Company Overview - As of December 31, 2025, the company owned 167 properties across 29 states, including 37 senior housing communities with 3,615 units and 130 outpatient medical facilities totaling approximately 3.7 million square feet of gross leasable area[17]. - The company focuses primarily on investments in senior housing operating properties (SHOPs) and aims to diversify its portfolio without geographic or asset percentage limits[20]. - The SHOP segment includes 37 properties, primarily consisting of 1,895 assisted living units, 838 memory care units, and 882 independent living units[21]. - The outpatient medical facilities segment consists of 130 properties leased to healthcare service providers, enhancing tenant retention through proximity to hospital systems[22]. Financial Structure - The company utilizes a combination of debt and equity for funding, with a Revolving Facility providing up to $400 million in variable-rate financing[24]. - The company must distribute at least 90% of its REIT taxable income to maintain its tax status, which commenced in 2013[27]. - As of December 31, 2025, the company had total outstanding indebtedness of $1.0 billion, which may increase business risks and limit access to capital markets[171]. - 17.8% of the total gross debt bore interest at variable rates as of December 31, 2025, increasing exposure to rising borrowing costs[181]. - The company has incurred, and may continue to incur, variable-rate debt, which has been affected by elevated federal funds rates, potentially increasing debt payments[178]. - The company may face challenges in refinancing indebtedness secured by properties if interest rates remain high, which could limit cash flow available for operations and distributions[179]. Regulatory Compliance - The healthcare industry is highly regulated, and compliance with federal, state, and local laws is critical for the company's tenants and operators[30]. - The company is subject to various federal and state laws, including the Anti-Kickback Statute and Stark Law, which impose significant penalties for violations, including fines exceeding $100,000 and civil penalties over $25,000 per violation[39][40]. - The Federal False Claims Act (FCA) allows for penalties between $14,308 and $28,619 per claim for false submissions, with the potential for significant financial repercussions for violations[43]. - The Centers for Medicare and Medicaid Services (CMS) has implemented alternative sanction enforcement options, including payment suspensions and civil monetary penalties for non-compliance with Medicare and Medicaid requirements[47]. - The company is subject to various risks, including economic downturns, regulatory changes, and competition from other real estate investors, which could affect its operations[79]. - The company is subject to environmental regulations that could increase operational costs and expose it to significant fines or penalties[128]. Tenant and Market Risks - The company faces competition from various entities, including other REITs and private investment funds, which may have greater resources and risk tolerance[29]. - The company has experienced net losses in recent years, attributed to property operating costs, impairment charges, and general administrative expenses[108]. - The company incurred bad debt expenses of $0.7 million, $1.5 million, and $1.2 million for the years ended December 31, 2025, 2024, and 2023, respectively, due to tenant defaults[82]. - The company’s real estate investments are concentrated in healthcare-related facilities, making it vulnerable to downturns in the healthcare industry, which could negatively affect lessees' ability to pay rent[136]. - The company may struggle to renew leases or re-lease space as leases expire, potentially leading to vacancies and reduced cash flow[102]. - Financial challenges faced by tenants and operators may result in bankruptcy, adversely affecting income from properties[163]. Operational Challenges - The company has transitioned to an internally-managed REIT, which may expose it to additional operational risks and costs associated with managing its workforce[78]. - The company may not realize anticipated synergies from its internalization strategy within the expected timeframe, which could affect its operational efficiency[78]. - Rising operating expenses, including increased insurance premiums and labor costs, could negatively impact cash flow and tenant retention[88]. - The company is exposed to operational risks due to reliance on independent contractors for facility management, which may lead to increased operational deficits[97]. - The company may face challenges in acquiring properties on favorable terms, particularly in the senior housing segment, which could impact its growth strategy[77]. Environmental and Health Regulations - Environmental regulations impose potential liabilities for cleanup costs and fines, which could exceed property values and impact the company's financial obligations[66]. - The company may incur significant costs related to mold remediation at properties, which could affect overall financial performance[129]. - The transition of Medicare to a value-based payment model poses challenges for providers, shifting financial responsibility and potentially impacting the company's tenants[60]. - Compliance with stringent healthcare regulations and potential penalties for non-compliance could materially impact tenants' financial health and their ability to pay rent[144]. Shareholder and Market Considerations - The company has not paid any cash distributions on its common stock since 2020, and there is no assurance of future cash distributions[81]. - The company’s share repurchase program is suspended, limiting stockholders' ability to sell shares and potentially affecting liquidity[185]. - The trading price of Series A and Series B Preferred Stock may be significantly volatile, influenced by factors such as financial condition, tenant performance, and market conditions[190]. - The company has a restriction on share ownership, limiting any person to own no more than 9.8% of the outstanding shares, which may deter potential acquisitions[193]. Cybersecurity and Technology Risks - Cybersecurity risks are a concern, as system failures or breaches could disrupt operations and incur significant remediation costs[202]. - The company carries cyber liability insurance, but it may not cover all losses related to cybersecurity incidents[207]. - The company faces risks related to unauthorized access and loss of sensitive information, which could adversely affect its operations and reputation[211]. Taxation and REIT Compliance - The company’s qualification as a REIT is crucial for tax purposes, and failure to maintain this status could lead to significant tax liabilities[210]. - Future changes in U.S. federal income tax laws could jeopardize the company's REIT status[212]. - The company may incur tax liabilities even as a REIT, which could reduce cash available for distribution to stockholders[214]. - The company is subject to a 4% nondeductible excise tax on any amount by which distributions fall short of certain income thresholds[215].
HEALTHCARE(HTIBP) - 2025 Q4 - Annual Report