Company Overview - As of December 31, 2023, the company owned 204 properties across 33 states, totaling 9.0 million rentable square feet with a gross asset value of $2.6 billion[19]. - The annualized rental income for the total portfolio was $320.7 million as of December 31, 2023, with 4,164 rentable units in the SHOP segment[20]. - As of December 31, 2023, the company had 156 medical office and healthcare-related buildings, totaling 5.2 million square feet, leased to tenants providing various healthcare services[29]. - The company’s seniors housing properties include 46 facilities with a total of 4,133 units, primarily consisting of assisted living, memory care, and independent living facilities[34]. - The company owned 46 seniors housing operating properties (SHOPs) as of December 31, 2023, which are leased to a wholly owned taxable REIT subsidiary (TRS)[51]. Investment Strategy - The company’s investment strategy focuses on maintaining a balanced, diversified portfolio, pursuing opportunistic investments, and maintaining a strong capital structure[21]. - The company utilizes a combination of debt and equity to fund investment activities, with short-term borrowing options available through various credit facilities[47]. - The company may need to secure additional funding for tenant improvements or capital needs, which may not be available on favorable terms[101]. Market Trends - The healthcare industry is projected to grow at an average rate of 5.4% per year from 2022 to 2031, outpacing the projected GDP growth of 4.6% during the same period[24]. - The U.S. population aged 65 and older is expected to increase to 94.7 million by 2060, up from 49.2 million in 2016, driving demand for healthcare-related facilities[26]. - The healthcare industry is experiencing rapid regulatory changes that could adversely affect tenants' ability to meet contractual obligations[53]. - The healthcare industry is experiencing rapid regulatory changes, which could negatively impact the economic performance of tenants and, in turn, the company's revenues and cash flows[135]. Financial Performance - The total debt leverage ratio as of December 31, 2023, was approximately 43.7%, with net debt totaling $1.1 billion and gross asset value at $2.6 billion[49]. - The company has total outstanding indebtedness of $1.2 billion as of December 31, 2023[161]. - The Estimated Per-Share NAV decreased from $15.00 as of December 31, 2021, to $14.00 as of December 31, 2022[80]. - The Estimated Per-Share NAV will be updated as of December 31, 2023, and is subject to subjective judgments and assumptions[186]. - The independent valuer estimates the market value of real estate assets, which may not reflect the realizable value, affecting the Estimated Per-Share NAV[187]. Operational Challenges - Recent inflationary pressures have impacted operating costs, including labor and supply chain disruptions, affecting the company's results[40]. - The company has reduced reliance on temporary contract labor in 2023, although wage expenses have increased due to inflation and a lack of qualified personnel[42]. - The company reported that occupancy in the SHOP segment trended downward from March 2020 until June 2021 but has since stabilized[41]. - The company may face challenges in collecting rent from tenants due to potential bankruptcies or financial difficulties, impacting cash flow and dividend payments[97]. - The company may face challenges in renewing leases or re-leasing space, which could lead to vacancies and reduced cash flow from properties[127]. Regulatory and Compliance Risks - The company is subject to extensive federal, state, and local laws and regulations, which could impact tenants' operations and their ability to pay rent[55]. - The company is subject to various regulatory laws regarding healthcare licenses, which could delay revenue collection if compliance is not met[124]. - The ACA has led to reductions in Medicare reimbursement rates, impacting healthcare operations[67]. - Increased enforcement of HIPAA regulations has resulted in significant penalties for healthcare providers, affecting their financial health[66]. Economic and Market Risks - The ongoing Russia-Ukraine conflict and the escalation of the Israel-Hamas conflict may lead to significant volatility in commodity prices and adversely affect the financial performance of the company[131]. - Federal and state budget pressures may lead to further reductions in Medicare and Medicaid expenditures[69]. - A shift in payor mix towards managed care payors is increasing revenue pressures on tenants, potentially affecting their ability to make rent payments[144]. - Changes in reimbursement rates from third-party payors, including Medicare and Medicaid, could hinder tenants' ability to make rent payments, affecting the company's financial condition[141]. Debt and Financing Risks - 62.5% of the total gross debt as of December 31, 2023, bore interest at variable rates, primarily based on the Secured Overnight Financing Rate (SOFR)[173]. - The significant increase in the federal funds rate in 2022 and 2023 has raised borrowing costs on variable-rate debt, impacting future financing costs[172]. - The company may face challenges in refinancing maturing indebtedness due to rising interest rates, which could adversely affect financial condition and liquidity[171]. - Changes in the debt markets could lead to tighter underwriting standards and reduced availability of financing, impacting capital access[168]. Stockholder Considerations - The common stock is not traded on a national securities exchange, and the Stock Repurchase Program (SRP) is suspended, limiting stockholders' ability to sell shares[185]. - The company has restrictions on stock ownership, limiting any person to own no more than 9.8% of the aggregate outstanding shares, which may deter potential acquirers[194]. - The change of control features of preferred stock may discourage third-party acquisitions that could provide premium prices to stockholders[195]. - The board is classified into three classes, which may delay or prevent changes in control that could benefit stockholders[196]. Environmental and Operational Risks - Catastrophic weather events and climate change pose risks to the company's properties, potentially leading to substantial damages that exceed insurance coverage[108]. - The company may incur significant costs related to environmental compliance and potential liabilities from hazardous conditions[119]. - Changes in insurance costs and availability could expose the company to uninsured losses, impacting asset value and cash flow[113]. Management and Advisory Risks - The company relies on its Advisor for investment opportunities, which may lead to conflicts of interest affecting investment decisions[177]. - The company does not maintain key person life insurance for its executive officers, which could pose risks if key personnel leave[211]. - The advisory agreement has limited termination rights, requiring a termination fee up to four times the compensation paid to the Advisor in the previous year under certain conditions[205].

Property Portfolio and Occupancy - As of September 30, 2023, the company owned 204 properties across 33 states, totaling 9.0 million rentable square feet[271] - The occupancy rate in the seniors housing operating properties (SHOP) segment was 74.1% as of September 30, 2023, a decline of 1.0% from December 31, 2022[277] - The SHOP segment had 46 properties managed by four independent contractors as of September 30, 2023, following the termination of one contractor managing 20 properties[273] - The company had a total of 156 properties in its portfolio as of September 30, 2023, including 145 Same Store Properties[296] Financial Performance - Net loss attributable to common stockholders decreased to $19.6 million for the three months ended September 30, 2023, compared to $23.3 million for the same period in 2022, representing a reduction of approximately 16%[290] - Revenue from tenants increased to $85.686 million in Q3 2023, up from $83.460 million in Q3 2022, reflecting a growth of 2.7%[290] - Total expenses decreased to $86.425 million in Q3 2023 from $92.004 million in Q3 2022, a decline of approximately 6.1%[290] - Net Operating Income (NOI) for Same Store Properties was $23.312 million in Q3 2023, down from $23.491 million in Q3 2022, indicating a decrease of 0.8%[296] - Net loss attributable to common stockholders decreased to $57.8 million for the nine months ended September 30, 2023, compared to $71.2 million for the same period in 2022, representing an improvement of $13.3 million[326] - Revenue from tenants increased by $8.2 million to $259.1 million for the nine months ended September 30, 2023, compared to $250.9 million in 2022[326] - Total expenses decreased by $20.8 million to $256.9 million for the nine months ended September 30, 2023, from $277.7 million in 2022[326] Revenue and Expenses - Revenue from tenants in the SHOP segment increased by $1.8 million to $52.029 million for the three months ended September 30, 2023, compared to $50.275 million for the same period in 2022, driven by a $2.4 million increase from Same Store Properties[302] - Property operating and maintenance expenses rose by $3.1 million to $44.947 million for the three months ended September 30, 2023, primarily due to a $4.4 million increase in Same Store Properties expenses[304] - Property operating and maintenance expenses in the MOB segment increased by $1.4 million, primarily due to a $1.2 million increase from same store properties[331] - Property operating and maintenance expenses rose by $3.5 million to $134.01 million for the nine months ended September 30, 2023, primarily due to an $8.0 million increase from Same Store properties[338] Debt and Interest Expenses - As of September 30, 2023, outstanding debt obligations were $1.2 billion at a weighted average interest rate of 5.56%, compared to $1.1 billion at 4.29% as of September 30, 2022[318] - Interest expense rose to $15.720 million in Q3 2023 from $13.284 million in Q3 2022, an increase of approximately 18.3%[290] - Interest expense increased by $13.1 million to $50.2 million for the nine months ended September 30, 2023, compared to $37.1 million in 2022[326] Cash Flow and Distributions - Net cash provided by operating activities was $16.4 million for the nine months ended September 30, 2023, with cash inflows including non-cash items of $18.1 million[361] - Total cash distributions for the nine months ended September 30, 2023, amounted to $10.487 million, with each quarter showing consistent distributions around $3.494 million to $3.497 million[416] - Cash flows provided by operations for the nine months ended September 30, 2023, were $16.358 million, indicating a reliance on operational cash flow to fund distributions[416] Dividends and Stockholder Returns - The company has declared and paid quarterly dividends entirely in shares of common stock since October 2020, with an Estimated Per-Share NAV of $14.00 as of December 31, 2022[274] - Since mid-2020, no cash dividends have been paid on common stock, only stock dividends at a rate of $0.85 per share per year[413] - The Board may reduce or suspend dividend payments based on various factors, including financial condition and capital expenditure requirements[414] - No cash distributions were made to common stockholders or restricted shareholders in the six months ended June 30, 2023[415] Operational Challenges and Market Conditions - The company’s ability to pay dividends depends on increasing cash generated from property operations, which is influenced by various external factors, including the COVID-19 pandemic[418] - Increased operating costs under net leases could adversely impact tenants' ability to pay rent, affecting the company's revenue stability[421] - The company faces risks related to inflation and labor costs in its SHOPs, which could impact operational results if lease renewals do not align with market rates[422]

Property Portfolio - As of June 30, 2023, the company owned 202 properties across 33 states, totaling 9.0 million rentable square feet[269] - As of June 30, 2023, the company had 154 medical office and other healthcare-related buildings with a leased percentage of 91.5%[283] - The company has acquired 5 properties and disposed of 5 properties in the six months ended June 30, 2023[286] Financial Performance - Net loss attributable to common stockholders for Q2 2023 was $20.8 million, a slight improvement from a loss of $21.1 million in Q2 2022, representing a decrease of 1.4%[287] - Revenue from tenants increased to $86.1 million in Q2 2023, up from $83.8 million in Q2 2022, reflecting a growth of 2.7%[287] - Total operating expenses decreased to $84.985 million in Q2 2023, down from $89.762 million in Q2 2022, a reduction of 5.3%[287] - Net loss attributable to common stockholders decreased to $38.3 million for the six months ended June 30, 2023, compared to $47.9 million for the same period in 2022, representing a reduction of approximately 20.5%[326] - Revenue from tenants increased by $5.983 million to $173.459 million for the six months ended June 30, 2023, compared to $167.476 million in 2022, marking a growth of approximately 3.6%[326] - Total expenses decreased by $15.197 million to $170.515 million for the six months ended June 30, 2023, from $185.712 million in 2022, a decline of approximately 8.2%[326] Occupancy and Rent Concessions - The occupancy rate in the Seniors Housing Operating Properties (SHOP) segment was 73.3% as of June 30, 2023, a decline of 1.5% from December 31, 2022[275] - The company experienced a decline in occupancy in the SHOP segment from a high of 85.1% in December 2019 to a low of 72.0% in March 2021[275] - Rent concessions granted in the SHOP segment amounted to $0.8 million and $1.4 million for the three and six months ended June 30, 2023, compared to $0.7 million and $2.0 million in the same periods of 2022[277] - Same Store properties experienced a reduction in rent concessions, amounting to $1.4 million in the first half of 2023, compared to $4.9 million in the same period of 2022[337] Expenses and Operating Income - Net Operating Income (NOI) for Same Store Properties was $23.566 million in Q2 2023, compared to $24.109 million in Q2 2022, indicating a decline of 2.3%[292] - Property operating and maintenance expenses increased by $1.1 million in Q2 2023, primarily due to inflation impacts on utility and maintenance costs[296] - Property operating and maintenance expenses decreased by $0.1 million to $44.1 million for the three months ended June 30, 2023, primarily due to a $1.6 million decrease from Disposed Properties, partially offset by a $1.5 million increase in Same Store Properties[303] - Same Store properties' operating and maintenance expenses increased by $1.9 million due to higher overtime wages and inflation on utilities and supplies, while contract labor costs decreased by $2.0 million[304] - Property operating and maintenance expenses in the MOB segment increased by $1.4 million, primarily due to inflation impacts, reaching $18.172 million for the six months ended June 30, 2023[331] Debt and Interest Expense - The company reported a significant increase in interest expense, rising to $18.703 million in Q2 2023 from $12.050 million in Q2 2022, an increase of 55.5%[287] - As of June 30, 2023, outstanding debt obligations were $1.2 billion at a weighted average interest rate of 5.49%, compared to $1.1 billion at 3.76% as of June 30, 2022[318] - Interest expense increased by $6.7 million to $18.7 million for the three months ended June 30, 2023, mainly due to the acceleration of deferred financing costs and higher average rates[317] - Interest expense rose to $34.488 million for the six months ended June 30, 2023, compared to $23.814 million in 2022, an increase of approximately 44.8%[326] - Interest expense rose by $10.7 million to $34.5 million for the six months ended June 30, 2023, primarily due to higher average rates and balances of outstanding debt[353] Cash Flow and Dividends - Net cash provided by operating activities was $10.7 million for the six months ended June 30, 2023, down from $13.7 million in the same period of 2022[363] - Net cash used in investing activities was $34.4 million for the six months ended June 30, 2023, including $25.4 million for the acquisition of five properties[365] - The company declared quarterly dividends of $1.84375 per share for Series A Preferred Stock, equivalent to 7.375% per annum based on a $25.00 liquidation preference[407] - The company has not paid cash dividends on common stock since mid-2020, opting instead for stock dividends at a rate of $0.85 per share per year[409] - Total cash distributions for the three months ended June 30, 2023, amounted to $3.497 million, with 52.5% allocated to Series A Preferred Stock and 46.2% to Series B Preferred Stock[413] Market and Economic Conditions - As of June 30, 2023, the 12-month Consumer Price Index (CPI) increase was 3.0%, impacting leases without indexed escalation provisions[417] - The company’s ability to pay dividends is contingent on cash generated from property operations, which is influenced by various factors including the COVID-19 pandemic[414] - There has been no material change in the company's exposure to market risk during the six months ended June 30, 2023[421]

Property Portfolio - As of March 31, 2023, the company owned 207 properties across 34 states, totaling 9.2 million rentable square feet[266] - The company has 155 medical office and other healthcare-related buildings with a leased percentage of 90.9%[283] - The SHOP segment had 4,374 rentable units as of March 31, 2023, with a weighted average remaining lease term of N/A[283] - As of March 31, 2023, the company owned 207 properties, an increase from 202 properties at the end of 2022, with 198 properties classified as Same Store Properties[284] - The company’s total number of Same Store Properties remained stable at 198, with 146 MOBs and 52 SHOPs[285] Financial Performance - Revenue from tenants for the three months ended March 31, 2023, was $87.355 million, up from $83.650 million in the same period of 2022, representing an increase of 3.9%[287] - The net loss attributable to common stockholders decreased to $17.509 million for the three months ended March 31, 2023, compared to a net loss of $26.801 million in the same period of 2022, reflecting an improvement of 34.6%[287] - Total expenses for the three months ended March 31, 2023, were $85.530 million, down from $95.950 million in the same period of 2022, a decrease of 10.5%[287] - Net Operating Income (NOI) for Same Store Properties was $23.909 million for the three months ended March 31, 2023, compared to $23.643 million in the same period of 2022, indicating a slight increase[292] - Interest expense increased to $15.785 million for the three months ended March 31, 2023, compared to $11.764 million in the same period of 2022, an increase of 34.2%[287] Cash Flow and Capital Expenditures - Net cash used in operating activities was $5.0 million for Q1 2023, compared to a net cash inflow of $5.9 million in Q1 2022, reflecting a decline in operational performance[321][322] - Net cash used in investing activities increased to $29.1 million in Q1 2023, primarily due to the acquisition of five properties for $25.4 million, compared to $8.4 million in Q1 2022[323][324] - Capital expenditures for the three months ended March 31, 2023, totaled $3.6 million, with $1.2 million allocated to the MOB segment and $2.4 million to the SHOP segment[345] Debt and Financing - As of March 31, 2023, outstanding debt obligations were $1.1 billion at a weighted average interest rate of 5.18%, compared to 3.47% the previous year[313] - The Credit Facility includes total commitments of $655.0 million, with $150.0 million outstanding under the Term Loan and $50.0 million under the Revolving Credit Facility as of March 31, 2023[339] - The company must maintain a Fixed Charge Coverage Ratio of at least 1.50 to 1.00 starting from the Commencement Quarter, which has not yet been elected as of March 31, 2023[341] Dividends and Distributions - Dividends on Series B Preferred Stock are declared quarterly at $1.78125 per share annually, equivalent to 7.125% of the $25.00 liquidation preference per share[368] - Since mid-2020, the company has not paid cash dividends on common stock but has issued stock dividends at a rate of $0.85 per share annually[369] - The company has not made cash distributions to common stockholders for the quarter ended March 31, 2023[373] Market and Economic Conditions - Approximately 90% of leases in the MOB segment contain rent escalation provisions averaging 2.3% per year, mitigating inflation impact[382] - The increase in the 12-month CPI for all items as of March 31, 2023, was 5.0%[382] - The company must distribute at least 90% of its REIT taxable income to maintain its REIT status, which affects dividend payments[381]

Company Overview - As of December 31, 2022, the company owned 202 properties across 34 states, totaling 9.1 million rentable square feet with a gross asset value of $2.564 billion[20]. - The company’s investment strategy focuses on maintaining a balanced portfolio of high-quality assets, pursuing opportunistic investments, and maintaining a strong capital structure[22]. - The company’s properties are diversified geographically, with the South region holding the largest number of properties at 70[21]. - The company owns 52 seniors housing properties, including two land parcels, leased to a wholly-owned TRS[53]. Financial Performance - The annualized rental income for the portfolio as of December 31, 2022, was $313.618 million, with the South region contributing the highest at $125.111 million[21]. - As of December 31, 2022, the total debt leverage ratio was approximately 41.5%, with net debt totaling $1.1 billion and gross asset value at $2.6 billion[51]. - The Estimated Per-Share NAV was $15.00 as of December 31, 2021, up from $14.50 as of December 31, 2020[83]. - The company has not paid cash distributions on its common stock since 2020, issuing dividends in the form of common stock instead[93]. Market Trends - The healthcare industry is projected to grow at an average annual rate of 5.1% from 2021 to 2030, leading to increased demand for medical office buildings (MOBs) and senior housing properties[25]. - The U.S. population aged 65 and older is expected to grow to 94.7 million by 2060, increasing the demand for healthcare-related facilities[27]. - The healthcare industry is experiencing rapid regulatory changes that could adversely affect tenants' ability to meet contractual obligations[55]. Operational Challenges - The company has experienced ongoing staffing shortages in the senior housing industry, but reported employment increases for nursing and assisted living facilities in 2022[25]. - The impact of inflation, labor shortages, and supply chain disruptions has adversely affected the company’s operations and may continue to do so[43]. - Operating costs in the SHOP segment rose materially due to inflation, reliance on temporary labor, and increased wages, which may continue to adversely impact revenues and net income[46]. - The company faces risks related to the inability to collect rent from tenants, which could adversely impact cash flow and dividends[114]. Regulatory Environment - The company is subject to various federal, state, and local laws, including environmental regulations, which could incur substantial costs[79]. - Increased enforcement actions related to healthcare regulations have led to a rise in investigations and audits, affecting tenants' financial health[66]. - Compliance with fraud and abuse laws is critical, as violations could jeopardize tenants' ability to make rent payments and result in significant penalties[185]. COVID-19 Impact - The ongoing global COVID-19 pandemic poses risks to tenants and operators, impacting their businesses[87]. - The ongoing COVID-19 pandemic has negatively impacted occupancy rates and lease-ups for assisted and independent living facilities[190]. - The company reported that the long-term impact of COVID-19 on tenants and operators in the SHOP segment remains uncertain[102]. Debt and Financing - The company has substantial indebtedness and may incur additional debt in the future, with potential increases in interest rates affecting debt payments[90]. - The company may experience difficulties in acquiring properties due to limited capital availability and potential disruptions in financial markets[105]. - The company must use net cash proceeds from capital events to repay amounts outstanding under the Revolving Credit Facility until certain conditions are met[211]. Investment Risks - The company may face challenges in renewing leases or re-leasing space as leases expire, potentially leading to reduced cash flow[153]. - The company’s real estate investments are concentrated in healthcare-related facilities, making it vulnerable to downturns in the healthcare industry[163]. - The company may not be able to dispose of properties on favorable terms due to the illiquid nature of real estate investments[156]. Economic Factors - Geopolitical instability, particularly the conflict between Russia and Ukraine, may adversely impact the U.S. and global economies, affecting tenant viability[158]. - Economic downturns may negatively affect state budgets, leading to potential Medicaid spending cuts that could impact tenants' operations[175].