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Item 1. Business

2025-02-27 compared with 2024-03-15 · 79 added, 128 removed, 199 unchanged (51% of the section changed)

We are an externally managed real estate investment trust for U.S.

federal income tax purposes (“REIT”), that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate, focused on medical office and other healthcare-related buildings (“MOBs”), and senior housing operating properties (“SHOPs”).

As described in further detail herein, we operate in two reportable business segments for management and internal financial reporting purposes:

MOBs and SHOPs.

As of December 31, 2023, we owned 204 properties located in 33 states and comprised of 9.0 million rentable square feet.

We are a real estate investment trust (“REIT”) for U.S.

federal income tax purposes.

We acquire, own and manage a diversified portfolio of healthcare-related real estate focused on outpatient medical facilities (“OMF”) and senior housing operating properties (“SHOP”).

As described in further details herein, we operate in two reportable business segments for management and internal financial reporting purposes:

OMFs and SHOPs.

Prior to September 27, 2024, our former advisor, Healthcare Trust Advisors, LLC (the “Advisor”), managed our day-to-day business with the assistance of our property manager, Healthcare Trust Properties, LLC (the “Property Manager”).

Prior to September 27, 2024, the Advisor and Property Manager were under common control with AR Global Investments, LLC (the “Advisor Parent”) and these related parties received compensation and fees for providing services to us.

On September 27, 2024, we internalized our advisory and property management functions with our own dedicated workforce (“Internalization”) (see Note 1 — Organization and Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Annual Report on Form 10-K (the “Consolidated Financial Statements”) for additional information).

On September 30, 2024, we also effected a reverse stock split of our common stock (the “Reverse Stock Split”).

Upon the effectiveness of the Reverse Stock Split, every four shares of our issued and outstanding common stock automatically combined and was reclassified into one issued and outstanding share of common stock.

All share and per share data in this Annual Report on Form 10-K have been adjusted for all periods presented to reflect the Reverse Stock Split.

As of December 31, 2024, we owned 193 properties located in 31 states, comprising 8.4 million rentable square feet.

The following table summarizes our portfolio of properties as of December 31, 2024:

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(In thousands)

Medical Office and Other Healthcare-Related Buildings 156 5,153,419 $ 1,468,401

Outpatient Medical Facilities

148 4,716,949 $ 1,381,166

Seniors Housing Operating Properties (2)

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(1) Gross asset value represents total real estate investments, at cost ($2.5 billion total at December 31, 2024), net of gross market lease intangible liabilities ($22.8 million total at December 31, 2024).

Impairment charges are already reflected within gross asset value.

Impairment charges are reflected within gross asset value.

(2) As of December 31, 2024, we had 3,939 rentable units in our SHOP segment.

(3) Excludes two land parcels with a gross asset value of $3.7 million.

The SHOP segment excludes one closed facility.

(3) Excludes one land parcel with a gross asset value of $0.6 million.

In constructing our portfolio, we are committed to diversifying our assets by geographic region.

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and (iii) maintaining a strong and flexible capital structure.

We have invested, and expect to continue investing, primarily in MOBs and seniors housing properties, primarily structured as SHOPs.

We have invested, and expect to continue investing, primarily in OMFs and seniors housing properties, primarily structured as SHOPs.

In addition, we may invest in facilities leased to hospitals, including rehabilitation hospitals, long-term acute care centers, surgery centers, inpatient rehabilitation facilities, special medical and diagnostic service providers, laboratories, research firms, pharmaceutical and medical supply manufacturers and health insurance firms.

Our SHOP investments are held through a structure permitted under the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA").

Our SHOP investments are held through a structure permitted using the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”).

We generally acquire a fee interest in any property we acquire (a “fee interest” is the absolute, legal possession and ownership of land, property, or rights), although we may also acquire a leasehold interest (a “leasehold interest” is a right to enjoy the exclusive possession and use of an asset or property for a stated definite period as created by a written lease).

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We also may make preferred equity investments in an entity.

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In addition, we may sell assets from time to time to recycle capital and manage our leverage.

Healthcare is the single largest industry in the United States based on contribution to Gross Domestic Product (“GDP”).

According to the National Health Expenditures Projections, 2023 - 2032 report prepared by the Centers for Medicare and Medicaid Services (“CMS”):

(i) national health expenditures are projected to grow on average 5.4% per year for 2022 through 2031 which is expected to exceed average projected GDP growth during those periods of 4.6% and (ii) the healthcare industry projected share of GDP is projected to increase slightly from 18.3% of U.S.

(i) national health expenditures are projected to grow on average 5.6% per year for 2023 through 2032 which is expected to exceed average projected GDP growth during those periods of 4.3%, and (ii) the healthcare industry projected share of GDP is projected to increase from 17.3% of U.S.

GDP in 2022 to 19.7% by 2032.

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According to the U.S.

According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare and social assistance sector) is projected to grow 9.7% from 2022 to 2032, adding approximately 2.1 million new jobs, representing job growth higher than any other sector and approximately 45% of all the projected job gains from 2022 to 2031.

This growth is expected due to an aging population and the projected increase in the number of individuals who will have access to health insurance.

We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for MOBs and other facilities that serve the healthcare industry.

Department of Labor’s Bureau of Labor Statistics (the “Bureau of Labor Statistics”), the healthcare industry was one of the largest industries in the United States, providing approximately 23 million seasonally adjusted jobs as of December 31, 2024, and the healthcare industry is expected to have the largest growth and be the fastest growing industry sector.

According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare and social assistance sector) is projected to grow 10.0% from 2023 to 2033, adding approximately 2.3 million new jobs, representing job growth higher than any other sector and over a third of all the projected job gains from 2023 to 2033.

This growth is expected due to an aging population, the growing prevalence of chronic conditions and high levels of mental health and behavioral disorders.

We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for OMFs and other facilities that serve the healthcare industry.

The senior housing industry has been experiencing ongoing staffing shortages in recent years;

however, the Bureau of Labor Statistics reported employment increases for nursing and assisted living facilities in 2023.

however, the Bureau of Labor Statistics reported employment increases for nursing and residential care facilities in 2023.

In addition to the growth in national health expenditures and corresponding increases in employment in the healthcare sector, the nature of healthcare delivery continues to evolve due to the impact of government programs, regulatory changes and consumer preferences.

We believe these changes have increased the need for capital among healthcare providers and increased incentives for these providers to develop more efficient real estate solutions in order to enhance the delivery of quality healthcare.

We believe that the aging population, improved chronic disease management, technological advances and healthcare reform will positively affect the demand for MOBs, seniors housing properties and other healthcare-related facilities and generate attractive investment opportunities.

We believe that the aging population, improved chronic disease management, technological advances and healthcare reform will positively affect the demand for OMFs, seniors housing properties and other healthcare-related facilities and generate attractive investment opportunities.

The first wave of Baby Boomers, the largest segment of the U.S.

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Census Bureau, the U.S.

population over 65 will grow to 94.7 million in 2060, up from 49.2 million in 2016.

This group will grow more rapidly than the overall population.

Thus, its share of the population will increase to 23% in 2060, from 15% in 2016.

population over 65 will grow to 88.8 million in 2060, up from 57.8 million as of July 2022.

This group is projected to grow more rapidly than the overall population.

Thus, its share of the population will increase to 24.4% in 2060, up from 17.3% as of July 2022.

Patients with diseases that were once life threatening are now being treated with specialized medical care and an arsenal of new pharmaceuticals.

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We may invest in healthcare assets through development and joint venture partnerships.

As of December 31, 2023, 2022 and 2021, none of our tenants (together with their affiliates) had annualized rental income on a straight-line basis representing 10% or greater of total annualized rental income on a straight-line basis for the portfolio.

The following table lists the states where we had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of December 31, 2023, 2022 and 2021:

State 2023 2022 2021

Florida 19.9% 19.2% 17.7%

Pennsylvania 10.6% * *

* State’s annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties as of the period specified.

Medical Office and Other Healthcare-Related Buildings

As of December 31, 2023, we owned 156 MOBs and other health care related buildings under lease totaling 5.2 million square feet.

Outpatient Medical Facilities

As of December 31, 2024, we owned 148 OMFs and other health care related buildings under lease totaling 4.7 million square feet.

These properties are leased to tenants that provide healthcare services that typically consist of:

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• post-acute care facilities,

• skilled nursing facilities (“SNFs”) and

• skilled nursing facilities, and

• other facilities.

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Certain of our properties can be located on or near hospital campuses and require significant plumbing, electrical and mechanical systems to accommodate diagnostic imaging equipment such as x-rays or other imaging equipment, and may also have significant plumbing to accommodate physician exam rooms.

In addition, MOBs are often built to accommodate higher structural loads for certain equipment and may contain specialized construction such as cancer radiation therapy vaults for cancer treatment.

Certain of our properties are located on or near hospital campuses and require significant plumbing, electrical and mechanical systems to accommodate diagnostic imaging equipment such as x-rays or other imaging equipment, and may also have significant plumbing to accommodate physician exam rooms.

In addition, OMFs are often built to accommodate higher structural loads for certain equipment and may contain specialized construction such as cancer radiation therapy vaults for cancer treatment.

Hospitals can include general acute care hospitals, inpatient rehabilitation hospitals, long-term acute care hospitals and surgical and specialty hospitals.

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Post-acute facilities offer restorative, rehabilitative and custodial care for people not requiring the more extensive and complex treatment available at acute care hospitals.

We include these types of assets in our MOB and other health care related segment when the property is leased to a tenant that operates the property.

There are a variety of types of MOBs:

on campus, off campus, affiliated and non-affiliated.

On campus MOBs are physically located on a hospital’s campus, often on land leased from the hospital.

We include these types of assets in our OMF and other health care related segment when the property is leased to a tenant that operates the property.

There are also a variety of types of OMFs, including on campus and off campus.

On campus OMFs are physically located on a hospital’s campus, often on land leased from the hospital.

A hospital typically creates strong tenant demand which leads to high tenant retention.

Off campus properties are located independent of a hospital’s location.

Affiliated MOBs may be located on campus or off campus, but are affiliated with a hospital or health system.

In some respects, affiliated MOBs are similar to on campus MOBs because the hospital relationship drives tenant demand and retention.

Finally, non-affiliated MOBs are not affiliated with any hospital or health system, but may contain physician offices and other healthcare services.

We favor affiliated MOBs versus non-affiliated MOBs because of the relationship and synergy with the sponsoring hospital or health system and buildings not affiliated with the hospital or health system but anchored or entirely occupied by a long-tenured physician practice.

The following table reflects the on campus, off campus, affiliated and non-affiliated MOB composition of our portfolio as of December 31, 2023:

MOB Classification Number of Properties Rentable Square Feet

On Campus 19 1,109,706

Off Campus 137 4,043,713

156 5,153,419

Affiliated 71 2,890,507

Non-affiliated 85 2,262,912

156 5,153,419

Seniors Housing Properties

Off campus OMFs are located independent of a hospital’s location.

Seniors Housing Operating Properties

As of December 31, 2024, we owned 44 seniors housing properties under the RIDEA structure in our SHOP segment.

Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by an independent qualifying management company, which we also refer to as an operator who qualifies as an eligible independent contractor.

Our seniors housing properties as of December 31, 2024 primarily consist of assisted living facilities (2,058 units), memory care facilities (968 units) and independent living facilities (882 units).

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These residents generally do not need assistance with activities of daily living, however, in some of our facilities, residents have the option to contract for these services.

However, independent living facilities on their own are not treated as qualified health care properties eligible to be leased to a TRS.

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However, independent living facilities on their own are not treated as qualified health care properties eligible to be leased to a taxable REIT subsidiary (a “TRS”).

Ancillary revenues and revenues from sub-acute care services are derived from providing services beyond room and board and include occupational, physical, speech, respiratory and intravenous therapy, wound care, oncology treatment, brain injury care and orthopedic therapy, as well as sales of pharmaceutical products and other services.

Certain facilities provide some of the foregoing services on an outpatient basis.

During the years ended December 31, 2021 and 2020, we took efforts to divest from SNFs through our property dispositions, and we have also converted many SNF units to memory care units in our existing properties, which have significantly reduced our SNF operations.

As of December 31, 2023 our seniors housing properties included 31 SNF units.

Adverse Economic Impacts Since the COVID-19 Pandemic

During the first quarter of 2020, the global COVID-19 pandemic commenced.

The pandemic and its aftermath have had, and could continue to have, adverse impacts on economic and market conditions.

Our SHOP segment continues to be impacted by the post-pandemic operating environment.

Our MOB segment was less impacted, and we believe our MOB segment has returned to its pre-pandemic operating conditions.

Further, recent increases in inflation brought about by labor shortages, supply chain disruptions, increases in property insurance and property tax rates and increases in interest rates have had, and may continue to have, adverse impacts on our results of operations.

Moreover, these increases in the rate of inflation, the ongoing wars in Ukraine, Israel and related sanctions, supply chain disruptions and increases in interest rates may also impact the ability of our tenants and residents to pay rent and hence our results of operations and liquidity.

For more information about the risks and uncertainties associated with inflation, the ongoing wars in Ukraine, Israel, and related sanctions and labor shortages, please see the sections “Inflation” and “Part II—Item 1A.

Risk Factors” below.

Adverse Economic Impacts — SHOP Segment

In our SHOP segment, occupancy trended downward from March 2020 until June 2021 and has since stabilized.

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

We generally bear these cost increases at our SHOPs, which were partially offset by funds received under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and to a lesser extent, cost recoveries for personal protective equipment from residents.

During the year ended December 31, 2022, we relied more on the use of temporary contract labor and agencies than we had historically.

We have since reduced our reliance on this labor source in the year ended December 31, 2023, however, wage expenses (including overtime, training and bonus wages) incurred from employees of our third party operators has increased due to, among other things, (i) inflation raising the cost of labor generally, (ii) a lack of qualified personnel that our third party operators are able to employ on a permanent basis and (iii) training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor.

The persistence of high inflation, labor shortages, supply chain disruptions, and higher interest rates, property insurance rates and property tax rates have caused adverse impacts to our occupancy and cost levels, and these trends may continue to impact us and have material adverse effects on the results of our operations in future periods.

The adverse financial impacts of the COVID-19 pandemic were partially offset by funds received under the CARES Act.

We did not receive any funds through the CARES Act in the year ended December 31, 2023.

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

For accounting purposes, we consider these funds as grant contributions from the government.

The full amounts received were recognized as reduction of property operating expenses in our consolidated statement of operations for the years ended December 31, 2022 and 2021, respectively, to offset incurred COVID-19 expenses.

We do not anticipate that any further funds under the CARES Act will be received, and there can be no assurance that the CARES Act program will be extended or any further amounts received under currently effective or potential future government programs.

Organizational Structure

Substantially all of our business is conducted through Healthcare Trust Operating Partnership, L.P.

(the “OP”), a Delaware limited partnership, and its wholly owned subsidiaries.

Our Advisor manages our day-to-day business with the assistance of our property manager, Healthcare Trust Properties, LLC (the “Property Manager”).

Our Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us.

We also reimburse these entities for certain expenses they incur in providing these services to us.

Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, has an interest in us through ownership of interests in our OP.

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Substantially all of our business is conducted through National Healthcare Properties Operating Partnership, L.P.

(the “OP”), a Delaware limited partnership, and its wholly owned subsidiaries, including TRSs.

We own our SHOPs through the RIDEA structure, pursuant to which, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” We view this as a structure primarily to be used on properties that present attractive valuation entry points with long term growth prospects or drive growth by:

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We utilize a combination of debt and equity to fund our investment activity.

Our debt and equity levels are determined by management in consultation with the Board.

For short-term purposes, we may borrow from our MOB Warehouse Facility and our Fannie Mae Master Credit Facilities, which include a secured credit facility with KeyBank National Association (the “KeyBank Facility”) and a secured credit facility with Capital One Multifamily Finance, LLC, an affiliate of Capital One, National Association (the “Capital One Facility”).

The KeyBank Facility and Capital One Facility are referred to herein together as the “Fannie Mae Master Credit Facilities”.

Our debt and equity levels are determined by management in consultation with our Board of Directors (the “Board”).

For expedited financing needs, we may borrow under our loan agreement, dated as of December 22, 2023 (the “OMF Warehouse Facility”), by and among Capital One, National Association (“Capital One”) and certain of the wholly-owned subsidiaries of the OP, which provides up to $50.0 million of variable-rate financing, by including additional unencumbered properties subject to the terms and conditions of the OMF Warehouse Facility and, subject to our compliance with the collateral pool and restrictive covenant requirements contained therein, also utilize our Fannie Mae Master Credit Facilities, which include a secured credit facility with KeyBank National Association (“KeyBank”) (the “KeyBank Facility”), pursuant to that certain Master Credit Facility Agreement, dated as of October 31, 2016, as amended, by and among KeyBank and certain of the OP’s wholly-owned subsidiaries, and a secured credit facility with Capital One Multifamily Finance, LLC, an affiliate of Capital One (the “Capital One Facility” and, together with the KeyBank Facility, the “Fannie Mae Master Credit Facilities”), pursuant to that certain Master Credit Facility Agreement, dated as of October 31, 2016, as amended, by and among Capital One Multifamily Finance, LLC, and certain of the OP’s wholly-owned subsidiaries.

We may seek and even replace current borrowings with longer-term capital such as senior secured or unsecured notes or other forms of long-term financing.

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In addition, we may obtain financing secured by previously unencumbered properties in which we have invested or may refinance properties acquired on a leveraged basis.

As of December 31, 2023, we had $635.9 million of unencumbered real estate investments, at cost.

In our agreements with our lenders, we are subject to restrictions with respect to secured and unsecured indebtedness, including restrictions on permitted investments, maintenance of a maximum leverage ratio, a minimum fixed charge coverage ratio, among other things.

As of December 31, 2023 we were in compliance with these covenants.

As of December 31, 2023, our total debt leverage ratio (net debt divided by gross asset value) was approximately 43.7%.

Net debt totaled $1.1 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($46.4 million).

Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion), net of gross market lease intangible liabilities ($23.5 million).

Cumulative impairment charges are reflected within gross asset value.

We elected to be taxed as a REIT under Sections 856 through 860 of Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2013.

Commencing with that taxable year, we believe we have been organized and operated in a manner so that we qualify as a REIT under the Code.

We intend to continue to operate in such a manner, but can provide no assurance that we will operate in a manner so as to remain qualified as a REIT.

To continue to qualify as a REIT, we must, among other things, distribute at least 90% of our REIT taxable income, which does not equal net income as calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), determined without regard to the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational requirements.

We elected to be taxed as a REIT under Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ended December 31, 2013.

We intend to continue to operate in such a manner, but we can provide no assurances that we will be able to operate in a manner so as to remain qualified for taxation as a REIT.

To continue to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”)), determined without regard to the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational requirements.

If we continue to qualify as a REIT, we generally will not be subject to U.S.

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As of December 31, 2024, we owned 44 SHOPs which we lease to our TRS.

The market for MOB and SHOP real estate is highly competitive.

The market for OMF and SHOP real estate is highly competitive.

We compete in all of our markets based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs and the manner in which the property is operated and marketed.

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In addition, these same entities seek financing through similar channels.

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The healthcare industry is one of the most regulated industries in the United States and is currently experiencing rapid regulatory change and uncertainty.

The regulatory uncertainty and the potential impact on our tenants and operators could have an adverse material effect on their ability to satisfy their contractual obligations.

Our tenants and operators must comply with a wide range of complex federal, state, and local laws and regulations, and the healthcare industry, in general, is the subject to increased enforcement and penalties in all areas.

Our tenants and operators must comply with a wide range of complex federal, state and local laws and regulations, and the healthcare industry, in general, is subject to increased enforcement and penalties in all areas.

Fraud and abuse continues to be an enforcement priority at both the federal and state levels including, but not limited to, the Federal Anti-Kickback Statute, the Federal Physician Self-Referral Statute (commonly known as the “Stark Law”), the False Claims Act (“FCA”), the Civil Monetary Penalties Law (“CMPL”) and a range of other federal and state regulations relating to waste, cost control and healthcare management.

The business and operations of our tenants and operators and therefore our business could be materially impacted by, among other things, a significant expansion of applicable federal, state or local laws and regulations, legislative changes or new judicial challenges to the Patient Protection and Affordable Care Act (the “Affordable Care Act” or “ACA”), future attempts to reform healthcare, new interpretations of existing laws and regulations, and changes or increased emphasis on certain enforcement priorities.

The business and operations of our tenants and operators and therefore our business could be materially impacted by, among other things, a significant expansion of applicable federal, state or local laws and regulations, legislative changes or new judicial challenges to the Patient Protection and Affordable Care Act (the “ACA”), future attempts to reform healthcare, new interpretations of existing laws and regulations, and changes or increased emphasis on certain enforcement priorities.

Our SHOP segment derives minimal revenues from Medicare and Medicaid so the impact of federal enforcement relating to waste, cost control and healthcare management is limited;

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In our SHOP segment, only one property receives payments from Medicare and Medicaid, and a small percentage of our assisted living revenue is derived from Medicaid.

For our MOB segment, our tenants and operators could be effected, which could impact our tenants’ ability to pay rent.

For our OMF segment, our tenants and operators could be affected, which could impact our tenants’ ability to pay rent.

Our tenants and operators are subject to extensive federal, state, and local laws, regulations and industry standards which govern business operations, physical plant and structure, patient and employee health and safety, access to facilities, patient rights - including privacy, price transparency, fewer restrictions on access to care - and security of health information.

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Licensure, Certification and Certificate of Need

Our tenants operate hospitals, assisted living facilities, a skilled nursing facility and other healthcare entities and providers that receive reimbursement for services from third-party payors, including the government sponsored Medicare and Medicaid programs and private insurance carriers.

Our tenants operate hospitals, assisted living facilities and other healthcare entities and providers that receive reimbursement for services from third-party payors, including the government sponsored Medicare and Medicaid programs and private insurance carriers.

To participate in the Medicare and Medicaid programs, tenants and operators of healthcare facilities and other healthcare providers must comply with the regulations previously referenced, as well as with licensing, certification and, in some states, certificate of need (“CON”) requirements.

In granting and renewing these licenses and certifications, the state regulatory agencies consider numerous factors relating to a facility’s operations, including, but not limited to, the plant and physical structure, admission and discharge standards, staffing, training, patient and consumer rights, medication guidelines and other rules.

In the SHOP segment, if a tenant and/or operator fails to maintain or renew any required license, certification or other regulatory approval or to correct serious deficiencies identified in compliance surveys, the tenant and/or operator could be prohibited from continuing operations at a facility.

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In addition, if we have to replace an operator, we may experience difficulties in finding a replacement because our ability to replace the operator may be affected by federal and state laws governing changes in control and ownership.

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Licensing and certification requirements also subject our tenants, and potentially operators, to compliance surveys and audits which are critical to the ongoing operations of the facilities.

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Healthcare facilities undergo periodic on-site licensure surveys, which generally are limited if the facility is accredited by The Joint Commission or other recognized accreditation organizations.

A loss of licensure or certification could adversely affect a facility’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with, the terms of the tenant’s leases or the operator’s contractual obligation with us.

A loss of licensure, certification or accreditation could adversely affect a facility’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with, the terms of the tenant’s leases or the operator’s contractual obligation with us.

In some states, healthcare facilities are subject to various state CON laws requiring governmental approval prior to the development or expansion of healthcare facilities and services.

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or (ii) purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering any good, facility, service or item for which payment may be made in whole or in party under a federal health care program;

• The Stark Law (42 USC Section 1395nn), which prohibits referrals by physicians of Medicare patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or certain other financial arrangements, unless an exception applies, and prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral;

• The Stark Law (42 USC Section 1395nn), which prohibits referrals by physicians of Medicare or Medicaid patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or certain other financial arrangements, unless an exception applies, and prohibits the designated health services entity from submitting claims to Medicare or Medicaid for those services resulting from a prohibited referral;

• The FCA (31 USC Sections 3729-3733) creates liability for any person who submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government.

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States have also adopted and are enforcing laws that increase the regulatory burden and potential liability of healthcare entities including, but not limited to, patient protections, such as minimum staffing levels, criminal background checks, sanctions for employing excluded providers, restrictions on the use and disclosure of health information, and these state laws have their own penalties which may be in addition to federal penalties.

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In the ordinary course of their business, the tenants, and potentially operators at our properties are regularly subject to inquiries, audits and investigations conducted by federal and state agencies that oversee applicable laws and regulations.

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Reimbursement

We and our tenants derive a large portion of our revenues from insurance payments with the remainder coming from Medicare and Medicaid reimbursement and private pay.

We and our tenants derive a portion of our revenues from insurance payments with the remainder coming from Medicare and Medicaid reimbursement and private pay.

The reimbursement methodologies for healthcare facilities are constantly changing and federal and state authorities may implement new or modified reimbursement methodologies that may negatively impact healthcare operations.

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For example, CMS is focused on reducing what it considers to be payment errors by identifying, reporting, and implementing actions to reduce payment error vulnerabilities.

In November 2020, CMS announced its successes in reducing the 2020 Medicare improper payment rate and specifically called out the successes of its actions to address improper payments in home health and SNF claims.

In 2021, CMS again successfully reduced the 2021 Medicare improper payment rate.

Including fiscal year 2024, the Medicare Fee-for-Service estimated improper payment rate has, for eight consecutive years, been below 10% threshold for compliance established by the improper payment statutory requirements.

The risk of improper payments in our SHOP segment is limited as only one property receives Medicare and Medicaid payments and a small percentage of our revenues come from assisted living facilities participating in Medicaid.

In addition, CMS’s continuing transition of Medicare from a traditional fee for service reimbursement model to a capitated value-based and bundled payment approach, which shifts the financial responsibility of certain patients to providers, will continue to create unprecedented challenges for providers.

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Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), permanently repealed the Sustainable Growth Rate formula, and provided for an annual rate increase of 0.5% for physicians through 2019, but imposed a six-year freeze on fee updates from 2020 through 2025.

Starting in 2026, participants in the Alternative Payment Models will receive a 0.75% update, with all other payment models receiving a 0.25% update.

MACRA established a new payment framework, called the Quality Payment Program, which modified certain Medicare payments to “eligible clinicians,” including physicians, dentists, and other practitioners.

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We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations during the year ended December 31, 2024 and do not expect that we will be required to make any such material capital expenditures during 2025.

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Human Capital Resources

We are an externally managed company and thus have no employees.

We have retained the Advisor pursuant to a long-term advisory contract to manage our affairs on a day-to-day basis.

We have also entered into agreements with our Property Manager to manage and lease our properties.

The employees of the Advisor, Property Manager, and their respective affiliates perform a full range of services for us, including acquisitions, property management, accounting, legal, asset management, investor relations and all general administrative services.

We depend on the Advisor and the Property Manager for services that are essential to us.

If the Advisor and the Property Manager were unable to provide these services to us, we would be required to provide these services ourselves or obtain them from other sources.

As of December 31, 2024, we had 26 employees located across the United States, none of whom are subject to a collective bargaining agreement.

Prior to the Internalization, we retained the Advisor pursuant to a long-term advisory contract to manage our affairs on a day-to-day basis and the employees of the Advisor, Property Manager and their respective affiliates performed a full range of services for us, including acquisitions, property management, accounting, legal, asset management, investor relations and all general administrative services.

Following the Internalization and the hiring of our own dedicated workforce, we no longer had to incur fees from contracts with the Advisor and the Property Manager;

instead, we began to incur expenses related to the compensation and benefits of our officers, employees and consultants.

See Note 1 — Organization and Note 9 — Related Party Transactions and Arrangements to our Consolidated Financial Statements for additional information.

We believe that a competitive compensation program is important to attract employees with the right skills, experience and industry knowledge that can significantly benefit our performance and support our business objectives.

All of our employees are provided with a comprehensive benefits and wellness package, which include high-quality medical, dental and vision insurance, life insurance, 401(k) matching, flexible spending accounts, generous vacation, holiday and personal time off policy, option to work remotely, company workspaces/amenities and other benefits.

We also provide continuous learning, improvement and professional development for our employees to keep their skills current and to adapt to new responsibilities and emerging market needs, including providing financial support for professional association memberships, continuing education credits and fees and travel expenses to attend relevant conferences.

As of December 31, 2024, 26.9% of our employees identified as minorities and 38.5% were females.

Estimate of Net Asset Value

On March 31, 2023, we published an estimate of per share asset value (“Estimated Per-Share NAV”) equal to $14.00 as of December 31, 2022.

Our previous Estimated Per-Share NAV was equal to $15.00 as of December 31, 2021.

The Estimated Per-Share NAV 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 paid 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 increase when dividends paid in stock are issued.

We intend to publish Estimated Per-Share NAV periodically at the discretion of our board of directors (the “Board”), provided that such estimates will be made at least once annually.

On March 27, 2024, we published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) equal to $13.00 as of December 31, 2023 (or $52.00 after reflecting the Reverse Stock Split).

The Estimated Per-Share NAV published on March 27, 2024 has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV.

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 will increase when dividends paid in stock are issued;

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

From October 2020 through January 2024, we issued an aggregate of approximately 5.2 million shares as stock dividends (as adjusted to reflect the Reverse Stock Split).

No other additional shares of common stock have been issued since October 2020.

We intend to publish Estimated Per-Share NAV periodically at the discretion of our Board, provided that such estimates will be made at least once annually unless we list our common stock on a national securities exchange.

See our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2024 for more information on the methodologies and assumptions used to determine, and the limitations and risks of, our Estimated Per-Share NAV.

Available Information

We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all amendments to those filings with the Securities and Exchange Commission (“SEC”).

We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all amendments to those filings with the SEC.

One may read and copy any materials we file with the SEC at the SEC’s Internet address located at https://www.sec.gov .

The website contains reports, proxy statements and information statements, and other information, which one may obtain free of charge.

In addition, copies of our filings with the SEC may be obtained from our website www.healthcaretrustinc.com .

In addition, copies of our filings with the SEC may be obtained from our website www.nhpreit.com .

Access to these filings is free of charge.

1 unchanged sentence

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 1. Business