10-12G/A 1 form10-12ga.htm

As filed with the Securities and Exchange Commission on July 12, 2022

File No. 000-56451

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

Amendment No. 1

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

STRAWBERRY FIELDS REIT, INC.

(Exact name of registrant as specified in its charter)

Maryland		84-2336054
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6101 Nimtz Parkway South Bend, IN		466281
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(574) 807-0800

With Copy to:

Alfred G. Smith, Esq.

Shutts & Bowen LLP

200 South Biscayne Boulevard

Suite 4100

Miami, FL 33131

Telephone: (305) 379-9147

Securities to be registered pursuant to Section 12(b) of the Act:

Title of each class to be so registered		Name of each exchange on which each class is to be registered
None		Not applicable

Securities to be registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.0001 per share

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 7(a)(2)(B) of the Securities Act. ☐

Table of Contents

Cautionary Note Regarding Forward-Looking Statements	3

Item 1. Business	6

Item 1a. Risk Factors	57

Item 2. Financial Information	93

Item 3. Properties	124

Item 4. Security Ownership of Certain Beneficial Owners and Management	124

Item 5. Directors and Executive Officers	126

Item 6. Executive Compensation	131

Item 7. Certain Relationships and Related Transactions, and Director Independence	135

Item 8. Legal Proceedings	145

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters	146

Item 10. Recent Sales of Unregistered Securities	149

Item 11. Description of Registrant’s Securities to be Registered	150

Item 12. Indemnification of Directors and Officers	164

Item 13. Financial Statements and Supplementary Data	165

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	165

Item 15. Financial Statements and Exhibits	165

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10 are “forward-looking statements” within the meaning of the U.S. federal securities laws. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. This Form 10 also contains forward-looking statements by third parties relating to market and industry data and forecasts; forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements contained in this Form 10. These forward-looking statements include information about possible or assumed future events, including, among other things, discussion and analysis of our future financial condition, results of operations, FFO, our strategic plans and objectives, cost management, potential property acquisitions, anticipated capital expenditures (and access to capital), amounts of anticipated cash distributions to our stockholders in the future and other matters. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of these words and other similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. Readers are cautioned to not place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to:

● risks and uncertainties related to the national, state and local economies, particularly the economies of Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas, and the real estate and healthcare industries in general;

● availability and terms of capital and financing;

● the impact of existing and future healthcare reform legislation on our tenants, borrowers and guarantors;

● adverse trends in the healthcare industry, including, but not limited to, changes relating to reimbursements available to our tenants by government or private payors;

● competition in long-term healthcare industry and shifts in the perception of various types of long-term care facilities, including skilled nursing facilities;

● the impact of COVID-19 on our business and the business of our tenants and operators, including without limitation, the extent and duration of the COVID-19 pandemic, increased costs and decreased occupancy levels experienced by operators of skilled nursing facilities, and the extent to which continued government support may be available to operators to offset such costs and the conditions related thereto;

● our tenants’ ability to make rent payments;

● our dependence upon key personnel whose continued service is not guaranteed;

● availability of appropriate acquisition opportunities and the failure to integrate successfully;

● ability to source target-marketed deal flow;

● ability to dispose of assets held for sale for the anticipated proceeds or on a timely basis, or to deploy the proceeds therefrom on favorable terms;

● fluctuations in mortgage and interest rates;

● changes in the ratings of our debt securities;

● risks and uncertainties associated with property ownership and development;

● the potential need to fund improvements or other capital expenditures out of operating cash flow;

● potential liability for uninsured losses and environmental liabilities;

● the outcome of pending or future legal proceedings;

● changes in tax laws and regulations affecting REITs;

● our ability to maintain our qualification as a REIT; and

● the effect of other factors affecting our business or the businesses of our operators that are beyond our or their control, including natural disasters, other health crises or pandemics and governmental action; particularly in the healthcare industry.

This list of risks and uncertainties, however, is only a summary of some of the most important factors and is not intended to be exhaustive. New risks and uncertainties may also emerge from time to time that could materially and adversely affect us.

GLOSSARY OF CERTAIN TERMS

The following is a glossary of certain terms used in this Form 10:

“ADA” means the Americans with Disabilities Act of 1990, as amended.

“ALF” means assisted living facility.

“Affordable Care Act” means the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.

“BVI Company” means Strawberry Fields REIT, Ltd., a company organized under the laws of the British Virgin Islands. Upon the consummation of the formation transactions, the BVI Company became a wholly-owned subsidiary of the Operating Partnership.

“CAGR” means compound annual growth rate.

“Capitalization rate” means the ratio of a property’s operating income to its purchase price.

“CMS” means the Centers for Medicare and Medicaid Services, which administers Medicare, Medicaid and the State Children’s Health Insurance Program.

“Company” means Strawberry Fields REIT, Inc., a Maryland corporation.

“Controlling Members of the Predecessor Company” or “Controlling Members” means Moishe Gubin, Michael Blisko and Ted Lerman, members of the Predecessor Company controlled by any of them and their affiliates.

“Dollars” or “$” means United States dollars.

“EBITDA” means earnings before interest, taxes, depreciation and amortization.

“EBITDAR” means earnings before interest, taxes, depreciation, amortization and rent.

“EBITDARM” means earnings before interest, taxes, depreciation, amortization, rent and management fees.

“GLA” or “gross leasable area” or means the area in any building that may be leased to tenants.

“HHS” means the U.S. Department of Health and Human Services.

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.

“HITECH Act” means the Health Information Technology for Economic and Clinical Health Act.

“HUD” means the U.S. Department of Housing and Urban Development, the government department for housing and urban development.

“long-term acute care hospital” or “LTACH” means medical institutions in which patients requiring prolonged hospitalization (but who are stable) are given medical care and rehabilitation for several weeks. The operation of these institutions is subject to receipt of a suitable license.

“NIS” means New Israeli Shekels.

“Operating Partnership” means Strawberry Fields Realty LP, a Delaware limited partnership.

“OP units” means the units of limited partnership interests in the Operating Partnership.

“Predecessor Company” means Strawberry Fields REIT, LLC, an Indiana limited liability company. Prior to the consummation of the formation transactions, the Predecessor Company was the indirect owner of 73 of our properties.

“SFMS” means Strawberry Fields Management Services, LLC. Upon the consummation of the formation transactions, SFMS became a wholly-owned subsidiary of the Operating Partnership.

“SNF” means a skilled nursing facility.

“Series A Bonds” means the Series A Bonds issued by the BVI Company, which were first offered to the public in Israel in 2015. The net outstanding principal balance of the Series A Bonds on March 31, 2022, was approximately $33.6 million.

“Series B Bonds” means the Series B Bonds issued by the BVI Company, which were first offered to the public in Israel in 2018. The outstanding principal balance of the Series B Bonds on December 31, 2021, was approximately $93.7 million. The Series B Bonds were repaid in full on March 31, 2022.

“Series C Bonds” means the Series C Bonds issued by the BVI Company, which were first offered to the public in Israel on July 28, 2021. As of March 31, 2022, the Series C Bonds had an outstanding principal balance of approximately $65.5 million.

“TASE” means the Tel Aviv Stock Exchange Ltd.

“TRS” means taxable REIT subsidiary.

ITEM 1. BUSINESS

References in this Form 10 to “we,” “our,” “us” and “the Company” refer to Strawberry Fields REIT, Inc., a Maryland corporation, together with its consolidated subsidiaries, including Strawberry Fields Realty LP, a Delaware limited partnership, which we refer to in this Form 10 as our Operating Partnership. We are the sole general partner of our Operating Partnership. The historical operations described in this Form 10 that occurred prior to June 8, 2021, refer to the historical operations of the businesses and assets of Strawberry Fields REIT, LLC, an Indiana limited liability company and our accounting predecessor (which we refer to in this Form 10 as the Predecessor Company). On June 8, 2021, the Predecessor Company contributed all of its assets to the Operating Partnership, and the Operating Partnership assumed all of the liabilities of the Predecessor Company, in connection with the consummation of the formation transactions described in this Form 10 under the caption “Structure and Formation of Our Company.”.

Introduction

We are a self-managed and self-administered company that specializes in the acquisition, ownership and triple-net leasing of skilled nursing facilities and other post-acute healthcare properties. As of the date of this Form 10, our portfolio consisted of 79 healthcare properties with an aggregate of 10,426 licensed beds. We hold fee title to 78 of these properties, and hold one property under a long-term lease. These properties are located across Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. Our 79 properties comprise 85 healthcare facilities, consisting of the following:

	●	74 stand-alone skilled nursing facilities;

	●	four dual-purpose facilities used as both skilled nursing facilities and long-term acute care hospitals; and

	●	three assisted living facilities.

We generate substantially all of our revenues by leasing our properties to tenants under long-term leases on a triple-net basis, under which the tenant pays the cost of real estate taxes, insurance and other operating costs of the facility and capital expenditures. Each healthcare facility located at our properties is managed by a qualified operator with an experienced management team.

We are entitled to monthly rent paid by the tenants and we do not receive any income or bear any expenses from the operation of such facilities. As of the date of this Form 10, the aggregate annualized average base rent under the leases for our properties was approximately $82.7 million.

Since the Predecessor Company was formed, we have demonstrated consistent growth through acquisitions, having purchased 28 properties since January 2017, with an aggregate purchase price of approximately $198.1 million. Since 2017, our aggregate annualized average base rent has grown at an approximate 11.1% CAGR from $57.1 million in fiscal year 2017 to $86.9 million in fiscal year 2021. In addition, our Adjusted EBITDA and FFO from 2018 to 2021 grew at an approximate 8.3% and 18.8% CAGR, respectfully. During that period, we expanded our geographic footprint from six states to nine states.

Our management team has extensive experience in acquiring, owning, financing, operating and leasing of skilled nursing facilities and other types of healthcare properties. The team is led by Moishe Gubin, our Chief Executive Officer and Chairman of our Board of Directors, Nahman Eingal, our Chief Financial Officer, and Jefferey Bajtner who serves as our Senior Investment Officer. Combined, this team has over 50 years of experience investing in real estate and particularly in healthcare related real estate and operating companies. They have completed over 80 real estate related/healthcare related acquisitions totaling over $700 million in gross investment through various investment vehicles. Our management team also has extensive experience as operators of, and healthcare consultants to, skilled nursing facilities, having managed and operated over 60 skilled nursing facilities, including 41 of our current tenants. We believe our management team’s unique experience across both skilled nursing operations and real estate and its extensive knowledge of the skilled nursing industry position us favorably to take advantage of healthcare investment opportunities. Additionally, our deep and broad relationships with industry operators-have allowed us to identify and acquire skilled nursing facilities to which many of our competitors do not have access.

We have assembled a high quality and diversified portfolio of skilled nursing and other healthcare related facilities and we plan to continue to invest primarily in skilled nursing facilities and other healthcare facilities that primarily provide services to the elderly. We believe these asset classes provide potential for higher risk-adjusted returns compared to other forms of net-leased real estate assets due to the specialized expertise necessary to acquire, own, finance and operate these properties, which are factors that tend to limit competition among investors, owners, operators and finance companies. Additionally, our management team’s strong relationships in the industry have allowed us to acquire healthcare-related properties at valuations that achieve attractive lease yields, with the goal of generating strong returns for our stockholders over the long-term. As we continue to acquire additional properties and expand our portfolio, we expect to continue diversifying our portfolio by geography and by tenant, while also maintaining balance sheet strength and liquidity.

We intend to elect to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2022. We are organized in an UPREIT structure in which we own substantially all of our assets and conduct substantially all of our business through the Operating Partnership. We are the general partner of the Operating Partnership and own approximately 11.4% of the outstanding OP units.

Structure And Formation of Our Company

Our Operating Entities

Our Company

We were formed as a Maryland corporation on July 8, 2019 and commenced operations on June 8, 2021, following the completion of the formation transactions. We conduct our business through a traditional UPREIT structure in which our properties are owned by our Operating Partnership directly or through limited liability companies, limited partnerships or other subsidiaries, as described below under “—Our Operating Partnership.” We are the sole general partner of our Operating Partnership and we own approximately 11.4% of the outstanding OP units as of the date of this Form 10. Our board of directors oversee our business and affairs.

Our Operating Partnership

Our Operating Partnership was formed as a Delaware limited partnership on July 9, 2019 and commenced operations on June 8, 2021, following the completion of the formation transactions. Substantially all of our assets are held by, and our operations is being conducted through, our Operating Partnership. As the sole general partner of our Operating Partnership, we generally have the exclusive power under the partnership agreement to manage and conduct its business and affairs, subject to certain limited approval and voting rights of the limited partners, which are described more fully below in “Description of the Partnership Agreement of Strawberry Fields Realty LP.” In the future, we may issue additional OP units or preferred OP units of limited partnership interest in our Operating Partnership, or preferred OP units, from time to time in connection with property acquisitions, compensation or otherwise.

Our Ownership Structure

The following diagram depicts our current ownership structure.

Formation Transactions

On June 8, 2021, pursuant to a contribution agreement among the Company, the Predecessor Company and the Operating Partnership, the Predecessor Company contributed all of its assets to the Operating Partnership, and the Operating Partnership assumed all of its liabilities. In exchange, our Operating Partnership issued an aggregate of 51,686,280 OP units to the Predecessor Company. The Predecessor Company distributed these OP units to its members, and certain of these members transferred their OP units to their beneficial owners and other transferees. We subsequently exchanged 5,824,846 of these OP units for 5,824,846 shares of our common stock.

The assets that were contributed to the Operating Partnership by the Predecessor Company included all of the shares of the BVI Company, all of the membership interests in three property-owning limited liability companies owned directly by the Predecessor Company and all of the membership interests in SFMS. The BVI Company continues to own, through wholly-owned subsidiaries, all of our 78 properties and to hold, through a wholly-owned subsidiary, one lease for an additional property.

The contribution agreement was not negotiated on an arms’ length basis and may not be as favorable to us as an agreement negotiated on an arms’ length basis. We did not obtain independent third-party appraisals of the assets owned by the Predecessor Company for purposes of the formation transactions nor any independent third-party valuation or fairness opinion. Accordingly, the value of the OP units that we issued as consideration for the assets of the Predecessor Company in the formation transactions may have exceeded their aggregate fair market value.

In connection with the formation transactions, the Company also issued 19,320 shares of the Company’s common stock to the employees of the Company and its affiliates.

As a result of the completion of the formation transactions and the other transactions described above, we became the owner of approximately 11.3% of the outstanding OP units, which increased to 11.4% of the OP units following the issuance of additional OP units in connection with the Operating Partnership’s acquisition of additional properties in Tennessee and Kentucky in August 2021, and the exchange of OP Units for shares of our common stock in May 2022. See “Item 2. Financial Information - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Acquisitions.”

In connection with the formation transactions, we also entered into a tax protection agreement with the Predecessor Company, pursuant to which we agreed to indemnify Predecessor Company, its members and their beneficial owners (the “protected parties”) against certain potential adverse tax consequences to them, which may affect the way in which we conduct our business in the future, including with respect to when and under what circumstances we sell certain properties or interests therein or repay debt. The potential adverse tax consequences against which we will indemnify the protected parties include future gain with respect to any negative capital account balances that exist after formation or that are “built-in” gain relating to assets that the protected parties are deemed to contribute to the Company. It is anticipated that the total amount of taxable built-in gain on the protected contributed properties and other assets will be approximately $394.8 million. Such indemnification obligations could result in aggregate payments of up to $165.2 million.

The provisions of the tax protection agreement originally obligated us to offer the protected parties the opportunity to guarantee debt, or, alternatively, to enter into a deficit restoration obligation, in a manner intended to provide an allocation of Operating Partnership liabilities to the partner for federal income tax purposes. In March 2022, the protected parties waived their rights under these provisions.

The amount of tax is calculated without regard to any deductions, losses or credits that may be available. See “Item 1. Business - Structure and Formation of Our Company—Tax Protection Agreement.”

Tax Protection Agreement

Under the Code, taxable gain recognized upon a sale of an asset contributed to a partnership must be allocated to the contributing partner, or original contributor, in a manner that takes into account the variation between the tax basis and the fair market value of the asset at the time of the contribution. This requirement may result in a significant allocation of taxable gain to the original contributor without an increased cash distribution. In addition, when a partner contributes an asset subject to a liability to a partnership, any reduction in the partner’s share of partnership liabilities that exceeds the partner’s adjusted tax basis in the partnership would result in taxable gain to the partner.

We entered into a tax protection agreement that provides benefits to the Predecessor Company, its members and their beneficial owners (the “protected parties”). See “Item. 7. Certain Relationships and Related Transactions—Tax Protection Agreement.” This agreement is intended to protect the protected party against the tax consequences described above. If we dispose of any interest in the protected properties in a taxable transaction prior to the tenth anniversary of the completion of the formation transactions, then we will indemnify the protected parties for their tax liabilities attributable to the built-in gain that exists with respect to such properties as of the time of the formation transactions and the tax liabilities incurred as a result of such tax protection payment. Pursuant to the tax protection agreement, it is anticipated that the total amount of protected built-in gain on the protected properties and other assets will be approximately $394.8 million. Such indemnification obligations could result in aggregate payments of up to $165.2 million. The amount of tax is calculated without regard to any deductions, losses or credits that may be available. With respect to each of the protected properties, the tax indemnities described above will not apply to a disposition of a protected property if such disposition constitutes a “like-kind exchange” under section 1031 of the Code, an involuntary conversion under section 1033 of the Code, or another transaction (including, but not limited to, (i) a contribution of property that qualifies for the non-recognition of gain under sections 721 or 351 of the Code or (ii) a merger or consolidation of our Operating Partnership with or into another entity that qualifies for taxation as a partnership for federal income tax purposes) if such transaction does not result in the recognition of taxable income or gain to a contributor with respect to its OP units. In the case of the exception discussed in the preceding sentence, the tax protection then would apply to the replacement property (or the partnership interest) received in the transaction, to the extent that the sale or other disposition of that replacement asset would result in the recognition of any of the built-in gain that existed for that property at the time of our formation transactions.

Industry Overview

We specialize in the acquisition of income-producing healthcare-related facilities, primarily focusing on skilled nursing facilities located in the United States. According to the National Health Expenditure Projections for 2019-2028 published by the Centers for Medicare & Medicaid Services (“CMS”), Office of the Actuary, nursing home expenditures are projected to grow from approximately $175 billion in 2019 to approximately $266 billion in 2028, which represents a CAGR of approximately 5% for this period. The industry has continued to evolve to meet the growing demand for post-acute and custodial healthcare services and will continue to increase in spending based on some of the following trends:

Aging Population. According to the U.S. Census Bureau, the number of Americans aged 65 or older is one of the fastest growing segments of the U.S. population and is projected to increase from approximately 55 million in 2020 to 72 million in 2030, which reflects a CAGR of approximately 2.7%. At the same time, the number of American aged 85 or older is projected to increase from approximately 6.6 million in 2020 to 8.7 million in 2030, which reflects a CAGR of approximately 2.8%.

Shift of Patient Care Settings to Lower Cost Alternatives. Cost containment measures adopted by the federal government encourage patient treatment in more cost-effective settings, such as SNFs. As a result, higher acuity patients that would have previously been treated in a long-term acute care hospital and/or in an inpatient rehabilitation facility are now increasingly being treated in lower cost settings such as SNFs.

Favorable Supply and Demand Industry Dynamics. The number of SNFs has declined modestly over the past several years. There were approximately 15,000 SNFs in the United States in 2019, according to MedPAC, compared with approximately 16,900 facilities in 2000, according to the Centers for Disease Control and Prevention. We expect that the potential profitability of the SNF industry will improve due to lack of growth in the supply of SNFs and an increase in demand for such facilities due to growing number of individuals over age 65.

Barriers to Entry. In some states, owners and operators of existing SNFs have the benefit of certificate of need, or CON, laws. These laws are state regulatory mechanisms for establishing or expanding health care facilities and services in a given area. In a state with a CON program, a state health planning agency must approve major capital expenditures for certain health care facilities. CON programs aim to control health care costs by restricting duplicative services and determining whether new capital expenditures meet a community need. We believe these laws create barriers to entry for new operators in CON states and limit competition for existing owners and operators. Eight of the nine states in which we own properties require a CON.

Our Portfolio

As of the date of this Form 10, we owned and leased a geographically diverse portfolio of 79 healthcare properties in nine states, with an aggregate of 10,426 licensed beds. Of these 79 properties, 74 are skilled nursing facilities, four are dual-purpose facilities used as both skilled nursing facilities and long-term acute care hospitals, and three are assisted living facilities.

The following table contains information regarding our owned and leased healthcare facility portfolio by facility type, as of the date of this Form 10.

Summary of Our Facilities
Facility Type	Number of Facilities⁽¹⁾		Licensed Bed Count		Annualized Average Base Rent^(2)(3)(4)		% of Total Annualized Base Rent
					(Amounts in $000s)
Skilled Nursing Facilities		78		10,174	$	80,791		97.7	%
Long-Term Acute Care Hospitals (5)		4		153		1,240		1.5	%
Assisted Living Facilities		3		99		710		0.8	%
Total		85		10,426	$	82,441		100.0	%

(1) Number of facilities does not equate to the number of properties because four properties include more than one type of facility.

(2) Annualized average base rent does not represent historical rental amounts. Rather, annualized average base rent represents the average annual base rent for the expected life of the lease, except as otherwise noted. Base rent does not include tenant recoveries, additional rents or other related adjustments, but does include contractual annual rent escalation and averages the base rent over the life of the lease. For additional information on the expiration of these leases, see “Item 1. Business — Lease Expirations.”

(3) On April 4, 2022, we were notified that the tenants under the master leases for 6 facilities located in central Illinois intended to default with respect to their lease agreements due to operating losses. The tenants indicated that their operating losses were partially due to decreased occupancy caused by COVID-19. The tenants are affiliates of Steven Blisko, who is the brother of Michael Blisko, one of our directors. These leases provided for a combined rent of $225,000 per month, or $2.7 million per year. All payments due under these leases were paid through mid-June 2022. On July 1, 2022, the Company entered into new lease agreements with an unaffiliated third party operator to lease these properties. The new leases have terms of 10 years each and provide for combined average base rent of $180,000 per month, or $2.3 million per year over the life of the leases. The Company expects to recognize a loss of approximately $1,080,000 in the second quarter of 2022 due to the write-off of straight-line rent receivable related to the former leases.

(4) There are no material differences between the annualized average base rent for the properties leased to related parties and the properties leased to unaffiliated third parties. In most cases, the base rent is equal to ten percent of the purchase price of the property, subject to adjustments based on changes in the consumer price index.

(5) As of the date of this Form 10, two of the Long-Term Acute Care Hospitals were vacant. We are actively seeking tenants for these facilities. Annualized Average Base Rent does not include any rent for these facilities.

Property Types

Skilled Nursing Facilities. Skilled nursing facilities, or SNFs, provide services that include daily nursing, therapeutic rehabilitation, social services, housekeeping, nutrition and administrative services for individuals and patients requiring certain assistance for daily living activities. A typical SNF includes mostly one or two bed units, each equipped with a private or shared bathroom and community dining halls.

Long-Term Acute Care Hospitals. Long-term acute care hospitals, or LTACHs, provide a range of services and treatments for acute care domains such as emergency care; urgent care; short-term stabilization; trauma care and acute care surgery; critical care; and prehospital care. The acute service domains mentioned are for individuals and patients with acute life- or limb- threatening medical surgical needs, ambulatory care needs, acute needs before delivery of definitive treatment, community care needs until patient transfer, life-threatening conditions requiring comprehensive care and constant monitoring, and life-threatening injuries requiring acute surgical attention.

Assisted Living Facilities. Assisted living facilities, or ALFs, provide services that include minimal nursing assistance, housekeeping, nutrition, laundry and administrative services for individuals and patients requiring minimal assistance for daily living activities. ALFs enable residents to maintain some of their privacy and independence as they do not require constant supervision and assistance. ALFs are typically comprised of one and two bedroom suites equipped with private bathrooms and efficiency kitchens. Services bundled within one regular monthly fee usually include three meals per day in a central dining room, daily housekeeping, laundry, medical reminders and 24-hour availability of assistance with the activities of daily living, such as eating, dressing and bathing. Professional nursing and healthcare services are available at the facility on-call or at scheduled times.

Geographic Diversification

As of the date of this Form 10, our portfolio of 79 properties is broadly diversified by geographic location across nine U.S. states, comprising Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas.

The following table contains information regarding our healthcare facility portfolio by geography, as of the date of this Form 10:

State	Number of Properties	Facility Type	Licensed Bed Count		Annualized Average Base Rent (Amounts in $000s)		% of Total Annualized Average Base Rent
Illinois	21	21 SNFs		4,327	$	25,579		30.9	%
Indiana	15	15 SNFs		1,388		14,258		17.2	%
Arkansas	13	12 SNFs 2 ALFs		1,572		11,044		13.4	%
Kentucky	9	9 SNFs 1 ALF		1,045		8,214		9.9	%
Tennessee	12	12 SNFs		1,056		17,148		20.8	%
Texas	3	3 SNFs 3 LTACHs		563		3,735		4.5	%
Oklahoma	1	1 SNFs 1 LTACH		137		1,077		1.3	%
Ohio	4	4 SNFs		238		864		1.0	%
Michigan	1	1 SNF		100		786		1.0	%
		78 SNFs 4 LTACHs 3 ALFs
Totals	79			10,426	$	82,705		100.0	%

Tenants and Operators

Our properties are currently leased to 83 tenants under 28 lease agreements. Our leases include 9 master lease agreements that cover 64 facilities leased to 64 tenants, with the remaining 19 leases each covering a single facility leased to one tenant. Forty-one of our tenants are related parties. As of the date of this Form 10, two facilities were vacant.

Each property is operated as a healthcare facility by a licensed operator, which may be the tenant or a separate operator. Each operator holds a license granted by state regulators to operate a specific type of facility. All of the operators have an experienced management team and senior healthcare staff with substantial knowledge of their respective local markets. We target healthcare operators that are owned by principals with a history of quality care, and the demonstrated ability to successfully navigate in a changing healthcare operating environment. Certain operators are related parties.

We believe that each of the operators of our properties is primarily focused on serving the needs of the local community. Unlike operators that are part of a large national healthcare conglomerate, we believe the operators at our properties can manage their facilities more efficiently because they are not burdened by costly infrastructure and have the flexibility to rapidly adjust their cost structure to respond to changes in the reimbursement environment.

In order to operate efficiently and improve profitability, most of the operators at our facilities have engaged large consulting firms that specialize in healthcare and skilled nursing operations. These consulting firms provide advice and assistance on marketing, operating policies and procedures, billing, collections and regulatory compliance. The operators and consultants work together to develop and standardize best practices in the facilities, while operating in a cost-efficient manner. The operators at our properties primarily use one of nine principal consulting firms, including four firms that are part of Infinity Healthcare, a healthcare consulting business that is owned by the Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company and Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company.

The tenants and operators of our properties have demonstrated the ability to generate consistent profitability despite the challenging markets in which they operate. In many cases, these tenants and operators have successfully optimized and stabilized underperforming skilled nursing facilities. While these tenants and operators have been successful, we expect to seek opportunities to diversify our tenant/operator mix through future acquisitions that will be leased to new operators.

The following table contains information regarding our healthcare facility portfolio by tenant, as of the date of this Form 10:

Lessor/ Company Subsidiary	Tenant/ Operator (1)	State	Property type	Number of licensed beds	Tenant Lease Expiration Year (2)	Rentable square feet		Percent leased			Annualized Lease Income (in $)		% of total Annualized Lease Income			Annualized lease income per SQF (in $)
Master Lease Indiana
1020 West Vine Street Realty LLC	The Waters of Princeton II, LLC	IN	SNF	95	2025		32,571		100	%		1,045,506		1.26	%		32.10
12803 Lenover Street Realty, LLC	The Waters of Dillsboro – Ross Manor II, LLC	IN	SNF	123	2025		67,851		100	%		1,353,655		1.63	%		19.95
1350 North Todd Drive Realty LLC	The Waters of Scottsburg II, LLC	IN	SNF	99	2025		28,050		100	%		1,089,527		1.32	%		38.84
1600 East Liberty Street Realty, LLC	The Waters of Covington II, LLC	IN	SNF	119	2025		40,821		100	%		1,309,634		1.58	%		32.08
1601 Hospital Drive Realty, LLC	The Waters of Greencastle II, LLC	IN	SNF	100	2025		31,245		100	%		1,100,532		1.33	%		35.22
1712 Leland Drive Realty, LLC	The Waters of Huntingburg II, LLC	IN	SNF	95	2025		45,156		100	%		1,045,506		1.26	%		23.15
2055 Heritage Drive Realty, LLC	The Waters of Martinsville II, LLC	IN	SNF	103	2025		30,060		100	%		1,133,548		1.37	%		37.71

3895 South Keystone Avenue Realty, LLC	The Waters of Indianapolis II, LLC	IN	SNF	81	2025	25,469	100	%	891,431	1.08	%	35.00
405 Rio Vista Lane Realty, LLC	The Waters of Rising Sun II, LLC	IN	SNF	58	2025	16,140	100	%	638,309	0.77	%	39.55
950 Cross Avenue Realty, LLC	The Waters of Clifty Falls II, LLC	IN	SNF	138	2025	39,438	100	%	1,518,735	1.84	%	38.51
958 East Highway 46 Realty, LLC	The Water of Batesville II, LLC	IN	SNF	86	2025	59,582	100	%	946,458	1.14	%	15.88
2400_Chateau Drive Realty, LLC	The Waters of Muncie II, LLC	IN	SNF	72	2025	22,350	100	%	792,383	0.96	%	35.45
The Big H2O, LLC	The Waters of New Castle II, LLC	IN	SNF	66	2025	24,860	100	%	726,351	0.88	%	29.22
Master Lease Central Illinois 1
253 Bradington Drive, LLC	Bria of Columbia LLC	IL	SNF	119	2032	43,189	100	%	286,565	0.35	%	6.64
3523 Wickenhauser, LLC	Bria of Alton, LLC	IL	SNF	181	2032	44,840	100	%	435,868	0.53	%	9.72
727 North 17^th Street LLC	Belleville Healthcare Center, LLC	IL	SNF	180	2032	50,650	100	%	433,460	0.52	%	8.56
Master Lease Landmark
1621 Coit Road Realty, LLC	Landmark of Plano Nursing and Rehabilitation, LLC	TX	SNF	160	2027	49,812	100	%	1,257,678	1.52	%	25.25
8200 National Avenue Realty, LLC	Landmark of Midwest City Nursing and Rehabilitation, LLC	OK	SNF	106	2027	39,789	100	%	833,211	1.01	%	20.94
8200 National Avenue Realty, LLC	Landmark of Midwest City Hospital	OK	LTACH	31	2027	49,319	100	%	243,675	0.29	%	4.94
5601 Plum Creek Drive Realty, LLC	Landmark of Amarillo Nursing and Rehabilitation, LLC	TX	SNF	99	2027	60,031	100	%	778,188	0.94	%	12.96
9300 Ballard Road Realty, LLC	Landmark of Desplaines Nursing and Rehabilitation, LLC	IL	SNF	231	2022	70,556	100	%	1,815,772	2.20	%	25.73
911 South 3^rd St Realty LLC	Chalet Of Niles	MI	SNF	100	2025	31,895	100	%	786,049	0.95	%	24.64
1015 Magazine Street, LLC	Landmark of River City Rehabilitation and Nursing Center	KY	SNF	92	2028	36,050	100	%	723,165	0.87	%	20.06

900 Gagel Avenue, LLC	Landmark of Iroquois Park Rehabilitation and Nursing Center	KY	SNF	120	2028	36,374	100	%	943,258	1.14	%	25.93
308 West Maple Avenue, LLC	Landmark of Lancaster Rehabilitation and Nursing Center	KY	SNF	96	2027	42,438	100	%	754,607	0.91	%	17.78
1155 Eastern Parkway, LLC	Landmark of Louisville Rehabilitation and Nursing Center	KY	SNF	252	2027	106,250	100	%	1,980,842	2.40	%	18.64
203 Bruce Court, LLC	Landmark of Danville Rehabilitation and Nursing Center, LLC, Goldenrod Village Assisted Living Center, LLC	KY	SNF/ ALF	108	2030	46,500	100	%	848,932	1.03	%	18.26
120 Life Care Way, LLC	Landmark of Bardstown Rehabilitation and Nursing Center	KY	SNF	100	2028	36,295	100	%	786,049	0.95	%	21.66
1033 North Highway 11, LLC	Landmark of Laurel Creek Rehabilitation and Nursing Center	KY	SNF	106	2028	32,793	100	%	833,211	1.01	%	25.41
945 West Russell Street, LLC	Landmark of Elkhorn City Rehabilitation and Nursing Center	KY	SNF	106	2028	31,637	100	%	833,211	1.01	%	26.34
1253 Lake Barkley Drive, LLC	Landmark of Kuttawa, A Rehabilitation & Nursing Center	KY	SNF	65	2031	37,892	100	%	510,932	0.62	%	13.48
Master Lease Central Illinois 2
107 South Lincoln Street LLC	Bria of Smithson, LLC	IL	SNF	101	2032	21,150	100	%	424,528	0.51	%	20.07
1623 West Delmar Avenue LLC	Bria of Godfrey, LLC	IL	SNF	68	2032	15,740	100	%	263,1285,82144	0.35	%	18.16
393 Edwardsville Road LLC	Bria of Wood River, LLC	IL	SNF	106	2032	29,491	100	%	445,545	0.54	%	15.11
Master Lease Ohio
3090 Five Points Hartford Realty, LLC	Concord Care Center of Healthcare of Hartford, Inc.	OH	SNF	54	2025	15,504	100	%	196,012	0.24	%	12.64
3121 Glanzman Road Realty, LLC	Concord Care Center of Healthcare of Toledo, Inc.	OH	SNF	84	2025	24,087	100	%	304,908	0.37	%	12.66
620 West Strub Road Realty, LLC	Concord Care Center of Healthcare of Sandusky, Inc.	OH	SNF	50	2025	18,984	100	%	181,493	0.22	%	9.56
4250 Sodom Hutchings Road Realty, LLC	Concord Care Center of Healthcare of Cortland, Inc.	OH	SNF	50	2025	14,736	100	%	181,493	0.22	%	12.32

Master Lease Tennessee 1
115 Woodlawn Drive, LLC	Lakebridge a Waters Community, LLC	TN	SNF	109	2031	37,734	100	%	1,514,820	1.83	%	40.14
146 Buck Creek Road, LLC	The Waters of Roan Highlands, LLC	TN	SNF	80	2031	30,139	100	%	1,111,794	1.34	%	36.89
704 5^th Avenue East, LLC	The Waters of Springfield, LLC	TN	SNF	66	2031	19,900	100	%	917,230	1.11	%	46.09
2501 River Road, LLC	The Waters of Cheatham, LLC	TN	SNF	80	2031	37,953	100	%	1,111,794	1.34	%	29.29
202 Enon Springs Road East, LLC	The Waters of Smyrna, LLC	TN	SNF	91	2031	34,070	100	%	1,264,666	1.53	%	37.12
140 Technology Lane, LLC	The Waters of Johnson City, LLC	TN	SNF	84	2031	34,814	100	%	1,167,384	1.41	%	33.53
835 Union Street, LLC	The Waters of Shelbyville, LLC	TN	SNF	96	2031	44,327	100	%	1,334,153	1.61	%	30.10
Master Lease Tennessee 2
505 North Roan Street, LLC	Agape Rehabilitation & Nursing Center, A Water’s Community	TN	SNF	84	2031	27,100	100	%	1,628,910	1.97	%	60.11
14510 Highway 79, LLC	Waters of McKenzie, A Rehabilitation & Nursing Center	TN	SNF	66	2031	22,454	100	%	1,279,858	1.55	%	57.00
6500 Kirby Gate Boulevard, LLC	Waters of Memphis, A Rehabilitation & Nursing Center	TN	SNF	90	2031	51,565	100	%	1,745,261	2.11	%	33.85
978 Highway 11 South, LLC	Waters of Sweetwater, A Rehabilitation & Nursing Center	TN	SNF	90	2031	30,312	100	%	1,745,261	2.11	%	57.58
2830 Highway 394, LLC	Waters of Bristol, A Rehabilitation & Nursing Center	TN	SNF	120	2031	53,913	100	%	2,327,014	2.81	%	43.16
Master Lease Arkansas 1
5301 Wheeler Avenue, LLC	Wheeler Avenue Operating, LLC	AR	SNF	117	2028	41,490	100	%	821,950	0.99	%	19.81
414 Massey Avenue, LLC	Massey Avenue ALF Operating, LLC	AR	ALF	32	2028	12,548	100	%	224,807	0.27	%	17.92
706 Oak Grove Street, LLC	Oak Grove Street Operating, LLC	AR	SNF	97	2028	31,586	100	%	681,445	0.82	%	21.57
8701 Riley Drive, LLC	Riley Drive Operating, LLC	AR	SNF	140	2028	61,543	100	%	983,530	1.19	%	15.98
1516 Cumberland Street, LLC	Cumberland Street Operating, LLC	AR	SNF	120	2028	82,328	100	%	843,025	1.02	%	10.24

5720 West Markham Street, LLC	West Markham Street Operating, LLC	AR	SNF	154	2028	56,176	100	%	1,081,883	1.31	%	19.26
2501 John Ashley Drive, LLC	John Ashley Drive Operating, LLC	AR	SNF	140	2028	65,149	100	%	983,530	1.19	%	15.10
1513 South Dixieland Road, LLC	South Dixieland Road Operating, LLC	AR	SNF	110	2028	32,962	100	%	772,773	0.93	%	23.44
826 North Street, LLC	North Street Operating, LLC	AR	SNF	94	2028	30,924	100	%	660,370	0.80	%	21.35
Individual Leases
Ambassador Nursing Realty, LLC	Ambassador Nursing and Rehabilitation Center II, LLC	IL	SNF	190	2026	37,100	100	%	1,005,313	1.22	%	27.10
Momence Meadows Realty, LLC	Momence Meadows Rehabilitation and Nursing Center, LLC	IL	SNF	140	2025	37,139	100	%	1,038,000	1.26	%	27.95
Oak Lawn Nursing Realty, LLC	Oak Lawn Respiratory and Rehabilitation Center, LLC	IL	SNF	143	2031	37,854	100	%	1,083,048	1.31	%	28.61
Forest View Nursing Realty, LLC	Forest View Rehabilitation and Nursing Center, LLC	IL	SNF	144	2024	34,152	100	%	1,215,483	1.47	%	35.59
Lincoln Park Holdings, LLC	Lakeview Rehabilitation and Nursing Center, LLC	IL	SNF	178	2031	34,362	100	%	1,260,000	1.52	%	36.67
Continental Nursing Realty, LLC	Continental Rehabilitation and Nursing Center, LLC	IL	SNF	208	2031	53,653	100	%	1,575,348	1.90	%	29.36
Westshire Nursing Realty, LLC	City View Multi care Center LLC	IL	SNF	485	2025	124,020	100	%	1,788,365	2.16	%	14.42
Belhaven Realty, LLC	Belhaven Rehabilitation and Nursing Center, LLC	IL	SNF	221	2026	60,000	100	%	2,134,570	2.58	%	35.58
West Suburban Nursing Realty, LLC	West Suburban Rehabilitation and Nursing Center, LLC	IL	SNF	259	2027	70,314	100	%	1,961,604	2.37	%	27.90
Niles Nursing Realty, LLC	Niles Nursing & Rehab, LLC	IL	SNF	304	2026	46,480	100	%	2,409,998	2.91	%	51.85
Parkshore Estates Nursing Realty, LLC	Parkshore Estates Rehabilitation and Nursing Center, LLC	IL	SNF	318	2024	94,018	100	%	2,454,187	2.97	%	26.10
Midway Neurological and Rehabilitation Realty, LLC	Midway Neurological and Rehabilitation Center, LLC	IL	SNF	404	2026	120,000	100	%	2,547,712	3.08	%	21.23

516 West Frech Street LLC	Parker Rehabilitation and Nursing Center, LLC	IL	SNF	102	2031	24,979	100	%	498,350	0.60	%	19.95
4343 Kennedy Drive, LLC	Hope Creek Nursing and Rehabilitation Center, LLC	IL	SNF	245	2030	104,000	100	%	478,985	0.58	%	4.63
1316 North Tibbs Avenue Realty LLC	West Park, a Water community	IN	SNF	89	2024	26,572	100	%	549,884	0.66	%	20.69
1585 Perry Worth Road LLC	The Waters of Lebanon LLC	IN	SNF	64	2027	32,650	100	%	116,677	0.14	%	3.57
1621 Coit Road Realty, LLC	None	TX	LTACH	43	-	24,906	0	%	-	0.00	%	-
2301 North Oregon Realty, LLC	Grace Point Wellness Center	TX	SNF	182	2027	19,895	100	%	739,423	0.89	%	37.17
2301 North Oregon Realty, LLC	Specialty Hospital Management	TX	LTACH	32	2029	24,660	100	%	960,000	1.16	%	38.93
5601 Plum Creek Drive Realty, LLC	None	TX	LTACH	47	-	30,015	0	%	-	0.00	%	-
9209 Dollarway Road, LLC	Dollarway Road Operating, LLC	AR	SNF	120	2029	45,771	100	%	843,026	1.02	%	18.42
Master Lease Arkansas 2
326 Lindley Lane, LLC	Lindley Lane Operating, LLC	AR	SNF	120	2029	49,675	100	%	843,044	1.02	%	16.97
2821 West Dixon Road, LLC	West Dixon Road Operating, LLC & West Dixon Road ALF Operating, LLC	AR	SNF/ALF	176	2029	50,382	100	%	1,236,465	1.50	%	24.54
552 Golf Links Road, LLC	Golf Links Road Operating, LLC	AR	SNF	152	2029	30,372	100	%	1,067,833	1.29	%	35.16
Total/Average				10,426		3,501,551	98.43	%	82,704,818	100.00	%	23.62

(1) The tenant and the operator are the same for each facility other than the 13 SNFs leased under the Indiana master lease agreement and one SNF in Amarillo, Texas. In the case of these other facilities, the tenants are county hospitals which have entered into management agreements with the operators listed in the table. These arrangements permit the facilities to participate in a CMS program that pays higher Medicaid reimbursement rates for facilities associated with hospitals in underserved areas.

(2) The expiration dates do not reflect the exercise of any renewable options.

As of the date of this Form 10, we lease 41 of our facilities to tenants that are affiliates of Moishe Gubin who serves as Chairman of the Board and our Chief Executive Officer, Michael Blisko, who serves as one of our directors, and Ted Lerman, one of the Controlling Members of the Predecessor Company. As of the data of this Form 10, approximately 63.9% of our annualized base rent is received from such related-party tenants. The failure of these tenants to perform their obligations under their leases or renew their leases upon expiration could have a material adverse effect on our business, financial condition and results of operations. As a result, a substantial portion of our rental income is received from related parties. The Controlling Members of the Predecessor Company are Moishe Gubin, Michael Blisko and Ted Lerman and their affiliates. Mr. Gubin is the Chief Executive Officer of the Predecessor Company and serves as our Chief Executive Officer and our Chairman. Michael Blisko is the Chief Executive Officer of Blisko Enterprises LP, a family-owned investment company and serves as one of our directors. Ted Lerman is the Chief Executive Officer of A&F Realty LLC, a family-owned investment company.

Rental income from leases with these related party tenants represented 63.1% of all rental income for the quarter ended March 31, 2022. We believe these affiliated relationships provide a strong alignment of interests between us and our tenants and offers us increased operating flexibility with regards to potentially replacing underperforming tenants or evaluating acquisitions in new states. As we continue to grow and expand our portfolio, we intend to develop new relationships with unrelated party tenants and operators in order to diversify our tenant base and reduce our dependence on related party and operators.

The following table contains information regarding tenant/operators that are related parties of the Predecessor Company as of the date of this Form 10:

Tenant/Operators that are Related Parties
Lessor/Company Subsidiary	Tenant/Operator (1)	Beneficial Owner Percentage in Tenant/Operator by Related Party
		Moishe Gubin/Gubin Enterprises LP			Michael Blisko/Blisko Enterprises LP			Ted Lerman/A&F Realty LLC
Master Lease Indiana
1020 West Vine Street Realty LLC	The Waters of Princeton II, LLC		38.60	%		39.64	%		20.20	%
12803 Lenover Street Realty, LLC	The Waters of Dillsboro – Ross Manor II, LLC		38.60	%		39.64	%		20.20	%
1350 North Todd Drive Realty LLC	The Waters of Scottsburg II, LLC		38.60	%		39.64	%		20.20	%
1600 East Liberty Street Realty, LLC	The Waters of Covington II, LLC		38.60	%		39.64	%		20.20	%
1601 Hospital Drive Realty, LLC	The Waters of Greencastle II, LLC		38.60	%		39.64	%		20.20	%
1712 Leland Drive Realty, LLC	The Waters of Huntingburg II, LLC		38.60	%		39.64	%		20.20	%
2055 Heritage Drive Realty, LLC	The Waters of Martinsville II, LLC		38.60	%		39.64	%		20.20	%
3895 South Keystone Avenue Realty, LLC	The Waters of Indianapolis II, LLC		38.60	%		39.64	%		20.20	%
405 Rio Vista Lane Realty, LLC	The Waters of Rising Sun II, LLC		38.60	%		39.64	%		20.20	%
950 Cross Avenue Realty, LLC	The Waters of Clifty Falls II, LLC		38.60	%		39.64	%		20.20	%

958 East Highway 46 Realty, LLC	The Water of Batesville II, LLC	38.60	%	39.64	%	20.20	%
2400 Chateau Drive Realty, LLC	The Waters of Muncie II, LLC	38.60	%	39.64	%	20.20	%
The Big H2O, LLC	The Waters of New Castle II, LLC	38.60	%	39.64	%	20.20	%
Master Lease Tennessee
115 Woodlawn Drive, LLC	Lakebridge, a Waters Community, LLC	40.00	%	40.00	%	20.00	%
146 Buck Creek Road, LLC	The Waters of Roan Highlands, LLC	40.00	%	40.00	%	20.00	%
704 5^th Avenue East, LLC	The Waters of Springfield, LLC	40.00	%	40.00	%	20.00	%
2501 River Road, LLC	The Waters of Cheatham, LLC	40.00	%	40.00	%	20.00	%
202 Enon Springs Road East, LLC	The Waters of Smyrna, LLC	40.00	%	40.00	%	20.00	%
140 Technology Lane, LLC	The Waters of Johnson City, LLC	40.00	%	40.00	%	20.00	%
835 Union Street, LLC	The Waters of Shelbyville, LLC	40.00	%	40.00	%	20.00	%
505 North Roan Street, LLC	Agape Rehabilitation & Nursing Center, A Water’s Community	40.00	%	40.00	%	20.00	%
14510 Highway 79, LLC	Waters of McKenzie, A Rehabilitation & Nursing Center	40.00	%	40.00	%	20.00	%
6500 Kirby Gate Boulevard, LLC	Waters of Memphis, A Rehabilitation & Nursing Center	40.00	%	40.00	%	20.00	%
978 Highway 11 South, LLC	Waters of Sweetwater, A Rehabilitation & Nursing Center	40.00	%	40.00	%	20.00	%
2830 Highway 394, LLC	Waters of Bristol, A Rehabilitation & Nursing Center	40.00	%	40.00	%	20.00	%

Individual Leases
Ambassador Nursing Realty, LLC	Ambassador Nursing and Rehabilitation Center II, LLC	37.50	%	37.50	%	5.00	%
Momence Meadows Realty, LLC	Momence Meadows Rehabilitation and Nursing Center, LLC	50.00	%	50.00	%	0.00	%
Oak Lawn Nursing Realty, LLC	Oak Lawn Respiratory and Rehabilitation Center, LLC	50.00	%	50.00	%	0.00	%
Forest View Nursing Realty, LLC	Forest View Rehabilitation and Nursing Center, LLC	50.00	%	50.00	%	0.00	%
Lincoln Park Holdings, LLC	Lakeview Rehabilitation and Nursing Center, LLC	40.00	%	40.00	%	0.00	%
Continental Nursing Realty, LLC	Continental Rehabilitation and Nursing Center, LLC	37.50	%	37.50	%	5.00	%
Westshire Nursing Realty, LLC	City View Multi care Center LLC	50.00	%	50.00	%	0.00	%
Belhaven Realty, LLC	Belhaven Rehabilitation and Nursing Center, LLC	35.00	%	35.00	%	24.99	%
West Suburban Nursing Realty, LLC	West Suburban Rehabilitation and Nursing Center, LLC	37.50	%	37.50	%	5.00	%
Niles Nursing Realty, LLC	Niles Nursing & Rehab, LLC	40.00	%	40.00	%	20.00	%
Parkshore Estates Nursing Realty, LLC	Parkshore Estates Rehabilitation and Nursing Center, LLC	30.00	%	30.00	%	20.00	%
Midway Neurological and Rehabilitation Realty, LLC	Midway Neurological and Rehabilitation Center, LLC	33.39	%	33.39	%	23.97	%
516 West Frech Street LLC	Parker Rehabilitation and Nursing Center, LLC	50.00	%	50.00	%	0.00	%

4343 Kennedy Drive, LLC	Hope Creek Nursing and Rehabilitation Center, LLC	50.00	%	50.00	%	0.00	%
1316 North Tibbs Avenue Realty LLC	West Park, a water community	40.00	%	40.00	%	20.00	%
1585 Perry Worth Road LLC	The Waters of Lebanon LLC	40.00	%	40.00	%	20.00	%

Principal Consulting Firms to Operators

The principal consulting firms engaged by our tenants as of July 1, 2022 are described below. They provide the tenants with a wide range of advice and assistance that we believe significantly enhances the operators’ ability to operate successfully. As further described below, some of the consulting firms are related parties.

Infinity Healthcare (“Infinity”). Infinity is a consulting group that provides healthcare consulting services to the healthcare industry, including facilities that offer skilled and intermediate nursing, short-term rehabilitation, services for residents with dementia and Alzheimer’s disease, behavioral health, ventilator units, in-house dialysis, and home health. Infinity was founded in 2008 by Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company and Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company. Infinity provides consulting services to 48 facilities (of which 41 are leased from us) in Illinois, Indiana, Michigan, Oklahoma, Tennessee and Texas.

Benchmark Healthcare (“Benchmark”). Benchmark is a healthcare consulting service provider to the skilled nursing facility industry. Benchmark was founded in 2015 and primarily provides consulting services to A&M Healthcare which, through its subsidiaries, holds the licenses to 15 skilled nursing facilities. A&M Healthcare operates under the trade name Landmark. Benchmark provides consulting services to 17 facilities (of which 16 are leased from us) in Kentucky, Illinois Texas, Michigan and Oklahoma.

Bria Health Services (“Bria”). Bria is a healthcare consulting company that provides consulting services to the skilled nursing facility industry. Bria was founded in 2012 by Avrum Weinfeld, Daniel Weiss and Natan Weiss and headquartered in Skokie, IL. Bria provides consulting services to 17 operators in Illinois with over 2,900 beds (including 6 Strawberry facilities located in southern Illinois with 755 licensed beds)

AOM Healthcare Management (“AOM”). AOM is a diverse and experienced healthcare consulting firm founded in the 2000’s and based in New York. AOM provides consulting services to 22 skilled nursing facilities (of which four are leased from us) in New York and Ohio.

Oasis Healthcare Group – Oasis is a diverse healthcare consulting firm founded in 2020 by three healthcare experienced individuals, Abraham Schreiber, Morris Schreiber, and Matis Herzka. The Company is based in New York. Oasis provides consulting services to 12 skilled nursing facilities and 2 ALFs (of which all are leased from us) in Arkansas.

Paramount Healthcare Consultants (“Paramount”). Paramount is a diverse and experienced healthcare consulting firm founded in 2008 and based in Louisiana. Paramount provides consulting services to 11 healthcare facilities (of which one is leased from us) in Louisiana and Texas.

Each of these consultants provides services to our tenants and operators directly without any involvement by us. None of these consultants provide us with any services and we have no contractual obligations or commitments with these consultants. We do not require any tenants or operators to use the services of any consultant.

Competitive Strengths

We believe that the following competitive strengths provide a solid foundation for the sustained growth of our business and successful execution of our business strategies:

Diversified Portfolio. We have a portfolio that is diversified in terms of both geography and tenant composition. As of the date of this Form 10, our portfolio is comprised of 79 healthcare-related properties with a total of 10,426 licensed beds located throughout Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. We believe that our geographic diversification limits the potential impact of any regulatory, reimbursement, competitive dynamic or other changes in any single market on the overall performance of our portfolio. We lease our properties to 83 tenants, with no single tenant accounting for more than 3.1% of our annualized base rent. This diversification limits our exposure for any single tenant that encounters financial or operational difficulties.

Protected Markets. In eight of the nine states in which we operate, we benefit from CON laws that require state approval for the constructions and expansion of certain types of healthcare facilities. These laws represent significant barriers to entry and limit competition in these markets.

Demonstrated Ability to Identify and Structure Accretive Acquisition Opportunities. Our management team has long-standing relationships in the skilled nursing and post-acute industries. Through their experience in acquiring these types of facilities, we have the proven ability to identify and complete complex and accretive transactions. For example, in 2019 we acquired seven skilled nursing facilities in Arkansas and Kentucky through the assumption of approximately $37 million of mortgage debt, which allowed us to acquire the properties at an estimated discount of approximately 31% to the fair market value of the properties. Similarly, in 2018 we also acquired an additional 10 facilities for a total consideration of $44.8 million through the assumption or payment of the outstanding loan on the facilities or directly from the lender, in each case at discounted prices relative to the fair market value of the properties. These 16 properties are expected to generate average annual rental income of approximately $14 million over the life of the leases and represent an opportunity that is consistent with our track record of identifying and acquiring accretive acquisitions. Additionally, because many of our acquisitions are off-market opportunities sourced through our management team’s network of industry relationships, we believe we do not typically compete with larger healthcare-focused real estate companies for acquisitions as they tend to focus on larger, platform acquisition opportunities. As a result, we have consistently acquired assets at attractive valuations and believe we can continue to identify these types of opportunities to expand our portfolio.

Significant Experience Acquiring Underperforming Assets. Although we primarily seek to acquire properties that have had consistent profitability, we may also acquire underperforming properties if we believe that the underlying facilities can become successful through better management. Our management team’s prior experience as operators gives it the ability to evaluate these types of facilities and their potential for improved revenue enhancement and increased operating efficiencies. We will consider the acquisition of underperforming properties if they are available at attractive valuations and provide us with significant upside potential once their new operators have successfully stabilized and optimized their operations. If we acquire underperforming properties, we would expect to lease them to tenants and operators that have significant turnaround experience and support from experienced consultants.

Experienced and Adept Operators. We have strong and long-standing relationships with operators and their principals who have significant experience in operating successful skilled nursing facilities. These operators and their principals have a strong track record of operating in challenging markets where operators are subject to increased regulatory issues and significant competition. Additionally, these operators and their principals have learned to successfully operate facilities in which most of the revenue is earned from providing services to patients covered by Medicaid which are subject to lower reimbursement rates than other revenue sources.

Consulting Firms Provide Additional Resources for the Operators of our Facilities. Most of the operators of our facilities utilize the services of experienced healthcare consulting firms to provide them with expert advice and assistance with their operations. We believe these consulting firms provide the operators with additional expertise and resources that materially enhance their ability to operate efficiently and to meet applicable regulatory requirements.

Close Relationships with Tenants, Operators and Consultants Provide Enhanced Oversight, Market Intelligence and Strong Alignment of Interests. The nature of our close relationships with the tenants and operators of our properties and their consulting firms allows us to maintain close communication and obtain early knowledge of potential issues faced by our tenants, enabling us to address those issues that affect us as the lessor. These relationships also provide us with intelligence on the markets in which we own properties and assistance in locating new and replacement tenants. Additionally, the consulting firms assist us without charge in evaluating potential acquisitions and operators. This assistance provides us with insight on local market trends, which is particularly valuable for new markets. These relationships also provide a strong alignment of interests between our interests as a property owner and our tenants’ interests.

Well-Structured, Long-Term, Triple-Net Leases Generate Predictable and Growing Rental Income Streams. Most of our owned properties are leased to tenants under long-term, non-cancellable, triple-net leases, pursuant to which the tenants are responsible for all maintenance and repairs, insurance and taxes associated with the leased properties and the business conducted at the properties. As of July 1, 2022, 98.4% of the gross leasable area of our facilities was leased with an average remaining lease term of 5.9 years. Our leases generally have terms that range from 10 to 20 years with two five-year extensions, and annual rent escalators of 1% to 3% per year, which provides us with a steady and growing cash rental stream. Additionally, our leases are structured to provide us with key credit support and have credit enhancement provisions that may include non-refundable security deposits of up to 6 months, personal and corporate guarantees and cross-default provisions under our master leases. Approximately 70.2% of our total annualized rental revenue is generated through our 9 master leases that have cross-default and cross-collateralization provisions.

Seasoned Management Team with Significant Experience. Moishe Gubin, our Chairman and Chief Executive Officer, has over 21 years of operating and real estate experience in the skilled nursing and long-term care industries. Prior to founding the Predecessor Company, Mr. Gubin worked as an operator of skilled nursing facilities and built a strong operational knowledge base that has been incorporated into the day-to-day management of our current portfolio. Additionally, Mr. Gubin has significant acquisition experience having completed over 80 healthcare-related facilities with an aggregate investment amount of over $700 million since 2003. Nahman Eingal, our Chief Financial Officer, has an extensive background in real estate finance with over 20 years of experience in the banking industry focusing on commercial lending to healthcare providers. Mr. Gubin and Mr. Eingal also have significant experience accessing the debt capital markets to fund growth, having raised over $266 million of publicly traded bonds that are listed on the Tel Aviv Stock Exchange. We believe that the diverse operational and financial background and expertise of our management team gives us the ability to successfully manage our portfolio and sustain our growth.

Experienced Public Filer. Our BVI Company has raised, in aggregate, over $266 million from the sale of bonds that are listed on the TASE. Under the regulations of the TASE and the Israeli Securities Act, the BVI Company has reporting and corporate governance requirements that include filing of quarterly and annual financial reports, conducting stockholder meetings, maintaining an independent board and addressing conflicts of interest. As a result, our management team has experience in operating in a manner that is similar to a U.S. public company and has established reporting and governance processes and policies that can be adapted to meet the requirements for operating as a U.S. public company.

Our Business and Growth Strategies

Our objective is to generate attractive returns for our stockholders over the long-term through dividends and capital appreciation. Key elements of our strategy include the following:

Acquire Additional Healthcare Properties in Concentrated Geographic Areas. We plan to invest primarily in real estate used as skilled nursing facilities and other healthcare facilities that provide services to the elderly, where our management team has substantial experience and relationships. We believe these facilities have the potential to provide higher risk-adjusted returns compared to other forms of net-leased real estate assets due to the specialized expertise necessary to acquire, own, finance and manage these properties, which are factors that tend to limit competition among investors, owners, operators and finance companies. We will seek to acquire properties in states where we believe we can build regional density in order to create competitive advantages and drive operational and cost efficiencies.

Negotiate Well-Structured Net Leases. Our primary ownership structure is a facility purchase with a long-term triple-net lease with the healthcare operator. We seek to structure our leases with lease terms ranging from 10 to 15 years with tenant options to extend the lease for an additional period of 5 to 10 years, and rent escalators that provide a steadily growing cash rental stream. Our lease structures are designed to provide us with credit support for our rents, including, in certain cases, lease deposits, covenants regarding liquidity, and various provisions for cross-default. We believe these features help insulate us from variability in operator cash flows and enable us to minimize our expenses while we continue to build our portfolio.

Leverage Existing and Develop New Operator Relationships. Our management team has long-standing relationships in the healthcare industry through which we have sourced our existing portfolio, and we intend to continue to expand our portfolio by leveraging these existing relationships. Forty-one of our properties are leased to related parties. One of our goals is to reduce our dependence on related party tenants in order to diversify our tenant base. Although we expect to continue to lease properties to related party tenants in markets in which the related party tenants have substantial experience and operations, we intend to lease properties in other markets to unrelated tenants if we are able to identify qualified operators. Additionally, we will consider leasing properties to unrelated parties in markets in which related parties operate if we are able to identify qualified operators that are willing to lease properties on terms that are no less favorable than those available from related parties.

Finance existing portfolio with Long-Term, Low-Interest Rate, HUD Guaranteed Non-Recourse Debt. We have, and will continue to use, an attractive capital structure in the form of HUD guaranteed mortgage loans through existing government programs, which are long-term, low-interest rate and non-recourse. Currently HUD guaranteed loans are available for periods of 30 to 35 years at a weighted-average interest rate of 10 years Treasury bills plus 1.8%-2.0% (excluding an additional 0.65% per annum mortgage insurance premium payable to HUD).

Utilize Comprehensive Investment Underwriting Criteria. We have adopted what we believe to be a thorough investment underwriting process based on careful analysis and due diligence with respect to both the healthcare real estate and the healthcare service operations. We seek to make investments in healthcare properties that have the following attributes: well-located, visible to traffic, in good physical condition with predictable future capital improvement needs and with attractive prospects for future profitability.

Monitor the Performance of our Facilities and Industry Trends. We carefully monitor the financial and operational performance of our tenants and of the specific facilities in which we invest through a variety of methods, such as reviews of periodic financial statements, and regular meetings with the facility operators. Pursuant to the terms of our leases, our tenants are required to provide us with certain periodic financial statements and operating data.

Utilize Targeted Leverage in Our Investing Activities. We seek to utilize a targeted level of leverage that is appropriate in light of market conditions, future cash flows, the creditworthiness of tenants and future rental rates. We will seek to achieve a ratio of debt to asset fair market value in the range of 45% to 55%. However, our charter and bylaws do not limit the amount of debt that we may incur and our board of directors has not adopted a policy limiting the total amount of our borrowings.

Policy for the Acquisition and Sale of Properties

As of the date of this Form 10, our goal is to increase our portfolio of properties through the purchase of additional healthcare properties at attractive prices with a targeted annual rate of return on equity in the range of 17%-20%, assuming financing based on a 65% loan-to-value ratio and interest at 6% percent per annum and lease payments of no more than 80% of the operator’s pro forma adjusted EBITDAR. Our goal is to obtain approximately 25% internal rate of return over an approximate 20 year investment horizon.

In considering these performance targets, readers should bear in mind that targeted performance for each acquisition is not a guarantee, projection, forecast or prediction and is not necessarily indicative of future results. These performance targets are as of the date hereof and may change in the future. The performance targets are based on an assumption that economic, market and other conditions will not deteriorate and, in some cases, will improve. These performance targets are also based on estimates and assumptions about performance believed to be reasonable under the circumstances, but actual realized returns of our investments will depend on, among other factors, the ability to consummate attractive investments, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which targeted returns are based. We believe the performance targets are reasonable, but readers should keep in mind that this investment involves a high degree of risk and they should purchase these securities only if they can afford a complete loss of their investment.

We believe our management team’s depth of experience in healthcare real estate, operations and finance provides us with unique perspective in underwriting potential investments. Our real estate underwriting process focuses on both real estate and healthcare operations. The process includes a detailed analysis of the facility and the financial strength and experience of the tenant and its management. Key factors that we consider in the underwriting process include the following:

● the current, historical and projected cash flow and operating margins of each tenant and at each facility;

● the ratio of our tenants’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt costs;

● the quality and experience of the tenant and its management team;

● construction quality, condition, design and projected capital needs of the facility and property condition assessments;

● competitive landscape;

● drivers of healthcare-related needs;

● the location of the facility;

● local economic and demographic factors and the competitive landscape of the market;

● licensure and accreditation;

● the effect of evolving healthcare legislation and other existing and future regulations and compliance with such regulations on our tenants’ profitability and liquidity; and

● the payor mix of private, Medicare and Medicaid patients at the facility.

We also require tenants to furnish property and operator-level financials, among other data, on a monthly basis; we evaluate individual and portfolio property performance, liquidity metrics, lease and debt coverage, occupancy, planned capital expenditures, and other measures; and we conduct in- person visits to each facility in the portfolio at least two times per year. We believe our underwriting process enables us to acquire desirable properties with strong tenants that will support our ability to deliver attractive risk-adjusted returns to our stockholders.

The policy does not limit the authority of our board of directors to change or deviate from the policy as it sees fit from time to time. Changes to the policy do not require stockholder approval.

Our management does not have a fixed policy relating to the sale of properties. Accordingly, each potential sale opportunity will be examined on its merits in view of the business opportunity involved.

Sourcing and Initial Screening

Our management team has developed and maintains an extensive network of relationships among active participants within the healthcare services industry. We believe these broad reaching relationships help identify potential healthcare properties for us to acquire and we intend to source acquisitions in off-market and target-marketed transactions from our existing operators and their consulting firms with whom we have strong existing relationships.

Underwriting and Analysis

Once a potential healthcare facility is identified, we begin our initial due diligence process. We generally require an initial pro forma EBITDAR for the potential facility, which is calculated based on current facility census, current facility Medicaid rate, projected Medicare rate based on a similar facility we own, and projected expenses also based on a similar facility (size, location and structure) we own. Once we have formulated a pro forma EBITDAR, we then allocate 80% of EBITDAR to future first year rent payment and 20% of EBITDAR to profit that is kept by the operator. We then leverage our relationships with the various consulting firms that are engaged by our tenants and collaborate with them in an effort to ensure the analysis is accurate and the facility’s EBITDAR goal is achievable. Their local market insights and experience operating skilled nursing facilities help us with our acquisition underwriting and assist us in determining valuations and projected rent payments. Once the financial analysis is confirmed, we apply a 10% capitalization rate on the target rent amount to set a maximum purchase price. We then submit a letter of intent, or LOI, to a seller for the purchase of the property. If the LOI is accepted, we request initial due diligence information and materials from the seller, which includes information on operational history, financial results, operational statistics, referral patterns and sources, payor mix, the various governmental oversight survey results and responses thereto, accreditation surveys and responses, payroll information and the competitive landscape of the market. After evaluating the due diligence materials, submitted by the potential tenant, our management team presents the opportunity to our investment committee to decide whether or not to pursue the acquisition.

Approval by Investment Committee and Board of Directors

The BVI Company has had an investment committee that reviews all acquisitions and makes recommendations regarding each acquisition to the board of directors of the BVI Company. If any transaction involves a related party, the transaction must first be approved by the audit committee of the BVI Company. All acquisitions must be approved by the full board of directors of the BVI Company. The members of the audit committee of the BVI Company, and a majority of the directors of the BVI Company, are deemed to be independent for purposes of the Israeli Companies Law and the Israeli Securities Act. This approval process will be maintained until all of the Bonds issued by the BVI Company in Israel are repaid and cancelled.

Additionally, the Company has implemented a similar approval process. Each acquisition is first reviewed by an investment committee appointed by our board of directors. If the acquisition is recommended by the investment committee, it would then be submitted to our board of directors for approval. If any transaction involves a related party, the transaction would need to be approved by our audit committee, all of whom will be independent directors or the affirmative vote of a majority of the disinterested members of the board.

At the present time, the investment committees of the Company and the BVI Company consist of Moishe Gubin, Michael Blisko, Ted Lerman, Mark Myers and Stan Gertz. Mr. Gubin is our Chairman and Chief Executive Officer. Mr. Blisko is a director of the Company. Mr. Gubin, Mr. Blisko and Mr. Lerman are also Controlling Members of the Predecessor Company. Mr. Myers is a broker with Walker & Dunlop, Inc., a real estate brokerage firm, and specializes in senior healthcare transaction. He is serving as member of the committee in his personal capacity and not as a representative of Walker & Dunlop, Inc. Mr. Gertz is a former commercial banker with substantial experience in healthcare lending.

We expect that the investment committees will review an in-depth investment package that is prepared by our management team for each acquisition. The investment package would typically include the facility type, operator, operator parent company (lease guarantor), acquisition price (in gross dollars, per square foot, per bed, or other manner as deemed appropriate), operator and parent financial statements (3 to 5 years), operator statistical trends (payor mix, referral sources, patient acuity, etc.), initial lease term, initial lease rate, annual increases to lease rate, optional renewal periods, lease coverage, fixed charge coverage, regulatory compliance and history of deficiencies, demographic and competitive information for the location, all of which are accompanied with a general discussion and summary of why our management team believes the property should be acquired.

Remaining Due Diligence and Closing

Typically, our in-house legal counsel will prepare and negotiate an asset purchase agreement, review the title report and the applicable federal, state or local regulatory compliance requirements. We typically engage third-party consultants to perform property environmental assessments, structural analyses, ALTA surveys and other applicable inspections or reports prior to closing on the transaction. Legal counsel is responsible for coordinating the flow of documents and reports.

Our Leases

As of the date of this Form 10, all of our properties were subject to lease agreements except for two vacant facilities with approximately 55,000 square feet combined that are designed as a long-term acute care hospitals in two of our dual-purpose properties. Our leases have a weighted-average annualized lease income per leased square foot of $23.62, and as of July 1, 2022, a weighted-average remaining lease term of approximately 5.9 years.

To our knowledge, except as noted below, none of our current tenants are in default under any of the leases. However, On April 4, 2022, we were notified that the tenants under the master leases for 6 facilities located in central Illinois intended to default with respect to their lease agreements due to operating losses. The tenants indicated that their operating losses were partially due to decreased occupancy caused by COVID-19. The tenants are affiliates of Steven Blisko, who is the brother of Michael Blisko, one of our directors. These leases provided for a combined rent of $225,000 per month, or $2.7 million per year. All payments due under these leases were paid through mid-June 2022. On July 1, 2022, the Company entered into new lease agreements with an unaffiliated third party operator to lease these properties. The new leases have terms of 10 years each and provide for combined average base rent of $180,000 per month, or $2.3 million per year over the life of the leases. The Company expects to recognize a loss of approximately $1,080,000 in the second quarter of 2022 due to the write-off of straight-line rent receivable related to the former leases.

Each of our properties is leased under a separate lease agreement, although 9 groups of properties, covering a total of 64 facilities, are subject to 9 master lease agreements. Each master lease agreement provides that the tenants under the master lease are jointly and severally liable for the obligations of all of the other tenants under such master lease. We entered into these master lease agreements in order to facilitate financing the underlying properties. Rental income under these master leases represents a substantial portion of our rental income.

The following table summarizes information concerning the master lease agreements as of the date of this Form 10 (dollars in thousands):

Master Lease Agreements
Master Lease Name	States	Facilities Count	GLA		Annualized Average Base Rent ($000s)		% of Total Annualized Average Base Rent
Master Lease Indiana (1)	IN	13		463,593	$	13,592		16.4	%
Master Lease Central Illinois 1	IL	3		138,679	$	1,156		1.4	%
Master Lease Landmark	TX/OK/ MI/IL/KY	16		707,631	$	13,929		16.8	%
Master Lease Ohio	OH	4		73,311	$	864		1.1	%
Master Lease Central Illinois 2	IL	3		66,381	$	1,156		1.4	%
Master Lease Tennessee 1 (1)	TN	7		238,937	$	8,422		10.2	%
Master Lease Tennessee 2 (1)	TN	5		185,344	$	8,726		10.6	%
Master Lease Arkansas 1	AR	9		414,706	$	7,053		8.5	%
Master Lease Arkansas 2	AR	4		130,429	$	3,147		3.8	%
Total (9)		64		2,419,011	$	58,045		70.2	%

Note 1: The tenants under these master lease agreements are related parties, including the tenants under the master leases in Indiana and the two Tennessee master leases, that are affiliated with Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company and Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company. See “Item 1. Business—Our Leases.”

The following table summarizes information concerning the lease agreements that are not subject to a master lease agreement as of the date of this Form 10 (dollars in thousands):

Individual Leases
Lessor	State	Facility Type	Rentable Sq. Ft.		Annualized Average Base Rent ($000s)		% of Total Annualized Average Base Rent
Ambassador Nursing Realty, LLC	Illinois	SNF		37,100	$	1,005		1.2	%
Momence Meadows Realty, LLC	Illinois	SNF		37,139	$	1,038		1.3	%
Oak Lawn Nursing Realty, LLC	Illinois	SNF		37,854	$	1,083		1.3	%
Forest View Nursing Realty, LLC	Illinois	SNF		34,152	$	1,215		1.5	%
Lincoln Park Holdings, LLC	Illinois	SNF		34,362	$	1,260		1.5	%
Continental Nursing Realty, LLC	Illinois	SNF		53,653	$	1,575		1.9	%
Westshire Nursing Realty, LLC	Illinois	SNF		124,020	$	1,788		2.1	%
Belhaven Realty, LLC	Illinois	SNF		60,000	$	2,135		2.6	%
West Suburban Nursing Realty, LLC	Illinois	SNF		70,314	$	1,962		2.4	%
Niles Nursing Realty, LLC	Illinois	SNF		46,480	$	2,410		2.9	%
Parkshore Estates Nursing Realty, LLC	Illinois	SNF		94,018	$	2,454		3.0	%
Midway Neurological and Rehabilitation Realty, LLC	Illinois	SNF		120,000	$	2,548		3.1	%
516 West Frech Street, LLC	Illinois	SNF		24,979	$	498		0.6	%
4343 Kennedy Drive, LLC	Illinois	SNF		104,000		479		0.6	%
1316 North Tibbs Avenue Realty LLC	Indiana	SNF		26,572	$	550		0.6	%
1585 Perry Worth Rd, LLC	Indiana	SNF		32,650	$	117		0.1	%
1621 Coit Road Realty, LLC⁽¹⁾	Texas	LTACH		24,906	$	0		0.0	%
2301 North Oregon Realty, LLC	Texas	SNF		19,895	$	740		0.9	%
2301 North Oregon Realty, LLC	Texas	LTACH		24,660	$	960		1.2	%
5601 Plum Creek Drive Realty, LLC⁽¹⁾	Texas	LTACH		30,015	$	0		0.0	%
9209 Dollarway Road, LLC	Arkansas	SNF		45,771	$	843		1.0	%
Total (21)				1,082,540	$	24,660		29.8	%

(1) Represents the two LTACH facilities that were vacant.

Current Portfolio Detail

The following table contains supplemental information regarding our total portfolio, as of the date of this Form 10 unless otherwise mentioned (dollars in thousands):

Location		Tenant/Operator	Weighted Average Remaining Lease Term		Total Lease GLA		% Of Total Lease GLA			Annualized Average Base Rent ($)(1)		% of Total Annualized Average Base Rent
Master Lease Indiana
Princeton	IN	The Waters of Princeton II, LLC(2)		3.09		32,571		0.93	%		1,045,506		1.26	%
Dillsboro	IN	The Waters of Dillsboro – Ross Manor II, LLC(2)		3.09		67,851		1.94	%		1,353,655		1.63	%
Scottsburg	IN	The Waters of Scottsburg II, LLC(2)		3.09		28,050		0.80	%		1,089,527		1.32	%
Covington	IN	The Waters of Covington II, LLC(2)		3.09		40,821		1.17	%		1,309,634		1.58	%
Greencastle	IN	The Waters of Greencastle II, LLC(2)		3.09		31,245		0.89	%		1,100,532		1.33	%
Huntingburg	IN	The Waters of Huntingburg II, LLC(2)		3.09		45,156		1.29	%		1,045,506		1.26	%
Martinsville	IN	The Waters of Martinsville II, LLC(2)		3.09		30,060		0.86	%		1,133,548		1.37	%
Indianapolis	IN	The Waters of Indianapolis II, LLC(2)		3.09		25,469		0.73	%		891,431		1.08	%
Rising Sun	IN	The Waters of Rising Sun II, LLC(2)		3.09		16,140		0.46	%		638,309		0.77	%
Madison	IN	The Waters of Clifty Falls II, LLC(2)		3.09		39,438		1.13	%		1,518,735		1.84	%
Batesville	IN	The Water of Batesville II, LLC(2)		3.09		59,582		1.70	%		946,458		1.14	%
Muncie	IN	The Waters of Muncie II, LLC(2)		3.09		22,350		0.64	%		792,383		0.96	%
New Castle	IN	The Waters of New Castle II, LLC (2)		3.09		24,860		0.71	%		726,351		0.88	%
Master Lease Central Illinois 1 (Note3)
Columbia	IL	Bria of Columbia, LLC		10.00		43,189		1.23	%		286,565		0.35	%
Alton	IL	Bria of Alton, LLC		10.00		44,840		1.28	%		435,868		0.53	%

Belleville	IL	Belleville Healthcare Center, LLC	10.00	50,650	1.45	%	433,460	0.52	%
Master Lease Landmark
Plano	TX	Landmark of Plano Nursing and Rehabilitation, LLC	5.17	49,812	1.42	%	1,257,610	1.52	%
Midwest City	OK	Landmark of Midwest City Nursing and Rehabilitation, LLC	5.17	39,789	1.14	%	833,167	1.01	%
Midwest City	OK	Landmark of Midwest City Hospital	5.17	49,319	1.41	%	243,662	0.29	%
Amarillo	TX	Landmark of Amarillo Nursing and Rehabilitation, LLC	5.17	60,031	1.71	%	778,146	0.94	%
Des Plaines	IL	Landmark of Des Plaines Nursing and Rehabilitation, LLC	0.42	70,556	2.01	%	1,815,674	2.20	%
Niles	MI	Chalet Of Niles	2.67	31,895	0.91	%	786,006	0.95	%
Louisville	KY	Landmark of River City Rehabilitation and Nursing Center	5.83	36,050	1.03	%	723,126	0.87	%
Louisville	KY	Landmark of Iroquois Park Rehabilitation and Nursing Center	6.17	36,374	1.04	%	943,207	1.14	%
Lancaster	KY	Landmark of Lancaster Rehabilitation and Nursing Center	4.83	42,438	1.21	%	754,566	0.91	%
Louisville	KY	Landmark of Louisville Rehabilitation and Nursing Center	5.17	106,250	3.03	%	1,980,736	2.40	%
Danville	KY	Landmark of Danville Rehabilitation and Nursing Center, LLC, Goldenrod Village Assisted Living Center, LLC	7.92	46,500	1.33	%	848,887	1.03	%
Bardstown	KY	Landmark of Bardstown Rehabilitation and Nursing Center	6.00	36,295	1.04	%	786,006	0.95	%

Manchester	KY	Landmark of Laurel Creek Rehabilitation and Nursing Center	6.00	32,793	0.94	%	833,167	1.01	%
Elkhorn City	KY	Landmark of Elkhorn City Rehabilitation and Nursing Center	6.00	31,637	0.90	%	833,167	1.01	%
Kuttawa	KY	Landmark of Kuttawa, A Rehabilitation & Nursing Center	9.00	37,892	1.08	%	510,904	0.62	%
Master Lease Central Illinois 2 (Note 3)
Smithton	IL	Bria of Smithson, LLC	10.00	21,150	0.60	%	424,528	0.51	%
Godfrey	IL	Bria of Godfrey, LLC	10.00	15,740	0.45	%	285,821	0.35	%
Wood River	IL	Bria of Wood River, LLC	10.00	29,491	0.84	%	445,545	0.54	%
Master Lease Ohio
Fowler	OH	Concord Care Center of Healthcare of Hartford, Inc.	3.09	15,504	0.44	%	196,012	0.24	%
Toledo	OH	Concord Care Center of Healthcare of Toledo, Inc.	3.09	24,087	0.69	%	304,908	0.37	%
Sandusky	OH	Concord Care Center of Healthcare of Sandusky, Inc.	3.09	18,984	0.54	%	181,493	0.22	%
Cortland	OH	Concord Care Center of Healthcare of Cortland, Inc.	3.09	14,736	0.42	%	181,493	0.22	%
Master Lease Tennessee 1
Johnson City	TN	Lakebridge, a Waters Community, LLC(2)	9.08	37,734	1.08	%	1,514,820	1.83	%
Roan Mountain	TN	The Waters of Roan Highlands, LLC(2)	9.08	30,139	0.86	%	1,111,794	1.34	%
Springfield	TN	The Waters of Springfield, LLC(2)	9.08	19,900	0.57	%	917,230	1.11	%
Ashland City	TN	The Waters of Cheatham, LLC(2)	9.08	37,953	1.08	%	1,111,794	1.34	%

Smyrna	TN	The Waters of Smyrna, LLC(2)	9.08	34,070	0.97	%	1,264,666	1.53	%
Johnson City	TN	The Waters of Johnson City, LLC(2)	9.08	34,814	0.99	%	1,167,384	1.41	%
Shelbyville	TN	The Waters of Shelbyville, LLC(2)	9.08	44,327	1.27	%	1,334,153	1.61	%
Master Lease Tennessee 2
Johnson City	TN	Agape Rehabilitation & Nursing Center, A Water’s Community	9.00	27,100	0.77	%	1,628,910	1.97	%
McKenzie	TN	Waters of McKenzie, A Rehabilitation & Nursing Center	9.00	22,454	0.64	%	1,279,858	1.55	%
Memphis	TN	Waters of Memphis, A Rehabilitation & Nursing Center	9.00	51,565	1.47	%	1,745,261	2.11	%
Sweetwater	TN	Waters of Sweetwater, A Rehabilitation & Nursing Center	9.00	30,312	0.87	%	1,745,261	2.11	%
Bristol	TN	Waters of Bristol, A Rehabilitation & Nursing Center	9.00	53,913	1.54	%	2,327,014	2.81	%
Master Lease Arkansas 1
Fort Smith	AR	Wheeler Avenue Operating, LLC	6.09	41,490	1.18	%	821,950	0.99	%
Mountain View	AR	Massey Avenue ALF Operating, LLC	6.09	12,548	0.36	%	224,807	0.27	%
Mountain View	AR	Oak Grove Street Operating, LLC	6.09	31,586	0.90	%	681,445	0.82	%
Little Rock	AR	Riley Drive Operating, LLC	6.09	61,543	1.76	%	983,530	1.19	%
Little Rock	AR	Cumberland Street Operating, LLC	6.09	82,328	2.35	%	843,025	1.02	%
Little Rock	AR	West Markham Street Operating, LLC	6.09	56,176	1.60	%	1,081,883	1.31	%
Little Rock	AR	John Ashley Drive Operating, LLC	6.09	65,149	1.86	%	983,530	1.19	%
Rogers	AR	South Dixieland Road Operating, LLC	6.09	32,962	0.94	%	772,773	0.93	%

Stamps	AR	North Street Operating, LLC	6.09	30,924	0.88	%	660,370	0.80	%
Master Lease Arkansas 2
Newport	AR	Lindley Lane Operating, LLC	6.83	49,675	1.42	%	843,044	1.02	%
Little Rock	AR	West Dixon Road Operating, LLC & West Dixon Road ALF Operating, LLC	6.83	50,382	1.44	%	1,236,465	1.50	%
Hot Springs	AR	Golf Links Road Operating, LLC	6.83	30,372	0.87	%	1,067,856	1.29	%
Individual Lease Agreements (Not Subject to Master Lease Agreements)
Chicago	IL	Ambassador Nursing and Rehabilitation Center II, LLC (2)	3.67	37,100	1.06	%	1,005,313	1.22	%
Momence	IL	Momence Meadows Rehabilitation and Nursing Center, LLC(2)	3.50	37,139	1.06	%	1,038,000	1.26	%
Oak Lawn	IL	Oak Lawn Respiratory and Rehabilitation Center, LLC(2)	8.92	37,854	1.08	%	1,083,048	1.31	%
Itasca	IL	Forest View Rehabilitation and Nursing Center, LLC(2)	2.42	34,152	0.98	%	1,215,483	1.47	%
Chicago	IL	Lakeview Rehabilitation and Nursing Center, LLC(2)	8.91	34,362	0.98	%	1,260,000	1.52	%
Chicago	IL	Continental Rehabilitation and Nursing Center, LLC(2)	8.67	53,653	1.53	%	1,575,348	1.90	%
Cicero	IL	City View Multi care Center LLC(2)	3.17	124,020	3.54	%	1,788,365	2.16	%
Chicago	IL	Belhaven Rehabilitation and Nursing Center, LLC(2)	3.66	60,000	1.71	%	2,134,570	2.58	%

Bloomingdale	IL	West Suburban Rehabilitation and Nursing Center, LLC(2)	5.34	70,314	2.01	%	1,961,604	2.37	%
Niles	IL	Niles Nursing & Rehab, LLC(2)	3.66	46,480	1.33	%	2,409,998	2.91	%
Chicago	IL	Parkshore Estates Rehabilitation and Nursing Center, LLC(2)	2.42	94,018	2.69	%	2,454,187	2.97	%
Bridgeview	IL	Midway Neurological and Rehabilitation Center, LLC(2)	3.66	120,000	3.43	%	2,547,712	3.08	%
Streator	IL	Parker Rehabilitation and Nursing Center, LLC(2)	8.75	24,979	0.71	%	498,350	0.60	%
East Moline	IL	Hope Creek Nursing & Rehabilitation Center, LLC	8.25	104,000	2.97	%	478,958	0.58	%
Indianapolis	IN	West Park, a water community(2)	1.92	26,572	0.76	%	549,884	0.66	%
Lebanon	IN	The Waters of Lebanon LLC(2)	4.92	32,650	0.93	%	116,677	0.14	%
Plano	TX	None		24,906	0.71	%	-	0.00	%
El Paso	TX	Grace Point Wellness Center	5.17	19,895	0.57	%	739,423	0.89	%
El Paso	TX	Specialty Hospital Management	7.00	24,660	0.70	%	960,000	1.16	%
Amarillo	TX	None		30,015	0.86	%		0.00	%
White Hall	AR	Dollarway Road Operating, LLC	6.74	45,771	1.31	%	843,026	1.02	%

		Average/Total	5.90	3,501,551	100.00	%	82,704,818	100.00	%

(1) Annualized average base rent does not represent historical rental amounts. Rather, annualized average base rent represents the actual average monthly rent for in-place leases that will be received over the life of the lease and multiplied by 12, calculated as of the date of this Form 10.

(2) Operating tenant is an affiliate with one of the current members of the Predecessor Company.

(3) On April 4, 2022, we were notified that the tenants under the master leases for 6 facilities located in central Illinois intended to default with respect to their lease agreements due to operating losses. The tenants indicated that their operating losses were partially due to decreased occupancy caused by COVID-19. The tenants are affiliates of Steven Blisko, who is the brother of Michael Blisko, one of our directors. These leases provided for a combined rent of $225,000 per month, or $2.7 million per year. All payments due under these leases were paid through mid-June 2022. On July 1, 2022, the Company entered into new lease agreements with an unaffiliated third party operator to lease these properties. The new leases have terms of 10 years each and provide for combined base rent of $180,000 per month, or $2.3 million per year in average over the life of the lease. The Company expects to recognize a loss of approximately $1,080,000 in the second quarter of 2022 due to the write-off of straight-line rent receivable related to the former leases.

Rent Escalation and Renewal Options

The following table sets forth information concerning rent escalation and renewal options:

Lessor/Company Subsidiary	Location		Annual Escalator			Extension options
Master Lease Indiana				3.00	%	2 five year
1020 West Vine Street Realty LLC	Princeton	IN
12803 Lenover Street Realty, LLC	Dillsboro	IN
1350 North Todd Drive Realty, LLC	Scottsburg	IN
1600 East Liberty Street Realty, LLC	Covington	IN
1601 Hospital Drive Realty, LLC	Greencastle	IN
1712 Leland Drive Realty, LLC	Huntingburg	IN
2055 Heritage Drive Realty, LLC	Martinsville	IN
3895 South Keystone Avenue Realty, LLC	Indianapolis	IN
405 Rio Vista Lane Realty, LLC	Rising Sun	IN
950 Cross Avenue Realty, LLC	Madison	IN
958 East Highway 46 Realty, LLC	Batesville	IN
2400 Chateau Drive Realty, LLC	Muncie	IN
The Big H2O, LLC	New Castle	IN
Master Lease Central Illinois 1 (Note 1)				1.50	%	2 five year
253 Bradington Drive, LLC	Columbia	IL
3523 Wickenhauser, LLC	Alton	IL
727 North 17^th Street, LLC	Belleville	IL

Master Lease Landmark			3.00	%	2 five year
1621 Coit Road Realty, LLC	Plano	TX
8200 National Avenue Realty, LLC	Midwest City	OK
8200 National Avenue Realty, LLC	Midwest City	OK
5601 Plum Creek Drive Realty, LLC	Amarillo	TX
9300 Ballard Road Realty, LLC	Des Plaines	IL	2.00	%	3 five year
911 South 3^rd St Realty LLC	Niles	MI
1015 Magazine Street, LLC	Louisville	KY
900 Gagel Avenue, LLC	Louisville	KY
308 West Maple Avenue, LLC	Lancaster	KY
1155 Eastern Parkway, LLC	Louisville	KY
203 Bruce Court, LLC	Danville	KY
120 Life Care Way, LLC	Bardstown	KY
1033 North Highway 11, LLC	Manchester	KY
945 West Russell Street, LLC	Elkhorn City	KY
1253 Lake Barkley Drive, LLC	Kuttawa	KY
Master Lease Central Illinois 2 (Note 1)			1.50	%	2 five year
107 South Lincoln Street LLC	Smithton	IL
1623 West Delmar Avenue LLC	Godfrey	IL
393 Edwardsville Road LLC	Wood River	IL
Master Lease Ohio			2.25	%	2 five year
3090 Five Points Hartford Realty, LLC	Fowler	OH
3121 Glanzman Road Realty, LLC	Toledo	OH
620 West Strub Road Realty, LLC	Sandusky	OH
4250 Sodom Hutchings Road Realty, LLC	Cortland	OH
Master Lease Tennessee 1			3.00	%	2 five years
115 Woodlawn Drive, LLC	Johnson City	TN

146 Buck Creek Road, LLC	Roan Mountain	TN
704 5^th Avenue East, LLC	Springfield	TN
2501 River Road, LLC	Ashland City	TN
202 Enon Springs Road East, LLC	Smyrna	TN
140 Technology Lane, LLC	Johnson City	TN
835 Union Street, LLC	Shelbyville	TN
Master Lease Tennessee 1			3.00	%	2 five years
505 North Roan Street, LLC	Johnson City	TN
14510 Highway 79, LLC	McKenzie	TN
6500 Kirby Gate Boulevard, LLC	Memphis	TN
978 Highway 11 South, LLC	Sweetwater	TN
2830 Highway 394, LLC	Bristol	TN
Master Lease Arkansas 1			3.00	%	2 five years
5301 Wheeler Avenue, LLC	Fort Smith	AR
414 Massey Avenue, LLC	Mountain View	AR
706 Oak Grove Street, LLC	Mountain View	AR
8701 Riley Drive, LLC	Little Rock	AR
1516 Cumberland Street, LLC	Little Rock	AR
5720 West Markham Street, LLC	Little Rock	AR
2501 John Ashley Drive, LLC	Little Rock	AR
1513 South Dixieland Road, LLC	Rogers	AR
826 North Street, LLC	Stamps	AR
Lease Agreements Not Subject to Master Lease Agreements
Ambassador Nursing Realty, LLC	Chicago	IL	3.00	%	2 five year
Momence Meadows Realty, LLC	Momence	IL	—		None
Oak Lawn Nursing Realty, LLC	Oak Lawn	IL	—		None

Forest View Nursing Realty, LLC	Itasca	IL	3.00	%	2 five year
Lincoln Park Holdings, LLC	Chicago	IL	—		None
Continental Nursing Realty, LLC	Chicago	IL	—		None
Westshire Nursing Realty, LLC	Cicero	IL	3.00	%	2 five year
Belhaven Realty, LLC	Chicago	IL	3.00	%	4 five year
West Suburban Nursing Realty, LLC	Bloomingdale	IL	—		None
Niles Nursing Realty, LLC	Niles	IL	3.00	%	2 five year
Parkshore Estates Nursing Realty, LLC	Chicago	IL	3.00	%	2 five year
Midway Neurological and Rehabilitation Realty, LLC	Bridgeview	IL	3.00	%	4 five year
516 West Frech Street, LLC	Streator	IL	Range of $12,000 to $24,000 Annually		None
4343 Kennedy Drive, LLC	East Moline	IL	2.00	%	2 five year
1316 North Tibbs Avenue Realty LLC	Indianapolis	IN	3.00	%	2 five year
1585 Perry Worth Road LLC	Lebanon	IN	3.00	%	2 five years
1621 Coit Road Realty, LLC	Plano	TX	-		-
2301 North Oregon Realty, LLC	El Paso	TX	2.5	%	2 five years
2301 North Oregon Realty, LLC	El Paso	TX	Inflation		2 five years
5601 Plum Creek Drive Realty, LLC	Amarillo	TX	-		-
9209 Dollarway Road, LLC	White Hall	AR	3.00	%	2 five years
Master Lease Arkansas 2			3.00	%	2 five years
326 Lindley Lane, LLC	Newport	AR
2821 West Dixon Road, LLC	Little Rock	AR
552 Golf Links Road, LLC	Hot Springs	AR
Average			2.67	%

Note 1. On April 4, 2022, we were notified that the tenants under the master leases for 6 facilities located in central Illinois intended to default with respect to their lease agreements due to operating losses. The tenants indicated that their operating losses were partially due to decreased occupancy caused by COVID-19. The tenants are affiliates of Steven Blisko, who is the brother of Michael Blisko, one of our directors. These leases provided for a combined rent of $225,000 per month, or $2.7 million per year. All payments due under these leases were paid through mid-June 2022. On July 1, 2022, the Company entered into new lease agreements with an unaffiliated third party operator to lease these properties. The new leases have terms of 10 years each and provide for combined average base rent of $180,000 per month, or $2.3 million per year over the life of the leases. The Company expects to recognize a loss of approximately $1,080,000 in the second quarter of 2022 due to the write-off of straight-line rent receivable related to the former leases.

Lease Expirations

The following table sets forth information concerning the expiration of our leases:

Lease Expirations
Year of Lease Expiration (1)	Number of Leases/Vacant Facilities	GLA of Leases Expiring		Percent of Portfolio GLA			Annualized Base Rent		Percentage of Total Annualized Base Rent			Annualized Base Rent Per Sq. Ft.

2020	-		-		-			-		-			-
2021	-		-		-			-		-			-
2022	1		70,556		2.01	%	$	1,815,772		2.20	%	$	25.74
2023	-		-		-			-		-		$	-
2024	3		154,742		4.42	%		4,219,554		5.10	%	$	27.27
2025	20		729,958		20.85	%		18,067,894		21.82	%	$	24.75
2026	4		263,580		7.53	%		8,097,593		9.79	%	$	30.72
2027	9		470,498		13.44	%		8,665,905		10.48	%	$	18.42
2028	14		587,855		16.79	%		11,172,206		13.51	%	$	19.01
Thereafter	32		1,169,441		33.40	%		30,665,892		37.08	%	$	26.22
Vacant (2)	2		54,921		1.57	%		-		-			-
Total	85		3,501,551		100.0	%	$	82,704,818		100.0	%	$	23.62

(1) The year of each lease expiration is based on current contract terms.

(2) As of the date of this Form 10, two of the LTACH facilities were vacant.

Other Lease Arrangements

A total of five properties are leased on a single net lease basis, pursuant to which the tenant pays a fixed periodic rental amount and we pay real estate taxes and insurance. These properties are leased to affiliates of Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company and Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company.

Monitoring Tenant Operating Results and Financial Condition

We regularly monitor the operating results and financial condition of our tenants. In this regard, we obtain on a monthly basis the following information from each tenant:

	●	Monthly financial statements prepared by the tenants.

	●	Monthly census information broken down by payor source. In addition, from March 2020 until July 2021, we received daily census information, together with COVID-19 infections and deaths among residents and staff at each of the facilities. Due to the improvement in infection rates in the United States, we are no longer requiring tenants to provide this information on a daily basis.

We require tenants to provide the following additional information:

● Health survey and plans of correction information from each of the tenants at any time a survey is being conducted in one of our facilities.

● Copies of any communications received by tenants that relate to reimbursements from Medicaid or Medicare.

● An annual facility cost report.

In addition, we visit each facility at least twice a year to assess the physical maintenance and the level of care being provided to residents.

Investments in Real Estate Mortgages

We currently hold real estate mortgages on five properties located in Massachusetts with an outstanding balance of $10.8 million as of March 31, 2022. We acquired these loans as part of a plan to cancel these loans in exchange for the title to the properties. However, subsequent to the purchase of the mortgages and prior to closing on the exchange, the owners had to surrender their licenses to operate healthcare facilities at these properties due to cash flow issues. As a result, we cancelled the planned acquisition of the properties and are attempting to collect the outstanding balance of these loans which are in default. As of March 31, 2022, we had established a reserve in an amount equal to the outstanding balance of these loans.

With the exception of these mortgages, we do not have any other investments in real estate mortgages and we do not plan to acquire real estate mortgages as part of our investment strategy. However, we may, at the discretion of our board of directors and without a vote of our stockholders, invest in additional mortgages and other types of real estate interests in a manner that is consistent with our qualification as a REIT. If we choose to invest in additional mortgages, we would expect to invest in mortgages secured by healthcare-related properties. However, there is no restriction on the proportion of our assets that may be invested in a type of mortgage or any single mortgage or type of mortgage loan. Investments in real estate mortgages run the risk that one or more borrowers may default under the mortgages and that the collateral securing those mortgages may not be sufficient to enable us to recoup our full investment.

Significant Properties

None of our properties represented 10% or more of our consolidated assets as of March 31, 2022 or December 31, 2021 or had gross revenues that amounted to 10% or more of our consolidated gross revenues for the three months ended March 31, 2022 or the years ended December 31, 2021, 2020 and 2019.

Properties Held by the Company as Lessee

One of our wholly-owned subsidiaries holds a property under a long-term, triple net lease.

The terms of the lease are as follows:

Lessor/Property Owner

Tenant/Company Subsidiary

Original Commencement Date

Current Lease Term/Expiration Date

Monthly Rent

Option to Extend Lease

Henry County

Memorial Hospital

The Big H2O, LLC

April 28, 1990

20 years/ March 1, 2028

30,784

Yes, Two 5-year
options

Indebtedness

As of March 31, 2022 we had approximately $486.8 million of outstanding debt, which primarily consisted of approximately $281.3 million in HUD guaranteed mortgage loans, $99.1 million in bond indebtedness, $107.6 million in other senior debt, and $1.4 million in seller notes.

Our HUD guaranteed loans have staggered maturities with a weighted average debt maturity of approximately 25.0 years, with a weighted average interest rate of 3.88% per annum (including mortgage insurance premium) as of March 31, 2022.

Approximately $15.7 million of our Bond debt is payable in 2022, with a weighted average interest rate of 6.1% per annum as of March 31, 2022. Our other senior debt has a weighted average debt maturity of approximately 4.9 years, with a weighted average interest rate of SOFR plus 3.5% per annum as of March 31, 2022. As of March 31, 2022, approximately 78.0% of our debt was fixed rate debt.

In the future, our overall leverage will depend on how we choose to finance our portfolio, including future acquisitions, and the cost of leverage. Neither our charter nor our investment policies restrict the amount of leverage that we may incur.

Historical Capital Expenditures

The following table sets forth certain information regarding historical maintenance capital expenditures made by our tenants at the properties in our portfolio for the years ended December 31, 2021 and 2020:

	Year Ended December 31,
	2021						2020
	Amount		Square Feet		Per Sq. Ft.		Amount		Square Feet		Per Sq. Ft.
Maintenance capital expenditures	$	3,165,000		3,501,551	$	0.90	$	5,995,000		3,278,315	$	1.83

Lease Defaults

Except as described below, to our knowledge, none of our tenants are in default under any of their leases, and there have been no defaults since January 1, 2019.

Lease Default for Four Properties in Texas

Commencing in 2016, the tenant of four of our properties in Texas experienced cash flow issues and was unable to make required rent payments. The properties were used as skilled nursing facilities and long-term acute care hospitals. The owners of the tenant had provided personal guarantees of the lease. The tenant was not a related party.

In April 2018, we entered into a settlement agreement with the tenant and its owners to resolve the issues arising from the default. Under the settlement agreement, the master lease was terminated. All of the properties have been leased to new operators other than one long-term acute care hospital.

Under the settlement agreement, the guarantors executed two notes in our favor in the principal amount of $7.2 million. The first note, in the amount of $6.5 million, bears interest at 2.5% per annum payable monthly. The principal amount of the note is payable as follows: (i) an initial payment of $500,000 is due on the seventh anniversary of the note, (ii) commencing after the seventh anniversary, there will be equal monthly installments of principal and interest based on a 25-year amortization, and (iii) the outstanding principal amount of approximately $4.7 million will be payable in a lump sum on the maturity date in April 2032. The second note, in the amount of $744,000, bears interest at 10% per annum.

The guarantors failed to make required payments under the notes commencing in September 2019. Due to the uncertainty regarding the repayment of the notes, we originally recorded the amount of the notes receivable at a discount. The recorded amount of the receivable was $2.0 million at December 31, 2018. This was reduced to $1.6 million at December 31, 2019, due to the failure of the guarantors to make the required payments and was further reduced to $0 during fiscal year 2020.

The Company has obtained a $13.5 million judgement against the guarantors and is exploring its options to recover this amount from the guarantors.

Default with Respect to Central Illinois Master Leases

On April 4, 2022, we were notified that the tenants under the master leases for 6 facilities located in central Illinois intended to default with respect to their lease agreements due to operating losses. The tenants indicated that their operating losses were partially due to decreased occupancy caused by COVID-19. The tenants are affiliates of Steven Blisko, who is the brother of Michael Blisko, one of our directors. These leases provided for a combined rent of $225,000 per month, or $2.7 million per year. All payments due under these leases were paid through mid-June 2022. On July 1, 2022, the Company entered into new lease agreements with an unaffiliated third party operator to lease these properties. The new leases have terms of 10 years each and provide for combined base rent of $180,000 per month, or $2.3 million per year in average over the life of the lease. The Company expects to recognize a loss of approximately $1,080,000 in the second quarter of 2022 due to the write-off of straight-line rent receivable related to the former leases.

Employees

As of the date of this Form 10, we had eight full-time employees. All of our employees are employed by Strawberry Fields Management Services, LLC, which is one of our wholly-owned subsidiaries of the Operating Partnership. At this time, there are no plans for the Company to employ any individuals.

Insurance

We require our tenants to maintain general liability, professional liability, all risks and other insurance coverages and to name us as an additional insured under these policies. We believe that the policy specifications and insured limits are appropriate given the relative risk of loss, the cost of the coverage and industry practice.

Competition

The market for making investments in healthcare properties is highly fragmented, and increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our investment objectives. In acquiring and leasing healthcare properties, we compete with private equity funds, real estate developers, REITs, other public and private real estate companies and private real estate investors, many of whom have greater financial and operational resources and lower costs of capital than we have. We also face competition in leasing or subleasing available facilities to prospective tenants.

Regulation

Healthcare Regulatory Matters

The following discussion describes certain material healthcare laws and regulations that may affect our operations and those of our tenants/operators. Although there is presently no Federal regulation on the lessor itself from Federal government agencies that regulate and inspect the operators and no regulation of the lessor in the States in which we own real property, our tenants (the operators of skilled nursing facilities, long-term acute care hospitals and other healthcare providers) are subject to extensive federal, state and local government healthcare laws and regulations. These laws and regulations include requirements related to licensure, conduct of operations, ownership of the facilities operation, addition or expansion of facilities and services, prices for services, billing for services and the confidentiality and security of health-related information. Different properties within our portfolio may be more or less subject to certain types of regulation, some of which are specific to the type of facility or provider. These laws and regulations are wide-ranging and complex, may vary or overlap from jurisdiction to jurisdiction, and are subject frequently to change. Compliance with these regulatory requirements can increase operating costs and, thereby, adversely affect the financial viability of our tenants/operators’ businesses. Our tenants/operators’ failure to comply with these laws and regulations could adversely affect their ability to successfully operate our properties, or receive reimbursement for services rendered within them, which could negatively impact their ability to satisfy their contractual obligations to us. Our leases will require the tenants/operators to comply with all applicable laws, including healthcare laws.

Our tenants are subject directly to healthcare laws and regulations, because of the broad nature of some of these restrictions, such as the Anti-Kickback Statute discussed below. We intend for all of our business activities and operations to conform in all material respects with all applicable laws and regulations, including healthcare laws and regulations. We expect that the healthcare industry will continue to face increased regulation and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services.

Healthcare Reform Measures. The Affordable Care Act changed how healthcare services are covered, delivered and reimbursed through expanded coverage of uninsured individuals, reduced growth in Medicare program spending, reductions in Medicare and Medicaid reimbursement, including but not limited to, Disproportionate Share Hospital, or DSH payments, and expanding efforts by governmental and private third party payors to tie reimbursement to quality and efficiency. In addition, the law reformed certain aspects of health insurance, contains provisions intended to strengthen fraud and abuse enforcement, and encourage the development of new payment models, including the creation of Accountable Care Organizations, or ACOs. The status of the Affordable Care Act is subject to substantial uncertainty due to proposals to terminate or modify its provisions. We are not able to predict the effect of such changes on our business since the nature of any changes is undetermined. However, any changes that result in a decrease in payments made on behalf of patients are likely to reduce the income that our tenants receive from the operation of facilities at our properties.

Sources of Revenue and Reimbursement. Our tenants and operators receive payments for patient services from the federal government under the Medicare program, state governments under their respective Medicaid or similar programs, managed care plans, private insurers and directly from patients. Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over, some disabled persons, persons with end-stage renal disease and persons with Lou Gehrig’s Disease. Medicaid is a federal-state program, administered by the states pursuant to certain conditions imposed by the Federal government, which provides hospital and medical benefits to qualifying individuals who are unable to afford healthcare. Generally, revenues for services rendered to Medicare patients are determined under a prospective payment system, or PPS. CMS annually establishes payment rates for the PPS for each applicable facility type.

Amounts received under Medicare and Medicaid programs are generally significantly less than established facility gross charges for the services provided and may not reflect the provider’s costs. Healthcare providers generally offer discounts from established charges to certain group purchasers of healthcare services, including private insurance companies, employers, health maintenance organizations, or HMOs, preferred provider organizations, or PPOs and other managed care plans. These discount programs generally limit a provider’s ability to increase revenues in response to increasing costs. Patients are generally not responsible for the total difference between established provider gross charges and amounts reimbursed for such services under Medicare, Medicaid, HMOs, PPOs and other managed care plans, but are responsible to the extent of any exclusions, deductibles or coinsurance features of their coverage. The amount of such exclusions, deductibles and coinsurance continues to increase. Collection of amounts due from individuals is typically more difficult than from governmental or third-party payers takes considerably longer and often requires the involvement of, and payment to, third parties to collect.

Payments to providers are being increasingly tied to quality and efficiency. These initiatives include requirements to report clinical data and patient satisfaction scores, reduced Medicare payments to hospitals based on “excess” readmission rates as determined by CMS, denial of payments under Medicare, Medicaid and some private payors for services resulting from a hospital or facility-acquired condition, or HAC, and reduced Medicare payments to hospitals with high risk-adjusted HAC rates. Certain provider types, including, but not limited to, inpatient rehabilitation facilities and long-term acute care hospitals, are subject to specific limits and restrictions on eligibility for admissions which, in turn, affect reimbursement at these facilities.

The amounts of program payments received by our tenants/operators can be changed from time to time by legislative or regulatory actions and by determinations by agents for the programs. Level of payment has also been impacted by the Federal budget sequestration which automatically reduces payments as a result of funding limitations. The Medicare and Medicaid statutory framework is subject to administrative rulings, interpretations and discretion that affect the amount and timing of reimbursement made under Medicare and Medicaid. Federal healthcare program reimbursement changes may be applied retroactively under certain circumstances. In recent years, the federal government has enacted various measures to reduce spending under federal healthcare programs. In April 2018, CMS announced as part of its patient driven payment model (“PDPM”) a skilled-nursing preferred payor system (“SNF-PPS”) intended to reduce administrative burden, and foster innovation to improve care and quality for patients. CMS estimates the program of payment redesign and policy changes would increase Medicare payments to SNFs by 2.4% ($850 million) during 2019.

In addition, many states have enacted, or are considering enacting, measures designed to reduce their Medicaid expenditures and change private healthcare insurance, and states continue to face significant challenges in maintaining appropriate levels of Medicaid funding due to state budget shortfalls. Many States have also sought to control costs by implementing a variety of alternative care and payment models authorized under Federal Medicaid waivers and such models often impose new or enhanced administrative requirements on health care providers as a condition of payment. Further, non-government payers may reduce their reimbursement rates in accordance with payment reductions by government programs or for other reasons. Healthcare provider operating margins may continue to be under significant pressure due to the deterioration in pricing flexibility and payor mix, as well as increases in operating expenses that exceed increases in payments under the Medicare and Medicaid programs.

Anti-Kickback Statute. A section of the Social Security Act known as the “Anti-Kickback Statute” prohibits, among other things, the offer, payment, solicitation or acceptance of remuneration, directly or indirectly, in return for referring an individual to a provider of services for which payment may be made in whole or in part under a federal healthcare program, including the Medicare or Medicaid programs. Courts have interpreted this statute broadly and held that the Anti-Kickback Statute is violated if just one purpose of the remuneration is to generate referrals, even if there are other lawful purposes. The Affordable Care Act provides that knowledge of the Anti-Kickback Statute or specific intent to violate the statute is not required in order to violate the Anti-Kickback Statute. Violation of the Anti-Kickback Statute is a crime, punishable by fines of up to $25,000 per violation, five years imprisonment, or both. Violations may also result in civil and administrative liability and sanctions, including civil penalties of up to $50,000 per violation, liability under the False Claims Act, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid, and additional monetary penalties in amounts treble to the underlying remuneration.

There are a limited number of statutory exceptions and regulatory safe harbors for categories of activities deemed protected from prosecution under the Anti-Kickback Statute. Currently, there are statutory exceptions and safe harbors for various activities, including the following: certain investment interests, space rental, equipment rental, practitioner recruitment, personnel services and management contracts, sale of practice, referral services, warranties, discounts, employees, managed care arrangements, investments in group practices, freestanding surgery centers, ambulance replenishing and referral agreements for specialty services. The safe harbor for space rental arrangements requires, among other things, that the aggregate rental payments be set in advance, be consistent with fair market value and not be determined in a manner that takes into account the volume or value of any referrals. The fact that conduct or a business arrangement does not fall within a safe harbor does not necessarily render the conduct or business arrangement illegal under the Anti-Kickback Statute. However, such conduct and business arrangements may lead to increased scrutiny by government enforcement authorities.

Many states have laws similar to the Anti-Kickback Statute that regulate the exchange of remuneration in connection with the provision of healthcare services, including prohibiting payments to physicians for patient referrals. The scope of these state laws is broad because they can often apply regardless of the source of payment for care. These statutes typically provide for criminal and civil penalties, as well as potential loss of facility licensure and eligibility for reimbursement by government payors.

We intend to use commercially reasonable efforts to structure our arrangements, including any lease/operating arrangements involving facilities in which local physicians are investors, so as to satisfy, or meet as closely as possible, safe harbor requirements. The safe harbors are narrowly structured, and there are not safe harbors available for every type of financial arrangement that we or our tenants/operators may enter. Although it is our intention to fully comply with the Anti-Kickback Statue, as well as all other applicable state and federal laws, we cannot assure you that all of our arrangements or the arrangements of our tenants/operators will meet all the conditions for a safe harbor. There can be no assurance regulatory authorities enforcing these laws will determine our financial arrangements or the financial relationships of our tenants/operators comply with the Anti-Kickback Statute or other similar laws and such regulatory authorities or private qui tam relators bringing actions on behalf of government entities in exchange for a portion of any recovery may allege non-compliance and seek financial or other penalties.

Stark Law. The Social Security Act also includes a provision commonly known as the “Stark Law.” The Stark Law is a strict liability statute that prohibits a physician from making a referral to an entity furnishing “designated health services” paid by Medicare or Medicaid if the physician or a member of the physician’s immediate family has a financial relationship with that entity unless an exception to the law is met. Designated health services include, among other services, inpatient and outpatient hospital services, clinical laboratory services, physical therapy services and radiology services. The Stark Law also prohibits entities that provide designated health services from billing the Medicare and Medicaid programs for any items or services that result from a prohibited referral and requires the entities to refund amounts received for items or services provided pursuant to the prohibited referral. Sanctions for violating the Stark Law are imposed without consideration to intent and include denial of payment, civil monetary penalties of up to $15,000 per prohibited service provided for failure to return amounts received in a timely manner, and exclusion from the Medicare and Medicaid programs. The statute also provides for a penalty of up to $100,000 for a circumvention scheme. Failure to refund amounts received pursuant to a prohibited referral may also constitute a false claim and result in additional penalties under the False Claims Act, which is discussed in greater detail below.

There are exceptions to the self-referral prohibition for many of the customary financial arrangements between physicians and providers, including employment contracts, leases and recruitment agreements. There is also an exception for a physician’s ownership interest in an entire hospital, as opposed to an ownership interest in a hospital department if such ownership interests and capacity were in place as of March 23, 2010. Unlike safe harbors under the Anti-Kickback Statute, an arrangement must comply with every requirement of a Stark Law exception, or the arrangement will be in violation of the Stark Law. Through a series of rulemakings, CMS has issued final regulations implementing the Stark Law. While these regulations were intended to clarify the requirements of the exceptions to the Stark Law, it is unclear how the government will interpret many of these exceptions for enforcement purposes and even an inadvertent failure to comply with the strict requirements, such as assuring a signature, can result in imposition of penalties under certain circumstances.

Although there is an exception for a physician’s ownership interest in an entire hospital, the Affordable Care Act prohibits newly created physician-owned hospitals from billing for Medicare patients referred by their physician owners. As a result, the law effectively prevents the formation after December 31, 2010 of new physician-owned hospitals that participate in Medicare and Medicaid. While the Affordable Care Act grandfathers existing physician-owned hospitals, it does not allow these hospitals to increase the percentage of physician ownership and significantly restricts their ability to expand services.

Many states also have laws similar to the Stark Law that prohibit certain self-referrals. The scope of these state laws is broad because they can often apply regardless of the source of payment for care, and little precedent exists for their interpretation or enforcement. These statutes typically provide for criminal and civil penalties, as well as loss of facility licensure.

Although our lease agreements will require tenants to comply with the Stark Law, we cannot offer assurance that the arrangements entered into by us or by our tenants/operators will be found to be in compliance with the Stark Law or similar state laws.

The False Claims Act. The federal False Claims Act prohibits knowingly making or presenting any false claim for payment to the federal government. The government may use the False Claims Act to prosecute Medicare and other government program fraud in areas such as coding errors, billing for services not provided, submitting false cost reports and failing to report and repay an overpayment within 60 days of identifying the overpayment or by the date a corresponding cost report is due, whichever is later. The False Claims Act defines the term “knowingly” broadly. Although simple negligence will not give rise to liability under the False Claims Act, submitting a claim with reckless disregard to its truth or falsity or failing to correct an error with in specified period of time constitutes a “knowing” submission.

The False Claims Act contains qui tam, or whistleblower, provisions that allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the federal government. Whistleblowers under the False Claims Act may collect a portion of the government’s recovery, which serves as an incentive to bring claims which then must be defended whether or not they have merit. Every entity that receives at least $5 million annually in Medicaid payments must have written policies for all employees, contractors or agents, providing detailed information about false claims, false statements and whistleblower protections under certain federal laws, including the False Claims Act, and similar state laws.

In some cases, whistleblowers and the federal government have taken the position, and some courts have held, that providers who allegedly have violated other statutes, such as the Anti-Kickback Statute and the Stark Law, have thereby submitted false claims under the False Claims Act. The Affordable Care Act clarifies this issue with respect to the Anti-Kickback Statute by providing that submission of claims for services or items generated in violation of the Anti-Kickback Statute constitutes a false or fraudulent claim under the False Claims Act. If a defendant is found liable under the False Claims Act, the defendant may be required to pay three times the actual damages sustained by the government, additional civil penalties of up to $10,000 per false claim, plus reimbursement of the fees of counsel for the whistleblower.

Many states have enacted similar statutes preventing the presentation of a false claim to a state government, and we expect more to do so because the Social Security Act provides a financial incentive for states to enact statutes establishing state level liability.

Other Fraud & Abuse Laws. There are various other fraud and abuse laws at both the federal and state levels that cover false claims and false statements and these may impact our business. For example, the Civil Monetary Penalties law authorizes the imposition of monetary penalties against an entity that engages in a number of prohibited activities. The penalties vary by the prohibited conduct, but include penalties of $10,000 for each item or service, $15,000 for each individual with respect to whom false or misleading information was given, and treble damages for the total amount of remuneration claimed. The prohibited actions include, but are not limited to, the following:

● knowingly presenting or causing to be presented, a claim for services not provided as claimed or which is otherwise false or fraudulent in any way;

● knowingly giving or causing to be giving false or misleading information reasonably expected to influence the decision to discharge a patient;

● offering or giving remuneration to any beneficiary of a federal healthcare program likely to influence the receipt of reimbursable items or services; arranging for reimbursable services with an entity which is excluded from participation from a federal healthcare program; or knowingly or willfully soliciting or receiving remuneration for a referral of a federal healthcare program beneficiary.

Any violations of the Civil Monetary Penalties Law by management or our tenants/operators could result in substantial fines and penalties, and could have an adverse effect on our business.

HIPAA Administrative Simplification and Privacy and Security Requirements. HIPAA, as amended by the HITECH Act, and its implementing regulations create a national standard for protecting the privacy and security of individually identifiable health information (called “protected health information”). Compliance with HIPAA is mandatory for covered entities, which include healthcare providers such as tenants/operators of our facilities. Compliance is also required for entities that create, receive, maintain or transmit protected health information on behalf of healthcare providers or that perform services for healthcare providers that involve the disclosure of protected health information, called “business associates.”

Covered entities must report a breach of protected health information that has not been secured through encryption or destruction to all affected individuals without unreasonable delay, but in any case, no more than 60 days after the breach is discovered. Notification must also be made to HHS and, in the case of a breach involving more than 500 individuals, to the media. In the final rule issued in January, 2013, HHS modified the standard for determining whether a breach has occurred by creating a presumption that any non-permitted acquisition, access, use or disclosure of protected health information is a breach unless the covered entity or business associate can demonstrate that there is a low probability that the information has been compromised, based on a risk assessment.

Covered entities and business associates are subject to civil penalties for violations of HIPAA of up to $1.5 million per year for violations of the same requirement. In addition, criminal penalties can be imposed not only against covered entities and business associates, but also against individual employees who obtain or disclose protected health information without authorization. The criminal penalties range up to $250,000 and up to 10 years imprisonment. In addition, state Attorneys General may bring civil actions for HIPAA violations, HHS must conduct periodic HIPAA compliance audits of covered entities and business associates. If any of our tenants/operators are subject to an investigation or audit and found to be in violation of HIPAA, such tenants/operators could incur substantial penalties, which could have a negative impact on their financial condition. Our tenants/operators may also be subject to more stringent state law privacy, security and breach notification obligations. Enforcement of HIPAA and the Health Information Technology for Economic and Clinical Health (HITECH) Act, which substantially augmented the requirements under HIPAA have become increasingly stringent and the penalties for non-compliance have become increasingly harsh.

Licensure, Certification and Accreditation. Healthcare property construction and operation are subject to numerous federal, state and local regulations relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, maintenance of adequate records, fire prevention, rate-setting and compliance with building codes and environmental protection laws. The requirements for licensure, certification and accreditation are subject to change and, in order to remain qualified, it may become necessary for our tenants/operators to make changes in their facilities, equipment, personnel and services.

Facilities in our portfolio will be subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation. We will require our healthcare properties to be properly licensed under applicable state laws. Except for provider types not eligible for participation in Medicare and Medicaid, we expect our tenant/operators to participate in the Medicare and Medicaid programs and, where applicable, to be accredited by an approved accrediting organization which is also often a requirement for Medicare certification. The loss of Medicare or Medicaid certification would result in our tenants/operators that operate Medicare/Medicaid-eligible providers from receiving reimbursement from federal healthcare programs. The loss of accreditation, where applicable, would result in increased scrutiny by CMS and likely the loss of payment from non-government payers which often condition participation and payment on participation in the Medicare program.

In some states, the construction or expansion of healthcare properties, the acquisition of existing facilities, the transfer or change of ownership and the addition of new beds or services may be subject to review by and prior approval of, or notifications to, state regulatory agencies under a Certificate of Need, or CON program. Such laws generally require the reviewing state agency to determine the public need for additional or expanded healthcare properties and services and have begun to expect some level of revenue from enforcement action in their budget planning. Some states in which we operate have also adopted limitations on the opening of new skilled nursing facilities. See “Item 1. Business – Skilled nursing facility industry Business in the United States.” The requirements for licensure, certification and accreditation also include notification or approval in the event of the transfer or change of ownership or certain other changes. Further, federal programs, including Medicare, must be notified in the event of a change of ownership or change of information at a participating provider. Failure by our tenants/operators to provide required federal and state notifications, obtain necessary state licensure and CON approvals could result in significant penalties as well as prevent the completion of an acquisition or effort to expand services or facilities. We may be required to provide ownership information or otherwise participate in certain of these approvals and notifications.

Antitrust Laws. The federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-skilled nursing facilities. These laws prohibit price fixing, concerted refusal to deal, market allocation, monopolization, attempts to monopolize, price discrimination, tying arrangements, exclusive dealing, acquisitions of competitors and other practices that have, or may have, an adverse effect on competition. Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement in the healthcare industry is currently a priority of the Federal Trade Commission and the Antitrust Division of the Department of Justice. We intend to operate so that we and our tenants/operators are in compliance with such federal and state laws, but future review by courts or regulatory authorities could result in a determination that could adversely affect the operations of our tenants/operators and, consequently, our operations. In addition to enforcement by Federal and State agencies, in an effort to control health care costs, private payors such as employee welfare benefit plans administered by or for employers or unions have become increasing aggressive in bringing actions against providers alleging violations of antitrust laws.

Healthcare Industry Investigations. Significant media and public attention has focused in recent years on the healthcare industry. The federal government is dedicated to funding additional federal enforcement activities related to healthcare providers and preventing fraud and abuse. Our tenants/operators will engage in many of routine healthcare operations and other activities that could be the subject of governmental investigations or inquiries. For example, our tenants/operators will likely have significant Medicare and Medicaid billings, numerous financial arrangements with physicians who are referral sources, and joint venture arrangements involving physician investors. In recent years, Congress and the States have increased the level of funding for fraud and abuse enforcement activities. It is possible that governmental entities could initiate investigations or litigation in the future and that such proceedings could result in significant costs and penalties, as well as adverse publicity. It is also possible that our executives could be included in governmental investigations or litigation or named as defendants in private litigation.

Governmental agencies and their agents, such as the Medicare Administrative Contractors, fiscal intermediaries and carriers, as well as the HHS-OIG, CMS and state Medicaid programs, may conduct audits of our tenants/operator’s operations. Private payers may conduct similar post-payment audits, and our tenants/operators may also perform internal audits and monitoring. Many of these audits employ the use of statistical sampling and extrapolation whereby a small number of claims are reviewed but adverse results are applied against a provider’s claims for long periods of time. Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic such that results are extrapolated, the resolution of these audits which can often require substantial repayments could have a material, adverse effect on our portfolio’s financial position, results of operations and liquidity.

Under the Recovery Audit Contractor, or RAC program, CMS contracts with RACs on a contingency basis to conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program, to managed Medicare plans and in the Medicaid program. CMS has also initiated a RAC prepayment demonstration program in 11 states. CMS also employs Medicaid Integrity Contractors, or MICs to perform post-payment audits of Medicaid claims and identify overpayments. In addition to RACs and MICs, the state Medicaid agencies and other contractors have increased their review activities. Aside from the costs associated with responding to a myriad of requests for substantiation of services, should any of our tenants/operators be found out of compliance with any of these laws, regulations or programs, our business, our financial position and our results of operations could be negatively impacted.

Environmental Matters

A wide variety of federal, state and local environmental and occupational health and safety laws and regulations affect healthcare property operations. These complex federal and state statutes, and their enforcement, involve a myriad of regulations, many of which involve strict liability on the part of the potential offender. Some of these federal and state statutes may directly impact us. Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property or a secured lender, such as us, may be liable for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons and adjacent property). The cost of any required remediation, removal, fines or personal or property damages and the owner’s or secured lender’s liability therefore could exceed or impair the value of the property, and/or the assets of the owner or secured lender. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, could reduce our revenues.

Prior to closing any property acquisition or loan, we ordinarily obtain Phase I environmental assessments in order to attempt to identify potential environmental concerns at the facilities. These assessments will be carried out in accordance with an appropriate level of due diligence and will generally include a physical site inspection, a review of relevant federal, state and local environmental and health agency database records, one or more interviews with appropriate site-related personnel, review of the property’s chain of title and review of historic aerial photographs and other information on past uses of the property. We may also conduct limited subsurface investigations and test for substances of concern where the results of the Phase I environmental assessments or other information indicates possible contamination or where our consultants recommend such procedures.

Americans with Disabilities Act

Our properties must comply with Title III of the ADA to the extent that such properties are “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. Many States and localities have similar requirements that are in addition to, and sometime more stringent than, Federal requirements. We believe the existing properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA or a comparable State or local requirement could result in imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We have not yet made a decision as to whether we will take advantage of any or all of these exemptions. If we do take advantage of any of these exemptions, we do not know if some investors will find common stock less attractive as a result. The result may be a less active trading market for common stock and our stock price may be more volatile.

In addition, the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for adopting new or revised accounting standards available to emerging growth companies.

We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenue equals or exceeds $1.07 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the first sale of shares pursuant to a registration statement filed under the Securities Act, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

Corporate Information

Our principal executive offices are located at 6101 Nimtz Parkway, South Bend, Indiana 46628. Our telephone number at our executive offices is (574) 807-0800 and our corporate website is www.strawberryfieldsreit.com. The information contained on, or accessible through, our website is not incorporated by reference into, and does not form a part of, this Form 10.

Policies With Respect To Certain Activities And Transactions

The following is a discussion of certain of our investment, financing and other policies. These policies have been determined by our board of directors and, in general, may be amended or revised from time to time by our board of directors without a vote of our stockholders.

Investment Policies

Investments in Real Estate or Interests in Real Estate

We will conduct all of our investment activities through our Operating Partnership and its subsidiaries. Our investment objectives are to maximize the cash flow of our properties, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for our stockholders through increases in the value of the Company. Consistent with our policy to acquire assets for both income and capital gain, our Operating Partnership intends to hold its properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning its properties and to make occasional sales of the properties as are consistent with our investment objectives. We have not established a specific policy regarding the relative priority of these investment objectives. For a discussion of our properties and our acquisition and other strategic objectives, see “Item 1. Business.”

We expect to pursue our investment objectives primarily through the ownership by our Operating Partnership of our portfolio of properties and other acquired properties and assets. We currently intend to invest primarily in healthcare-related properties. Future investment or development activities will not be limited to any geographic area, property type or to a specified percentage of our assets. While we may diversify in terms of property locations, size and market, we do not have any limit on the amount or percentage of our assets that may be invested in any one property or any one geographic area. We intend to engage in such future investment activities in a manner that is consistent with the maintenance of our status as a REIT for federal income tax purposes. In addition, we may purchase or lease income-producing healthcare facilities or other types of properties for long-term investment, expand and improve the properties we presently own or other acquired properties, or sell such properties, in whole or in part, when circumstances warrant.

We may also participate with third parties in property ownership, through joint ventures or other types of co-ownership. We also may acquire real estate or interests in real estate in exchange for the issuance of common stock, units, preferred stock or options to purchase stock. These types of investments may permit us to own interests in larger assets without unduly restricting our diversification and, therefore, provide us with flexibility in structuring our portfolio. We will not, however, enter into a joint venture or other partnership arrangement to make an investment that would not otherwise meet our investment policies.

Equity investments in acquired properties may be subject to existing mortgage financing and other indebtedness or to new indebtedness which may be incurred in connection with acquiring or refinancing these properties. Debt service on such financing or indebtedness will have a priority over any dividends with respect to our common stock. Investments are also subject to our policy not to fall within the definition of an “investment company” under the Investment Company Act of 1940, as amended, or the 1940 Act.

Investments in Real Estate Mortgages

We currently hold real estate mortgages on five properties located in Massachusetts with an outstanding balance of $10.8 million as of March 31, 2022. We acquired these loans as part of a plan to cancel these loans in exchange for the title to the properties. However, subsequent to the purchase of the mortgages and prior to closing on the exchange, the owner/operator had to surrender its licenses to the State of Massachusetts due to cash flow issues. As a result, the planned acquisition was cancelled and we are attempting to collect the outstanding balance of these loans which are currently in default. See “Item 1. Business —Legal Proceedings.”

With the exception of these mortgages, we do not have any investments in real estate mortgages and we do not plan to acquire real estate mortgages as part of our investment strategy. However, we may, at the discretion of our board of directors and without a vote of our stockholders, invest in additional mortgages and other types of real estate interests in a manner that is consistent with our qualification as a REIT. If we choose to invest in additional mortgages, we would expect to invest in mortgages secured by healthcare- related properties. However, there is no restriction on the proportion of our assets that may be invested in a type of mortgage or any single mortgage or type of mortgage loan. Investments in real estate mortgages run the risk that one or more borrowers may default under the mortgages and that the collateral securing those mortgages may not be sufficient to enable us to recoup our full investment.

Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Issuers

Subject to the percentage of ownership limitations and the income and asset tests necessary for REIT qualification, we may in the future invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers where such investment would be consistent with our investment objectives. We may invest in the debt or equity securities of such entities, including for the purpose of exercising control over such entities. We have no current plans to invest in entities that are not engaged in real estate activities. We do not have any limit on the amount or percentage of our assets that may be invested in any one entity, property or geographic area. Our investment objectives are to maximize cash flow of our investments, acquire investments with growth potential and provide cash distributions and long-term capital appreciation to our stockholders through increases in the value of the Company. We have not established a specific policy regarding the relative priority of these investment objectives. We will limit our investment in such securities so that we will not fall within the definition of an “investment company” under the 1940 Act.

Investments in Other Securities

Other than as described above, we do not intend to invest in any additional securities such as bonds, preferred stock or common stock.

Dispositions and Potential Dispositions

On February 12, 2021, we sold five properties located in southern Illinois that housed skilled nursing facilities to a group of unrelated third parties for an aggregate price of $26.1 million. The leases for these properties provided for annualized base rent of $3.6 million. We elected to sell these properties because the offered price was attractive and the sale reduced our concentration in this market. We recognized a gain of $3.8 million as a result of these sales. See “Item 1. Business—Recent Disposition.”

In April 2021, tenants for 13 of our properties located in Arkansas agreed to assign their leases to a group of unaffiliated third parties. The prior tenants were related parties of the Company. The facilities located on these properties consist of 12 SNFs and 2 ALFs, with one property housing both a SNF and an ALF. There were no changes to the terms of the existing leases. The assignment of the leases was subject to the approval of the Arkansas Department of Human Services, which was granted in November 2021. In connection with the lease assignments, the Company and the new tenants executed an option to purchase the properties for an aggregate price of $90 million. The tenants are entitled to exercise the option within the lease period but after the claims by the prior owners of the properties have been resolved. See “Item 1. Business—Legal Proceedings” for more information on the claims. These properties are subject to claims by the prior owners of the properties. These claims are not expected to have any impact on the assignment of the leases, but they may interfere with any sale of the properties. See “Item 1. Business—Legal Proceedings.”

With exception of these properties, we do not currently intend to dispose of any of our properties, although we reserve the right to do so if, based upon management’s periodic review of our portfolio, our board of directors determines that such action would be in our best interests. The tax consequences to our directors and executive officers who hold OP units resulting from a proposed disposition of a property may influence their decision as to the desirability of such proposed disposition.

Financing and Leverage Policy

In the future, we anticipate using a combination of additional HUD guaranteed mortgage loans, bond financing, commercial loans and cash flows from operations to finance our operations and acquisitions. We may also utilize other sources of financing, such as asset sales, seller financing, issuance of debt securities, private financings (such as additional bank credit facilities, which may or may not be secured by our assets), common or preferred equity issuances or any combination of these sources, to the extent available to us, or other sources that may become available from time to time. Any debt that we incur may be recourse or nonrecourse and may be secured or unsecured. We also may take advantage of joint venture or other partnering opportunities as such opportunities arise in order to acquire properties that would otherwise be unavailable to us. We may use the proceeds of our borrowings to acquire assets, to refinance existing debt or for general corporate purposes.

We intend, when appropriate, to employ prudent amounts of leverage and to use debt as a means of providing additional funds for the acquisition of assets, to refinance existing debt or for general corporate purposes. We expect to use leverage conservatively, assessing the appropriateness of new equity or debt capital based on market conditions, including prudent assumptions regarding future cash flow, the creditworthiness of tenants and future rental rates.

Our charter and bylaws do not limit the amount of debt that we may incur. Our board of directors has not adopted a policy limiting the total amount of debt that we may incur. Going forward, we expect to target an overall debt-to-gross total assets ratio in the range of 45% to 55%, which is in line with similar publicly traded REITs.

Our board of directors will consider a number of factors in evaluating the amount of debt that we may incur. If we adopt a debt policy, our board of directors may from time to time modify such policy in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general conditions in the market for debt and equity securities, fluctuations in the market price of our common stock, growth and acquisition opportunities and other factors. Our decision to use leverage in the future to finance our assets will be at our discretion and will not be subject to the approval of our stockholders, and we are not restricted by our governing documents or otherwise in the amount of leverage that we may use.

Equity Capital Policies

To the extent that our board of directors determines to obtain additional capital, we may issue debt or equity securities, including additional OP units or senior securities of our Operating Partnership, retain earnings (subject to provisions in the Code requiring distributions of income to maintain REIT qualification) or pursue a combination of these methods. As long as our Operating Partnership is in existence, we will generally contribute the proceeds of all equity capital raised by us to our Operating Partnership in exchange for additional interests in our Operating Partnership, which will dilute the ownership interests of the limited partners in our Operating Partnership.

Existing common stockholders will have no preemptive rights to common or preferred stock or units issued in any securities offering by us, and any such offering might cause a dilution of a stockholder’s investment in us. Although we have no current plans to do so, we may in the future issue shares of capital stock or OP units in connection with acquisitions of property.

We may, under certain circumstances, purchase shares of our common stock or other securities in the open market or in private transactions with our stockholders, provided that those purchases are approved by our board of directors. Our board of directors has no present intention of causing us to repurchase any shares of our common stock or other securities, and any such action would only be taken in conformity with applicable federal and state laws and the applicable requirements for qualification as a REIT.

Conflict of Interest Policies

Overview

Conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our Operating Partnership or any partner thereof, on the other. Our directors and officers have duties to the Company under applicable Maryland law in connection with their oversight and management of the Company. At the same time, we, as the general partner of our Operating Partnership, have fiduciary duties and obligations to our Operating Partnership and its other partners under Maryland law and the partnership agreement in connection with the management of our Operating Partnership. Our fiduciary duties and obligations, as the general partner of our Operating Partnership, may come into conflict with the duties of our directors and officers to the Company. Affiliates of certain of our officers and directors will be limited partners of our Operating Partnership.

Under Delaware law, a partnership agreement may restrict or eliminate a general partner’s fiduciary duties to a limited partnership or its partners, provided that the partnership agreement may not eliminate the implied contractual covenant of good faith and fair dealing. The partnership agreement provides that we will be under no obligation to consider the separate interests of the limited partners of our Operating Partnership in deciding whether to cause the Operating Partnership to take or decline to take any actions. The partnership agreement also provides that, in the event of a conflict between the interests of our Operating Partnership or any limited partner, on the one hand, and the separate interests of the Company or our stockholders, on the other hand, that cannot be resolved in a manner not adverse to either our stockholders or the limited partners, we, in our capacity as the general partner of our Operating Partnership, shall resolve the conflict in favor of the Company and our stockholders. Additionally, any action or failure to act on our part or on the part of our board of directors that gives priority to the separate interests of the Company or our stockholders that does not result in a violation of the contract rights of the limited partners of the Operating Partnership under its partnership agreement does not violate the duty of loyalty that we, in our capacity as the general partner of our Operating Partnership, owe to the Operating Partnership and its limited partners. The duty of care requires a general partner to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law, and this duty may not be unreasonably reduced by the partnership agreement.

The partnership agreement provides that we are not liable to our Operating Partnership or any partner for monetary damages for losses sustained, liabilities incurred or benefits not derived by our Operating Partnership or any limited partner, except for liability for our intentional harm or gross negligence. The partnership agreement also provides that any obligation or liability in our capacity as the general partner of our Operating Partnership that may arise at any time under the partnership agreement or any other instrument, transaction or undertaking contemplated by the partnership agreement will be satisfied, if at all, out of our assets or the assets of our Operating Partnership only, and no obligation or liability of the general partner will be personally binding upon any of our directors, stockholders, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise, and none of our directors or officers will be liable or accountable in damages or otherwise to the partnership, any partner or any assignee of a partner for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or any act or omission. Our Operating Partnership must indemnify us, our directors and officers, officers of our Operating Partnership and any other person designated by us against any and all losses, claims, damages, liabilities (whether joint or several), expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, that relate to the operations of the Operating Partnership, unless (1) an act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active and deliberate dishonesty, (2) for any transaction for which such person actually received an improper personal benefit in violation or breach of any provision of the partnership agreement, or (3) in the case of a criminal proceeding, the person had reasonable cause to believe the act or omission was unlawful.

Our Operating Partnership must also pay or reimburse the reasonable expenses of any such person upon its receipt of a written affirmation of the person’s good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to repay any amounts paid or advanced if it is ultimately determined that the person did not meet the standard of conduct for indemnification. Our Operating Partnership will not indemnify or advance funds to any person with respect to any action initiated by the person seeking indemnification without our approval (except for any proceeding brought to enforce such person’s right to indemnification under the partnership agreement) or if the person is found to be liable to our Operating Partnership on any portion of any claim in the action.

Sale or Refinancing of Properties

In the event that we sell the properties we acquired in the formation transactions, certain OP unitholders could incur adverse tax consequences which are different from the tax consequences to us and to holders of our common stock. Consequently, unitholders may have differing objectives regarding the appropriate pricing and timing of any such sale or repayment of indebtedness.

While we will have the exclusive authority under the partnership agreement to determine whether, when, and on what terms to sell a property or when to refinance or repay indebtedness, any such decision would require the approval of our board of directors. In addition, our Operating Partnership has agreed to indemnify certain limited partners, including affiliates of certain of our executive officers, employees and directors, for their tax liabilities (plus an additional amount equal to the taxes incurred as a result of such indemnity payment) attributable to their share of the built-in gain, as of the completion of the formation transactions, with respect to their interest in the tax protected properties.

Policies Applicable to All Directors and Officers

Our charter and bylaws do not restrict any of our directors, officers, stockholders or affiliates from having a pecuniary interest in an investment or transaction that we have an interest in or from conducting, for their own account, business activities of the type we conduct. We intend, however, to adopt policies that are designed to eliminate or minimize potential conflicts of interest, including a policy for the review, approval or ratification of any related party transactions, including negotiating and entering into leases with directors, officers and stockholders or other related parties, and transactions which raise potential conflicts of interest between us and Operating Partnership, including the tender of OP units by the Predecessor Company or its affiliates, for cash redemption or exchange for shares of our common stock. See “Item. 11. Description of Registrant’s Securities - Description of the Partnership Agreement of Strawberry Fields Realty LP—Redemption Rights.” This policy will provide that the audit committee of our board of directors, comprised of independent directors, will review the relevant facts and circumstances of each related party transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party before approving such transaction. Based on its consideration of all of the relevant facts and circumstances, the audit committee will decide whether or not to approve such transaction. The audit committee would also consider the effect any related party transaction would have on our continued ability to qualify as a REIT. If the board of directors becomes aware of an existing related party transaction that has not been pre-approved under this policy, the transaction will be referred to the audit committee, which will evaluate all options available, including ratification, revision or termination of such transaction. Subject to certain exclusions, this policy also will require any member of the audit committee who may be interested in a related party transaction to recuse himself or herself from any consideration of such related party transaction.

We also adopted a code of business conduct and ethics, which provides that all of our directors, officers and employees are prohibited from taking for themselves opportunities that are discovered through the use of corporate property, information or position without our consent. However, we cannot assure you that these policies or provisions of law will always be successful in eliminating the influence of such conflicts, and if they are not successful, decisions could be made that might fail to reflect fully the interests of all stockholders.

Interested Director and Officer Transactions

Pursuant to the MGCL, a contract or other transaction between us and a director or between us and any other corporation, firm or other entity in which any of our directors is a director or has a material financial interest is not void or voidable solely on the grounds of such common directorship or interest, the presence of such director at the meeting at which the contract or transaction is authorized, approved or ratified or the counting of the director’s vote in favor thereof, provided that:

● the fact of the common directorship or interest is disclosed or known to our board of directors or a committee of our board, and our board or such committee authorizes, approves or ratifies the transaction or contract by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum;

● the fact of the common directorship or interest is disclosed or known to our stockholders entitled to vote thereon, and the transaction or contract is authorized, approved or ratified by a majority of the votes cast by the stockholders entitled to vote other than the votes of shares owned of record or beneficially by the interested director or corporation, firm or other entity; or

● the transaction or contract is fair and reasonable to us at the time it is authorized, ratified or approved.

Furthermore, under Delaware law (where our Operating Partnership is formed), we, as general partner, have a fiduciary duty of loyalty to our Operating Partnership and its partners and, consequently, such transactions also are subject to the duties that we, as general partner, owe to the Operating Partnership and its limited partners (as such duty has been modified by the partnership agreement). As noted above, we also intend to adopt policies that are designed to eliminate or minimize potential conflicts of interest, including a policy for the review, approval or ratification of any related party transactions.

Policies with Respect to Other Activities

We have authority to offer common stock, preferred stock or options to purchase stock in exchange for property and to repurchase or otherwise acquire our common stock or other securities in the open market or otherwise, and we may engage in such activities in the future. As described in “Description of the Partnership Agreement of Strawberry Fields Realty LP” we expect, but are not obligated, to issue common stock to holders of OP units upon some or all of their exercises of their redemption rights. Except in connection with the formation transactions, we have not issued common stock or any other securities in exchange for property or any other purpose. Our board of directors has no present intention of causing us to repurchase any common stock. Our board of directors has the authority, without further stockholder approval, to amend our charter to increase or decrease the number of authorized shares of common stock or preferred stock or the number of shares of stock of any class or series that we have authority to issue and our board of directors, without stockholder approval, has the authority to authorize us to issue additional shares of common stock or preferred stock, in one or more series, including senior securities, in any manner, and on the terms and for the consideration, it deems appropriate. See “Item. 11. Description of Capital Stock.” We have not engaged in trading, underwriting or agency distribution or sale of securities of other issuers other than our Operating Partnership and do not intend to do so. At all times, we intend to make investments in such a manner as to qualify as a REIT, unless because of circumstances or changes in the Code, or the Treasury regulations, our board of directors determines that it is no longer in our best interests to qualify as a REIT. In addition, we intend to make investments in such a way that we will not be treated as an investment company under the 1940 Act.

Reporting Policies

We intend to make available to our stockholders annual reports, including our audited financial statements. Upon the effectiveness of this Form 10, we will become subject to the information reporting requirements of the Exchange Act. Pursuant to those requirements, we will be required to file annual and periodic reports, proxy statements and other information, including audited financial statements, with the SEC.

ITEM 1A. RISK FACTORS

Risks Related to Business and Operations

We lease 41 of our facilities to tenants that are affiliates of Moishe Gubin who serves as Chairman of the Board and our Chief Executive Officer, Michael Blisko, who serves as one of our directors, and Ted Lerman, one of the Controlling Members of the Predecessor Company. As of the data of this Form 10, approximately 63.9% of our annualized base rent is received from these related-party tenants. The failure of these tenants to perform their obligations under their leases or renew their leases upon expiration could have a material adverse effect on our business, financial condition and results of operations.

Forty one of our facilities are leased to tenants that are affiliates of Moishe Gubin who serves as Chairman of the Board and our Chief Executive Officer, Michael Blisko, who serves as one of our directors, and Ted Lerman, one of the Controlling Members of the Predecessor Company. Based on our current leases, approximately 63.9% of our annualized base rental income is received from these tenants. We expect that leases to related party tenants will continue to be the primary source of our revenues for the foreseeable future. Due to such concentration, any failure by these entities to perform their obligations under their leases or a failure to renew their leases upon expiration, could cause interruptions in the receipt of lease revenue or result in vacancies, or both, which would reduce our revenue until the affected properties are leased, and could decrease the ultimate value of the affected property upon sale and have a material adverse effect on our business, financial condition and results of operations.

The leases with related parties have not been negotiated on an arm’s-length basis, and the terms of those agreements may be less or more favorable to us than they might otherwise have been in arm’s-length transactions.

While we endeavor to have our leases with related parties reflect customary, arm’s-length commercial terms and conditions, these agreements were not the result of arm’s-length negotiations, and consequently there can be no assurance that the terms of these agreements were as favorable to us as if they had been negotiated with unaffiliated third parties. In addition, we may choose not to enforce, or to enforce less vigorously, our rights under these leases because of our desire to maintain our ongoing relationship with these affiliates. In this connection, Moishe Gubin, our Chairman and Chief Executive Officer, and Michael Blisko, one of our directors, are the controlling members of 41 of our tenants and related operators. Messrs. Gubin and Blisko are subject to potential conflicts of interest due to their ownership of these tenants and their duties as directors of the Company. As a result of these conflicts, actions by the Company with respect to these related party tenants would be directed by the audit committee of our board of directors, comprised of independent directors, under our conflicts of interest policies. See “Item 1. Business. Policies With respect to Certain Activities and Transactions—Conflict of Interest Policies.” For a description of these agreements and the other agreements that we have entered into with the Predecessor Company, See “Item. 7. Certain Relationships and Related Party Transactions.”

We have entered into nine master lease agreements with respect to 64 of our facilities, including three master lease agreements with tenants that are affiliates of Moishe Gubin who serves as Chairman of the Board and our Chief Executive Officer, Michael Blisko, who serves as one of our directors, and Ted Lerman, one of the Controlling Members of the Predecessor Company. As of the date of this Form 10, these nine leases represent approximately 70.2% of the annualized base rent under all of our leases. The failure of these tenant/operators to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Each master lease agreement provides that the tenants under the master lease are jointly and severally liable for the obligations of all of the other tenants under such master lease. The tenants under each master lease agreement are affiliates of each other.

Rental income under the master leases represents approximately 70.2% of our annualized base rent. Five of these master lease agreements account for more than 5% of our annualized base rent and range from 8.53% to 16.84% of our annualized base rent.

Because our tenants under each master lease agreement are affiliates of each other, the failure of one tenant, or operator under a master lease, may cause the decline in the performance of all of the tenants or operators under the master lease, leading to a lease payment default by multiple tenants.

In addition, the affiliation of the tenants under each master lease increases the potential financial impact to us of an adverse event that affects one of these tenant/operators, such as legal proceedings that seek to suspend or exclude an operator or its principals or employees from Medicaid, Medicare or similar government programs, or otherwise make the tenant/operator ineligible for reimbursement. This type of event could affect all of the tenants under a particular master lease, which could lead to defaults by all of the tenants under that master lease.

Lease payment defaults under any lease including the master lease agreements or declines in the operating performance of groups of tenants could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

If a substantial number of tenants default, we could lose a significant portion of our revenue. In the event of such a default, we may experience delays in enforcing our rights as lessor and may incur substantial costs in protecting our investment and re-leasing these properties. Further, we cannot assure you that we will be able to re-lease these properties for the rent previously received, or at all, or that lease terminations will not cause us to sell the properties at a loss. The result of any of the foregoing risks could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our growth strategy will depend upon future acquisitions of healthcare properties, and we may be unsuccessful in identifying and consummating attractive acquisitions or taking advantage of other investment opportunities, which would impede our growth and negatively affect our cash available for distribution to stockholders.

Our ability to expand through acquisitions is integral to our business strategy and requires that we identify and consummate suitable acquisition or investment opportunities that meet our investment criteria and are compatible with our growth strategy. We may not be successful in identifying and consummating acquisitions or investments in healthcare properties that meet our investment criteria, which would impede our growth. In addition, general fluctuations in the market prices of securities and interest rates may affect our investment opportunities and the value of our investments. Our ability to acquire healthcare properties on favorable terms, or at all, may be adversely affected by the following significant factors:

● competition from other real estate investors, including public and private REITs, private equity investors and institutional investment funds, many of whom may have greater financial and operational resources and lower costs of capital than we have and may be able to accept more risk than we can prudently manage;

● competition from other potential acquirers, which could significantly increase the purchase prices for properties we seek to acquire;

● we may incur significant costs and divert management attention in connection with evaluating and negotiating potential acquisitions, including ones that we are subsequently unable to complete;

● increases in interest rates, inflationary pressures on the margins of our portfolio assets may impact our investment activities;

● even if we enter into agreements for the acquisition of properties, these agreements are subject to customary closing conditions, including the satisfactory results of our due diligence investigations; and

● we may be unable to finance the acquisition on favorable terms, or at all.

Our failure to identify and consummate attractive acquisitions or take advantage of other investment opportunities without substantial expense, delay or other operational or financial problems, would impede our growth and negatively affect our results of operations and cash available for distribution to our stockholders.

Our real estate investments are, and are expected to continue to be, concentrated in skilled nursing facilities, which could adversely affect our operations relative to a more diversified portfolio of assets.

We primarily invest in properties operated as skilled nursing facilities. As of the date of this Form 10, approximately 97.7% of our total annualized base rent is derived from skilled nursing facilities. We are subject to risks inherent in concentrating investments in real estate, and the risks resulting from a lack of diversification may become even greater as a result of our business strategy to concentrate our investments in these types of healthcare properties. Any adverse effects that result from these risks could be more pronounced than if we diversified our investments outside of this type of healthcare properties. Given our focus on this type of properties, our tenant base is limited to operators of this type of facility and dependent upon the healthcare industry generally, and in particular, that the Federal and State governments, through their administration of the Medicare and Medicaid programs, have significant control over the amount and conditions of payment for services rendered and increasingly on conditions for operation which impact on revenue. Any changes in reimbursement or conditions of payment or operation which impact on revenue, in addition to, any industry downturn or negative regulatory or governmental development could adversely affect the ability of our tenants to make lease payments and our ability to maintain current rental and occupancy rates. Accordingly, a downturn in the healthcare industry generally, or in the healthcare-related facility specifically, could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

A pandemic, epidemic or outbreak of an infectious disease in the United States, such as the recent outbreak of the coronavirus known as COVID-19, could adversely affect the operating results and financial condition of the operators of our facilities, which in turn could undermine their ability to meet their lease obligations to us.

Our operating results and financial condition are dependent on the ability of our tenants to meet their lease obligations to us. A pandemic, epidemic or outbreak of an infectious disease, such as the recent outbreak of respiratory illness caused by the novel coronavirus known as COVID-19, could adversely affect the ability of our tenants to meet their lease obligation by increasing their operating costs and reducing their income. Tenants may be required to make significant expenditures to prevent or contain such illnesses. Tenants’ revenues could be affected if public trust in skilled nursing facilities and long-term acute care hospitals were undermined because of such illnesses. Tenants’ revenues could also be adversely affected if a pandemic caused a temporary shutdown or diversion of patients, disrupted the delivery of medical supplies or caused staffing shortages or substantially increased the costs of supplies or staffing or resulted in increased costs as a result of new conditions of operation. The risk to our tenants is enhanced because their facilities primarily serve the elderly, who are particularly at risk for respiratory illnesses such as COVID-19.

Although the amount of rent we receive from our tenants is not dependent on our tenants’ operating results, our tenants’ ability to fulfill their lease obligations, including the payment of rent, could be adversely affected if our tenants encountered significant financial difficulties due to a pandemic.

As of the date of this Form 10, the pandemic caused by the coronavirus known as COVID-19 has not had a material adverse effect on the Company’s financial performance, results of operations, liquidity or access to financing. However, the Company’s operations and financial performance are dependent on the ability of its tenants to meet their lease obligations to the Company.

To the Company’s knowledge and based on information provided to the Company by its tenants, the principal financial effects of the pandemic on the Company’s tenants have been to increase their payroll expenses, to require additional purchases of personal protective equipment, and to decrease occupancy at their facilities. The Company believes that the decline in occupancy was primarily due to declining referrals as a result of hospitals postponing elective surgeries as well as patients’ concerns regarding the risk of infection from COVID-19.

The following table reflects the changes in occupancy at the SNFs operated by related party tenants on the first date of each month from March 1, 2020, through July 1, 2022. Occupancy at these SNFs was not affected due to COVID-19 until after March 1, 2020. The Company is aware that unrelated tenants experienced similar changes through March 2022, which is the most recent information available to the Company for occupancy of unrelated tenants.

	Total Residents		Occupancy Percentage (%)			Change from 3/1/2020

March 1, 2020		4,944		73.4	%
April 1, 2020		4,716		70.1	%		-4.61	%
May1, 2020		4,423		65.7	%		-10.54	%
June 1, 2020		4,315		64.1	%		-12.72	%
July 1, 2020		4,325		64.2	%		-12.52	%
Aug. 1, 2020		4,350		64.6	%		-12.01	%
Sept. 1, 2020		4,291		63.7	%		-13.21	%
Oct. 1, 2020		4,387		65.2	%		-11.27	%
Nov. 1, 2020		4,442		66.0	%		-10.15	%
Dec. 1, 2020		4,403		65.4	%		-10.94	%
Jan. 1, 2021		4,358		64.7	%		-11.85	%
Feb. 1, 2021		4,291		63.7	%		-13.21	%
March 1, 2021		4,300		63.9	%		-13.03	%
April 1, 2021		4,330		64.3	%		-12.42	%
May 1, 2021		4,427		65.8	%		-10.46	%
June 1, 2021		4,474		66.5	%		-9.51	%
July 1, 2021		4,494		66.8	%		-9.10	%
Aug. 1, 2021		4,561		67.8	%		-7.75	%
Sept. 1, 2021		4,535		67.4	%		-8.27	%
Oct. 1, 2021		4,564		67.8	%		-7.69	%
Nov. 1, 2021		4,604		68.4	%		-6.88	%
Dec. 1, 2021		4,642		68.9	%		-6.11	%
Jan. 1, 2022		4,637		68.9	%		-6.21	%
Feb 1, 2022		4,625		68.7			-6.45
March 1, 2022		4,656		69.2	%		-5.85	%
April 1, 2022		4,646		69.0	%		-6.03	%
May 1, 2022		4,625		68.7	%		-6.45	%
June 1, 2022		4,660		69.2	%		-5.74	%
July 1, 2022		4,738		70.4	%		-4.17	%

Between March 1, 2020, and September 1, 2020, occupancy at the SNFs operated by related party tenants decreased from 73.4% on March 1, 2020, to 63.7% on September 1, 2020, or approximately 13%. Since that time, occupancy has varied between a low of 63.7% on September 1, 2020 and again on February 1, 2021, to a high of 70.4% on July 1, 2022. Occupancy steadily increased after April 2021 due to the widespread availability of vaccines for COVID-19, so that the occupancy as of July 1, 2022 was only 4.17% below the level on March 1, 2020. To the Company’s knowledge, the emergence of the delta variant in the summer of 2021 and the omicron variant in the fall of 2021 has not resulted in any reduction in occupancy at the Company’s facilities.

As a result of the COVID-19 pandemic, our tenants have received financial support under several government programs. These programs consisted of forgivable loans under Paycheck Protection Program, grants to operators under the Coronavirus Aid, Relief and Economic Security (CARES) Act in an amount equal to 2% of their historical annual revenues, the waiver of the three day hospital stay required by Medicare, accelerated payments under Medicare, and increased funding for Medicaid patients by some state governments.

The Company’s management does not expect that the discontinuation of these government programs will have a material adverse effect on the tenants’ ability to pay rent for four reasons. First, the Company’s management believes that most nursing home residents in the United States have received vaccines for COVID-19, which have been highly effective in preventing cases of COVID-19. Second, occupancy significantly increased between April 2021 and the beginning of July 2022. Third, the source of the tenants’ revenues has partially shifted from Medicaid to Medicare because more patients have become eligible for Medicare due to changes in the eligibility criteria. The tenants receive larger payments from Medicare than Medicaid. Fourth, most of the Company’s tenants have the ability to maintain profitability notwithstanding the decrease in revenues because approximately 85% to 90% of their operating costs are variable items (such as labor costs, food, drugs and supplies, including personal protection equipment and cleaning supplies) that can be reduced when occupancy decreases.

To the Company’s knowledge, its tenants are complying with all applicable governmental requirements and guidelines for addressing the risks posed by COVID-19. Although there have been a limited number of confirmed cases of COVID-19 at the facilities operated by the Company’s tenants, to its knowledge, these cases have not had a material impact on any of the operators or resulted in any claims against any of the operators.

As a landlord, the Company does not control the operations of its tenants, including related party tenants, and is not able to cause its tenants to take any specific actions to address trends in occupancy at the facilities operated by its tenants, other than to monitor occupancy and income of its tenants, discuss trends in occupancy with tenants and possible responses, and, in the event of a default, to exercise its rights as a landlord. However, Moishe Gubin, our Chairman and Chief Executive Officer, and Michael Blisko, one of our directors, as the controlling members of 41 of our tenants and related operators, have the ability to obtain information regarding these tenants and related operators and cause the tenants and operators to take actions, including with respect to occupancy. Messrs. Gubin and Blisko are subject to potential conflicts of interest due to their ownership of these tenants and their duties as directors of the Company. As a result of these conflicts, actions by the Company with respect to these related party tenants would be directed by the audit committee of our board of directors, comprised of independent directors, under our conflicts of interest policies. See “Item 1. Business. Policies With respect to Certain Activities and Transactions—Conflict of Interest Policies.”

Except as described below, COVID-19 has not caused any of our tenants to be unable to meet their lease obligations to us, including their obligation to pay rent in a timely manner.

On April 4, 2022, we were notified that the tenants under the master leases for 6 facilities located in central Illinois intended to default with respect to their lease agreements due to operating losses. The tenants indicated that their operating losses were partially due to decreased occupancy caused by COVID-19. The tenants are affiliates of Steven Blisko, who is the brother of Michael Blisko, one of our directors. These leases provided for a combined rent of $225,000 per month, or $2.7 million per year. All payments due under these leases were paid through mid-June 2022. On July 1, 2022, the Company entered into new lease agreements with an unaffiliated third party operator to lease these properties. The new leases have terms of 10 years each and provide for combined average base rent of $180,000 per month, or $2.3 million per year over the life of the leases. The Company expects to recognize a loss of approximately $1,080,000 in the second quarter of 2022 due to the write-off of straight-line rent receivable related to the former leases.

As of the date of this Form 10, none of the Company’s current tenants are delinquent on the payment of rent, and none of them have requested the Company to amend the terms of their leases to reduce current or future lease payments. The Company accordingly believes that its current tenants have the ability to meet their lease obligations based on their current levels of occupancy. However, if tenants were to experience additional decreases in occupancy due to the emergence of new variants of COVID-19, and such decreases adversely affected its tenants’ operating income, tenants might be unable to meet their lease obligations. The Company is unable to determine what level of decreased occupancy would result in lease defaults because decreases in occupancy also allow tenants to reduce operating costs due to reduced staffing requirements.

In the event that tenants were to default due to decreased occupancy, the Company would seek to obtain new operators to take over the leases and the facilities. This could result in decreases in the Company’s rental income if the new tenants required lower rental payments. Additionally, if the Company were unable to obtain new operators, the Company could lose rental income from these properties. Either of these events could have a material adverse effect on our financial condition and results of operation.

The COVID-19 pandemic has also caused and is likely to continue to cause regulatory changes and, as a result, healthcare operators may face increased regulatory scrutiny and new requirements for operations and/or payment, especially from government payors including Medicare and Medicaid. Any changes in the regulatory framework or the intensity or extent of government or private enforcement actions could materially increase operating costs incurred by us or our tenants, operators and managers for monitoring and reporting compliance, which could have a material effect on us.

We depend on key personnel whose continued service is not guaranteed and each of whom would be difficult to replace.

We depend on the efforts and expertise of Mr. Gubin, our Chief Executive Officer and Chairman of our board of directors, Mr. Eingal, our Chief Financial Officer, and Mr. Jeffrey Bajtner, our Senior Investment Officer, to execute our business strategy. If one or more of these individuals were to no longer be employed by us, we may be unable to find suitable replacements. If we were to lose the services of one or more of our executive officers and were unable to find suitable replacements, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially and adversely affected.

Our growth depends on our ability to obtain additional debt and equity financing from third-party sources. Such financing is outside of our control and may not be available to us on commercially reasonable terms or at all, which could limit our ability, among other things, to meet our capital and operating needs or make the cash distributions to our stockholders necessary to qualify and maintain our qualification as a REIT.

We intend to elect to the taxed as a REIT commencing with the 2022 calendar year. In order to qualify and maintain our qualification as a REIT, we will be required under the Code, among other things, to distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our REIT taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we intend to rely on third-party sources to fund our capital needs. We may not be able to obtain such financing on favorable terms or at all and any additional debt we incur will increase our leverage and likelihood of default. Our access to third-party sources of capital depends, in part, on:

	●	general market conditions;

	●	the market’s perception of our business and growth potential;

	●	our current debt levels;

	●	our current and expected future earnings;

	●	our cash flow and cash distributions; and

	●	the market price per share of our common stock.

If we cannot obtain capital from third-party sources, we may not be able to acquire properties when strategic opportunities exist, meet the capital and operating needs of our existing properties, satisfy our debt service obligations or make the cash distributions to our stockholders necessary to qualify and maintain our qualification as a REIT.

We have substantial indebtedness, which could adversely affect our financial condition, results of operations and cash flows.

As of March 31, 2022, we had total indebtedness of approximately $486.8 million, consisting of $281.3 million in HUD guaranteed debt, $99.1 million in net Series A and Series C Bonds outstanding, $107.6 million in commercial mortgage loans from third party lenders that were not guaranteed by HUD and $1.4 million in seller notes. We also expect to incur significant additional debt to finance future acquisitions.

We currently anticipate that we will have sufficient liquidity to meet our working capital obligations, including our debt service obligations.

Nevertheless, payments of principal and interest on borrowings may leave us with insufficient cash to operate our properties or to pay the dividends currently contemplated or necessary to qualify and maintain our qualification as a REIT.

Our substantial level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:

● our cash flows may be insufficient to meet our required principal and interest payments;

● we may be unable to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to meet operational needs;

● we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;

● we may be forced to dispose of one or more of our properties, possibly on unfavorable terms or in violation of certain covenants to which we may be subject;

● we may default on our obligations, in which case the lenders or mortgagees may have the right to foreclose on any properties that secure the loans and/or collect rents and other income from our properties;

● increased inflation may have a pronounced negative impact on the interest expense we pay in connection with our outstanding indebtedness and our general and administrative expenses, as these costs could increase at a rate higher than our rents; and

● we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations or reduce our ability to pay, or prohibit us from paying, distributions to our stockholders.

If any one of these events were to occur, our financial condition, results of operations and cash flows could be materially adversely affected. Furthermore, foreclosures could create taxable income without accompanying cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Indebtedness.”

Certain of our debt agreements include restrictive covenants which could limit our ability to make distributions.

The indentures for our Series A Bonds and Series C Bonds contain restrictions on the payment of dividends by the BVI Company.

Under these indentures, the BVI Company may not make any distribution unless certain conditions set forth in the indentures are fulfilled. These conditions include limitations on annual dividends to a percentage of current income and restrictions on dividends based on certain financial ratios. See “Management Discussion and Analysis of Results of Operations and Financial Condition – Liquidity and Capital Resources.” At March 31, 2022, the BVI Company would have been permitted to pay dividends of up to $28.0 million under the indentures.

Additionally, our subsidiaries that have received HUD guaranteed mortgage loans are parties to customary healthcare regulatory agreements with HUD. These agreements restrict the ability of these subsidiaries to make distributions with funds borrowed under the mortgage loans in the event that the subsidiary does not have surplus funds to make a distribution. Surplus funds are funds in excess of the amount required to make the following month’s payment under the loan.

The restrictions under the indentures for the Series A Bonds Series C Bonds and the loan agreements for our other loans could affect the ability of the BVI Company and its subsidiaries to make distributions to the Operating Partnership. This is in turn could affect our ability to make distributions to our stockholders, including cash dividends required to meet the annual distribution requirements applicable to the Company as a REIT. In such event, we would seek to obtain additional loans or sell additional OP units in order to fund required distributions or make elective stock dividends.

Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.

Substantially all of our properties have been financed with mortgage debt. Mortgage and other secured debt obligations increase our risk of property losses because defaults on indebtedness secured by properties may result in foreclosure actions initiated by lenders and ultimately our loss of the property securing any loans for which we are in default. Any foreclosure on a mortgaged property or group of properties could adversely affect the overall value of our portfolio of properties. For tax purposes, a foreclosure on any of our properties that is subject to a nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code. Foreclosures could also trigger our tax indemnification obligations under the terms of our tax protection agreements with respect to the sales of certain properties.

The indenture for the Series C Bonds provides for a balloon payment of the entire principal of $49.8 million in 2026. The loan agreement for our new $105 million term loan provides for a balloon payment in 2027. We may also obtain additional financing that contains balloon payment obligations. These types of obligations may materially adversely affect us, including our cash flows, financial condition and ability to make distributions.

The indenture for the Series C Bond provides for a balloon payment of the entire principal of $49.8 million in 2026. The loan agreement for our new $105 million term loan provides for a balloon payment in 2027.

It is also possible that our future debt arrangements may require us to make a lump-sum or “balloon” payment at maturity.

To the extent we have these types of obligations, our ability to make a balloon payment at maturity will depend on our working capital at the time of repayment, our ability to obtain additional financing or our ability to sell the property. At the time the balloon payment is due, we may or may not be able to refinance the existing financing on terms as favorable as the original loan or sell the property at a price sufficient to make the balloon payment. In addition, balloon payments and payments of principal and interest on our indebtedness may leave us with insufficient cash to pay the distributions that we are required to pay to qualify and maintain our qualification as a REIT. In such event, we would seek to obtain additional loans or sell additional OP units in order to fund required distributions or make elective stock dividends.

The loan agreement for our $105 million commercial bank term loan contains covenants and other terms that impose material operating and financial restrictions. The loan agreement also contains provisions that allow the lender to accelerate the amounts due under the loan agreement if Moishe Gubin, our Chairman and Chief Executive Officer, ceases to be actively involved in the executive management of the Operating Partnership or ceases to be a director of the Company or if any person or group (other than Mr. Gubin) acquires more than 30% of the common stock of the Company. A breach of these covenants and restrictions could result in the acceleration of the amounts due under the loan agreement, which would have a material adverse effect on the Company’s financial conditions and results of operations.

In the event of any breach of the covenants or restrictions under the loan agreement, we would seek to obtain a waiver from the lender. If the lender refused to grant a waiver, we would seek to refinance the loan with a new lender or seek to sell properties in order to obtain funds to repay the loan. If we were unable to refinance the loan or repay the loan utilizing the proceeds from the sale of our properties, the lender could foreclose its mortgage lien against the properties pledged as collateral for the loan. Such an event would have a material adverse effect on our financial condition and our operating results because it would eliminate a substantial portion of our income generating assets and potentially result in the acceleration of other debt that subject to default if the loan agreement is accelerated

On March 18, 2022, the Operating Partnership and 21 of its subsidiaries received a $105 million mortgage loan from a commercial bank. The loan is secured by a lien on all of the assets of the Operating Partnership and the 21 subsidiaries that are borrowers. The collateral primarily consists of 21 properties owned by these subsidiaries. The loan is also secured by guarantees of the Company and the BVI Company. The borrowers must pay down the loan in the event that the outstanding balance of the loan exceeds 65% of the fair market value of the properties pledged to the lender.

The loan agreement contains a number of restrictive covenants that impose material operating and financial restrictions and may limit our ability to undertake transactions that we may believe are in our long-term best interest. These restrictions limit the ability of the Operating Partnership and the borrower subsidiaries to:

	●	incur additional indebtedness, other than indebtedness incurred by the Operating Partnership that would not result in a violation of the financial covenants described below;

	●	pay dividends or make other distributions or repurchase or redeem capital stock, other than dividends that would not result in a violation of the financial covenants described below and dividends made by the Operating Partnership and subsidiary borrowers that are used by the Company to make distributions that are necessary to maintain our REIT status;

	●	make loans and investments, other than loans and investments by the Operating Partnership that would not result in a violation of the financial covenants described below;

	●	sell assets, other than the sale of assets by the Operating Partnership;

	●	incur liens on any of the collateral for the loan or on the other assets of the borrower subsidiaries;

	●	enter into transactions with affiliates except on arm’s length terms; and

	●	enter into any transaction, including any merger or consolidation, that could result in a change of control.

The loan agreement defines a change of control as the occurrence of any of the following events:

	●	the BVI Company fails to own all of the equity interests in the borrower subsidiaries;

	●	the Operating Partnership fails to own all of the equity interests in the BVI Company;

	●	the failure of the Company to be the general partner of the Operating Partnership;

	●	the failure of Moishe Gubin to be a voting member of the board of directors of each of the Company and the BVI Company; and

	●	the failure of Moishe Gubin to be actively involved in the executive management of the Operating Partnership; or

	●	any person (other than Moishe Gubin) shall have acquired beneficial ownership, directly or indirectly, of more than 30% of the common stock of the Company.

In addition, the loan agreement contains financial covenants that require us to maintain specified financial ratios and maintain a minimum amount of equity in our subsidiaries.

The financial covenants consist of (i) a covenant that the ratio of the Company’s indebtedness to its EBITDA cannot exceed 8.0 to 1, (ii) a covenant that the ratio of the Company’s net operating income to its debt service before dividend distribution is at least 1.20 to 1.00 for each fiscal quarter as measured pursuant to the terms of the loan agreement, (iii) a covenant that the ratio of the Company’s net operating income to its debt service after dividend distribution is at least 1.05 to 1.00 for each fiscal quarter as measured pursuant to the terms of the loan agreement, and (iv) a covenant that the Company’s equity in its subsidiaries equal at least $20,000,000.

Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we may be unable to meet them.

As a result of these restrictions, we may be:

	●	limited in how we conduct our business;

	●	unable to raise additional debt or equity financing to operate during general economic or business downturns; or

	●	unable to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results and our substantial indebtedness could adversely affect the availability and terms of our financing.

A breach of the covenants or restrictions under the loan agreement could result in an event of default under the loan agreement. Such a default would allow the lender to accelerate the loan and may result in the acceleration of any debt to which a cross-acceleration or cross-default provision applies.

The restrictions related to a change of control include a requirement that Mr. Gubin remain actively involved in the management of our business and serving as a director. Although we expect that Mr. Gubin will continue to be actively involved in the Company’s business because he owns a significant portion of our common stock and the OP units in the Operating Partnership, it is possible that he could become unavailable for reasons outside of his control such illness or injury. Such an event could result in the breach of the loan agreement.

The restrictions related to a change of control also include a requirement that no person or group (other than Mr, Gubin) acquire more than 30% of our common stock. We believe that the risk of a violation of this restriction is limited because the Company’s organizational documents prohibit any person or such person’s affiliates from acquiring more than 9.9% of our common stock.

In the event of any breach of the covenants or restrictions under the loan agreement, we would seek to obtain a waiver from the lender. If the lender refused to grant a waiver, we would seek to refinance the loan with a new lender or seek to sell properties in order to obtain funds to repay the loan. If we were unable to refinance the loan or repay the loan utilizing the proceeds from the sale of our properties, the lender could foreclose its mortgage lien against the properties pledged as collateral for the loan. Such an event would have a material adverse effect on our financial condition and our operating results because it would eliminate a substantial portion of our income generating assets and potentially result in the acceleration of any other debt that is subject to default if the loan agreement is accelerated.

For addition information concerning the new commercial bank term loan, see “Item 2. Financial Information-Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources- Commercial Bank Term Loan.”

Changes in the method pursuant to which LIBOR is determined and potential phasing out of LIBOR after 2021 may adversely affect our financial results.

On July 27, 2017, the Chief Executive of the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates the LIBOR administrator, ICE Benchmark Administration Limited (“IBA”), announced that the FCA will no longer persuade or compel panel banks to submit rates for the calculation of LIBOR after 2021. On March 5, 2021, the FCA and the IBA announced that the IBA will cease publication in the current form for 1-week and 2-month U.S. dollar LIBOR rates immediately following the publication on December 31, 2021 and for overnight, 1-month, 3-month, 6-month and 12-month U.S. dollar LIBOR rates immediately following the publication on June 30, 2023. The FCA and U.S. bank regulators have welcomed the IBA’s plans to continue publishing certain tenors for U.S. dollar LIBOR through June 30, 2023 because it will allow many legacy U.S. dollar LIBOR contracts that lack effective fallback provisions and are difficult to amend to mature before such LIBOR rates experience disruptions. U.S. bank regulators are, however, encouraging banks to cease entering into new financial contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. Given consumer protection, litigation, and reputation risks, U.S. bank regulators believe entering into new financial contracts that use LIBOR as a reference rate after December 31, 2021 would create safety and soundness risks. In addition, they expect new financial contracts to either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation. Although the foregoing may provide some sense of timing, there is no assurance that LIBOR, of any particular currency and tenor, will continue to be published or be representative of the underlying market until any particular date, and it appears highly likely that LIBOR will be discontinued or no longer be representative after December 31, 2021 or June 30, 2023, depending on the currency and tenor. It is not possible to predict all consequences of the IBA’s plans to cease publishing LIBOR, any related regulatory actions and the expected discontinuance of the use of LIBOR as a reference rate for financial contracts.

As of the date of this Form 10, $2.9 million of our senior debt (representing less than 1% of our total debt) bears interest at variable rate equal to 1-month U.S. dollar LIBOR plus a margin. It is possible that we may borrow additional funds at variable rates linked to LIBOR. We expect that all of our variable rate senior debt and any additional variable rate debt will have matured, been prepaid or otherwise terminated prior to June 30, 2023. In this regard, all of our senior debt that bears interest at variable rate based on 1-month U.S. dollar LIBOR will mature prior to June 30, 2023. Until the earlier of the satisfaction of such debt or June 30, 2023, we intend to rely on the IBA’s plan to continue to publish U.S. Dollar LIBOR rates in order to defer modifying the agreements for such debt to replace LIBOR. Our variable rate senior debt does not include robust fallback language that replaces LIBOR with a clearly defined alternative reference rate after LIBOR’s discontinuation. If any of our variable rate debt matures after LIBOR ceases to be published, our counterparties may disagree with us about how to calculate or replace LIBOR. Even if robust fallback language were included, there can be no assurance that the replacement rate plus any spread adjustment will be economically equivalent to LIBOR, which could result in us paying a higher interest rate on such debt. Modifications to any agreements governing our variable rate debt to replace LIBOR with an alternative reference rate could result in adverse tax consequences.

The Alternative Reference Rates Committee, a group of private-market participants convened by the U.S. Federal Reserve Board and the New York Federal Reserve, has recommended the Secured Overnight Financing Rate (“SOFR”) as a more robust reference rate alternative to U.S. dollar LIBOR. SOFR is calculated based on overnight transactions under repurchase agreements, backed by Treasury securities. SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR). SOFR is therefore likely to be lower than LIBOR and is less likely to correlate with the funding costs of financial institutions. To approximate economic equivalence to LIBOR, SOFR can be compounded over a relevant term and a spread adjustment may be added. The use of SOFR as a substitute for LIBOR is voluntary and may not be suitable for all market participants. Market acceptance of SOFR remains uncertain as market conventions related to calculating SOFR-based interest continue to develop and several services are offering or developing credit sensitive alternative rates. Inconsistent use of replacement rates or calculation conventions among financial products could expose us to additional financial risks and increase the cost of any related hedging transactions.

We have experienced and expect to continue to experience significant growth and may not be able to adapt our management and operational systems to respond to the integration of the healthcare properties we expect to acquire without unanticipated disruption or expense, which could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our stockholders.

We have experienced and expect to continue to experience significant growth through the potential acquisition of healthcare properties that we identify. We may not be able to adapt our management, administrative, accounting and operational systems or hire and retain sufficient operational staff to manage such potential acquisitions without operating disruptions or unanticipated costs. Our failure to successfully manage our growth could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may be unsuccessful in our efforts to develop relationships with unaffiliated operators.

Part of our business strategy is to develop relationships with unaffiliated operators. We believe these efforts will assist us in expanding our portfolio and reducing our dependency on operators that are related parties. As of the date of this Form 10, 42 of our facilities, or approximately 49.4% of the total, were leased and operated by unaffiliated third parties. We do not have any commitments from any unaffiliated operators to lease facilities and there can be no assurance that we will be able to establish such relationships or enter into leases with such third parties.

Properties in Illinois, Indiana, Tennessee and Arkansas account for approximately 82.3% of the annualized base rent from our portfolio as of the date of this Form 10.

As of the date of this Form 10, approximately 82.3% of our annualized base rent was derived from properties located in the states of Illinois (30.9%), Indiana (17.2%), Tennessee (20.7%) and Arkansas (13.5%). As a result of this geographic concentration, we are particularly exposed to downturns in the economies of, as well as other changes in the real estate and healthcare industries in, these geographic areas or in increased regulation or new conditions on operations or payment,. Any material change in the current payment programs or regulatory, economic, environmental or competitive conditions in these geographic areas could have a disproportionate effect on our overall business results. In the event of negative economic or other changes in these geographic areas, our business, financial condition and results of operations and our ability to make distributions to our stockholders may be adversely affected.

We face potential adverse consequences of bankruptcy or insolvency by our tenants, operators, borrowers, managers and other obligors.

We are exposed to the risk that our tenants, operators, borrowers, managers or other obligors could become bankrupt or insolvent. Although our lease agreements will provide us with the right to exercise certain remedies in the event of default on the obligations owing to us or upon the occurrence of certain insolvency events, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization. For example, a debtor-lessee may reject its lease with us in a bankruptcy proceeding. In such a case, our claim against the debtor-lessee for unpaid and future rents would be limited by the statutory cap of the U.S. Bankruptcy Code. This statutory cap could be substantially less than the remaining rent actually owed under the lease, and any claim we have for unpaid rent might not be paid in full. In addition, a debtor-lessee may assert in a bankruptcy proceeding that its lease should be re-characterized as a financing agreement. If such a claim is successful, our rights and remedies as a lender, compared to a lessor, are generally more limited. In the event of an obligor bankruptcy, we may also be required to fund certain expenses and obligations (e.g., 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 tenant, operator or manager. As a result, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be adversely affected if an obligor becomes bankrupt or insolvent.

Long-term leases may result in below market lease rates over time, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We have entered into long-term leases with tenants/operators at most of our properties. Our long-term leases provide for rent to increase over time. However, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of such long-term leases at levels such that even after contractual rental increases, the rent under our long-term leases could be less than then-current market rental rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially and adversely affected.

We may incur additional costs in acquiring or re-leasing properties, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may invest in properties designed or built primarily for a particular tenant/operator of a specific type of use known as a single-user facility. If the tenant/operator fails to renew its lease or defaults on its lease obligations, we may not be able to readily market a single-user facility to a new tenant/operator without making substantial capital improvements or incurring other significant costs. We also may incur significant litigation costs in enforcing our rights against the defaulting tenant/operator. These consequences could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases.

We cannot predict whether our tenants will renew existing leases beyond their current terms. If any of our leases are not renewed upon expiration, we would attempt to lease those properties to another tenant. In case of non-renewal, we generally expect to have advance notice before expiration of the lease term to arrange for repositioning of the properties and our tenants are required to continue to perform all of their obligations (including the payment of all rental amounts) for the non-renewed assets until such expiration. However, following expiration of a lease term 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 reposition the properties with a suitable replacement tenant. We also might not be successful in identifying suitable replacement tenants or entering into leases with new tenants on a timely basis or on terms as favorable to us as our current leases, or at all, and we may be required to fund certain expenses and obligations (e.g., 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 repositioned. Our ability to reposition our properties with a suitable tenant could be significantly delayed or limited by state licensing, receivership, certificate of need or other laws, relating to debtor-creditor rights and obligations and the ownership and operation of health care facilities, as well as by the Medicare and Medicaid change-of-ownership rules. We could also incur substantial additional expenses in connection with any licensing, receivership or change-of-ownership proceedings, which can be complex and time consuming and can sometimes require that new tenants comply with new or additional requirements for a facility’s physical plant or operations which might not have been imposed on prior tenants because of grandfathering provisions in law or regulation. In addition, our ability to locate suitable replacement tenants could be impaired by the specialized healthcare uses or contractual restrictions on use of the properties which are designed for specific health care purposes, and we may be required to spend substantial amounts to adapt the properties to other uses or obtain governmental approvals to do so. Any such delays, limitations and expenses could adversely impact our ability to collect rent, obtain possession of leased properties or otherwise exercise remedies for tenant default and could have a material adverse effect on us. In addition, if we are unable to re-let the properties to healthcare operators with the expertise necessary to operate the type of properties in which we intend to invest, we may be forced to sell the properties at a loss due to the repositioning expenses likely to be incurred by potential purchasers.

All of these risks may be greater in smaller markets, where there may be fewer potential replacement tenants, making it more difficult to replace tenants, especially for specialized space, and could have a material adverse effect on us.

On April 4, 2022, we were notified that the tenants under the master leases for 6 facilities located in central Illinois intended to default with respect to their lease agreements due to operating losses. The tenants indicated that their operating losses were partially due to decreased occupancy caused by COVID-19. The tenants are affiliates of Steven Blisko, who is the brother of Michael Blisko, one of our directors. These leases provided for a combined rent of $225,000 per month, or $2.7 million per year. All payments due under these leases were paid through mid-June 2022. On July 1, 2022, the Company entered into new lease agreements with an unaffiliated third party operator to lease these properties. The new leases have terms of 10 years each and provide for combined average base rent of $180,000 per month, or $2.3 million per year over the life of the leases. The Company expects to recognize a loss of approximately $1,080,000 in the second quarter of 2022 due to the write-off of straight-line rent receivable related to the former leases.

Our computer systems may be subject to potential cyberattacks by state actors as a result of the conflict between Russia and Ukraine.

The invasion of Ukraine by Russia on February 24, 2022 has increased the risk of potential cyberattacks of businesses located in the United States, including our business. In the event that our computer systems or database were subject to such an attack, our ability to operate our business could be significantly impaired until we were able to address the attack by rebuilding the parts of our computer systems and database affected by such an attack. Our computer database primarily consists of financial information relating to our rental properties, including information concerning rental payments from tenants and the payment of property and operating expenses by us and our tenants. We do not have any patient information. To address the risk of a possible cyberattack by state actors, the Company has engaged a third party consultant to implement additional security protections for our systems, including restrictions on the ability of persons utilizing URLs located outside of the United States to log on to our systems. We also maintain backups of our data on third party servers. Although these steps provide additional protection from cyberattacks, they are not full proof, and it is possible that we may experience a cyberattack that materially disrupts our business.

We and our directors and officers may become subject to litigation and disputes, which could have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock.

We and our directors and officers may become subject to litigation, including claims relating to our operations, properties, offerings, and otherwise in the ordinary course of business.

For example, the sellers of certain properties acquired by the Predecessor Company in Arkansas and Kentucky have commenced legal proceedings against two of our directors, Moishe Gubin, Michael Blisko, the Predecessor Company and certain of its subsidiaries, as well as the operators of the facilities located at the acquired properties, asserting claims for fraud, breach of contract and rescission based on defendants’ alleged failure to perform certain post-closing obligations. We have potential direct exposure for these claims because the subsidiaries of the Predecessor Company that were named as defendants are now subsidiaries of the Operating Partnership. Additionally, the Operating Partnership is potentially liable for the claims made against Moishe Gubin, Michael Blisko and the Predecessor Company pursuant to the provisions of the contribution agreement, under which the Operating Partnership assumed all of the liabilities of the Predecessor Company and agreed to indemnify the Predecessor Company and its affiliates for such liabilities. See “Item 8. Legal Proceedings.” Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. In addition, we are regularly named as a defendant in claims made against our tenants/operators due to patient injuries. We generally intend to vigorously defend ourselves; however, we cannot be certain of the ultimate outcomes of any claims that may arise in the future. Resolution of these types of matters against us may result in our having to pay significant fines, judgments, or settlements, which, if uninsured, or if the fines, judgments, and settlements exceed insured levels, could adversely impact our earnings and cash flows, thereby having an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock.

In addition, the COVID-19 pandemic may cause our business and the businesses of our tenants, operators and managers to face increased exposure to union or other disputes, lawsuits or other legal or regulatory proceedings filed at the same time across multiple jurisdictions, such as professional liability litigation alleging wrongful death and negligence claims, some of which may result in large damage awards and not be indemnified or subject to sufficient insurance coverage. Federal, state, local and industry-initiated efforts may limit our tenants’, operators’ and managers’ liabilities from COVID-19 related quality of care litigation but the extent of such limitations are uncertain and, to the extent such limitations of liability may not be applicable or enforced, such liabilities could adversely impact the business and financial conditions of our tenants, operators and managers. If, in turn, such tenants, operators or managers fail to make contractual rent payments to us or, with respect to our senior living operating portfolio, cash flows are adversely affected, it could have a material adverse effect on us.

Further, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage or result in future limitations in coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors.

Our use of OP units as consideration to acquire properties could result in stockholder dilution or limit our ability to sell such properties, which could have a material adverse effect on our business, results of operations and cash flows.

In the future, we may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for OP units in our Operating Partnership, which may result in stockholder dilution. This acquisition structure may have the effect of, among other things, reducing the amount of tax depreciation we could deduct over the tax life of the acquired properties, and may require that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax bases. These restrictions could limit our ability to sell properties at a time, or on terms, that would be favorable absent such restrictions, which could have a material adverse effect on our business, results of operations and cash flows.

We did not obtain any third-party appraisals of the assets and properties previously owned by the Predecessor Company for purposes of the formation transactions nor any independent third-party valuations or fairness opinions. Accordingly, the value of the common stock and OP units that were issued by us to the Predecessor Company in exchange for its assets and liabilities in the formation transactions may have exceeded their aggregate fair market value.

We did not obtain any third-party appraisals of the assets and properties previously owned by the Predecessor Company for purposes of the formation transactions. We also did not obtain any independent third-party valuation or fairness opinion in connection with the formation transactions.

The value of the OP units in the Operating Partnership that were issued by the Operating Partnership to the Predecessor Company in our formation transactions in exchange for the assets and liabilities of the Predecessor Company was not based on arm’s-length negotiations and was not approved by any independent directors. In addition, Moishe Gubin, our Chairman and Chief Executive Officer, who had significant influence in structuring the formation transactions, had pre-existing ownership interests in those properties and beneficially owns OP units in the Operating Partnership as a result of the formation transactions. It is possible that the consideration we paid for the properties and assets in the formation transactions may have exceeded their fair market value and that we could have realized less value from these assets than we would have if the assets had been acquired after arm’s-length negotiation or if we had obtained independent appraisals for these assets. See “Item 7. Certain Relationships and Related Transactions.”

The historical performance of the Predecessor Company is not, and the consolidated financial statements of the Predecessor Company included in this Form 10 are not necessarily, indicative of our future results.

The historical performance of the Predecessor Company and the consolidated financial statements of the Predecessor Company that are included in this Form 10 are not necessarily indicative of what our results of operations, financial position or cash flows will be in the future. It is not possible for us to accurately estimate all adjustments that may reflect all the significant changes that will occur in our cost structure, funding and operations as a result of the formation transactions, including potential increased costs associated with reduced economies of scale and increased costs associated with being an independent publicly traded company.

We have no operating history as a REIT or a publicly traded company in the United States and may not be able to operate our business successfully as a REIT or publicly traded company.

We intend to elect to be taxed as a REIT for the 2022 calendar year. We have no operating history as a REIT or a publicly traded company in the United States. We cannot assure you that the past experience of our senior management team will be sufficient to successfully operate the Company as a REIT or a U.S. publicly traded company, including the requirements to disclosure requirements of the SEC in a timely manner. As a U.S. public company, we will be required to develop and implement control systems and procedures in order to qualify and maintain our qualification as a REIT and satisfy our periodic and current reporting requirements under applicable SEC regulations, and this transition could place a significant strain on our management systems, infrastructure and other resources. See “—Risks Related to Our Status as a REIT.”

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make common stock less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act. We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenue equals or exceeds $1.07 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the first sale of shares pursuant to a registration statement filed under the Securities Act, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. We may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions and benefits under the JOBS Act. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile and decline significantly.

We have elected to avail ourselves of the extended transition period for adopting new or revised accounting standards available to emerging growth companies under the JOBS Act and will, therefore, not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies, which could make our common stock less attractive to investors.

The JOBS Act provides that an emerging growth company can take advantage of exemption from various reporting requirements applicable to other public companies and an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We intend to avail ourselves of these exemptions and the extended transition periods for adopting new or revised accounting standards and therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, our consolidated financial statements may not be comparable to companies that comply with public company effective dates. We intend to avail ourselves of these options although, subject to certain restrictions, we may elect to stop availing ourselves of these exemptions in the future even while we remain an “emerging growth company.” We cannot predict whether investors will find our stock less attractive as a result of this election. If some investors find shares of our common stock less attractive as a result of this election, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will be subject to the requirements of the Sarbanes-Oxley Act.

As long as we remain an emerging growth company, as that term is defined in the JOBS Act, we will be permitted to gradually comply with certain of the on-going reporting and disclosure obligations of public companies pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes- Oxley Act”).

However, our management will be required to deliver a report that assesses the effectiveness of our internal controls over financial reporting, pursuant to Section 302 of the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act may require our auditors to deliver an attestation report on the effectiveness of our internal controls over financial reporting in conjunction with their opinion on our audited financial statements as of December 31 subsequent to the year in which this Form 10 becomes effective if we are no longer an “emerging growth company”. Substantial work on our part may be required to implement appropriate processes, document the system of internal control over key processes, assess their design, remediate any deficiencies identified and test their operation. This process may be both costly and challenging. We cannot give any assurances that material weaknesses will not be identified in the future in connection with our compliance with the provisions of Section 302 and 404 of the Sarbanes-Oxley Act. The existence of any material weakness described above would preclude a conclusion by management and our independent auditors that we maintained effective internal control over financial reporting. Our management may be required to devote significant time and expense to remediate any material weaknesses that may be discovered and may not be able to remediate any material weakness in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our consolidated financial statements that could require us to restate our consolidated financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all of which could lead to a decline in the per share trading price of our common stock.

We face possible risks and costs associated with severe weather conditions, natural disasters or the physical effects of climate change.

Some of our properties are located in areas particularly susceptible to revenue loss, cost increase or damage caused by severe weather conditions or natural disasters such as hurricanes, earthquakes, tornadoes, fires and floods, as well as the effects of climate change. To the extent that climate change impacts changes in weather patterns, our markets could experience more frequent and severe natural disasters. Operationally, such events could cause a major power outage, leading to a disruption of our operators’ operations or require them to incur additional cost associated with evacuation plans. Over time, any of these conditions could result in increased operator costs, delays in construction, resulting in increased construction costs, or in the inability of our operators to operate our facilities at all. Such events could also have a material adverse impact on our tenants’ operations and ability to meet their obligations to us. In the event of a loss in excess of insured limits, 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 and our financial condition and results of operations.

Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable. To the extent that significant changes in the climate occur in areas where our properties are located, we may experience more frequent extreme weather events which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties and could also require us to spend more on our new development properties without a corresponding increase in revenue. Should the impact of climate change be material in nature, including destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected.

Risks Related to Healthcare Industry

Adverse trends in healthcare provider operations may negatively affect the operations at our properties, which in turn, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We believe the healthcare industry is currently experiencing the following trends:

● changes in the demand for and methods of delivering healthcare services;

● changes in third-party reimbursement policies, including a shift to Medicaid managed care, and changes in Medicare reimbursement for skilled nursing facility services which commenced on October 1, 2019;

● significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas;

● increased expense for uninsured patients;

● increased expense arising from an older and sicker patient mix;

● increased competition among healthcare providers;

● shortage of qualified health care workers due to competition from other health industry employers and enhancement of credentials required to perform specified services;

● substantial increases in costs associated with employing health care workers due to competition and health care industry specific wage mandates, general inflationary pressures on wages and other statutory and regulatory requirements associated with the employment of worker in the health industry and specifically for skilled nursing facilities;

● increased liability insurance expense and reductions in the availability of certain coverages resulting in gaps;

● increasing shift of the plaintiffs’ bar from medical malpractice to skilled nursing facility industry liability;

● continued pressure by private and governmental payors to reduce payments to providers of services along with the consolidation of payors, which has resulted in a decreased ability to negotiate levels and conditions of payment;

● increased scrutiny of billing, referral and other practices by federal and state authorities and private insurers; and

● increasing focus by relators and the qui tam bar on the skilled nursing facility industry.

These factors may materially adversely affect the economic performance of some or all of our tenants/operators, which in turn could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Both we and the tenants and operators of our properties may be adversely affected by healthcare regulation and enforcement.

The regulatory environment of the long-term healthcare industry has generally intensified over time both in the amount, complexity and type of regulations and in the efforts to enforce those regulations. The extensive federal, state and local laws and regulations affecting the healthcare industry include those relating to, among other things, licensure, conduct of operations, ownership of facilities, addition of facilities and equipment, allowable costs, services, prices for services, qualified beneficiaries, quality of care, patient rights, fraudulent or abusive behavior, and financial and other arrangements that may be entered into by healthcare providers. Moreover, changes in enforcement policies by federal and state governments have resulted in an increase in the number of inspections, citations of regulatory deficiencies and other regulatory sanctions, including terminations from the Medicare and Medicaid programs, bars on Medicare and Medicaid payments for new admissions, and certain services as well as more aggressive imposition of exclusions from participation in, and receipt of reimbursement from, the Medicare and Medicaid programs, civil monetary penalties and even criminal penalties. See “Item 1. Business — Regulation.” We are unable to predict the scope of future federal, state and local regulations and legislation, including the Medicare and Medicaid statutes and regulations, or the intensity of enforcement efforts with respect to such regulations and legislation, and any changes in the regulatory framework could have a material adverse effect on our tenants, operators, guarantors and managers, which, in turn, could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Further, if our tenants and operators fail to comply with the extensive laws, regulations and other requirements applicable to their businesses and the operation of our properties (some of which are discussed below), they could become ineligible to receive reimbursement from governmental and private third-party payor programs, face bans on admissions of new patients or residents, suffer civil or criminal penalties or be required to make significant changes to their operations. We also may become subject directly to healthcare laws and regulations because of the broad nature of some of these restrictions. Our tenants, operators, borrowers, guarantors, managers and we also could be forced to expend considerable resources responding to an investigation or other enforcement action under applicable laws or regulations or in implementing new or additional measures to reduce the possibility of enforcement action. In such event, the results of operations and financial condition of our tenants, operators, borrowers, guarantors and managers and the results of operations of our properties operated or managed by those entities could be adversely affected, which, in turn, could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

All healthcare providers who accept Medicare and Medicaid reimbursement are subject to the federal Anti-Kickback Statute, which establishes civil, criminal and administrative penalties with respect to any person who knowingly and willfully offers, pays, solicits, or receives any remuneration to induce or in return for (1) referring an individual to a person for the furnishing or arranging for the furnishing of any item or service payable in whole or in part under a Federal healthcare program; or (2) purchasing, leasing, ordering or arranging for, or recommending the purchasing, leasing or ordering of any good, facility service, or item payable under a Federal healthcare program, such as Medicare and Medicaid. Remuneration is defined broadly to include the transfer of anything of value, in case or in kind, directly or indirectly, overtly or covertly. Certain healthcare facilities are also subject to the Federal Ethics in Patient Referral Act of 1989, commonly referred to as the Stark Law. The Stark Law prohibits the submission of claims to Medicare for payment if the claim results from a physician referral (including an order or prescription) for certain designated services and the physician has a financial relationship with the health service provider that does not qualify under one of the exceptions for a financial relationship under the Stark Law. Similar prohibitions on kickbacks, physician self-referrals and submission of claims apply to state Medicaid programs, and may also apply to private payors under state laws, which in some cases are even broader and contain stricter prohibitions or requirements than Federal prohibitions. Violations of these laws subject persons and entities to termination from participation in Medicare, Medicaid and other federally funded healthcare programs or result in criminal prosecution, the imposition of civil monetary penalties, the imposition of treble damages and fines and/or other penalties as well as potential civil liability under the Federal False Claims Act. In addition, criminal liability under the Federal Travel Act is increasingly used to prosecute healthcare providers for certain business relationships. Healthcare facilities and providers may also experience an increase in audits and medical record reviews from public and private payors and a host of government agencies and contractors, including the HHS Office of the Inspector General, the Department of Justice, Zone Program Integrity Contractors, and Recovery Audit Contractors.

Other laws that impact how the operators conduct their operations include: federal and state laws designed to protect the confidentiality and security of patient health information; state and local licensure laws; laws protecting consumers against deceptive practices; laws generally affecting the operators’ management of property and equipment and how the operators generally conduct their operations, such as fire, health and safety, and environmental laws; federal and state laws affecting assisted living facilities mandating quality of services and care, and quality of food service; resident rights (including abuse and neglect laws); and health standards set by the federal Occupational Safety and Health Administration. For example, HIPAA imposes extensive requirements on the way in which certain healthcare entities use, disclose, and safeguard protected health information (as that term is defined under HIPAA), including requirements to protect the integrity, availability, and confidentiality of electronic medical records. Many of these obligations were expanded under the HITECH Act. In order to comply with HIPAA and the HITECH Act, covered entities often must undertake significant operational and technical implementation efforts. Operators also may face significant financial exposure if they fail to maintain the privacy and security of medical records, personal health information about individuals, or protected health information. HIPAA violations are also potentially subject to criminal penalties. See “Item 1. Business—Regulation.”

We may also be adversely affected by possible changes to CON laws which serve as a barrier to entry in eight of the nine states in which we own properties. The Trump administration has called for repeal of state Certificate of Need laws and certain states are considering the possible repeal of these laws. If these laws are repealed in states in which we own properties, we and the tenants and operators of our properties could be subject to increased competition.

Our tenants/operators may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us and, thus, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

As is typical in the healthcare industry, our tenants/operators may often become subject to claims that their services have resulted in patient injury or other adverse effects. Many of these tenants/operators may have experienced an increasing trend in the frequency and severity of professional liability and general liability insurance claims and litigation asserted against them. The insurance coverage maintained by tenants/operators may not cover all claims made against them nor continue to be available at a reasonable cost, if at all. In some states, insurance coverage for the risk of punitive damages arising from professional liability and general liability claims and/or litigation may not, in certain cases, be available to these tenants/operators due to state law prohibitions or limitations of availability. As a result, these types of tenants/operators of our healthcare properties operating in these states may be liable for punitive damage awards that are either not covered or are in excess of their insurance policy limits. We also believe that there has been, and will continue to be, an increase in governmental investigations of certain healthcare providers, particularly in the area of Medicare/Medicaid overbilling and compliance with the conditions of payment and participation and false claims, as well as an increase in debar actions resulting from these investigations. Insurance is generally not available to cover such losses, including the costs of investigation and any penalties in the absence of specialized underwriting. None of our related party tenants, and to our knowledge, none of our other tenants, have such insurance. Additionally, neither the Company nor its subsidiaries have such insurance. The costs of a comprehensive investigation along with any adverse determination in a legal proceeding or governmental investigation, whether currently asserted or arising in the future or a condition imposed as a result of an investigation such as a monitoring by an independent review organization (“IRO”) under a Corporate Integrity Agreement, could have a material adverse effect on a tenant/operator’s financial condition. Neither our related party tenants nor, to our knowledge, our other tenants, are subject to any pending or threatened legal proceedings or investigations by any governmental authorities, and none of them has entered into any Corporate Integrity Agreements. If a tenant/operator were unable to obtain or maintain insurance coverage, if judgments were obtained in excess of the insurance coverage, if a tenant/operator were required to pay uninsured or uninsurable punitive damages, or if a tenant/operator were subject to an uninsured or uninsurable payor audit or government enforcement action, the tenant/operator could be exposed to substantial additional liabilities, which could affect the tenant/operator’s ability to pay rent to us, which in turn could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders. Neither the Company nor its subsidiaries are subject to any pending or threatened legal proceedings or investigations by any governmental authorities, and none of them has entered into any Corporate Integrity Agreements.

Risks Related to Real Estate Industry

Our business is subject to risks associated with real estate assets and the real estate industry, which could materially adversely affect our financial condition, results of operations, cash flow, cash available for distribution and our ability to service our debt obligations.

Our ability to pay dividends to our stockholders depends on our ability to generate revenues in excess of expenses, scheduled principal payments on debt and capital expenditure requirements. Events and conditions generally applicable to owners and operators of real property that are beyond our control may decrease cash available for distribution and the value of our properties. These events include many of the risks set forth above under “—Risks Related to Our Business and Operations,” as well as the following:

● adverse changes in financial conditions of buyers, sellers and tenants of properties;

● vacancies or our inability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights or below-market renewal options, and the need to periodically repair, renovate and re-let space;

● increased operating costs, including insurance premiums, utilities, real estate taxes and state and local taxes;

● civil unrest, acts of war, terrorist attacks and natural disasters, including hurricanes, which may result in uninsured or underinsured losses;

● geopolitical challenges and uncertainties (including wars and other forms of conflict, terrorist acts and security operations), such as the war between Russia and Ukraine and the severe economic sanctions and export controls imposed by the U.S. and other governments against Russia and Russian interests;

● decreases in the underlying value of our real estate; and

● changing market demographics.

In addition, periods of economic downturn or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases, which could materially adversely affect our financial condition, results of operations, cash flow, cash available for distribution and ability to service our debt obligations.

As an owner of real estate, we could incur significant costs and liabilities related to environmental matters.

Under various federal, state and local laws and regulations relating to the environment, as a current or former owner of real property, we may be liable for costs and damages resulting from the presence or release of hazardous or toxic substances, waste or petroleum products at, on, in, under or migrating from such property, including costs to investigate, clean up such contamination and liability for any alleged harm to human health, property or natural resources. Such laws often impose strict liability without regard to fault, including whether the owner or operator knew of, or was responsible for, the presence of such contamination, and the liability may be joint and several. These liabilities could be substantial and the cost of any required investigation, remediation, removal, fines or other costs could exceed the value of the property and/or our aggregate assets. In addition, the presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability for costs of remediation and/or personal or property damage or materially adversely affect our ability to sell, lease or develop our properties or to borrow using the properties as collateral. In addition, environmental laws may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures. See “Item 1. Item 1. Business—Regulation—Environmental Matters.”

Some of our properties may have been or may be impacted by contamination arising from current or prior uses of the property, or adjacent properties, for commercial or industrial purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store such materials. In most cases, the Predecessor Company obtained Phase I Environmental Site Assessments for the properties contributed by the Predecessor Company to the Operating Partnership in connection with our formation transactions. The Phase I Environmental Site Assessments are of limited scope and may not have conducted comprehensive asbestos, lead-based paint, lead in drinking water, mold or radon assessments. Although these assessments provide some assurance regarding environmental issues at the properties, they are not a guarantee that the properties do not have an environmental issue. As a result, we may not be aware of all potential or existing environmental contamination liabilities at the properties in our portfolio. There also exists the risk that material environmental conditions, liabilities or compliance concerns may arise in the future. If any of our properties are subject to environmental issues, we could potentially incur material liability for these issues. The realization of any or all of these environmental issues may also have an adverse effect on our business, financial condition and results of operations.

As the owner of the buildings on our properties, we could face liability for the presence of hazardous materials, such as asbestos or lead, or other adverse conditions, such as poor indoor air quality, in our buildings. Environmental laws govern the presence, maintenance, and removal of hazardous materials in buildings, and if we do not comply with such laws, we could face fines for such noncompliance and could be required to abate, remove or otherwise address the hazardous material to achieve compliance with applicable environmental laws and regulations. Also, we could be liable to third parties, such as occupants or employees of the buildings, for damages related to exposure to hazardous materials or adverse conditions in our buildings, and we could incur material expenses with respect to abatement or remediation of hazardous materials or other adverse conditions in our buildings. If we incur material environmental liabilities in the future, we may find it difficult to sell or lease any affected properties.

We did not obtain new Phase I Environmental Site Assessments for the properties contributed by the Predecessor Company in connection with our formation transactions, and the assessments that the Predecessor Company obtained in connection with its acquisition of these properties do not provide assurance that we will not be exposed to environmental liabilities in our initial portfolio.

We did not obtain new Phase I Environmental Site Assessments with respect to the properties contributed to our Operating Partnership by the Predecessor Company in connection with the formation transactions. No assurances can be given that any of the Phase I Environmental Site Assessments previously obtained by our Predecessor Company identify all environmental conditions impacting the properties because material environmental conditions may have developed since the Phase I Environmental Site Assessments were conducted. In addition, while we have reviewed the Phase I Environmental Site Assessments conducted, or provided to us, by the Predecessor Company, the Predecessor Company did not conduct Phase I Environmental Site Assessments on all of its properties. In instances when no Phase I Environmental Site Assessment were reviewed by us or the Predecessor Company, there can be no assurance that a Phase I Environmental Site Assessments was ever conducted on such property, or if a Phase I Environmental Site Assessments was conducted, that it did not reveal environmental issues.

Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our sole tenant, employees of our sole tenant or others if property damage or personal injury is alleged to have occurred.

Our properties may be subject to impairment charges.

On a quarterly basis, we will assess whether there are any indicators that the value of our properties may be impaired. A property’s value is considered to be impaired only if the estimated aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. In our estimate of cash flows, we will consider factors such as expected future operating income, trends and prospects, the effects of demand, competition and other factors. If we are evaluating the potential sale of an asset or development alternatives, the undiscounted future cash flows analysis will consider the most likely course of action at the balance sheet date based on current plans, intended holding periods and available market information. We will be required to make subjective assessments as to whether there are impairments in the value of our properties. These assessments may be influenced by factors beyond our control, such as early vacating by a tenant or damage to properties due to earthquakes, tornadoes, hurricanes and other natural disasters, fire, civil unrest, terrorist acts or acts of war. These assessments may have a direct impact on our earnings because recording an impairment charge results in an immediate negative adjustment to earnings. There can be no assurance that we will not take impairment charges in the future related to the impairment of our properties. Any such impairment could have a material adverse effect on our business, financial condition and results of operations in the period in which the charge is taken.

We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties.

Properties are subject to various covenants and federal, state and local laws and regulatory requirements, including permitting and licensing requirements. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain approval from local officials or restrict our use of our properties and may require us to obtain approval from local officials of community standards organizations at any time with respect to our properties, including prior to developing or acquiring a property or when undertaking renovations of any of our existing properties. Among other things, these restrictions may relate to fire and safety, seismic or hazardous material abatement requirements. There can be no assurance that existing laws and regulatory policies will not adversely affect us or the timing or cost of any future development, acquisitions or renovations, or that additional regulations will not be adopted that increase such delays or result in additional costs. Our growth strategy may be affected by our ability to obtain permits, licenses and zoning relief.

In addition, federal and state laws and regulations, including laws such as the ADA and the Fair Housing Amendment Act of 1988, or FHAA, impose further restrictions on our properties and operations. Under the ADA and the FHAA, all public accommodations must meet federal requirements related to access and use by disabled persons. Although we believe that all our properties are in compliance with the requirements of the ADA and the FHAA, if one or more of the properties in our portfolio were not in compliance with the ADA, the FHAA or any other regulatory requirements, we could incur additional costs to bring such properties into compliance, be subject to governmental fines or the award of damages to private litigants or be unable to refinance such properties. In addition, we do not know whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures that will adversely impact our financial condition, results of operations and cash flow.

Risks Related to Organizational Structure

Moishe Gubin, our Chairman and Chief Executive Officer, and Michael Blisko, one of our directors, are the beneficial owners of approximately 7.3% of our outstanding shares and approximately 80.7% of the OP units in the Operating Partnership. They have the ability to influence decisions by the Company and the Operating Partnership, including the approval of matters involving conflicts of interest and significant corporate transactions.

Moishe Gubin, one of the Controlling Members of the Predecessor Company, currently serves as our Chairman and our Chief Executive Officer. Michael Blisko, another Controlling Member of the Predecessor Company, serves as one of our directors. Mr. Gubin and Mr. Blisko also control the tenants and operators of 41 of our facilities.

As a result of their ownership of our common stock and the OP units, and their board positions, Moishe Gubin and Michael Blisko and their affiliates have the ability to influence the outcome of matters presented to our directors or stockholders, including the election of our board of directors, matters related to the leases of our properties to their affiliates and approval of significant corporate transactions, including business combinations, consolidations and mergers.

The ability of Mr. Gubin and Mr. Blisko to influence decisions by the Board is limited by our conflicts of interest policy, which requires matters in which a director has a conflict of interest to be approved by the audit committee of the Board, which consists exclusively of independent directors. The ability of Mr. Gubin, Mr. Blisko and their affiliates to influence decisions by the Company’s stockholders is limited by the terms of our articles of incorporation, which prohibit any stockholder from holding more than 9.8% of the shares of our common stock. Additionally, the ability of Mr. Gubin, Mr. Blisko and their affiliates to influence decisions by the Operating Partnership is limited because the Operating Partnership is controlled by the Company as its sole general partner and the OP units issued to the Predecessor Company have no voting rights.

Nevertheless, Moishe Gubin, Mr. Blisko and their affiliates have significant influence over us and it is possible that they could exercise influence in a manner that is not in the best interests of our other stockholders. Furthermore, as discussed above, certain conflicts of interest may exist between the interests of Mr. Gubin, Mr. Blisko, and their affiliates and the interests of our stockholders. Their voting power might also have the effect of delaying or preventing a change of control that our stockholders may view as beneficial.

Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of OP units in the Operating Partnership, which may impede business decisions that could benefit our stockholders.

Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and the Operating Partnership or any partner thereof, on the other. Our directors and officers have duties to the Company under Maryland law in connection with their management of the Company. At the same time, we, as the general partner of the Operating Partnership, have fiduciary duties and obligations to the Operating Partnership and its limited partners under Delaware law and the partnership agreement of the Operating Partnership in connection with the management of the Operating Partnership. Our fiduciary duties and obligations as the general partner of the Operating Partnership may come into conflict with the duties of our directors and officers to the Company. Moishe Gubin, our Chairman and Chief Executive Officer, and Michael Blisko, one of our directors, beneficially own 80.5% of the OP units in the Operating Partnership and may have conflicts of interest in making decisions that affect both our stockholders and the limited partners of the Operating Partnership, particularly since their ownership interests in the Operating Partnership is significantly greater than their 7.3% ownership interest in shares of the common stock of the Company.

The partnership agreement provides that we will be under no obligation to consider the separate interests of the limited partners of our Operating Partnership in deciding whether to cause the Operating Partnership to take or decline to take any actions. The partnership agreement also provides that, in the event of a conflict between the interests of the Operating Partnership or any limited partner, on the one hand, and the separate interests of the Company or our stockholders, on the other hand, that cannot be resolved in a manner not adverse to either our stockholders or the limited partners, we, in our capacity as the general partner of the Operating Partnership, shall resolve the conflict in favor of the Company and our stockholders. Additionally, any action or failure to act on our part or on the part of our board of directors that does not violate the contract rights of the limited partners of the Operating Partnership but does give priority to the separate interests of the Company or our stockholders shall not be deemed to violate our duty of loyalty to the Operating Partnership and its limited partners that arises from our role as the general partner of the Operating Partnership.

Additionally, the partnership agreement provides that we will not be liable to the Operating Partnership or any partner for monetary damages for losses sustained, liabilities incurred as a result of errors in judgment or mistakes of fact or law or of any act or omission if any such party acted in good faith. Our Operating Partnership must indemnify us, our directors and officers, officers of the Operating Partnership and our designees from and against any and all claims that relate to the operations of the Operating Partnership, unless it is established that: (i) the act or omission of the person was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the person actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the person had reasonable cause to believe that the act or omission was unlawful. Our Operating Partnership must also pay or reimburse the reasonable expenses of any such person upon its receipt of a written affirmation of the person’s good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to repay any amounts paid or advanced if it is ultimately determined that the person did not meet the standard of conduct for indemnification. The Operating Partnership will not indemnify or advance funds to any person with respect to any action initiated by the person seeking indemnification without our approval (except for any proceeding brought to enforce such person’s right to indemnification under the partnership agreement) or if the person is found to be liable to the Operating Partnership on any portion of any claim in the action.

We may assume unknown liabilities in connection with our formation transactions, and any recourse against third parties, including the Predecessor Company, for certain of these liabilities will be limited.

As part of our formation transactions, the Predecessor Company contributed all of its assets to the Operating Partnership, and the Operating Partnership assumed all of its liabilities, some of which may be unknown or unquantifiable. Additionally, the assets of the Predecessor Company included the equity interests in its subsidiaries. These entities and their assets may be subject to existing liabilities, some of which may be unknown or unquantifiable at the time of the formation transactions were completed. These liabilities might include liabilities for investigation or remediation of undisclosed environmental conditions, claims by tenants, vendors or other persons dealing with the Predecessor Company and its subsidiaries (that had not been asserted or threatened prior to the completion of the formation transactions), tax liabilities and accrued but unpaid liabilities incurred in the ordinary course of business. While in some instances we may have the right to seek reimbursement against an insurer, any recourse against third parties, including the prior investors in our assets, for certain of these liabilities will be limited. The Predecessor Company and the Controlling Members did not make any representations and warranties concerning such liabilities in the contribution agreement.

Our charter contains certain provisions restricting the ownership and transfer of our stock that may delay, defer or prevent a change of control transaction that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests.

Our charter contains certain ownership limits with respect to our stock. Our charter, among other restrictions, prohibits, subject to certain exceptions, the beneficial or constructive ownership by any person of more than 9.8% in value of the aggregate outstanding shares of our common stock or more than 9.8% in value of the outstanding shares of any class or series of our preferred stock. Our board of directors, in its sole and absolute discretion, may exempt a person, prospectively or retroactively, from this ownership limit if certain conditions are satisfied. See “Item. 11. Description of Capital Stock—Restrictions on Ownership and Transfer.” This ownership limit as well as other restrictions on ownership and transfer of our stock in our charter may:

● discourage a tender offer, proxy contest, or other transactions or a change in management or of control that might result in a premium price for our common stock or that our stockholders otherwise believe to be in their best interests; and

● result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of certain of the benefits of owning the additional shares.

We could increase the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval.

Our board of directors, without stockholder approval, has the power under our charter to amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue. In addition, under our charter, our board of directors, without stockholder approval, has the power to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock into one or more classes or series of stock and set the preference, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications or terms or conditions of redemption for such newly classified or reclassified shares. See “Item 11. Description of the Registrant’s Securities to be Registered - Description of Capital Stock—Power to Increase or Decrease Authorized Stock and Issue Additional Shares of Common and Preferred Stock.” As a result, we may issue series or classes of common stock or preferred stock with preferences, dividends, powers and rights, voting or otherwise, that are senior to, or otherwise conflict with, the rights of holders of our common stock. Although our board of directors has no such intention at the present time, it could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests.

Certain provisions of Maryland General Corporation Law, or MGCL, could inhibit changes of control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests.

Certain provisions of the MGCL may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:

● “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes certain fair price and/or supermajority stockholder voting requirements on these combinations; and

● “control share” provisions that provide that holders of “control shares” of the Company (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

We have opted out of the business combination provisions of the MGCL, which provides that any business combination between us and any other person is exempt from the business combination provisions of the MGCL, provided that the business combination is first approved by our board of directors (including a majority of directors who are not affiliates or associates of such persons). In addition, pursuant to a provision in our bylaws, we have opted out of the control share provisions of the MGCL.

Certain provisions of the MGCL permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain corporate governance provisions, some of which (for example, a classified board) are not currently applicable to us. If implemented, these provisions may have the effect of limiting or precluding a third party from making an unsolicited acquisition proposal for us or of delaying, deferring or preventing a change in control of us under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then current market price. Our charter contains a provision whereby we elect, at such time as we become eligible to do so, to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our board of directors. See “Item 11. Description of Registrant’s Securities - Certain Provisions of Maryland Law and of Our Charter and Bylaws.”

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our bylaws generally provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland (or in certain circumstances, the United States District Court for the District of Maryland, Northern Division) shall be the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders with respect to the Company, our directors, our officers or our employees. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers or employees, which may discourage meritorious claims from being asserted against us and our directors, officers and employees. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. We adopted this provision because Maryland judges have more experience in dealing with issues of Maryland corporate law than judges in any other state and we believe it makes it less likely that we will be forced to incur the expense of defending duplicative actions in multiple forums and less likely that plaintiffs’ attorneys will be able to employ such litigation to coerce us into otherwise unjustified settlements. These provisions of our bylaws will not apply to claims that may be asserted under federal securities laws.

Certain provisions in the partnership agreement of the Operating Partnership may delay or prevent unsolicited acquisitions of us.

Provisions in the partnership agreement of the Operating Partnership may delay, or make more difficult, unsolicited acquisitions of us or changes of our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some of our stockholders might consider such proposals, if made, desirable. These provisions include, among others:

● redemption rights;

● a requirement that we may not be removed as the general partner of the Operating Partnership without our consent;

● transfer restrictions on OP units;

● our ability, as general partner, in some cases, to amend the partnership agreement and to cause the Operating Partnership to issue units with terms that could delay, defer or prevent a merger or other change of control of us or the Operating Partnership without the consent of the limited partners; and

● the right of the limited partners to consent to direct or indirect transfers of the general partnership interest, including as a result of a merger or a sale of all or substantially all of our assets, in the event that such transfer requires approval by our common stockholders.

The tax protection agreement with the Predecessor Company and its affiliates could limit our ability to sell or otherwise dispose of certain properties.

In connection with the formation transactions, we entered into a tax protection agreement with members of the Predecessor Company and certain of their affiliates, including affiliates of Moishe Gubin, our Chairman and Chief Executive Officer and Michael Blisko, one of our directors, that provides that if we dispose of any interest in the protected initial properties in a taxable transaction prior to the tenth anniversary of the completion of the formation transactions, subject to certain exceptions, we will indemnify with the Predecessor Company, its members and their beneficial owners (the “protected parties”) for their tax liabilities attributable to the built-in gain that exists with respect to such property interests as of the time of the formation transactions, and the tax liabilities incurred as a result of such tax protection payment. Pursuant to the tax protection agreement, it is anticipated that the total amount of protected built-in gain on the properties and other assets contributed to the Company in connection with the formation transactions will be approximately $394.8 million. Such indemnification obligations could result in aggregate payments, based on current tax laws, of up to $165.2 million. The amount of tax is calculated without regard to any deductions, losses or credits that may be available.

In this regard, the Company has granted the tenant of one of the Company’s properties, an SNF located in Illinois, an option to purchase this property. If the tenant had exercised its option as of March 31, 2022, the Company would have recognized a built-in gain of approximately $1.9 million on such property, which could have required the Company to make a tax indemnity payment of approximately $0.8 million. The Company has also entered into an option agreement with the tenants in 13 of the Company’s properties in Arkansas to grant these tenants an option to purchase the properties for an aggregate price of $90 million. If the Company had sold these properties for this price as of March 31, 2022, the Company would have recognized a built-in gain of approximately $44.2 million on such properties, which could have required the Company to make a tax indemnity payment of approximately $18.2 million.

In light of our indemnification obligations under the tax protection agreement, it may be economically prohibitive for us to sell our properties even if it may be otherwise in our stockholders’ best interests to do so. Moreover, as a result of these potential tax liabilities, Moishe Gubin and Michael Blisko may have a conflict of interest with respect to our determination as to the disposition of these properties.

We may pursue less vigorous enforcement of terms of the contribution and other agreements with the Predecessor Company and its affiliates because of their relationship with members of our management and board of directors.

Moishe Gubin, who is our Chairman and Chief Executive Officer, and Michael Blisko, who is one of our directors, are two of the Controlling Members of the Predecessor Company. The Predecessor Company and its affiliates are parties to or have interests in the contribution agreement pursuant to which we acquired all of the assets of the Predecessor Company. Additionally, we lease 41 facilities in our portfolio to tenant/operators who are affiliates of Mr. Gubin and Mr. Blisko. We may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationships with members of board of directors and our management, with possible negative impact on stockholders.

Our board of directors may change our strategies, policies and procedures without stockholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations.

Our investment, financing, leverage and distribution policies, and our policies with respect to all other activities, including growth, capitalization and operations, will be determined exclusively by our board of directors, and may be amended or revised at any time by our board of directors without notice to or a vote of our stockholders. This could result in us conducting operational matters, making investments or pursuing different business or growth strategies than those contemplated in this Form 10. Further, our charter and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our board of directors may alter or eliminate our current policy on borrowing at any time without stockholder approval. If this policy changed, we could become more highly leveraged which could result in an increase in our debt service. Higher leverage also increases the risk of default on our obligations. In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure to interest rate risk, real estate market fluctuations and liquidity risk. Changes to our policies with regards to the foregoing could materially adversely affect our financial condition, results of operations and cash flow.

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

Under Maryland law, generally, a director will not be liable if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from:

● actual receipt of an improper benefit or profit in money, property or services; or

● active and deliberate dishonesty by the director or officer that was established by a final judgment as being material to the cause of action adjudicated.

Our charter requires us to indemnify, and advance expenses to, each director and officer, to the maximum extent permitted by Maryland law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us. We intend to enter into indemnification agreements with each of our executive officers and directors whereby we will indemnify our directors and executive officers to the fullest extent permitted by Maryland law against all expenses and liabilities incurred in their capacity as an officer and/or director, subject to limited exceptions. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist absent the current provisions in our charter or that might exist with other companies.

We are a holding company with no direct operations and, as such, we will rely on funds received from our limited ownership interest in the Operating Partnership to pay liabilities, and the interests of our stockholders will be structurally subordinated to all liabilities and obligations of the Operating Partnership and its subsidiaries.

We are a holding company and will conduct substantially all of our operations through the Operating Partnership. We do not have, apart from our limited ownership interest in the Operating Partnership, which represents only 11.4% of the outstanding OP units, any independent operations. As a result, we rely on cash distributions from the Operating Partnership to pay any dividends we might declare on shares of our common stock. We also rely on distributions from the Operating Partnership to meet any of our obligations, including any tax liability on taxable income allocated to us from the Operating Partnership. In addition, because we are a holding company, your claims as a stockholder will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of the Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of the Operating Partnership and its subsidiaries will be available to satisfy the claims of our stockholders only after all of our and the Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

Our Operating Partnership may issue additional OP units to third parties without the consent of our stockholders, which would reduce our limited ownership percentage in the Operating Partnership even further and could have a dilutive effect on the amount of distributions made to us by the Operating Partnership and, therefore, the amount of distributions we can make to our stockholders.

As discussed above, we own approximately 11.4% of the outstanding OP units as of the date of this Form 10. We may, in connection with our acquisition of properties or otherwise, issue additional OP units to third parties. Such issuances would reduce our limited ownership percentage in the Operating Partnership and could affect the amount of distributions made to us by the Operating Partnership and, therefore, the amount of distributions we can make to our stockholders. Because you will not directly own OP units, you will not have any voting rights with respect to any such issuances or other partnership level activities of the Operating Partnership.

If we are deemed to be an investment company under the Investment Company Act, our stockholders’ investment return may be reduced.

We are not registered as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), based on exceptions we believe are available to us. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things, limitations on capital structure, restrictions on specified investments, prohibitions on transactions with affiliates, and compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

Risks Related to Status as a REIT

If we do not qualify to be taxed as a REIT, or if we fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face substantial tax liability, which would substantially reduce funds available for distribution to our stockholders.

Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis, the results of which will not be monitored by Shutts & Bowen LLP. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Moreover, the proper classification of one or more of our investments may be uncertain in some circumstances, which could affect the application of the REIT qualification requirements. Accordingly, there can be no assurance that the IRS will not contend that our investments violate the REIT requirements.

If we were to fail to qualify as a REIT in any taxable year beginning on or after January 1, 2022, we would be subject to U.S. federal income tax, and possibly state and local tax, on our taxable income at regular corporate rates, and distributions to our stockholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse effect on the value of, and trading prices for, our common stock. Unless we are deemed to be entitled to relief under certain provisions of the Code, we would also be disqualified from taxation as a REIT for the four taxable years following the year during which we initially ceased to qualify as a REIT.

Our ownership of and relationship with any future taxable REIT subsidiaries will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries (“TRSs”). A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation (other than a REIT) of which a TRS directly or indirectly owns securities possessing more than 35% of the total voting power or total value of the outstanding securities of such corporation will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs. A domestic TRS will pay U.S. federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. Any domestic TRS that we own or form will pay U.S. federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to us but is not required to be distributed to us unless necessary to maintain our REIT qualification.

We do not currently own any subsidiaries that are expected to be TRSs, nor do we have any plans to establish any TRSs in the future. However, in the event we were to form a TRS, it would need to comply with the foregoing requirements.

Our ownership of and relationship with our tenants will be limited and a failure to comply with such limits would jeopardize our REIT status.

If a REIT owns, actually or constructively, 10% or more (measured by voting power or fair market value) of the stock of a corporate lessee, or 10% or more of the assets or net profits of any non-corporate lessee (each a “related party tenant”), other than a TRS, any income that a REIT receives from the lessee will be non-qualifying income for purposes of a REIT’s 75% or 95% gross income tests. The constructive ownership rules generally provide that, if 10% or more in value of our stock is owned, directly or indirectly, by or for any person, the REIT is considered as owning the shares or other equity interests owned, directly or indirectly, by or for such person. A REIT that fails either the 75% or 95% gross income tests, or both, in a taxable year, may nonetheless continue to qualify as a REIT, if the failure was due to reasonable cause and not willful neglect and the nature and amounts of the REIT’s items of gross income are properly disclosed to the Internal Revenue Service. However, in such a case, the REIT would be required to pay a penalty tax equal to (1) the greater of (A) the amount by which we fail to satisfy the 75% gross income test and (B) the amount by which we fail to satisfy the 95% gross income test, multiplied by (2) a fraction intended to reflect our profitability.

Our charter prohibits transfers of our stock that would cause us to own actually or constructively, 10% or more of the ownership interests in any non-TRS lessee. Based on the foregoing, we should not own, actually or constructively, 10% or more of any lessee other than a TRS. However, because the constructive ownership rules are broad and it is not possible to monitor continually direct and indirect transfers of our stock, no absolute assurance can be given that such transfers or other events of which we have no knowledge will not cause us to own constructively 10% or more of a lessee (or a subtenant, in which case only rent attributable to the subtenant is disqualified) other than a TRS at some future date. At the present time, to our knowledge, no person beneficially or constructively owns more than 9.8% of our stock. Two of our directors, Moishe Gubin and Michael Blisko, beneficially own approximately 7.3% of our outstanding common stock as well as 80.7% of the outstanding OP units in the Operating Partnership. They also own majority interests in more than 41 of our tenants. We believe that these tenants would not currently be treated as related party tenants for purposes of the REIT qualification requirements because we believe that Mr. Gubin and Mr. Blisko do not constructively own 10% of the Company. However, if their constructive ownership of the Company were to exceed 10% in the future, or if interests in these tenants are otherwise treated as constructively owned by us, the rental income from the tenants controlled by Mr. Gubin and Mr. Blisko would not be qualifying income for REIT qualification purpose, which would cause us to fail to satisfy the REIT gross income tests and could cause us to fail to qualify as a REIT or be subject to a substantial penalty tax. The Company intends to closely monitor their ownership of the Company to avoid this issue.

We must distribute earnings and profits in our first taxable year as a REIT that were attributable to any period before we were a REIT.

In order to qualify as a REIT, we must not have accumulated earnings and profits attributable to any non-REIT years. A REIT has until the close of its first taxable year in which it has non-REIT accumulated earnings and profits to distribute any such accumulated earnings and profits. Unless the “deficiency dividend” procedures described below apply and we comply with those procedures, failure to distribute such accumulated earnings and profits would result in our disqualification as a REIT.

We were taxable as a C corporation prior to 2022, and have taxable income and accumulated earnings and profits for the period from June 8, 2021, to December 31, 2021. We intend to make a distribution of such accumulated earnings and profits attributable to this period during the tax year beginning on January 1, 2022.

We may potentially have additional tax exposure from built-in gains from the disposal of assets that we hold at the time that we become a REIT.

We plan to elect to be taxed as a REIT for the tax year beginning on January 1, 2022. Notwithstanding our qualification and taxation as a REIT, we may still be subject to corporate taxation in particular circumstances. If we recognize gain on the disposition of any REIT asset that is held by us on the date that we become a REIT (i.e., January 1, 2022) during a specified period (generally five years) thereafter, then we will generally pay tax at the highest regular corporate tax rate, currently 21%, on the lesser of (a) the excess, if any, of the asset’s fair market value over our basis in the asset, each determined on January 1, 2022, or (b) our gain recognized in the disposition. Accordingly, any taxable disposition during the specified period of a REIT asset we held on January 1, 2022 could be subject to this built-in gains tax.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

Dividends payable by non-REIT corporations to non-REIT stockholders that are individuals, trusts and estates are generally taxed at reduced tax rates. Dividends payable by REITs, however, generally are not eligible for the reduced rates. The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including shares of our common stock. However, dividends received from a REIT by certain noncorporate taxpayers, including individuals, may qualify for a deduction of up to 20% for REIT ordinary dividends under Section 199A of the Code for taxable years prior to 2026.

Qualifying as a REIT involves highly technical and complex provisions of the Code.

Qualifying as a REIT involves the application of highly technical and complex provisions of the Code for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Compliance with these requirements must be carefully monitored on a continuing basis, and there can be no assurance that our personnel responsible for doing so will be able to successfully monitor our compliance. In addition, our ability to satisfy the requirements to qualify to be taxed as a REIT may depend, in part, on the actions of third parties over which we have either no control or only limited influence.

The prohibited transactions tax may limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a tax of 100%. In general, prohibited transactions are sales or other dispositions of property other than foreclosure property, held primarily for sale to customers in the ordinary course of business. We may be subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of our properties or may conduct such sales through a TRS, which would be subject to federal and state income taxation.

If our Operating Partnership failed to qualify as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences.

We believe that our Operating Partnership will be treated as a partnership for federal income tax purposes. As a partnership, our Operating Partnership generally will not be subject to federal income tax on its income. Instead, each of its partners, including us, will be allocated, and may be required to pay tax with respect to, its share of our Operating Partnership’s income. We cannot assure you, however, that the IRS will not challenge the status of our Operating Partnership or any other subsidiary partnership in which we own an interest as a partnership for federal income tax purposes, or that a court would not sustain such a challenge. For example, the IRS could attempt to classify the Operating Partnership as a publicly-traded partnership for U.S. income tax purposes if the IRS does not agree that the Operating Partnership qualifies for the private placement exclusion. See “Material U.S. Federal Income Tax Consequences — Other Tax Consequences — Tax Aspects of Our Investments in Our Operating Partnership and Subsidiary Partnerships - Classification as Partnerships”.

Furthermore, if the IRS were successful in treating our Operating Partnership or any such other subsidiary partnership as an entity taxable as a corporation for federal income tax purposes, we may fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, we could cease to qualify as a REIT. Also, the failure of our Operating Partnership or any subsidiary partnerships to qualify as a partnership could cause it to become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for debt service and for distribution to its partners, including us.

Legislative, administrative, regulatory or other actions affecting REITs, including positions taken by the IRS, could have an adverse impact on our investors or us.

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process, and by the IRS and the U.S. Department of the Treasury (the “Treasury”). Changes to the tax laws, such as the tax law informally known as the Tax Cuts and Jobs Act enacted on December 22, 2017 (“TCJA”) or the PATH Act enacted on December 18, 2015, or interpretations thereof by the IRS and the Treasury, with or without retroactive application, could materially and adversely affect our investors or the Company. We cannot predict how changes in the tax laws might affect our investors or us. New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify to be taxed as a REIT and/or the U.S. federal income tax consequences to our investors and the Company of such qualification.

REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan.

In order for us to qualify to be taxed as a REIT, and assuming that certain other requirements are also satisfied, we generally must distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, to our stockholders each year, so that U.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT, but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% non-deductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal income tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements.

Under some circumstances, we may be able to rectify a failure to meet the distribution requirement for a year by paying dividends to stockholders in a later year, which may be included in our deduction for dividends paid for the earlier year (“deficiency dividends”). Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends. We will, however, be required to pay interest based upon the amount of any deduction taken for deficiency dividends.

The IRS has also issued Revenue Procedure 2017-45, authorizing elective stock dividends to be made by public REITs. Pursuant to this revenue procedure, effective for distributions declared on or after August 11, 2017, the IRS