vtr-20251231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
For the year ended December 31, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number: 001-10989
Ventas, Inc.
(Exact Name of Registrant as Specified in Its Charter)
300 North LaSalle Street, Suite 1600
Chicago, Illinois
60654
(Address of Principal Executive Offices)
(877) 483-6827
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol Title of Each Class Name of Exchange on Which Registered
VTR Common Stock, $0.25 par value New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ☒ No ̈
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ̈No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ No ̈
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ̈
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
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If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of shares of the registrant’s common stock held by non-affiliates of the registrant on June 30, 2025, based on a closing price of the common stock of $63.15 as reported on the New York Stock Exchange, was $28.6 billion.
As of February 3, 2026, there were 474,965,224 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2026 Annual Meeting of Stockholders are incorporated by reference into Part III, Items 10 through 14 of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2025.
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CAUTIONARY STATEMENTS
Unless otherwise indicated or except where the context otherwise requires, the terms “we,” “us,” “our,” “Ventas,” the “Company” and other similar terms in this Annual Report on Form 10-K (this “Annual Report”) refer to Ventas, Inc. and its consolidated subsidiaries.
Forward-Looking Statements
This Annual Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments and other matters that are not historical facts. Forward-looking statements include, among others, statements regarding our and our officers’ intent, belief or expectation as identified by the use of phrases or words such as “assume,” “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “target,” “forecast,” “plan,” “potential,” “opportunity,” “estimate,” “could,” “would,” “should,” “line of sight,” “outlook” and other comparable and derivative terms or the negatives thereof. Forward-looking statements are based on management’s beliefs as well as on a number of assumptions concerning future events. You should not put undue reliance on these forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made. We urge you to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance, including those made under “—Summary Risk Factors” below and in “Risk Factors” in Part 1A of this Annual Report.
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Summary Risk Factors
Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what we believe are the principal risk factors, but these risks are not the only ones we face. You should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report, together with the other information in this Annual Report. If any of the following risks, or any other risks and uncertainties that are not addressed below or elsewhere in this Annual Report or that we have not yet identified, actually occur, our business, financial condition and results of operations could be materially adversely affected and the value of our securities could decline.
Risks Relating to Our Business Operations and Strategy
•Macroeconomic trends, including trends relating to labor costs, unemployment, inflation, interest rates and exchange rates, may affect our business and financial results
•Changes in the U.S. political and regulatory environment could affect availability of government funding that we or our managers, tenants or borrowers rely on, which could negatively impact our business
•To the extent that we or our managers, tenants and borrowers are unable to navigate successfully the trends affecting our or their businesses and the industries in which we or they operate, we may be adversely affected
•Our managers and tenants operate or exert substantial control over the properties that they manage or lease from us, which limits our control and influence over operations and results
•If our managers’, tenants’ or borrowers’ financial condition or business prospects deteriorate, our business, financial condition and results of operations could be adversely affected
•We face potential adverse consequences from the bankruptcy or insolvency of our managers, tenants, borrowers and other obligors
•A significant portion of our revenues and operating income is dependent on a limited number of tenants and managers, including Ardent, Kindred, Atria, Sunrise and Le Groupe Maurice
•We are vulnerable to adverse changes affecting our specific asset classes and the real estate industry generally
•Ownership of properties or operation of our business outside the United States may subject us to different or greater risks than those associated with our domestic operations
•Our operating assets in our SHOP segment may expose us to various operational risks, liabilities and claims that could adversely affect our ability to generate revenues or increase our costs and could adversely affect our business, financial condition and results of operations
•Our inability to renew our management agreements with our SHOP managers or our leases with our NNN and OM&R tenants on as favorable terms or at all, and our inability when necessary, to effectively and efficiently transition a SHOP community to a new manager or a NNN or OM&R property to a new tenant, may have an adverse effect on our business, financial condition and results of operations
•The hospitals on or near the campuses where our outpatient medical buildings are located and their affiliated health systems may not remain competitive or financially viable
•Our research tenants face unique levels of expense and uncertainty
•If a borrower defaults, we may be unable to obtain payment, successfully foreclose on collateral or realize the value of any collateral, which could adversely affect our ability to recover our investment
•Our ongoing strategy depends, in part, upon identifying and consummating future acquisitions and investments and effectively managing our external growth opportunities
•Our investments and acquisitions may be unsuccessful or fail to meet our expectations
•Our investments in co-investment and similar vehicles may subject us to risks that we would not otherwise face
•Merger, acquisition and investment activity in our industries resulting in a change of control of, or a competitor’s investment in, one or more of our managers, tenants or borrowers could adversely affect our business, financial condition and results of operations
•Increased construction and development in the markets in which our properties are located could adversely affect our future occupancy rates, operating margins and profitability
•Development, redevelopment and construction risks could affect our profitability
•We may face increased risks and costs associated with volatility in materials and labor prices or as a result of supply chain or procurement disruptions, which may adversely affect the status of our construction projects
•Damage from catastrophic or extreme weather or other natural events could result in losses to the Company
•We may be unable to sell certain properties on a timely basis or on favorable terms, which may have an adverse effect on our business, financial condition and results of operations
•We own properties that are subject to ground lease, air rights or other restrictive agreements that limit our uses of the properties, restrict our ability to sell or otherwise transfer the properties and expose us to loss of the properties if such agreements are breached by us or terminated
•We may be required to recognize reserves, allowances, credit losses or impairment charges
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•Cybersecurity threats and incidents could disrupt our operations or the operations of the third parties with whom we do business, invest in or lend to, result in the loss of or unauthorized access to confidential or personal information or damage our or their business relationships and reputation
•The use of, or inability to take advantage of the benefits of, artificial intelligence by us or our managers, tenants and borrowers presents risks and challenges that may adversely impact our business and operating results or the business and operating results of our managers, tenants and borrowers or may adversely impact the requirements and demand for properties
•Our success depends, in part, on our ability to attract and retain talented employees. The loss of any one of our key personnel or the inability to maintain appropriate staffing could adversely impact our business
•Damage to our reputation could adversely affect our business, financial condition or result of operations
Risks Relating to Our Capital Structure
•Market conditions, the actual and perceived state of the capital markets generally and limitations on our ability to access such markets could negatively impact our business and have an adverse effect on us, including our ability to make required payments on our debt obligations, make distributions to our stockholders or make future investments necessary to implement our business strategy
•We have a significant amount of outstanding indebtedness and may incur additional indebtedness in the future
•Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable terms
•We are exposed to increases in interest rates, which could reduce our profitability and adversely impact our ability to refinance existing debt, sell assets or engage in acquisition, investment, development and redevelopment activity, and our decision to hedge against interest rate risk might not be effective
•We may be adversely affected by fluctuations in currency exchange rates
•Covenants in the instruments governing our and our subsidiaries’ existing indebtedness limit our operational flexibility, and a covenant breach could adversely affect our operations
•The market price and trading volume of our common stock may be volatile
•Our stockholders may experience dilution if we issue additional common stock
Risks Relating to Legal, Compliance and Regulatory
•Significant legal or regulatory proceedings could subject us or our managers, tenants or borrowers to increased operating costs and substantial uninsured liabilities, which could adversely affect our or their liquidity, financial condition and results of operations
•We and our managers, tenants and borrowers may be adversely affected by regulation and enforcement
•Our investments may expose us to unknown liabilities
•We and our managers, tenants and borrowers may be adversely affected by complex and evolving laws and regulations regarding data privacy and cybersecurity
•The amount and scope of insurance coverage provided by our policies and policies maintained by our managers, tenants or other counterparties may not adequately insure against losses
•We could incur substantial liabilities and costs if any of our properties are found to be contaminated with hazardous substances or we become involved in any environmental disputes
Risks Relating to Our REIT Status
•Loss of our status as a REIT would have significant adverse consequences for us and the value of our common stock
•Our REIT status depends on meeting Code requirements, and failure to do so could negatively impact our business, financial condition, or results of operations
•Legislative or other actions affecting REITs or taxes could have a negative effect on our stockholders or us
Note Regarding Third-Party Information
This Annual Report may include information provided to us by our managers, tenants, borrowers, business partners and unconsolidated entities or that we have obtained from SEC filings or other publicly available information of our tenants, managers, business partners and unconsolidated entities in which we invest.We believe that such information is accurate and that the sources from which it has been obtained are reliable. However, we cannot guarantee the accuracy of such information and have not independently verified the assumptions on which such information is based.
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Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 18
Item 1B. Unresolved Staff Comments 47
Item 1C. Cybersecurity 47
Item 2. Properties 49
Item 3. Legal Proceedings 51
Item 4. Mine Safety Disclosures 51
PART II
Item 6. [Reserved] 54
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 88
Item 8. Financial Statements and Supplementary Data 89
Item 9A. Controls and Procedures 157
Item 9B. Other Information 157
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 157
PART III
Item 10. Directors, Executive Officers and Corporate Governance 158
Item 11. Executive Compensation 158
Item 14. Principal Accountant Fees and Services 158
PART IV
Item 15. Exhibits and Financial Statement Schedules 159
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PART I
ITEM 1. Business
BUSINESS
Overview
Ventas, Inc. is an S&P 500 company focused on delivering strong, sustainable shareholder returns by enabling exceptional environments that benefit a large and growing aging population. We hold a portfolio that includes senior housing communities, outpatient medical buildings, research centers, hospitals and healthcare facilities located in North America and the United Kingdom. As of December 31, 2025, we owned or had investments in 1,409 properties consisting of 1,374 properties in our reportable segments (“Segment Properties”) and 35 properties held by unconsolidated real estate entities in our non-segment operations. We are headquartered in Chicago, Illinois with additional corporate offices in Louisville, Kentucky and New York, New York.
We elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 1999. Provided we qualify for taxation as a REIT, we generally are not required to pay U.S. federal corporate income taxes on our REIT taxable income that is currently distributed to our stockholders. In order to maintain our qualification as a REIT, we must satisfy a number of technical requirements, which impact how we invest in, operate and manage our assets. See “Risk Factors—Risks Relating to Our REIT Status” included in Part I, Item 1A of this Annual Report.
We operate through three reportable segments: senior housing operating portfolio, which we refer to as “SHOP,” outpatient medical and research portfolio, which we refer to as “OM&R,” and triple-net leased properties, which we refer to as “NNN.” We also hold assets outside of our reportable segments, which we refer to as non-segment assets, and which consist primarily of corporate assets, including cash and cash equivalents, restricted cash, loans receivable and investments, accounts receivable and investments in unconsolidated entities. Our investments in unconsolidated entities include investments made through our third-party institutional private capital management platform, Ventas Investment Management (“VIM”). Through VIM, we partner with third-party institutional investors to invest in real estate through various joint ventures and other co-investment vehicles where we are the sponsor or general partner, including our open-ended investment vehicle, the Ventas Life Science & Healthcare Real Estate Fund (the “Ventas Fund”). Our investments in unconsolidated entities also include investments in operating entities, such as Ardent Health, Inc. (together with its subsidiaries, “Ardent”) and Atria Senior Living, Inc. (together with its subsidiaries, “Atria”). See our Consolidated Financial Statements and the related notes, including “Note 7 – Investments in Unconsolidated Entities” included in Part II, Item 8 of this Annual Report.
Our chief operating decision maker evaluates performance of the combined properties in each operating segment and determines how to allocate resources to these segments based on net operating income (“NOI”) for each segment. See our Consolidated Financial Statements and the related notes, including “Note 2 – Accounting Policies” and “Note 18 – Segment Information” included in Part II, Item 8 of this Annual Report.
The following table summarizes information for our portfolio for the year ended December 31, 2025 (dollars in thousands):
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Segment NOI (1) Percentage of Total NOI Segment Properties
Outpatient medical and research portfolio (OM&R) 590,169 24.7 % 409
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(1) “NOI” is defined as total revenues, less interest and other income, property-level operating expenses and third-party capital management expenses. See “Non-GAAP Financial Measures” included elsewhere in this Annual Report for additional disclosure and a reconciliation of Net income attributable to common stockholders, as computed in accordance with U.S. generally accepted accounting principles (“GAAP”), to NOI.
(2) NOI for non-segment includes management fees and promote revenues, net of expenses related to our third-party institutional private capital management platform, income from loans and investments and corporate-level expenses not directly attributable to any of our three reportable segments.
n/a—not applicable
Business Strategy
For nearly three decades, Ventas has pursued a strategy focused on delivering outsized value to stockholders and other key stakeholders by enabling exceptional environments that benefit a large and growing aging population. Working with industry-leading care providers, partners and research and medical institutions, our collaborative and experienced team is focused on achieving consistent, superior total returns through: (1) delivering profitable organic growth in senior housing, (2) capturing value-creating external growth focused on senior housing, (3) generating strong cash flow throughout our portfolio of high-quality assets unified in meeting demographic demand and (4) maintaining financial strength, flexibility and liquidity.
Our objective is to generate reliable and growing cash flows from our portfolio, which enables us to pay regular cash dividends to stockholders and creates opportunities to increase stockholder value.
Our Businesses
Senior Housing Operating Portfolio (SHOP)
In our SHOP segment, we own and invest in senior housing communities. We participate directly in the financial performance of the communities’ operations and are generally responsible for all operational costs, expenses and other liabilities. We typically engage third-party managers to operate the communities on our behalf but generally hold applicable healthcare licenses and enroll in applicable government healthcare programs on behalf of the communities in our SHOP segment.
In order to support our SHOP segment, we developed Ventas OITM, a proprietary data and analytics platform, to provide us with timely access to high-quality data that informs real-time decisions. Through Ventas OITM, we collect and assess data from a variety of sources, including proprietary data from our senior housing operations and external data sources. This data supports business models and automated dashboard reporting that are enabled by machine learning, providing us with reporting systems & business intelligence dashboards, marketing and sales analytics, competitive intelligence and geospatial analytics. Ventas OITM blends our operational expertise and data analytics to engage the managers, enhance the performance of our communities and elevate the quality of care and services delivered to residents. We also leverage Ventas OITM for our investment and capital expenditure decisions.
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The senior housing communities in our SHOP segment include independent living communities, assisted living communities, memory care communities and continuing care retirement communities. Independent living communities are typically age-restricted multifamily rental properties with central dining facilities that provide residents with access to meals and other services such as housekeeping, linen service, transportation and social and recreational activities. Assisted living communities typically offer similar services as independent living communities, plus supportive care that is provided by trained employees to residents who require assistance with activities of daily living, such as bathing, dressing and medication management. Memory care communities provide care for individuals with Alzheimer’s disease and other forms of dementia or memory loss. Continuing care retirement communities are typically age-restricted properties that offer a continuum of care, and may include a combination of independent living, assisted living, memory care and skilled nursing units. Our assisted living, memory care and continuing care retirement communities are generally subject to state licensure requirements for the delivery of some or all of their services, while our independent living communities generally are not. Charges for room, board and services at these communities are generally paid from private sources, with limited reliance on government reimbursement programs such as Medicaid.
Because we have elected to be taxed as a REIT, we are subject to restrictions impacting how we invest in, operate or manage our properties, including the senior housing communities in our SHOP segment. Some of those restrictions depend on whether a senior housing community is treated as a “qualified health care property” under the REIT rules. Senior housing communities in our SHOP segment that are “qualified health care properties” generally must be managed and operated by a third-party manager, including for purposes of procuring supplies, hiring and training employees, entering into third-party contracts for the benefit of the community and providing resident care and services. Senior housing communities that are not “qualified health care properties” may be managed by us directly through a taxable REIT subsidiary or by a third-party manager. The majority of senior housing communities in our SHOP segment are characterized as “qualified health care properties” that must be operated by third-party managers. See “—Government Regulation—Tax Regulation” included in Part I, Item 1 of this Annual Report.
Where we engage a third-party manager, either by choice or as required by REIT tax rules, we generally rely on the third-party managers’ personnel, expertise, technical resources and information systems, risk management processes, proprietary information, good faith and judgment to manage the senior housing communities’ operations efficiently and effectively. We also rely on the third-party managers to set appropriate resident fees, to provide accurate property-level financial results in a timely manner and otherwise manage risk and operate the senior housing communities in compliance with the terms of our management agreements and all applicable laws and regulations. We are generally responsible for all operational costs, expenses and other risks and liabilities. While our managers typically indemnify us for liabilities arising out of certain of their actions such as gross negligence, fraud or willful misconduct, we may not be able to enforce these rights, or we may determine it is not prudent to do so if we believe that enforcement of our rights would be more detrimental to our business than seeking alternative approaches. See “Risk Factors—Risks Relating to Our Business Operations and Strategy—Our operating assets in our SHOP segment may expose us to various operational risks, liabilities and claims that could adversely affect our ability to generate revenues or increase our costs and could adversely affect our business, financial condition and results of operations”included in Part I, Item 1A of this Annual Report.
Our management agreements typically have fixed terms and are subject to renewal under certain conditions. These agreements may include provisions for termination under specific circumstances, with or without the payment of a fee. The managers generally receive annual management fees which are calculated based on various performance measures, which may include revenue, NOI and other objective financial metrics. Incentive fees may be awarded if specified performance targets are met.
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As of December 31, 2025, we engaged 39 third-party managers to operate the 752 properties in our SHOP segment on our behalf. The following table provides information regarding our significant SHOP manager concentration as of and for the year ended December 31, 2025:
Sunrise Senior Living, LLC 6.8 98 7.1
The properties in our SHOP segment managed by Atria, Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”) and Le Groupe Maurice (together with its subsidiaries, “Le Groupe Maurice”) accounted for a significant portion of our SHOP segment revenues and NOI for the year ended December 31, 2025. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Concentration Risk” included in Part II, Item 7 of this Annual Report and “Risk Factors—Risks Relating to Our Business Operations and Strategy—A significant portion of our revenues and operating income is dependent on a limited number of tenants and managers, including Ardent, Kindred, Atria, Sunrise and Le Groupe Maurice” included in Part I, Item 1A of this Annual Report.
As of December 31, 2025, we held a 34% ownership interest in Atria, which entitles us to customary minority rights and protections, as well as the right to appoint two members to the Atria Board of Directors. See Note 7 – Investments in Unconsolidated Entities of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Outpatient Medical and Research Portfolio (OM&R)
In our OM&R segment, we primarily acquire, own, develop, lease and manage outpatient medical buildings and research centers.
Our outpatient medical buildings, which are predominantly located on or contiguous to a health system campus, are generally multi-tenant properties leased to health systems and several unrelated medical practices, although in many cases they may be associated with a large single specialty or multi-specialty group, including neighboring health systems. Tenants typically require customized space devoted to patient examination and treatment, diagnostic imaging, outpatient surgery and other outpatient services. Outpatient medical buildings typically require enhanced plumbing, electrical and mechanical systems to accommodate the needs of healthcare providers such as sinks in every room, brighter lights and specialized medical equipment.
Our research centers generally contain laboratory and office space that is leased primarily to universities, academic medical centers, technology, biotechnology, medical device and pharmaceutical companies and other organizations involved in the research industry. While these properties may have certain characteristics similar to commercial office buildings, they generally contain more advanced electrical, mechanical, heating, ventilating and air conditioning systems. The facilities generally have specialty equipment including emergency generators, fume hoods, lab bench tops and related amenities. In many instances, research center tenants make significant investments to improve their leased space, in addition to landlord improvements, to accommodate biology, chemistry or medical device research initiatives. Our research centers are often located on or contiguous to university and academic medical campuses.
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We lease these properties to tenants under varying lease types that obligate the tenants to pay rent, and may require the tenant to pay their proportionate share of some or all property-related expenses, including utilities, real estate taxes, insurance, repairs and maintenance, cleaning, roads and grounds expense and other expenses. The leases are typically for a fixed term, and may be subject to renewal under certain conditions.
Although we do not participate directly in the financial performance of our tenants’ operations, we are exposed to the credit risk of our tenants in our OM&R segment. See “Risk Factors—Risks Relating to Our Business Operations and Strategy—If our managers’, tenants’ or borrowers’ financial condition or business prospects deteriorate, our business, financial condition and results of operations could be adversely affected” included in Part I, Item 1A of this Annual Report.
Through our Lillibridge subsidiary and our 50% ownership interest in PMB Real Estate Services LLC (“PMBRES”), a property management platform, we provide outpatient medical building and research center management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems and universities, academic medical centers, biotech and other similar companies throughout the United States.
Triple-Net Leased Properties (NNN)
In our NNN segment, we invest in and own senior housing communities, skilled nursing facilities (“SNFs”), long-term acute care facilities (“LTACs”), freestanding inpatient rehabilitation facilities (“IRFs”) and other healthcare facilities.
The senior housing communities in our NNN segment may include independent living communities, assisted living communities, memory care communities and continuing care retirement communities, which property types are described in more detail above in “—Senior Housing Operating Portfolio (SHOP).”
SNFs provide rehabilitative, restorative, skilled nursing and medical treatment for patients and residents who do not require the high technology, care-intensive, high-cost setting of an acute care or rehabilitation hospital. Treatment programs may include physical, occupational, speech, respiratory and other therapies, including sub-acute clinical protocols such as wound care and intravenous drug treatment.
LTACs typically serve medically complex, chronically ill patients who require a high level of monitoring and specialized care, but whose conditions do not necessitate the continued services of an intensive care unit and have a Medicare average length of stay of greater than 25 days. LTACs typically have the capability to treat patients who suffer from multiple systemic failures or conditions such as neurological disorders, head injuries, brain stem and spinal cord trauma, cerebral vascular accidents, chemical brain injuries, central nervous system disorders, developmental anomalies and cardiopulmonary disorders. Chronic patients often depend on technology for continued life support, such as mechanical ventilators, total parenteral nutrition, respiration or cardiac monitors and dialysis machines, and, due to their severe medical conditions, generally are not clinically appropriate for admission to a SNF or rehabilitation hospital.
IRFs are devoted to the rehabilitation of patients with various neurological, musculoskeletal, orthopedic and other medical conditions following stabilization of their acute medical issues. Other healthcare facilities include facilities that provide medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic services and emergency services. These other healthcare facilities may also provide outpatient services such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology and physical therapy.
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Charges for services provided at SNFs, LTACs, IRFs and other healthcare facilities are generally paid from a combination of government reimbursement and commercial insurance and other private sources.
We lease the properties in our NNN segment to tenants under triple-net or absolute-net leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures. The leases in our NNN segment typically contain annual or periodic rent escalators that may be contingent upon the satisfaction of specified facility revenue parameters or based on increases in the Consumer Price Index (“CPI”), with caps, floors or collars. These agreements may include provisions for termination under specific circumstances, including in the event of a monetary or non-monetary default by the tenant or in the event of a failure of the tenant to meet certain financial or operational covenants. The agreements typically include broad indemnities in our favor from the tenant for liabilities arising out of the tenant’s operations. Although we do not participate directly in the financial performance of the tenants’ operations, we are exposed to the credit risk of our tenants in our NNN segment. See “Risk Factors—Risks Relating to Our Business Operations and Strategy—If our managers’, tenants’ or borrowers’ financial condition or business prospects deteriorate, our business, financial condition and results of operations could be adversely affected” included in Part I, Item 1A of this Annual Report.
The following table provides information regarding our significant NNN tenant concentration as of and for the year ended December 31, 2025:
Brookdale Senior Living, Inc. (1) 6.2 % 77 5.6 %
Kindred Healthcare, LLC 5.8 31 2.3
Ardent Health Partners, LLC 6.4 30 2.2
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(1)Percentage of Total NOI includes the NOI for 121 senior housing properties in our NNN segment that were leased to Brookdale (as defined below) for all or part of 2025, including 56 properties for which the lease expired on or before December 31, 2025 (the “Brookdale Conversion and Sale Communities”). In connection therewith, (i) 42 of the Brookdale Conversion and Sale Communities were converted to our SHOP segment during 2025, with the NOI for those properties included through the date of conversion, (ii) 3 of the Brookdale Conversion and Sale Communities were converted to our SHOP segment on January 1, 2026, (iii) 2 of the Brookdale Conversion and Sale Communities were sold during 2025, with the NOI for those properties included through the date of sale and (iv) 9 of the Brookdale Conversion and Sale Communities were held for sale as of December 31, 2025. As a result of the foregoing, Brookdale is not expected to represent a significant portion of the Total NOI or properties for our NNN segment in 2026 and thereafter.
The properties we lease to Brookdale Senior Living, Inc. (together with its subsidiaries, “Brookdale”), Ardent and Kindred Healthcare, LLC (together with its subsidiaries, “Kindred”) accounted for a significant portion of our NNN segment revenues and NOI for the year ended December 31, 2025. As noted previously, Brookdale is not expected to represent a significant portion of the Total NOI or properties for our NNN segment in 2026 and going forward. See “Risk Factors—Risks Relating to Our Business Operations and Strategy—A significant portion of our revenues and operating income is dependent on a limited number of tenants and managers, including Ardent, Kindred, Atria, Sunrise and Le Groupe Maurice” included in Part I, Item 1A of this Annual Report,“ “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Concentration Risk” included in Part II, Item 7 of this Annual Report and “Note 3 – Concentration of Credit Risk” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
As of December 31, 2025, we held warrants exercisable at any time prior to September 13, 2034, for 9.9% of the common equity of a parent company of Kindred exercisable at the pre-issuance value of such common equity (the “Scion Warrants”). See “Note 9 – Other Assets” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
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As of December 31, 2025, we held an approximately 6.6% ownership interest in Ardent. See “Note 7 – Investments in Unconsolidated Entities” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Non-Segment Assets
Non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, loans receivable and investments and accounts receivable. Our loans receivable and investments generally provide us with interest income and fees and are often secured by mortgage liens or leasehold mortgages on the underlying properties and corporate or personal guarantees by affiliates of the borrowing entity. In some cases, the loans are secured by a pledge of ownership interests in the entity or entities that own the related properties or may take the form of mezzanine loans, which are subordinated to senior secured loans held by other investors that encumber the same real estate. We also hold non-mortgage loans receivable, net, which are generally corporate loans that are collateralized primarily by non-real estate related collateral or are unsecured. See “Note 6 – Loans Receivable and Investments, net” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. Although we do not participate directly in the financial performance of the operations of our borrowers’ properties, we are directly exposed to the credit risk of our borrowers and therefore indirectly to their operational risks. See “Risk Factors—Risks Relating to Our Business Operations and Strategy—If our managers’, tenants’ or borrowers’ financial condition or business prospects deteriorate, our business, financial condition and results of operations could be adversely affected” included in Part I, Item 1A of this Annual Report.
Non-segment assets also include our investments in unconsolidated entities, including investments in unconsolidated real estate entities through our third-party institutional private capital management platform, VIM, and investments in unconsolidated operating entities, such as Ardent and Atria. Through VIM, we partner with third-party institutional investors to invest in real estate through various joint ventures and other co-investment vehicles. In these arrangements, we are typically the general partner and earn fees as a result of that service. The assets in our VIM business are primarily comprised of three platforms: the Ventas Fund, a state pension fund joint venture and a sovereign wealth fund joint venture. The Ventas Fund is a perpetual life vehicle focused on investments in core and core plus life science, outpatient medical and senior housing real estate in North America. Our state pension fund joint venture is principally focused on investments in ground up development and value-added redevelopment of senior housing. Our sovereign wealth fund joint venture is focused on university-based research and innovation development projects. In the Ventas Fund and certain other ventures, we have the ability to earn revenues through incentive fees periodically during the life of the venture. See “Note 7 – Investments in Unconsolidated Entities” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Development and Redevelopment Activities
From time to time, we engage in development and redevelopment activities within our reportable segments and through our investments in unconsolidated entities. For example, we are party to certain agreements that commit us to develop properties funded through capital that we and, in certain circumstances, our joint venture partners provide. In addition, from time to time, we engage in redevelopment projects with respect to our existing senior housing communities, outpatient medical buildings and research centers to maximize the value, increase NOI, maintain a market-competitive position, achieve property stabilization or change the primary use of the property.
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Geographic Diversification of Properties
Our portfolio of assets is broadly diversified by geographic location throughout the United States, Canada and the United Kingdom, with properties in only one state (California) accounting for more than 10% of our total revenues for the year ended December 31, 2025. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—”Concentration Risk” included in Part II, Item 7 of this Annual Report.
Competition
We generally compete for investments in real estate with publicly traded, private and non-listed healthcare REITs, real estate partnerships, healthcare providers, healthcare lenders and other investors, including developers, banks, insurance companies, pension funds, government-sponsored entities and private equity firms, some of whom may have greater financial resources and lower costs of capital than we do. Increased competition challenges our ability to identify and successfully capitalize on opportunities that meet our objectives, which is affected by, among other factors, the availability of suitable acquisition or investment targets, our ability to negotiate acceptable transaction terms and our access to and cost of capital. See “Risk Factors—Risks Relating to Our Business Operations and Strategy—Our ongoing strategy depends, in part, upon identifying and consummating future acquisitions and investments and effectively managing our external growth opportunities” included in Part I, Item 1A of this Annual Report and “Note 10 – Senior Notes Payable and Other Debt” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.
Our managers, tenants and borrowers typically compete on a local and regional basis with other organizations that provide comparable services. They typically compete to attract and retain residents and patients to our properties based on scope and quality of care, reputation and financial condition, price, location and physical appearance of the properties, services offered, qualified personnel, physician referrals and family preferences. With respect to outpatient medical buildings and research centers, we and our third-party managers compete to attract and retain tenants based on many of the same factors, in addition to quality of the affiliated health system or university, physician preferences and proximity to hospital or university campuses or research centers and quality of lab space. The ability of our managers, tenants and borrowers to compete successfully could be affected by private, federal and state reimbursement programs and other laws and regulations. See “Risk Factors—Risks Relating to Our Capital Structure—Changes in the U.S. political and regulatory environment could affect availability of government funding that we or our managers, tenants or borrowers rely on, which could negatively impact our business” and “Risk Factors—Risks Relating to Legal, Compliance and Regulatory—We and our managers, tenants and borrowers may be adversely affected by regulation and enforcement” included in Part I, Item 1A of this Annual Report.
We also compete to attract and retain qualified employees. Our ability to compete effectively will depend on our ability to attract new employees and retain and motivate existing employees. See“Risk Factors—Our success depends, in part, on our ability to attract and retain talented employees. The loss of any one of our key personnel or the inability to maintain appropriate staffing could adversely impact our business”
Human Capital Management
Our experienced team is focused on winning together to drive success and create value. As of December 31, 2025, we had 542 employees, none of which are subject to a collective bargaining agreement. We provide a unique environment that offers opportunities for our team to contribute their talents, develop their skills and learn from each other as they build successful careers.
The Compensation Committee and Nominating, Governance and Corporate Responsibility (“NGCR”) Committee of the Board of Directors of the Company (“Board of Directors” or “Board”) and the Board itself
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provide oversight of certain human capital matters. We report on human capital matters regularly to these committees and periodically to our Board of Directors. The most significant human capital measures and objectives that we focus on include the topics described below.
Talent Acquisition, Development and Retention
We are focused on maintaining a strong culture that attracts and retains individuals who share a passion for excellence, integrity, execution, problem-solving skills and collaboration. We invest in our people and their continuous development by providing valuable professional experiences, tailored skill and leadership development programs and meaningful opportunities to learn from internal and external experts.
Employee engagement and satisfaction contribute to our ability to attract and retain top talent. Each year, we conduct an employee engagement survey through an independent third party, which measures our progress on key employee engagement metrics and identifies opportunities for evolving our programs.
Compensation and Benefits
Ventas prides itself in offering an industry-leading compensation and benefits package. Our benefits programs include a robust offering of medical, dental, vision, life, accidental death and dismemberment, disability plans and wellness programs, all of which require very low employee contributions or are offered at no cost to employees. We also provide other ancillary benefits at competitive group rates that allow employees to customize benefits to best meet their needs. We offer employees a 401(k) profit sharing plan with both pretax and Roth offerings and competitive employer matching contributions that enables them to plan for retirement.
Health & Safety
Ventas is committed to the health and safety of its employees. Helping to make our workplaces secure and hazard-free is a responsibility shared with each Ventas employee. Our commitment to health and safety is maintained by effective administration, training and education, and we expect our operating and development partners to comply with applicable company and legal requirements.
Organizational Resilience
Our talented employee base is the foundation of our organizational resilience. As part of our employee value proposition, in addition to competitive compensation and benefits offerings, we invest in growth, development opportunities and comprehensive performance management for our employees that empower them to realize their full potential, expand their capabilities and fill critical roles within the organization. Our employee base is comprised of a mix of longer tenured employees, who contribute deep institutional experience and knowledge, and shorter tenured employees, who contribute new perspectives and ways of doing things. As of December 31, 2025, more than 42% of our employees have been promoted or transferred internally for new opportunities, reflecting our deep commitment to creating an environment where people can build their careers.
The NGCR Committee leads, and the Board oversees and reviews at least annually, a robust short- and long-term succession planning process for our senior management team, including our CEO. In assessing possible CEO candidates, our independent directors identify the skills, experience and attributes they believe are required for an effective leader in light of the Company’s strategic plan, business opportunities and challenges. The Board employs a similar approach with respect to evaluating possible candidates for other
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senior management positions. In general, our management succession planning is designed to anticipate both “planned” successions, such as those arising from anticipated retirements, and “unplanned” succession events, including emergencies and a range of other potential contingencies. Our Board has adopted an emergency succession plan to facilitate the transition to both interim and long-term leadership in the event of an unexpected vacancy in the position of CEO.
The CEO, Executive Vice President, General Counsel and Vice President, Human Resources support the annual succession plan review conducted by the NGCR Committee by providing information about each executive role and succession scenarios, including an overview of each potential successor’s experience and potential, readiness assessment and planned leadership development opportunities. The independent members of the Board also regularly interact with employees across several levels of seniority of Ventas through management presentations at Board meetings and other informal events to form their own independent assessment of senior leaders.
The NGCR Committee and the Board also regularly review strength and gaps in the executive and senior management team and their organizations with the Company’s long-term strategy and goal of optimizing performance in mind. When appropriate, action plans are identified and executed to drive performance, enhance organizational resilience and support succession planning, including for the CEO. We engage third party experts where appropriate to bring additional insights to and facilitate succession planning, conduct assessments and provide coaching and development to executives and others in cases where the Company and the employee will benefit.
Corporate Sustainability
Ventas takes a data-driven, holistic view of risks and opportunities to develop and execute corporate sustainability initiatives that support our business strategy and enhance value for stockholders. Our priorities are organized under three pillars:
•Sustainable Business: Creating Long-Term Value
•Exceptional Employees: Attracting and Engaging Top Talent
•High Standards: Leading in Governance, Ethics and Transparency
Ventas has set measurable goals related to our key sustainability topics and progress towards these goals is reported annually in our Corporate Sustainability Report.
These matters are overseen by our NGCR Committee. Our EVP, General Counsel and Ethics & Compliance Officer and VP, Corporate Sustainability report on these matters regularly to the NGCR Committee and periodically to our Board of Directors.
Insurance
We maintain and/or contractually require that our managers, tenants, borrowers and certain other counterparties maintain comprehensive insurance coverage on our properties, our operations and, where appropriate, their operations, with terms, conditions, limits and deductibles that we believe are customary for similarly situated companies in each industry. We frequently review our insurance programs and requirements. The insurance that we maintain or require may take the form of commercial insurance, captive insurance or self-insurance.
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We maintain the property insurance for a vast majority of our properties in our OM&R and SHOP segments. We maintain liability insurance for the properties in our OM&R segment and general and professional liability insurance for most of the senior housing communities and related operations in our SHOP segment. Where we do not maintain the general and professional liability insurance for a senior housing community and its related operations, the manager is contractually required to maintain it in accordance with standards set forth in our management agreements. We also contractually require the tenants in our NNN segment to maintain property and liability insurance in accordance with standards set forth in our lease agreements with them.
Through our OM&R segment, we provide engineering, construction and architectural services in connection with new development projects, and we maintain and/or contractually require tenants, contractors, design professionals and other parties involved with such services to maintain property and liability insurance with respect to those activities.
The Company maintains a wholly-owned captive insurance company, which provides insurance coverage for losses below the deductible and within the self-insured retention of the commercial property and general and professional liability insurance that we maintain for certain of our outpatient medical and senior housing properties. The captive insurance company also provides a portion of the insurance coverage for losses above the self-insured retention of the commercial property insurance.
Additional Information
We maintain a website at www.ventasreit.com and an Investor Relations website at ir.ventasreit.com. We use our Investor Relations website as a means of disclosing material information. Accordingly, investors should monitor our Investor Relations website in addition to following our press releases, SEC filings and public conference calls and webcasts. The information on our website and our Investor Relations website is not incorporated by reference in this Annual Report, and our web addresses are included as an inactive textual reference only.
We make available, free of charge, through our Investor Relations website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (the “SEC”). In addition, our Guidelines on Governance, Global Code of Ethics and Business Conduct (including waivers from and amendments to that document) and the charters for each of our Audit and Compliance, NGCR and Compensation Committees are available on our Investor Relations website, and we will mail copies of the foregoing documents to stockholders, free of charge, upon request to our Corporate Secretary at Ventas, Inc., 300 North LaSalle Street, Suite 1600, Chicago, Illinois 60654.
GOVERNMENT REGULATION
United States Healthcare Regulation, Licensing and Enforcement
We, along with our managers, tenants and borrowers in the United States, are subject to or impacted by extensive and complex federal, state and local healthcare laws and regulations, including laws and regulations relating to quality of care, licensure and certificates of need (“CON”), conduct of operations, government reimbursement, such as Medicare and Medicaid, fraud and abuse, qualifications of personnel, appropriateness and classification of care, adequacy of plant and equipment and data privacy and cybersecurity. In our SHOP segment, these laws and regulations typically apply directly to us and our senior housing communities, where we generally hold the applicable healthcare licenses. In some instances, we enroll in government reimbursement programs, such as Medicare and Medicaid, on behalf of the communities in our SHOP segment. In our other segments, our tenants and borrowers are typically subject to these laws and regulations. Imposition of sanctions
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associated with these laws and regulations could adversely affect the tenant’s or borrower’s ability to satisfy their obligations to us. See “Risk Factors—Risks Relating to Our Business Operations and Strategy—Our operating assets in our SHOP segment may expose us to various operational risks, liabilities and claims that could adversely affect our ability to generate revenues or increase our costs and could adversely affect our business, financial condition and results of operations,” “Risk Factors—Risks Relating to Our Business Operations and Strategy—If our managers’, tenants’ or borrowers’ financial condition or business prospects deteriorate, our business, financial condition and results of operations could be adversely affected” and “Risk Factors—Risks Relating to Legal, Compliance and Regulatory—We and our managers, tenants and borrowers may be adversely affected by regulation and enforcement” included in Part I, Item 1A of this Annual Report.
Healthcare laws and regulations are wide-ranging and complex. Noncompliance may result in the imposition of civil, criminal, and administrative penalties, including: the loss or suspension of accreditation, licenses or CONs; suspension of or non-payment for new admissions; denial of reimbursement; fines; suspension, decertification, or exclusion from federal and state healthcare programs; or facility closure. Changes in laws or regulations, reimbursement policies, enforcement activity and regulatory non-compliance by us or our managers, tenants or borrowers could have a significant effect on our and their operations and financial condition, which in turn may adversely impact us, as detailed below and set forth under “Risk Factors—Risks Relating to Legal, Compliance and Regulatory” in Part I, Item 1A of this Annual Report.
Licensure, Certification and CONs
Senior housing communities, other than independent living communities, are subject to state and local healthcare laws that may require licenses, certifications and permits in order to operate, and may vary greatly from one jurisdiction to another. Our senior housing communities that receive government reimbursement payments are also subject to extensive federal laws and regulation. Our tenants or borrowers who operate other facilities, such as SNFs, LTACs, IRFs, health systems and medical practices, are typically subject to extensive federal and state regulation and must hold various licenses, certifications, and permits. Licensure and certification may be conditioned on requirements related to, among other things, the quality of medical care provided, compliance with staffing levels and reporting requirements, qualifications of the operator’s administrative personnel and clinical staff, adequacy of the physical plant and equipment and continuing compliance with applicable laws and regulations. Sanctions for failure to comply with licensure and certification laws and regulations include loss of licensure or certification and ability to participate in or receive payments from the Medicare and Medicaid programs, suspension of or non-payment for new admissions, fines, and potential criminal penalties.
Many of our licensed facilities, tenants and borrowers are subject to state CON laws, which require governmental approval prior to the development or expansion of licensed facilities and services. The approval process in states with CON laws generally requires a facility to demonstrate the need for additional or expanded licensed facilities or services. CONs, where applicable, are also sometimes necessary for changes in ownership or control of licensed facilities, addition of beds, investment in major capital equipment, introduction of new services or termination of services previously approved through the CON process. CON laws and regulations may restrict our or our tenants’ ability to expand and grow in certain circumstances, which could have an adverse effect on our or their revenues.
Fraud and Abuse Enforcement
Participants in the U.S. healthcare industry are subject to complex federal and state civil and criminal laws and regulations governing healthcare provider referrals, relationships and arrangements. These laws include: (i) federal and state false claims acts, which generally prohibit providers from filing false claims or making false statements to receive payment from Medicare, Medicaid or other federal or state healthcare programs; (ii) federal and state anti-kickback and fee-splitting statutes, including the federal Anti-Kickback Statute, which prohibits the payment or receipt of remuneration to induce referrals or generate business involving healthcare items or services payable by Medicare or Medicaid; (iii) federal and state physician self-
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referral laws, which generally prohibit referrals of certain services by physicians to entities with which the physician or an immediate family member has a financial relationship; and (iv) the federal Civil Monetary Penalties Law, which requires a lower burden of proof than other fraud and abuse laws and prohibits, among other things, the knowing presentation of a false or fraudulent claim for certain healthcare services.
Violating these healthcare fraud and abuse laws and regulations may result in criminal and civil penalties, such as punitive sanctions, damage assessments, monetary penalties, imprisonment, denial of Medicare and Medicaid payments, and exclusion from the Medicare and Medicaid programs. These laws and regulations are enforced by a variety of federal, state and local governmental agencies, and many can also be enforced by private litigants through federal and state false claims acts and other laws that allow private individuals to bring whistleblower suits known as qui tam actions.
Government Reimbursement
Sources of revenue for us and some of our tenants and borrowers include, among others, governmental healthcare programs, such as the federal Medicare programs and state Medicaid programs, and non-governmental third-party payors, such as insurance carriers and health maintenance organizations. Medicare is a federal health insurance program for persons aged 65 and over, some disabled persons, persons with end-stage renal disease and persons with amyotrophic lateral sclerosis. Medicaid is a medical assistance program for eligible needy persons that is funded jointly by federal and state governments and administered by the states. Medicaid eligibility requirements and benefits vary by state. The Medicare and Medicaid programs are highly regulated and subject to frequent and substantial changes resulting from legislation, regulations and administrative and judicial interpretations of existing law.
Federal and state governments have made and continue to make significant modifications to the Medicare and Medicaid programs, including changes intended to reduce government spending. These changes may include, for example, reductions in reimbursement rates, funding restrictions, limitations on payments to Medicare and Medicaid managed care plans and cost control strategies such as increased enrollment in managed care programs. Private payors, such as insurance companies, are typically for-profit companies and are continuously seeking opportunities to control healthcare costs.In some cases, private payors rely on Medicare reimbursement systems to determine reimbursement rates, such that changes in government health care programs that reduce payments under those programs may negatively impact payments from private payors. These changes may result in reduced or slower growth in reimbursement for certain services provided by some of our tenants and borrowers. Additionally, the U.S. Congress and certain state legislatures have introduced and passed a large number of proposals and legislation affecting the healthcare system, including laws that directly or indirectly affect reimbursement. For example, the federal budget reconciliation bill, H.R. 1, enacted on July 4, 2025, (the “OBBBA”), includes several healthcare policy changes that are expected to result in Medicaid spending reductions and changes in administration of state Medicaid programs. The law requires changes to Medicaid financing mechanisms, some of which are intended to reduce the federal matching funds received by state Medicaid programs. Reductions in federal Medicaid funds and increases to state administrative burdens could have a significant impact on Medicaid programs, such as limitations on eligibility or coverage, particularly if states are unable to offset federal funding reductions.
In recent years, governmental and commercial payers have made efforts to promote shifting from traditional fee-for-service reimbursement models to alternative payment models that tie reimbursement to quality and cost of care, such as accountable care organizations and bundled payments. It is difficult to predict the nature and success of future financial or delivery system reforms, but changes to reimbursement rates and related policies could adversely impact our and our tenants’ results of operations. See “Risk Factors—Risks Relating to Our Capital Structure—Changes in the U.S. political and regulatory environment could affect availability of government funding that we or our managers, tenants or borrowers rely on, which could negatively impact our business” included in Part I, Item 1A of this Annual Report.
CARES Act and Similar Governmental Funding Programs
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In response to the COVID-19 pandemic, in 2020, Congress enacted a series of economic stimulus and relief measures through the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the Paycheck Protection Program and Health Care Enhancement Act and the Consolidated Appropriations Act, 2021. Other domestic, foreign, local, regional or national governments also implemented similar grant programs. We, and our managers, tenants and borrowers, applied for and received grants under these types of government programs.
The U.S. Department of Health and Human Services (“HHS”) Office of Inspector General, the Pandemic Response Accountability Committee and other governments each may have the right to conduct audits of our, or our managers’, tenants’ or borrowers’, use of funds from such programs and may have the right to recoup some or all of the payments if it determines those payments were not made or the funds not used in compliance with its rules, regulations and interpretive guidance.
International Healthcare Regulation
Our SHOP segment includes senior housing communities in Canada and the United Kingdom. Our SHOP operations and the operations of our tenants in those countries are subject to a variety of healthcare laws and regulations related to, among other things, quality of care, licensure, government reimbursement and fraud and abuse.
Our senior living communities in Canada are provincially regulated. Within each province, there are different categories for senior living residences that are generally based on the level of care sought or required by a resident (e.g., assisted or retirement living, senior living residences, residential care, long-term care). In some of these categories and depending on the province, residences may be government funded, or the individual residents may be eligible for a government subsidy, while other residences are exclusively private-pay. The governing legislation and regulations vary by province, but generally impose licensing requirements and requirements related to quality control, public health, infection control and other care-related operating standards. These laws empower regulators in each province to take a variety of steps to ensure compliance, conduct inspections, issue reports and generally regulate the industry. These laws typically apply directly to us and our senior living communities in Canada, where we generally hold the applicable operating licenses. Also, certain provinces (such as Quebec) impose rent control regulations that apply to our senior living communities.
In the United Kingdom, operations in our senior housing communities are principally regulated as “care home services” under the Health and Social Care Act 2008 (as amended) and other regulations including the Health and Care Act 2022 and the Health and Social Care Act 2008 (Regulated Activities) (Amendment) Regulations 2023. This legislation subjects service providers to standards of care and requires that all persons carrying out such activities be registered and comply with requirements related to, among other things, ensuring the senior housing communities provide safe, effective care and are caring, responsive and well-led, and that managers of such persons be registered and be “fit and proper persons”. In the case of our senior housing communities in the UK that are in our SHOP segment, we are required to be registered under such legislation and are directly subject to such requirements. A failure to comply with such requirements may result in, among other things, substantial fines and criminal prosecutions in certain cases. Sources of revenue for our senior housing communities in the United Kingdom include federal (including the National Health Service) and local governmental authorities in addition to private payors.
Data Privacy and Cybersecurity
We and our managers, tenants and borrowers are subject to federal, state and international laws and regulations related to data privacy and cybersecurity. These statutes, and other similar federal, state and
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international laws and regulations that may be enacted in the future, may require us or our managers, tenants or borrowers to modify our or their data processing and cybersecurity practices and policies, incur substantial compliance-related costs and expenses and otherwise suffer adverse impacts on our or their business. See “Risk Factors—Risks Relating to Legal, Compliance and Regulatory—We and our managers, tenants and borrowers may be adversely affected by complex and evolving laws and regulations regarding data privacy and cybersecurity” in Part I, Item 1A of this Annual Report.
We and our managers, tenants and borrowers may be subject to data privacy and cybersecurity regulations issued pursuant to the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”). These regulations restrict the use and disclosure of individually identifiable health information (“protected health information” or “PHI”), provide for individual rights and require safeguards for PHI and notification of breaches of unsecure PHI. Entities subject to HIPAA include most healthcare providers, including some of our managers, tenants and borrowers. These covered entities are required to implement administrative, physical and technical practices to protect the security of PHI that is electronically maintained or transmitted. Business associates of covered entities who create, receive, maintain or transmit PHI are also subject to certain HIPAA provisions. Violations of HIPAA may result in substantial civil and/or criminal fines and penalties. The Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to data breaches and regulate unfair or deceptive acts or practices, including with respect to data privacy and cybersecurity. The U.S. Congress has considered, and will likely in the future consider, proposals for more comprehensive federal data privacy and cybersecurity legislation to which we or our managers, tenants and borrowers may be subject if passed.
Data privacy and cybersecurity are areas of increasing state legislative focus, and states are increasingly proposing or enacting legislation that relates to data privacy and cybersecurity. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”), gives California residents certain rights with respect to their personal information. Other states where we or our managers, tenants or borrowers do business, or may in the future do business, have enacted, or are considering enacting, comprehensive data privacy and cybersecurity laws that share similarities with the CCPA, for example the Texas Data Privacy and Security Act, effective as of July 1, 2024. In addition, laws in all 50 U.S. states and most U.S. territories generally require businesses to provide notice under certain circumstances to consumers whose personal information has been disclosed as a result of a data breach, and we or our managers, tenants or borrowers may be required to report events related to data privacy or cybersecurity issues, events where customer information may be compromised, unauthorized access to our or their systems or networks and other security breaches, to affected individuals or the relevant regulatory authorities.
Our senior housing communities in Canada are subject to data privacy and cybersecurity legislation, including, in certain provinces, data privacy and cybersecurity laws specifically related to personal health information. Although the obligations of senior living residences in the various provinces differ, they all include the obligation to protect personal information. The powers of data privacy and cybersecurity regulators and penalties for violations of data privacy and cybersecurity laws vary according to the applicable law or are left to the courts.
In the United Kingdom, providers of care home services, including us and our tenants and managers, are subject to the U.K.’s Data Protection Act 2018, U.K. General Data Protection Regulation, Privacy and Electronic Communications Regulations and Data (Use and Access) Act 2025 (collectively, “U.K. Data Protection Laws”), which govern the processing of personal data (including in relation to employees, clients and recipients of care home services). The U.K. Data Protection Laws impose a significant number of obligations on data controllers with the potential for fines of up to 4% of annual worldwide turnover or £17.5 million, whichever is greater.
Regulation Impacting our Life Sciences Research Tenants
Some of our tenants, including university-affiliated organizations and private sector companies, conduct life sciences, medical device or related research. These tenants may be dependent on the public markets, private investors, the federal government agencies, such as the National Institutes of Health (“NIH”), or other
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sources of funding to support their activities. Creating a new pharmaceutical product or medical device requires substantial investments of time and capital, in part because of the extensive regulation of the healthcare industry. It also entails considerable risk of failure in demonstrating that the product is safe and effective and in gaining regulatory approval and market acceptance. Therefore, these tenants may face high levels of regulation, expense and uncertainty.
Our tenants with marketable products may be adversely affected by healthcare reform and government reimbursement policies, including changes under the current presidential administration or by private healthcare payors.
Tax Regulation
We elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 1999. Provided we qualify for taxation as a REIT, we generally will not be required to pay U.S. federal corporate income taxes on our REIT taxable income that is currently distributed to our stockholders. This treatment substantially eliminates the “double taxation” that ordinarily results from investment in a C corporation. We are required to pay income tax in certain circumstances, including on taxable income earned by our taxable REIT subsidiaries.
We are subject to state and local tax in the United States and certain states that do not conform completely to the federal income tax rules. We also are subject to non-U.S. tax on our operations in Canada and in the United Kingdom, as our U.S. REIT status does not by itself afford us special tax status in those countries. We attempt to structure our investments outside of the U.S. in the most efficient manner possible, but do expect to incur some tax expense on our non-U.S. operations, which could increase due to tax rate increases, interest expense limitations or other changes in law. In particular, legislation related to interest expense deductibility in Canada may have a significant impact on our income tax expense and cash taxes. See “Risk Factors—Risks Relating to Our REIT Status—Legislative or other actions affecting REITs or taxes could have a negative effect on our stockholders or us” included in Part I, Item 1A of this Annual Report.
The Code defines a REIT as a corporation, trust or association:
1.that is managed by one or more trustees or directors;
2.that issues transferable shares or transferable certificates to evidence its beneficial ownership;
3.that would be taxable as a domestic corporation, but for Sections 856 through 860 of the Code;
4.that is not a financial institution or an insurance company within the meaning of certain provisions of the Code;
5.that is beneficially owned by 100 or more persons;
6.not more than 50% in value of the outstanding stock of which is owned, actually or constructively, by five or fewer individuals, including certain specified entities, during the last half of each taxable year; and
7.that meets other tests, regarding the nature of its income and assets and the amount of its distributions.
We believe that we have been organized and have operated in a manner that has allowed us, and will continue to allow us, to satisfy conditions (1) through (7) inclusive, during the relevant time periods, and we intend to continue to be organized and operate in this manner. However, qualification and taxation as a REIT depend upon our ability to meet the various qualification tests imposed under the Code, including through actual operating results, asset composition, distribution levels and diversity of stock ownership. Accordingly, no
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assurance can be given that we will be organized or will be able to operate in a manner so as to qualify or remain qualified as a REIT.
If we lose our status as a REIT (currently or with respect to any tax years for which the statute of limitations has not expired), we will face serious tax consequences that will substantially reduce the funds available to satisfy our obligations, to implement our business strategy and to make distributions to our stockholders for each of the years involved because:
•We would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to regular U.S. federal corporate income tax;
•We could be subject to increased state and local taxes; and
•Unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified.
In addition, in such event we would no longer be required to pay dividends to maintain REIT status, which could adversely affect the value of our common stock. See “Risk Factors—Risks Relating to Our REIT Status.” included in Part I, Item 1A of this Annual Report.
Our senior housing communities, including certain of our independent living communities, that are considered “qualified health care properties” that are not leased to a third party operator generally must be owned and operated in a structure where we engage a third-party manager to manage and operate the senior housing communities. For these senior housing communities we are required to rely on a third-party manager to manage and operate the property, including for purposes of procuring supplies, hiring and training all employees, entering into all third-party contracts for the benefit of the property, including resident/patient agreements, complying with laws and regulations, including but not limited to healthcare laws, and providing resident care and services, in exchange for a management fee. The majority of senior housing communities in our SHOP segment are characterized as qualified health care properties that must be operated by third-party managers.
On July 4, 2025, the OBBBA was signed into law. The OBBBA includes several significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017, reforms to Medicaid and other changes to the Code that affect us and our investors. Among other things, the OBBBA (i) permanently extended the 20% deduction for “qualified REIT dividends” for our stockholders who are individuals and non-corporate taxpayers under Section 199A of the Code, (ii) increased the percentage limit under the REIT asset test applicable to our TRSs from 20% to 25% for taxable years beginning after December 31, 2025, and (iii) increased the base for the 30% interest deduction limit under Section 163(j) of the Code by modifying the definition of “adjusted taxable income” to exclude depreciation, amortization and depletion expense for taxable years beginning after December 31, 2024. The OBBBA also contains numerous provisions that may affect our or our managers’, tenants’ or borrowers’ operations, including but not limited to provisions that pertain to funding of government reimbursement programs, which in turn may affect our business, financial condition or results of operations. See “Risk Factors” included in Part I, Item 1A of this Annual Report for additional discussion of the risks and uncertainties we and our managers, tenants or borrowers may face.
Environmental Regulation
A wide variety of federal, local and foreign environmental and occupational health and safety laws and regulations affect our assets. These complex federal, local and foreign statutes, and their enforcement, involve a myriad of regulations, many of which impose strict liability on offenders. Some of these federal, local and foreign laws and regulations may directly impact us. Under various federal, local and foreign 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
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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). See “Risk Factors—Risks Relating to Legal, Compliance and Regulatory—We could incur substantial liabilities and costs if any of our properties are found to be contaminated with hazardous substances or we become involved in any environmental disputes” in Part I, Item 1A of this Annual Report.
With respect to our properties that are operated by third parties, we may be held primarily or jointly and severally liable for costs relating to the investigation and cleanup of any property from which there is or has been an actual or threatened release of a regulated material and any other affected properties, regardless of whether we knew of or caused the release. Such costs typically are not limited by law or regulation and could exceed the property’s value. In addition, we may be liable for certain other costs, such as governmental fines and injuries to persons, property or natural resources, as a result of any such actual or threatened release. See “Risk Factors—Risks Relating to Our Business Operations and Strategy—Our operating assets in our SHOP segment may expose us to various operational risks, liabilities and claims that could adversely affect our ability to generate revenues or increase our costs and could adversely affect our business, financial condition and results of operations” included in Part I, Item 1A of this Annual Report.
Under the terms of our leases and loans, we generally have a right to indemnification by the tenants of our properties or borrowers for any contamination caused by them.
In some instances, we have agreed to indemnify our managers and tenants against any environmental claims (including penalties and cleanup costs) resulting from any condition arising in, on or under, or relating to, the applicable properties at any time before the applicable lease or management commencement date. With respect to SHOP, we have agreed to indemnify our managers against any environmental claims (including penalties and cleanup costs) resulting from any condition on those properties.
ITEM 1A. Risk Factors
This section discusses material factors that affect our business, operations and financial condition. It does not describe all risks and uncertainties applicable to us, our industry or ownership of our securities. If any of the following risks, or any other risks and uncertainties that are not addressed below or that we have not yet identified, actually occur, we could be materially adversely affected, and the value of our securities could decline.
As set forth below, we believe that the risks we face generally fall into the following categories:
•Risks Relating to Our Business Operations and Strategy
•Risks Relating to Our Capital Structure
•Risks Relating to Legal, Compliance and Regulatory
•Risks Relating to Our REIT Status
Risks Relating to Our Business Operations and Strategy
Macroeconomic trends, including trends relating to labor costs, unemployment, inflation, interest rates and exchange rates, may affect our business and financial results.
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Macroeconomic trends, including unfavorable trends relating to labor costs, unemployment, inflation, interest rates and exchange rates, may adversely impact our business, financial condition and results of operations.
Increased labor costs and a shortage of available skilled and unskilled workers may impact our or our managers’, tenants’ or borrowers’ workforce, including employees at our senior housing communities. To the extent we or our managers, tenants or borrowers cannot hire sufficient qualified workers, we or they may need to rely on high-cost alternatives to meet labor needs, including contract and overtime labor. In addition, we and our managers, tenants and borrowers compete with various other companies in attracting and retaining qualified and skilled personnel. Competitive pressures may require that we or our managers, tenants or borrowers enhance pay and benefits packages to compete effectively for such personnel. We and our managers, tenants and borrowers may not be able to offset additional staffing costs by increasing the rates we charge, whether to residents, tenants or others. If there is an increase in these costs or if we or our managers, tenants and borrowers fail to attract and retain qualified and skilled personnel, our respective businesses and operating results could be adversely affected. See also “—To the extent that we or our managers, tenants and borrowers are unable to navigate successfully the trends affecting our or their businesses and the industries in which we or they operate, we may be adversely affected.”
Many of our costs and the costs of our managers, tenants and borrowers, including operating and administrative expenses, interest expense and real estate acquisition and construction costs, are subject to inflation. Any increase in inflation that results in an increase in such costs could adversely affect our business, results of operation and financial condition. These costs include expenses for contracted services, utilities, repairs and maintenance and insurance and general and administrative costs including compensation costs and fees for technology and professional services. See also “—We may face increased risks and costs associated with volatility in materials and labor prices or as a result of supply chain or procurement disruptions, which may adversely affect the status of our construction projects.” Property taxes are also impacted by inflationary changes because taxes in some jurisdictions are regularly reassessed based on changes in the fair value of our properties. We may not be able to offset such additional costs by passing them through, or increasing the rates we charge, to residents and tenants.
Rising interest rates may result in higher operating and incremental borrowing costs for us and our managers, tenants and borrowers. Increases in or elevated interest rates may also result in a decrease in the value of our real estate and a decrease in our cash flows and net income. See also “—We are exposed to increases in interest rates, which could reduce our profitability and adversely impact our ability to refinance existing debt, sell assets or engage in acquisition, investment, development and redevelopment activity, and our decision to hedge against interest rate risk might not be effective.”
Elevated inflation or higher than expected interest rates due to macrodevelopments, U.S. government policies or otherwise could negatively impact consumer spending, our and our managers’, tenants’ and borrowers’ businesses and future demand for our properties. Additionally, the perception by consumers of weak or weakening market conditions may reduce disposable income and impact consumer spending in senior housing or healthcare, which could adversely affect our financial results. See also “—If our managers’, tenants’ or borrowers’ financial condition or business prospects deteriorate, our business, financial condition and results of operations could be adversely affected” and “—Market conditions, the actual and perceived state of the capital markets generally and limitations on our ability to access such markets could negatively impact our business and have an adverse effect on us, including our ability to make required payments on our debt obligations, make distributions to our stockholders or make future investments necessary to implement our business strategy.”
Further, we are exposed to general economic conditions, local, regional, national and international economic conditions and other events and occurrences that affect the markets in which we own properties. Our operating performance is impacted by the economic conditions of the specific markets in which we have concentrations of properties and could be adversely affected if conditions become less favorable in any such markets. A substantial portion of our revenues are derived from properties in California, Texas, New York, Quebec, Canada and Illinois. As a result, we are subject to increased exposure to adverse conditions affecting
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these regions, including downturns in the local economies or changes in local real estate conditions, changing demographics, increased construction and competition or decreased demand for our properties, regional disruptions to, or limited availability of, utilities and other services and changes in the state and local legal and regulatory environment. Our inability to respond to such conditions, events or occurrences could adversely affect our business, financial condition and results of operations.
Changes in the U.S. political and regulatory environment could affect availability of government funding that we or our managers, tenants or borrowers rely on, which could negatively impact our business.
We and our managers, tenants and borrowers may rely on government programs or agencies as a source of funding. From time to time, lawmakers or regulators may take actions that result in significant changes to the healthcare system in the United States, including with respect to government funding of or from NIH, Medicare and Medicaid. Our tenants include universities, academic medical centers and other research institutions whose funding may be dependent on grants from government agencies, such as the NIH and similar agencies or organizations. Other of our tenants, such as LTACs, SNFs, IRFs and certain healthcare facilities, may rely on reimbursement from Medicare and/or Medicaid. Our managers, tenants and borrowers who operate senior housing communities typically depend on private pay sources consisting of the income or assets of residents or their family members to pay fees but may in some limited circumstances receive payments from government reimbursement programs like Medicare and Medicaid.
Funding from government agencies and reimbursement programs such as the NIH, Medicare and Medicaid, including the overall availability and reimbursement rates under these programs, often fluctuates and is subject to the political process, which is often unpredictable. For example, in 2025, the U.S. administration adopted substantial policy changes that affect research and government program funding. Certain of our tenants, including certain university tenants, may depend on NIH grants and reimbursements to partially fund research and in some cases to pay rent for space in our properties. In addition, federal policymakers have proposed and enacted policies to reduce overall healthcare spending which could impact our managers, tenants and borrowers. Any reduction in the availability or rate of funding or reimbursement, or delays surrounding the approval of such funding or reimbursement, may adversely impact our managers’, tenants’ or borrowers’ operations or may cause our tenants to cease making rent payment payments to us or delay or forgo leasing space in our properties, which in turn may negatively impact our business, financial condition, or results of operations. In addition, such developments could adversely impact the overall demand for space in our properties.
To the extent that we or our managers, tenants and borrowers are unable to navigate successfully the trends affecting our or their businesses and the industries in which we or they operate, we may be adversely affected.
Our managers, tenants and borrowers include senior housing managers, hospitals, post-acute facilities and other healthcare systems, medical practices and life sciences and technology companies that are subject to a complex set of trends affecting their businesses and the industries in which they operate. If we or they are unable to successfully navigate these trends, our business, financial condition and operating results and that of our managers, tenants and borrowers could be adversely affected.
There have been, and there are expected to continue to be, advances and changes in technology, payment models, healthcare delivery models, public policy, regulation and consumer behavior and perception that could reduce demand for on-site activities provided at our properties. If our managers, tenants or borrowers are unable to adapt to long-term changes in demand, their financial condition could be materially impacted and our business, financial condition and results of operations could suffer.
In addition, our managers, tenants and borrowers face a highly competitive labor market, which has been compounded by general inflationary pressures on wages and could be further compounded by a shortage of care givers or other trained personnel, union activities or minimum wage laws. For example, California
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SB-525, which was signed into law in June 2023 and became effective for healthcare workers in 2024, requires certain healthcare facility employers to pay wages for certain covered employees that are higher than other state-mandated minimum wages. Pressures such as these may require our managers, tenants and borrowers to comply with regulations or enhance pay and benefits packages to compete effectively for trained personnel or use high-cost alternatives to meet labor needs, including contract and overtime labor. They may be unable to offset these increased costs by increasing the amounts they charge their patients, residents or clients. Rising labor expense could negatively impact the financial condition of our managers, tenants and borrowers and impair their ability to meet their obligations to us.
These and other trends could significantly and adversely affect the profitability of these tenants, which could affect their ability to make payments or meet their other obligations to us or their willingness to renew their leases on terms that are as favorable to us, or at all.
Our managers and tenants operate or exert substantial control over the properties that they manage or lease from us, which limits our control and influence over operations and results.
A significant portion of our properties are either managed for us by third-party managers or leased from us by third-party tenants. Our third-party managers and tenants are ultimately in control of the day-to-day business of the properties that they manage for or lease from us. We have limited rights to direct or influence the business or operations of those properties. Although we may have the right under specified circumstances to terminate our arrangements with these third parties or pursue other remedies, we either may not be able to enforce these rights or may choose not to enforce these rights if we believe that enforcement would be more detrimental to our business than seeking alternative approaches. We depend on these third parties to operate our properties in a manner that complies with applicable law and regulation, minimizes legal risk and maximizes the value of our investment. These third parties may have business interests, goals and competing interests which conflict with ours. Additionally, new or smaller third-party managers may have less experience and require more oversight or attention. The failure by these third parties to operate these properties efficiently and effectively and adequately manage the related risks could adversely affect our business, financial condition and results of operations.
If our managers’, tenants’ or borrowers’ financial condition or business prospects deteriorate, our business, financial condition and results of operations could be adversely affected.
We rely heavily on our managers, tenants and borrowers and on their ability to perform their obligations to us, regardless of whether our relationship is structured as a management agreement, lease or loan. We have limited control over the success or failure of their businesses. At any time, our managers, tenants or borrowers may experience a weakening in their overall financial or operating condition as a result of deteriorating operating performance or trends affecting their businesses and industries in which they operate. See also “—Macroeconomic trends, including trends relating to labor costs, unemployment, inflation, interest rates and exchange rates, may affect our business and financial results,” “—To the extent that we or our managers, tenants and borrowers are unable to navigate successfully the trends affecting our or their businesses and the industries in which we or they operate, we may be adversely affected” and “—Changes in the U.S. political and regulatory environment could affect availability of government funding that we or our managers, tenants or borrowers rely on, which could negatively impact our business.”
Our managers, tenants and borrowers depend on their ability to attract seniors, patients and other users of their services to their businesses, which may be affected by many factors, including, among other factors: (i) prevailing economic conditions and market trends, including market volatility, inflation and the strength of the economy generally and the housing market in particular; (ii) the ability to pay for such services, either through private resources or government reimbursement programs; (iii) consumer confidence; (iv) demographics; (v) property conditions; (vi) clinical conditions and safety, including as a result of a severe cold and flu season, an
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epidemic or any other widespread illness or pandemic; (vi) public perception about such healthcare services; and (vii) social and environmental factors.
If our managers, tenants or borrowers fail to effectively conduct their operations, or to maintain and improve our properties on our behalf, it could adversely affect (i) their ability to attract and retain residents and patients in our properties, which could have an adverse effect on our and our managers’, tenants’ or borrowers’ business, financial condition or results of operations (ii) our business reputation as the owner of the properties and (iii) the business reputation of our managers, tenants or borrowers. If that happens, the manager, tenant or borrower may fail to make payments or meet its other obligations to us, which could have an adverse impact on our results of operations and financial condition. Although we may have the right under specified circumstances to terminate our management agreements, terminate a lease, evict a tenant, demand immediate repayment of outstanding loan amounts or pursue other remedies, we may not be able to enforce these rights, or we may determine it is not prudent to do so if we believe that enforcement of our rights would be more detrimental to our business than seeking alternative approaches. Further, if a manager, tenant or borrower defaults or fails to pay its outstanding obligations at a time when it is difficult or not possible to terminate our agreement with or replace such manager, tenant or borrower, we may elect instead to amend such agreement or lease, which may be on terms that are less favorable to us than the original agreements and may have a material adverse effect on our results of operations and financial condition.
We face potential adverse consequences from the bankruptcy or insolvency of our managers, tenants, borrowers and other obligors.
At any time, any of our managers, tenants or borrowers could experience a downturn in their business, decline in their operating results or deterioration in their overall financial condition, which could ultimately lead to their bankruptcy or insolvency. Bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization that may render certain of our rights and remedies unenforceable or delay our ability to pursue such rights and remedies and realize any recoveries. For example, we cannot evict a tenant solely because it has filed a bankruptcy petition. A debtor-lessee may reject our lease in a bankruptcy proceeding, and any claim we have for unpaid rent might not be paid in full. We may be unable to exercise available termination rights under our management contracts or leases during the pendency of any bankruptcy petition. We also may be required to fund certain expenses and obligations (such as real estate taxes, debt costs and maintenance expenses) to preserve the value of our properties, avoid the imposition of liens on our properties or transition our properties to a new manager or tenant.
Bankruptcy or insolvency proceedings may result in increased costs and require significant management attention and resources. If we are unable to transition affected properties efficiently and effectively, such properties could experience prolonged operational disruption, leading to lower occupancy rates and further depressed revenues. Publicity about a manager’s, tenant’s or borrower’s financial condition and insolvency proceedings may negatively impact its reputation, which could result in decreased customer demand and revenues. Any or all of these risks could adversely affect our business, financial condition and results of operations. These risks would be magnified where we lease multiple properties to a single third party, as a failure or default could expose us to these risks across multiple properties.
See also “—If a borrower defaults, we may be unable to obtain payment, successfully foreclose on collateral or realize the value of any collateral, which could adversely affect our ability to recover our investment.”
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A significant portion of our revenues and operating income is dependent on a limited number of tenants and managers, including Ardent, Kindred, Atria, Sunrise and Le Groupe Maurice.
The portfolios leased by us to Ardent and Kindred represent a substantial portion of our NNN portfolio and account for a significant portion of our NNN revenues and NOI. We depend on Ardent and Kindred to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing, if any, affecting the properties they lease from us. These tenants have also agreed to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with their respective businesses. We cannot assure you that they will be able to, or will continue to, satisfy their obligations to us. Any failure by any one of Ardent or Kindred to effectively conduct its operations or to maintain and improve the properties they lease from us could adversely affect their financial condition and, in turn, our business, financial condition and results of operations.
We rely on Atria, Sunrise and Le Groupe Maurice to manage a significant portion of the properties in our SHOP segment, including by setting appropriate resident fees, managing expenses, providing accurate property-level financial results in a timely manner and otherwise managing risk and operating our senior housing communities profitably and in compliance with the terms of our management agreements and all applicable law and regulation. Any adverse developments in such managers’ business and affairs or financial condition or changes in their ownership or leadership could impair their ability to manage our properties and the associated risks effectively and in compliance with law and regulation which could adversely affect the financial performance of our properties and our business, financial condition and results of operations.
We are vulnerable to adverse changes affecting our specific asset classes and the real estate industry generally.
We invest in a variety of asset classes in real estate, including senior housing, outpatient medical, research, long-term acute care facilities and other healthcare facilities. There can be no assurance that in a particular economic or operational environment all assets will perform equally well or that our balance sheet will be appropriately balanced. Each of our asset classes are subject to their own dynamics and their own specific operational, financial, compliance, regulatory and market risks.
A broad downturn or slowdown in the healthcare real estate sector could have a greater adverse impact on our business than if we had investments in multiple industries and could negatively impact the ability of our managers, tenants and borrowers to meet their obligations to us. A downturn or slowdown in any one of our asset classes could adversely affect the value of our properties in such asset class and our ability to sell such properties at prices or on terms acceptable or favorable to us if at all.
We are exposed to the risks inherent in investments in real estate. Real estate investments are relatively illiquid, and our ability to quickly sell or exchange our properties in response to changes in economic or other conditions is limited. If we market any of our properties for sale, the value of those properties and our ability to sell at prices or on terms acceptable to us could be adversely affected by a downturn in the real estate industry. Transfers of healthcare real estate may be subject to regulatory approvals that are not required for transfers of other types of commercial real estate. We cannot assure you that we will recognize the full value of any property that we sell, and the inability to respond quickly to changes in the performance of our investments could adversely affect our business, financial condition and results of operations.
Ownership of properties or operation of our business outside the United States may subject us to different or greater risks than those associated with our domestic operations.
We own properties and operate in the United Kingdom and Canada, which represent 1.2% and 9.5% of our total revenues, respectively. International development, ownership and operating activities involve risks that are different from those we face with respect to our U.S. properties and operations. These risks include, but are
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not limited to: (i) foreign currency fluctuations and challenges with respect to the repatriation of foreign earnings and cash; (ii) treatment of international currency gains or losses under certain tests required for us to maintain our status as a REIT; (iii) impact from international trade disputes and the associated impact on our managers’, tenants’ and borrowers’ supply chain and consumer spending levels; (iv) changes in foreign political, regulatory and economic conditions; (v) challenges in staffing and labor and managing international operations, including negotiating with foreign labor unions; (vi) challenges of complying with a wide variety of foreign laws and regulations, including those relating to real estate, corporate governance, operations, licensing, taxes, data privacy (including U.K. GDPR), cybersecurity, employment and legal proceedings; (vii) changes in regulatory and environmental requirements, taxes, tariffs, trade wars and laws; (viii) foreign ownership restrictions with respect to operations in foreign countries; (ix) local businesses and cultural factors that differ from our usual standards and practices; (x) differences in lending practices and the willingness of domestic or foreign lenders to provide financing; (xi) regional or country-specific business cycles and political and economic instability; and (xii) failure to comply with applicable laws and regulations in the United States that affect foreign operations, such as the U.S. Foreign Corrupt Practices Act.
Our operating assets in our SHOP segment may expose us to various operational risks, liabilities and claims that could adversely affect our ability to generate revenues or increase our costs and could adversely affect our business, financial condition and results of operations.
Under the REIT tax rules, the senior housing communities in our SHOP segment that are “qualified healthcare properties” generally must be operated and managed for us by third-party managers and we have limited rights to direct or influence the business or operations of those communities. A number of the non-qualified healthcare properties in our SHOP segment are also managed by third-party managers. However, in each case, we nonetheless participate directly in the financial performance of the communities’ operations and are ultimately responsible for all operational risks and other liabilities of such properties, other than those arising out of certain actions by our managers, such as gross negligence, fraud or willful misconduct. These risks include, and our financial performance is impacted by, among other things, fluctuations in occupancy levels, the inability to charge desirable resident fees (including anticipated increases in those fees), increases in the cost of food, supplies, energy, labor (as a result of labor shortages, unionization, inflation or otherwise) or other services, rent control regulations, national and regional economic conditions, the imposition of new or increased taxes, capital expenditure requirements, changes in management or equity, accounting misstatements, professional and general liability claims, litigation and regulatory actions and the availability and cost of insurance. Additionally, new or smaller third-party managers may have less experience in managing these senior housing communities and may require more oversight or attention. Any one or a combination of these factors could impact the performance of our SHOP segment, which could adversely affect our business, financial condition and results of operations. Such risks could also arise as a result of our ownership of outpatient medical and research buildings, and which could also adversely affect our business, financial condition and results of operations.
We generally hold the applicable healthcare license and enroll in applicable government healthcare programs on behalf of the properties in our SHOP segment, which subjects us to potential liability under various healthcare laws and regulations. See “—We and our managers, tenants and borrowers may be adversely affected by regulation and enforcement.”
Our inability to renew our management agreements with our SHOP managers or our leases with our NNN and OM&R tenants on as favorable terms or at all, and our inability when necessary, to effectively and efficiently transition a SHOP community to a new manager or a NNN or OM&R property to a new tenant, may have an adverse effect on our business, financial condition and results of operations.
We are party to management agreements with our SHOP managers and leases with our NNN and OM&R tenants. While our management agreements and leases may be renewed, either pursuant to prenegotiated renewal rights or through negotiation, there can be no assurance that our managers or tenants will renew with us. Even if a manager or tenant renews its agreement with us, we cannot assure you that the renewals will be on favorable terms. This risk may be exacerbated if market conditions at the time of the renewal are not as favorable
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as they were at the time the agreement was initially entered into or if the manager or tenant is subject to financial or operational difficulties.
Our management agreements and leases provide us and our managers and tenants with termination rights in certain circumstances. If our management agreements or leases are not renewed or are otherwise terminated, we may attempt to transition those properties to one or more managers or tenants or reposition those properties for an alternative use. We may not be successful in identifying suitable replacements or entering into management agreements, leases, or other arrangements with new managers or tenants on a timely basis or on terms as favorable to us as our current management agreements or leases, if at all.
During transition periods to new managers or tenants or in connection with repositioning the property, the attention of existing managers or tenants may be diverted from the performance of the properties, which could cause the financial and operational performance at those properties to decline and could increase exposure to operational and compliance risks. We may be required to fund certain expenses and obligations (such as real estate taxes, debt costs and maintenance expenses) or provide certain indemnities to preserve the value of, and avoid the imposition of liens on, our properties while they are being repositioned. In the case of our leased properties, following the termination or expiration of lease, or if we exercise our right to replace a tenant in default, rental payments on the related properties could decline or cease altogether while we attempt to reposition the properties with a suitable replacement tenant or for an alternative use. This risk could be exacerbated by laws and regulations in certain jurisdictions that limit our ability to take remedial action against defaulted tenants under certain circumstances. Our ability to transition our properties to a suitable replacement manager or tenant or reposition our properties could be significantly delayed or limited by state licensing, receivership, certificates of need, Medicaid change-of-ownership rules or other legal and regulatory requirements or restrictions. The inability to replace a manager or tenant on a timely or successful basis could have an adverse effect on our business, financial condition and results of operations.
The hospitals on or near the campuses where our outpatient medical buildings are located and their affiliated health systems may not remain competitive or financially viable.
Our outpatient medical buildings and other properties that serve the healthcare industry depend on the competitiveness and financial viability of the hospitals on or near the campuses where our properties are located or that our properties are otherwise affiliated with, and their ability to attract physicians and other healthcare-related clients to our properties. The viability of these hospitals, in turn, depends on the quality and mix of healthcare services provided, successful competition for patients, physicians and physician groups, positive demographic trends in the surrounding community, positive macroeconomic conditions, superior market position and growth potential as well as the ability of the affiliated health systems to provide economies of scale and access to capital. If a hospital on or near the campus where one of our properties is located fails or becomes unable to meet its financial obligations, and if an affiliated health system is unable to support that hospital, that hospital may be unable to compete successfully. That could adversely impact the hospital’s ability to attract physicians and other healthcare-related clients, and, in some cases, the hospital might even close or relocate. We rely on proximity to and affiliations with hospitals to create leasing demand in our outpatient medical buildings and similar properties. If a hospital moves, closes, doesn’t remain competitive or financially viable or can’t attract physicians and physician groups, our properties and our business, financial condition and results of operations could be adversely affected.
Our research tenants face unique levels of expense and uncertainty.
Our research tenants develop and sell products and services in an industry that is characterized by rapid and significant changes, evolving industry standards, significant research and development risk, in some cases, and uncertainty over the implementation of new healthcare reform or medical device legislation. These tenants, particularly those involved in developing and marketing pharmaceutical or other life science products, require significant outlays of funds for the research and development, clinical testing, manufacture and commercialization of their products and technologies, as well as to fund their other obligations, including rent
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payments to us. Our tenants’ ability to raise capital depends on the timely success of their research and development activities, viability of their products and technologies, their financial and operating condition and outlook and the overall financial, economic and legal and regulatory environment. If private investors, the federal government, universities, public markets or other sources of funding are unwilling or unable to fund these tenants because of general economic conditions, adverse market conditions or otherwise, a tenant may not be able to pay rent or meet its other obligations to us and its business may fail. The financing market and availability of government funding for research companies has been and may continue to be volatile, which may contribute to these risks. See also “—Changes in the U.S. political and regulatory environment could affect availability of government funding that we or our managers, tenants or borrowers rely on, which could negatively impact our business.”
The research and development, clinical testing, manufacture and marketing of some of our tenants’ products require federal, state and foreign regulatory approvals. The approval process is typically long, expensive and uncertain. Even if our tenants have sufficient funds to seek approvals, one or all of their products may fail to obtain the required regulatory approvals on a timely basis or at all. Our tenants may only have a small number of products under development. If one product fails to receive the required approvals at any stage of development, it could significantly and adversely affect the tenant’s entire business. Our tenants may be unable to manufacture their products successfully or economically, may be unable to adapt to rapid technological advances in their industry, may be unable to adequately obtain, maintain, enforce, defend, protect or commercialize their intellectual property, may face competition from new products or may not receive acceptance of their products. If our research tenants’ business deteriorates for these or any other reasons, they may be unable to make payments or meet their other obligations to us.
We cannot assure you that any of our research tenants will be successful in their businesses. Any tenant that is unable to avoid, or sufficiently mitigate, the risks described above may have difficulty making payments or satisfying its other obligations to us, which in turn could adversely affect our business, financial condition and results of operations.
If a borrower defaults, we may be unable to obtain payment, successfully foreclose on collateral or realize the value of any collateral, which could adversely affect our ability to recover our investment.
We hold secured loans that are primarily collateralized by a mortgage, leasehold mortgage and/or an assignment or pledge of equity interests in entities that primarily own real estate. We also hold other loans that are generally corporate loans and are unsecured or secured primarily by non-real estate collateral. If a borrower under one of our loans defaults, we may attempt to obtain payment in full or foreclose on the collateral securing the loan, including by acquiring any pledged equity interests or acquiring title to the subject properties, to protect our investment. The defaulting borrower may not be able to repay us even if we are legally entitled to full repayment of the debt. The defaulting borrower may contest our enforcement of foreclosure or other available remedies, seek bankruptcy protection against our exercise of enforcement or other available remedies or bring claims against us for lender liability. Any such delay or limit on our ability to pursue our rights or remedies could adversely affect our business, financial condition and results of operations. See also “—We face potential adverse consequences from the bankruptcy or insolvency of our managers, tenants, borrowers and other obligors.”
Although our loan agreements give us the right to exercise, under certain circumstances, certain remedies in the event of a default on the obligations owing to us, we may decide not to exercise those remedies for one or more reasons. For example, we may not exercise remedies (or be successful in exercising remedies) if the terms are not enforceable, if the terms are too costly to enforce or if we believe that enforcement of our rights would be more detrimental to our business than seeking alternative approaches. We may also decide not to enforce other contractual protections, such as annual rent escalators, or the properties may not generate sufficient revenue to achieve the specified rent escalation parameters.
Even if we successfully foreclose on any collateral securing our loans, costs related to enforcement of our remedies, high loan-to-value ratios or declines in the value of the collateral could prevent us from realizing the
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full amount of our investment and we could be required to record a reserve or valuation allowance with respect to such loans. The collateral securing our loans may include equity interests in an entity with unexpected liabilities that limits the value of those equity interests, or the equity interests may be subject to securities law restrictions that limit our ability to sell those interests in a timely manner, if at all. Our loans may have other limiting characteristics that result in us not having full recourse to the collateral securing those obligations or may limit our flexibility if we foreclose on the collateral. In connection with any foreclosure on any loan, we may be required to assume, replace or otherwise incur indebtedness, which may have an adverse effect on our financial condition. We may be unable to reposition any real property included in acquired collateral on a timely basis, if at all, or without making significant improvements or repairs. Any delay or costs incurred in selling or repositioning acquired collateral could adversely affect our ability to recover the full amount of our investment.
Our ongoing strategy depends, in part, upon identifying and consummating future acquisitions and investments and effectively managing our external growth opportunities.
Our ongoing strategy depends, in part, upon identifying and consummating future acquisitions and investments and effectively managing our expansion opportunities. Our ability to execute this strategy successfully is affected by many factors, including the significant competition we face for acquisition, investment, development and redevelopment opportunities, the availability of suitable opportunities, our relationships with current and prospective clients and partners, our ability to obtain debt and equity capital at costs comparable to or better than our competitors and lower than the yield we earn on our acquisitions or investments and our ability to negotiate favorable terms with counterparties, including buyers and sellers of assets. We compete for these opportunities with a broad variety of potential investors, including other healthcare REITs, real estate partnerships, healthcare providers, healthcare lenders and other investors, including developers, banks, insurance companies, pension funds, government-sponsored entities and private equity firms, some of whom may have advantages compared to us, including greater financial resources and lower costs of capital. See “Business—Competition” included in Part I, Item 1 of this Annual Report. If we are unsuccessful at identifying and capitalizing on investment, acquisition, development and redevelopment opportunities and otherwise expanding and diversifying our portfolio, our growth and profitability may be adversely affected.
When expanding into areas that are new to us, we face numerous risks and uncertainties, including risks associated with (i) the required investment of capital and other resources; (ii) the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk; (iii) the diversion of management’s attention from our other businesses; (iv) the increasing demands on or issues related to operational and management systems and controls; (v) compliance with additional legal or regulatory requirements with which we are not familiar; and (vi) the broadening of our geographic footprint, including the risks associated with conducting operations in non-U.S. jurisdictions. Any new strategies, markets or businesses that we enter into may not be successful or meet our expectations, or we may be unable to effectively monitor or manage our portfolio of properties as it expands. Failure to meet any of these objectives could adversely affect our business, financial condition and results of operations.
Our investments and acquisitions may be unsuccessful or fail to meet our expectations.
We have made, and expect to continue making, significant acquisitions and investments as part of our overall business strategy. Investing in and acquiring healthcare real estate entails risks associated with real estate investments generally, including the risk that the investment will not achieve expected returns, that the cost estimates for necessary property improvements will prove inaccurate or that a manager, tenant or borrower will fail to meet performance expectations or their obligations to us. We also make acquisitions and investments outside the United States, which raises legal, economic and market risks associated with doing business in foreign countries, such as currency exchange fluctuations and foreign tax risks. See also “—Ownership of properties or operation of our business outside the United States may subject us to different or greater risks than those associated with our domestic operations.”
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Our real estate development and redevelopment projects present additional risks, including the risk of construction delays or cost overruns that increase expenses, the inability to obtain required zoning, occupancy and other governmental approvals and permits on a timely basis and the incurrence of significant costs prior to completion of the project. Healthcare real estate properties are often highly customized, and the development or redevelopment of such properties may require costly tenant-specific or market-driven improvements.
Other risks that our significant acquisition and investment activity, including our developments and redevelopments, presents include that:
•We may be unable to successfully integrate the operations, personnel or systems of acquired companies, maintain consistent standards, controls, policies and procedures, retain key personnel or companies we acquire or realize the anticipated benefits of acquisitions and other investments within the anticipated time frame if at all;
•Our underwriting assumptions, including projections of estimated future revenues and expenses and anticipated synergies and other costs savings, and other financial and operating metrics that we develop may be inaccurate, in which case we may not be able to realize the expected benefits of the acquisition, investment, development or redevelopment;
•Our leverage could increase or our per share financial results could decline if we incur additional debt or issue equity securities to finance acquisitions and investments;
•Acquisitions and investments could divert management’s attention from our existing assets;
•The value of the assets we acquire or invest in may decline or we may not realize the expected return on the developments or redevelopments we undertake;
•If our acquisitions, investments, developments and redevelopments are not successful, the market price of our common stock may decline; and
•Acquisitions may expose us to unknown liabilities. See also “—Our investments may expose us to unknown liabilities.”
We cannot assure you that our acquisitions, investments, developments and redevelopments will be successful or meet our expectations, which could adversely affect our business, financial condition and results of operations. See also “—Our ongoing strategy depends, in part, upon identifying and consummating future acquisitions and investments and effectively managing our external growth opportunities.”
Our investments in co-investment vehicles, joint ventures and minority interests may subject us to risks that we would not otherwise face.
We have and may continue to develop and acquire properties in co-investment vehicles or joint ventures with other persons or entities when circumstances warrant the use of these structures. In 2020, we formed Ventas Investment Management(“VIM”) to combine our private capital management capabilities for certain assets under a single platform. We also own minority investments in properties and unconsolidated operating entities. These minority investments usually entitle us to typical rights and protections but inherently involve a lesser degree of control over business operations than if we owned a majority interest. In the future, we may enter into additional co-investments, partnerships and joint ventures, either through VIM or otherwise.
There can be no assurance that our co-investments, joint ventures, minority or other investments, which we refer to collectively below as investments and ventures, will be successful or meet our expectations. These investments and ventures involve significant risk, including, among others, the following:
•We may be unable to take actions that are opposed by our partners under arrangements that require us to share decision-making authority;
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•For investments and ventures in which we have a noncontrolling interest, our partners may take actions that we oppose;
•If our partners become bankrupt, insolvent or otherwise fail to fund their share of required capital contributions or fulfill other partner obligations, we may choose to or be required to contribute that capital;
•Our partners may seek to redeem their investment, and may do so simultaneously, causing the venture to seek capital to satisfy these requests on less than optimal terms;
•Some of our investments and ventures may incur indebtedness; in some cases, we may guarantee the payment of such indebtedness, in whole or in part; depending on credit market conditions, the refinancing or payoff of such indebtedness may require equity capital calls, which we or our partners may not be capable of funding or which may be required at inopportune times;
•We may be subject to restrictions on our ability to transfer our interest in the investment or venture, which may require us to retain our interest at a time when we would otherwise prefer to sell it;
•Our partners may have business interests or goals that compete with or conflict with our business interests and goals, including the timing, terms and strategies for any investments, and what levels of financing to incur or carry;
•Our partners may be structured differently than us for tax purposes and this could create conflicts of interest, including with respect to our compliance with the REIT requirements, and our REIT status could be jeopardized if any of our joint ventures do not operate in compliance with REIT requirements;
•Our investments or ventures or our partners may be unable to meet their financial or other obligations to us or to the investment or venture, including any obligation to provide equity to the investment or venture or indemnify us or the investment or venture for losses;
•We could experience an impasse on certain decisions where we do not have sole decision-making authority, which could require us to expend additional resources on resolving such impasses or potential disputes;
•We could become engaged in a dispute with any of our partners that could lead to the sale of either party’s ownership interest or the underlying assets;
•Disagreements with our partners could result in litigation or arbitration; and
•We may suffer other losses as a result of actions taken by our partners.
In some instances, our partners may have the right to cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction. Our ability to acquire our partner’s interest will be limited if we do not have sufficient cash, available borrowing capacity or other capital resources.This may require us to sell our interest in the investment or venture when we would otherwise prefer to retain it.
In certain circumstances, Ventas serves as managing member, general partner or controlling party with respect to investments and ventures, including within our VIM platform. In such instances, we may face additional risks including, among others, the following:
•Ventas may have increased duties to the other investors or partners in the investment or venture;
•In the event of certain events or conflicts, our partners may have recourse against Ventas, including the right to monetary penalties, the ability to force a sale or exit the investment or venture;
•Our partners may have the right to remove us as the general partner or managing member in certain cases involving cause; and
•Our subsidiaries that would be the general partner or managing member of the investment or venture could be generally liable, under applicable law or the governing agreement of a venture, for the debts and obligations of the investment or venture, subject to certain exculpation and indemnification rights pursuant to the terms of the governing agreement.
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Merger, acquisition and investment activity in our industries resulting in a change of control of, or a competitor’s investment in, one or more of our managers, tenants or borrowers could adversely affect our business, financial condition and results of operations.
The senior housing and healthcare industries have experienced, and may continue to experience, consolidation, including among owners of real estate, managers, tenants borrowers and care providers. When a change of control of a manager, tenant or borrower occurs, that manager’s, tenant’s or borrower’s strategy, financial condition, management team or real estate needs may change, any of which could adversely affect our relationship with that party and our revenues and results of operations. If any of our managers or tenants merge with one another, our dependence on a small group of significant third parties would increase. See also “—Our investments and acquisitions may be unsuccessful or fail to meet our expectations.” A competitor’s investment in one of our managers, tenants or borrowers could enable our competitor to directly or indirectly influence that manager’s, tenant’s or borrower’s business and strategy in a manner that impairs our relationship with the manager, tenant or borrower or is otherwise adverse to our interests. Depending on our contractual agreements and the specific facts and circumstances, we may not have the right to prevent a competitor’s investment in, a change of control of, or other transactions impacting a manager, tenant or borrower.
Increased construction and development in the markets in which our properties are located could adversely affect our future occupancy rates, operating margins and profitability.
If existing supply and development collectively outpaces demand in the markets in which our properties are located, those markets may become saturated and we could experience decreased occupancy, reduced operating margins and lower profitability, which could adversely affect our business, financial condition and results of operations. Depending on the jurisdiction, there are limited barriers to developing properties in our asset classes, particularly senior housing. As a result, supply and demand dynamics can change quickly. We may be unable to rebalance our portfolio in a timely manner in order to respond to changes in those dynamics.
Development, redevelopment and construction risks could affect our profitability.
We invest in various development and redevelopment projects. In deciding whether to make an investment in a project, we make certain underwriting assumptions regarding expected future performance. Our assumptions are subject to risks generally associated with development and redevelopment projects, including, among others, that:
•Tenants may not lease the amount of space projected or at the projected rental rate levels or lease on the projected schedule, including due to increased competition in the market and other market and economic conditions;
•Our underwriting assumptions and other financial and operating metrics that we develop, such as the estimated costs necessary to develop or redevelop the property, may be inaccurate, in which case we may not be able to realize the expected benefits of the project;
•We may not complete the project on schedule or within budgeted amounts;
•We may not be able to recognize rental revenue even though cash rent is being paid and the lease has commenced;
•We may encounter delays in obtaining or we may fail to obtain necessary zoning, land use, building, occupancy, environmental and other governmental permits and authorizations;
•We may be unable to obtain financing for the project on favorable terms or at all, including at the maturity of an applicable construction loan;
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•Construction or other delays may provide tenants or residents the right to terminate preconstruction leases or cause us to incur additional costs, including through rent abatement;
•Volatility in the price of construction materials or labor may increase our project costs;
•Any partners in the project may maintain significant decision-making authority with respect to the project, which lessens our control and could lead to increased costs, project delays or disputes;
•Our builders or development managers may fail to meet their obligations to us or satisfy the expectations of our tenants and partners; and
•We may incorrectly forecast risks associated with development in new geographic regions or addressing markets that are new to us, including new markets where we may not have sufficient depth of market knowledge.
We may face increased risks and costs associated with volatility in materials and labor prices or as a result of supply chain or procurement disruptions, which may adversely affect the status of our construction projects.
The price of materials and labor for our construction projects may increase due to external factors, including but not limited to performance of third-party suppliers and contractors, overall market supply and demand, elevated or increasing interest rates, government regulation and policies, including actions taken by the Federal Reserve, and changes in general business, economic or political conditions. For example, our costs and the costs of our tenants and borrowers may be impacted by rising construction costs from tariffs on imported materials and rising labor costs. As a result, the costs of construction materials and skilled labor required for the completion of our development and redevelopment projects may fluctuate significantly over time.
We rely on a number of third-party suppliers and contractors to supply materials and labor for our construction projects. We may experience difficulties obtaining necessary materials from suppliers or vendors whose supply chains might be disrupted by macroeconomic conditions or otherwise, or difficulties obtaining adequate labor from third-party contractors. If we are unable to access materials and labor to complete our construction projects within our expected budgets and meet our or our development partners’ and tenants’ demands and expectations in a timely and efficient manner, our results of operations may be adversely impacted. We may be unable to complete our development or redevelopment projects timely or within our budget, which may affect our ability to lease space to potential tenants and adversely affect our business, financial condition and results of operations.
If any of the risks described above occur, our development and redevelopment projects may not yield anticipated returns, which could adversely affect our business, financial condition and results of operations.
Damage from catastrophic or extreme weather or other natural events could result in losses to the Company.
Some of our properties are in areas particularly susceptible to revenue loss, cost increase or damage caused by catastrophic or extreme weather and other natural events, including fires, snow, rain or ice storms, windstorms, tornadoes, hurricanes, earthquakes, flooding and other severe weather. These adverse weather and natural events could cause substantial damages or losses to our properties that could exceed our or our managers’, tenants’ or borrowers’ property insurance coverage. Any of these events could cause a major power outage, leading to a disruption of our systems and operations.
If we incur a loss from these kinds of events greater than insured limits, or if for any reason insurance coverage is unavailable, we could lose our capital invested in the affected property, as well as anticipated future revenue from that property. Any such loss could materially and adversely affect our business, financial condition and results of operations. The occurrence of these kinds of events or the increase in their frequency and/or
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likelihood (as well as other factors) may increase the cost of property insurance on terms we find acceptable or make such insurance unavailable. See also “—The amount and scope of insurance coverage provided by our policies and policies maintained by our managers, tenants or other counterparties may not adequately insure against losses.”
We may be unable to sell certain properties on a timely basis or on favorable terms, which may have an adverse effect on our business, financial condition and results of operations.
From time to time, we may elect to sell certain of our properties, either because their financial performance or prospects has declined or for other reasons. We may not be successful in identifying suitable buyers or entering into sale agreements with buyers on a timely basis or on favorable terms, if at all. While we are attempting to sell a property, the performance of that property may decline. We may also be required to fund some expenses and obligations (such as real estate taxes, debt costs and maintenance expenses) to preserve the value of, and avoid the imposition of liens on, our properties while they are being sold. If we are unable to sell our properties on a timely basis or on favorable terms, our business, financial condition and operating results could be adversely affected.
Some of our properties are subject to purchase options, rights of first offer, rights of first refusal or similar rights in favor of third parties. Purchase options for our properties may give a third party the right to purchase the property at fair market value, at a price set based on our investment in the property, or at fixed prices as of certain dates. The proceeds we receive as a result of the exercise of a purchase option may be less than the price we paid for the property, and we may not be able to re-invest the proceeds on favorable terms or at all. In addition, purchase options could force us to sell a property when we would otherwise prefer to hold such property. Purchase options, rights of first offer or rights of first refusal that encumber our properties could discourage prospective buyers from negotiating with us and may prevent us from receiving the maximum price that we may otherwise have obtained.
We own properties that are subject to ground lease, air rights or other restrictive agreements that limit our uses of the properties, restrict our ability to sell or otherwise transfer the properties and expose us to loss of the properties if such agreements are breached by us or terminated.
Our investments in outpatient medical buildings and research buildings and facilities as well as other properties may be made through leasehold interests in the land on which the buildings are located, leases of air rights for the space above the land on which the buildings are located, or other similar restrictive arrangements. Many of these ground lease, air rights and other restrictive agreements impose significant limitations on our uses of the subject properties, restrict our ability to sell or otherwise transfer our interests in the properties or restrict the leasing of the properties. These restrictions may limit our ability to timely sell or exchange the properties, impair the properties’ value or negatively impact our ability to find suitable tenants for the properties. We could lose our interests in the subject properties if the ground lease, air rights or other restrictive agreements are breached by us, are terminated or expire. In addition, we could be forced to renegotiate such ground leases upon their expiration on terms that are unfavorable to us.