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 internalized its advisory and property management functions on September 27, 2024, transitioning to a dedicated workforce[18]. - A reverse stock split was executed on September 30, 2024, consolidating every four shares into one[19]. - The company focuses primarily on senior housing operating properties (SHOPs) for future investments, with no 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 due to proximity to hospital systems[22]. Financial Performance - 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 has not paid any cash distributions on its common stock since 2020, and there is no assurance of future cash distributions[81]. - The company has experienced net losses in the past and may continue to do so in the future, impacting its financial condition[81]. - The company incurred impairment charges of $44.9 million during the year ended December 31, 2025, which directly impacted its net loss for GAAP purposes[103]. - The company has experienced net losses in recent years, attributed to property operating costs, impairment charges, and general administrative expenses[108]. - 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]. Regulatory and Compliance Risks - The healthcare industry is highly regulated, and compliance failures by tenants could materially impact the company's business[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 non-compliance[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 faces ongoing audits and investigations from federal and state agencies, which could adversely affect tenants' ability to pay rent and impact the company's financial condition[45][49]. - The company is subject to risks related to its high concentration of properties in certain states, which may be adversely affected by economic cycles and natural disasters[74]. - The company is subject to environmental regulations that could increase operational costs and expose it to significant fines[128]. - The company is exposed to significant costs related to environmental remediation and liability under various federal, state, and local laws, which could materially affect financial performance[129]. Market and Competitive Risks - The company faces competition from various entities, including other REITs and private investment funds, which may have greater resources[29]. - The company faces competition from nearby hospitals and outpatient medical facilities, which may lead to pricing pressure and lower occupancy rates[85]. - The company competes with various entities for property acquisitions and attracting creditworthy tenants, which may increase acquisition prices and impact cash flow[117]. - The company may face challenges in acquiring properties on favorable terms, particularly in the senior housing segment, which could impact its investment objectives[77]. Operational Risks - The company may be unable to renew leases or re-lease space as leases expire, which could adversely affect its rental income[72]. - The company is exposed to operational risks due to reliance on independent contractors for facility management, which may lead to increased operational deficits[97]. - Properties are subject to lock-out provisions that may restrict the ability to sell or refinance, impacting financial flexibility[87]. - The company may face challenges in renewing leases or re-leasing space as leases expire, potentially leading to vacancies and reduced cash flow[102]. - Rising operating expenses, including increased insurance premiums and labor costs, could negatively impact cash flow and tenant retention[88]. - Inflation has affected the value of long-term leases, particularly those without indexed escalation provisions, potentially increasing operational costs[89]. - Most leases in the OMF segment contain rent escalation provisions, but these rates have often been below current inflation rates[90]. Healthcare Industry Risks - The company’s tenants and operators rely on various revenue sources, including Medicare and Medicaid reimbursements, which are subject to constant changes in reimbursement methodologies that could negatively impact operations[56][64]. - The One Big Beautiful Bill Act of 2025 (OBBBA) modified Medicaid enrollment requirements, potentially reducing enrollment and reimbursements, which could materially affect tenants' ability to meet financial obligations[59]. - The transition from traditional fee-for-service to value-based payment models by CMS presents unprecedented challenges for healthcare providers, impacting financial risk and operational stability[60]. - The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) established a new payment framework that may lead to further consolidation in the healthcare industry, affecting the market for certain healthcare providers[61]. - Recent legislation, including the OBBBA, may significantly reduce the number of patients covered by Medicaid, leading to increased instances of uncompensated care and affecting tenants' financial obligations[142]. - The shift in payor mix towards managed care payors may impact revenue streams for tenants, potentially restricting their ability to meet rental obligations[149]. - Compliance with new healthcare regulations and reporting requirements could impose additional costs on tenants, affecting their profitability and ability to pay rent[143]. - Delays in receiving reimbursements from Medicare and Medicaid could materially affect tenants' ability to make rent payments, impacting the company's revenue[145]. - Economic slowdowns or government shutdowns could pressure state budgets, leading to potential reductions in Medicaid spending that adversely affect tenants' operations[148]. - Reductions in Medicare payment rates could adversely affect tenants' ability to make rent payments, with ongoing government initiatives pressuring healthcare costs[151]. - The transition to value-based payment models by CMS may create challenges for providers, impacting their financial responsibilities and ability to pay rent[153]. - Pre- and post-payment reviews by governmental authorities could lead to payment recoupments or delays, adversely affecting tenant profitability and rent payments[154]. Tax and REIT Compliance Risks - The company must distribute at least 90% of its REIT taxable income to maintain its REIT status, which affects its tax obligations[27]. - 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]. - Failure to maintain REIT qualification could result in a corporate tax on taxable income at the federal rate, impacting net earnings available for distribution[213]. - 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]. - Compliance with REIT qualification requirements is complex and may require significant management resources[212]. - Future changes in U.S. federal income tax laws could jeopardize the company's REIT status[212]. - The company may need to borrow funds or liquidate investments to pay applicable taxes if it loses REIT qualification[213]. Cybersecurity and Management Risks - Cybersecurity risks are a concern, with potential significant costs associated with system failures or breaches impacting operations[206]. - The company carries cyber liability insurance, but it may not cover all losses related to cybersecurity incidents[207]. - Conflicts of interest may arise from management's involvement in other business activities, potentially affecting the company's growth strategies[195]. - The company has opted out of certain Maryland laws that could deter hostile takeovers, potentially removing protections against such actions[199]. - The company relies on distributions from its Operating Partnership (OP) and its subsidiaries for cash flow, which may be limited by legal and contractual restrictions[208].
HEALTHCARE(HTIA) - 2025 Q4 - Annual Report