Community Healthcare Trust (CHCT) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01Our real estate investments are concentrated in healthcare properties, making us more vulnerable economically than if our investments were diversified in other segments of the economy
2. 02Given our dependence on rental revenue, failure by our major tenants to make rental payments to us, because of a deterioration of their financial condition, a termination of their leases, a non-renewal of their leases or otherwise, could have a material adverse effect on our results of operations
3. 03We may be unable to source off-market or lightly marketed deal flow in the future, which may have a material adverse effect on our growth
4. 04Inflation and the U.S. government’s response thereto could adversely impact our tenants and our operations
5. 05Changes to U.S. tariff and import/export regulations may have an adverse effect on our business, financial condition and results of operationsNew
6. 06We depend on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results, financial condition, and stock price
7. 07In addition, we have recently observed an overall tightening and increasingly competitive labor market. Our business could be adversely affected by an inability to retain personnel or upward pressure on wages as a result of the competitive labor market
8. 08We may obtain only limited warranties when we purchase a property, which, in turn, would only provide us with limited recourse against the seller if issues arise after our purchase of a property
9. 09We may be unable to successfully acquire properties and expand our operations into new or existing target submarkets
10. 10A pandemic, epidemic, outbreak of a contagious disease, or other health crisis may adversely affect our tenants' financial condition and the profitability of our properties
11. 11The bankruptcy, insolvency or weakened financial position of our tenants, and particularly our largest tenants, could materially and adversely affect our operating results and financial condition
12. 12We may have difficulty finding suitable replacement tenants in the event of non-renewal of our leases or a tenant default
13. 13We may be unable to secure funds for future tenant or other capital improvements or payment of leasing commissions, which could limit our ability to attract or replace tenants and adversely impact our ability to make cash distributions to our stockholders
14. 14We may be required to make rent or other concessions and significant capital expenditures to improve our properties in order to retain and attract tenants, which could adversely affect our financial condition, results of operations and cash flow
15. 15Supply chain disruptions and unexpected construction expenses and delays could impact our ability to timely deliver spaces to tenants and/or our ability to achieve the expected value of a construction project or lease, thereby adversely affecting our profitability
16. 16Some of the leases at our properties contain “early termination” provisions which, if triggered, may allow tenants to terminate their leases without further payment to us, which could adversely affect our financial condition and results of operations and the value of the applicable property
17. 17Adverse economic or other conditions in the geographic markets in which we conduct business could negatively affect our occupancy levels and rental rates and have a material adverse effect on our operating results
18. 18Climate change may adversely affect our business
19. 19In recent years, the assessment of the potential impact of climate change has begun to impact the activities of government authorities and other areas that impact the business environment in the U.S., including, but not limited to, energy-efficiency measures, water use measures and land-use practices
20. 20Environmental, social and governance matters may cause us to incur additional costs, make personnel changes, and affect the attractiveness of our stock to investors
21. 21A large percentage of our annualized rent is provided by properties that are located in Texas and Florida and changes in these markets may materially adversely impact our business and financial condition30% rewritten
22. 22We will rely upon external sources of capital to fund future capital needs, and, if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations
23. 23Covenants related to our indebtedness could limit our operations
24. 24We may not be able to control our expenses or our expenses may remain constant or increase, even if our revenue does not increase, which could cause our results of operations to be adversely affected
25. 25Our ability to issue equity to expand our business will depend, in part, upon the market price of our common stock, and our failure to meet market expectations with respect to our business could adversely affect the market price of our common stock and thereby limit our ability to raise capital
26. 26We have now, and may have in the future, exposure to contingent rent escalators, which can hinder our growth and profitability
27. 27Our investments in development projects may not yield anticipated returns which could directly affect our operating results and reduce the amount of funds available for distributions
28. 28Notes receivable in which we may invest in may be impacted by unfavorable real estate market conditions, which could decrease their value51% rewritten
29. 29Delays in liquidating defaulted note investments could reduce our investment returns
30. 30We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business61% rewritten
31. 31damage, or the improper access or disclosure of personally identifiable or proprietary information and any such event could materially and adversely impact our business, financial condition or results of operationsNew
32. 32Cybersecurity incidents could disrupt our business and result in the unavailability or compromise of confidential information

Risks Related to the Healthcare Industry

1. 33The healthcare industry is heavily regulated and new laws or regulations, changes to existing laws or regulations, changes to reimbursement models or structure, loss of licensure or failure to obtain licensure could adversely impact our company and result in the inability of our tenants to make rent payments to us
2. 34Adverse trends in healthcare provider operations may negatively affect our lease revenues and our ability to make distributions to our stockholders
3. 35Reductions in reimbursement from third-party payers, including Medicare and Medicaid, could adversely affect the profitability of our tenants and hinder their ability to make rent payments to us or renew their lease64% rewritten
4. 36Trump Administration affecting Medicaid enrollment and payments, and the availability of lower cost, lower coverage plans creates uncertainty around private insurer costs and, thereby, payment rates to providersNew
5. 37Our tenants and our Company are subject to fraud and abuse laws, the violation of which by a tenant may jeopardize the tenant’s ability to make rent payments to us
6. 38Our tenants may be subject to compliance issues and cyber-attacks associated with the protection of personal information48% rewritten
7. 39business, financial condition and results of operating our ability to pay distributions to our stockholders and the market price of our common stockNew
8. 40Our healthcare-related tenants may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us, and we could be subject to healthcare industry violations

Risks Related to the Real Estate Industry

1. 41Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties
2. 42We may suffer reduced or delayed revenues for, or have difficulty selling, properties with vacancies
3. 43Uncertain market conditions could cause us to sell our healthcare properties at a loss in the future
4. 44If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flows
5. 45Uninsured losses relating to real property may adversely affect your returns
6. 46Rising expenses could reduce cash flow and funds available for future acquisitions
7. 47Our property taxes could increase due to property tax rate changes or reassessments, which could materially adversely impact our cash flows
8. 48Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation
9. 49We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties
10. 50Environmental compliance costs and liabilities associated with owning and leasing our properties may affect our results of operations
11. 51Some of the properties we acquire may be subject to ground lease or other restrictions on the use of the space. If we are required to undertake significant capital expenditures to procure new tenants, then our business and results of operations may suffer
12. 52Our assets may be subject to impairment charges

Risks Related to our Corporate Structure and the Acquisition of Properties

1. 53Conflicts of interest could arise in the future between the interests of our stockholders and the interests of holders of OP units, which may impede business decisions that could benefit our stockholders
2. 54We may have assumed unknown liabilities in connection with our acquisitions which could result in unexpected liabilities and expenses
3. 55Required payments of principal and interest on our Credit Facility may leave us with insufficient cash to operate our properties or to pay the distributions currently contemplated or necessary to qualify as a REIT and may expose us to the risk of default under our debt obligations
4. 56We could become highly leveraged in the future because our organizational documents contain no limitations on the amount of debt that we may incur22% rewritten
5. 57Increases in interest rates may increase our interest expense and adversely affect our cash flows and our ability to service our indebtedness and to make distributions to our shareholders20% rewritten
6. 58The Company may enter into swap agreements from time to time that may not effectively reduce its exposure to changes in interest rates30% rewritten
7. 59Our use of OP units in our operating partnership as currency to acquire properties could result in stockholder dilution and/or limit our ability to sell such properties, which could have a material adverse effect on us
8. 60Our charter restricts the ownership and transfer of our outstanding shares which may have the effect of delaying, deferring or preventing a transaction or change of control of our Company
9. 61Certain provisions of Maryland law could inhibit changes of control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests
10. 62We could increase the number of authorized shares, classify and reclassify unissued shares and issue shares without stockholder approval
11. 63Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited acquisitions of us
12. 64We may change our business, investment and financing strategies without stockholder approval
13. 65Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event that we take certain actions which are not in your best interests43% rewritten
14. 66officers than might otherwise exist absent the current provisions in our charter, bylaws and indemnification agreements or that might exist with other companiesNew
15. 67We are a holding company with no direct operations and, as such, we will rely on funds received from our subsidiaries to pay liabilities, and the interests of our stockholders will be structurally subordinated to all liabilities and obligations of our subsidiaries

Risks Related to Our Qualification and Operation as a REIT

1. 68Failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would adversely affect the value of our shares and substantially reduce funds available for distributions to our stockholders
2. 69If our operating partnership failed to qualify as a “partnership” for U.S. federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences
3. 70We may face other tax liabilities that reduce our cash flows
4. 71Complying with the REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments
5. 72The “prohibited transactions” tax may limit our ability to dispose of our properties
6. 73Any ownership of a TRS will be subject to limitations, and our transactions with a TRS cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms
7. 74TRSs will be subject to federal and state income taxes
8. 75If a TRS tenant failed to qualify as a TRS, or the operator of a facility engaged by a TRS tenant did not qualify as an “eligible independent contractor,” we could fail to qualify as a REIT and could be subject to higher taxes and have less cash available for distribution to our stockholders
9. 76If leases of our properties are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT and would be subject to higher taxes and have less cash available for distribution to our stockholders
10. 77The share ownership restrictions of the Code for REITs and the 9.8% share ownership limit and other restrictions on ownership and transfer of our shares contained in our charter may inhibit market activity in our shares and restrict our business combination opportunities
11. 78Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
12. 79Distributions to tax-exempt stockholders may be classified as unrelated business taxable income
13. 80Non-U.S. stockholders may be subject to FIRPTA taxation upon the sale of their shares of our common stock
14. 81We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock

Risks Related to our Common Stock

1. 82The trading volume of our common stock may be volatile, and you may not be able to resell shares of our common stock at prices equal to or greater than the price you paid or at all
2. 83Increases in market interest rates may have an adverse effect on the market price of our common stock as prospective purchasers of our common stock may expect a higher dividend yield and as an increased cost of borrowing may decrease our funds available for distribution
3. 84Our issuance of equity securities or the perception that such issuances might occur could materially adversely affect us, including the per share trading price of our common stock
4. 85If securities analysts do not publish research or reports about our industry or if they downgrade our common stock or the healthcare-related real estate sector, the price of our common stock could decline
5. 86Future sales of shares of our common stock, particularly by our executive officers or directors, may cause the per share trading price of our common stock to decline27% rewritten