What the changes say
- Expansion into international markets like the UK via the Care REIT acquisition introduces new currency and regulatory risks.
- Growth of the SHOP platform increases direct operational, legal, and insurance liabilities for senior housing communities.
- Regulatory updates clarify the repeal of CMS nursing home minimum staffing mandates through 2034.
What changed since the prior 10-K
New
- NewRisks Related to Our Business and Operations
We are dependent on the ability of our third party managers to successfully manage and operate our SHOP communities
We depend on third-party managers to operate our SHOP communities, set resident fees, and maintain financial records, exposing us to operational risks.
- NewRisks Related to Our Business and Operations
The intended benefits of the Care REIT acquisition may not be realized
The acquisition of Care REIT on May 8, 2025, covering 134 care homes in the UK, may not be accretive or successfully integrated.
- NewRisks Related to Our Business and Operations
We will be subject to additional risks from our investment in Care REIT and any other international investments
Our international investments, starting with Care REIT in the UK, expose us to foreign laws and currency exchange rate fluctuations.
- NewRisks Related to Our Business and Operations
We assume operational and legal risks with respect to our properties managed in RIDEA structures that could have a material adverse effect on our business, results of operations and financial condition
RIDEA joint ventures leave us legally and operationally responsible for property liabilities despite third-party managers controlling day-to-day care and staffing.
- NewRisks Related to Our Business and Operations
Our operating assets may expose us to various operational risks, liabilities and claims that could adversely affect our ability to generate revenues or increase our costs and could adversely affect our business, financial condition and results of operations
SHOP platform REIT rules limit our control over senior housing operations while keeping us directly exposed to financial and operational liabilities.
- NewRisks Related to Our Business and Operations
such circumstances, the insurance proceeds received might not be adequate to restore the economic position with respect to such tenant, borrower, or property
Maintaining general and professional liability insurance for our SHOP platform increases our costs and exposes us to potential coverage shortfalls.
- NewRisks Related to Our Business and Operations
We may be affected by unfavorable resolution of litigation or disputes and rising liability and insurance costs as a result thereof or other market factors
Litigation against tenants or managers over quality of care can increase costs and insurance premiums, directly impacting our SHOP cash flows.
- NewRisks Related to Our Status as a REIT
In addition, subject to certain exceptions (including with respect to leases of “qualified healthcare properties”
Stock ownership restrictions in our charter may fail to prevent rents from violating REIT qualifying income tests.
- NewRisks Related to Our Status as a REIT
The lease of qualified healthcare properties to a TRS is subject to special requirements
Leasing qualified healthcare properties to TRSs involves complex compliance rules regarding independent contractors and unlicensed properties.
- NewRisks Related to Our Status as a REIT
Certain subsidiaries might fail to qualify or remain qualified as a REIT
If our subsidiary REIT fails to qualify as a REIT, we would face corporate income taxes and potential loss of REIT status.
- NewRisks Related to Our Capital Resources and Indebtedness
activities; creating restrictions on the ability of our subsidiaries to pay distributions or other amounts to us; selling assets; effecting a consolidation or merger or selling all or substantially all of our assets; making acquisitions; and amending organizational documents
The Third Amended Credit Agreement imposes financial maintenance covenants and restrictions that limit our operational flexibility.
Dropped
- DroppedRisks Related to Our Business and Operations
Our tenants and borrowers depend on reimbursement from government and other third-party payors and if reimbursement rates from such payors are reduced by future legislative reform, it could cause our tenants’ and borrowers’ revenues to decline and could affect their ability to meet their obligations to us
Reworded
- 73% rewrittenRisks Related to Our Capital Resources and Indebtedness
Covenants in our debt agreements restrict our activities and could adversely affect our business
Updated debt covenant descriptions under the Third Amended Credit Agreement regarding restricted payments and investments.
- 66% rewrittenRisks Related to Our Business and Operations
Unstable market and economic conditions may have serious adverse consequences on our business, results of operations and financial condition
Removed references to the Trump administration and specified ongoing U.S. trade, fiscal policy, and Ukraine conflict risks.
- 58% rewrittenRisks Related to Our Status as a REIT
We could fail to qualify to be taxed as a REIT if income we receive from our tenants is not treated as qualifying income
Minor clarifying phrasing on REIT qualifying income and true lease requirements.
- 56% rewrittenRisks Related to Our Business and Operations
We, our tenants, or our borrowers may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expenses
Minor clarifying wording regarding uninsured or underinsured losses and property restoration feasibility.
- 51% rewrittenRisks Related to Laws and Regulations
Healthcare reform legislation impacts cannot accurately be predicted and could adversely affect our results of operations
Added details that the CMS minimum staffing rule was vacated in April 2025, subjected to a moratorium until September 2034, and repealed in December 2025.
- 44% rewrittenRisks Related to Laws and Regulations
If we, our tenants, managers, and borrowers fail to adhere to applicable privacy and data security laws, this could have a material adverse effect on us or on our tenants’ or borrowers’ ability to meet their obligations to us
Expanded data security risks to explicitly include contractual obligations and potential enforcement actions, fines, or penalties.
Was: If we, our tenants or borrowers fail to adhere to applicable privacy and data security laws, this could have a material adverse effect on us or on our tenants’ and borrowers’ ability to meet their obligations to us
- 44% rewrittenRisks Related To Our Common Stock and Organizational Documents
Our bylaws contain a provision that exempts from the MGCL’s control share acquisition statute any and all acquisitions by any person of shares of our stock. However, there can be no assurance that this provision will not be amended or eliminated, in whole or in part, at any time in the future
Refined language regarding board takeover protections and shareholder sentiment under the MGCL control share acquisition statute.
- 42% rewrittenRisks Related to Our Business and Operations
The geographic concentration of some of our properties could leave us vulnerable to an economic downturn, regulatory changes or acts of nature in those areas
Added the U.K. and Tennessee alongside California and Texas as key geographic concentrations affecting properties and SHOP communities.
Was: The geographic concentration of some of our facilities could leave us vulnerable to an economic downturn, regulatory changes or acts of nature in those areas
- 41% rewrittenRisks Related to Laws and Regulations
If we or our tenants, managers, and borrowers fail to comply with federal, state and local licensure, certification and inspection laws and regulations, they may cease to operate or be unable to meet their financial and other contractual obligations to us
Was: Tenants and borrowers that fail to comply with federal, state and local licensure, certification and inspection laws and regulations may cease to operate or be unable to meet their financial and other contractual obligations to us
- 35% rewrittenRisks Related to Our Business and Operations
Replacement tenants or managers may be difficult to identify and we may be required to incur substantial renovation costs to make our healthcare properties suitable for such parties
Was: Replacement tenants or operators may be difficult to identify and we may be required to incur substantial renovation costs to make our healthcare properties suitable for such tenants or operators
- 32% rewrittenRisks Related to Our Business and Operations
Investments in consolidated joint ventures involve risks not present in investments in which we are the sole investor
- 30% rewrittenRisks Related to Our Status as a REIT
Legislative or other actions affecting REITs could have a negative effect on us
- 28% rewrittenRisks Related to Our Business and Operations
Increased competition has resulted and may further result in lower net revenues for some of our tenants and borrowers and may affect their ability to meet their financial and other contractual obligations to us
- 28% rewrittenRisks Related to Our Status as a REIT
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
- 27% rewrittenRisks Related to Our Status as a REIT
Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow
All 50 risk factors
Headings as the filing states them, in filing order.
Risks Related to Our Business and Operations
- 01We are dependent on the ability of our third party managers to successfully manage and operate our SHOP communitiesNew
- 02Unstable market and economic conditions may have serious adverse consequences on our business, results of operations and financial condition66% rewritten
- 03We face potential adverse consequences of bankruptcy, insolvency or financial deterioration of our tenants or borrowers
- 04Replacement tenants or managers may be difficult to identify and we may be required to incur substantial renovation costs to make our healthcare properties suitable for such parties35% rewritten
- 05We have incurred and may in the future incur impairment charges, which could negatively impact our results of operations
- 06The geographic concentration of some of our properties could leave us vulnerable to an economic downturn, regulatory changes or acts of nature in those areas42% rewritten
- 07We are subject to risks associated with public health crises and government measures to prevent the spread of infectious diseases
- 08We pursue property acquisitions and other real estate investments and seek strategic opportunities in the ordinary course of our business, which may result in significant usage of management resources or costs, and we may not fully realize the potential benefits of such transactions
- 09Investments in consolidated joint ventures involve risks not present in investments in which we are the sole investor32% rewritten
- 10The intended benefits of the Care REIT acquisition may not be realizedNew
- 11We will be subject to additional risks from our investment in Care REIT and any other international investmentsNew
- 12We assume operational and legal risks with respect to our properties managed in RIDEA structures that could have a material adverse effect on our business, results of operations and financial conditionNew
- 13Our operating assets may expose us to various operational risks, liabilities and claims that could adversely affect our ability to generate revenues or increase our costs and could adversely affect our business, financial condition and results of operationsNew
- 14Increased competition has resulted and may further result in lower net revenues for some of our tenants and borrowers and may affect their ability to meet their financial and other contractual obligations to us28% rewritten
- 15Required regulatory approvals can delay or prohibit transfers of our healthcare properties, which could result in periods in which we are unable to receive rent for such properties
- 16We may not be able to sell properties when we desire because real estate investments are relatively illiquid, which could materially and adversely affect our business, financial position or results of operations
- 17We, our tenants, or our borrowers may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expenses56% rewritten
- 18such circumstances, the insurance proceeds received might not be adequate to restore the economic position with respect to such tenant, borrower, or propertyNew
- 19We may be affected by unfavorable resolution of litigation or disputes and rising liability and insurance costs as a result thereof or other market factorsNew
- 20We are, and may continue to be, exposed to contingent rent escalators, which could hinder our profitability and growth
- 21Cybersecurity incidents or other damage to the information systems and technology of us, our tenants, managers, or borrowers could harm our business
- 22Bank failures or other events affecting financial institutions could have a material adverse effect on our, our tenants’ or our borrowers’ liquidity, results of operations, and financial condition
Risks Related to Laws and Regulations
- 23Healthcare reform legislation impacts cannot accurately be predicted and could adversely affect our results of operations51% rewritten
- 24Tenants, managers, and borrowers that fail to comply with applicable requirements of governmental reimbursement programs, such as Medicare or Medicaid, may cease to operate or be unable to meet their financial and other contractual obligations to us
- 25If we, our tenants, managers, and borrowers fail to adhere to applicable privacy and data security laws, this could have a material adverse effect on us or on our tenants’ or borrowers’ ability to meet their obligations to us44% rewritten
- 26If we or our tenants, managers, and borrowers fail to comply with federal, state and local licensure, certification and inspection laws and regulations, they may cease to operate or be unable to meet their financial and other contractual obligations to us41% rewritten
- 27Environmental compliance costs and liabilities may materially impair the value of properties owned by us
Risks Related to Our Status as a REIT
- 28If we fail to qualify or remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face substantial tax liability, which could adversely affect our ability to raise capital or service our indebtedness
- 29Legislative or other actions affecting REITs could have a negative effect on us30% rewritten
- 30We could fail to qualify to be taxed as a REIT if income we receive from our tenants is not treated as qualifying income58% rewritten
- 31In addition, subject to certain exceptions (including with respect to leases of “qualified healthcare properties”New
- 32The lease of qualified healthcare properties to a TRS is subject to special requirementsNew
- 33Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends28% rewritten
- 34REIT distribution requirements could adversely affect our ability to execute our business plan
- 35Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow27% rewritten
- 36Complying with REIT requirements may cause us to forgo otherwise attractive acquisition opportunities or liquidate otherwise attractive investments
- 37Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities
- 38Certain subsidiaries might fail to qualify or remain qualified as a REITNew
Risks Related to Our Capital Resources and Indebtedness
- 39From time to time, we may have substantial indebtedness and we are able to incur significant additional indebtedness
- 40We may be unable to service our indebtedness
- 41We rely on our subsidiaries for our operating funds
- 42Covenants in our debt agreements restrict our activities and could adversely affect our business73% rewritten
- 43activities; creating restrictions on the ability of our subsidiaries to pay distributions or other amounts to us; selling assets; effecting a consolidation or merger or selling all or substantially all of our assets; making acquisitions; and amending organizational documentsNew
- 44Increases in interest rates could increase our existing and future debt borrowing costs and adversely affect our stock price
- 45A credit rating downgrade could impair our ability to obtain additional debt financing on favorable terms, if at all, and significantly reduce the trading price of our common stock
Risks Related To Our Common Stock and Organizational Documents
- 46Our charter restricts the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company
- 47Maryland law and provisions in our charter and bylaws may delay or prevent takeover attempts by third parties and therefore inhibit our stockholders from realizing a premium on their stock
- 48Our bylaws contain a provision that exempts from the MGCL’s control share acquisition statute any and all acquisitions by any person of shares of our stock. However, there can be no assurance that this provision will not be amended or eliminated, in whole or in part, at any time in the future44% rewritten
- 49Our bylaws provide that the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees
- 50We cannot assure you of our ability to pay dividends in the future
Other CareTrust REIT 10-Ks
- FY2024 10-K risk factors40 risks
CareTrust REIT is a healthcare real estate investment trust heavily dependent on government reimbursement rates for tenants operating skilled nursing facilities.
Filed Feb 12, 2025
About this page
The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.