Chiron Real Estate (XRN) risk factors, FY2024 10-K

Risks Related to our Business and Healthcare Facilities

1. 01We are dependent on our tenants for our revenues. Our tenants face a wide range of business risks, including economic, competitive, government reimbursement and regulatory risks, any of which could cause our tenants to be unable to pay rent to us
2. 02Our assets are concentrated in healthcare-related facilities, making us more economically vulnerable to specific industry-related risks than if our assets were diversified across different industries
3. 03The inability of any of our significant tenants to pay rent to us could have a disproportionate negative affect on our business
4. 04Our leases are generally medium-to-long-term leases with annual rent escalators, however, some of our debt financing is subject to floating interest rates. Recent increases in interest rates have not been matched by an increase in our rent payments, which has exposed us to a funding imbalance
5. 05The bankruptcy of any of our tenants could bar our efforts to collect pre-bankruptcy debts from the tenant or evict the tenant and take back control of the property
6. 06The physical effects of climate change could have a material adverse effect on our properties
7. 07Adverse economic or other conditions in our geographic markets could negatively affect our tenants’ ability to pay rent to us
8. 08Most of our healthcare facilities are occupied by a single tenant, and we may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases, especially for our healthcare facilities located in smaller markets
9. 09All these risks may be greater in smaller markets, where there may be fewer potential replacement tenants, making it more difficult to replace tenants, especially for specialized space
10. 10We may be unable to successfully enter into definitive purchase or sale agreements for, or close the acquisition or sale of, the properties in our investment pipeline or our portfolio
11. 11Our use of joint ventures may limit our returns on and our flexibility with jointly owned investments
12. 12We 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
13. 13Our healthcare buildings that are subject to ground leases could restrict our use of such healthcare facilities
14. 14Our healthcare facilities and our tenants may be unable to compete successfully, which could negatively affect our tenants’ businesses and ability to pay rent to us
15. 15We may incur uninsured losses or losses in excess of our insurance coverage, which may result in us having to absorb all or a portion of such loss
16. 16We may incur environmental compliance costs and liabilities associated with owning, leasing, developing and operating our healthcare facilities
17. 17The income from certain of our properties is dependent on the ability of our property managers to successfully manage those properties
18. 18We, our tenants, and our property managers face risks associated with security breaches through cyber-attacks, cyber-intrusions, or otherwise, as well as other significant disruptions of information technology networks and related systems
19. 19Any or all the foregoing could have a material adverse effect on our business, financial condition and results of operations, our ability to pay distributions to our stockholders and the trading price of our common and preferred stock

Risks Related to our Financings

1. 20Our interest rate hedges may not be successful in mitigating our interest rate risks
2. 21We finance our healthcare facilities with term indebtedness, and we may place term indebtedness on our healthcare facilities in the future. We may not be able to refinance such debt when due or may be unable to refinance such debt on favorable terms
3. 22We rely on 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

Risks Related to the Healthcare Industry

1. 23Adverse trends in the healthcare industry may negatively affect our tenants’ businesses
2. 24The 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. 25Reductions in reimbursement from third-party payors, 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 leases
4. 26Our 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 also be subject to healthcare industry violations

Risks Related to the Real Estate Industry

1. 27Changes in the general real estate market conditions may adversely affect us
2. 28Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our healthcare facilities
3. 29Uncertain market conditions could cause us to sell our healthcare facilities at a loss in the future
4. 30Our assets may become subject to impairment charges

Risks Related to Our Structure

1. 31We have no direct operations and rely on funds received from our Operating Partnership and its subsidiaries to meet our obligations
2. 32Subject to certain requirements under Maryland law and REIT requirements, the Board has sole discretion to determine if we will pay distributions and the amount and frequency of such distributions, and past distribution amounts may not be indicative of future distribution amounts
3. 33Our use of OP Units as currency to acquire healthcare facilities could result in stockholder dilution and/or limit our ability to sell such healthcare facilities, which could have a material adverse effect on us
4. 34We may be unable to maintain effective internal control over financial reporting
5. 35Conflicts of interest could arise because of our UPREIT structure
6. 36For us to qualify as a REIT, no more than 50% of the value of our outstanding shares of stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year other than our initial REIT taxable year
7. 37We could increase the number of authorized shares of common and preferred stock, classify and reclassify unissued shares and issue shares without stockholder approval
8. 38We may change our business, investment, and financing strategies without stockholder approval
9. 39Our 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 interests
10. 40Certain provisions in the partnership agreement of our Operating Partnership may delay or prevent unsolicited acquisitions of us
11. 41We may be unable to obtain or retain key personnel or continue to remain appropriately staffed

Risks Related to Our Qualification and Operation as a REIT

1. 42Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders
2. 43Even if we continue to qualify as a REIT, we may face other tax liabilities that could reduce our cash flows and negatively impact our results of operations and financial condition
3. 44Failure to make required distributions would subject us to U.S. federal corporate income tax
4. 45Recharacterization of sale-leaseback transactions may cause us to lose our REIT status
5. 46Our qualification as a REIT could be jeopardized as a result of our interests in joint ventures
6. 47Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments
7. 48Certain taxes may limit our ability to dispose of our healthcare facilities
8. 49We may pay taxable dividends in our common stock and cash, in which case stockholders may sell shares of our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock
9. 50The ability of the Board to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders
10. 51Our ownership of our TRS is subject to limitations and our transactions with our TRS will 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
11. 52The formation of a TRS lessee would increase our overall tax liability
12. 53If leases of our healthcare facilities 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
13. 54If a TRS lessee failed to qualify as a TRS or the facility operators engaged by a TRS lessee did not qualify as “eligible independent contractors,” 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
14. 55The stock ownership restrictions for REITs in the Code and the 9.8% share ownership limit in our charter may inhibit market activity in our capital stock and restrict our business combination opportunities
15. 56Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
16. 57We may be subject to adverse legislative or regulatory tax changes
17. 58If 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
18. 59Tax protection agreements may limit our ability to sell or otherwise dispose of certain properties and may require our Operating Partnership to maintain certain debt levels that otherwise would not be required to operate our business
19. 60We are subject to risks related to corporate social responsibility
20. 61Artificial intelligence and other machine learning techniques could increase competitive, operational, legal and regulatory risks to our business in ways that we cannot predict