STSR 10-K & 10-Q changes, risk factors and insider trading

In the past, we have made distributions from sources other than cash flow from operations, including borrowings and net proceeds from our Offerings. In the event we resume distributions in the future, but do not have enough cash from operations to fund our distributions, we may borrow, issue additional securities, or sell assets in order to fund the distributions. We are not prohibited from undertaking such activities by our charter, bylaws, or investment policies, and we may use an unlimited amount from any source to pay our distributions. It is likely that some or all of the distributions we have made and that we make in the future represented or will represent a return of capital to our stockholders. For the year ended December 31, 2025, we did not make any distributions. For the year ended December 31, 2024, we paid a one-time capital gain distribution in connection with the sale of our Fayetteville propertyProperty in July 2024. For the year ended December 31, 2023, we did not make any distributions. For the year ended December 31, 2022, we paid a one-time capital gain distribution in connection with the sale of our Tallahassee property in January 2022. Payment of distributions in excess of earnings may have a dilutive effect on the value of our shares. Payment of distributions from sources other than cash flow from operations would reduce our stockholders’ overall returns and constitute a return of capital. Additionally, to the extent distributions exceed cash flow from operations, a stockholder’s basis in our stock may be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize a capital gain.

Our Advisor and its affiliates has performed services for us in connection with the offer and sale of our shares and the selection and acquisition of our investments, and will continue to perform transfer agent and registrar services and oversight of the management of our properties. We have accrued and paid substantial fees for these services, which will reduce the amount of cash available for distribution to stockholders. In addition, we may be required to pay the contingent acquisition fees if we terminate the Advisory Agreement with our Advisor. Payment of these fees to our Advisor and its affiliates will reduce cash available for distribution. Furthermore, subject to limitations in our charter, the fees, compensation, income, expense reimbursements, incentive distributions and other payments payable to our Advisor and its affiliates may increase in the future without stockholder approval if such increase is approved by a majority of our independent directors.

Our third party senior housing operator manages or operates other properties in addition to ours. If a negative event were to occur with respect to such properties or with respect to the third party senior housing operator, our properties may suffer adverse consequences as a result. Our third party senior housing operator may have to devote significant time to management of a crisis event at another property that they manage or operate, which could cause them to devote less time and fewer resources to our property than is necessary or appropriate. If our third party senior housing operator were to face significant liabilities associated with their business, their ability to satisfy the needs of our properties may be negatively impacted. In addition, if another property managed or operated by our our third party senior housing operator were to experience negative publicity, whether due to an outbreak of an illness (such as COVID-19), deaths, significant legal claims, or otherwise, our properties may be adversely impacted as a result of our association with such third party.

We intended to use medium-to-high leverage (between 55% to 60% loan to purchase price) and may place other permanent financing on our properties or obtain additional credit facilities or other similar financing. However, asAs a result of the suspension of our Public Offering in March 2020 and subsequent termination of our Primary Offering, our debt leverage level has remained higher and our ability to incur additional indebtedness is limited and uncertain. As of December 31, 2024,2025, our debt leverage based on purchase price was approximately 58%.57%. We may also decide to later further leverage our properties. We may incur mortgage debt and pledge all or some of our real properties as security for that debt to obtain funds to acquire real properties. We may borrow if we need funds to pay a desired distribution rate to our stockholders if distributions are resumed. We may also borrow if we deem it necessary or advisable to assure that we qualify and maintain our qualification as a REIT for federal income tax purposes. If there is a shortfall between the cash flow from our properties and the cash flow needed to service mortgage debt, then the amount available for distribution to stockholders may be reduced.

We believe that our critical accounting policies include the following: real estate purchase price allocations; the evaluation of whether any of our long-lived assets have been impaired; the determination of the useful lives of our long-lived assets; and the evaluation of the consolidation of our interests in joint ventures. The following discussion of these policies supplements, but does not supplant the description of our significant accounting policies, as contained in Note 2 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements contained in this report, and is intended to present our analysis of the uncertainties involved in arriving upon and applying each policy.

We evaluate the consolidation of our investments in joint venturesVIE's in accordance with relevant accounting guidance. This evaluation requires us to determine whether we have a controlling interest in a joint ventureVIE through a means other than voting rights, and, if so, such joint ventureVIE may be required to be consolidated in our financial statements. Our evaluation of our joint venturesVIE's under such accounting guidance could result in a materially different presentation of the financial statements or materially different amounts being reported in the consolidated financial statements, as the joint venture entitiesVIE's included in our consolidated financial statements may vary based on the estimates and assumptions we use.

For the years ended December 31, 20242025 and 2023,2024, we have derived revenues from our continuing operations principally from rents and related fees received from residents of our senior housing properties and to a lesser extent from other services provided at our senior housing properties. In addition, during the yearsyear ended December 31, 2024 and 2023,2024, we have derived revenues from discontinued operations principally from rents and related fees received from residents of our student housing property. Our operating results depend significantly on our ability to retain our existing residents and lease our available units to new residents, while maintaining and, where possible, increasing rates. Additionally, our operating results depend on our residents making their required payments to us.

Recent Market Conditions

Cash flows provided by (used in) investingoperating activities for the years ended December 31, 20242025 and 20232024 were approximately $69.5$3.2 million and approximately ($2.9$5.3) million, respectively, a change of approximately $72.4$8.4 million. The increase in cash provided by investingoperating activities iswas primarily the result of an increase in revenue during 2025, which reduced the net proceedsloss, and the net loss from thediscontinued saleoperations of the Fayetteville property in Julyduring 2024.

Cash flows (used in) financingprovided by investing activities for the years ended December 31, 20242025 and 20232024 were approximately $60.5($9.0) million and $2.3$69.5 million, respectively, a change of approximately $58.2($78.5) million. The increase in cash used in financinginvesting activities is primarily the result of theour repaymentinvestment ofin short-term U.S. Treasury Securities, the $34.5increase millionin Fayettevilleadditions Mortgageto Loanreal estate during 2025, and the $25.4net millionproceeds KeyBank Bridge Loans in conjunction withfrom the sale of the Fayetteville propertyProperty in July 2024.

For the year ended December 31, 2024, we made a special one-time distribution in connection with the sale of the Fayetteville property,Property, and had net income attributable to our common stockholders of approximately $17.8 million. Net income attributable to our common stockholders for the year ended December 31, 2024 includes non-cash depreciation of approximately $6.0 million, andbut nodoes not include any acquisition related expenses.

On a long-term basis, our principal demands for funds will be for the payment of interest and principal on our outstanding indebtedness, for the payment of operating expenses and distributions, if resumed in the future, and for property expansion, capital improvements, and acquisitions, either directly or through entity interests, if any.

We incurred net loss attributable to common stockholders of approximately $0.7$3.0 million for the threesix months ended MarchJune 31,30, 2026. Our accumulated deficit was approximately $68.7$71.1 million as of MarchJune 31,30, 2026. Due to COVID-19 we terminated our Public Offering, we currently have no plans to acquire any additional properties and our operations will likely not be profitable in 2026.

As of DecemberJune 31,30, 2025,2026, we had sold approximately 362,000 Class A shares, approximately 70,000 Class T shares, approximately 83,000 Class W shares, approximately 1.1 million Class Y shares, and approximately 165,000 Class Z shares for gross offering proceeds of approximately $17.1 million in our Primary Offering.

As of MarchJune 31,30, 2026, we owned four senior housing properties.

As of MarchJune 31,30, 2026, our senior housing property portfolio was comprised as follows:

Calculated based on our revenue earned during the three months ended MarchJune 31,30, 2026 divided by average occupied units over the same period.

Represents occupied units divided by total rentable units as of MarchJune 31,30, 2026.

During the threesix months ended MarchJune 31,30, 2026 and 2025, we derived revenues from operations principally from rents and related fees received from residents of our senior housing properties and to a lesser extent from other services provided at our senior housing properties. Our operating results depend significantly on our ability to retain our existing residents and lease our available units to new residents, while maintaining and, where possible, increasing rates. Additionally, our operating results depend on our residents making their required payments to us.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

Leasing and related revenues for the three months ended MarchJune 31,30, 2026 were approximately $10.2$10.3 million, as compared to approximately $9.0$9.3 million for the three months ended MarchJune 31,30, 2025, an increase of approximately $1.2$1.0 million. The increase is primarily attributable to an increase in both rates and occupancy at our senior housing properties. We expect leasing and related revenues to fluctuate in future periods commensurate with our leasing activity.

Property operating expenses for the three months ended MarchJune 31,30, 2026 were approximately $6.9$7.1 million, as compared to approximately $6.3$6.4 million for the three months ended MarchJune 31,30, 2025, an increase of approximately $0.6$0.7 million. The increase is primarily related to occupancy related property operating expense and insurance increases. Such property operating expenses include the cost to operate our senior housing properties including payroll, food service costs, utilities, insurance, real estate taxes, repairs and maintenance, third-party property management fees, and other direct property costs.

Property operating expenses - affiliates for both of the three months ended MarchJune 31,30, 2026 and 2025 were approximately $0.5 million. Property operating expenses - affiliates consists of asset management and property management oversight fees for our senior housing properties due to our Advisor.

General and administrative expenses for the three months ended MarchJune 31,30, 2026 were approximately $0.4$1.9 million, as compared to approximately $0.5 million for the three months ended MarchJune 31,30, 2025, aan decreaseincrease of approximately $0.1$1.4 million. General and administrative expenses consist primarily of legal expenses, directors’ and officers’ insurance expense, transfer agent expenses, an allocation of a portion of payroll related costs attributable to our Advisor and its affiliates, accounting expenses and professional services. The decreaseincrease is primarily related to transferan agentaccrual for the final ISL arbitration award of approximately $1.3 million recorded during the three months ended June 30, 2026. Please refer to Note 8 - Commitments and legalContingencies expenses.for additional details. We expect general and administrative expenses to fluctuate in future periods commensurate with our operational activity.

Depreciation expense for the three months ended MarchJune 31,30, 2026 was approximately $1.5 million, as compared to approximately $1.4 million for the three months ended MarchJune 31,30, 2025, an increase of approximately $0.1 million. Depreciation expense consists primarily of depreciation on the buildings, site improvements, and furniture, fixtures and equipment at our properties. The increase is primarily related to capital improvements completed during 2025.

Interest expense for both of the three months ended MarchJune 31,30, 2026 and 2025 were approximately $1.3 million. We expect interest expense to fluctuate in future periods commensurate with our future debt level.

Interest expense - debt issuance costs for both of the three months ended MarchJune 31,30, 2026 and 2025 were approximately $36,000. Interest expense - debt issuance costs reflects the amortization of costs incurred in connection with obtaining debt related to the acquisition of our properties. We expect interest expense - debt issuance costs to fluctuate commensurate with our future financing activity.

A comparison of our cash flows for operating, investing and financing activities for the threesix months ended MarchJune 31,30, 2026 and 2025, is as follows:

Cash flows provided by operating activities for the threesix months ended MarchJune 31,30, 2026 and 2025 were approximately $1.5$2.3 million and $0.9$2.2 million, respectively, an increase of approximately $0.6$0.1 million. The increase in cash provided by operating activities was primarily the result of aan decreaseincrease in netchanges loss.in assets and liabilities.

Cash flows provided by (used in) investing activities for the threesix months ended MarchJune 31,30, 2026 and 2025 were approximately $0.8$4.3 million and ($0.4$1.7) million, respectively, an increase of approximately $1.2$6.0 million. The increase in cash provided by investing activities is primarily the result of the maturity of short-term U.S. Treasury Securities during the threesix months ended MarchJune 31,30, 2026.

Cash flows used in financing activities for both the threesix months ended MarchJune 31,30, 2026 and 2025 waswere approximately $0.5$970,000 million.and $920,000, respectively, an increase of approximately $50,000. Cash used in financing activities is primarily the result of scheduled principal payments on mortgage debt.

Our liquidity needs consist primarily of our property operating expenses, general and administrative expenses, regularly scheduled debt service payments, and capital expenditures. Currently, we generally expect that we will meet our short-term operating liquidity requirements from the combination of our cash on hand, proceeds from net cash provided by property operations, proceeds from secured or unsecured financing from banks or other lenders, issuance of preferred units in our Operating Partnership, and advances from our Advisor, which will be repaid, without interest, as funds are available after meeting our current liquidity requirements, subject to the limitations on reimbursement set forth in our Advisory Agreement.

We commenced paying distributions in September 2017. From our inception through MarchJune 31,30, 2026, we paid cumulative distributions of approximately $20.5 million, including approximately $0.2 million related to our preferred unitholders, as compared to cumulative net loss attributable to our common stockholders of approximately $68.7$71.1 million, which includes acquisition related expenses of approximately $3.4 million and non-cash depreciation and amortization of approximately $82.5$84 million.

For the three and six months ended MarchJune 31,30, 2026, we did not declare or pay any distributions and had a net loss attributable to our common stockholders of approximately $0.7$2.3 million.million and $3.0 million, respectively. For the three and six months ended MarchJune 31,30, 2025, we did not declare or pay any distributions and had a net loss attributable to our common stockholders of approximately $1.4$1.1 million.million and $2.5 million, respectively.

As of MarchJune 31,30, 2026, our total indebtedness was approximately $102.3$101.8 million in fixed rate debt. See Note 4 of the Notes to the Consolidated Financial Statements for more information about our indebtedness.

The following table summarizes our contractual obligations as of MarchJune 31,30, 2026: