The income we generate from RIDEA structures is subject to a number of operational risks including but not limited to fluctuations in occupancy levels and resident fee levels, competitive pressures and market dynamics, impacts from quality of care, private pay collectibility, insurance reimbursement rate changes, increases in the cost of food, materials, energy, labor or other services, macroeconomic conditions, the imposition of new or increased taxes and regulation, capital expenditure requirements, professional and general liability claims and the availability and cost of professional and general liability insurance. In addition, as our operating companies are required to hold healthcare licenses and in some cases may enroll in a government healthcare program (e.g., Medicare or Medicaid), we may experience penalties for failure to comply with applicable healthcare laws, including loss or suspension of licenses and certificates of need, certification or accreditation, exclusion from government healthcare programs, administrative sanctions and civil monetary penalties. If our managers fail to effectively conduct operations on our behalf, or to maintain and improve our properties, it could adversely affect our business reputation as the owner of the properties, as well as the business reputation of our managers and their ability to attract and retain patients and residents in our properties, which could have a material adverse effect on our and our managers’ business, results of operations, and financial condition.
Risks Related to Us and Our Operations
Severe respiratory disease seasons, epidemics, pandemics or other widespread illnesses could adversely affect our properties and could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Our business and operations were significantly impacted by the COVID-19 pandemic and are exposed to continuing risks from severe respiratory disease seasons or the occurrence of other epidemics, pandemics or other widespread illnesses. As we experienced during the COVID-19 pandemic, a future respiratory disease or other epidemic or pandemic could significantly increase the cost burdens faced by our operators, including if they are required to implement quarantines for residents, as well as cause a reduction in occupancy, each of which could adversely affect our operators’ revenues and their ability to meet their obligations to us, which could have a material adverse effect on our financial results.
The effect of a pandemic or other future widespread illness on our and our operators’ operational and financial performance will depend on future developments, including the ability to control the spread of the outbreak generally and in our facilities, and the delivery and efficacy of and participation in vaccination programs and other treatments, government funds and other support for the senior care sector and the efficacy of other policies and measures that may mitigate the impact of the pandemic or illness.
There are no assurances of our ability to pay dividends in the future.
Our ability to pay dividends may be adversely affected upon the occurrence of any of the risks described herein. Our payment of dividends is subject to compliance with restrictions contained in our credit agreements, the indentures governing our senior notes and any preferred stock that our Board may from time to time authorize. All dividends will be paid at the discretion of our Board and will depend upon our earnings, our financial condition, maintenance of our REIT status and such other factors as our Board may deem relevant from time to time. There are no assurances of our ability to pay dividends in the future. In addition, our dividends in the past have included, and may in the future include, a return of capital.
We rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to make future investments necessary to grow our business or meet maturing commitments.
As a REIT under the Code, we are required to, among other things, distribute at least 90% of our REIT taxable income each year to our stockholders. Because of this distribution requirement, we may not be able to fund, from cash retained from operations, all future capital needs, including capital needed to make investments and to satisfy or refinance maturing commitments. As a result, we rely on external sources of capital, including debt and equity financing. If we are unable to obtain needed capital at all or only on unfavorable terms from these sources, we might not be able to make the investments needed to grow our business, or to meet our obligations and commitments as they mature, which could negatively affect our debt ratings and, in extreme circumstances, affect our ability to continue operations. We may not be in a position to take advantage of future investment opportunities if we are unable to access the capital markets on a timely basis or we are only able to obtain financing on unfavorable terms.
Our ability to raise capital through equity sales is dependent, in part, on the market price of our common stock, and our failure to meet market expectations with respect to our business, or other factors we do not control, could negatively impact such market price and availability of equity capital.
As with other publicly-traded companies, the availability of equity capital will depend, in part, on the market price of our common stock which, in turn, will depend upon various market conditions and other factors, some of which we cannot control, that may change from time to time including:
| ● | the extent of investor interest; |
