ITEM
1. Business
We
are a self-managed and self-administered company that specializes in the acquisition, ownership and triple-net leasing of skilled nursing
facilities and other post-acute healthcare properties. As of the date of this Form 10-K, our portfolio consisted of 79 healthcare properties
with an aggregate of 10,351 licensed beds. We hold fee title to 78 of these properties, and hold one property under a long-term lease.
These properties are located across Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. Our 79 properties
comprise 83 healthcare facilities, consisting of the following:
| |
● |
76
stand-alone skilled nursing facilities; |
| |
● |
two
dual-purpose facilities used as both skilled nursing facilities and long-term acute care hospitals; and |
| |
● |
three
assisted living facilities. |
We
generate substantially all of our revenues by leasing our properties to tenants under long-term leases on a triple-net basis, under which
the tenant pays the cost of real estate taxes, insurance and other operating costs of the facility and capital expenditures. Each healthcare
facility located at our properties is managed by a qualified operator with an experienced management team.
We
are entitled to monthly rent paid by the tenants and we do not receive any income or bear any expenses from the operation of such facilities.
As of the date of this Form 10-K, the aggregate annualized average base rent under the leases for our properties was approximately $82.5
million.
Since
the Predecessor Company was formed, we have grown significantly through acquisitions, having purchased 29 properties since
January 2017, with an aggregate purchase price of approximately $204.1 million. Since 2017, our aggregate annualized average base rent
has grown at an approximate 7.6% CAGR from $57.1 million in fiscal year 2017 to $82.5 million in fiscal year 2022. In addition, our Adjusted
EBITDA and FFO from 2018 to 2022 grew at an approximate 10.8% and 23.4% CAGR, respectfully.
During that period, we expanded our geographic footprint from six states to nine states.
From
January 1, 2022, through March 27, 2023, we acquired one SNF for a total cost of approximately $6.0 million (including finder fees and
leasehold improvements), which includes capitalized acquisition costs. This acquisition is expected to generate initial annual cash revenues
of approximately $0.6 million.
Our
management team has extensive experience in acquiring, owning, financing, operating and leasing of skilled nursing facilities and
other types of healthcare properties. The team is led by Moishe Gubin, our Chief Executive Officer and Chairman of our Board of
Directors, Nahman Eingal, our Chief Financial Officer, and Jeffrey Bajtner who serves as our Senior Investment Officer. Combined,
this team has over 50 years of experience investing in real estate and particularly in healthcare related real estate and operating
companies. They have completed over 80 real estate related/healthcare related acquisitions totaling over $900 million in gross
investment through various investment vehicles. Our management team also has extensive experience as operators of, and healthcare
consultants to, skilled nursing facilities, having managed and operated over 60 skilled nursing facilities, including 41 of our
current tenants. We believe our management team’s unique experience across both skilled nursing operations and real estate and
its extensive knowledge of the skilled nursing industry position us favorably to take advantage of healthcare investment
opportunities. Additionally, our deep and broad relationships with industry operators have allowed us to identify and acquire
skilled nursing facilities to which many of our competitors do not have access.
We
have assembled a high quality and diversified portfolio of skilled nursing and other healthcare related facilities and we plan to continue
to invest primarily in skilled nursing facilities and other healthcare facilities that primarily provide services to the elderly. We
believe these asset classes provide potential for higher risk-adjusted returns compared to other forms of net-leased real estate assets
due to the specialized expertise necessary to acquire, own, finance and operate these properties, which are factors that tend to limit
competition among investors, owners, operators and finance companies. Additionally, our management team’s strong relationships
in the industry have allowed us to acquire healthcare-related properties at valuations that achieve attractive lease yields, with the
goal of generating strong returns for our stockholders over the long-term. As we continue to acquire additional properties and expand
our portfolio, we expect to continue diversifying our portfolio by geography and by tenant, while also maintaining balance sheet strength
and liquidity.
As
of December 31, 2022, we had notes receivable consisting of a working capital loan to one of our tenants with a balance of $1.9
million, two uncollateralized loans to purchasers of our former properties with an aggregate balance due of $9.1 million, an $8
million uncollateralized note that the Company purchased related to our Arkansas properties and a short-term loan with a
balance of $0.4 million which was repaid in January 2023. All of the notes receivable are current.
We
elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2022. We
believe that we have been organized and have operated, and we intend to continue to operate, in a manner to qualify for taxation as
a REIT. We operate through an umbrella partnership, commonly referred to as an UPREIT structure, in which substantially all of our
properties and assets are held through Strawberry Fields Realty, L.P. (the “Operating Partnership”). We are the general
partner of the Operating Partnership and own approximately 12.0% of the outstanding OP units. To maintain REIT status, we must meet
certain organizational and operational requirements, including a requirement that we annually distribute to our stockholders at
least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital
gains.
We
generate revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under
which the tenant is solely responsible for the costs related to the property (including property taxes, insurance, maintenance and repair
costs and capital expenditures). From time to time, we also extend loans to healthcare operators, generally secured by their receivables. We conduct and manage our business as one operating segment for internal reporting and internal decision-making purposes.
We expect to grow our portfolio by pursuing opportunities to acquire additional properties that will be leased to a diverse group of
local, regional and national healthcare providers, which may include new or existing skilled nursing operators. We also anticipate diversifying
our portfolio over time, including by acquiring properties in different geographic markets, and in different asset classes. In addition,
we actively monitor the clinical, regulatory, and financial operating results of our tenants, and work to identify opportunities within
their operations and markets that could improve their operating results at our facilities. We communicate such observations to our tenants;
however, we have no contractual obligation to do so. Moreover, our tenants have sole discretion with respect to the day-to-day operation
of the facilities they lease from us, and how and whether to implement any observation we may share with them. We also actively monitor
the overall occupancy, skilled mix, and other operating metrics of our tenants monthly.
We have replaced tenants in the past, and may
elect to replace tenants in the future, if they fail to meet the terms and conditions of their leases with us. The replacement tenants
may include tenants with whom we have had no prior landlord-tenant relationship as well as current tenants with whom we are comfortable
expanding our relationships. In addition, we periodically reassess the investments we have made and the tenant relationships we have
entered, and have selectively disposed of facilities or investments, or terminated such relationships, and we expect to continue making
such reassessments and, where appropriate, taking such actions.
Our
Industry
The
skilled nursing industry has evolved to meet the growing demand for post-acute and custodial healthcare services generated by an aging
population, increasing life expectancies and the trend toward shifting patient care to lower cost settings. We believe this evolution
has led to a number of favorable improvements in the industry, as described below:
| |
● |
Shift of Patient Care to Lower Cost Alternatives. The
growth of the senior population in the United States continues to increase healthcare costs. In response, federal and state governments
have adopted cost-containment measures that encourage the treatment of patients in more cost-effective settings such as SNFs, for which
the staffing requirements and associated costs are often significantly lower than acute care hospitals, inpatient rehabilitation facilities
and other post-acute care settings. As a result, SNFs are generally serving a larger population of higher-acuity patients than in the
past. The same trend is impacting ALFs, which are now generally serving some patients who previously would have received services at
SNFs. |
| |
|
|
| |
● |
Significant Acquisition and Consolidation Opportunities.
The skilled nursing industry is large and highly fragmented, characterized predominantly by numerous local and regional providers.
We believe this fragmentation provides significant acquisition and consolidation opportunities. |
| |
|
|
| |
● |
Widening Supply and Demand Imbalance. The number of
SNFs has declined modestly over the past several years. According to the American Health Care Association, the nursing home industry
was comprised of approximately 15,000 facilities as of December 2020, as compared with over 16,700 facilities as of December 2000. We
expect that the supply/demand imbalance in the skilled nursing industry will increasingly favor skilled nursing and assisted living providers
due to the shift of patient care to lower cost settings and an aging population. |
| |
|
|
| |
● |
Increased Demand Driven by Aging Populations. As seniors
account for a higher percentage of the total U.S. population, we believe the overall demand for skilled nursing services will increase.
At present, the primary market demographic for skilled nursing services is individuals aged 75 and older. The 2020 U.S. Census reported
that there were over 56 million people in the United States in 2020 over the age of 65. The U.S. Census estimates this group to be one
of the fastest growing segments of the United States population, projecting that it will almost double between 2020 and 2060. According
to the Centers for Medicare & Medicaid Services, nursing home care facilities and continuing care retirement expenditures are projected
to grow from approximately $196.8 billion in 2020, which includes federal expenditures in response to the COVID-19 pandemic, to approximately
$266 billion in 2028. Although skilled nursing and seniors housing occupancy rates have declined during the COVID-19 pandemic, we believe
that these trends in population will support an increasing demand for skilled nursing services in the long-term, which in turn will likely
support an increasing demand for the services provided within our properties. |
Tenants
and Operators
Our
properties are currently leased to 83 tenants under 27 lease agreements. Our leases include 8 master lease agreements that cover 64 facilities
leased to 64 tenants, with the remaining 19 leases each covering a single facility leased to one tenant. Forty-one of our tenants are
related parties.
Each
property is operated as a healthcare facility by a licensed operator, which may be the tenant or a separate operator. Each operator holds
a license granted by state regulators to operate a specific type of facility. All the operators have experienced management teams
and senior healthcare staff with substantial knowledge of their respective local markets. We target healthcare operators that are owned
by principals with a history of quality care, and the demonstrated ability to successfully navigate in a changing healthcare operating
environment. Certain operators are related parties.
We
believe that each of the operators of our properties is primarily focused on serving the needs of the local community. Unlike operators
that are part of a large national healthcare conglomerate, we believe the operators at our properties can manage their facilities more
efficiently because they are not burdened by costly infrastructure and have the flexibility to rapidly adjust their cost structure to
respond to changes in the reimbursement environment.
In
order to operate efficiently and improve profitability, most of the operators at our facilities have engaged large consulting firms that
specialize in healthcare and skilled nursing operations. These consulting firms provide advice and assistance on marketing, operating
policies and procedures, billing, collections and regulatory compliance. The operators and consultants work together to develop and standardize
best practices in the facilities, while operating in a cost-efficient manner. The operators at our properties primarily use one of nine
principal consulting firms, including three firms that are part of Infinity Healthcare, a healthcare consulting business that is owned
by the Moishe Gubin, who is our Chairman and Chief Executive Officer and Michael Blisko, who is one of our directors.
The
tenants and operators of our properties have demonstrated the ability to generate consistent profitability despite the challenging markets
in which they operate. In many cases, these tenants and operators have successfully optimized and stabilized underperforming skilled
nursing facilities. While these tenants and operators have been successful, we expect to seek opportunities to diversify our tenant/operator
mix through future acquisitions that will be leased to new operators.
The
following table contains information regarding our healthcare facility portfolio by tenant, as of March 27, 2023.
Lessor/
Company Subsidiary |
|
Manager/Tenant/
Operator (1) |
|
State |
|
Property type |
|
Number
of licensed beds |
|
|
Tenant
Lease Expiration Year (2) |
|
|
Rentable
square feet |
|
|
Percent
leased |
|
|
Annualized Lease
Income
(in $) |
|
|
% of
total Annualized Lease Income |
|
|
Annualized
lease income per SQF (in $) |
|
| Master Lease Indiana |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1020 West Vine Street Realty LLC |
|
The Waters of Princeton II LLC |
|
IN |
|
SNF |
|
|
95 |
|
|
|
2025 |
|
|
|
32,571 |
|
|
|
100 |
% |
|
|
1,045,506 |
|
|
|
1.27 |
% |
|
|
32.10 |
|
| 12803 Lenover Street Realty LLC |
|
The Waters of Dillsboro – Ross Manor II LLC |
|
IN |
|
SNF |
|
|
123 |
|
|
|
2025 |
|
|
|
67,851 |
|
|
|
100 |
% |
|
|
1,353,655 |
|
|
|
1.64 |
% |
|
|
19.95 |
|
| 1350 North Todd Drive Realty, LLC |
|
The Waters of Scottsburg II LLC |
|
IN |
|
SNF |
|
|
99 |
|
|
|
2025 |
|
|
|
28,050 |
|
|
|
100 |
% |
|
|
1,089,527 |
|
|
|
1.32 |
% |
|
|
38.84 |
|
| 1600 East Liberty Street Realty LLC |
|
The Waters of Covington II, LLC |
|
IN |
|
SNF |
|
|
119 |
|
|
|
2025 |
|
|
|
40,821 |
|
|
|
100 |
% |
|
|
1,309,634 |
|
|
|
1.59 |
% |
|
|
32.08 |
|
| 1601 Hospital Drive Realty LLC |
|
The Waters of Greencastle II LLC |
|
IN |
|
SNF |
|
|
100 |
|
|
|
2025 |
|
|
|
31,245 |
|
|
|
100 |
% |
|
|
1,100,532 |
|
|
|
1.33 |
% |
|
|
35.22 |
|
| 1712 Leland Drive Realty, LLC |
|
The Waters of Huntingburg II LLC |
|
IN |
|
SNF |
|
|
95 |
|
|
|
2025 |
|
|
|
45,156 |
|
|
|
100 |
% |
|
|
1,045,506 |
|
|
|
1.27 |
% |
|
|
23.15 |
|
| 2055 Heritage Drive Realty LLC |
|
The Waters of Martinsville II LLC |
|
IN |
|
SNF |
|
|
103 |
|
|
|
2025 |
|
|
|
30,060 |
|
|
|
100 |
% |
|
|
1,133,548 |
|
|
|
1.37 |
% |
|
|
37.71 |
|
| 3895 South Keystone Avenue Realty LLC |
|
The Waters of Indianapolis II LLC |
|
IN |
|
SNF |
|
|
81 |
|
|
|
2025 |
|
|
|
25,469 |
|
|
|
100 |
% |
|
|
891,431 |
|
|
|
1.08 |
% |
|
|
35.00 |
|
| 405 Rio Vista Lane Realty LLC |
|
The Waters of Rising Sun II LLC |
|
IN |
|
SNF |
|
|
58 |
|
|
|
2025 |
|
|
|
16,140 |
|
|
|
100 |
% |
|
|
638,309 |
|
|
|
0.77 |
% |
|
|
39.55 |
|
| 950 Cross Avenue Realty LLC |
|
The Waters of Clifty Falls II LLC |
|
IN |
|
SNF |
|
|
138 |
|
|
|
2025 |
|
|
|
39,438 |
|
|
|
100 |
% |
|
|
1,518,735 |
|
|
|
1.84 |
% |
|
|
38.51 |
|
| 958 East Highway 46 Realty LLC |
|
The Water of Batesville II LLC |
|
IN |
|
SNF |
|
|
86 |
|
|
|
2025 |
|
|
|
59,582 |
|
|
|
100 |
% |
|
|
946,458 |
|
|
|
1.14 |
% |
|
|
15.88 |
|
| 2400 Chateau Drive Realty, LLC |
|
The Waters of Muncie II LLC |
|
IN |
|
SNF |
|
|
72 |
|
|
|
2025 |
|
|
|
22,350 |
|
|
|
100 |
% |
|
|
792,383 |
|
|
|
0.96 |
% |
|
|
35.45 |
|
| The Big H2O LLC |
|
The Waters of New Castle II LLC |
|
IN |
|
SNF |
|
|
66 |
|
|
|
2025 |
|
|
|
24,860 |
|
|
|
100 |
% |
|
|
726,351 |
|
|
|
0.88 |
% |
|
|
29.22 |
|
| Master Lease Central Illinois |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 253 Bradington Drive, LLC |
|
Bria of Columbia LLC |
|
IL |
|
SNF |
|
|
119 |
|
|
|
2032 |
|
|
|
43,189 |
|
|
|
100 |
% |
|
|
279,872 |
|
|
|
0.34 |
% |
|
|
6.48 |
|
| 3523 Wickenhauser, LLC |
|
Bria of Alton LLC |
|
IL |
|
SNF |
|
|
181 |
|
|
|
2032 |
|
|
|
44,840 |
|
|
|
100 |
% |
|
|
425,687 |
|
|
|
0.52 |
% |
|
|
9.49 |
|
| 727 North 17TH Street, LLC |
|
Belleville Healthcare Center LLC |
|
IL |
|
SNF |
|
|
180 |
|
|
|
2032 |
|
|
|
50,650 |
|
|
|
100 |
% |
|
|
423,335 |
|
|
|
0.51 |
% |
|
|
8.36 |
|
| 107 South Lincoln Street LLC (3) |
|
Bria of Smithson, LLC |
|
IL |
|
SNF |
|
|
0 |
|
|
|
0 |
|
|
|
21,150 |
|
|
|
0 |
% |
|
|
367,518 |
|
|
|
0.45 |
% |
|
|
17.38 |
|
| 1623 West Delmar Avenue, LLC |
|
Bria of Godfrey LLC |
|
IL |
|
SNF |
|
|
68 |
|
|
|
2032 |
|
|
|
15,740 |
|
|
|
100 |
% |
|
|
247,438 |
|
|
|
0.30 |
% |
|
|
15.72 |
|
| 393 Edwardsville Road, LLC |
|
Bria of WoodRiver LLC |
|
IL |
|
SNF |
|
|
106 |
|
|
|
2032 |
|
|
|
29,491 |
|
|
|
100 |
% |
|
|
385,712 |
|
|
|
0.47 |
% |
|
|
13.08 |
|
| Master Lease Landmark |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1621 Coit Road Realty, LLC |
|
Landmark of Plano Rehabilitation and Nursing Center, LLC |
|
TX |
|
SNF |
|
|
160 |
|
|
|
2032 |
|
|
|
49,812 |
|
|
|
100 |
% |
|
|
1,177,910 |
|
|
|
1.43 |
% |
|
|
23.65 |
|
| 8200 National Avenue Realty, LLC |
|
Landmark of Midwest City Rehabilitation and Nursing Center, LLC |
|
OK |
|
SNF |
|
|
106 |
|
|
|
2032 |
|
|
|
39,789 |
|
|
|
100 |
% |
|
|
780,365 |
|
|
|
0.95 |
% |
|
|
19.61 |
|
| 8200 National Avenue Realty, LLC |
|
Landmark of Midwest City Hospital, LLC |
|
OK |
|
LTACH |
|
|
31 |
|
|
|
2032 |
|
|
|
49,319 |
|
|
|
100 |
% |
|
|
228,220 |
|
|
|
0.28 |
% |
|
|
4.63 |
|
| 5601 Plum Creek Drive Realty, LLC |
|
Landmark of Amarillo Rehabilitation and Nursing Center, LLC |
|
TX |
|
SNF |
|
|
99 |
|
|
|
2032 |
|
|
|
60,031 |
|
|
|
100 |
% |
|
|
728,832 |
|
|
|
0.88 |
% |
|
|
12.14 |
|
| 9300 Ballard Road Realty, LLC |
|
Landmark of Des Plaines Rehabilitation and Nursing Center, LLC |
|
IL |
|
SNF |
|
|
231 |
|
|
|
2032 |
|
|
|
70,556 |
|
|
|
100 |
% |
|
|
1,700,607 |
|
|
|
2.06 |
% |
|
|
24.10 |
|
| 911 South 3rd Street, LLC |
|
Chalet Of Niles, LLC |
|
MI |
|
SNF |
|
|
100 |
|
|
|
2032 |
|
|
|
31,895 |
|
|
|
100 |
% |
|
|
736,193 |
|
|
|
0.89 |
% |
|
|
19.61 |
|
| 1015 Magazine Street, LLC |
|
Landmark of River City Rehabilitation and Nursing Center, LLC |
|
KY |
|
SNF |
|
|
92 |
|
|
|
2032 |
|
|
|
36,050 |
|
|
|
100 |
% |
|
|
677,298 |
|
|
|
0.82 |
% |
|
|
18.79 |
|
| 900 Gagel Avenue, LLC |
|
Landmark of Iroquois Park Rehabilitation and Nursing Center, LLC |
|
KY |
|
SNF |
|
|
120 |
|
|
|
2032 |
|
|
|
36,374 |
|
|
|
100 |
% |
|
|
883,432 |
|
|
|
1.07 |
% |
|
|
24.29 |
|
| 308 West Maple Avenue, LLC |
|
Landmark of Lancaster Rehabilitation and Nursing Center, LLC |
|
KY |
|
SNF |
|
|
96 |
|
|
|
2032 |
|
|
|
42,438 |
|
|
|
100 |
% |
|
|
706,746 |
|
|
|
0.86 |
% |
|
|
16.65 |
|
| 1155 Eastern Parkway, LLC |
|
Landmark of Louisville Rehabilitation and Nursing Center, LLC |
|
KY |
|
SNF |
|
|
252 |
|
|
|
2032 |
|
|
|
106,250 |
|
|
|
100 |
% |
|
|
1,855,208 |
|
|
|
2.25 |
% |
|
|
17.46 |
|
| 203 Bruce Court, LLC |
|
Landmark of Danville Rehabilitation and Nursing Center, LLC, Goldenrod
Village Assisted Living Center, LLC |
|
KY |
|
SNF/
ALF |
|
|
108 |
|
|
|
2032 |
|
|
|
46,500 |
|
|
|
100 |
% |
|
|
795,089 |
|
|
|
0.96 |
% |
|
|
17.10 |
|
| 120 Life Care Way, LLC |
|
Landmark of Bardstown Rehabilitation and Nursing Center, LLC |
|
KY |
|
SNF |
|
|
100 |
|
|
|
2032 |
|
|
|
36,295 |
|
|
|
100 |
% |
|
|
736,193 |
|
|
|
0.89 |
% |
|
|
20.28 |
|
| 1033 North Highway 11, LLC |
|
Landmark of Laurel Creek Rehabilitation and Nursing Center, LLC |
|
KY |
|
SNF |
|
|
106 |
|
|
|
2032 |
|
|
|
32,793 |
|
|
|
100 |
% |
|
|
780,365 |
|
|
|
0.95 |
% |
|
|
23.80 |
|
| 945 West Russell Street, LLC |
|
Landmark of Elkhorn City Rehabilitation and Nursing Center, LLC |
|
KY |
|
SNF |
|
|
106 |
|
|
|
2032 |
|
|
|
31,637 |
|
|
|
100 |
% |
|
|
780,365 |
|
|
|
0.95 |
% |
|
|
24.67 |
|
| 1253 Lake Barkley Drive, LLC |
|
Landmark of Kuttawa, A Rehabilitation & Nursing Center, LLC |
|
KY |
|
SNF |
|
|
65 |
|
|
|
2032 |
|
|
|
37,892 |
|
|
|
100 |
% |
|
|
478,526 |
|
|
|
0.58 |
% |
|
|
12.63 |
|
| 420 Jett Drive, LLC |
|
Landmark of Breathitt County Rehabilitation and Nursing Center, LLC
|
|
KY |
|
SNF |
|
|
120 |
|
|
|
2031 |
|
|
|
32,581 |
|
|
|
100 |
% |
|
|
883,432 |
|
|
|
1.07 |
% |
|
|
27.11 |
|
| Master Lease Ohio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3090 Five Points Hartford Realty, LLC |
|
Continent Health Company of Hartford, LLC |
|
OH |
|
SNF |
|
|
54 |
|
|
|
2025 |
|
|
|
15,504 |
|
|
|
100 |
% |
|
|
196,012 |
|
|
|
0.24 |
% |
|
|
12.64 |
|
| 3121 Glanzman Road Realty, LLC |
|
Continent Health Company of Toledo, LLC |
|
OH |
|
SNF |
|
|
84 |
|
|
|
2025 |
|
|
|
24,087 |
|
|
|
100 |
% |
|
|
304,908 |
|
|
|
0.37 |
% |
|
|
12.66 |
|
| 620 West Strub Road Realty, LLC |
|
Continent Health Company of Sandusky, LLC |
|
OH |
|
SNF |
|
|
50 |
|
|
|
2025 |
|
|
|
18,984 |
|
|
|
100 |
% |
|
|
181,493 |
|
|
|
0.22 |
% |
|
|
9.56 |
|
| 4250 Sodom Hutchings Road Realty, LLC |
|
Continent Health Company of Cortland, LLC |
|
OH |
|
SNF |
|
|
50 |
|
|
|
2025 |
|
|
|
14,736 |
|
|
|
100 |
% |
|
|
181,493 |
|
|
|
0.22 |
% |
|
|
12.32 |
|
| Master Lease Tennessee 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 115 Woodlawn Drive, LLC |
|
Lakebridge A Waters Community, LLC |
|
TN |
|
SNF |
|
|
109 |
|
|
|
2031 |
|
|
|
37,734 |
|
|
|
100 |
% |
|
|
1,514,820 |
|
|
|
1.84 |
% |
|
|
40.14 |
|
| 146 Buck Creek Road, LLC |
|
The Waters of Roan Highlands, LLC |
|
TN |
|
SNF |
|
|
80 |
|
|
|
2031 |
|
|
|
30,139 |
|
|
|
100 |
% |
|
|
1,111,794 |
|
|
|
1.35 |
% |
|
|
36.89 |
|
| 704 5TH Avenue East, LLC |
|
The Waters of Springfield, LLC |
|
TN |
|
SNF |
|
|
66 |
|
|
|
2031 |
|
|
|
19,900 |
|
|
|
100 |
% |
|
|
917,230 |
|
|
|
1.11 |
% |
|
|
46.09 |
|
| 2501 River Road, LLC |
|
The Waters of Cheatham, LLC |
|
TN |
|
SNF |
|
|
80 |
|
|
|
2031 |
|
|
|
37,953 |
|
|
|
100 |
% |
|
|
1,111,794 |
|
|
|
1.35 |
% |
|
|
29.29 |
|
| 202 Enon Springs Road East, LLC |
|
The Waters of Smyrna, LLC |
|
TN |
|
SNF |
|
|
91 |
|
|
|
2031 |
|
|
|
34,070 |
|
|
|
100 |
% |
|
|
1,264,666 |
|
|
|
1.53 |
% |
|
|
37.12 |
|
| 140 Technology Lane, LLC |
|
The Waters of Johnson City, LLC |
|
TN |
|
SNF |
|
|
84 |
|
|
|
2031 |
|
|
|
34,814 |
|
|
|
100 |
% |
|
|
1,167,384 |
|
|
|
1.41 |
% |
|
|
33.53 |
|
| 835 Union Street, LLC |
|
The Waters of Shelbyville, LLC |
|
TN |
|
SNF |
|
|
96 |
|
|
|
2031 |
|
|
|
44,327 |
|
|
|
100 |
% |
|
|
1,334,153 |
|
|
|
1.62 |
% |
|
|
30.10 |
|
| Master Lease Tennessee 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 505 North Roan Street, LLC |
|
Agape Rehabilitation & Nursing Center, A Water’s Community, LLC |
|
TN |
|
SNF |
|
|
84 |
|
|
|
2031 |
|
|
|
27,100 |
|
|
|
100 |
% |
|
|
1,628,910 |
|
|
|
1.97 |
% |
|
|
60.11 |
|
| 14510 Highway 79, LLC |
|
Waters of McKenzie, A Rehabilitation & Nursing Center, A Water’s
Community, LLC |
|
TN |
|
SNF |
|
|
66 |
|
|
|
2031 |
|
|
|
22,454 |
|
|
|
100 |
% |
|
|
1,279,858 |
|
|
|
1.55 |
% |
|
|
57.00 |
|
| 6500 Kirby Gate Boulevard, LLC |
|
Waters of Memphis, A Rehabilitation & Nursing Center, LLC |
|
TN |
|
SNF |
|
|
90 |
|
|
|
2031 |
|
|
|
51,565 |
|
|
|
100 |
% |
|
|
1,745,261 |
|
|
|
2.11 |
% |
|
|
33.85 |
|
| 978 Highway 11 South, LLC |
|
Waters of Sweetwater, A Rehabilitation & Nursing Center, LLC |
|
TN |
|
SNF |
|
|
90 |
|
|
|
2031 |
|
|
|
30,312 |
|
|
|
100 |
% |
|
|
1,745,261 |
|
|
|
2.11 |
% |
|
|
57.58 |
|
| 2830 Highway 394, LLC |
|
Waters of Bristol, A Rehabilitation & Nursing Center, LLC |
|
TN |
|
SNF |
|
|
120 |
|
|
|
2031 |
|
|
|
53,913 |
|
|
|
100 |
% |
|
|
2,327,014 |
|
|
|
2.82 |
% |
|
|
43.16 |
|
| Master Lease Arkansas 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5301 Wheeler Avenue, LLC |
|
Wheeler Avenue Operating LLC |
|
AR |
|
SNF |
|
|
117 |
|
|
|
2028 |
|
|
|
41,490 |
|
|
|
100 |
% |
|
|
821,950 |
|
|
|
1.00 |
% |
|
|
19.81 |
|
| 414 Massey Avenue, LLC |
|
Massey Avenue ALF Operating LLC |
|
AR |
|
ALF |
|
|
32 |
|
|
|
2028 |
|
|
|
12,548 |
|
|
|
100 |
% |
|
|
224,807 |
|
|
|
0.27 |
% |
|
|
17.92 |
|
| 706 Oak Grove Street, LLC |
|
Oak Grove Street Operating LLC |
|
AR |
|
SNF |
|
|
97 |
|
|
|
2028 |
|
|
|
31,586 |
|
|
|
100 |
% |
|
|
681,445 |
|
|
|
0.83 |
% |
|
|
21.57 |
|
| 8701 Riley Drive, LLC |
|
Riley Drive Operating LLC |
|
AR |
|
SNF |
|
|
140 |
|
|
|
2028 |
|
|
|
61,543 |
|
|
|
100 |
% |
|
|
983,530 |
|
|
|
1.19 |
% |
|
|
15.98 |
|
| 1516 Cumberland Street, LLC |
|
Cumberland Street Operating LLC |
|
AR |
|
SNF |
|
|
120 |
|
|
|
2028 |
|
|
|
82,328 |
|
|
|
100 |
% |
|
|
843,025 |
|
|
|
1.02 |
% |
|
|
10.24 |
|
| 5720 West Markham Street, LLC |
|
West Markham Street Operating LLC |
|
AR |
|
SNF |
|
|
154 |
|
|
|
2028 |
|
|
|
56,176 |
|
|
|
100 |
% |
|
|
1,081,883 |
|
|
|
1.31 |
% |
|
|
19.26 |
|
| 2501 John Ashley Drive, LLC |
|
John Ashley Drive Operating LLC |
|
AR |
|
SNF |
|
|
140 |
|
|
|
2028 |
|
|
|
65,149 |
|
|
|
100 |
% |
|
|
983,530 |
|
|
|
1.19 |
% |
|
|
15.10 |
|
| 1513 South Dixieland Road, LLC |
|
South Dixieland Road Operating LLC |
|
AR |
|
SNF |
|
|
110 |
|
|
|
2028 |
|
|
|
32,962 |
|
|
|
100 |
% |
|
|
772,773 |
|
|
|
0.94 |
% |
|
|
23.44 |
|
| 826 North Street, LLC |
|
North Street Operating LLC |
|
AR |
|
SNF |
|
|
94 |
|
|
|
2028 |
|
|
|
30,924 |
|
|
|
100 |
% |
|
|
660,370 |
|
|
|
0.80 |
% |
|
|
21.35 |
|
| Individual Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ambassador Nursing Realty, LLC |
|
Ambassador Nursing and Rehabilitation Center II, LLC |
|
IL |
|
SNF |
|
|
190 |
|
|
|
2026 |
|
|
|
37,100 |
|
|
|
100 |
% |
|
|
1,005,313 |
|
|
|
1.22 |
% |
|
|
27.10 |
|
| Momence Meadows Realty, LLC |
|
Momence Meadows Nursing and Rehabilitation Center, LLC |
|
IL |
|
SNF |
|
|
140 |
|
|
|
2025 |
|
|
|
37,139 |
|
|
|
100 |
% |
|
|
1,038,000 |
|
|
|
1.26 |
% |
|
|
27.95 |
|
| Oak Lawn Nursing Realty, LLC |
|
Oak Lawn Respiratory and Rehabilitation Center, LLC |
|
IL |
|
SNF |
|
|
143 |
|
|
|
2031 |
|
|
|
37,854 |
|
|
|
100 |
% |
|
|
1,083,048 |
|
|
|
1.31 |
% |
|
|
28.61 |
|
| Forest View Nursing Realty, LLC |
|
Forest View Rehabilitation and Nursing Center, LLC |
|
IL |
|
SNF |
|
|
144 |
|
|
|
2024 |
|
|
|
34,152 |
|
|
|
100 |
% |
|
|
1,215,483 |
|
|
|
1.47 |
% |
|
|
35.59 |
|
| Lincoln Park Holdings, LLC |
|
Lakeview Rehabilitation and Nursing Center, LLC |
|
IL |
|
SNF |
|
|
178 |
|
|
|
2031 |
|
|
|
34,362 |
|
|
|
100 |
% |
|
|
1,260,000 |
|
|
|
1.53 |
% |
|
|
36.67 |
|
| Continental Nursing Realty, LLC |
|
Continental Nursing and Rehabilitation Center, LLC |
|
IL |
|
SNF |
|
|
208 |
|
|
|
2031 |
|
|
|
53,653 |
|
|
|
100 |
% |
|
|
1,575,348 |
|
|
|
1.91 |
% |
|
|
29.36 |
|
| Westshire Nursing Realty, LLC |
|
City View Multicare Center, LLC |
|
IL |
|
SNF |
|
|
485 |
|
|
|
2025 |
|
|
|
124,020 |
|
|
|
100 |
% |
|
|
1,788,365 |
|
|
|
2.17 |
% |
|
|
14.42 |
|
| Belhaven Realty, LLC |
|
Belhaven Nursing and Rehabilitation Center, LLC |
|
IL |
|
SNF |
|
|
221 |
|
|
|
2026 |
|
|
|
60,000 |
|
|
|
100 |
% |
|
|
2,134,570 |
|
|
|
2.59 |
% |
|
|
35.58 |
|
| West Suburban Nursing Realty, LLC |
|
West Suburban Nursing and Rehabilitation Center, LLC |
|
IL |
|
SNF |
|
|
259 |
|
|
|
2027 |
|
|
|
70,314 |
|
|
|
100 |
% |
|
|
1,961,604 |
|
|
|
2.38 |
% |
|
|
27.90 |
|
| Niles Nursing Realty, LLC |
|
Niles Nursing & Rehabilitation Center, LLC |
|
IL |
|
SNF |
|
|
304 |
|
|
|
2026 |
|
|
|
46,480 |
|
|
|
100 |
% |
|
|
2,409,998 |
|
|
|
2.92 |
% |
|
|
51.85 |
|
| Parkshore Estates Nursing Realty, LLC |
|
Parkshore Estates Rehabilitation and Nursing Center, LLC |
|
IL |
|
SNF |
|
|
318 |
|
|
|
2024 |
|
|
|
94,018 |
|
|
|
100 |
% |
|
|
2,454,187 |
|
|
|
2.97 |
% |
|
|
26.10 |
|
| Midway Neurological and Rehabilitation Realty, LLC |
|
Midway Neurological and Rehabilitation Center, LLC |
|
IL |
|
SNF |
|
|
404 |
|
|
|
2026 |
|
|
|
120,000 |
|
|
|
100 |
% |
|
|
2,547,712 |
|
|
|
3.09 |
% |
|
|
21.23 |
|
| 516 West Frech Street LLC |
|
Parker Rehab & Nursing Center, LLC |
|
IL |
|
SNF |
|
|
102 |
|
|
|
2031 |
|
|
|
24,979 |
|
|
|
100 |
% |
|
|
498,350 |
|
|
|
0.60 |
% |
|
|
19.95 |
|
| 4343 Kennedy Drive, LLC |
|
Hope Creek Nursing and Rehabilitation Center, LLC |
|
IL |
|
SNF |
|
|
245 |
|
|
|
2030 |
|
|
|
104,000 |
|
|
|
100 |
% |
|
|
478,985 |
|
|
|
0.58 |
% |
|
|
4.63 |
|
| 1316 North Tibbs Avenue Realty, LLC |
|
Westpark A Waters Community, LLC |
|
IN |
|
SNF |
|
|
89 |
|
|
|
2024 |
|
|
|
26,572 |
|
|
|
100 |
% |
|
|
549,884 |
|
|
|
0.67 |
% |
|
|
20.69 |
|
| 1585 Perry Worth Road, LLC |
|
The Waters of Lebanon, LLC |
|
IN |
|
SNF |
|
|
64 |
|
|
|
2027 |
|
|
|
32,650 |
|
|
|
100 |
% |
|
|
116,677 |
|
|
|
0.14 |
% |
|
|
3.57 |
|
| 1621 Coit Road Realty, LLC |
|
None |
|
TX |
|
Flex-space |
|
|
- |
|
|
|
- |
|
|
|
24,906 |
|
|
|
|
|
|
|
- |
|
|
|
0.00 |
% |
|
|
- |
|
| 2301 North Oregon Realty, LLC |
|
MPD Operators Mesa Hills, LLC |
|
TX |
|
SNF |
|
|
182 |
|
|
|
2027 |
|
|
|
19,895 |
|
|
|
100 |
% |
|
|
737,455 |
|
|
|
0.89 |
% |
|
|
37.17 |
|
| 2301 North Oregon Realty, LLC |
|
Mesa Hills Specialty Hospital Operator, LLC |
|
TX |
|
LTACH |
|
|
32 |
|
|
|
2029 |
|
|
|
24,660 |
|
|
|
100 |
% |
|
|
960,000 |
|
|
|
1.16 |
% |
|
|
38.93 |
|
| 5601 Plum Creek Drive Realty, LLC |
|
None |
|
TX |
|
Flex-space |
|
|
- |
|
|
|
- |
|
|
|
30,015 |
|
|
|
|
|
|
|
- |
|
|
|
0.00 |
% |
|
|
- |
|
| 9209 Dollarway Road, LLC |
|
Dollarway Road Operating LLC |
|
AR |
|
SNF |
|
|
120 |
|
|
|
2029 |
|
|
|
45,771 |
|
|
|
100 |
% |
|
|
843,026 |
|
|
|
1.02 |
% |
|
|
18.42 |
|
| Master Lease Arkansas 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 326 Lindley Lane, LLC |
|
Lindley Lane Operating LLC |
|
AR |
|
SNF |
|
|
120 |
|
|
|
2029 |
|
|
|
49,675 |
|
|
|
100 |
% |
|
|
850,639 |
|
|
|
1.03 |
% |
|
|
17.12 |
|
| 2821 West Dixon Road, LLC |
|
West Dixon Road Operating LLC & West Dixon Road ALF Operating LLC |
|
AR |
|
SNF/ALF |
|
|
172 |
|
|
|
2029 |
|
|
|
50,382 |
|
|
|
100 |
% |
|
|
1,219,250 |
|
|
|
1.48 |
% |
|
|
24.20 |
|
| 552 Golf Links Road, LLC |
|
Golf Links Road Operating LLC |
|
AR |
|
SNF |
|
|
152 |
|
|
|
2029 |
|
|
|
30,372 |
|
|
|
100 |
% |
|
|
1,077,476 |
|
|
|
1.31 |
% |
|
|
35.48 |
|
| Total/Average |
|
|
|
|
|
|
|
|
10,351 |
|
|
|
|
|
|
|
3,534,132 |
|
|
|
100 |
% |
|
|
82,520,652 |
|
|
|
100.00 |
% |
|
|
23.35 |
|
(1)
The tenant and the operator are the same for each facility other than the 13 SNFs leased under the Indiana master lease agreement and
one SNF in Amarillo, Texas. In the case of these other facilities, the tenants are county hospitals which have entered into management
agreements with the operators listed in the table. These arrangements permit the facilities to participate in a CMS program that pays
higher Medicaid reimbursement rates for facilities associated with hospitals in underserved areas.
(2)
The expiration dates do not reflect the exercise of any renewable options.
(3)
In February 2023 the facility was closed. The closure was a result of the tenant request and mainly for efficiency reasons. This SNF
is under a master lease with 5 other facilities and the full amount of the rent payments under the master lease are continuing to be
paid.
Related
Party Tenants
As
of December 31, 2022, we leased 41 of our facilities to tenants that are affiliates of Moishe Gubin who serves as Chairman of the
Board and our Chief Executive Officer, Michael Blisko, who serves as one of our directors, and Ted Lerman, one of the controlling
members of the Predecessor Company. As of March 27, 2023, approximately 64.05% of our annualized base rent is received from such
related-party tenants. The failure of these tenants to fulfill their obligations under their leases or renew their leases upon
expiration could have a material adverse effect on our business, financial condition and results of operations. In January 2023,
affiliates of Moishe Gubin and Michael Blisko acquired the membership interests held by the affiliate of Ted Lerman in all of the related party tenants.
Rental
income from leases with these related party tenants represented 64.0% of all rental income for the year ended December 31, 2022. We believe
these affiliated relationships provide a strong alignment of interests between us and our tenants and offers us increased operating flexibility
with regards to potentially replacing underperforming tenants or evaluating acquisitions in new states. As we continue to grow and expand
our portfolio, we intend to develop new relationships with unrelated party tenants and operators in order to diversify our tenant base
and reduce our dependence on related party and operators.
The
following table contains information regarding tenant/operators that are related parties of the Company as March 27, 2023:
| Manager/Tenant/Operators
that are Related Parties |
|
|
|
| Lessor/Company
Subsidiary |
|
Manager/Tenant/Operator
|
|
Beneficial
Owner Percentage in Tenant/Operator by Related Party |
|
| |
|
|
|
Moishe
Gubin/Gubin Enterprises LP |
|
|
Michael
Blisko/Blisko Enterprises LP |
|
| Master Lease
Indiana |
|
|
|
|
|
|
|
|
|
|
| 1020 West Vine
Street Realty, LLC |
|
The Waters of Princeton
II LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 12803 Lenover Street Realty
LLC |
|
The Waters of Dillsboro –
Ross Manor II LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 1350 North Todd Drive Realty,
LLC |
|
The Waters of Scottsburg II
LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 1600 East Liberty Street Realty
LLC |
|
The Waters of Covington II,
LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 1601 Hospital Drive Realty
LLC |
|
The Waters of Greencastle II
LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 1712 Leland Drive Realty, LLC |
|
The Waters of Huntingburg II
LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 2055 Heritage Drive Realty
LLC |
|
The Waters of Martinsville
II LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 3895 South Keystone Avenue
Realty LLC |
|
The Waters of Indianapolis
II LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 405 Rio Vista Lane Realty
LLC |
|
The Waters of Rising Sun II
LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 950 Cross Avenue Realty LLC |
|
The Waters of Clifty Falls
II LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 958 East Highway 46 Realty
LLC |
|
The Water of Batesville II
LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| 2400 Chateau Drive Realty,
LLC |
|
The Waters of Muncie II LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| The Big H2O, LLC |
|
The Waters of New Castle II
LLC |
|
|
49.24 |
% |
|
|
50.25 |
% |
| Master Lease
Tennessee |
|
|
|
|
|
|
|
|
|
|
| 115 Woodlawn Drive, LLC |
|
Lakebridge,
a Waters Community, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 146 Buck Creek Road, LLC |
|
The Waters of Roan Highlands,
LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 704 5TH Avenue East,
LLC |
|
The Waters of Springfield,
LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 2501 River Road, LLC |
|
The Waters of Cheatham, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 202 Enon Springs Road East,
LLC |
|
The Waters of Smyrna, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 140 Technology Lane, LLC |
|
The Waters of Johnson City,
LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 835 Union Street, LLC |
|
The Waters of Shelbyville,
LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| Master Lease
Tennessee 2 |
|
|
|
|
|
|
|
|
|
|
| 505 North Roan Street, LLC |
|
Agape Rehabilitation &
Nursing Center, A Water’s Community, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 14510 Highway 79, LLC |
|
Waters of McKenzie, A Rehabilitation
& Nursing Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 6500 Kirby Gate Boulevard,
LLC |
|
Waters of Memphis, A Rehabilitation
& Nursing Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 978 Highway 11 South, LLC |
|
Waters of Sweetwater, A Rehabilitation
& Nursing Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 2830 Highway 394, LLC |
|
Waters of Bristol, A Rehabilitation
& Nursing Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| Individual
Leases |
|
|
|
|
|
|
|
|
|
|
| Ambassador Nursing Realty,
LLC |
|
Ambassador Nursing and Rehabilitation
Center II, LLC |
|
|
40.00 |
% |
|
|
40.00 |
% |
| Momence Meadows Realty, LLC |
|
Momence Meadows Nursing and Rehabilitation Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| Oak Lawn Nursing Realty, LLC |
|
Oak Lawn Respiratory and Rehabilitation
Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| Forest View Nursing Realty,
LLC |
|
Forest View Rehabilitation
and Nursing Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| Lincoln Park Holdings, LLC |
|
Lakeview Rehabilitation and
Nursing Center, LLC |
|
|
40.00 |
% |
|
|
40.00 |
% |
| Continental Nursing Realty,
LLC |
|
Continental Nursing and Rehabilitation Center, LLC |
|
|
40.00 |
% |
|
|
40.00 |
% |
| Westshire Nursing Realty, LLC |
|
City View Multicare Center
LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| Belhaven Realty, LLC |
|
Belhaven Nursing and Rehabilitation Center, LLC |
|
|
35.00 |
% |
|
|
35.00 |
% |
| West Suburban Nursing Realty,
LLC |
|
West Suburban Nursing and Rehabilitation Center, LLC |
|
|
40.00 |
% |
|
|
40.00 |
% |
| Niles Nursing Realty LLC |
|
Niles Nursing & Rehabilitation Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| Parkshore Estates Nursing Realty,
LLC |
|
Parkshore Estates Nursing and Rehabilitation Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| Midway Neurological and Rehabilitation
Realty, LLC |
|
Midway Neurological and Rehabilitation
Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 516 West Frech Street, LLC |
|
Parker Rehab & Nursing Center, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 4343 Kennedy Drive, LLC |
|
Hope Creek
Nursing and Rehabilitation Center, LLC |
|
|
27.50 |
% |
|
|
27.50 |
% |
| 1316 North Tibbs Avenue Realty
LLC |
|
Westpark A Waters Community, LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
| 1585 Perry Worth Road LLC |
|
The Waters of Lebanon LLC |
|
|
50.00 |
% |
|
|
50.00 |
% |
We
monitor the creditworthiness of our tenants by evaluating the ability of the tenants to meet their lease obligations to us based on the
tenants’ financial performance, including the evaluation of any guarantees of tenant lease obligations. The primary basis for our
evaluation of the credit quality of our tenants (and more specifically the tenants’ ability to pay their rent obligations to us)
is the tenants’ lease coverage ratios. These coverage ratios compare (i) earnings before interest, income taxes, depreciation,
amortization and rent (“EBITDAR”) to rent coverage, and (ii) earnings before interest, income taxes, depreciation, amortization,
rent and management fees (“EBITDARM”) to rent coverage. We utilize a standardized 5% management fee when we calculate lease
coverage ratios. We obtain various financial and operational information from our tenants each month. We regularly review this information
to calculate the above-described coverage metrics, to identify operational trends, to assess the operational and financial impact of
the changes in the broader industry environment (including the potential impact of government reimbursement and regulatory changes),
and to evaluate the management and performance of the tenants’ operations. These metrics help us identify potential areas of concern
relative to our tenants’ credit quality and ultimately the tenants’ ability to generate sufficient liquidity to meet their
ongoing obligations, including their obligations to continue paying contractual rents due to us and satisfying other financial obligations
to third parties, as prescribed by our triple-net leases.
Geographic
Diversification
As
of March 27, 2023, our portfolio of 79 properties is broadly diversified by geographic location across nine U.S. states, comprising Arkansas,
Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas.
The
following table contains information regarding our healthcare facility portfolio by geography, as of March 27, 2023:
| State | |
Number of Properties | | |
Facility Type | |
Licensed Bed Count | | |
Annualized
Average Base Rent
(Amounts in $000s) | | |
% of Total Annualized Average Base Rent | |
| Illinois(1) | |
| 20 | | |
20 SNFs | |
| 4,226 | | |
$ | 25,281 | | |
| 30.6 | % |
| Indiana | |
| 15 | | |
15 SNFs | |
| 1,388 | | |
| 14,258 | | |
| 17.3 | % |
| Arkansas | |
| 13 | | |
12 SNFs 2 ALFs | |
| 1,568 | | |
| 11,044 | | |
| 13.4 | % |
| Kentucky | |
| 10 | | |
10 SNFs 1 ALF | |
| 1,165 | | |
| 8,577 | | |
| 10.4 | % |
| Tennessee | |
| 12 | | |
12 SNFs | |
| 1,056 | | |
| 17,148 | | |
| 20.8 | % |
| Texas | |
| 3 | | |
3 SNFs
1 LTACH | |
| 473 | | |
| 3,604 | | |
| 4.4 | % |
| Oklahoma | |
| 1 | | |
1 SNFs
1 LTACH | |
| 137 | | |
| 1,009 | | |
| 1.2 | % |
| Ohio | |
| 4 | | |
4 SNFs | |
| 238 | | |
| 864 | | |
| 1.0 | % |
| Michigan | |
| 1 | | |
1 SNF | |
| 100 | | |
| 736 | | |
| 0.9 | % |
| | |
| | | |
| |
| | | |
| | | |
| | |
| Totals | |
| 79 | | |
78 SNFs
2 LTACHs
3 ALFs | |
| 10,351 | | |
$ | 82,521 | | |
| 100.0 | % |
| |
(1) |
In February 2023 one of the SNF we own in Southern Illinois was closed by the tenant for efficiency reasons. This SNF is under a master lease with 5 other facilities
and the full amount of the rent payments under the master lease are continuing to be paid. |
Competitive
Strengths
We
believe that the following competitive strengths provide a solid foundation for the sustained growth of our business and successful execution
of our business strategies:
Diversified
Portfolio. We have a portfolio that is diversified in terms of both geography and tenant composition. As of March 27, 2023,
our portfolio is comprised of 79 healthcare-related properties with a total of 10,351 licensed beds located throughout Arkansas,
Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. We believe that our geographic diversification limits
the potential impact of any regulatory, reimbursement, competitive dynamic or other changes in any single market on the overall
performance of our portfolio. We lease our properties to 83 tenants, with no single tenant accounting for more than 3.1% of our
annualized base rent. This diversification limits our exposure for any single tenant that encounters financial or operational
difficulties.
Protected
Markets. In eight of the nine states in which we operate, we benefit from CON laws that require state approval for the constructions
and expansion of certain types of healthcare facilities. These laws represent significant barriers to entry and limit competition in
these markets.
Demonstrated
Ability to Identify and Structure Accretive Acquisition Opportunities. Our management team has long-standing relationships in
the skilled nursing and post-acute industries. Through their experience in acquiring these types of facilities, we have the proven ability
to identify and complete complex and accretive transactions. Additionally, because many of our acquisitions are off-market
opportunities sourced through our management team’s network of industry relationships, we believe we do not typically compete with
larger healthcare-focused real estate companies for acquisitions as they tend to focus on larger, platform acquisition opportunities.
As a result, we have consistently acquired assets at attractive valuations and believe we can continue to identify these types of opportunities
to expand our portfolio.
Significant
Experience Acquiring Underperforming Assets. Although we primarily seek to acquire properties that have had consistent profitability,
we may also acquire underperforming properties if we believe that the underlying facilities can become successful through better management.
Our management team’s prior experience as operators gives it the ability to evaluate these types of facilities and their potential
for improved revenue enhancement and increased operating efficiencies. We will consider the acquisition of underperforming properties
if they are available at attractive valuations and provide us with significant upside potential once their new operators have successfully
stabilized and optimized their operations. If we acquire underperforming properties, we would expect to lease them to tenants and operators
that have significant turnaround experience and support from experienced consultants.
Experienced
and Adept Operators. We have strong and long-standing relationships with operators and their principals who have significant
experience in operating successful skilled nursing facilities. These operators and their principals have a strong track record of operating
in challenging markets where operators are subject to increased regulatory issues and significant competition. Additionally, these operators
and their principals have learned to successfully operate facilities in which most of the revenue is earned from providing services to
patients covered by Medicaid which are subject to lower reimbursement rates than other revenue sources.
Consulting
Firms Provide Additional Resources for the Operators of our Facilities. Most of the operators of our facilities utilize the services
of experienced healthcare consulting firms to provide them with expert advice and assistance with their operations. We believe these
consulting firms provide the operators with additional expertise and resources that materially enhance their ability to operate efficiently
and to meet applicable regulatory requirements.
Close
Relationships with Tenants, Operators and Consultants Provide Enhanced Oversight, Market Intelligence and Strong Alignment of Interests.
The nature of our close relationships with the tenants and operators of our properties and their consulting firms allows us to
maintain close communication and obtain early knowledge of potential issues faced by our tenants, enabling us to address those issues
that affect us as the lessor. These relationships also provide us with intelligence on the markets in which we own properties and assistance
in locating new and replacement tenants. Additionally, the consulting firms assist us without charge in evaluating potential acquisitions
and operators. This assistance provides us with insight on local market trends, which is particularly valuable for new markets. These
relationships also provide a strong alignment of interests between our interests as a property owner and our tenants’ interests.
Well-Structured,
Long-Term, Triple-Net Leases Generate Predictable and Growing Rental Income Streams. Most of our owned properties are leased
to tenants under long-term, non-cancellable, triple-net leases, pursuant to which the tenants are responsible for all maintenance and
repairs, insurance and taxes associated with the leased properties and the business conducted at the properties. As of December 31, 2022,
100% of the gross leasable area of our facilities was leased with an average remaining lease term of 6.47 years. Our leases generally
have terms that range from 10 to 20 years with two five-year extensions, and annual rent escalators of 1% to 3% per year, which provides
us with a steady and growing cash rental stream. Additionally, our leases are structured to provide us with key credit support and have
credit enhancement provisions that may include non-refundable security deposits of up to 6 months, personal and corporate guarantees
and cross-default provisions under our master leases. Approximately 70.1% of our total annualized rental revenue is generated through
our 8 master leases that have cross-default and cross-collateralization provisions.
Seasoned
Management Team with Significant Experience. Moishe Gubin, our Chairman and Chief Executive Officer, has over 25 years of operating
and real estate experience in the skilled nursing and long-term care industries. Prior to founding the Predecessor Company, Mr. Gubin
worked as an operator of skilled nursing facilities and built a strong operational knowledge base that has been incorporated into the
day-to-day management of our current portfolio. Additionally, Mr. Gubin has significant acquisition experience having completed over
80 healthcare-related facilities with an aggregate investment amount of over $900 million since 2003. Nahman Eingal, our Chief Financial
Officer, has an extensive background in real estate finance with over 20 years of experience in the banking industry focusing on commercial
lending to healthcare providers. Mr. Gubin and Mr. Eingal also have significant experience accessing the debt capital markets to fund
growth, having raised over $266 million of publicly traded bonds that are listed on the Tel Aviv Stock Exchange. We believe that the
diverse operational and financial background and expertise of our management team gives us the ability to successfully manage our portfolio
and sustain our growth.
Our
Business and Growth Strategies
Our
objective is to generate attractive returns for our stockholders over the long-term through dividends and capital appreciation. Key elements
of our strategy include the following:
Acquire
Additional Healthcare Properties in Concentrated Geographic Areas. We plan to invest primarily in real estate used as skilled
nursing facilities and other healthcare facilities that provide services to the elderly, where our management team has substantial experience
and relationships. We believe these facilities have the potential to provide higher risk-adjusted returns compared to other forms of
net-leased real estate assets due to the specialized expertise necessary to acquire, own, finance and manage these properties, which
are factors that tend to limit competition among investors, owners, operators and finance companies. We will seek to acquire properties
in states where we believe we can build regional density in order to create competitive advantages and drive operational and cost efficiencies.
Negotiate
Well-Structured Net Leases. Our primary ownership structure is a facility purchase with a long-term triple-net lease with the
healthcare operator. We seek to structure our leases with lease terms of 10 years with tenant options to extend the lease for an additional
period of 5 to 10 years, and rent escalators that provide a steadily growing cash rental stream. Our lease structures are designed to
provide us with credit support for our rents, including, in certain cases, lease deposits, covenants regarding liquidity, and various
provisions for cross-default. We believe these features help insulate us from variability in operator cash flows and enable us to minimize
our expenses while we continue to build our portfolio.
Leverage
Existing and Develop New Operator Relationships. Our management team has long-standing relationships in the healthcare industry
through which we have sourced our existing portfolio, and we intend to continue to expand our portfolio by leveraging these existing
relationships. Forty-one of our properties are leased to related parties. One of our goals is to reduce our dependence on related party
tenants in order to diversify our tenant base. Although we expect to continue to lease properties to related party tenants in markets
in which the related party tenants have substantial experience and operations, we intend to lease properties in other markets to unrelated
tenants if we are able to identify qualified operators. Additionally, we will consider leasing properties to unrelated parties in markets
in which related parties operate if we are able to identify qualified operators that are willing to lease properties on terms that are
no less favorable than those available from related parties.
Utilize
Prudent Investment Underwriting Criteria. We have adopted what we believe to be a thorough investment underwriting process based
on careful analysis and due diligence with respect to both the healthcare real estate and the healthcare service operations. We seek
to make investments in healthcare properties that have the following attributes: well-located, visible to traffic, in good physical condition
with predictable future capital improvement needs and with attractive prospects for future profitability.
Monitor
the Performance of our Facilities and Industry Trends. We carefully monitor the financial and operational performance of our
tenants and of the specific facilities in which we invest through a variety of methods, such as reviews of periodic financial statements,
and regular meetings with the facility operators. Pursuant to the terms of our leases, our tenants are required to provide us with certain
periodic financial statements and operating data.
Utilize
Targeted Leverage in Our Investing Activities. We seek to utilize a targeted level of leverage that is appropriate in light of
market conditions, future cash flows, the creditworthiness of tenants and future rental rates. We will seek to achieve a ratio of debt
to asset fair market value in the range of 45% to 55%. However, our charter and bylaws do not limit the amount of debt that we may incur
and our board of directors has not adopted a policy limiting the total amount of our borrowings.
Policy
for the Acquisition and Sale of Properties
In
considering these performance targets, readers should bear in mind that targeted performance for each acquisition is not a guarantee,
projection, forecast or prediction and is not necessarily indicative of future results. These performance targets are as of the date
hereof and may change in the future. The performance targets are based on an assumption that economic, market and other conditions will
not deteriorate and, in some cases, will improve. These performance targets are also based on estimates and assumptions about performance
believed to be reasonable under the circumstances, but actual realized returns of our investments will depend on, among other factors,
the ability to consummate attractive investments, future operating results, the value of the assets and market conditions at the time
of disposition, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances
on which targeted returns are based. We believe the performance targets are reasonable, but readers should keep in mind that this investment
involves a high degree of risk and they should purchase these securities only if they can afford a complete loss of their investment.
We
believe our management team’s depth of experience in healthcare real estate, operations and finance provides us with unique perspective
in underwriting potential investments. Our real estate underwriting process focuses on both real estate and healthcare operations. The
process includes a detailed analysis of the facility and the financial strength and experience of the tenant and its management. Key
factors that we consider in the underwriting process include the following:
●
the current, historical and projected cash flow and operating margins of each tenant and at each facility;
●
the ratio of our tenants’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt
costs;
●
the quality and experience of the tenant and its management team;
●
construction quality, condition, design and projected capital needs of the facility and property condition assessments;
●
competitive landscape;
●
drivers of healthcare-related needs;
●
the location of the facility;
●
local economic and demographic factors and the competitive landscape of the market;
●
licensure and accreditation;
●
the effect of evolving healthcare legislation and other existing and future regulations and compliance with such regulations on our tenants’
profitability and liquidity; and
●
the payor mix of private, Medicare and Medicaid patients at the facility.
We
also require tenants to furnish property and operator-level financials, among other data, on a monthly basis; we evaluate individual
and portfolio property performance, liquidity metrics, lease and debt coverage, occupancy, planned capital expenditures, and other measures;
and we conduct in- person visits to each facility in the portfolio at least two times per year. We believe our underwriting process enables
us to acquire desirable properties with strong tenants that will support our ability to deliver attractive risk-adjusted returns to our
stockholders.
The
policy does not limit the authority of our board of directors to change or deviate from the policy as it sees fit from time to time.
Changes to the policy do not require stockholder approval.
Our
management does not have a fixed policy relating to the sale of properties. Accordingly, each potential sale opportunity will be examined
on its merits in view of the business opportunity involved.
Our
Leases
As
of March 27, 2023, all of our healthcare properties were subject to lease agreements. Our leases have a weighted-average annualized
lease income per leased square foot of $23.35, and as of December 31, 2022, a weighted-average remaining lease term of approximately
6.47 years.
To
our knowledge, except as noted below, none of our current tenants are in default under any of the leases.
Each
of our properties is leased under a separate lease agreement, although 8 groups of properties, covering a total of 64 facilities, are
subject to 8 master lease agreements. Each master lease agreement provides that the tenants under the master lease are jointly and severally
liable for the obligations of all of the other tenants under such master lease. We entered into these master lease agreements in order
to facilitate financing the underlying properties. Rental income under these master leases represents a substantial portion of our rental
income.
The
following table summarizes information concerning the master lease agreements as of March 27, 2023 (dollars in thousands):
| Master Lease Agreements |
| Master Lease Name | |
States | |
Facilities Count | | |
GLA | | |
Annualized Average Base Rent ($000s) | | |
% of Total Annualized Average
Base Rent | |
| Master Lease Indiana (1) | |
IN | |
| 13 | | |
| 463,593 | | |
$ | 13,592 | | |
| 16.4 | % |
| Master Lease Central Illinois (2) | |
IL | |
| 5 | | |
| 205,060 | | |
$ | 2,130 | | |
| 2.6 | % |
| Master Lease Landmark | |
TX/OK/ MI/IL/KY | |
| 17 | | |
| 740,212 | | |
$ | 13,929 | | |
| 16.9 | % |
| Master Lease Ohio | |
OH | |
| 4 | | |
| 73,311 | | |
$ | 864 | | |
| 1.1 | % |
| Master Lease Tennessee 1 (1) | |
TN | |
| 7 | | |
| 238,937 | | |
$ | 8,422 | | |
| 10.2 | % |
| Master Lease Tennessee 2 (1) | |
TN | |
| 5 | | |
| 185,344 | | |
$ | 8,726 | | |
| 10.6 | % |
| Master Lease Arkansas 1 | |
AR | |
| 9 | | |
| 414,706 | | |
$ | 7,053 | | |
| 8.5 | % |
| Master Lease Arkansas 2 | |
AR | |
| 4 | | |
| 130,429 | | |
$ | 3,147 | | |
| 3.8 | % |
| Total (8) | |
| |
| 64 | | |
| 2,451,592 | | |
$ | 57,863 | | |
| 70.1 | % |
(1) The tenants under the master leases in Indiana and the two Tennessee
master leases are affiliated with Moishe Gubin, who is our Chairman and Chief Executive Officer and Michael Blisko, who is one of our directors.
See “Item 1. Business—Our Leases.”
(2) In February 2023 one of the SNF under
the Southern Illinois Master Lease was closed. The closure was a result of the tenant request and mainly for efficiency reasons. The
full amount of the rent payments under the master lease are continuing to be paid.
The
following table summarizes information concerning the lease agreements that are not subject to a master lease agreement as of March 27,
2023 (dollars in thousands):
| Individual Leases |
| Lessor | |
State | |
Facility Type | |
Rentable Sq. Ft. | | |
Annualized Average Base Rent ($000s) | | |
% of Total Annualized Average Base Rent | |
| Ambassador Nursing Realty, LLC | |
Illinois | |
SNF | |
| 37,100 | | |
$ | 1,005 | | |
| 1.2 | % |
| Momence Meadows Realty, LLC | |
Illinois | |
SNF | |
| 37,139 | | |
$ | 1,038 | | |
| 1.3 | % |
| Oak Lawn Nursing Realty, LLC | |
Illinois | |
SNF | |
| 37,854 | | |
$ | 1,083 | | |
| 1.3 | % |
| Forest View Nursing Realty, LLC | |
Illinois | |
SNF | |
| 34,152 | | |
$ | 1,215 | | |
| 1.5 | % |
| Lincoln Park Holdings, LLC | |
Illinois | |
SNF | |
| 34,362 | | |
$ | 1,260 | | |
| 1.5 | % |
| Continental Nursing Realty, LLC | |
Illinois | |
SNF | |
| 53,653 | | |
$ | 1,575 | | |
| 1.9 | % |
| Westshire Nursing Realty, LLC | |
Illinois | |
SNF | |
| 124,020 | | |
$ | 1,788 | | |
| 2.1 | % |
| Belhaven Realty, LLC | |
Illinois | |
SNF | |
| 60,000 | | |
$ | 2,135 | | |
| 2.6 | % |
| West Suburban Nursing Realty, LLC | |
Illinois | |
SNF | |
| 70,314 | | |
$ | 1,962 | | |
| 2.4 | % |
| Niles Nursing Realty LLC | |
Illinois | |
SNF | |
| 46,480 | | |
$ | 2,410 | | |
| 2.9 | % |
| Parkshore Estates Nursing Realty, LLC | |
Illinois | |
SNF | |
| 94,018 | | |
$ | 2,454 | | |
| 3.0 | % |
| Midway Neurological and Rehabilitation Realty, LLC | |
Illinois | |
SNF | |
| 120,000 | | |
$ | 2,548 | | |
| 3.1 | % |
| 516 West Frech Street, LLC | |
Illinois | |
SNF | |
| 24,979 | | |
$ | 498 | | |
| 0.6 | % |
| 4343 Kennedy Drive, LLC | |
Illinois | |
SNF | |
| 104,000 | | |
$ | 479 | | |
| 0.6 | % |
| 1316 North Tibbs Avenue Realty, LLC | |
Indiana | |
SNF | |
| 26,572 | | |
$ | 550 | | |
| 0.7 | % |
| 1585 Perry Worth Rd, LLC | |
Indiana | |
SNF | |
| 32,650 | | |
$ | 117 | | |
| 0.1 | % |
| 2301 North Oregon Realty, LLC | |
Texas | |
SNF | |
| 19,895 | | |
$ | 740 | | |
| 0.9 | % |
| 2301 North Oregon Realty, LLC | |
Texas | |
LTACH | |
| 24,660 | | |
$ | 960 | | |
| 1.2 | % |
| 9209 Dollarway Road, LLC | |
Arkansas | |
SNF | |
| 45,771 | | |
$ | 843 | | |
| 1.0 | % |
| Total (19) | |
| |
| |
| 1,027,619 | | |
$ | 24,660 | | |
| 29.9 | % |
Investment
and Financing Policies
Our
properties are located in 9 states and we intend to continue to acquire properties in other states throughout the United States. Our
investment objectives are to increase cash flow, provide quarterly cash dividends, maximize the value of our properties and acquire properties
with cash flow growth potential. We intend to invest primarily in SNFs and seniors housing, including ALFs and we may determine in the
future to expand our investments to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities.
Although our portfolio currently consists primarily of owned real property, future investments may include first mortgages, mezzanine
debt and other securities issued by, or joint ventures with, REITs or other entities that own real estate consistent with our investment
objectives.
Competition
The market for making investments in healthcare properties is highly fragmented,
and increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our investment
objectives. In acquiring and leasing healthcare properties, we compete with private equity funds, real estate developers, REITs, other
public and private real estate companies and private real estate investors, many of whom have greater financial resources than we have.
We also face competition in leasing or subleasing available facilities to prospective tenants.
Regulation
Healthcare
Regulatory Matters
The
following discussion describes certain material healthcare laws and regulations that may affect our operations and those of our tenants/operators.
Although there is presently no Federal regulation on the lessor itself from Federal government agencies that regulate and inspect the
operators and no regulation of the lessor in the States in which we own real property, our tenants (the operators of skilled nursing
facilities, long-term acute care hospitals and other healthcare providers) are subject to extensive federal, state and local government
healthcare laws and regulations. These laws and regulations include requirements related to licensure, conduct of operations, ownership
of the facilities operation, addition or expansion of facilities and services, prices for services, billing for services and the confidentiality
and security of health-related information. Different properties within our portfolio may be more or less subject to certain types of
regulation, some of which are specific to the type of facility or provider. These laws and regulations are wide-ranging and complex,
may vary or overlap from jurisdiction to jurisdiction, and are subject frequently to change. Compliance with these regulatory requirements
can increase operating costs and, thereby, adversely affect the financial viability of our tenants/operators’ businesses. Our tenants/operators’
failure to comply with these laws and regulations could adversely affect their ability to successfully operate our properties, or receive
reimbursement for services rendered within them, which could negatively impact their ability to satisfy their contractual obligations
to us. Our leases will require the tenants/operators to comply with all applicable laws, including healthcare laws.
Our
tenants are subject directly to healthcare laws and regulations, because of the broad nature of some of these restrictions, such as the
Anti-Kickback Statute discussed below. We intend for all of our business activities and operations to conform in all material respects
with all applicable laws and regulations, including healthcare laws and regulations. We expect that the healthcare industry will continue
to face increased regulation and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of
services.
Healthcare
Reform Measures. The Affordable Care Act changed how healthcare services are covered, delivered and reimbursed through expanded coverage
of uninsured individuals, reduced growth in Medicare program spending, reductions in Medicare and Medicaid reimbursement, including but
not limited to, Disproportionate Share Hospital, or DSH payments, and expanding efforts by governmental and private third party payors
to tie reimbursement to quality and efficiency. In addition, the law reformed certain aspects of health insurance, contains provisions
intended to strengthen fraud and abuse enforcement, and encourage the development of new payment models, including the creation of Accountable
Care Organizations, or ACOs. The status of the Affordable Care Act is subject to substantial uncertainty due to proposals to terminate
or modify its provisions. We are not able to predict the effect of such changes on our business since the nature of any changes is undetermined.
However, any changes that result in a decrease in payments made on behalf of patients are likely to reduce the income that our tenants
receive from the operation of facilities at our properties.
Sources
of Revenue and Reimbursement. Our tenants and operators receive payments for patient services from the federal government under the
Medicare program, state governments under their respective Medicaid or similar programs, managed care plans, private insurers and directly
from patients. Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over,
some disabled persons, persons with end-stage renal disease and persons with Lou Gehrig’s Disease. Medicaid is a federal-state
program, administered by the states pursuant to certain conditions imposed by the Federal government, which provides hospital and medical
benefits to qualifying individuals who are unable to afford healthcare. Generally, revenues for services rendered to Medicare patients
are determined under a prospective payment system, or PPS. CMS annually establishes payment rates for the PPS for each applicable facility
type and level of care provided.
Amounts
received under Medicare and Medicaid programs are generally significantly less than established facility gross charges for the services
provided and may not reflect the provider’s costs. Healthcare providers generally offer discounts from established charges to certain
group purchasers of healthcare services, including private insurance companies, employers, health maintenance organizations, or HMOs,
preferred provider organizations, or PPOs and other managed care plans. These discount programs generally limit a provider’s ability
to increase revenues in response to increasing costs. Patients are generally not responsible for the total difference between established
provider gross charges and amounts reimbursed for such services under Medicare, Medicaid, HMOs, PPOs and other managed care plans, but
are responsible to the extent of any exclusions, deductibles or coinsurance features of their coverage. The amount of such exclusions,
deductibles and coinsurance continues to increase. Collection of amounts due from individuals is typically more difficult than from governmental
or third-party payers takes considerably longer and often requires the involvement of, and payment to, third parties to collect.
Payments
to providers are being increasingly tied to quality and efficiency. These initiatives include requirements to report clinical data and
patient satisfaction scores, reduced Medicare payments to hospitals based on “excess” readmission rates as determined by
CMS, denial of payments under Medicare, Medicaid and some private payors for services resulting from a hospital or facility-acquired
condition, or HAC, and reduced Medicare payments to hospitals with high risk-adjusted HAC rates. Certain provider types, including, but
not limited to, inpatient rehabilitation facilities and long-term acute care hospitals, are subject to specific limits and restrictions
on eligibility for admissions which, in turn, affect reimbursement at these facilities.
The
amounts of program payments received by our tenants/operators can be changed from time to time by legislative or regulatory actions and
by determinations by agents for the programs. Level of payment has also been impacted by the Federal budget sequestration which automatically
reduces payments as a result of funding limitations. The Medicare and Medicaid statutory framework is subject to administrative rulings,
interpretations and discretion that affect the amount and timing of reimbursement made under Medicare and Medicaid. Federal healthcare
program reimbursement changes may be applied retroactively under certain circumstances. In recent years, the federal government has enacted
various measures to reduce spending under federal healthcare programs. In April 2018, CMS announced as part of its patient driven payment
model (“PDPM”) a skilled-nursing preferred payor system (“SNF-PPS”) intended to reduce administrative burden,
and foster innovation to improve care and quality for patients. CMS estimates the program of payment redesign and policy changes would
increase Medicare payments to SNFs by 2.4% ($850 million) during 2019.
In
addition, many states have enacted, or are considering enacting, measures designed to reduce their Medicaid expenditures and change private
healthcare insurance, and states continue to face significant challenges in maintaining appropriate levels of Medicaid funding due to
state budget shortfalls. Many States have also sought to control costs by implementing a variety of alternative care and payment models
authorized under Federal Medicaid waivers and such models often impose new or enhanced administrative requirements on health care providers
as a condition of payment. Further, non-government payers may reduce their reimbursement rates in accordance with payment reductions
by government programs or for other reasons. Healthcare provider operating margins may continue to be under significant pressure due
to the deterioration in pricing flexibility and payor mix, as well as increases in operating expenses that exceed increases in payments
under the Medicare and Medicaid programs.
Anti-Kickback
Statute. A section of the Social Security Act known as the “Anti-Kickback Statute” prohibits, among other things, the
offer, payment, solicitation or acceptance of remuneration, directly or indirectly, in return for referring an individual to a provider
of services for which payment may be made in whole or in part under a federal healthcare program, including the Medicare or Medicaid
programs. Courts have interpreted this statute broadly and held that the Anti-Kickback Statute is violated if just one purpose of the
remuneration is to generate referrals, even if there are other lawful purposes. The Affordable Care Act provides that knowledge of the
Anti-Kickback Statute or specific intent to violate the statute is not required in order to violate the Anti-Kickback Statute. Violation
of the Anti-Kickback Statute is a crime, punishable by fines of up to $25,000 per violation, five years imprisonment, or both. Violations
may also result in civil and administrative liability and sanctions, including civil penalties of up to $50,000 per violation, liability
under the False Claims Act, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid, and
additional monetary penalties in amounts treble to the underlying remuneration.
There
are a limited number of statutory exceptions and regulatory safe harbors for categories of activities deemed protected from prosecution
under the Anti-Kickback Statute. Currently, there are statutory exceptions and safe harbors for various activities, including the following:
certain investment interests, space rental, equipment rental, practitioner recruitment, personnel services and management contracts,
sale of practice, referral services, warranties, discounts, employees, managed care arrangements, investments in group practices, freestanding
surgery centers, ambulance replenishing and referral agreements for specialty services. The safe harbor for space rental arrangements
requires, among other things, that the aggregate rental payments be set in advance, be consistent with fair market value and not be determined
in a manner that takes into account the volume or value of any referrals. The fact that conduct or a business arrangement does not fall
within a safe harbor does not necessarily render the conduct or business arrangement illegal under the Anti-Kickback Statute. However,
such conduct and business arrangements may lead to increased scrutiny by government enforcement authorities.
Many
states have laws similar to the Anti-Kickback Statute that regulate the exchange of remuneration in connection with the provision of
healthcare services, including prohibiting payments to physicians for patient referrals. The scope of these state laws is broad because
they can often apply regardless of the source of payment for care. These statutes typically provide for criminal and civil penalties,
as well as potential loss of facility licensure and eligibility for reimbursement by government payors.
We
intend to use commercially reasonable efforts to structure our arrangements, including any lease/operating arrangements involving facilities
in which local physicians are investors, so as to satisfy, or meet as closely as possible, safe harbor requirements. The safe harbors
are narrowly structured, and there are not safe harbors available for every type of financial arrangement that we or our tenants/operators
may enter. Although it is our intention to fully comply with the Anti-Kickback Statue, as well as all other applicable state and federal
laws, we cannot assure you that all of our arrangements or the arrangements of our tenants/operators will meet all the conditions for
a safe harbor. There can be no assurance regulatory authorities enforcing these laws will determine our financial arrangements or the
financial relationships of our tenants/operators comply with the Anti-Kickback Statute or other similar laws and such regulatory authorities
or private qui tam relators bringing actions on behalf of government entities in exchange for a portion of any recovery may allege non-compliance
and seek financial or other penalties.
Stark
Law. The Social Security Act also includes a provision commonly known as the “Stark Law.” The Stark Law is a strict liability
statute that prohibits a physician from making a referral to an entity furnishing “designated health services” paid by Medicare
or Medicaid if the physician or a member of the physician’s immediate family has a financial relationship with that entity unless
an exception to the law is met. Designated health services include, among other services, inpatient and outpatient hospital services,
clinical laboratory services, physical therapy services and radiology services. The Stark Law also prohibits entities that provide designated
health services from billing the Medicare and Medicaid programs for any items or services that result from a prohibited referral and
requires the entities to refund amounts received for items or services provided pursuant to the prohibited referral. Sanctions for violating
the Stark Law are imposed without consideration to intent and include denial of payment, civil monetary penalties of up to $15,000 per
prohibited service provided for failure to return amounts received in a timely manner, and exclusion from the Medicare and Medicaid programs.
The statute also provides for a penalty of up to $100,000 for a circumvention scheme. Failure to refund amounts received pursuant to
a prohibited referral may also constitute a false claim and result in additional penalties under the False Claims Act, which is discussed
in greater detail below.
There
are exceptions to the self-referral prohibition for many of the customary financial arrangements between physicians and providers,
including employment contracts, leases and recruitment agreements. There is also an exception for a physician’s ownership
interest in an entire hospital, as opposed to an ownership interest in a hospital department if such ownership interests and
capacity were in place as of March 23, 2010. Unlike safe harbors under the Anti-Kickback Statute, an arrangement must comply with
every requirement of a Stark Law exception, or the arrangement will be in violation of the Stark Law. Through a series of
rulemakings, CMS has issued final regulations implementing the Stark Law. While these regulations were intended to clarify the
requirements of the exceptions to the Stark Law, it is unclear how the government will interpret many of these exceptions for
enforcement purposes and even an inadvertent failure to comply with the strict requirements, such as assuring a signature, can
result in imposition of penalties under certain circumstances.
Although
there is an exception for a physician’s ownership interest in an entire hospital, the Affordable Care Act prohibits newly created
physician-owned hospitals from billing for Medicare patients referred by their physician owners. As a result, the law effectively prevents
the formation after December 31, 2010 of new physician-owned hospitals that participate in Medicare and Medicaid. While the Affordable
Care Act grandfathers existing physician-owned hospitals, it does not allow these hospitals to increase the percentage of physician ownership
and significantly restricts their ability to expand services.
Many
states also have laws similar to the Stark Law that prohibit certain self-referrals. The scope of these state laws is broad because they
can often apply regardless of the source of payment for care, and little precedent exists for their interpretation or enforcement. These
statutes typically provide for criminal and civil penalties, as well as loss of facility licensure.
Although
our lease agreements will require tenants to comply with the Stark Law, we cannot offer assurance that the arrangements entered into
by us or by our tenants/operators will be found to be in compliance with the Stark Law or similar state laws.
The
False Claims Act. The federal False Claims Act prohibits knowingly making or presenting any false claim for payment to the federal
government. The government may use the False Claims Act to prosecute Medicare and other government program fraud in areas such as coding
errors, billing for services not provided, submitting false cost reports and failing to report and repay an overpayment within 60 days
of identifying the overpayment or by the date a corresponding cost report is due, whichever is later. The False Claims Act defines the
term “knowingly” broadly. Although simple negligence will not give rise to liability under the False Claims Act, submitting
a claim with reckless disregard to its truth or falsity or failing to correct an error with in specified period of time constitutes a
“knowing” submission.
The
False Claims Act contains qui tam, or whistleblower, provisions that allow private individuals to bring actions on behalf of the government
alleging that the defendant has defrauded the federal government. Whistleblowers under the False Claims Act may collect a portion of
the government’s recovery, which serves as an incentive to bring claims which then must be defended whether or not they have merit.
Every entity that receives at least $5 million annually in Medicaid payments must have written policies for all employees, contractors
or agents, providing detailed information about false claims, false statements and whistleblower protections under certain federal laws,
including the False Claims Act, and similar state laws.
In
some cases, whistleblowers and the federal government have taken the position, and some courts have held, that providers who allegedly
have violated other statutes, such as the Anti-Kickback Statute and the Stark Law, have thereby submitted false claims under the False
Claims Act. The Affordable Care Act clarifies this issue with respect to the Anti-Kickback Statute by providing that submission of claims
for services or items generated in violation of the Anti-Kickback Statute constitutes a false or fraudulent claim under the False Claims
Act. If a defendant is found liable under the False Claims Act, the defendant may be required to pay three times the actual damages sustained
by the government, additional civil penalties of up to $10,000 per false claim, plus reimbursement of the fees of counsel for the whistleblower.
Many
states have enacted similar statutes preventing the presentation of a false claim to a state government, and we expect more to do so
because the Social Security Act provides a financial incentive for states to enact statutes establishing state level liability.
Other
Fraud & Abuse Laws. There are various other fraud and abuse laws at both the federal and state levels that cover false claims
and false statements and these may impact our business. For example, the Civil Monetary Penalties law authorizes the imposition of monetary
penalties against an entity that engages in a number of prohibited activities. The penalties vary by the prohibited conduct, but include
penalties of $10,000 for each item or service, $15,000 for each individual with respect to whom false or misleading information was given,
and treble damages for the total amount of remuneration claimed. The prohibited actions include, but are not limited to, the following:
●
knowingly presenting or causing to be presented, a claim for services not provided as claimed or which is otherwise false or fraudulent
in any way;
●
knowingly giving or causing to be giving false or misleading information reasonably expected to influence the decision to discharge a
patient;
●
offering or giving remuneration to any beneficiary of a federal healthcare program likely to influence the receipt of reimbursable items
or services; arranging for reimbursable services with an entity which is excluded from participation from a federal healthcare program;
or knowingly or willfully soliciting or receiving remuneration for a referral of a federal healthcare program beneficiary.
Any
violations of the Civil Monetary Penalties Law by management or our tenants/operators could result in substantial fines and penalties,
and could have an adverse effect on our business.
HIPAA
Administrative Simplification and Privacy and Security Requirements. HIPAA, as amended by the HITECH Act, and its implementing regulations
create a national standard for protecting the privacy and security of individually identifiable health information (called “protected
health information”). Compliance with HIPAA is mandatory for covered entities, which include healthcare providers such as tenants/operators
of our facilities. Compliance is also required for entities that create, receive, maintain or transmit protected health information on
behalf of healthcare providers or that perform services for healthcare providers that involve the disclosure of protected health information,
called “business associates.”
Covered
entities must report a breach of protected health information that has not been secured through encryption or destruction to all affected
individuals without unreasonable delay, but in any case, no more than 60 days after the breach is discovered. Notification must also
be made to HHS and, in the case of a breach involving more than 500 individuals, to the media. In the final rule issued in January, 2013,
HHS modified the standard for determining whether a breach has occurred by creating a presumption that any non-permitted acquisition,
access, use or disclosure of protected health information is a breach unless the covered entity or business associate can demonstrate
that there is a low probability that the information has been compromised, based on a risk assessment.
Covered
entities and business associates are subject to civil penalties for violations of HIPAA of up to $1.5 million per year for violations
of the same requirement. In addition, criminal penalties can be imposed not only against covered entities and business associates, but
also against individual employees who obtain or disclose protected health information without authorization. The criminal penalties range
up to $250,000 and up to 10 years imprisonment. In addition, state Attorneys General may bring civil actions for HIPAA violations, HHS
must conduct periodic HIPAA compliance audits of covered entities and business associates. If any of our tenants/operators are subject
to an investigation or audit and found to be in violation of HIPAA, such tenants/operators could incur substantial penalties, which could
have a negative impact on their financial condition. Our tenants/operators may also be subject to more stringent state law privacy, security
and breach notification obligations. Enforcement of HIPAA and the Health Information Technology for Economic and Clinical Health (HITECH)
Act, which substantially augmented the requirements under HIPAA have become increasingly stringent and the penalties for non-compliance
have become increasingly harsh.
Licensure,
Certification and Accreditation. Healthcare property construction and operation are subject to numerous federal, state and local
regulations relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, maintenance of adequate
records, fire prevention, rate-setting and compliance with building codes and environmental protection laws. The requirements for licensure,
certification and accreditation are subject to change and, in order to remain qualified, it may become necessary for our tenants/operators
to make changes in their facilities, equipment, personnel and services.
Facilities
in our portfolio will be subject to periodic inspection by governmental and other authorities to assure continued compliance with the
various standards necessary for licensing and accreditation. We will require our healthcare properties to be properly licensed under
applicable state laws. Except for provider types not eligible for participation in Medicare and Medicaid, we expect our tenant/operators
to participate in the Medicare and Medicaid programs and, where applicable, to be accredited by an approved accrediting organization
which is also often a requirement for Medicare certification. The loss of Medicare or Medicaid certification would result in our tenants/operators
that operate Medicare/Medicaid-eligible providers from receiving reimbursement from federal healthcare programs. The loss of accreditation,
where applicable, would result in increased scrutiny by CMS and likely the loss of payment from non-government payers which often condition
participation and payment on participation in the Medicare program.
In
some states, the construction or expansion of healthcare properties, the acquisition of existing facilities, the transfer or change of
ownership and the addition of new beds or services may be subject to review by and prior approval of, or notifications to, state regulatory
agencies under a Certificate of Need, or CON program. Such laws generally require the reviewing state agency to determine the public
need for additional or expanded healthcare properties and services and have begun to expect some level of revenue from enforcement action
in their budget planning. Some states in which we operate have also adopted limitations on the opening of new skilled nursing facilities.
See “Item 1. Business – Skilled nursing facility industry Business in the United States.” The requirements for licensure,
certification and accreditation also include notification or approval in the event of the transfer or change of ownership or certain
other changes. Further, federal programs, including Medicare, must be notified in the event of a change of ownership or change of information
at a participating provider. Failure by our tenants/operators to provide required federal and state notifications, obtain necessary state
licensure and CON approvals could result in significant penalties as well as prevent the completion of an acquisition or effort to expand
services or facilities. We may be required to provide ownership information or otherwise participate in certain of these approvals and
notifications.
Antitrust
Laws. The federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-skilled
nursing facilities. These laws prohibit price fixing, concerted refusal to deal, market allocation, monopolization, attempts to monopolize,
price discrimination, tying arrangements, exclusive dealing, acquisitions of competitors and other practices that have, or may have,
an adverse effect on competition. Violations of federal or state antitrust laws can result in various sanctions, including criminal and
civil penalties. Antitrust enforcement in the healthcare industry is currently a priority of the Federal Trade Commission and the Antitrust
Division of the Department of Justice. We intend to operate so that we and our tenants/operators are in compliance with such federal
and state laws, but future review by courts or regulatory authorities could result in a determination that could adversely affect the
operations of our tenants/operators and, consequently, our operations. In addition to enforcement by Federal and State agencies, in an
effort to control health care costs, private payors such as employee welfare benefit plans administered by or for employers or unions
have become increasing aggressive in bringing actions against providers alleging violations of antitrust laws.
Healthcare
Industry Investigations. Significant media and public attention has focused in recent years on the healthcare industry. The federal
government is dedicated to funding additional federal enforcement activities related to healthcare providers and preventing fraud and
abuse. Our tenants/operators will engage in many routine healthcare operations and other activities that could be the subject of governmental
investigations or inquiries. For example, our tenants/operators will likely have significant Medicare and Medicaid billings, numerous
financial arrangements with physicians who are referral sources, and joint venture arrangements involving physician investors. In recent
years, Congress and the States have increased the level of funding for fraud and abuse enforcement activities. It is possible that governmental
entities could initiate investigations or litigation in the future and that such proceedings could result in significant costs and penalties,
as well as adverse publicity. It is also possible that our executives could be included in governmental investigations or litigation
or named as defendants in private litigation.
Governmental
agencies and their agents, such as the Medicare Administrative Contractors, fiscal intermediaries and carriers, as well as the HHS-OIG,
CMS and state Medicaid programs, may conduct audits of our tenants/operator’s operations. Private payers may conduct similar post-payment
audits, and our tenants/operators may also perform internal audits and monitoring. Many of these audits employ the use of statistical
sampling and extrapolation whereby a small number of claims are reviewed but adverse results are applied against a provider’s claims
for long periods of time. Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered
systemic such that results are extrapolated, the resolution of these audits which can often require substantial repayments could have
a material, adverse effect on our portfolio’s financial position, results of operations and liquidity.
Under
the Recovery Audit Contractor, or RAC program, CMS contracts with RACs on a contingency basis to conduct post-payment reviews to detect
and correct improper payments in the fee-for-service Medicare program, to managed Medicare plans and in the Medicaid program. CMS has
also initiated a RAC prepayment demonstration program in 11 states. CMS also employs Medicaid Integrity Contractors, or MICs to perform
post-payment audits of Medicaid claims and identify overpayments. In addition to RACs and MICs, the state Medicaid agencies and other
contractors have increased their review activities. Aside from the costs associated with responding to a myriad of requests for substantiation
of services, should any of our tenants/operators be found out of compliance with any of these laws, regulations or programs, our business,
our financial position and our results of operations could be negatively impacted.
Environmental
Matters
A
wide variety of federal, state and local environmental and occupational health and safety laws and regulations affect healthcare property
operations. These complex federal and state statutes, and their enforcement, involve a myriad of regulations, many of which involve strict
liability on the part of the potential offender. Some of these federal and state statutes may directly impact us. Under various federal,
state and local environmental laws, ordinances and regulations, an owner of real property or a secured lender, such as us, may be liable
for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as
well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons
and adjacent property). The cost of any required remediation, removal, fines or personal or property damages and the owner’s or
secured lender’s liability therefore could exceed or impair the value of the property, and/or the assets of the owner or secured
lender. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely
affect the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, could reduce
our revenues.
Prior
to closing any property acquisition or loan, we ordinarily obtain Phase I environmental assessments in order to attempt to identify potential
environmental concerns at the facilities. These assessments will be carried out in accordance with an appropriate level of due diligence
and will generally include a physical site inspection, a review of relevant federal, state and local environmental and health agency
database records, one or more interviews with appropriate site-related personnel, review of the property’s chain of title and review
of historic aerial photographs and other information on past uses of the property. We may also conduct limited subsurface investigations
and test for substances of concern where the results of the Phase I environmental assessments or other information indicates possible
contamination or where our consultants recommend such procedures.
Americans
with Disabilities Act
Our
properties must comply with Title III of the ADA to the extent that such properties are “public accommodations” as defined
by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our
properties where such removal is readily achievable. Many States and localities have similar requirements that are in addition to, and
sometime more stringent than, Federal requirements. We believe the existing properties are in substantial compliance with the ADA and
that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance
with the ADA or a comparable State or local requirement could result in imposition of fines or an award of damages to private litigants.
The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make
alterations as appropriate in this respect.
Emerging
Growth Company Status
We
are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,”
including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We have not yet made a decision as to whether we will take advantage of any or all of these exemptions. If we do take advantage of any
of these exemptions, we do not know if some investors will find common stock less attractive as a result. The result may be a less active
trading market for common stock and our stock price may be more volatile.
In
addition, the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period
provided in the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can
delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected
to avail ourselves of the extended transition period for adopting new or revised accounting standards available to emerging growth companies.
We
will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which
our total annual revenue equals or exceeds $1.07 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year
following the fifth anniversary of the first sale of shares pursuant to a registration statement filed under the Securities Act, (iii)
the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date
on which we are deemed to be a “large accelerated filer” under the Exchange Act.
Human
Capital Resource Management
As
of December 31, 2022, we had 8 full-time employees. Our employees are primarily located at our corporate office in Chicago. Our employees
are not members of any labor union, and we consider our relations with our employees to be satisfactory.
We
endeavor to maintain workplaces that are free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity,
religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law. The
basis for recruitment, hiring, development, training, compensation and advancement at the Company is qualifications, performance, skills
and experience. We believe our employees are fairly compensated, and compensation and promotion decisions are made without regard to
gender, race and ethnicity. Employees are routinely recognized for outstanding performance.
Insurance
We
require our tenants to maintain general liability, professional liability, all risks and other insurance coverages and to name us as
an additional insured under these policies. We believe that the policy specifications and insured limits are appropriate given the relative
risk of loss, the cost of the coverage and industry practice.
Available
Information
We
file annual, quarterly and current reports, proxy statements and other information with SEC. The SEC maintains an internet site that
contains these reports, and other information about issuers, like us, which file electronically with the SEC. The address of that site
is http://www.sec.gov. We make available our reports on Form 10-K, 10-Q, and 8-K (as well as all amendments to these reports), and other
information, free of charge, on the Investor Relations section of our website at www.strawberryfieldsreit.com. The information
found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this report
or any other document that we file with the SEC.