National Healthcare Properties (NHP) risk factors, FY2024 10-K

Risks Related to Our Properties and Operations

1. 01Our property portfolio has a high concentration of properties located in certain states. Our properties may be adversely affected by economic cycles and risks inherent to those states
2. 02We may be unable to enter into contracts for and complete property acquisitions or dispositions on advantageous terms and our property acquisitions may not perform as we expect
3. 03We may be unable to realize the anticipated synergies and other benefits of the Internalization or do so within the anticipated time frame
4. 04We have not paid any distributions on our common stock in cash since 2020, and there can be no assurance we will pay distributions on our common stock in cash in the future
5. 05If a tenant or lease guarantor declares bankruptcy or becomes insolvent, we may be unable to collect balances due under relevant leases
6. 06A sale-leaseback transaction may be recharacterized in a tenant’s bankruptcy proceeding
7. 07Our results of operations have been, and may continue to be, adversely impacted by our inability to collect rent from tenants
8. 08We obtain only limited warranties when we purchase a property and therefore have only limited recourse if our due diligence did not identify any issues that lower the value of our property
9. 09Our properties and tenants may be unable to compete successfully
10. 10We may be unable to secure funds for future tenant improvements or capital needs
11. 11We have acquired or financed, and may continue to acquire or finance, properties with lock-out provisions which may prohibit us from selling a property, or may require us to maintain specified debt levels for a period of years on some properties
12. 12Rising expenses could reduce cash flow
13. 13Inflation may have an adverse effect on our investments and results of operations
14. 14Damage from catastrophic weather and other natural events and climate change could result in losses to us
15. 15We may suffer uninsured losses relating to real property or have to pay expensive premiums for insurance coverage
16. 16Covenants, conditions and restrictions may impact our ability to operate a property
17. 17Our operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks
18. 18We compete with third parties in acquiring properties and other investments and attracting credit worthy tenants
19. 19Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results
20. 20If we sell properties by providing financing to purchasers, defaults by the purchasers could adversely affect our cash flows
21. 21We assume additional operational risks and are subject to additional regulation and liability because we depend on eligible independent contractors to manage some of our facilities
22. 22Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers
23. 23Net leases may not result in market rental rates over time
24. 24We may be unable to renew leases or re-lease space as leases expire
25. 25Our properties have been and may continue to be subject to impairment charges
26. 26Our real estate investments are relatively illiquid, and therefore we may not be able to dispose of properties when we desire to do so or on favorable terms
27. 27Our success is dependent on the continued contributions of certain key personnel
28. 28If there are deficiencies in our disclosure controls and procedures or internal control over financial reporting, we could be adversely impacted
29. 29We have experienced net losses in the past and may experience additional losses in the future
30. 30We are subject to risks associated with public health crises, such as pandemics and epidemics, which may have a material adverse effect on our business

Risks Related to the Healthcare Industry

1. 31Our real estate investments are concentrated in healthcare-related facilities, and we may be negatively impacted by adverse trends in the healthcare industry
2. 32The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us
3. 33Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements, could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us
4. 34Required regulatory approvals can delay or prohibit transfers of our healthcare facilities
5. 35A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants
6. 36Certain of our facilities may be subject to pre- and post-payment reviews and audits by governmental authorities, which could result in recoupments, denials or delay of payments and could adversely affect the profitability of our tenants and operators
7. 37We may incur costs associated with complying with the Americans with Disabilities Act
8. 38Events that adversely affect the ability of seniors and their families to afford daily resident fees at our SHOPs could cause our occupancy rates and resident fee revenues to decline
9. 39Termination of SHOP leases by residents pursuant to state law mandated contractual provisions could have an adverse effect on our business, financial condition and results of operations
10. 40There are various federal and state laws prohibiting fraudulent and abusive business practices by healthcare providers who participate in, receive payments from or are in a position to make referrals in connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs
11. 41Tenants and operators of our healthcare-related assets 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
12. 42We may experience adverse effects as a result of potential financial and operational challenges faced by the tenants and operators of any seniors housing facilities and skilled nursing facilities we own or acquire
13. 43We may change our targeted investments without stockholder consent

Risks Related to our Indebtedness

1. 44Our level of indebtedness may increase our business risks
2. 45Our financing arrangements have restrictive covenants, which may limit our ability to pursue strategic alternatives and react to changes in our business and industry or pay distributions
3. 46Changes in the debt markets could have a material adverse impact on our earnings and financial condition
4. 47Elevated interest rates may make it difficult for us to finance or refinance indebtedness secured by our properties and could increase the amount of our debt payments
5. 48Any hedging strategies we utilize may not be successful in mitigating our risks

Risks Related to our Corporate Structure

1. 49Our common stock is not traded on a national securities exchange, and our share repurchase program (the “SRP”), which provides for repurchases only in the event of death or disability of a stockholder, is suspended. Stockholders may have to hold their shares for an indefinite period of time
2. 50The Estimated Per-Share NAV of our common stock is based upon subjective judgments, assumptions and opinions about future events, and may not reflect the amount that our stockholders might receive for their shares
3. 51Because Estimated Per-Share NAV is only determined annually, it may differ significantly from our actual per‑share net asset value at any given time
4. 52The trading price of our Series A Preferred Stock and Series B Preferred Stock may fluctuate significantly
5. 53We currently do not pay cash distributions on our common stock and we may be unable to pay or maintain cash distributions in the future or increase distributions over time
6. 54The limit on the number of shares a person may own may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders
7. 55The terms of our Series A Preferred Stock, Series B Preferred Stock, and the terms of other preferred stock we may issue, may discourage a third- party from acquiring us in a manner that might result in a premium price to stockholders
8. 56We have a classified board, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders
9. 57Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders
10. 58Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders
11. 59Certain provisions in our bylaws and agreements may deter, delay or prevent a change in our control
12. 60Maryland law limits the ability of a third-party to buy a large stake in us and exercise voting power in electing directors, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders
13. 61The stockholder rights plan adopted by our Board may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders
14. 62Our business and operations could suffer if our operations experiences system failures or cyber incidents or a deficiency in cybersecurity
15. 63We depend on our OP and its subsidiaries for cash flow and are structurally subordinated in right of payment to the obligations of our OP and its subsidiaries
16. 64Our failure to remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax
17. 65Even as a REIT, in certain circumstances, we may incur tax liabilities that would reduce our cash available for distribution to our stockholders
18. 66To qualify as a REIT, we must meet annual distribution requirements, which may force us to forgo otherwise attractive opportunities or borrow funds during unfavorable market conditions. This could delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return
19. 67Recharacterization of sale-leaseback transactions may cause us to lose our REIT status
20. 68Certain of our business activities are potentially subject to the prohibited transaction tax
21. 69TRSs are subject to corporate-level taxes and our dealings with TRSs may be subject to a 100% excise tax
22. 70If the OP failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT
23. 71If our qualified health care properties are not properly leased to a TRS or the managers of those qualified health care properties do not qualify as “eligible independent contractors,” we could fail to qualify as a REIT
24. 72If our leases with TRSs are not respected as true leases for U.S. federal income tax purposes, we likely would fail to qualify as a REIT
25. 73We may choose to make distributions partly in cash and partly in shares of our common stock, in which case our stockholders may be required to pay U.S. federal income taxes in excess of the cash portion of such distributions they receive
26. 74The taxation of distributions can be complex; however, distributions to stockholders that are treated as dividends for U.S. federal income tax purposes generally will be taxable as ordinary income, which may reduce our stockholders’ after-tax anticipated return from an investment in us
27. 75Our stockholders may have tax liability on distributions that they elect to reinvest in shares of our common stock, but they would not receive the cash from such distributions to pay such tax liability
28. 76Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities
29. 77Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities
30. 78The ability of the Board to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce distributions to our stockholders
31. 79We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility, and reduce the value of shares of our stock
32. 80The share ownership restrictions for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities
33. 81These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for shares of our stock or otherwise be in the best interests of the stockholders
34. 82Potential characterization of dividends and other distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors