Company Portfolio and Operations - As of December 31, 2024, the company owned 193 properties across 31 states, totaling 8.4 million rentable square feet, with an annualized rental income of $323.573 million[19][20]. - The portfolio includes 148 outpatient medical facilities (OMFs) with a gross asset value of $1.381 billion and 44 seniors housing operating properties (SHOPs) valued at $1.082 billion[22]. - As of December 31, 2024, the company owned 44 seniors housing operating properties (SHOPs) leased to a wholly owned taxable REIT subsidiary (TRS) which operates these facilities through third-party management contracts[39]. - The company executed a reverse stock split on September 30, 2024, consolidating every four shares into one[18]. - The company internalized its advisory and property management functions on September 27, 2024, enhancing operational efficiency[17]. Market Trends and Demographics - The healthcare industry is projected to grow at an average rate of 5.6% per year from 2023 to 2032, outpacing the projected GDP growth of 4.3% during the same period[24]. - The U.S. population aged 65 and older is expected to increase to 88.8 million by 2060, representing 24.4% of the total population, up from 17.3% in 2022[26]. - The healthcare sector is expected to add approximately 2.3 million new jobs from 2023 to 2033, driven by an aging population and increased demand for healthcare services[24]. Financial Performance and Risks - The company has experienced net losses in the past and may continue to do so in the future, impacting financial stability[73]. - The company incurred bad debt expenses of $1.5 million, $1.2 million, and $3.2 million for the years ended December 31, 2024, 2023, and 2022, respectively, due to tenant defaults[85]. - Rising expenses, including increased operating costs and inflation, could negatively impact cash flow and the company's results of operations[94][95]. - The company may face challenges in collecting rent from tenants due to potential bankruptcies, which could adversely affect cash flow and the ability to pay dividends[83]. - The company has not paid cash distributions on its common stock since 2020, raising concerns about future cash distributions[73]. Regulatory Environment - The healthcare industry is highly regulated, and regulatory changes could adversely affect tenants' ability to meet contractual obligations, impacting rental payments[41]. - Compliance with extensive federal, state, and local laws is critical for tenants, as failure to comply could result in loss of licensure and negatively impact rental payments[43]. - The uncertain status of the Affordable Care Act (ACA) and potential budget cuts to Medicare and Medicaid could affect future planning and revenue streams for the company[56]. - The transition of Medicare to a capitated value-based and bundled payment approach presents challenges for providers, potentially affecting the financial health of tenants[59]. - Increased enforcement of fraud and abuse laws could materially affect tenants' liquidity and financial condition, impacting their ability to meet rental obligations[53]. Investment Strategy and Capital Structure - The investment strategy focuses on maintaining a diversified portfolio, pursuing opportunistic investments, and ensuring a strong capital structure[21]. - The company utilizes a combination of debt and equity for funding, with access to a $50 million variable-rate financing facility[36][37]. - The company has total outstanding indebtedness of $1.2 billion as of December 31, 2024[152]. - The company may invest in properties through joint ventures and development partnerships, particularly in the healthcare sector[23]. Environmental and Operational Risks - The company is subject to various environmental regulations, which could result in substantial costs for compliance or penalties for non-compliance[64]. - Properties may be subject to catastrophic weather events, which could result in substantial damages and increased insurance costs, affecting overall financial performance[99][100]. - The company may incur costs related to compliance with the Americans with Disabilities Act, which could adversely impact cash flow[141]. - Environmental laws may impose significant costs and liabilities on the company, including remediation expenses for hazardous materials[108]. Shareholder and Governance Issues - The company has not paid any cash distributions on its common stock since 2020 and does not intend to declare further stock dividends in the future[81]. - The stockholder rights plan has been extended to May 18, 2026, which may deter third-party acquisitions that could result in a premium price for stockholders[182]. - The classification of the board of directors may delay or prevent a change in control, potentially affecting stockholder value[174]. - The company relies on distributions from its Operating Partnership (OP) and its subsidiaries for cash flow, with no assurance that these distributions will be sufficient to meet obligations[187]. Tax and REIT Compliance - To qualify as a REIT, the company must distribute at least 90% of its REIT taxable income annually to stockholders[193]. - The company’s ability to satisfy REIT qualification requirements is complex and could be jeopardized by changes in operations or IRS recharacterization[189]. - The company may incur significant costs from system failures or cyber incidents, which could disrupt operations and require additional resources for remediation[183]. - Changes in tax laws could adversely affect the company's tax liability and the market value of its shares[210].
HEALTHCARE(HTIA) - 2024 Q4 - Annual Report