National Healthcare Properties, Inc.

Current report

We may not be able to successfully integrate or operate our recent or future acquisitions or may incur unanticipated liabilities.

Current report

We have recently acquired, and continue to pursue acquisitions of, SHOP communities, and the successful integration of acquired properties depends on our ability and the ability of the third-party operators that manage our SHOP communities to transition and integrate operations, systems, procedures, and personnel, including resident care, billing, accounting and data reporting systems, and to control costs. Because our SHOP communities are operated by eligible independent contractors under the RIDEA structure, we have limited control over the integration and day-to-day operation of acquired communities and depend on our operators’ ability to assume or transition those operations successfully. We or our operators may encounter difficulties in these integrations. Potential difficulties associated with acquisitions include: (i) our ability to effectively monitor and manage our expanded portfolio of properties and the operators that manage them with our existing personnel and resources; (ii) the disruption of our ongoing business or that of the acquired property, including disruption to residents and staff resulting from a change of operator; (iii) possible inconsistencies in standards, controls, procedures, and policies, including with respect to integrating financial and operating information from acquired properties and their operators into our financial reporting and internal control over financial reporting; (iv) the diversion of management’s attention from other business concerns; (v) where we acquire properties through joint ventures, our reliance on, and potential disagreements with, our joint venture partners; and (vi) the assumption of unexpected liabilities and claims, for which we may have limited or no recourse against the seller, including:

Current report

•liabilities relating to the cleanup or remediation of undisclosed environmental conditions;

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•unasserted claims of vendors, residents, patients, employees or other persons dealing with the seller or prior operator;

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•liabilities, claims, and litigation, whether or not incurred in the ordinary course of business, relating to periods prior to the acquisition, including professional and general liability claims relating to resident care;

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•claims for indemnification;

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•claims for the return or recoupment of payments received from Medicare, Medicaid or other third-party payors, and liabilities arising from noncompliance with healthcare, licensing or other regulatory requirements; and

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•liabilities for taxes relating to periods prior to the acquisition.

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In addition, acquired properties may fail to perform as expected, including with respect to anticipated occupancy, rental rates, operating margins and yields. Because we bear the operating risks of our SHOP communities under the RIDEA structure, any underperformance at those communities directly affects our results of operations. Inaccurate assumptions regarding future occupancy or rental rates could result in overly optimistic estimates of future revenues. Similarly, we may underestimate future operating expenses, including labor costs, or the costs necessary to bring properties up to our standards or for property improvements and capital expenditures. Additionally, acquired properties may be located in new markets where we or our operators may face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area, competition from other senior housing communities, and unfamiliarity with local governmental laws, rules or regulations, including state licensing and other requirements applicable to senior housing communities. As a result, we cannot assure you that we will achieve the economic benefit we expect from acquisitions.

Current report

If we or our operators have difficulties with any of these areas, or if we later discover additional liabilities or experience unforeseen costs relating to our acquired properties or changing of operators, we may not achieve the anticipated economic benefits from our acquisitions, and this may have a material adverse effect on us.