that affect or restrict our policies regarding dividends and other distributions and our operations, require us to satisfy financial coverage ratios, and may restrict our ability to, among other things, incur additional indebtedness, make certain investments, replace our Advisor, discontinue insurance coverage, merge with another company, and create, incur or assume liens.

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We may in the future acquire or originate real estate debt or invest in real estate-related securities issued by real estate market participants, which would expose us to additional risks.

• risk of defaults by borrowers in paying debt service on outstanding indebtedness and to other impairments of our loans and investments;

• increased competition from entities engaged in mortgage lending and, or investing in our target assets;

• deterioration in the performance of properties securing our investments may cause deterioration in the performance of our investments and, potentially, principal losses to us;

• fluctuations in interest rates and credit spreads could reduce our ability to generate income on our loans and other investments;

• difficulty in redeploying the proceeds from repayments of our existing loans and investments;

• the illiquidity of certain of these investments;

• lack of control over certain of our loans and investments;

• the potential need to foreclose on certain of the loans we originate or acquire, which could result in losses;

use of leverage may create a mismatch with the duration and interest rate of the investments that we finance;

• risks related to the operating performance or trading price volatility of any publicly-traded and private companies primarily engaged in real estate businesses we invest in;

Any one or a combination of these factors may cause a borrower to default on a loan or to declare bankruptcy.

If a default or bankruptcy occurs and the underlying asset value is less than the loan amount, we will suffer a loss.

In the event of any default under a commercial real estate loan held directly by us, we will bear a risk of loss of principal or accrued interest to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the commercial real estate loan, which could have a material adverse effect on our cash flow from operations.

In the event of a default by a borrower on a non-recourse commercial real estate loan, we will only have recourse to the underlying asset (including any escrowed funds and reserves) collateralizing the commercial real estate loan.

If a borrower defaults on one of our commercial real estate investments and the underlying property collateralizing the commercial real estate debt is insufficient to satisfy the outstanding balance of the debt, we may suffer a loss of principal or interest.

In addition, even if we have recourse to a borrower’s assets, we may not have full recourse to such assets in the event of a borrower bankruptcy as the loan to such borrower will be deemed to be secured only to the extent of the value of the mortgaged property at the time of bankruptcy (as determined by the bankruptcy court) and the lien securing the loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.

We are also exposed to these risks through the commercial real estate loans underlying a commercial real estate security we hold, which may result in us not recovering a portion or all of our investment in such commercial real estate security.

Our financing arrangements have restrictive covenants, which may limit our ability to pursue strategic alternatives and react to changes in our business and industry or pay distributions.

The agreements governing our borrowings contain provisions that affect or restrict our policies regarding dividends and other distributions and our operations, require us to satisfy financial coverage ratios, and may restrict our ability to, among other things, incur additional indebtedness, make certain investments, enter into certain transactions with our affiliates, replace our Advisor, discontinue insurance coverage, merge with another company, and create, incur or assume liens.

These or other limitations may adversely affect our flexibility and our ability to achieve our investment and operating objectives.

Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of debt under such agreements.

Any such event of default or acceleration could have a material adverse effect on our business, financial condition and results of operations.

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Changes in the debt markets could have a material adverse impact on our earnings and financial condition.

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We also face a heightened level of interest rate risk as the U.S.

Federal Reserve Board tapers its quantitative easing program and raises interest rates.

Federal Reserve Board tapers its quantitative easing program and raises interest rates, such as in recent years.

All of these actions will likely lead to increases in borrowing costs.

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In addition, we may find it difficult, costly or impossible to refinance maturing indebtedness.

Furthermore, the state of the debt markets could have an impact on the overall amount of capital being invested in real estate, which may result in price or value decreases of real estate assets and could negatively impact the value of our assets.

Increases in interest rates may make it difficult for us to finance or refinance indebtedness secured by our properties.

We have borrowed, and may continue to borrow monies, secured and unsecured by our properties.

Increases in interest rates may adversely impact our ability to refinance our indebtedness, including the indebtedness secured by our properties, as the loans come due or we otherwise desire to do so on favorable terms, or at all.

If interest rates are higher when the indebtedness is refinanced, we may not be able to refinance indebtedness secured by the properties and we may be required to obtain equity to repay the loan or to increase the collateral for the loan.

Increasing interest rates could increase the amount of our debt payments and we may be adversely affected by uncertainty surrounding the LIBOR.

Federal Reserve Board significantly increased the federal funds rate in 2022 and 2023.

Further increases in interest rates may adversely impact our ability to refinance our indebtedness, including the indebtedness secured by our properties, as the loans come due or we otherwise desire to do so on favorable terms, or at all.

Increasing interest rates could increase the amount of our debt payments.

We have incurred, and may continue to incur, variable-rate debt.

Increases in interest rates on our variable-rate debt would increase our interest cost.

We have mortgages, credit facilities and derivative agreements that have terms that are based on the London Interbank Offered Rate (“LIBOR”).

As of December 31, 2022, we have nine designated interest rate swaps with a notional amount of $578.5 million, which effectively fixes a portion of our variable-rate debt.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts.

They ceased publishing the one-week and two-month USD LIBOR settings effective December 31, 2021.

The remaining USD LIBOR settings, including the USD LIBOR rates currently relevant to us,

will continue to be published through June 30, 2023.

We are monitoring and evaluating the risks related to changes in LIBOR availability, which include potential changes in interest paid on debt and amounts received and paid on interest rate swaps.

In addition, the value of debt or derivative instruments tied to LIBOR will also be impacted as LIBOR is limited and discontinued and contracts must be transitioned to a new alternative rate.

In some instances, transitioning to an alternative rate may require negotiation with lenders and other counterparties and could present challenges.

Certain of our agreements that have terms that are based on LIBOR have alternative rates already contained in the agreements while others do not.

We anticipate that we will either utilize the alternative rates contained in the agreements or negotiate a replacement reference rate for LIBOR with the lenders and derivative counterparties.

The consequences of these developments cannot be entirely predicted and could include an increase in the cost of our variable rate debt.

The consequences of these developments cannot be entirely predicted and could include an increase in the cost of our variable rate indebtedness.

The significant increase in the federal funds rate in 2022 and 2023 has increased the borrowing costs on our variable-rate debt and may increase the cost of any new debt we incur or refinance.

We have mortgages, credit facilities and derivative agreements that have terms that are based on the Secured Overnight Financing Rate (“SOFR”).

As of December 31, 2023, 62.5% of our total gross debt bore interest at variable rates.

As of December 31, 2023, we had one designated interest rate swap with a notional amount of $378.5 million, which effectively fixes a portion of our variable-rate debt, and we had seven interest rate caps with a notional amount of $364.2 million, which, while not designated as hedges for accounting purposes, do economically limit our exposure to increasing variable rates, but such interest rate swap and caps may not be effective in reducing our exposure to interest rate changes.

SOFR has a limited history, and the future performance of SOFR cannot be predicted based on historical performance

As of December 31, 2023, approximately 62.5% of our total gross debt bore interest at variable rates, all of which are based on SOFR.

The publication of SOFR began in April 2018, and, therefore, it has a limited history.

In addition, the future performance of SOFR cannot be predicted based on the limited historical performance.

Future levels of SOFR may bear little or no relation to the historical actual or historical indicative SOFR data.

Prior observed patterns, if any, in the behavior of market variables and their relation to SOFR, such as correlations, may change in the future.

Hypothetical performance data are not indicative of, and have no bearing on, the potential performance of SOFR.

Although changes in term SOFR and compounded SOFR generally are not expected to be as volatile as changes in SOFR on a daily basis, the return on, value of and market for the SOFR based debt may fluctuate more than floating rate debt securities with interest rates based on less volatile rates.

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Any hedging strategies we utilize may not be successful in mitigating our risks.

We have and may continue to enter into hedging transactions to manage risk of interest rate changes, price changes or currency fluctuations with respect to borrowings made or to be made to acquire or own real estate assets.

To the extent that we use derivative financial instruments, we will be exposed to credit, basis and legal enforceability risks.

We have used, and may continue to use, derivative financial instruments to hedge our exposure to changes in interest rates with respect to borrowings made or to be made to acquire or own real estate assets, which instruments expose us to credit basis and legal enforceability risks.

Derivative financial instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements.

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Finally, legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract.

These derivative instruments are speculative in nature and there is no guarantee that they will be effective.

If we are unable to manage these risks effectively, we could be materially and adversely affected.

Risks Related to Conflicts of Interest

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In addition, we may acquire properties in geographic areas where other entities advised by affiliates of AR Global own properties, and if we may acquire properties from, or sell properties to, other entities advised by affiliates of AR Global.

If one of the other entities advised by affiliates of AR Global attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays in locating another suitable tenant.

If one of the other entities advised by affiliates of AR Global attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays in locating another suitable tenant, which could adversely affect our cash flows and ability to make distributions to our stockholders.

Our Advisor faces conflicts of interest relating to joint ventures, which could result in a disproportionate benefit to the other venture partners at our expense.

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Our Advisor, AR Global and their officers and employees and certain of our executive officers and other key personnel and their respective affiliates are key personnel, general partners, sponsors, managers, owners and advisors of other real estate investment programs, including entities advised by affiliates of AR Global, some of which have investment objectives and legal and financial obligations similar to ours and may have other business interests as well.

Because these entities and individuals have competing demands on their time and resources, they may have conflicts of interest in allocating their time between our business and these other activities.

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All of our executive officers, some of our directors and the key real estate and other professionals assembled by our Advisor and our Property Manager face conflicts of interest related to their positions or interests in entities related to AR Global, which could hinder our ability to implement our business strategy.

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Shares that are repurchased will be repurchased at a price equal to the applicable Estimated Per-Share NAV and may be at a substantial discount to the price the stockholder paid for the shares.

We are also restricted from making any share repurchases until the Commencement Quarter and, after that, to the extent they would be aggregated with dividends and other distributions to our stockholders under the covenant in our Credit Facility, all of which may further limit the amount that may be repurchased.

The Estimated Per-Share NAV of our common stock is based upon subjective judgments, assumptions and opinions about future events, and may not reflect the amount that our stockholders might receive for their shares.

We intend to publish an updated Estimated Per-Share NAV as of December 31, 2022 in early April 2023.

We intend to publish an updated Estimated Per-Share NAV as of December 31, 2023 in late March 2024.

Our Advisor has engaged an independent valuer to perform appraisals of our real estate assets in accordance with valuation guidelines established by the Board.

As with any methodology used to estimate value, the valuation methodologies that will be used by any independent valuer to value our properties involve subjective judgments concerning factors such as comparable sales, rental and operating expense data, capitalization or discount rate, and projections of future rent and expenses.

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Under our valuation guidelines, our independent valuer estimates the market value of our principal real estate and real estate-related assets, and our Advisor makes a recommendation as to the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimate provided by the independent valuer.

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As a result, the appraised value of a particular property may be greater or less than its potential realizable value, which would cause our Estimated per-share NAV to be greater or less than the potential realizable value of our assets.

The price at which shares of our common stock may be sold under the DRIP and the price at which shares of our common stock may be repurchased by us pursuant to the SRP are based on Estimated Per-Share NAV and may not reflect the price that our stockholders would receive for their shares in a market transaction, the proceeds that would be received upon our liquidation or the price that a third-party would pay to acquire us.

The price at which shares of our common stock may be sold under the DRIP, if reinstated, would be the price at which shares of our common stock may be repurchased by us pursuant to the SRP, if reinstated, would be based on Estimated Per-Share NAV and may not reflect the price that our stockholders would receive for their shares in a market transaction, the proceeds that would be received upon our liquidation or the price that a third-party would pay to acquire us.

Because Estimated Per-Share NAV is only determined annually, it may differ significantly from our actual per‑share net asset value at any given time.

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Also, cash dividends and other distributions in excess of our cash flows provided by operations could decrease our Estimated Per-Share NAV.

The Estimated Per-Share NAV reflected Stock Dividends actually issued as of December 31, 2021, but has not been adjusted to reflect or consider any of the other stock dividends that were issued and will not be adjusted for stock dividends paid or that may be issued in the future until the Board determines a new Estimated Per-Share NAV which is expected in early April 2023.

The Estimated Per-Share NAV reflected stock dividends actually issued as of December 31, 2022, but has not been adjusted to reflect or consider any of the other stock dividends that were issued and will not be adjusted for stock dividends paid or that may be issued in the future until the Board determines a new Estimated Per-Share NAV which is expected in late March 2024.

Dividends paid in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding increases when dividends paid in stock are issued reducing the Estimated Per-Share NAV.

The Estimated Per-Share NAV may not reflect the value of shares of our common stock at any given time, and our estimated per-share NAV may differ significantly from our actual per-share net asset value at any given time.

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The trading price of our Series A Preferred Stock and Series B Preferred Stock may fluctuate significantly.

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An increase in interest rates available to investors could also reduce the value of our common stock.

We currently do not pay cash distributions on our common stock and we may be unable to pay or maintain cash distributions in the future or increase distributions over time.

There are many factors that can affect the availability and timing of cash distributions to stockholders, and we currently do not pay cash distributions on our common stock.

Distributions will be based principally on cash available from our operations.

The amount of cash available for distributions is affected by many factors, such as income from our properties and our operating expense levels, as well as many other variables.

Actual cash available for distributions may vary substantially from estimates.

We cannot assure a stockholder that we will be able to pay distributions or that distributions will increase over time with respect to our capital stock.

Our actual results may differ significantly from the assumptions used by our Board in establishing the distribution rate to stockholders.

We may not have sufficient cash from operations to make a distribution required to qualify or maintain our qualification as a REIT, which may materially adversely affect a stockholder’s investment.

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The limit on the number of shares a person may own may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.

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We may also issue other classes or series of preferred stock that could also have the same effect.

We may issue additional equity securities in the future.

Our stockholders do not have preemptive rights to any shares issued by us in the future.

Our charter authorizes us to issue up to 350,000,000 shares of stock, consisting of 300,000,000 shares of common stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share.

As of December 31, 2022, we had the following stock issued and outstanding:

(i) 105,080,531 shares of common stock;

(ii) 3,977,144 shares of Series A Preferred Stock;

and (iii) 3,630,000 shares of Series B Preferred Stock.

Subject to the approval rights of holders of our Series A Preferred Stock and Series B Preferred Stock regarding authorization or issuance of equity securities ranking senior to the Series A Preferred Stock or Series B Preferred Stock, the board, without approval of our common stockholders, may amend our charter from time to time to increase or decrease the aggregate number of authorized shares of stock, or the number of authorized shares of any class or series of stock or may classify or reclassify any unissued shares into other classes or series of stock without obtaining stockholder approval and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the stock.

All of our authorized but unissued shares of stock may be issued in the discretion of the board.

The issuance of additional shares of our common stock could dilute the interests of the holders of our common stock, and any issuance of shares of preferred stock senior to our common stock, such as our Series A Preferred Stock and Series B Preferred Stock, or any incurrence of additional indebtedness, could affect our ability to pay distributions on our common stock.

The issuance of additional shares of preferred stock ranking equal or senior to our Series A Preferred Stock and Series B Preferred Stock, including preferred stock convertible into shares of our common stock, could dilute the interests of the holders of common

stock, Series A Preferred Stock, Series B Preferred Stock and any issuance of shares of preferred stock senior to our Series A Preferred Stock, Series B Preferred Stock or incurrence of additional indebtedness could affect our ability to pay dividends on, redeem or pay the liquidation preference on our Series A Preferred Stock and Series B Preferred Stock.

These issuances could also adversely affect our Estimated Per-Share NAV or the trading price of our Series A Preferred Stock and Series B Preferred Stock.

We may issue shares in public or private offerings in the future, including shares of our common stock issued as awards to our officers, directors and other eligible persons, pursuant to the advisory agreement in payment of fees thereunder and pursuant to the DRIP.

We may also issue partnership units in the OP designated as “Common OP Units” to sellers of properties we acquire which, subject to satisfying certain requirements, would give the holder of Common OP Units the option to redeem Common OP Units for shares of our common stock or cash at our option.

We also may issue securities that are convertible into shares of our common stock.

Because our decision to issue equity 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.

The issuance of additional equity securities could adversely affect stockholders.

We have a classified board, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.

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• 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 with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

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These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

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Certain provisions in our bylaws and agreements may deter, delay or prevent a change in our control.

Provisions contained in our bylaws may deter, delay or prevent a change in control of our board of directors, including, for example, provisions requiring qualifications for an individual to serve as a director and a requirement that certain of our directors be “Managing Directors” and other directors be “Independent Directors”, as defined in our governing documents.

As changes occur in the marketplace for corporate governance policies, the provisions may change, be removed or new ones may be added.

Provisions contained in our bylaws may deter, delay or prevent a change in control of our Board, including, for example, provisions requiring qualifications for an individual to serve as a director and a requirement that certain of our directors be “Managing Directors” and other directors be “Independent Directors”, as defined in our governing documents.

Such provisions may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might otherwise result in a premium for our stockholders.

Maryland law limits the ability of a third-party to buy a large stake in us and exercise voting power in electing directors, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.

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There can be no assurance that this provision will not be amended or eliminated at any time in the future.

If our stockholders do not agree with the decisions of the board, our stockholders only have limited control over changes in our policies and operations and may not be able to change our policies and operations.

The board determines our major policies, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and dividends and other distributions.

The board may amend or revise these and other policies without a vote of the stockholders except to the extent that the policies are set forth in our charter.

Under MGCL and our charter, our common stockholders have a right to vote only on the following:

• the election or removal of directors;

• amendment of our charter, except that the board may amend our charter without stockholder approval to (a) increase or decrease the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have the authority to issue, (b) effect certain reverse stock splits, and (c) change our name or the name or other designation or the par value of any class or series of our stock and the aggregate par value of our stock;

• our liquidation or dissolution;

• certain reorganizations of our company;

• certain mergers, consolidations or sales or other dispositions of all or substantially all our assets

All other matters are subject to the discretion of the board.

Holders of our Series A Preferred Stock and Series B Preferred Stock have extremely limited voting rights.

The stockholder rights plan adopted by our board of directors may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.

Our board of directors previously adopted a stockholder rights plan that will expire in May 2023 or sooner under certain circumstances.

In connection with the rights plan, in December 2020, we paid a dividend of one common share purchase right for each share of our common stock outstanding as authorized by our board in its discretion.

If a person or entity, together with its affiliates and associates, acquires beneficial ownership of 2.0% or more of our then outstanding common stock, subject to certain exceptions, each right would entitle its holder (other than the acquirer, its affiliates and associates) to purchase additional shares of our common stock at a substantial discount to the then current per share estimated net asset value.

In addition, under certain circumstances, we may exchange the rights (other than rights beneficially owned by the acquirer, its affiliates and associates), in whole or in part, for shares of common stock on a one-for-one basis.

The stockholder rights plan could make it more difficult for a third-party to acquire the Company or a large block of our common stock without the approval of our board or directors, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.

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If we internalize our management functions, we would be required to pay a transition fee and would not have the right to retain our management or personnel.

We may engage in an internalization transaction and become self-managed in the future.

We also would not have any right to retain our executive officers or other personnel of our Advisor who currently manage our day-to-day operations.

We may terminate our advisory agreement in only limited circumstances, which may require payment of a termination fee.

We have limited rights to terminate our Advisor.

Further, we may terminate the agreement only under limited circumstances.

Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business.

We may also incur additional costs to remedy damages caused by these disruptions.

As reliance on technology has increased, so have the risks posed to those systems.

However, these upgrades, processes, new technology and training may not be sufficient to protect us from all risks.

In some cases, attempted attacks and intrusions are designed not to be detected and, in fact, may not be detected.

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• result in misstated financial reports, violations of loan covenants, missed reporting deadlines or missed permitting deadlines;

• affect our ability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

• result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;

• require significant management attention and resources to remedy any damages that result;

• subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements;

• adversely impact our reputation among our tenants, operators and investors generally.

We have no employees.

Personnel and services that we require are provided to us under contracts with our Advisor and its affiliates including our Property Manager.

We depend on our Advisor and our Property Manager to manage our operations and acquire and manage certain of our real estate assets.

Our Advisor makes all decisions with respect to the management of our company, subject to the supervision of, and any guidelines established by, the Board.

Our success depends to a significant degree upon the contributions of our executive officers and other key personnel of our Advisor and its affiliates, including Michael Anderson, our chief executive officer, and Scott Lappetito, our chief financial officer, treasurer and secretary.

Further, we do not maintain key person life insurance on any person.

We believe that our success depends, in large part, upon the ability of our Advisor to hire, retain or contract for services of highly skilled managerial, operational and marketing personnel.

Competition for skilled personnel is intense, and there can be no assurance that our Advisor will be successful in attracting and retaining skilled personnel.

We depend on our OP and its subsidiaries for cash flow and are structurally subordinated in right of payment to the obligations of our OP and its subsidiaries.

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Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our OP and its subsidiaries will be available to satisfy the claims of our creditors or to pay dividends and other distributions to our stockholders only after all the liabilities and obligations of our OP and its subsidiaries have been paid in full.

We indemnify our officers, directors, our Advisor and its affiliates against claims or liability they may become subject to due to their service to us, and our rights and the rights of our stockholders to recover claims against our officers, directors, our Advisor and its affiliates are limited.

Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances.

In addition, subject to certain limitations set forth therein or under Maryland law, our charter provides that no director or officer will be liable to us or our stockholders for monetary damages and permits us to indemnify our directors and officers from liability and advance certain expenses to them in connection with claims or liability they may become subject to due to their service to us, and we are not restricted from indemnifying our Advisor or its affiliates on a similar basis.

We have entered into indemnification agreements consistent with Maryland law and our charter with our directors and officers, certain former directors and officers, our Advisor and AR Global.

We and our stockholders may have more limited rights against our directors, officers, employees and agents, and our Advisor and its affiliates, than might otherwise exist under common law, which could reduce the recovery of our stockholders and our recovery against them.

In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents or our Advisor and its affiliates in some cases.

Subject to conditions and exceptions, we also indemnify our Advisor and its affiliates from losses arising in the performance of their duties under the advisory agreement and have agreed to advance certain expenses to them in connection with claims or liability they may become subject to due to their service to us.

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Federal Income Tax Risks

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Accordingly, we cannot be certain that we will be successful in operating so that we can remain qualified as a REIT.

Our ability to satisfy the asset tests depends on our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and

for which we will not obtain independent appraisals.

Our ability to satisfy the asset tests depends on our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.

Our compliance with the REIT income or quarterly asset requirements also depends on our ability to successfully manage the composition of our income and assets on an ongoing basis.

Accordingly, if certain of our operations were to be recharacterized by the IRS, such recharacterization would jeopardize our ability to satisfy all requirements for qualification as a REIT.

Accordingly, if certain of our operations were to be recharacterized by the IRS, such recharacterization could jeopardize our ability to satisfy all requirements for qualification as a REIT.

Furthermore, future legislative, judicial or administrative changes to the U.S.

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In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we lose our REIT qualification.

Losing our REIT qualification would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability.

Losing our REIT qualification would reduce our net earnings available for investment or distribution to stockholders because of the additional entity-level tax liability.

In addition, amounts paid to stockholders that are treated as dividends for U.S.

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federal income and excise taxes on our earnings while we qualify as a REIT, it is possible that we might not always be able to do so.

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Recharacterization of sale-leaseback transactions may cause us to lose our REIT status.

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For so long as we qualify as a REIT, our ability to dispose of property during the first few years following acquisition may be restricted to a substantial extent as a result of our REIT qualification.

foreclosure property) that we own, directly or indirectly through any subsidiary entity, including the OP, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business.

Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT and provided we do not meet a safe harbor available under the Code, we will be subject to a 100% penalty tax on the net income from the sale or other disposition of any property (other than foreclosure property) that we own, directly or indirectly through any subsidiary entity, including the OP, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business.

Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property.

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Such a recharacterization of an underlying property owner could also threaten our ability to maintain our REIT qualification.

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If our qualified health care properties are not properly leased to a TRS or the managers of those qualified health care properties do not qualify as “eligible independent contractors,” we could fail to qualify as a REIT.

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federal income tax purposes, we may fail to qualify as a REIT.

We may choose to make distributions in shares of our common stock, in which case our stockholders may be required to pay U.S.

federal income taxes in excess of the cash portion of distributions they receive.

We may choose to make distributions partly in cash and partly in shares of our common stock, in which case our stockholders may be required to pay U.S.

federal income taxes in excess of the cash portion of such distributions they receive.

In connection with our qualification as a REIT, we are required to distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain.

In order to satisfy this requirement, as much as 80% of the aggregate distributions may be in shares of our common stock.

The IRS has issued Revenue Procedures authorizing elective cash/stock distributions to be made by “publically offered REITs,” like us, in order to satisfy this requirement, provided that at least 20% of the aggregate amount of a distribution to stockholders is paid in cash and certain other parameters detailed in the Revenue Procedures are satisfied.

Taxable stockholders receiving such distributions will be required to include the full amount of such distributions as ordinary dividend income to the extent of our current or accumulated earnings and profits, as determined for U.S.

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Accordingly, U.S.

stockholders receiving a distribution of shares of our common stock may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution.

stockholders receiving a distribution partly in cash and partly in shares of our common stock may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution.

stockholder sells the shares that it receives as part of the distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the value of the shares at the time of the sale.

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Because there is no established trading market for shares of our common stock, stockholders may not be able to sell shares of our common stock to pay taxes owed on dividend income.

Our current distribution policy with respect to distributions on shares of our common stock is to pay such distributions solely in shares of our common stock.

Such distributions are not taxable to our stockholders.

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The taxation of distributions can be complex;

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Our stockholders may have tax liability on distributions that they elect to reinvest in shares of our common stock, but they would not receive the cash from such distributions to pay such tax liability.

Stockholders who participate in the DRIP will be deemed to have received, and for U.S.

federal income tax purposes will be taxed on, the distributions reinvested in shares of our common stock to the extent the distributions were not a tax-free return of capital.

In addition, our stockholders will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value.

Stockholders who participate in the DRIP generally will be deemed to receive distributions in an amount equal to the fair market value of the shares of our common stock received on the date of distribution, regardless of whether such shares were purchased at a discount to fair market value, and will be taxed on any such distribution to the extent it was not a tax-free return of capital.

As a result, unless a stockholder is a tax-exempt entity, it may have to use funds from other sources to pay its tax liability on the distributions reinvested in shares of our common stock pursuant to the DRIP.

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In addition, losses in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of the TRS.

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Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities.

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These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for shares of our stock or otherwise be in the best interests of the stockholders.

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stockholders will be subject to U.S.

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trade or business.

However, a capital gain distribution will not be treated as effectively connected income if (a) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the U.S.

and (b) the non-U.S.

stockholder does not own more than 10% of any class of our stock at any time during the one-year period ending on the date the distribution is received.

However, a capital gain distribution will not be treated as effectively connected income if (a) the distribution is received with respect to a class of stock that is “regularly traded,” as defined in applicable Treasury regulations on an established securities market located in the United States and (b) the non-U.S.

stockholder does not own more than 10% of such class of our stock at any time during the one-year period ending on the date the distribution is received.

Gain recognized by a non-U.S.

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corporate stockholders in determining whether a REIT is domestically controlled.

We believe, but there can be no assurance, that we will be a domestically-controlled qualified investment entity.

We believe that we currently are, but there can be no assurance that we will continue to be, a domestically-controlled qualified investment entity.

Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S.

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taxation as a sale of a USRPI if (a) the shares are of a class of our stock that is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market, and (b) such non-U.S.

stockholder owned, actually and constructively, 10% or less of the outstanding shares of our stock of that class at any time during the five-year period ending on the date of the sale.

stockholder owned, actually and constructively, 10% or less of the outstanding shares of such class of stock at all times during the shorter of (x) five-year period ending on the date of the sale and (y) the period during which the non-U.S.

stockholders held such shares of our stock.

Potential characterization of dividends and other distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.

1 unchanged sentence

federal income tax as unrelated business taxable income under the Code.

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