HTI - Healthcare Trust Inc.
03/29/2024 | Press release | Distributed by Public on 03/29/2024 05:11
Material Event - Form 8-K
Item 8.01. Other Events
Determination of Estimated Per-Share Net Asset Value
Overview
The board of directors (the "Board") of Healthcare Trust, Inc. (the "Company") has previously adopted valuation guidelines used in connection with determining the estimated per-share net asset value ("Estimated Per-Share NAV") of the Company's common stock. Under these guidelines, the Company publishes an Estimated Per-Share NAV on at least an annual basis. Healthcare Trust Advisors, LLC, the Company's advisor (the "Advisor"), calculates the Estimated Per-Share NAV taking into consideration appraisals of the Company's real estate assets (each asset individually, a "Real Estate Asset" and collectively, the "Real Estate Assets") which are performed by an independent valuation firm in accordance with the valuation guidelines. The Advisor reviews these valuations both for consistency with the valuation guidelines and for the reasonableness of the independent valuation firm's conclusions. The independent directors of the Board ultimately make the final determination of Estimated Per-Share NAV. The independent directors of the Board rely on the Advisor's input, including its view of the estimate and the appraisals performed by the independent valuation firm, but may, in the Board's discretion, consider other factors.
On March 27, 2024, the independent directors of the Board, who comprise a majority of the Board unanimously approved an Estimated Per-Share NAV as of December 31, 2023 (the "Valuation Date") equal to $13.00. The Estimated Per-Share NAV of $13.00 selected by the independent directors of the Board fell within the range of the values reported by Kroll, LLC (formerly known as Duff & Phelps, LLC) ("Kroll"), an independent third-party real estate advisory firm engaged by the Company to value its real estate assets and review the valuations of its other assets and liabilities. The range of values provided by Kroll was based on the estimated fair value of the Company's assets less the estimated fair value of the Company's liabilities and the liquidation value of the Company's 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock (the "Series A Preferred Stock"), which includes the Company's 100,000 partnership units in the Company's operating partnership designated as "Series A Preferred Units" and the liquidation value of the Company's 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock (the "Series B Preferred Stock"), divided by 112,034,251shares of common stock outstanding as of December 31, 2023. The common stock outstanding amount used to calculate the Estimated Per-Share NAV as of December 31, 2023 includes the dividends declared and issued entirely in shares of the Company's common stock through December 31, 2023, but does not include any other dividend declared and payable in whole or in part in shares of the Company's common stock subsequent to December 31, 2023. Issuing dividends in additional shares of common stock will, all things equal, cause the Estimated Per-Share NAV to decline because the number of shares outstanding increases when shares of common stock are issued in respect of a stock dividend; however, because each stockholder will receive the same proportionate number of new shares, the total value of a common stockholder's investment, all things equal, will not change assuming no sales or other transfers.
In determining the Estimated Per-Share NAV of $13.00, the independent directors of the Board considered various factors, including the information provided by Kroll, the impact of the stock dividend that was issued in January 2024 and the fact that three properties expected to be sold subsequent to December 31, 2023 were valued based on their estimated sale prices and without giving consideration to the reinvestment of the sale proceeds. There have been no other changes between December 31, 2023 and the date of this filing that the Advisor believes would materially impact the overall Estimated Per-Share NAV.
The Estimated Per-Share NAV will not be adjusted for any stock dividend(s) paid in the future until the Board determines a new Estimated Per-Share NAV.
Sensitivity Analysis
The Advisor noted that applying the low, midpoint and high ends of the range of capitalization rates and discount rates used by Kroll resulted in an Estimated Per-Share NAV range equal to $12.01 - $13.60 per share. The midpoint in that range was $12.58 per share.
The capitalization rates and discount rates used have a significant impact on the estimated value of the Real Estate Assets. The following chart presents the impact on the Company's Estimated Per-Share NAV resulting from variations in the capitalization rates for those properties valued using the Direct Capitalization Method (as defined below) and variations in discount rates for those properties valued using the Discounted Cash Flow Method (as defined below), within the range of values determined by Kroll.
| Range of Value | ||||||
| Low | Midpoint | High | ||||
| Share Price | $ | 12.01 | $ | 12.58 | $ | 13.60 |
| Weighted Average Capitalization Rate | 6.45 | % | 6.71 | % | 6.96 | % |
|
Weighted Average Discount Rate (1)
|
7.81 | % | 8.31 | % | 8.81 | % |
(1)This analysis shows the effect of varying the discount rate used in the Discounted Cash Flow Method. For purposes of this sensitivity analysis, the weighted average terminal capitalization rate, which applies only to Real Estate Assets valued using the Discounted Cash Flow Method was 7.02%.
Process
Consistent with the Company's valuation guidelines, Kroll performed appraisals of the Real Estate Assets as of the Valuation Date and provided a valuation range for each Real Estate Asset. In addition, Kroll was engaged to review the Company's market value estimates regarding other assets, liabilities and the liquidation values of the outstanding shares of Series A Preferred Stockand Series B Preferred Stockas of the Valuation Date. Kroll has extensive experience estimating the fair value of commercial real estate.
The method used by Kroll to appraise the Real Estate Assets in the report furnished to the Advisor and the Board by Kroll (the "Kroll Report") complies with the Institute of Portfolio Alternatives (formerly known as the Investment Program Association) Practice Guideline 2013-01 titled "Valuations of Publicly Registered Non-Listed REITs," issued April 29, 2013. Also, Kroll advised that the scope of work performed was conducted in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. The Company has engaged Kroll for the past nine years to assist the Board in determining the Company's Estimated Per-Share NAV. For preparing the Kroll Report, the Company paid Kroll a customary fee for services of this nature, no part of which was contingent relating to the provision of services or specific findings. Other than its engagement as described herein and its engagements to provide certain purchase price allocation and other real estate valuation services, Kroll does not have any direct interests in any transaction with the Company.
Potential conflicts of interest between Kroll, on one hand, and the Company or the Advisor, on the other hand, may arise as a result of (i) the impact of the findings of Kroll in relation to the Company's Real Estate Assets, or the assets of real estate investment programs sponsored by affiliates of the Advisor, on the value of ownership interests owned by, or incentive compensation payable to, directors, officers or affiliates of the Company and the Advisor, or (ii) Kroll performing valuation services for other programs sponsored by affiliates of the Advisor, as well as other services for the Company. While the Company and other programs sponsored by affiliates of the Advisor have engaged and may engage Kroll or its affiliates in the future for valuations and real estate-related services of various kinds, the Company believes that there are no material conflicts of interest with respect to the Company's engagement of Kroll.
Valuation Methodology
In preparing its valuation materials and in reaching its conclusion, Kroll, among other things:
•performed its valuations on a desktop basis;
•relied on information provided by the Company relating to each property's physical, financial and economic characteristics;
•performed a study of each market to measure current market conditions, supply and demand factors, growth patterns and their effect on each of the Real Estate Assets;
•reviewed financial and operating information requested from, or provided by, the Company, including property level cash flow and other leasing assumptions for applicable Real Estate Assets;
•reviewed other assets and liabilities of the Company, including the Company's mortgage debt, credit facilities and the liquidation values of the outstanding shares of Series A Preferred Stockand Series B Preferred Stock; and
•performed such other analyses and studies, and considered factors, as Kroll considered appropriate.
Kroll valued the Real Estate Assets utilizing an income capitalization approach consisting of either the Direct Capitalization Method or the Discounted Cash Flow Method and certain other approaches, all as described further below. These approaches are commonly used in the commercial real estate industry.
The Estimated Per-Share NAV is generally comprised of (i) the sum of (A) the estimated value of the Real Estate Assets and (B) the estimated value of the other assets, minus (ii) the sum of (C) the estimated value of debt and other liabilities (D) the estimate of the aggregate incentive fees, participations and limited partnership interests held by or allocable to the Advisor, management of the Company or any of their respective affiliates based on the aggregate net asset value of the Company and payable in a hypothetical liquidation of the Company as of the Valuation Date (which was zero as of December 31, 2023), and (E) the liquidation value of the outstanding shares of Series A Preferred Stockand Series B Preferred Stock, divided by (iii) the number of shares of common stock outstanding as of the Valuation Date, which was 112,034,251. In determining the Estimated Per-Share NAV, the independent directors of the Board also considered the impact of other factors described herein that were not specifically quantified. Shares of common stock outstanding for these purposes is the sum of shares of common stock outstanding, including vested and unvested restricted shares, and partnership units of the Company's operating partnership designated as "OP Units" ("OP Units"), excluding performance-based restricted partnership units of the Company's operating partnership designated as "Class B Units" ("Class B Units") because the Advisor concluded that, in a hypothetical liquidation at such Estimated Per-Share NAV, it may not be entitled to any incentive fees or Class B Units. The Advisor determined the Estimated Per-Share NAV in a manner consistent with the definition of fair value under U.S. generally accepted accounting principles set forth in FASB's Topic ASC 820, Fair Value Measurements and Disclosures.
Income Capitalization Approach
Kroll estimated a range of "as is" market value for substantially all of the Real Estate Assets as of December 31, 2023 using primarily the income capitalization approach, which simulates the reasoning of an investor who views the cash flows that would result from the anticipated revenue and expense on a property throughout its projection period. The net income developed in Kroll's analysis is the balance of potential income remaining after vacancy and collection loss and operating expenses. This net income was then capitalized at an appropriate rate to derive an estimate of value (the "Direct Capitalization Method") or discounted by an appropriate yield rate over a typical projection period in a discounted cash flow analysis (the "Discounted Cash Flow Method"). The Direct Capitalization Method was used for stabilized real estate assets, and the Discounted Cash Flow Method was used for real estate assets that were not stabilized or which had leases with irregular rent escalations. Thus, two key steps were involved: (i) estimating the net income applicable to each Real Estate Asset, and (ii) choosing appropriate capitalization rates and discount rates, as applicable.
Other Approaches
Kroll utilized a sales comparison approach (the "Sales Comparison Approach") to estimate the market value of the Company's two vacant land parcels based on what other purchasers and sellers in the applicable market had agreed to as a price for comparable vacant land parcels. This approach is based on the principle of substitution, which states that the limits of prices, rents and rates tend to be set by the prevailing prices, rents and rates of equally desirable substitutes.
Kroll utilized the contract purchase price (the "Acquisition Method") to estimate the value of seven recently acquired Medical Office Buildings.
Kroll utilized the estimated sales price (the "Disposition Method") to estimate the value of two Seniors Housing Properties, one of which was sold subsequent to December 31, 2023, and one MOB property.
Summary of Approaches
Kroll utilized the Discounted Cash Flow Method for 177 Real Estate Assets, the Direct Capitalization Method for 15 Real Estate Assets, the Acquisition Method for seven Real Estate Assets, the Disposition Method for three Real Estate Assets and the Sales Comparison Approach for two Real Estate Assets.
Kroll changed the valuation approach for 14 Seniors Housing Properties from Direct Capitalization Method as of December 31, 2022 to the Discounted Cash Flow Method as of December 31, 2023, reflecting the fact that the cash flows from these properties were negatively impacted and are expected to stabilize over time. Also, Kroll changed the valuation approach for two Seniors Housing Properties from the Discounted Cash Flow Method as of December 31, 2022, to the Direct Capitalization Method as of December 31, 2023, which reflects cash flow stabilization at these properties.
The following table presents the valuation methodology by property type:
| Income Capitalization Approach | Other Approaches | |||||
| Discounted Cash Flow Method | Direct Capitalization Method | Acquisition Method | Disposition Method | Sales Comparison Approach | Total | |
| Medical Office Buildings | 146 | 2 | 7 | 1 | - | 156 |
| Seniors Housing Properties | 31 | 13 | - | 2 | 2 | 48 |
| Total | 177 | 15 | 7 | 3 | 2 | 204 |
Estimated Per-Share NAV
The following table, prepared by the Advisor, summarizes the individual components of the low, midpoint and high values of the Real Estate Assets estimated by Kroll and the Advisor's estimate of the values of the Company's other assets and liabilities. The Estimated Per-Share NAV approved by the Board of $13.00 was $0.42 per share above the midpoint of the range provided in the Kroll Report and considered various factors. See the "Overview" section above for additional discussion of these considerations. The shares of common stock outstanding used in the calculation of the Estimated Per-Share Nav were 112,034,251 and 105,541,612 as of December 31, 2023 and 2022, respectively, which represents an increase of approximately 6% of outstanding shares. The 6% increase in outstanding shares is one component, among many, of the change in per share range of values detailed in the table below.
As stated above, issuing dividends in additional shares of common stock will, all things equal, cause the Estimated Per-Share NAV to decline because the number of shares outstanding increases when shares of common stock are issued in respect of a stock dividend; however, because each stockholder will receive the same proportionate number of new shares, the total value of a common stockholder's investment, all things equal, will not change assuming no sales or other transfers.
|
December 31, 2023
|
December 31, 2022 | |||||||||
| Range of Values | Final | Final | ||||||||
| Low | Midpoint | High | ||||||||
|
Real Estate Assets (1)
|
$ | 23.22 | $ | 23.79 | $ | 24.81 | $ | 24.21 | $ | 25.23 |
|
Other Assets (2)
|
0.98 | 0.98 | 0.98 | 0.98 | 0.91 | |||||
|
Derivative Assets, at fair value (3)
|
0.25 | 0.25 | 0.25 | 0.25 | 0.39 | |||||
|
Fair Value of Debt (4)
|
(10.26) | (10.26) | (10.26) | (10.26) | (10.26) | |||||
|
Other Liabilities (5)
|
(0.46) | (0.46) | (0.46) | (0.46) | (0.44) | |||||
|
Series A Preferred Stock(6)
|
(0.91) | (0.91) | (0.91) | (0.91) | (0.97) | |||||
|
Series B Preferred Stock (7)
|
(0.81) | (0.81) | (0.81) | (0.81) | (0.86) | |||||
| Kroll Range of Values | $ | 12.01 | $ | 12.58 | $ | 13.60 | $ | 13.00 | $ | 14.00 |
(1)The low value of the Real Estate Assets approximates,and the midpoint and high values of the Real Estate Assets reflect overall increases of 2.3% and 6.6% above, the net of (i) the aggregate carrying value of the Real Estate Assets, at cost of $2.6 billion, and (ii) the gross market lease intangible liabilities of $23.5 million. Cumulative impairment charges on properties owned as of December 31, 2023 totaled $27.9 million, and are reflected within real estate, at cost. The key assumptions that were used by Kroll in its models to estimate the value of each Real Estate Asset are set forth below:
The following summarizes the range of capitalization rates used to arrive at the estimated market values of the Real Estate Assets valued utilizing the Direct Capitalization Method as of December 31, 2023:
| Range |
Weighted Average |
|
| Capitalization Rate | 6.25% - 8.25% | 6.71% |
The following summarizes the range of terminal capitalization rates and discount rates used to arrive at the estimated market values of the Real Estate Assets valued utilizing the Discounted Cash Flow Method as of December 31, 2023:
| Range |
Weighted Average |
|
| Terminal Capitalization Rate | 5.50% - 9.50% | 7.02% |
| Discount Rate | 6.25% - 12.75% | 8.31% |
(2)Includes the following line items from the Company's audited financial statements: (i) cash and cash equivalents; (ii) restricted cash; and (iii) prepaid expenses and other assets, adjusted for certain items. The Advisor believes that the carrying values of these assets estimate their fair values.
(3)As disclosed in Note 6 - Fair Value of Financial Instrumentsto the Company's audited consolidated financial statements in the Company's Annual Report on Form 10-K, the valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments, are incorporated into the fair values to account for the Company's potential nonperformance risk and the performance risk of the counterparties.
(4)As disclosed in Note 6 - Fair Value of Financial Instrumentsto the Company's audited consolidated financial statements in the Company's Annual Report on Form 10-K, the value of the Company's mortgage notes payable was estimated using a discounted cash flow analysis. The inputs into the discounted cash flow analysis were based on the Advisor's experience with similar types of borrowing arrangements. Advances under the Company's credit facilities are considered to be reported at fair value, because the interest rates on the credit facilities vary with changes in SOFR.
(5)Includes the following line items from the Company's audited financial statements: (i) accounts payable and accrued expenses (including amounts due to related parties); (ii) deferred rent; and (iii) distributions payable. The Advisor believes that the carrying values of these liabilities estimate their fair values.
(6)Series A Preferred Stockwas initially issued in December 2019. Amount represents the liquidation value of the 3,977,144 shares of Series A Preferred Stockand the 100,000 units of Series A Preferred Units outstanding as of December 31, 2023with a liquidation preference of $25.00 per share.
(7)Series B Preferred Stockwas initially issued in October 2021. Amount represents the liquidation value of the 3,630,000 shares of Series B Preferred Stockoutstanding as of December 31, 2023 with a liquidation preference of $25.00 per share.
Limitations of the Asset Appraisals
The Company believes that the assumptions described herein to estimate the value of the Real Estate Assets are within the ranges used by market participants buying and selling similar properties, assuming a willing buyer and a willing seller, neither being under any compulsion to buy or to sell. The estimated values of the Real Estate Assets may not, however, represent current market value or book value. Real properties are currently carried at their amortized cost basis in the Company's financial statements. The estimated value of the Real Estate Assets reflected above does not necessarily represent the value the Company would receive or accept if the Real Estate Assets were marketed for sale. The market for commercial real estate can and does fluctuate and values are expected to change in the future. Further, the Estimated Per-Share NAV does not reflect a liquidity discount for the fact that the shares of common stock are not currently traded on a national securities exchange, a discount for the non-assumability or prepayment obligations associated with certain of the Company's debt obligations and other costs that may be incurred, including any costs associated with the sale of assets.
As with any methodology used to estimate value, the methodologies employed to value the Real Estate Assets by Kroll, and used by the Advisor to make recommendations to the Board, were based upon a number of estimates and assumptions that may not be accurate or complete, including estimates and assumptions such as comparable sales, rental and operating expense data, capitalization or discount rates, and projections of future rent and expenses. Further, different parties using different assumptions and estimates could derive a different Estimated Per-Share NAV, which could be significantly different from this Estimated Per-Share NAV.
The Estimated Per-Share NAV does not reflect "enterprise value" which may include an adjustment for:
•the large number of Real Estate Assets, given that some buyers may be willing to pay more for a large portfolio than they are willing to pay for each property in the portfolio separately;
•any other intangible value associated with a going concern; or
•the possibility that shares of common stock could trade at a premium or a discount to the Estimated Per-Share NAV if they were listed on a national securities exchange.
Limitations of the Estimated Per-Share NAV
The Estimated Per-Share NAV does not represent the: (i) the price at which shares of common stock would trade at on a national securities exchange or a third party would pay for the Company, (ii) the amount a stockholder would obtain if he or she tried to sell his or her shares of common stock or (iii) the amount stockholders would receive if the Company liquidated its assets and distributed the proceeds after paying all of its expenses and liabilities. Accordingly, with respect to the Estimated Per-Share NAV, the Company can give no assurance that:
•a stockholder would be able to resell his or her shares of common stock at Estimated Per-Share NAV;
•a stockholder would ultimately realize distributions per share of common stock equal to Estimated Per-Share NAV upon liquidation of the Company's assets and settlement of its liabilities or a sale of the Company;
•shares of common stock would trade at a price equal to or greater than Estimated Per-Share NAV if they were listed on a national securities exchange or that a third party would purchase the Company at a value per share of common stock equal to Estimated Per-Share NAV; or
•the methodology used to establish the Estimated Per-Share NAV would be acceptable to the Financial Industry Regulatory Authority for use on customer account statements, or that the Estimated Per-Share NAV will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of 1986, as amended (the "Code") with respect to employee benefit plans subject to ERISA and other retirement plans or accounts subject to Section 4975 of the Code.
Further, the Estimated Per-Share NAV was calculated as of a specific date, and the value of shares of common stock will fluctuate over time as a result of, among other things, developments related to individual assets, changes in the real estate and capital markets, acquisitions or dispositions of assets and the distribution of proceeds from the sale of real estate to stockholders.
Conclusion
The Estimated Per-Share NAV as of December 31, 2023 of $13.00 was unanimously adopted by the independent directors of the Board, who comprise a majority of the Board, on March 27, 2024. The independent directors of the Board based their conclusions on their review of the Advisor's analysis and recommendation, the Kroll Report, estimates and calculations and the fundamentals of the Real Estate Assets. The Board is ultimately and solely responsible for the Estimated Per-Share NAV. Estimated Per-Share NAV was determined at a moment in time and will likely change over time as a result of changes to the value of individual assets as well as changes and developments in the real estate and capital markets, including changes in interest rates.
Forward-Looking Statements
Certain statements made in this Form 8-K are "forward-looking statements" (as defined in Section 21E of the Securities Exchange Act of 1934, as amended), which reflect the Company's expectations regarding future events. Forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those contained in forward-looking statements. Such forward-looking statements include, but are not limited to, market and other expectations, objectives and intentions, as well as any other statements that are not historical facts.
The Company's potential risks and uncertainties are presented in the section titled "Item 1-A - Risk Factors" disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities Exchange Commission (the "SEC") on March 15, 2024 (as amended by that Amendment No. 1 on Form 10-K/A filed with the SEC on March 22, 2024) and all other filings with the SEC after that date. The Company disclaims any obligation to update and revise statements contained in these materials to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. The following are some of the risks and uncertainties relating to the Company, although not all risks and uncertainties, that could cause the Company's actual results to differ materially from those presented in forward-looking statements:
•The Company's operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market.
•The Company's property portfolio has a high concentration of properties located in Florida and Pennsylvania. The Company's properties may be adversely affected by economic cycles and risks inherent to those states.
•The Company has not paid distributions on its common stock in cash since 2020, and there can be no assurance it will pay distributions on its common stock in cash in the future.
•Inflation will have an adverse effect on the Company's investments and its results of operations.
•No public market currently exists, or may ever exist, for shares of the Company's common stock, and its shares are, and may continue to be, illiquid.
•The Company's real estate investments are concentrated in healthcare-related facilities, which may be negatively impacted by adverse trends in the healthcare industry.
•The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of the Company's tenants to make rent payments to the Company.
•If a tenant or lease guarantor declares bankruptcy or becomes insolvent, the Company may be unable to collect balances due under relevant leases.
•The Company assumes additional operating risks and is subject to additional regulation and liability because of its dependence on eligible independent contractors to manage some of its facilities.
•Joint venture investments could be adversely affected by the Company's lack of sole decision-making authority, its reliance on the financial condition of co-ventures and disputes between the Company and its co-ventures.
•The Company may be unable to renew leases or re-lease space as leases expire.
•The Company' level of indebtedness may increase its business risks.
•The Company's financing arrangements have restrictive covenants, which may limit its ability to pursue strategic alternatives and react to changes in its business and industry or pay dividends.
•The Company depends on the Advisor and the Property Manager to provide it with executive officers, key personnel and all services required for the Company to conduct its operations, and the Company's operating performance may be impacted by any adverse changes in the financial health or reputation of the Advisor and the Property Manager.
•All of the Company's executive officers, some of its directors and the key real estate and other professionals assembles by the Advisor and Property Manager face conflicts of interest, related to their positions or interests in entities related to AR Global, which could hinder the Company's ability to implement its business strategy.
•The Company may terminate its advisory agreement in only limited circumstances, which may require payment of a termination fee.
•The Estimated Per-Share NAV of the Company's common stock is based on subjective judgments, assumptions and opinions about future events, and may not reflect the value that the Company's stockholders might receive for their shares.
•The stockholder rights plan adopted by the Company's board of directors, the Company's classified board and other aspects of the Company's corporate structure and Maryland law may discourage a third party from acquiring the Company in a manner that might result in a premium price to holders of the Company's common stock.
•The share ownership restrictions for REITs and the 9.8% share ownership limit in the Company's charter may inhibit market activity in its shares of stock and restrict its business combination opportunities.
•The Company's failure to remain qualified as a REIT would subject it to U.S. federal income tax and potentially state and local taxes.
•Complying with REIT requirements may force the Company to forgo or liquidate otherwise attractive investment opportunities.