UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2023


			OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission file number: 001-39153

Healthcare Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

38-3888962

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

~~650 Fifth Ave., 30~~th ~~Floor, New York, NY 10019~~

~~___________________________________________________ __________________________________________________~~

~~(Address of principal executive offices) (Zip~~


222 Bellevue Ave., Newport, RI						02840
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (212) 415-6500

~~Former name, former address and former fiscal year, if changed since last report: Not Applicable~~


650 Fifth Ave., 30th Floor, New York, NY
Former name, former address and former fiscal year, if changed since last report

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share

HTIA

The Nasdaq Global Market

7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share

HTIBP

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of ~~July 31,~~November 6, 2023, the registrant had ~~109,928,083~~111,545,038 shares of common stock outstanding.

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


			Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Consolidated Balance Sheets as of ~~June~~September 30,, 2023 and December 31, 2022 (Unaudited)			3
Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~and Six~~ Nine Months Ended ~~June~~ September 30,, 2023 and 2022 (Unaudited)			4
Consolidated Statements of Changes in Equity for the Three and T h ~~ree a~~n d ~~Six~~Nine Months Ended J u ne 30 ~~, 2023~~September 30, 2023 (Unaudited)			5
Consolidated Statements of Changes in Equity for the Three and ~~Six~~Nine Months Ended ~~June~~ September 30, ~~202~~2 2022 (Unaudited)			6
Consolidated Statements of Cash Flows for the ~~Six~~N i ne Months Ended JSeptember u ne 30,, 2023 and 2022 (Unaudited)			7
Notes to Consolidated Financial Statements (Unaudited)			9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.			4445

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			6566

Item 4. Controls and Procedures.			6567

PART II - OTHER INFORMATION			6668

Item 1. Legal Proceedings.			6668

Item 1A. Risk Factors.			6668

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds and Issuer Purchases of Equity Securities.			6668

Item 3. Defaults Upon Senior Securities.			6668

Item 4. Mine Safety Disclosures.			6668

Item 5. Other Information.			6668

Item 6. Exhibits.			6769

Signatures.			6870

Table of Contents

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements.

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022
ASSETS	ASSETS	(Unaudited)		(Unaudited)		ASSETS	(Unaudited)		(Unaudited)
Real estate investments, at cost:	Real estate investments, at cost:					Real estate investments, at cost:
Land	Land	$	207,307	$	206,454	Land	$	208,594	$	206,454
Buildings, fixtures and improvements	Buildings, fixtures and improvements	2,105,607		2,089,133		Buildings, fixtures and improvements	2,119,797		2,089,133
Acquired intangible assets	Acquired intangible assets	292,150		292,034		Acquired intangible assets	293,295		292,034
Total real estate investments, at cost	Total real estate investments, at cost	2,605,064		2,587,621		Total real estate investments, at cost	2,621,686		2,587,621
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(643,677)		(609,324)		Less: accumulated depreciation and amortization	(663,534)		(609,324)
Total real estate investments, net	Total real estate investments, net	1,961,387		1,978,297		Total real estate investments, net	1,958,152		1,978,297

Cash and cash equivalents	Cash and cash equivalents	71,705		53,654		Cash and cash equivalents	51,041		53,654
Restricted cash	Restricted cash	33,800		22,884		Restricted cash	40,245		22,884
Derivative assets, at fair value	Derivative assets, at fair value	36,776		40,647		Derivative assets, at fair value	37,547		40,647
Straight-line rent receivable, net	Straight-line rent receivable, net	25,864		25,276		Straight-line rent receivable, net	26,214		25,276
Operating lease right-of-use assets	Operating lease right-of-use assets	7,764		7,814		Operating lease right-of-use assets	7,739		7,814
Prepaid expenses and other assets (including $2,262 of prepayments to related parties as of June 30, 2023)		33,125		34,554
Prepaid expenses and other assets						Prepaid expenses and other assets	36,019		34,554

Deferred costs, net	Deferred costs, net	14,856		17,223		Deferred costs, net	15,300		17,223
Total assets	Total assets	$	2,185,277	$	2,180,349	Total assets	$	2,172,257	$	2,180,349

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Mortgage notes payable, net	Mortgage notes payable, net	$	808,513	$	578,700	Mortgage notes payable, net	$	808,752	$	578,700
Credit facilities, net	Credit facilities, net	349,162		530,297		Credit facilities, net	347,720		530,297
Market lease intangible liabilities, net	Market lease intangible liabilities, net	8,639		9,407		Market lease intangible liabilities, net	8,519		9,407

Accounts payable and accrued expenses (including $47 due to related parties as of December 31, 2022)		42,348		45,247
Accounts payable and accrued expenses (including $665 and $47, respectively, due to related parties as of September 30, 2023 and December 31, 2022)						Accounts payable and accrued expenses (including $665 and $47, respectively, due to related parties as of September 30, 2023 and December 31, 2022)	48,234		45,247
Operating lease liabilities	Operating lease liabilities	8,063		8,087		Operating lease liabilities	8,051		8,087
Deferred rent	Deferred rent	5,478		5,925		Deferred rent	6,904		5,925
Distributions payable	Distributions payable	3,496		3,496		Distributions payable	3,496		3,496
Total liabilities	Total liabilities	1,225,699		1,181,159		Total liabilities	1,231,676		1,181,159
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
7.375% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, 4,740,000 authorized; 3,977,144 issued and outstanding as of June 30, 2023 and December 31, 2022		40		40
7.125% Series B cumulative redeemable perpetual preferred stock, $0.01 par value, 3,680,000 authorized; 3,630,000 issued and outstanding as of June 30, 2023 and December 31, 2022		36		36
Common stock, $0.01 par value, 300,000,000 shares authorized, 108,284,434 shares and 105,080,531 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		1,082		1,051
7.375% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, 4,740,000 authorized; 3,977,144 issued and outstanding as of September 30, 2023 and December 31, 2022						7.375% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, 4,740,000 authorized; 3,977,144 issued and outstanding as of September 30, 2023 and December 31, 2022	40		40
7.125% Series B cumulative redeemable perpetual preferred stock, $0.01 par value, 3,680,000 authorized; 3,630,000 issued and outstanding as of September 30, 2023 and December 31, 2022						7.125% Series B cumulative redeemable perpetual preferred stock, $0.01 par value, 3,680,000 authorized; 3,630,000 issued and outstanding as of September 30, 2023 and December 31, 2022	36		36
Common stock, $0.01 par value, 300,000,000 shares authorized, 109,877,212 shares and 105,080,531 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively						Common stock, $0.01 par value, 300,000,000 shares authorized, 109,877,212 shares and 105,080,531 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	1,098		1,051
Additional paid-in capital	Additional paid-in capital	2,462,523		2,417,059		Additional paid-in capital	2,485,745		2,417,059
Accumulated other comprehensive income	Accumulated other comprehensive income	34,945		36,910		Accumulated other comprehensive income	35,340		36,910
Distributions in excess of accumulated earnings	Distributions in excess of accumulated earnings	(1,545,708)		(1,462,457)		Distributions in excess of accumulated earnings	(1,588,261)		(1,462,457)
Total stockholders’ equity	Total stockholders’ equity	952,918		992,639		Total stockholders’ equity	933,998		992,639
Non-controlling interests	Non-controlling interests	6,660		6,551		Non-controlling interests	6,583		6,551
Total equity	Total equity	959,578		999,190		Total equity	940,581		999,190
Total liabilities and equity	Total liabilities and equity	$	2,185,277	$	2,180,349	Total liabilities and equity	$	2,172,257	$	2,180,349

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Revenue from tenants	Revenue from tenants	$	86,104	$	83,826	$	173,459	$	167,476	Revenue from tenants	$	85,686	$	83,460	$	259,145	$	250,936

Operating expenses:	Operating expenses:									Operating expenses:
Property operating and maintenance	Property operating and maintenance	53,569		52,592		107,452		105,682		Property operating and maintenance	54,326		51,198		161,778		156,880
Impairment charges	Impairment charges	—		6,193		—		16,837		Impairment charges	—		8,949		—		25,786
Operating fees to related parties	Operating fees to related parties	6,369		6,352		12,756		12,670		Operating fees to related parties	6,397		6,333		19,153		19,003
Acquisition and transaction related	Acquisition and transaction related	148		375		211		954		Acquisition and transaction related	173		199		384		1,153
General and administrative	General and administrative	4,331		3,999		9,352		8,898		General and administrative	4,753		4,471		14,105		13,369
Depreciation and amortization	Depreciation and amortization	20,568		20,251		40,744		40,671		Depreciation and amortization	20,776		20,854		61,520		61,525
Total expenses	Total expenses	84,985		89,762		170,515		185,712		Total expenses	86,425		92,004		256,940		277,716
Operating income (loss) before loss on sale of real estate investments		1,119		(5,936)		2,944		(18,236)
Loss on sale of real estate investments		(306)		—		(191)		(303)
Operating income (loss)		813		(5,936)		2,753		(18,539)
Operating (loss) income before loss (gain) on sale of real estate investments										Operating (loss) income before loss (gain) on sale of real estate investments	(739)		(8,544)		2,205		(26,780)
(Loss) gain on sale of real estate investments										(Loss) gain on sale of real estate investments	(173)		194		(364)		(109)
Operating (loss) income										Operating (loss) income	(912)		(8,350)		1,841		(26,889)
Other income (expense):	Other income (expense):									Other income (expense):
Interest expense	Interest expense	(18,703)		(12,050)		(34,488)		(23,814)		Interest expense	(15,720)		(13,284)		(50,208)		(37,098)
Interest and other income	Interest and other income	313		2		318		14		Interest and other income	258		10		576		24
Gain on non-designated derivatives	Gain on non-designated derivatives	286		392		104		1,386		Gain on non-designated derivatives	406		1,826		510		3,212
Total other expenses	Total other expenses	(18,104)		(11,656)		(34,066)		(22,414)		Total other expenses	(15,056)		(11,448)		(49,122)		(33,862)
Loss before income taxes	Loss before income taxes	(17,291)		(17,592)		(31,313)		(40,953)		Loss before income taxes	(15,968)		(19,798)		(47,281)		(60,751)
Income tax expense	Income tax expense	(41)		(43)		(87)		(82)		Income tax expense	(157)		(77)		(244)		(159)
Net loss	Net loss	(17,332)		(17,635)		(31,400)		(41,035)		Net loss	(16,125)		(19,875)		(47,525)		(60,910)
Net loss attributable to non-controlling interests	Net loss attributable to non-controlling interests	22		29		31		78		Net loss attributable to non-controlling interests	14		22		45		100
Allocation for preferred stock	Allocation for preferred stock	(3,449)		(3,449)		(6,899)		(6,899)		Allocation for preferred stock	(3,450)		(3,450)		(10,349)		(10,349)
Net loss attributable to common stockholders	Net loss attributable to common stockholders	(20,759)		(21,055)		(38,268)		(47,856)		Net loss attributable to common stockholders	(19,561)		(23,303)		(57,829)		(71,159)

Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Unrealized gain (loss) on designated derivatives	Unrealized gain (loss) on designated derivatives	5,466		10,170		(1,965)		36,436		Unrealized gain (loss) on designated derivatives	395		16,948		(1,570)		53,384
Comprehensive loss attributable to common stockholders	Comprehensive loss attributable to common stockholders	$	(15,293)	$	(10,885)	$	(40,233)	$	(11,420)	Comprehensive loss attributable to common stockholders	$	(19,166)	$	(6,355)	$	(59,399)	$	(17,775)

Weighted-average shares outstanding — Basic and Diluted (1)	Weighted-average shares outstanding — Basic and Diluted (1)	109,727,785		109,653,175		109,727,785		109,653,175		Weighted-average shares outstanding — Basic and Diluted (1)	111,426,241		111,365,461		111,404,655		111,333,801
Net loss per common share attributable to common stockholders — Basic and Diluted (1)	Net loss per common share attributable to common stockholders — Basic and Diluted (1)	$	(0.19)	$	(0.19)	$	(0.35)	$	(0.44)	Net loss per common share attributable to common stockholders — Basic and Diluted (1)	$	(0.18)	$	(0.21)	$	(0.52)	$	(0.64)

_____

(1)Retroactively adjusted for the effects of the stock dividends (see Note 1).

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

(Unaudited)


		Six Months Ended June 30, 2023																												Nine Months Ended September 30, 2023
		Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income																						Series A Preferred Stock							Series B Preferred Stock							Common Stock											Accumulated Other Comprehensive Income
		Number of Shares	Par Value		Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-in Capital				Distributions in excess of accumulated earnings				Total Stockholders Equity				Non-controlling Interests					Total Equity				Number of Shares					Par Value			Number of Shares			Par Value			Number of Shares				Par Value			Additional Paid-in Capital								Distributions in excess of accumulated earnings				Total Stockholders Equity				Non-controlling Interests				Total Equity
Balance, December 31, 2022	Balance, December 31, 2022	3,977,144	40		3,630,000	$	36	105,080,531	$	1,051	$	2,417,059			$	36,910			$	(1,462,457)			$	992,639				$	6,551				$	999,190		Balance, December 31, 2022	3,977,144			40			3,630,000			$	36			105,080,531			$	1,051			$	2,417,059			$	36,910			$	(1,462,457)			$	992,639			$	6,551		$	999,190

Share-based compensation, net	Share-based compensation, net	—	—		—	—		—	—		460		—				—				460				—					460			Share-based compensation, net		—				—			—			—				—			—				689				—				—				689				—			689
Distributions declared in common stock, $0.42 per share	Distributions declared in common stock, $0.42 per share	—	—		—	—		3,203,903	31		44,952		—				(44,983)				—				—					—			Distributions declared in common stock, $0.42 per share		—				—			—			—				4,796,681			47				67,928				—				(67,975)				—				—			—

Distributions declared on Series A Preferred Stock, $0.92 per share	Distributions declared on Series A Preferred Stock, $0.92 per share	—	—		—	—		—	—		—		—				(3,666)				(3,666)				—					(3,666)			Distributions declared on Series A Preferred Stock, $0.92 per share		—				—			—			—				—			—				—				—				(5,500)				(5,500)				—			(5,500)
Distributions declared on Series B Preferred Stock, $0.90 per share	Distributions declared on Series B Preferred Stock, $0.90 per share	—	—		—	—		—	—		—		—				(3,233)				(3,233)				—					(3,233)			Distributions declared on Series B Preferred Stock, $0.90 per share		—				—			—			—				—			—				—				—				(4,849)				(4,849)				—			(4,849)
Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—				—				—				(92)					(92)			Distributions to non-controlling interest holders		—				—			—			—				—			—				—				—				—				—				(138)			(138)
Net loss	Net loss	—	—		—	—		—	—		—		—				(31,369)				(31,369)				(31)					(31,400)			Net loss		—				—			—			—				—			—				—				—				(47,480)				(47,480)				(45)			(47,525)
Unrealized loss on designated derivatives	Unrealized loss on designated derivatives	—	—		—	—		—	—		—		(1,965)				—				(1,965)				—					(1,965)			Unrealized loss on designated derivatives		—				—			—			—				—			—				—				(1,570)				—				(1,570)				—			(1,570)
Contributions from minority interests	Contributions from minority interests	—	—		—	—		—	—		—		—				—				—				284					284			Contributions from minority interests		—				—			—			—				—			—				—				—				—				—				284			284
Rebalancing of ownership percentage	Rebalancing of ownership percentage	—	—		—	—		—	—		52		—				—				52				(52)					—			Rebalancing of ownership percentage		—				—			—			—				—			—				69				—				—				69				(69)			—
Balance, June 30, 2023		3,977,144	$	40	3,630,000	$	36	108,284,434	$	1,082	$	2,462,523	$	34,945			$	(1,545,708)			$	952,918			$	6,660				$	959,578
Balance, September 30, 2023																											Balance, September 30, 2023		3,977,144					$	40			3,630,000			$	36		109,877,212				$	1,098		$	2,485,745			$	35,340			$	(1,588,261)			$	933,998			$	6,583			$	940,581


		Three Months Ended June 30, 2023																												Three Months Ended September 30, 2023
		Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income																						Series A Preferred Stock						Series B Preferred Stock						Common Stock								Accumulated Other Comprehensive Income
		Number of Shares	Par Value		Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-in Capital				Distributions in excess of accumulated earnings				Total Stockholders Equity				Non-controlling Interests					Total Equity				Number of Shares				Par Value			Number of Shares			Par Value			Number of Shares			Par Value			Additional Paid-in Capital					Distributions in excess of accumulated earnings			Total Stockholders Equity			Non-controlling Interests			Total Equity
Balance, March 31, 2023		3,977,144	$	40	3,630,000	$	36	106,668,245	$	1,066	$	2,439,662			$	29,479			$	(1,502,299)			$	967,984				$	6,441				$	974,425
Issuance of Preferred Stock, net		—	—		—	—		—	—		2		—				—				2				—					2
Balance, June 30, 2023																											Balance, June 30, 2023		3,977,144					$	40		3,630,000			$	36		108,284,434			$	1,082		$	2,462,523		$	34,945	$	(1,545,708)		$	952,918		$	6,660		$	959,578

Share-based compensation, net	Share-based compensation, net	—	—		—	—		—	—		230		—				—				230				—					230			Share-based compensation, net		—			—			—			—			—			—			229		—			—			229			—		229
Distributions declared in common stock, $0.21 per share	Distributions declared in common stock, $0.21 per share	—	—		—	—		1,616,189	16		22,632		—				(22,648)				—				—					—			Distributions declared in common stock, $0.21 per share		—			—			—			—			1,592,778			16			22,976		—			(22,992)			—			—		—
Distributions declared on Series A Preferred Stock, $0.46 per share	Distributions declared on Series A Preferred Stock, $0.46 per share	—	—		—	—		—	—		—		—				(1,834)				(1,834)				—					(1,834)			Distributions declared on Series A Preferred Stock, $0.46 per share		—			—			—			—			—			—			—		—			(1,834)			(1,834)			—		(1,834)
Distributions declared on Series B Preferred Stock, $0.45 per share	Distributions declared on Series B Preferred Stock, $0.45 per share	—	—		—	—		—	—		—		—				(1,617)				(1,617)				—					(1,617)			Distributions declared on Series B Preferred Stock, $0.45 per share		—			—			—			—			—			—			—		—			(1,616)			(1,616)			—		(1,616)
Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—				—				—				(46)					(46)			Distributions to non-controlling interest holders		—			—			—			—			—			—			—		—			—			—			(46)		(46)
Net loss	Net loss	—	—		—	—		—	—		—		—				(17,310)				(17,310)				(22)					(17,332)			Net loss		—			—			—			—			—			—			—		—			(16,111)			(16,111)			(14)		(16,125)
Unrealized gain on designated derivatives	Unrealized gain on designated derivatives	—	—		—	—		—	—		—		5,466				—				5,466				—					5,466			Unrealized gain on designated derivatives		—			—			—			—			—			—			—		395			—			395			—		395
Contributions from minority interests		—	—		—	—		—	—		—		—				—				—				284					284

Rebalancing of ownership percentage	Rebalancing of ownership percentage	—	—		—	—		—	—		(3)		—				—				(3)				3					—			Rebalancing of ownership percentage		—			—			—			—			—			—			17		—			—			17			(17)		—
Balance, June 30, 2023		3,977,144	$	40	3,630,000	$	36	108,284,434	$	1,082	$	2,462,523	$	34,945			$	(1,545,708)			$	952,918			$	6,660				$	959,578
Balance, September 30, 2023																											Balance, September 30, 2023		3,977,144					$	40		3,630,000			$	36		109,877,212			$	1,098		$	2,485,745		$	35,340	$	(1,588,261)		$	933,998		$	6,583		$	940,581

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

(Unaudited)


					Six Months Ended June 30, 2022																																						Nine Months Ended September 30, 2022
		Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive (Loss) Income																						Series A Preferred Stock								Series B Preferred Stock							Common Stock											Accumulated Other Comprehensive (Loss) Income
		Number of Shares	Par Value		Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-in Capital				Distributions in Excess of Accumulated Earnings				Total Stockholders Equity				Non-controlling Interests					Total Equity				Number of Shares					Par Value			Number of Shares				Par Value			Number of Shares				Par Value			Additional Paid-in Capital								Distributions in Excess of Accumulated Earnings				Total Stockholders Equity				Non-controlling Interests				Total Equity
Balance, December 31, 2021	Balance, December 31, 2021	3,977,144	$	40	3,630,000	$	36	99,281,754	$	993	$	2,329,839			$	(14,341)			$	(1,282,871)			$	1,033,696				$	6,704				$	1,040,400		Balance, December 31, 2021	3,977,144			$	40			3,630,000			$	36			99,281,754			$	993			$	2,329,839			$	(14,341)			$	(1,282,871)			$	1,033,696			$	6,704		$	1,040,400
Issuance of Preferred Stock, net	Issuance of Preferred Stock, net	—	—		—	—		—	—		(11)		—				—				(11)				—					(11)			Issuance of Preferred Stock, net		—				—				—			—				—			—				(39)				—				—				(39)				—			(39)
Share-based compensation, net	Share-based compensation, net	—	—		—	—		—	—		664		—				—				664				—					664			Share-based compensation, net		—				—				—			—				—			—				955				—				—				955				—			955
Distributions declared in common stock, $0.42 per share	Distributions declared in common stock, $0.42 per share	—	—		—	—		2,882,917	29		42,540		—				(42,569)				—				—					—			Distributions declared in common stock, $0.42 per share		—				—				—			—				4,330,590			43				64,237				—				(64,280)				—				—			—
Distributions declared on Series A Preferred Stock, $0.92 per share	Distributions declared on Series A Preferred Stock, $0.92 per share	—	—		—	—		—	—		—		—				(3,666)				(3,666)				—					(3,666)			Distributions declared on Series A Preferred Stock, $0.92 per share		—				—				—			—				—			—				—				—				(5,500)				(5,500)				—			(5,500)
Distributions declared on Series B Preferred Stock, $0.90 per share	Distributions declared on Series B Preferred Stock, $0.90 per share	—	—		—	—		—	—		—		—				(3,233)				(3,233)				—					(3,233)			Distributions declared on Series B Preferred Stock, $0.90 per share		—				—				—			—				—			—				—				—				(4,850)				(4,850)				—			(4,850)
Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—				—				—				(92)					(92)			Distributions to non-controlling interest holders		—				—				—			—				—			—				—				—				—				—				(138)			(138)
Net loss	Net loss	—	—		—	—		—	—		—		—				(40,957)				(40,957)				(78)					(41,035)			Net loss		—				—				—			—				—			—				—				—				(60,810)				(60,810)				(100)			(60,910)
Unrealized gain on designated derivatives	Unrealized gain on designated derivatives	—	—		—	—		—	—		—		36,436				—				36,436				—					36,436			Unrealized gain on designated derivatives		—				—				—			—				—			—				—				53,384				—				53,384				—			53,384
Rebalancing of ownership percentage	Rebalancing of ownership percentage	—	—		—	—		—	—		(143)		—				—				(143)				143					—			Rebalancing of ownership percentage		—				—				—			—				—			—				(202)				—				—				(202)				202			—
Balance, June 30, 2022		3,977,144	$	40	3,630,000	$	36	102,164,671	$	1,022	$	2,372,889	$	22,095			$	(1,373,296)			$	1,022,786			$	6,677				$	1,029,463
Balance, September 30, 2022																											Balance, September 30, 2022		3,977,144					$	40			3,630,000				$	36		103,612,344				$	1,036		$	2,394,790			$	39,043			$	(1,418,311)			$	1,016,634			$	6,668			$	1,023,302


					Three Months Ended June 30, 2022																																				Three Months Ended September 30, 2022
		Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income																						Series A Preferred Stock						Series B Preferred Stock						Common Stock								Accumulated Other Comprehensive Income
		Number of Shares	Par Value		Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-in Capital				Distributions in Excess of Accumulated Earnings				Total Stockholders Equity				Non-controlling Interests					Total Equity				Number of Shares				Par Value			Number of Shares			Par Value			Number of Shares			Par Value			Additional Paid-in Capital					Distributions in Excess of Accumulated Earnings			Total Stockholders Equity			Non-controlling Interests			Total Equity
Balance, March 31, 2022		3,977,144	$	40	3,630,000	$	36	100,737,224	$	1,007	$	2,350,902			$	11,925			$	(1,330,730)			$	1,033,180				$	6,914				$	1,040,094
Balance, June 30, 2022																											Balance, June 30, 2022		3,977,144					$	40		3,630,000			$	36		102,164,671			$	1,022		$	2,372,889		$	22,095	$	(1,373,296)		$	1,022,786		$	6,677		$	1,029,463
Issuance of Preferred Stock, net	Issuance of Preferred Stock, net	—	—		—	—		—	—		43		—				—				43				—					43			Issuance of Preferred Stock, net		—			—			—			—			—			—			(28)		—			—			(28)			—		(28)
Share-based compensation, net	Share-based compensation, net	—	—		—	—		—	—		332		—				—				332				—					332			Share-based compensation, net		—			—			—			—			—			—			291		—			—			291			—		291
Distributions declared in common stock, $0.21 per share	Distributions declared in common stock, $0.21 per share	—	—		—	—		1,427,447	15		21,450		—				(21,465)				—				—					—			Distributions declared in common stock, $0.21 per share		—			—			—			—			1,447,673			14			21,697		—			(21,711)			—			—		—
Distributions declared on Series A Preferred Stock, $0.46 per share	Distributions declared on Series A Preferred Stock, $0.46 per share	—	—		—	—		—	—		—		—				(1,789)				(1,789)				—					(1,789)			Distributions declared on Series A Preferred Stock, $0.46 per share		—			—			—			—			—			—			—		—			(1,834)			(1,834)			—		(1,834)
Distributions declared on Series B Preferred Stock, $0.45 per share	Distributions declared on Series B Preferred Stock, $0.45 per share	—	—		—	—		—	—		—		—				(1,706)				(1,706)				—					(1,706)			Distributions declared on Series B Preferred Stock, $0.45 per share		—			—			—			—			—			—			—		—			(1,617)			(1,617)			—		(1,617)
Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—				—				—				(46)					(46)			Distributions to non-controlling interest holders		—			—			—			—			—			—			—		—			—			—			(46)		(46)
Net loss	Net loss	—	—		—	—		—	—		—		—				(17,606)				(17,606)				(29)					(17,635)			Net loss		—			—			—			—			—			—			—		—			(19,853)			(19,853)			(22)		(19,875)
Unrealized gain on designated derivatives	Unrealized gain on designated derivatives	—	—		—	—		—	—		—		10,170				—				10,170				—					10,170			Unrealized gain on designated derivatives		—			—			—			—			—			—			—		16,948			—			16,948			—		16,948
Rebalancing of ownership percentage	Rebalancing of ownership percentage	—	—		—	—		—	—		162		—				—				162				(162)					—			Rebalancing of ownership percentage		—			—			—			—			—			—			(59)		—			—			(59)			59		—
Balance, June 30, 2022		3,977,144	$	40	3,630,000	$	36	102,164,671	$	1,022	$	2,372,889	$	22,095			$	(1,373,296)			$	1,022,786			$	6,677				$	1,029,463
Balance, September 30, 2022																											Balance, September 30, 2022		3,977,144					$	40		3,630,000			$	36		103,612,344			$	1,036		$	2,394,790		$	39,043	$	(1,418,311)		$	1,016,634		$	6,668		$	1,023,302

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(31,400)	$	(41,035)	Net loss	$	(47,525)	$	(60,910)
Adjustments to reconcile net loss to net cash provided by operating activities:	Adjustments to reconcile net loss to net cash provided by operating activities:					Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	40,744		40,671		Depreciation and amortization	61,520		61,525
Amortization of deferred financing costs	Amortization of deferred financing costs	5,210		2,333		Amortization of deferred financing costs	5,954		3,542
(Accretion) amortization of terminated swap	(Accretion) amortization of terminated swap	(1,125)		423		(Accretion) amortization of terminated swap	(2,660)		423
Amortization of mortgage premiums and discounts, net	Amortization of mortgage premiums and discounts, net	46		5		Amortization of mortgage premiums and discounts, net	69		28
Accretion of market lease and other intangibles, net	Accretion of market lease and other intangibles, net	(471)		(245)		Accretion of market lease and other intangibles, net	(675)		(421)
Bad debt expense	Bad debt expense	695		865		Bad debt expense	909		2,559
Equity-based compensation	Equity-based compensation	460		664		Equity-based compensation	689		955
Loss on sale of real estate investments, net	Loss on sale of real estate investments, net	191		303		Loss on sale of real estate investments, net	364		109
Cash received from non-designated derivative instruments	Cash received from non-designated derivative instruments	2,301		—		Cash received from non-designated derivative instruments	3,866		—
Gain on non-designated derivative instruments	Gain on non-designated derivative instruments	(104)		(1,386)		Gain on non-designated derivative instruments	(510)		(3,212)
Impairment charges	Impairment charges	—		16,837		Impairment charges	—		25,786
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Straight-line rent receivable	Straight-line rent receivable	(605)		(1,053)		Straight-line rent receivable	(938)		(1,236)
Prepaid expenses and other assets	Prepaid expenses and other assets	909		1,892		Prepaid expenses and other assets	(4,180)		(986)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	(5,728)		(4,736)		Accounts payable, accrued expenses and other liabilities	(1,504)		(4,855)
Deferred rent	Deferred rent	(446)		(1,801)		Deferred rent	979		(2,212)
Net cash provided by operating activities	Net cash provided by operating activities	10,677		13,737		Net cash provided by operating activities	16,358		21,095
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Property acquisitions	Property acquisitions	(25,443)		(17,799)		Property acquisitions	(35,261)		(17,799)
Capital expenditures	Capital expenditures	(9,140)		(9,075)		Capital expenditures	(13,998)		(16,707)
Investments in non-designated interest rate caps	Investments in non-designated interest rate caps	(4,580)		—		Investments in non-designated interest rate caps	(4,580)		—
Proceeds from sales of real estate investments	Proceeds from sales of real estate investments	4,803		11,759		Proceeds from sales of real estate investments	4,803		11,759
Net cash used in investing activities	Net cash used in investing activities	(34,360)		(15,115)		Net cash used in investing activities	(49,036)		(22,747)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Payments on credit facilities	Payments on credit facilities	(197,717)		—		Payments on credit facilities	(199,160)		—
Proceeds from credit facilities	Proceeds from credit facilities	20,000		—		Proceeds from credit facilities	20,000		—

Proceeds from mortgage notes payable	Proceeds from mortgage notes payable	240,000		—		Proceeds from mortgage notes payable	240,000		—
Payments on mortgage notes payable	Payments on mortgage notes payable	(565)		(7,199)		Payments on mortgage notes payable	(850)		(8,329)
Proceeds from termination of (payments for) derivative instruments		5,413		(39)
Proceeds from termination of derivative instruments						Proceeds from termination of derivative instruments	5,413		—
Payments of deferred financing costs	Payments of deferred financing costs	(7,774)		(277)		Payments of deferred financing costs	(7,774)		(858)

Payments for derivative instruments						Payments for derivative instruments	—		(39)
Preferred stock issuance costs	Preferred stock issuance costs	—		(6)		Preferred stock issuance costs	—		(39)
Contributions from non-controlling interests	Contributions from non-controlling interests	284		—		Contributions from non-controlling interests	284		—

Dividends paid on Series A Preferred stock	Dividends paid on Series A Preferred stock	(3,666)		(3,666)		Dividends paid on Series A Preferred stock	(5,500)		(5,500)
Dividends paid on Series B Preferred stock	Dividends paid on Series B Preferred stock	(3,233)		(3,233)		Dividends paid on Series B Preferred stock	(4,849)		(4,849)
Distributions to non-controlling interest holders	Distributions to non-controlling interest holders	(92)		(92)		Distributions to non-controlling interest holders	(138)		(138)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	52,650		(14,512)		Net cash provided by (used in) financing activities	47,426		(19,752)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	28,967		(15,890)		Net change in cash, cash equivalents and restricted cash	14,748		(21,404)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	76,538		85,382		Cash, cash equivalents and restricted cash, beginning of period	76,538		85,382
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	105,505	$	69,492	Cash, cash equivalents and restricted cash, end of period	$	91,286	$	63,978

Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
Cash, cash equivalents, end of period		$	71,705	$	42,664
Cash and cash equivalents, end of period						Cash and cash equivalents, end of period	$	51,041	$	40,120
Restricted cash, end of period	Restricted cash, end of period	33,800		26,828		Restricted cash, end of period	40,245		23,858
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	105,505	$	69,492	Cash, cash equivalents and restricted cash, end of period	$	91,286	$	63,978

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid for interest	Cash paid for interest	$	28,093	$	20,987	Cash paid for interest	$	46,905	$	32,448
Cash paid for income and franchise taxes	Cash paid for income and franchise taxes	415		565		Cash paid for income and franchise taxes	416		566

Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Common stock issued through stock dividends	Common stock issued through stock dividends	$	44,983	$	42,569	Common stock issued through stock dividends	$	67,975	$	64,280
Proceeds from real estate sales used to repay mortgage notes payable	Proceeds from real estate sales used to repay mortgage notes payable	$	2,663	$	—	Proceeds from real estate sales used to repay mortgage notes payable	$	2,663	$	—
Mortgage notes payable repaid with proceeds from real estate sales	Mortgage notes payable repaid with proceeds from real estate sales	$	(2,663)	$	—	Mortgage notes payable repaid with proceeds from real estate sales	$	(2,663)	$	—
Proceeds from real estate sales used to repay amounts outstanding under the Prior Credit Facility	Proceeds from real estate sales used to repay amounts outstanding under the Prior Credit Facility	$	5,167	$	—	Proceeds from real estate sales used to repay amounts outstanding under the Prior Credit Facility	$	5,167	$	—
Amounts outstanding under the Prior Credit Facility repaid with proceeds from real estate sales	Amounts outstanding under the Prior Credit Facility repaid with proceeds from real estate sales	$	(5,167)	$	—	Amounts outstanding under the Prior Credit Facility repaid with proceeds from real estate sales	$	(5,167)	$	—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

Note 1 — Organization

Healthcare Trust, Inc. (including, as required by context, Healthcare Trust Operating Partnership, L.P. (the “OP”) and its subsidiaries, the “Company”), is an externally managed entity that for U.S. federal income tax purposes has qualified as a real estate investment trust (“REIT”). The Company acquires, owns and manages a diversified portfolio of healthcare-related real estate, focused on medical office and other healthcare-related buildings (“MOBs”) and senior housing operating properties (“SHOPs”).

As of ~~June~~September 30, 2023, the Company owned ~~202~~204 properties located in 33 states and comprised of 9.0 million rentable square feet.

Substantially all of the Company’s business is conducted through the OP and its wholly-owned subsidiaries including taxable REIT subsidiaries. The Company’s advisor, Healthcare Trust Advisors, LLC (the “Advisor”) manages its day-to-day business with the assistance of its property manager, Healthcare Trust Properties, LLC (the “Property Manager”). The Company’s Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”), and these related parties receive compensation and fees for providing services to the Company. The Company also reimburses these entities for certain expenses they incur in providing these services to the Company. Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, also has an interest in the Company through ownership of interests in the OP. As of ~~June~~September 30, 2023, the Company owned 46 seniors housing properties using the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure in its SHOP segment. Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by a person who qualifies as an eligible independent contractor.

The Company operates in two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs. All of the Company’s properties across both business segments are located throughout the United States. In its MOB operating segment, the Company owns, manages, and leases single- and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. The Property Manager or third-party managers manage the Company’s MOBs. In its SHOP segment, the Company invests in seniors housing properties ~~using~~through the RIDEA structure. As of ~~June~~September 30, 2023, the Company had four eligible independent contractors operating 46 SHOPs, although effective on September 30, 2023, the Company terminated its contract with one independent contractor which managed 20 SHOPs. ~~All~~The Company is in the process of transferring the ~~Company’s properties across both business segments are located throughout~~management of these 20 SHOPs to a new independent contractor, which the ~~United States.~~Company expects to be completed before December 31, 2023. The Company incurred $0.3 million of costs directly related to the termination in the three and nine months ended September 30, 2023.

The Company has declared quarterly dividends entirely in shares of its common stock since October 2020. Dividends payable entirely in shares of common stock are treated in a fashion similar to a stock split for accounting purposes specifically related to per-share calculations for the current and prior periods. Since October 2020, the Company has issued an aggregate of approximately ~~15.7~~17.3 million shares as stock dividends. No other additional shares of common stock have been issued since October 2020. References made to weighted-average shares and per-share amounts in the accompanying consolidated statements of operations and comprehensive income have been retroactively adjusted to reflect the cumulative increase in shares outstanding resulting from the stock dividends since October 2020 and through ~~July~~October 2023, and are noted as such throughout the accompanying financial statements and notes. Any future issuances of stock dividends will also result in retroactive adjustments. Please see Note 8 — Stockholder’s Equity for additional information on the stock dividends.

On March 31, 2023, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2022. The Estimated Per-Share NAV published on March 31, 2023 has not been adjusted since publication and will not be adjusted until the Company’s board of directors (the “Board”) determines a new Estimated Per-Share NAV. Issuing dividends in additional shares of common stock will, all things equal, cause the value of each share to decline because the number of shares outstanding increases when shares of common stock are issued in respect of a ~~Stock Dividend;~~stock dividend; however, because each stockholder will receive the same 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. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless the Company lists its common stock.

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(Unaudited)

Note 2 — Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to this Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results for the interim periods. The results of operations for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 are not necessarily indicative of the results for the entire year or any subsequent interim periods.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on March 17, 2023. Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company’s significant accounting policies during the ~~six~~nine months ended ~~June~~September 30, 2023.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity (“VIE”) for which the Company is the primary beneficiary. The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company’s assets and liabilities are held by the OP.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, impairments, fair value measurements and income taxes, as applicable.

Continuing Impacts of the COVID-19 Pandemic ~~and its Aftermath~~

During the first quarter of 2020, the global COVID-19 pandemic ~~that has spread around the world and to every state in the United States~~ commenced. The pandemic and its aftermath has had, and could continue to have, an adverse ~~impact~~impacts on economic and market ~~conditions, including a global economic slowdown and recession that may continue for some time.~~conditions. The Company’s tenants and SHOP properties operate businesses that require in-person interactions with their patients and residents, and concern regarding the transmission of COVID-19 impacted, and may continue to impact, the willingness of persons to, among other things, live in or use facilities at the Company’s properties, and impact the revenues generated by the Company’s tenants which may further impact the ability of the Company’s tenants to pay their rent obligations to the Company when due.

The Company’s ability to lease space and negotiate and maintain favorable rents and the results of operations at its SHOPs could also continue to be negatively impacted by a prolonged recession in the U.S. economy as could the rates charged to residents at its SHOPs. Moreover, the demand for leasing space at the Company’s MOB properties could decline, ~~further~~ negatively impacting occupancy percentage, revenue and ~~net income.~~earnings. Additionally, downturns or stagnation in the U.S. housing market as a result of an economic downturn could adversely affect the ability, or perceived ability, of seniors to afford the resident fees and services at the Company’s SHOPs.

Further, recent and continuing increases in inflation brought about by labor shortages, supply chain disruptions and increases in interest rates have had, and may ~~adversely impact~~continue to have, adverse impacts on the Company’s results of operations. Moreover, these increases in the rate of inflation, the ongoing ~~war~~wars in Ukraine, Israel and related sanctions, supply chain disruptions and increases in interest rates may also impact the ability of the Company’s tenants to pay rent and hence the Company’s results of operations and liquidity.

Beginning in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect the Company in a number of ways that vary by operating segment:

~~COVID-19 Impact — MOB Segment~~

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COVID-19 Impact — MOB Segment

The financial stability and overall health of the Company’s tenants is critical to its business. The Company took a proactive approach to achieve mutually agreeable solutions with its tenants and in some cases, during the year ended December 31, 2020, the Company executed lease amendments providing for deferral of rent. Since the year ended December 31, 2020, the Company has not entered into any rent deferral agreements with any of its tenants in this segment, and all amounts previously deferred under prior rent deferral agreements have been collected.

For accounting purposes, in accordance with ASC 842: Leases, normally a company would be required to assess a lease modification to determine if the lease modification should be treated as a separate lease and if not, modification accounting would be applied which would require a company to reassess the classification of the lease (including leases for which the prior classification under ASC 840 was retained as part of the election to apply the package of practical expedients allowed upon the adoption of ASC 842, which doesn’t apply to leases subsequently modified). However, in light of the COVID-19 pandemic in which many leases ~~have been~~were modified, the Financial Accounting Standards Board (“FASB”) and SEC ~~have~~ provided relief that ~~allows~~allowed companies to ~~make a policy election as to~~elect whether they ~~treat~~treated COVID-19 related lease amendments as ~~a provision~~provisions included in the pre-concession ~~arrangement,~~arrangements, and therefore, not a lease ~~modification,~~modifications, or to treat ~~the~~ lease ~~amendment~~amendments as ~~a modification.~~modifications. In order to be considered COVID-19 related, cash flows ~~must~~had to be substantially the same or less than those prior to the ~~concession.~~concessions. For COVID-19 relief qualified changes, there ~~are~~were two methods to potentially account for such rent deferrals or abatements under the relief: (i) as if the changes were originally contemplated in the lease contract or (ii) as if the deferred payments are variable lease payments contained in the lease contract.

For all other lease changes that did not qualify for FASB relief, the Company iswas required to apply modification accounting including assessing classification under ASC 842. Some, but not all of the Company’s lease modifications ~~qualify~~qualified for the FASB relief. In accordance with the relief provisions, instead of treating these qualifying leases as modifications, the Company ~~has~~ elected to treat the modifications as if previously contained in the lease and recast rents receivable prospectively (if necessary). Under that accounting, for modifications that were deferrals only, there ~~would be~~was no impact on overall rental revenue and for any abatement amounts that reduced total rent to be received, the impact ~~would be~~was recognized ratably over the remaining life of the ~~lease.~~leases. For leases not qualifying for this relief, the Company ~~has~~ applied modification accounting and determined that there were no changes in the current classification of its leases impacted by negotiations with its tenants.

COVID-19 Impact — SHOP Segment

In the Company’s SHOP segment, occupancy trended downward from March 2020 until June 2021 and then stabilized until June 2022. Since then, SHOP occupancy has trended downward. The Company ~~has~~ also experienced lower inquiry volumes and reduced in-person tours ~~since the onset of~~during the COVID-19 pandemic compared to ~~prior~~pre-pandemic periods. In addition, beginning in March 2020, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as the Company’s operators took appropriate actions to protect residents and caregivers. At the SHOPs, the Company generally bears these cost increases, which were partially offset by funds received under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and to a lesser extent, cost recoveries for personal protective equipment from residents. See “CARES Act Grants” below for additional information on the CARES Act.

During the year ended December 31, 2022, the Company relied more on the use of temporary contract labor and agencies than it had historically. The Company has since reduced its reliance on this labor source in the ~~six~~nine months ended ~~June~~September 30, 2023. However, the wage expenses (including overtime, training and bonus wages) incurred by the Company from employees of its third party operators has increased ~~in response to a shortage of workers largely~~ due to, among other things, inflation raising the cost of labor generally, ~~and~~ a lack of qualified personnel that the Company’s third party operators are able to employ on a permanent ~~basis.~~basis and training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor.

The persistence of high inflation, labor shortages and supply chain disruptions ~~may cause prolonged~~have caused adverse impacts to the Company’s occupancy and cost levels, and these trends may continue to impact the Company and have a material adverse effect on its operations in future periods.

The adverse financial impacts of the COVID-19 pandemic on the Company ~~was~~were partially offset by funds received by the Company under the CARES Act. The Company received $4.5 million, $5.1 million and $3.6 million under the CARES Act during the years ended December 31, 2022, 2021, and 2020, respectively. The Company did not receive any such funds during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and it received ~~$0.2~~$4.3 million and $4.5 million, respectively, in funding from the CARES Act during the three and ~~six~~nine months ended ~~June~~September 30, 2022. For accounting purposes, the Company treated these funds as grant contributions from the government. The full amounts received were recognized as reductions of property operating and maintenance expenses in the Company’s consolidated statements of operations and comprehensive loss

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for the periods in which the funds were received, to partially offset the incurred COVID-19 expenses. The Company does not anticipate that any further funds under the CARES

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~~(Unaudited)~~

Act will be received, and there can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.

Revenue Recognition

The Company’s revenues, which are derived primarily from lease contracts, include rent received from tenants in its MOB segment. As of ~~June~~September 30, 2023, these leases had a weighted average remaining lease term of 4.8 years. Rent from tenants in the Company’s MOB operating segment (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease. Because many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable for, and include in revenue from tenants on a straight-line basis, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation. For new leases after acquisition, the commencement date is considered to be the date the tenant takes control of the space. For lease modifications, the commencement date is considered to be the date the lease modification is executed. The Company defers the revenue related to lease payments received from tenants in advance of their due dates. Tenant revenue also includes operating expense reimbursements which generally increase with any increase in property operating and maintenance expenses in our MOB segment. In addition to base rent, dependent on the specific lease, tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases. Under ASC 842, the Company has elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For expenses paid directly by the tenant, under both ASC 842 and 840, the Company has reflected them on a net basis.

The Company’s revenues also include resident services and fee income primarily related to rent derived from lease contracts with residents in the Company’s SHOP segment, held using a structure permitted under RIDEA. Rental income from residents in the Company’s SHOP segment is recognized as earned when services are provided. Residents pay monthly rent that covers occupancy of their unit and basic services, including utilities, meals and some housekeeping services. The terms of the leases are short term in nature, primarily month-to-month.

The Company defers the revenue related to lease payments received from tenants and residents in advance of their due dates. Pursuant to certain of the Company’s lease agreements, tenants are required to reimburse the Company for certain property operating and maintenance expenses related to non-SHOP assets (recorded in revenue from tenants), in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating and maintenance costs of the respective properties.

The following table presents future base rent payments on a cash basis due to the Company over the next five years and thereafter. These amounts exclude tenant reimbursements and contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes, among other items. These amounts also exclude SHOP leases which are short term in nature.

As of ~~June~~September 30, 2023:


(In thousands)	(In thousands)	Future Base Rent Payments		(In thousands)	Future Base Rent Payments
2023 (remainder)	2023 (remainder)	$	54,165	2023 (remainder)	$	27,566
2024	2024	105,063		2024	108,291
2025	2025	94,324		2025	98,378
2026	2026	86,414		2026	90,299
2027	2027	68,157		2027	71,439
Thereafter	Thereafter	232,411		Thereafter	240,452
Total	Total	$	640,534	Total	$	636,425

The Company continually reviews receivables related to rent and unbilled rent and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Under the leasing standards, the Company is required to assess, based on credit risk only, if it is probable that the Company will collect virtually all of the lease payments ~~at lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and~~

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at lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant. Partial reserves, or the ability to assume partial recovery are no longer permitted. If the Company determines that it is probable it will collect virtually all of the lease payments (rent and common area maintenance), the lease will continue to be accounted for on an accrual basis (i.e., straight-line). However, if the Company determines it is not probable that it will collect virtually all of the lease payments, the lease will be accounted for on a cash basis and a full reserve would be recorded on previously accrued amounts in cases where it was subsequently concluded that collection was not probable. Cost recoveries from tenants are included in operating revenue from tenants in accordance with new accounting rules, on the accompanying consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.

The Company recorded reductions in revenue of ~~$0.4~~$0.2 million and ~~$0.7~~$0.9 million, respectively, for uncollectable amounts during the three and ~~six~~nine months ended ~~June~~September 30, 2023, ~~respectively,~~ and ~~$0.4~~$1.7 million and ~~$0.9~~$2.6 million, respectively, during the three and ~~six~~nine months ended ~~June~~September 30, ~~2022, respectively.~~2022.

Investments in Real Estate

Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life or improve the productive capacity of the asset. Costs of repairs and maintenance are expensed as incurred.

At the time an asset is acquired, the Company evaluates the inputs, processes and outputs of the asset acquired to determine if the transaction is a business combination or asset acquisition. If an acquisition qualifies as a business combination, the related transaction costs are recorded as an expense in the consolidated statements of operations and comprehensive loss. If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets. See the “Purchase Price Allocation” section in this Note for a discussion of the initial accounting for investments in real estate.

Disposal of real estate investments that represent a strategic shift in operations that will have a major effect on the Company's operations and financial results are required to be presented as discontinued operations in the consolidated statements of operations. No properties were presented as discontinued operations during the three months ended ~~June~~September 30, 2023 and 2022. Properties that are intended to be sold are to be designated as “held for sale” on the consolidated balance sheets at the lesser of carrying amount or fair value less estimated selling costs when they meet specific criteria to be presented as held for sale, most significantly that the sale is probable within one year. The Company evaluates probability of sale based on specific facts including whether a sales agreement is in place and the buyer has made significant non-refundable deposits. Properties are no longer depreciated when they are classified as held for sale. There were no real estate investments held for sale as of ~~June~~September 30, 2023 or December 31, 2022.

The Company generally determines the value of construction in progress based upon the replacement cost. During the construction period, the Company capitalizes interest, insurance and real estate taxes until the development has reached substantial completion.

Purchase Price Allocation

In both a business combination and an asset acquisition, the Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets or liabilities based on their respective fair values. Tangible assets may include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. Intangible assets may include the value of in-place leases and above- and below-market leases and other identifiable assets or liabilities based on lease or property specific characteristics. In addition, any assumed mortgages receivable or payable and any assumed or issued non-controlling interests (in a business combination) are recorded at their estimated fair values. In allocating the fair value to assumed mortgages, amounts are recorded to debt premiums or discounts based on the present value of the estimated cash flows, which is calculated to account for either above or below-market interest rates. In allocating the fair value to any assumed or issued non-controlling interests, amounts are recorded at their fair value at the close of business on the acquisition date. In a business combination, the difference between the purchase price and the fair value of identifiable net assets acquired is either recorded as goodwill or as a bargain purchase gain. In an asset acquisition, the difference between the acquisition price (including capitalized transaction costs) and the fair value of identifiable net assets acquired is allocated to the non-current assets. All acquisitions during the ~~six~~nine months ended ~~June~~September 30, 2023 were asset acquisitions. The Company acquired ~~five~~seven properties during the ~~six~~nine months ended ~~June~~September 30, 2023.

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~~(Unaudited)~~

For acquired properties with leases classified as operating leases, the Company allocates the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed, based on their respective fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of the Company’s pre-acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.

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Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. The Company estimates the fair value using data from appraisals, comparable sales, discounted cash flow analysis and other methods. Fair value estimates are also made using significant assumptions such as capitalization rates, fair market lease rates, discount rates and land values per square foot.

Identifiable intangible assets include amounts allocated to acquired leases for above- and below-market lease rates and the value of in-place leases. Factors considered in the analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at contract rates during the expected lease-up period, which typically ranges from six to 24 months. The Company also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.

Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases.

The aggregate value of intangible assets related to customer relationships, as applicable, is measured based on the Company’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The Company did not record any intangible asset amounts related to customer relationships during the ~~six~~nine months ended ~~June~~September 30, 2023 or 2022.

Accounting for Leases

Lessor Accounting

In accordance with the lease accounting standard, all of the Company’s leases as lessor prior to adoption were accounted for as operating leases. The Company evaluates new leases originated after the adoption date (by the Company or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than a major part of the remaining economic useful life of the asset (e.g., equal to or greater than 75%), the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or the asset is so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor. As of ~~June~~September 30, 2023 and December 31, 2022, the Company had no leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.

As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating and maintenance expenses) as a single lease component as an operating lease because (i) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (ii) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under the accounting guidance. Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed.

Lessee Accounting

The Company is also the lessee under certain land leases which will continue to be classified as operating leases under transition elections unless subsequently modified. These leases are reflected on the balance sheets as of ~~June~~September 30, 2023 and

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~~(Unaudited)~~

December 31, 2022, and the rent expense is reflected on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.

For lessees, the accounting standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a

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right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction. For additional information and disclosures related to the Company’s operating leases, see Note 16 — Commitments and Contingencies.

Impairment of Long-Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the property for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If an impairment exists, due to the inability to recover the carrying value of a property, the Company would recognize an impairment loss in the consolidated statements of operations and comprehensive income to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held for use. For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net earnings.

Reportable Segments

The Company has determined that it has two reportable segments, with activities related to investing in MOBs and SHOPs. Management evaluates the operating performance of the Company’s investments in real estate and seniors housing properties on an individual property level. For additional information see Note 15 — Segment Reporting.

Depreciation and Amortization

Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, 7 to 10 years for fixtures and improvements, and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

Construction in progress is not depreciated until the project has reached substantial completion. The value of certain other intangibles such as certificates of need in certain jurisdictions are amortized over the expected period of benefit (generally the life of the related building).

The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to expense over the remaining periods of the respective leases.

The value of customer relationship intangibles, if any, is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.

Assumed mortgage premiums or discounts are amortized as an increase or reduction to interest expense over the remaining terms of the respective mortgages.

Income Taxes

The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ended December 31, 2013. If the Company continues to qualify for taxation as a REIT, it generally will not be subject to U.S. federal corporate income tax to the extent it distributes all of its REIT taxable income (which does not equal net income as calculated in accordance with GAAP) to its stockholders. REITs are subject to a number of organizational and operational requirements, including a requirement that the Company distribute annually at least 90% of the Company’s REIT taxable income to the Company’s stockholders.

If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal, state and local income taxes at regular corporate rates beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s

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four subsequent taxable years. The Company distributed to its stockholders 100% of its REIT taxable income for each of the years ended December 31, 2022, 2021 and 2020. Accordingly, no provision for U.S. federal or state income taxes related to such REIT taxable income was recorded in the Company’s financial statements. Even if the Company continues to qualify as a REIT, it may be subject to certain state and local taxes on its income and property, and U.S. federal income and excise taxes on its undistributed income.

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September 30, 2023

(Unaudited)

Certain limitations are imposed on REITs with respect to the ownership and operation of seniors housing properties. Generally, to qualify as a REIT, the Company cannot directly or indirectly operate seniors housing properties. Instead, such facilities may be either leased to a third-party operator or leased to a TRS and operated by a third party on behalf of the TRS. Accordingly, the Company has formed a TRS that is wholly-owned by the OP to lease its SHOPs and the TRS has entered into management contracts with unaffiliated third-party operators to operate the facilities on its behalf.

As of ~~June~~September 30, 2023, the Company owned 46 seniors housing properties which are leased and operated through its TRS. The TRS is a wholly-owned subsidiary of the OP. A TRS is subject to U.S. federal, state and local income taxes. The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies (including modifying intercompany leases with the TRS) and recent financial operations. In the event the Company determines that it would not be able to realize the deferred income tax assets in the future in excess of the net recorded amount, the Company establishes a valuation allowance which offsets the previously recognized income tax asset. Deferred income taxes result from temporary differences between the carrying amounts of the TRS’s assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes as well as net operating loss carryforwards. Significant components of the deferred tax assets and liabilities as of ~~June~~September 30, 2023 and December 31, 2022 consisted of deferred rent and net operating loss carryforwards. During the year ended December 31, 2020, the Company modified 25 intercompany leases with the TRS which abated intercompany rent due to the ~~ongoing~~ COVID-19 pandemic. ~~These abatements were extended through June~~During the three months ended September 30, 2023, ~~and may continue to be extended for future periods.~~the Company modified 26 intercompany leases with the TRS which reduced intercompany rent.

Because of the TRS's recent operating history of losses and the impact of the COVID-19 pandemic on the results of operations of the Company’s SHOP assets, the Company is not able to conclude that it is more likely than not it will realize the future benefit of its deferred tax assets; thus the Company has provided a 100% valuation allowance of ~~$7.9~~$7.6 million as of ~~June~~September 30, 2023. If and when the Company believes it is more likely than not that it will recover its deferred tax assets, the Company will reverse the valuation allowance as an income tax benefit in its consolidated statements of comprehensive loss. As of December 31, 2022, the Company had a deferred tax asset of $6.9 million with a full valuation allowance.

CARES Act Grants

On March 27, 2020, the CARES Act was signed into law and provides funding to Medicare providers in order to provide financial relief during the COVID-19 pandemic. Funds provided under the program were to be used for the preparation, prevention, and medical response to COVID-19, and were designed to reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19. The Company did not receive any funding from the CARES Act during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and the Company received ~~$0.2~~$4.3 million and $4.5 million, respectively, in funding from the CARES Act during the three and ~~six~~nine months ended ~~June~~September 30, 2022. For accounting purposes, the CARES Act funds are treated as a grant contribution from the government. Any funding that the Company would receive is recognized as a reduction of property operating and maintenance expenses in the Company’s consolidated statements of operations to offset the negative impacts of COVID-19. There can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.

Recently Issued Accounting Pronouncements

Adopted as of January 1, 2022:

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Topic 815). The new standard reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and amends the guidance for the derivatives scope exception for contracts in an entity's own equity. The standard also amends and makes targeted improvements to the related earnings per share guidance. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption was permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The standard allows for either modified or full retrospective transition methods. The Company adopted the new guidance on January 1, 2022 and determined it did not have a material impact on its

~~Table of Contents~~

~~HEALTHCARE TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

consolidated financial statements.

Not yet Fully Adopted as of ~~June~~September 30, 2023:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period from March 12, 2020 through June 30, 2023 as reference rate reform

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to (i) the assertion that the Company’s hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of the Company’s derivatives, which will be consistent with the Company’s past presentation. The Company will continue to evaluate the impact of the guidance and may apply other elections, as applicable, as additional changes in the market occur.

Note 3 — Real Estate Investments, Net

Property Acquisitions

The Company invests in healthcare-related facilities, primarily MOBs and seniors housing properties which expand and diversify its portfolio and revenue base. The Company owned ~~202~~204 properties as of ~~June~~September 30, 2023. During the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, the Company acquired ~~five~~seven and three properties, respectively. All acquisitions in the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were considered asset acquisitions for accounting purposes.

The following table presents the allocation of real estate assets acquired and liabilities assumed during the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


		Six Months Ended June 30,					Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		(In thousands)	2023		2022
Real estate investments, at cost:	Real estate investments, at cost:					Real estate investments, at cost:
Land	Land	$	2,085	$	4,199	Land	$	3,373	$	4,199
Buildings, fixtures and improvements	Buildings, fixtures and improvements	19,440		10,662		Buildings, fixtures and improvements	27,069		10,662

Total tangible assets	Total tangible assets	21,525		14,861		Total tangible assets	30,442		14,861
Acquired intangibles:	Acquired intangibles:					Acquired intangibles:
In-place leases and other intangible assets	In-place leases and other intangible assets	3,912		2,670		In-place leases and other intangible assets	5,057		2,670
Market lease and other intangible assets	Market lease and other intangible assets	33		268		Market lease and other intangible assets	33		268
Market lease liabilities	Market lease liabilities	(27)		—		Market lease liabilities	(271)		—
Total intangible assets and liabilities	Total intangible assets and liabilities	3,918		2,938		Total intangible assets and liabilities	4,819		2,938

Cash paid for real estate investments, including acquisitions	Cash paid for real estate investments, including acquisitions	$	25,443	$	17,799	Cash paid for real estate investments, including acquisitions	$	35,261	$	17,799
Number of properties purchased	Number of properties purchased	5		3		Number of properties purchased	7		3

Significant Tenants

As of ~~June~~September 30, 2023 and 2022, the Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or greater of total annualized rental income for the portfolio on a straight-line basis. The following table lists the states where the Company had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of ~~June~~September 30, 2023 and 2022:


		June 30,			September 30,
State	State	2023	2022	State	2023	2022

Florida	Florida	19.7%	18.5%	Florida	19.8%	19.0%

Pennsylvania	Pennsylvania	10.7%	*	Pennsylvania	10.6%	*

_________

* The annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties as of the date specified.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

Intangible Assets and Liabilities

The following table discloses amounts recognized within the consolidated statements of operations and comprehensive loss related to amortization of in-place leases and other intangible assets, amortization and accretion of above- and below-market lease assets and liabilities, net and the amortization and accretion of above- and below-market ground leases, net, for the periods presented:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		2023		2022		(In thousands)	2023		2022		2023		2022
Amortization of in-place leases and other intangible assets (1)	Amortization of in-place leases and other intangible assets (1)	$	3,500	$	3,821	$	6,960	$	7,687	Amortization of in-place leases and other intangible assets (1)	$	3,455	$	3,815	$	10,414	$	11,502
Accretion of above -and below-market leases, net (2)	Accretion of above -and below-market leases, net (2)	$	(300)	$	(166)	$	(551)	$	(330)	Accretion of above -and below-market leases, net (2)	$	(244)	$	(219)	$	(795)	$	(549)
Amortization of above -and below-market ground leases, net (3)	Amortization of above -and below-market ground leases, net (3)	$	40	$	40	$	80	$	80	Amortization of above -and below-market ground leases, net (3)	$	40	$	40	$	120	$	120

________

(1)Reflected within depreciation and amortization expense.

(2)Reflected within rental income.

(3)Reflected within property operating and maintenance expense.

The following table provides the projected amortization expense and adjustments to revenues for the next five years:


(In thousands)	(In thousands)	2023 (remainder)		2024		2025		2026		2027		(In thousands)	2023 (remainder)		2024		2025		2026		2027
In-place lease assets	In-place lease assets	$	6,612	$	11,722	$	10,134	$	8,889	$	5,379	In-place lease assets	$	3,157	$	11,812	$	10,224	$	8,979	$	5,468
Other intangible assets	Other intangible assets	10		10		10		10		10		Other intangible assets	10		10		10		10		10
Total to be added to amortization expense	Total to be added to amortization expense	$	6,622	$	11,732	$	10,144	$	8,899	$	5,389	Total to be added to amortization expense	$	3,167	$	11,822	$	10,234	$	8,989	$	5,478

Above-market lease assets	Above-market lease assets	$	(231)	$	(419)	$	(366)	$	(331)	$	(243)	Above-market lease assets	$	(101)	$	(419)	$	(366)	$	(331)	$	(243)
Below-market lease liabilities	Below-market lease liabilities	674		1,267		1,096		941		623		Below-market lease liabilities	309		1,297		1,127		972		654
Total to be added to revenue from tenants	Total to be added to revenue from tenants	$	443	$	848	$	730	$	610	$	380	Total to be added to revenue from tenants	$	208	$	878	$	761	$	641	$	411

Dispositions

Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2023

During the ~~second quarter~~three months ended September 30, 2023, the Company did not dispose of any properties. During the nine months ended September 30, 2023, the Company disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of the four disposed SHOPs were impaired by ~~$6.2~~$15.1 million in the ~~second quarter of~~year ended December 31, 2022 (see below). As a result, the Company recorded an aggregate loss on sale of ~~$0.2~~$0.4 million, which is presented in the Company’s consolidated statement of operations and comprehensive loss for the ~~six~~nine months ended ~~June~~September 30, 2023.

Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2022

On July 1, 2020, the Company transitioned four triple-net leased properties in Texas (collectively, the “LaSalle Properties”) from the former triple-net leased healthcare facilities segment to the SHOP segment, and the LaSalle Properties were leased to the Company’s TRS and operated and managed on the Company’s behalf by a third-party operator. During the third quarter of 2021, the Company began to actively market the LaSalle Properties for sale, and a non-binding letter of intent was signed in the fourth quarter of 2021 for an aggregate contract sales price of $12.4 million. The Company had previously recorded $34.0 million of impairment charges on the LaSalle Properties in the year ended December 31, 2021. The Company completed the sale of the LaSalle Properties in the first quarter of 2022 and recorded a loss on sale of $0.3 million in the first quarter of 2022, which is presented in the Company’s consolidated statement of operations and comprehensive loss for the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022.The Company recorded a gain on sale of $0.2 million in the three months ended September 30, 2022 related to the settlement of a lien on formerly disposed properties.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

Assets Held for Sale

When assets are identified by management as held for sale, the Company reflects them separately on its balance sheet and stops recognizing depreciation and amortization expense on the identified assets and estimates the sales price, net of costs to sell, of those assets. If the carrying amount of the assets classified as held for sale exceeds the estimated net sales price, the Company records an impairment charge equal to the amount by which the carrying amount of the assets exceeds the Company’s estimate of the net sales price of the assets. For held-for-sale properties, the Company predominately uses the contract sale price as fair market value.

There were no assets held for sale as of ~~June~~September 30, 2023 and December 31, 2022.

Assets Held for Use

When circumstances indicate the carrying value of a property classified as held for use may not be recoverable, the Company reviews the property for impairment. For the Company, the most common triggering events are (i) concerns regarding the tenant (i.e., credit or expirations) in the Company’s single-tenant properties or significant vacancy in the Company’s multi-tenant properties and (ii) changes to the Company’s expected holding period as a result of business decisions or non-recourse debt maturities. If a triggering event is identified, the Company considers the projected cash flows due to various performance indicators, and where appropriate, the Company evaluates the impact on its ability to recover the carrying value of the properties based on the expected cash flows on an undiscounted basis over its intended holding period. The Company makes certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessments of terminal values. Where more than one possible scenario exists, the Company uses a probability weighted approach in estimating cash flows. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses for impairment may be realized in the future. If the undiscounted cash flows over the expected hold period are less than the carrying value, the Company reflects an impairment charge to write the asset down to its fair value.

Impairment Charges

There were no impairment charges recorded in the three and ~~six~~nine months ended ~~June~~September 30, 2023. The following table presents impairment charges by segment recorded during the ~~six~~nine months ended ~~June~~September 30, 2022:

~~Six Months Ended June 30,~~

~~(In thousands)~~

~~2022~~

~~MOB Segment:~~

~~Illinois skilled nursing facilities~~ ~~(1)~~

~~10,644~~

~~Total MOB impairment charges~~

~~10,644~~

~~SHOP Segment:~~

~~Various held for use SHOPs~~ ~~(2)~~

~~6,193~~

~~Total SHOP impairment charges~~

~~6,193~~

~~Total impairment charges~~

~~16,837~~


	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2022		2022
MOB Segment:
Illinois skilled nursing facilities (1)	$	—	$	10,644

Total MOB impairment charges	—		10,644

SHOP Segment:
Various held for use SHOPs (2)	8,949		15,142


Total SHOP impairment charges	8,949		15,142

Total impairment charges	$	8,949	$	25,786

(1)These seven properties were impaired after the Company received an offer by the tenant to purchase all seven properties, which caused the Company to reassess its expected holding period for these properties. As of ~~June~~September 30, 2023, these properties were not disposed of, nor were any under contract for disposal.

(2)Consists of ~~two~~eight total properties that were impaired as a result of the Company reassessing the holding period for the properties. ~~These~~Two of these properties were sold in the ~~second quarter of~~nine months ended September 30, 2023.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

Note 4 — Mortgage Notes Payable, Net

The following table reflects the Company’s mortgage notes payable as of ~~June~~September 30, 2023 and December 31, 2022:


			Outstanding Loan Amount as of				Effective Interest Rate (1) as of									Outstanding Loan Amount as of				Effective Interest Rate (1) as of
Portfolio	Portfolio	Encumbered Properties	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022		Interest Rate		Maturity	Portfolio	Encumbered Properties	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022		Interest Rate		Maturity
			(In thousands)		(In thousands)											(In thousands)		(In thousands)
Fox Ridge Bryant - Bryant, AR	Fox Ridge Bryant - Bryant, AR	1	$	6,732	$	6,817	3.98	%	3.98	%	Fixed		May 2047	Fox Ridge Bryant - Bryant, AR	1	$	6,689	$	6,817	3.98	%	3.98	%	Fixed		May 2047
Fox Ridge Chenal - Little Rock, AR	Fox Ridge Chenal - Little Rock, AR	1	15,442		15,639		2.95	%	2.95	%	Fixed		May 2049	Fox Ridge Chenal - Little Rock, AR	1	15,344		15,639		2.95	%	2.95	%	Fixed		May 2049
Fox Ridge North Little Rock - North Little Rock, AR	Fox Ridge North Little Rock - North Little Rock, AR	1	9,582		9,704		2.95	%	2.95	%	Fixed		May 2049	Fox Ridge North Little Rock - North Little Rock, AR	1	9,520		9,704		2.95	%	2.95	%	Fixed		May 2049
Capital One MOB Loan (2)	Capital One MOB Loan (2)	41	378,500		378,500		3.71	%	3.73	%	Fixed	(2)	Dec. 2026	Capital One MOB Loan (2)	41	378,500		378,500		3.71	%	3.73	%	Fixed	(2)	Dec. 2026
Multi-Property CMBS Loan	Multi-Property CMBS Loan	20	116,037		118,700		4.60	%	4.60	%	Fixed		May 2028	Multi-Property CMBS Loan	20	116,037		118,700		4.60	%	4.60	%	Fixed		May 2028
Shiloh - Illinois	Shiloh - Illinois	1	12,909		13,071		4.34	%	4.34	%	Fixed		Jan. 2025	Shiloh - Illinois	1	12,828		13,071		4.34	%	4.34	%	Fixed		Jan. 2025
BMO CMBS Loan	BMO CMBS Loan	9	42,750		42,750		2.89	%	2.89	%	Fixed		Dec. 2031	BMO CMBS Loan	9	42,750		42,750		2.89	%	2.89	%	Fixed		Dec. 2031
Barclay’s MOB Loan		62	240,000		—		6.45	%	—	%	Fixed		June 2033
Barclays MOB Loan														Barclays MOB Loan	62	240,000		—		6.45	%	—	%	Fixed		June 2033
Gross mortgage notes payable	Gross mortgage notes payable	136	821,952		585,181		4.58	%	3.83	%				Gross mortgage notes payable	136	821,668		585,181		4.58	%	3.83	%
Deferred financing costs, net of accumulated amortization (3)	Deferred financing costs, net of accumulated amortization (3)		(12,121)		(5,117)									Deferred financing costs, net of accumulated amortization (3)		(11,620)		(5,117)
Mortgage premiums and discounts, net	Mortgage premiums and discounts, net		(1,318)		(1,364)									Mortgage premiums and discounts, net		(1,296)		(1,364)
Mortgage notes payable, net	Mortgage notes payable, net		$	808,513	$	578,700								Mortgage notes payable, net		$	808,752	$	578,700

_____________

(1)Calculated on a weighted average basis for all mortgages outstanding as of ~~June~~September 30, 2023 and December 31, 2022. For the ~~SOFR/~~SOFR (defined in Note 5 — Credit Facilities)/LIBOR based loans, the Company used the applicable SOFR/LIBOR rate index in effect at the balance sheet date. For the Capital One MOB Loan, the effective rate does not include the effect of amortizing the amount paid to terminate the previous pay-fixed swap. See Note 7 — Derivatives and Hedging Activities for additional details.

(2)Variable rate loan, based on daily SOFR as of ~~June~~September 30, 2023 and December 31, 2022, which is fixed as a result of entering into “pay-fixed” interest rate swap agreements. The Company allocated $378.5 million of its “pay-fixed” interest rate swaps to this mortgage consistently as of ~~June~~September 30, 2023 and December 31, 2022.

(3)Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close or result in a definitive agreement.

As of ~~June~~September 30, 2023, the Company had pledged $1.3 billion in total real estate investments, at cost, as collateral for its $0.8 billion of gross mortgage notes payable. This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable secured by these properties. The Company makes payments of principal and interest, or interest only, depending upon the specific requirements of each mortgage note, on a monthly basis.

Some of the Company’s mortgage note agreements require compliance with certain property-level financial covenants, including debt service coverage ratios. As of ~~June~~September 30, 2023, the Company was in compliance with these financial covenants.

See Note 5 — Credit Facilities - Future Principal Payment and LIBOR Transition for a schedule of principal payment requirements of the Company’s Mortgage Notes and Credit Facilities and discussion of the ~~expected~~ cessation of LIBOR publication.

~~Barclay’s~~Barclays MOB Loan

On May 24, 2023, the Company, through certain subsidiaries of the OP), entered into a non-recourse loan agreement (the ~~“Barclay’s~~“Barclays MOB Loan Agreement”), with (i) Barclays Capital Real Estate Inc., (ii) Société Générale Financial Corporation and (iii) KeyBank National Association (each individually, a “Lender,” and collectively, the “Lenders”), in the aggregate amount of $240.0 million (the “Barclay’s MOB Loan”). In connection with the Barclay’s MOB Loan Agreement, the OP entered into a Guaranty Agreement (the “Guaranty”) and an Environmental Indemnity Agreement (the “Environmental Indemnity”) for the benefit of the Lenders.

The Barclays MOB Loan is secured by, among other things, first priority mortgages on the Company’s interests in 62 MOBs with an aggregate ~~carrying~~gross asset value of ~~$414.8~~$416.8 million. ~~Under the Barclay’s~~The Barclays MOB Loan has a 10-year term and is interest-only at a fixed rate of 6.453% per year. ~~The~~Under the Barclays MOB Loan Agreement, the Company is required to make interest-only

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

payments on a monthly basis with the principal balance due on the maturity date of June 6, 2033. The Barclays MOB Loan Agreement requires the OP to comply with certain covenants, including, maintaining combined cash and cash equivalents totaling at least $12.5 million at all times.

Subject to certain conditions, the Company may prepay the Barclays MOB Loan in whole or in part at any time after one year from closing with a pre-payment premium equal to the Yield Maintenance Program (as defined in the Barclays MOB Loan Agreement) by providing the lenders thereunder with prior written notice of prepayment no less than thirty days before prepayment, subject to a pre-payment premium equal to the Yield Maintenance Premium (as defined in the Barclay’s MOB Loan Agreement). Following the earlier of May 24, 2026 and the date that is two years after the securitization of the Barclay’s MOB Loan, the Company may prepay the Barclays MOB Loan through defeasance, Notwithstanding the foregoing, the Barclays MOB Loan may be prepaid at par during the final six months of the term. The Company paid $7.8 million in deferred financing costs related to the Barclay’s MOB Loan, which is amortized into interest expense over the term of the loan.

At the closing of the ~~Barclay’s~~Barclays MOB Loan, the Company applied $194.8 million of the ~~Barclay’s~~Barclays MOB Loan proceeds to repay and terminate the Company’s then-existing credit facility (the “Prior Credit Facility”). The Company also terminated its interest rate swap contracts that formerly hedged interest rate changes under the Prior Credit Facility (see Note 7 — Derivatives and Hedging Activities for additional information). The remaining proceeds of approximately $39.0 million (after the payment of ~~Barclay’s~~Barclays MOB Loan closing costs and reimbursement of deposits) are available for general corporate purposes, subject to the terms of the ~~Barclay’s~~Barclays MOB Loan Agreement. Additionally, by terminating the Prior Credit Facility, the Company is no longer subject to certain restrictive covenants previously imposed by the Prior Credit Facility (see Note 5 — Credit Facilities for additional information).

Under the Guaranty, the OP has (i) guaranteed the full repayment of the ~~Barclay’s~~Barclays MOB Loan in the case of certain major defaults by the Company or the OP, including bankruptcy, and (ii) indemnified the Lenders against losses, costs or liabilities related to certain other “bad boy” acts of the Company or the OP, including fraud, willful misconduct, bad faith, and gross negligence. Pursuant to the Environmental Indemnity, the OP and the Company have indemnified the Lenders against losses, costs or liabilities related to certain environmental matters.

Note 5 — Credit Facilities

The Company had the following credit facilities outstanding as of ~~June~~September 30, 2023 and December 31, 2022:


				Outstanding Facility Amount as of				Effective Interest Rate (8)													Outstanding Facility Amount as of				Effective Interest Rate (8)
Credit Facilities	Credit Facilities	Encumbered Properties (1)		June 30, 2023		December 31, 2022		June 30, 2023			December 31, 2022			Interest Rate		Maturity		Credit Facilities	Encumbered Properties (1)		September 30, 2023		December 31, 2022		September 30, 2023			December 31, 2022			Interest Rate		Maturity
				(In thousands)		(In thousands)															(In thousands)		(In thousands)
Prior Credit Facility:	Prior Credit Facility:																	Prior Credit Facility:
Revolving Credit Facility	Revolving Credit Facility			$	—	$	30,000	—	%		7.26	%		Variable		Mar. 2024	(7)	Revolving Credit Facility			$	—	$	30,000	—	%		7.26	%		Variable		Mar. 2024	(7)

Term Loan	Term Loan			—		150,000		—	%		5.11	%		Fixed	(5)	Mar. 2024		Term Loan			—		150,000		—	%		5.11	%		Fixed	(5)	Mar. 2024
Deferred financing costs	Deferred financing costs			—		(1,750)												Deferred financing costs			—		(1,750)
Term Loan, net	Term Loan, net			—		148,250												Term Loan, net			—		148,250
Total Prior Credit Facility	Total Prior Credit Facility	—		$	—	$	178,250											Total Prior Credit Facility	—		$	—	$	178,250

Fannie Mae Master Credit Facilities:	Fannie Mae Master Credit Facilities:																	Fannie Mae Master Credit Facilities:
Capital One Facility	Capital One Facility	11	(2)	$	208,713	$	210,483	7.61	%		5.90	%		Variable	(6)	Nov. 2026		Capital One Facility	11	(2)	$	207,829	$	210,483	7.84	%		5.90	%		Variable	(6)	Nov. 2026
KeyBank Facility	KeyBank Facility	10	(3)	140,449		141,564		7.65	%		6.60	%		Variable	(6)	Nov. 2026		KeyBank Facility	10	(3)	139,891		141,564		7.89	%		6.60	%		Variable	(6)	Nov. 2026
Total Fannie Mae Master Credit Facilities	Total Fannie Mae Master Credit Facilities	21		$	349,162	$	352,047											Total Fannie Mae Master Credit Facilities	21		$	347,720	$	352,047

Total Credit Facilities	Total Credit Facilities	21		$	349,162	$	530,297	7.63	%	(4)	5.94	%	(4)					Total Credit Facilities	21		$	347,720	$	530,297	7.86	%	(4)	5.94	%	(4)

________

(1)Encumbered properties are as of ~~June~~September 30, 2023.

(2)Secured by first-priority mortgages on 11 of the Company’s seniors housing properties as of ~~June~~September 30, 2023 with aan aggregate carrying value, at cost of ~~$0.3~~$350.5 million.

~~(3)Secured by first-priority mortgages on ten of the Company’s seniors housing properties as of June 30, 2023 with a carrying value of $0.3 million.~~

~~(4)Calculated on a weighted average basis for all credit facilities outstanding as of June 30, 2023 and December 31, 2022, respectively.~~

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(Unaudited)

(3)Secured by first-priority mortgages on ten of the Company’s seniors housing properties as of September 30, 2023 with an aggregate carrying value, at cost of $261.9 million.

(4)Calculated on a weighted average basis for all credit facilities outstanding as of September 30, 2023 and December 31, 2022, respectively.

(5)Variable rate loan, based on SOFR, all of which was economically fixed as a result of entering into “pay-fixed” interest rate swap agreements (the Company designates its SOFR “pay-fixed” interest rate swaps against all 30-day SOFR debt, see Note 7 — Derivatives and Hedging Activities for additional details).

(6)The effective rates above only include the impact of designated hedging instruments. The Company has seven non-designated interest rate cap agreements with an aggregate notional amount of ~~$353.8~~$351.6 million which limited 30-day LIBOR (until June 30, 2023, and SOFR thereafter) to 3.50%. The Company did not designate these derivatives as hedges and accordingly, the changes in value and any cash received from these derivatives are presented within gain (loss) on derivative instruments on the consolidated statements of operations and comprehensive income (see Note 7 — Derivatives and Hedging Activities for additional details). Inclusive of the impact of these interest rate caps on these non-designated derivatives, the economic interest rate on the Capital One Fannie Mae Facility and KeyBank Fannie Mae Facility was 5.89% and 5.93%, respectively, as of September 30, 2023, and 5.26%, and 5.96%, respectively, as of ~~June 30, 2023 and~~ December 31, 2022.

(7)During the year ended December 31 2022, the Company exercised its option to extend the maturity one year to March 2024 subject to certain conditions.

(8)Effective interest rate below for variable rate debt gives effect to any outstanding “pay-fixed” swaps entered into by the Company allocated to the loan for presentation purposes. If no “pay-fixed” swaps are allocated, the effective interest rate below represents the variable rate (or contractual floor if appropriate) and the applicable margin in effect as of ~~June~~September 30, 2023 and December 31, 2022. The Company allocated $150.0 million of its SOFR-based interest rate swaps to the Term Loan $50.0 million of its LIBOR-based interest rate swaps to the Capital One Facility as of December 31, 2022. ~~These~~The interest rate swaps allocated to the Prior Credit Facility were all terminated in the ~~six~~nine months ended ~~June~~September 30, 2023. Upon termination, the fair ~~value~~values of terminated swaps are recorded within AOCI, and are amortized into interest expense over the original term of the then-existing swap. These amortized amounts from terminated swaps are not included in the calculation of effective interest. The Company continues to have $378.5 million of SOFR-based “pay-fixed” interest rate swaps allocated to a variable-rate mortgage note payable as of September 30, 2023. See Note 7 — Derivatives and Hedging Activities for additional details.

As of ~~June~~September 30, 2023, the carrying value of the Company’s real estate investments, at cost was $2.6 billion, with $1.3 billion of this asset value pledged as collateral for mortgage notes payable and $0.6 billion of this asset value pledged to secure advances under the Fannie Mae Master Credit Facilities. All of the real estate assets pledged to secure debt or to secure the Fannie Mae Master Credit Facilities are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, unless, as applicable, the existing indebtedness associated with the property is satisfied or the property is removed from the pledged collateral.

Unencumbered real estate investments, at cost as of ~~June~~September 30, 2023 were ~~$0.6~~$0.7 billion, although there can be no assurance as to the amount of liquidity the Company would be able to generate from using these unencumbered assets as collateral for future mortgage loans, future advances under the Fannie Mae Master Credit Facilities, or other future financings.

Prior Credit Facility

The Prior Credit Facility consisted of two components, a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”). The Revolving Credit Facility and Term Loan were interest-only and would have matured on March 13, 2024. The Prior Credit Facility was fully repaid in May 2023 with net proceeds provided by the ~~Barclay’s~~Barclays MOB Loan (seeNote 4 — Mortgage Notes Payable, Net for details) and the Prior Credit Facility was terminated.

Amounts outstanding under the Prior Credit Facility bore interest at the Company’s option of either (i) ~~SOFR,~~Secured Overnight Financing Rate (“SOFR”), plus an applicable margin that ranges, depending on the Company’s leverage, from 2.10% to 2.85% or (ii) the Base Rate (as defined in the Prior Credit Facility), plus an applicable margin that ~~ranges,~~ranged, depending on the Company’s leverage, from 0.85% to 1.60%. For the period from January 1, 2023 through the termination of the Prior Credit Facility in May 2023, the Company ~~had~~ elected to use the SOFR option for all of its borrowings under the Prior Credit Facility. At termination, the Company wrote off the remaining deferred financing costs associated with the Prior Credit Facility of $2.6 million which is included in interest expense in the consolidated statements of operations and comprehensive loss for the three and ~~six~~nine months ended ~~June~~September 30, 2023.

The Prior Credit Facility contained various restrictions which no longer apply, that limited the Company’s ability to incur additional debt, maintain certain cash balances or pay dividends, among other things.

Fannie Mae Master Credit Facilities

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement relating to a secured credit facility with KeyBank (the “KeyBank Facility”) and a master credit facility agreement with Capital One for a secured credit facility with Capital One Multifamily Finance LLC, an affiliate of Capital One (the “Capital One Facility”; the Capital One Facility and the KeyBank Facility are referred to herein individually as a “Fannie Mae Master Credit Facility” and together as the “Fannie Mae Master Credit Facilities”). Advances made under these agreements ~~are~~were assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.

In connection with the Fannie Mae Master Credit Facilities, the Company was required to enter into interest rate cap agreements which the Company periodically renews upon their expiration. During the three months ended ~~June~~September 30, 2023, the Company paid premiums of $4.6 million to renew three caps which matured in the three months ended ~~June~~September 30, 2023. The Company also deposited $2.8 million with the lender was held in escrow, reflected within restricted cash on the Company’s balance sheet as of June 30, 2023. Subsequent to June 30, 2023, the escrowed amount was returned to the Company.

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~~HEALTHCARE TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

As of ~~June~~September 30, 2023 the Company had ~~nine~~six non-designated interest rate cap agreements ~~(six active and the three replacement caps, which are forward-starting)~~ with an aggregate current effective notional amount of ~~$353.8~~$351.6 million which caps ~~LIBOR~~SOFR at 3.50% ~~with~~and various maturities through April 2024. The existing caps were transitioned to SOFR-based contracts effective July 1, 2023. The Company does not apply hedge accounting to these non-designated interest cap agreements and changes in value are reflected in earnings (see Note 7 — Derivatives and Hedging Activities for additional information regarding the Company’s derivatives).

As of ~~June~~September 30, 2023, ~~$349.2~~$347.7 million was outstanding under the Fannie Mae Master Credit Facilities. The Company may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Borrowings under the Fannie Mae Master Credit Facilities bore annual interest at a rate that varied on a monthly basis and was equal to the sum of the current LIBOR for one month U.S. dollar-denominated deposits and a spread (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively). Effective July 1, 2023, the Fannie Mae Master Credit Facilities automatically transitioned to SOFR-based borrowings with monthly interest equal to the sum of the current SOFR for one-month denominated deposits and a spread of (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively). The Fannie Mae Master Credit Facilities mature on November 1, 2026.

As of December 31, 2022, the Company had $150.0 million of SOFR-based interest swap agreements, which were allocated to the Term Loan, and $50.0 million of LIBOR-based interest swap agreements which were allocated to the Capital One Facility. These swaps were all terminated in the six months ended June 30, 2023. The Term Loan was fully repaid in the three months ended June 30, 2023, but the Capital One Facility remained outstanding.

~~Subsequent to June~~In the three months ended September 30, 2023, the Company ~~made~~provided a $5.1 million cash deposit to Fannie Mae because the debt service coverage ratios of the underlying properties of each facility were below the minimum required amount per the debt agreements. This amount will be recorded as restricted cash and is pledged as additional collateral for the Fannie Mae Master Credit Facilities. This deposit will be refunded the earlier of the Company’s achievement of a debt service coverage ratio above the minimum required amount of 1.40 or the maturity of the Fannie Mae Master Credit Facilities. Subsequent to September 30, 2023, the Company provided an additional deposit of $6.7 million, which brought the total deposit to $11.8 million (see Note 17 — Subsequent Events for additional information).

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Future Principal Payments

The following table summarizes the scheduled aggregate principal payments for the five years subsequent to ~~June~~September 30, 2023 and thereafter, on all of the Company’s outstanding debt (mortgage notes payable and credit facilities):


		Future Principal Payments							Future Principal Payments
(In thousands)	(In thousands)	Mortgage Notes Payable		Credit Facilities		Total		(In thousands)	Mortgage Notes Payable		Credit Facilities		Total
2023 (remainder)	2023 (remainder)	$	574	$	2,884	$	3,458	2023 (remainder)	$	289	$	1,442	$	1,731
2024	2024	1,178		5,769		6,947		2024	1,178		5,769		6,947
2025	2025	13,270		5,769		19,039		2025	13,270		5,769		19,039
2026	2026	379,393		334,740		714,133		2026	379,393		334,740		714,133
2027	2027	922		—		922		2027	922		—		922
Thereafter	Thereafter	426,615		—		426,615		Thereafter	426,616		—		426,616
Total	Total	$	821,952	$	349,162	$	1,171,114	Total	$	821,668	$	347,720	$	1,169,388

LIBOR Transition

In July 2017, the Financial Conduct Authority (which regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the ~~Secured Overnight Financing Rate (“SOFR”)~~SOFR as its preferred alternative to LIBOR in derivatives and other financial contracts. On March 5, 2021, the Financial Conduct Authority confirmed a partial extension of this deadline announcing that it will cease the publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021. The remaining USD LIBOR settings were published through June 30, 2023.

The Company had no LIBOR-based borrowings or derivative instruments as of September 30, 2023. As of ~~June~~September 30, 2023, the Company had ~~$349.2~~$347.7 million of variable-rate, ~~LIBOR-based~~SOFR-based borrowings under the Fannie Mae Master Credit Facilities, which automatically transitioned tofrom variable-rate, ~~SOFR-based~~LIBOR-based borrowings on July 1, 2023. As of September 30, 2023, the Company had SOFR-based interest rate caps with notional amounts of $351.6 million which are not designated as hedging instruments which also transitioned from LIBOR-based contracts effective July 1, 2023.

During the

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~~HEALTHCARE TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

year ended December 31, 2022, the Company converted $150.0 million of its “pay-fixed” swaps on its Prior Credit Facility from LIBOR to SOFR, as well as its $378.5 million Capital One MOB Loan and the related “pay-fixed” swap from LIBOR to SOFR. During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company terminated its remaining $50.0 million of LIBOR-based “pay-fixed” swaps. The “pay-fixed” swaps were terminated in an asset position and the Company received $5.4 million in cash following the termination. This amount was included in accumulated other comprehensive income (“AOCI”), and will amortize into earnings as a reduction to interest expense through March 2024 (the original term of the swap and variable hedged debt). See Note 7 — Derivatives and Hedging Activities for additional details.

As of June 30, 2023, the Company had LIBOR-based interest rate caps with notional amounts of $353.8 million which are not designated as hedging instruments which also transitioned to SOFR-based contracts effective July 1, 2023.

Note 6 — Fair Value of Financial Instruments

GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring assets and liabilities at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:

Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 — Unobservable inputs that reflect the entity’s own assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

Financial Instruments Measured at Fair Value on a Recurring Basis

Derivative Instruments

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of ~~June~~September 30, 2023, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

The following table presents information about the Company’s assets and liabilities measured at fair value as of ~~June~~September 30, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those instruments fall.


(In thousands)	(In thousands)	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total		(In thousands)	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
June 30, 2023
September 30, 2023										September 30, 2023
Derivative assets, at fair value (non-designated)	Derivative assets, at fair value (non-designated)	$	—	$	6,106	$	—	$	6,106	Derivative assets, at fair value (non-designated)	$	—	$	4,946	$	—	$	4,946
Derivative assets, at fair value (designated)	Derivative assets, at fair value (designated)	—		30,670		—		30,670		Derivative assets, at fair value (designated)	—		32,601		—		32,601
Total	Total	$	—	$	36,776	$	—	$	36,776	Total	$	—	$	37,547	$	—	$	37,547

December 31, 2022	December 31, 2022									December 31, 2022
Derivative assets, at fair value (non-designated)	Derivative assets, at fair value (non-designated)	$	—	$	3,737	$	—	$	3,737	Derivative assets, at fair value (non-designated)	$	—	$	3,737	$	—	$	3,737
Derivative assets, at fair value (designated)	Derivative assets, at fair value (designated)	—		36,910		—		36,910		Derivative assets, at fair value (designated)	—		36,910		—		36,910
Total	Total	$	—	$	40,647	$	—	$	40,647	Total	$	—	$	40,647	$	—	$	40,647

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the ~~six~~nine months ended ~~June~~September 30, 2023.

Real Estate Investments Measured at Fair Value on a Non-Recurring Basis

Real Estate Investments - Held for Use

The Company also had impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheets as of ~~June~~September 30, 2023 and December 31, 2022.

As of ~~June~~September 30, 2023, the Company owned 1816 held for use properties (10 MOBs and ~~eight~~six SHOPs) for which the Company had reconsidered their expected holding periods, of which ~~five~~six properties ~~(one~~(three MOB and ~~four~~three SHOPs) are being marketed for sale. As a result, the Company evaluated the impact on its ability to recover the carrying values of the respective properties, and has previously recorded impairment charges on 10 properties (eight MOBs and two SHOPs) to reduce the carrying values to their estimated fair values during the year ended December 31, 2022.

See Note 3 — Real Estate Investments, Net - “Assets Held for Use and Related Impairments” for additional details.

Real Estate Investments - Held for Sale

Real estate investments held for sale are carried at net realizable value on a non-recurring basis and are generally classified in Level 3 of the fair value hierarchy. The Company did not have any real estate investments classified as held for sale as of ~~June~~September 30, 2023 and December 31, 2022.

Financial Instruments ~~not~~Not Measured at Fair Value

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of short-term financial instruments such as cash and cash equivalents, restricted cash, straight-line rent receivable, net, prepaid expenses and other assets, deferred costs, net, accounts payable and accrued expenses, deferred rent and distributions payable approximate their carrying value on the consolidated balance sheets due to their short-term nature.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

The fair values of the Company’s remaining financial instruments that are not reported at fair value on the consolidated balance sheets are reported below:


			June 30, 2023				December 31, 2022						September 30, 2023				December 31, 2022
(In thousands)	(In thousands)	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(In thousands)	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Gross mortgage notes payable and mortgage premium and discounts, net	Gross mortgage notes payable and mortgage premium and discounts, net	3	$	820,634	$	834,616	$	583,817	$	550,626	Gross mortgage notes payable and mortgage premium and discounts, net	3	$	820,372	$	766,584	$	583,817	$	550,626
Prior Credit Facility	Prior Credit Facility	3	$	—	$	—	$	180,000	$	179,496	Prior Credit Facility	3	$	—	$	—	$	180,000	$	179,496
Fannie Mae Master Credit Facilities	Fannie Mae Master Credit Facilities	3	$	349,162	$	349,815	$	352,047	$	353,034	Fannie Mae Master Credit Facilities	3	$	347,720	$	348,120	$	352,047	$	353,034

The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Advisor’s experience with similar types of borrowing arrangements, excluding the value of derivatives.

Note 7 — Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company may use derivative financial instruments, including interest rate swaps, caps, collars, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings.

The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. Additionally, in using interest rate derivatives, the Company aims to add stability to interest expense and to manage its exposure to interest rate movements. The Company does not intend to utilize derivatives for speculative purposes or purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company, and its affiliates, may also have other financial relationships. The Company does not anticipate that any of its counterparties will fail to meet their obligations.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of ~~June~~September 30, 2023 and December 31, 2022:

(In thousands)

Balance Sheet Location

June 30,
2023

December 31, 2022

(In thousands)

Balance Sheet Location

September 30,
2023

December 31, 2022

Derivatives designated as hedging instruments:

Interest rate “pay-fixed” swaps

Derivative assets, at fair value

30,670

36,910

Interest rate “pay-fixed” swaps

Derivative assets, at fair value

32,601

36,910

Derivatives not designated as hedging instruments:

Interest rate caps

Derivative assets, at fair value

6,106

3,737

Interest rate caps

Derivative assets, at fair value

4,946

3,737

Cash Flow Hedges of Interest Rate Risk

As of ~~June~~September 30, 2023 and December 31, 2022, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk:


		June 30, 2023			December 31, 2022				September 30, 2023			December 31, 2022
Interest Rate Derivatives	Interest Rate Derivatives	Number of Instruments	Notional Amount		Number of Instruments	Notional Amount		Interest Rate Derivatives	Number of Instruments	Notional Amount		Number of Instruments	Notional Amount
			(In thousands)			(In thousands)				(In thousands)			(In thousands)
SOFR-based interest rate “pay-fixed” swaps	SOFR-based interest rate “pay-fixed” swaps	1	$	378,500	7	$	528,500	SOFR-based interest rate “pay-fixed” swaps	1	$	378,500	7	$	528,500
LIBOR-based interest rate “pay-fixed” swaps	LIBOR-based interest rate “pay-fixed” swaps	—	—		2	50,000		LIBOR-based interest rate “pay-fixed” swaps	—	—		2	50,000
Total interest rate “pay-fixed” swaps	Total interest rate “pay-fixed” swaps	1	$	378,500	9	$	578,500	Total interest rate “pay-fixed” swaps	1	$	378,500	9	$	578,500

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

The table below details the location in the financial statements of the gain (loss) recognized on interest rate derivatives designated as cash flow hedges for the periods presented:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		2023		2022		(In thousands)	2023		2022		2023		2022
Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives	Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives	$	10,131	$	8,397	$	6,660	$	32,009	Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives	$	5,418	$	17,513	$	12,078	$	49,522
Amount of gain (loss) reclassified from accumulated other comprehensive income into income as interest expense	Amount of gain (loss) reclassified from accumulated other comprehensive income into income as interest expense	$	4,665	$	(1,773)	$	8,626	$	(4,427)	Amount of gain (loss) reclassified from accumulated other comprehensive income into income as interest expense	$	5,023	$	565	$	13,648	$	(3,862)
Total amount of interest expense presented in the consolidated statements of operations and comprehensive loss	Total amount of interest expense presented in the consolidated statements of operations and comprehensive loss	$	(18,703)	$	(12,050)	$	(34,488)	$	(23,814)	Total amount of interest expense presented in the consolidated statements of operations and comprehensive loss	$	(15,720)	$	(13,284)	$	(50,208)	$	(37,098)

As of ~~June~~September 30, 2023, the Company had one SOFR-based “pay-fixed” interest rate swap that is designated as a cash flow hedge. The Company uses its interest rate swap as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for fixed-rate payments by the Company over the life of the agreement without exchange of the underlying notional amount. During the ~~six~~nine months ended ~~June~~September 30, 2023 and the year ended December 31, 2022, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The remaining interest rate “pay-fixed” swap has a base interest rate of 1.61% and matures December 2026.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in ~~accumulated other comprehensive income (“AOCI”)~~AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

MOB Loan Swap Termination

In connection with the refinancing of the $250.0 million loan made by Capital One, National Association and certain other lenders to certain subsidiaries of the OP on June 30, 2017 (the “MOB Loan”), during the fourth quarter of 2019, the Company terminated two interest rate swaps with an aggregate notional amount of $250.0 million for a payment of approximately $2.2 million. Following these terminations, $2.2 million was recorded in AOCI and was reclassified as an increase to interest expense over the original term of the two terminated swaps and the MOB Loan prior to its refinancing. For the ~~six~~nine months ended ~~June~~September 30, 2022, the Company reclassified $0.4 million from AOCI as an increase to interest expense. No amounts remained in AOCI related to this swap termination designated to the MOB Loan as of December 31, 2022.

Prior Credit Facility Swap Terminations

During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company terminated two LIBOR-based interest rate swap agreements with an aggregate notional amount of $50.0 million and six SOFR-based interest rate swap agreements with an aggregate notional amount of $150.0 million. The swaps were terminated in asset positions, and the Company received $1.9 million in cash from the LIBOR-based swap terminations, and $3.5 million in cash from the SOFR-based swap terminations. These amounts were included in AOCI and will be amortized into earnings as a reduction to interest expense from the termination dates of the swaps through March 2024 (the original term of the swap and the Prior Credit Facility). For the three and ~~six~~nine months ended ~~June~~September 30, 2023, the Company reclassified ~~$0.9~~$1.5 million and ~~$1.1~~$2.7 million, respectively, from AOCI as decreases to interest expense, and ~~$4.3~~$2.7 million remained in AOCI as of ~~June~~September 30, 2023.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, from ~~July~~October 1, 2023 through ~~June~~September 30, 2024, the Company estimates that ~~$17.7~~$16.5 million will be reclassified from AOCI as a decrease to interest expense or other comprehensive income relating to the “pay-fixed” swaps designated as derivatives.

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(Unaudited)

Non-Designated Derivatives

The Company had the following outstanding interest rate derivatives with current effective notional amounts that were not designated as hedges in qualified hedging relationships as of ~~June~~September 30, 2023 and December 31, 2022:

June 30, 2023

December 31, 2022

September 30, 2023

December 31, 2022

Interest Rate Derivatives

Number of Instruments

Notional Amount (1)

Number of Instruments

Notional Amount (1)

Interest Rate Derivatives

Number of Instruments

Notional Amount (1)

Number of Instruments

Notional Amount (1)

(In thousands)

Interest rate caps (2)

353,829

354,624

Interest rate caps (2)

351,572

354,624

(1)Notional amount represents the currently active interest rate cap contract and excludes three interest rate cap agreements (included in the instrument count) with aggregate notional amounts of $52.6 million which take effect upon the expiration of similar caps included above and effectively extend the term for the same notional amount.contracts.

(2)All of the Company’s interest rate cap agreements limited 30-day LIBOR through June 30, 2023 (and SOFR, thereafter) to 3.50% with terms through July 2025. The actual 30-day LIBOR rates during the six months ended June 30, 2023, and the SOFR rates during the three months ended September 30, 2023, exceeded the strike price rate of 3.50% and the Company received payments under these agreements. Changes in the fair market value of these non-designated derivatives, as well as any cash received, are presented within gain (loss) on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive income.

These derivatives are used to limit the Company’s exposure to interest rate movements for economic purposes, however, the Company has not elected to apply hedge accounting. As of ~~June~~September 30, 2023 and December 31, 2022, the Company had entered into ~~nine~~six SOFR-based and seven LIBOR-based interest rate caps, respectively, with notional amounts of ~~$353.8~~$351.6 million and $354.6 million, respectively, ~~(of which six caps were active as of June 30, 2023 and December 31, 2022)~~ which limited 30-day SOFR/LIBOR borrowings to 3.50% and have varying maturities through July 2025.

The Company paid premiums of $4.6 million to renew three caps with an aggregate notional amount of $138.5 million which matured in the ~~three~~nine months ended ~~June~~September 30, 2023. Subsequent to September 30, 2023, the Company paid premiums of $5.0 million to renew two maturing interest rate caps with an aggregate notional amount of $150.9 million (see Note 17 — Subsequent Events for additional information). One interest rate cap with a notional amount of $60.0 million matures in April 2024, which represents the next interest rate cap maturity excluding those renewed subsequent to September 30, 2023. All of the Company’s LIBOR-based interest rate caps were transitioned to SOFR-based contracts effective July 1, 2023.

Beginning in the ~~fourth quarter of~~year ended December 31, 2022, LIBOR exceeded 3.50% and the Company began receiving payments under these interest rate caps. While the Company does not apply hedge accounting for these interest rate caps, they are economically hedging the Capital One Facility and KeyBank Facility. Changes in the fair value of, and any cash received from, derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net loss and are presented within gain (loss) on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.

The ~~gain~~gains on non-designated derivatives were ~~$0.3~~$0.4 million and ~~$0.1~~$0.5 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2023, ~~respectively,~~ and were ~~$0.4~~$1.8 million and ~~$1.4~~$3.2 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, ~~2022, respectively.~~2022. During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company received aggregate payments of ~~$2.3~~$3.9 million related to its effective interest rate caps as ~~LIBOR~~LIBOR/SOFR exceeded the effective rates of the capped debt. No such amounts were received during the ~~six~~nine months ended ~~June~~September 30, 2022.

Offsetting Derivatives

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives (both designated and non-designated) as of ~~June~~September 30, 2023 and December 31, 2022. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets.

Gross Amounts Not Offset in the Consolidated Balance Sheet
(In thousands) Gross Amounts of Recognized Assets Gross Amounts of Recognized (Liabilities) Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Assets presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Received Net Amount
June 30, 2023 $ 36,776 $ — $ — $ 36,776 $ — $ — $ 36,776
December 31, 2022 $ 40,647 $ — $ — $ 40,647 $ — $ — $ 40,647

~~Credit-risk-related Contingent Features~~

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(Unaudited)


									Gross Amounts Not Offset in the Consolidated Balance Sheet
(In thousands)	Gross Amounts of Recognized Assets		Gross Amounts of Recognized (Liabilities)		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
September 30, 2023	$	37,547	$	—	$	—	$	37,547	$	—	$	—	$	37,547
December 31, 2022	$	40,647	$	—	$	—	$	40,647	$	—	$	—	$	40,647

Credit-risk-related Contingent Features

The Company has agreements in place with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of ~~June~~September 30, 2023, there were no derivatives in a net liability position. The Company is not required to post any collateral related to these agreements and was not in breach of any agreement provisions.

Note 8 — Stockholders’ Equity

Common Stock

As of ~~June~~September 30, 2023 and December 31, 2022, the Company had ~~108,284,434~~109,877,212 and 105,080,531 shares of common stock outstanding, respectively, including unvested restricted shares, shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases, and shares issued as stock dividends since October 2020. Since October 2020, the Company has issued an aggregate of approximately ~~15.7~~17.3 million shares in respect to the stock dividends. Except for shares issued as dividends, no additional shares of common stock were issued during the ~~quarter~~nine months ended ~~March 31,~~September 30, 2023 or the year ended December 31, 2022. References made to weighted-average shares and per-share amounts in the consolidated statements of operations and comprehensive ~~income~~loss have been retroactively adjusted to reflect the cumulative increase in shares outstanding due to the stock dividends (including the ~~April~~October 2023 stock dividend) and are noted as such throughout the accompanying financial statements and notes. Any future issuances of stock dividends will also result in retroactive adjustments. See Note 1 — Organization for additional information.

On March 31, 2023, the Company published a new Estimated Per-Share NAV as of December 31, 2022, which was approved by the Board on March 31, 2023. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless the Company lists its common stock.

Share Repurchase Program

Under the Company’s share repurchase program (the “SRP”), as amended from time to time, qualifying stockholders are able to sell their shares to the Company in limited circumstances. The SRP permits investors to sell their shares back to the Company after they have held them for at least one year, subject to significant conditions and limitations. Repurchases of shares of the Company’s common stock, when requested, are at the sole discretion of the Board.

Under the SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of the Company’s common stock or received their shares from the Company (directly or indirectly) through one or more non-cash transactions are considered for repurchase. Additionally, pursuant to the SRP, the repurchase price per share equals 100% of the Estimated Per-Share NAV in effect on the last day of the fiscal semester, or the six-month period ending June 30 or December 31.

The Board suspended the SRP in August 2020 and rejected all repurchase requests made during the period from January 1, 2020 until the effectiveness of the suspension of the SRP. No further repurchase requests under the SRP may be made unless and until the SRP is reactivated. No assurances can be made as to when or if the SRP will be reactivated.

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September 30, 2023

(Unaudited)

When a stockholder requests redemption and redemption is approved by the Board, the Company will reclassify such obligation from equity to a liability based on the settlement value of the obligation. Shares repurchased under the SRP have the status of authorized but unissued shares.

The table below reflects the number of shares repurchased and the average price per share, under the SRP and does not include any repurchases under tender offers, cumulatively through ~~June~~September 30, 2023.

Number of Shares Repurchased Average Price per Share
Cumulative repurchases as of December 31, 2022 4,896,620 $ 20.60
Six months ended June 30, 2023 — —
Cumulative repurchases as of June 30, 2023 4,896,620 20.60

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~~June 30, 2023~~

~~(Unaudited)~~


	Number of Shares Repurchased	Average Price per Share

Cumulative repurchases as of December 31, 2022	4,896,620	$	20.60
Nine months ended September 30, 2023	—	—
Cumulative repurchases as of September 30, 2023	4,896,620	20.60

Distribution Reinvestment Plan

Pursuant to the DRIP, stockholders may elect to reinvest distributions paid in cash by the Company into shares of common stock. No dealer manager fees or selling commissions are paid with respect to shares purchased under the DRIP. The shares purchased pursuant to the DRIP have the same rights and are treated in the same manner as all of the other shares of outstanding common stock. The Board may designate that certain cash or other distributions be excluded from reinvestment pursuant to the DRIP. The Company has the right to amend the DRIP or terminate the DRIP with ten days’ notice to participants. Shares issued under the DRIP are recorded as equity in the accompanying consolidated balance sheets in the period distributions are declared. During the ~~six~~nine months ended ~~June~~September 30, 2023 and the year ended December 31, 2022, the Company did not issue any shares of common stock pursuant to the DRIP. Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as the Company pays distributions in stock instead of cash.

Stockholder Rights Plan

In May 2020, the Company announced that the Board had approved a stockholder rights plan. In December 2020, the Company issued a dividend of one common share purchase right for each share of its common stock outstanding as authorized by its Board in its discretion.

Preferred Stock and Preferred Units

The Company is authorized to issue up to 50,000,000 shares of preferred stock. In connection with an underwritten offering in December 2019, the Company classified and designated 1,610,000 shares of its authorized preferred stock as authorized shares of its Series A Preferred Stock. In September 2020, the Board authorized the classification of 600,000 additional shares of the Company’s preferred stock as Series A Preferred Stock in connection with the preferred stock purchase agreement and registration rights agreement with B. Riley Principal Capital, LLC, (the “Preferred Stock Equity Line”) and in May 2021, the Board authorized the classification of 2,530,000 additional shares of the Company’s preferred stock as Series A Preferred Stock in connection with the offering in May 2021. Also, in connection with an underwritten offering in October 2021, the Company classified and designated 3,680,000 shares of its authorized preferred stock on October 4, 2021 as authorized shares of its Series B Preferred Stock.

The Company had 3,977,144 shares of Series A Preferred Stock issued and outstanding as of ~~June~~September 30, 2023 and December 31, 2022.

The Company had 3,630,000 shares of Series B Preferred Stock issued and outstanding as of ~~June~~September 30, 2023 and December 31, 2022.

The Company also had 100,000 Series A Preferred Units outstanding as of ~~June~~September 30, 2023 and December 31, 2022, which were accounted for as a component of non-controlling interests. See Note 13 — Non-controlling Interests for additional information.

Distributions and Dividends

Common Stock

From March 1, 2018 until June 30, 2020, the Company paid monthly distributions to stockholders at a rate equivalent to $0.85 per annum per share of common stock.

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On August 13, 2020, the Board changed the Company’s common stock distribution policy to preserve the Company’s liquidity and maintain additional financial flexibility. Under the policy, distributions authorized by the Board on the Company’s shares of common stock, if and when declared, are paid on a quarterly basis in arrears in shares of the Company’s common stock valued at the Company’s Estimated Per Share NAV of common stock in effect on the applicable date:

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

Stock Dividend Declaration Date

Stock Dividend Issue Date

Quarterly Stock Dividend Rate (per share)

October 1, 2020

October 15, 2020

0.013492

January 4, 2021

January 15, 2021

0.013492

April 2, 2021

April 15, 2021

0.014655

July 1, 2021

July 15, 2021

0.014655

October 1, 2021

October 15, 2021

0.014655

January 3, 2022

January 15, 2022

0.014655

April 1, 2022

April 18, 2022

0.014167

July 1, 2022

July 15, 2022

0.014167

October 3, 2022

October 17, 2022

0.014167

January 3, 2023

January 18, 2023

0.014167

April 3, 2023

April 17, 2023

0.015179

July 3, 2023

July 17, 2023

0.015179

October 2, 2023

October 16, 2023

0.015179

Note 9 — Related Party Transactions and Arrangements

As of ~~June~~September 30, 2023 and December 31, 2022, the Special Limited Partner owned ~~10,392~~10,550 and 10,094 shares (assuming conversion of its partnership interests), respectively, of the Company’s outstanding common stock. The Advisor and its affiliates may incur and pay costs and fees on behalf of the Company. As of ~~June~~September 30, 2023 and December 31, 2022, the Advisor held 90 partnership units in the OP designated as “Common OP Units”.

The limited partnership agreement of the OP (as amended from time to time, the “LPA”) allows for the special allocation, solely for tax purposes, of excess depreciation deductions of up to $10.0 million to the Advisor, a limited partner of the OP. In connection with this special allocation, the Advisor has agreed to restore a deficit balance in its capital account in the event of a liquidation of the OP and has agreed to provide a guaranty or indemnity of indebtedness of the OP.

Fees Incurred in Connection with the Operations of the Company

The Second Amended and Restated Advisory Agreement by and among the Company, the OP and the Advisor (as amended the “Second A&R Advisory Agreement”) took effect on February 17, 2017 and is automatically renewable for another ten-year term upon each ten-year anniversary unless the Second A&R Advisory Agreement is terminated (i) with notice of an election not to renew at least 365 days prior to the applicable tenth anniversary, (ii) in accordance with a change of control (as defined in the Second A&R Advisory Agreement) or a transition to self-management, (iii) by 67% of the independent directors of the Board for cause, without penalty, with 45 days’ notice or (iv) with 60 days’ prior written notice by the Advisor for (a) a failure to obtain a satisfactory agreement for any successor to the Company to assume and agree to perform obligations under the Second A&R Advisory Agreement or (b) any material breach of the Second A&R Advisory Agreement of any nature whatsoever by the Company.

On July 25, 2019, the Company entered into Amendment No. 1 to the Second A&R Advisory Agreement (the “Advisory Agreement Amendment”) among the Company, the OP, and the Advisor. The Advisory Agreement Amendment was unanimously approved by the Company’s independent directors. Additional information on the Advisory Agreement Amendment is included later in this footnote under “—Professional Fees and Other Reimbursements.”

Acquisition Expense Reimbursements

The Advisor may be reimbursed for services provided for which it incurs investment-related expenses, or insourced expenses. The amount reimbursed for insourced expenses may not exceed 0.5% of the contract purchase price of each acquired property or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimburses the Advisor for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

third-party acquisition expenses. Under the Second A&R Advisory Agreement, total acquisition expenses may not exceed 4.5% of the contract purchase price of the Company’s portfolio or 4.5% of the amount advanced for all loans or other investments. This threshold has not been exceeded through ~~June~~September 30, 2023.

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(Unaudited)

Asset Management Fees and Variable Management/Incentive Fees

Under the LPA and the advisory agreement that was superseded by the original amended and restated advisory agreement and until March 31, 2015, for its asset management services, the Company issued the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the Board) to the Advisor partnership units of the OP designated as “Class B Units” (“Class B Units”). The Class B Units were intended to be profit interests and vest, and no longer are subject to forfeiture, at such time as: (x) the value of the OP’s assets plus all distributions made equals or exceeds the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “Economic Hurdle”); (y) any one of the following occurs: (1) a listing; (2) another liquidity event or (3) the termination of the advisory agreement by an affirmative vote of a majority of the Company’s independent directors without cause; and (z) the Advisor is still providing advisory services to the Company (the “Performance Condition”).

Unvested Class B Units will be forfeited immediately if: (a) the advisory agreement is terminated for any reason other than a termination without cause; or (b) the advisory agreement is terminated by an affirmative vote of a majority of the Company’s independent directors without cause before the Economic Hurdle has been met.

Subject to approval by the Board, the Class B Units were issued to the Advisor quarterly in arrears pursuant to the terms of the LPA. The number of Class B Units issued in any quarter was equal to: (i) the excess of (A) the product of (y) the cost of assets multiplied by (z) 0.1875% over (B) any amounts payable as an oversight fee (as described below) for such calendar quarter; divided by (ii) the value of one share of common stock as of the last day of such calendar quarter, which was initially equal to $22.50 (the price in the Company’s initial public offering of common stock minus the selling commissions and dealer manager fees). The value of issued Class B Units will be determined and expensed when the Company deems the achievement of the Performance Condition to be probable. As of ~~June~~September 30, 2023, the Company determined that achieving the Performance Condition was not yet considered probable for accounting purposes. The Advisor receives cash distributions on each issued Class B Unit equivalent to the cash distribution paid, if any, on the Company’s common stock. These cash distributions on Class B Units are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss until the Performance Condition is considered probable to occur. stock dividends do not cause the OP to issue additional Class B Units, rather, the redemption ratio to common stock is adjusted. The Board has previously approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement. The Board determined in February 2018 that the Economic Hurdle had been satisfied, however none of the events have occurred, including a listing of the Company’s common stock on a national securities exchange, which would have satisfied the other vesting requirement of the Class B Units. Therefore, no expense has ever been recognized in connection with the Class B Units.

On May 12, 2015, the Company, the OP and the Advisor entered into an amendment to the then-current advisory agreement, which, among other things, provided that the Company would cease causing the OP to issue Class B Units to the Advisor with respect to any period ending after March 31, 2015.

Effective February 17, 2017, the Second A&R Advisory Agreement requires the Company to pay the Advisor a base management fee, which is payable on the first business day of each month. The fixed portion of the base management fee is equal to $1.625 million per month, while the variable portion of the base management fee is equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity (including convertible equity and certain convertible debt but excluding proceeds from the DRIP) issued by the Company and its subsidiaries subsequent to February 17, 2017 per month. There are no variable management fees earned from the issuance of common stock dividends. The base management fee is payable to the Advisor or its assignees in cash, Common OP Units or shares, or a combination thereof, the form of payment to be determined at the discretion of the Advisor and the value of any Common OP Unit or share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

In addition, the Second A&R Advisory Agreement requires the Company to pay the Advisor a variable management/incentive fee quarterly in arrears equal to (1) the product of fully diluted shares of common stock outstanding multiplied by (2) (x) 15.0% of the applicable prior quarter’s Core Earnings (as defined below) per share in excess of $0.375 per share plus (y) 10.0% of the applicable prior quarter’s Core Earnings per share in excess of $0.47 per share. Core Earnings is defined as, for the applicable period, net income or loss, computed in accordance with GAAP, excluding non-cash equity compensation expense, the variable management/incentive fee, acquisition and transaction related fees and expenses, financing related fees and expenses, depreciation and amortization, realized gains and losses on the sale of assets, any unrealized gains or losses or other non-cash items recorded in net income or loss for the applicable period, regardless of whether such items are included in other comprehensive income or loss, or in net income, one-time events pursuant to changes in GAAP and certain non-cash charges, impairment losses on real estate related investments and other than temporary impairments of securities, amortization of deferred financing costs, amortization of tenant inducements, amortization of straight-line rent and any associated bad debt

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~~June~~September 30, 2023

(Unaudited)

reserves, amortization of market lease intangibles, provision for loss loans, and other non-recurring revenue and expenses (in each case after discussions between the Advisor and the independent directors and approved by a majority of the independent directors). The variable management/incentive fee is payable to the Advisor or its assignees in cash or shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor and the value of any share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. No incentive fee was incurred for the three and ~~six~~nine months ended ~~June~~September 30, 2023 or 2022.

In June 2023, the Board approved a one-time, non-recurring prepayment to the Advisor of the July 2023 asset management fees totaling $1.8 million (including both the fixed and variable portions), which was paid on June 29, 2023. The amount of this prepayment is presented within prepaid expenses and other assets on the Company’s consolidated balance sheet as of June 30, 2023.

Property Management Fees

Unless the Company contracts with a third party, the Company pays the Property Manager a property management fee on a monthly basis, equal to 1.5% of gross revenues from the Company’s stand-alone single-tenant net leased properties managed and 2.5% of gross revenues from all other types of properties managed, plus market-based leasing commissions applicable to the geographic location of the property. The Company also reimburses the Property Manager for property level expenses incurred by the Property Manager. The Property Manager may charge a separate fee for the one-time initial rent-up or leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties, and the Property Manager is allowed to receive a higher property management fee in certain cases if approved by the Company’s Board (including a majority of the independent directors).

If the Company contracts directly with third parties for such services, the Company will pay the third party customary market fees and will pay the Property Manager an oversight fee of 1.0% of the gross revenues of the property managed by the third party. In no event will the Company pay the Property Manager or any affiliate of the Property Manager both a property management fee and an oversight fee with respect to any particular property. If the Property Manager provides services other than those specified in the Property Management Agreement, the Company will pay the Property Manager a monthly fee equal to no more than that which the Company would pay to a third party that is not an affiliate of the Company or the Property Manager to provide the services.

On February 17, 2017, the Company entered into the Amended and Restated Property Management and Leasing Agreement (the “A&R Property Management Agreement”) with the OP and the Property Manager. The A&R Property Management Agreement automatically renews for successive one-year terms unless any party provides written notice of its intention to terminate the A&R Property Management Agreement at least 90 days prior to the end of the term. Neither party has provided notice of intent to terminate. The current term of the A&R Property Management Agreement expires February 17, 2024. The Property Manager may assign the A&R Property Management Agreement to any party with expertise in commercial real estate which has, together with its affiliates, over $100.0 million in assets under management.

On April 10, 2018, in connection with the Multi-Property CMBS Loan, the Company and the OP entered into a further amendment to the A&R Property Management Agreement confirming, consistent with the intent of the parties, that the borrowers under the Multi-Property CMBS Loan and other subsidiaries of the OP that own or lease the Company’s properties are the direct obligors under the arrangements pursuant to which the Company’s properties are managed by either the Property Manager or a third party overseen by the Property Manager pursuant to the A&R Property Management Agreement. See the Mortgage Notes Payable table included in Note 4 — Mortgage Notes Payable, Net for additional information on the Multi-Property CMBS Loan.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

Professional Fees and Other Reimbursements

The Company reimburses the Advisor’s costs of providing administrative services including personnel costs, except for costs to the extent that the employees perform services for which the Advisor receives a separate fee. This reimbursement includes reasonable overhead expenses for employees of the Advisor or its affiliates directly involved in the performance of services on behalf of the Company, including the reimbursement of rent expense at certain properties that are both occupied by employees of the Advisor or its affiliates and owned by affiliates of the Advisor. During the three and ~~six~~nine months ended ~~June~~September 30, 2023, the Company incurred ~~$2.4~~$2.5 million and ~~$4.8~~$6.4 million, respectively, of reimbursement expenses from the Advisor for providing administrative services. During the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company incurred ~~$2.1~~$2.4 million and ~~$4.3~~$6.7 million, respectively, of reimbursement expenses from the Advisor for providing administrative services. These reimbursement expenses are included in general and administrative expense on the consolidated statements of operations and comprehensive loss.

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September 30, 2023

(Unaudited)

On July 25, 2019, the Company entered into the Advisory Agreement Amendment. Under the Advisory Agreement Amendment, including prior to the Advisory Agreement Amendment, the Company has been required to reimburse the Advisor for, among other things, reasonable salaries and wages, benefits and overhead of all employees of the Advisor or its affiliates, except for costs of employees to the extent that the employees perform services for which the Advisor receives a separate fee.

The Advisory Agreement Amendment clarifies that, with respect to executive officers of the Advisor, the Company is required to reimburse the Advisor or its affiliates for the reasonable salaries and wages, benefits and overhead of the Company’s executive officers, other than for any executive officer that is also a partner, member or equity owner of AR Global, an affiliate of the Advisor.

Further, under the Advisory Agreement Amendment, the aggregate amount of expenses relating to salaries, wages and benefits, including for executive officers and all other employees of the Advisor or its affiliates (the “Capped Reimbursement Amount”), is limited to the greater of: (a) a fixed component (the “Fixed Component”) and (b) a variable component (the “Variable Component”).

Both the Fixed Component and the Variable Component increase by an annual cost of living adjustment equal to the greater of (x) 3.0% and (y) the CPI, as defined in the Advisory Agreement Amendment for the prior year ended December 31st. Initially, for the year ended December 31, 2020; (a) the Fixed Component was equal to $6.8 million (currently $7.7 million) and (b) the Variable Component was equal to (i) the sum of the total real estate investments, at cost as recorded on the balance sheet dated as of the last day of each fiscal quarter (the “Real Estate Cost”) in the year divided by four, which amount is then (ii) multiplied by 0.29%.

If the Company sells real estate investments aggregating an amount equal to or more than 25.0% of Real Estate Cost, in one or a series of related dispositions in which the proceeds of the disposition(s) are not reinvested in Investments (as defined in the Advisory Agreement Amendment), then within 12 months following the disposition(s), the Advisory Agreement Amendment requires the Advisor and the Company to negotiate in good faith to reset the Fixed Component; provided that if the proceeds of the disposition(s) are paid to shareholders of the Company as a special distribution or used to repay loans with no intent of subsequently re-financing and re-investing the proceeds thereof in Investments, the Advisory Agreement Amendment requires these negotiations within 90 days thereof, in each case taking into account reasonable projections of reimbursable costs in light of the Company’s reduced assets.

Summary of fees, expenses and related payables

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

The following table details amounts incurred, forgiven and payable in connection with the Company’s operations-related services described above as of and for the periods presented:


		Three Months Ended June 30,					Six Months Ended June 30,			Payable (Prepayments) as of			Three Months Ended September 30,								Nine Months Ended September 30,				Payable (Prepayments) as of
		2023		2022			2023	2022								2023			2022			2023		2022
(In thousands)	(In thousands)	Incurred			Incurred			Incurred			Incurred			June 30, 2023			December 31, 2022			(In thousands)		Incurred			Incurred		Incurred		Incurred		September 30, 2023		December 31, 2022
Non-recurring fees and reimbursements:	Non-recurring fees and reimbursements:																			Non-recurring fees and reimbursements:
Acquisition cost reimbursements	Acquisition cost reimbursements	$	—		$	18		$	21		$	18		$	—		$	5		Acquisition cost reimbursements		$	10		$	—	$	31	$	18	$	10	$	5
Ongoing fees and reimbursements:	Ongoing fees and reimbursements:																			Ongoing fees and reimbursements:
Asset management fees	Asset management fees	5,458			5,458			10,916			10,916			(1,819)			—			Asset management fees		5,458			5,458		16,374		16,374		—		—
Property management and fees (2)	Property management and fees (2)	911			929			1,840			1,957			(410)			3			Property management and fees (2)		1,155			1,101		3,132		3,058		161		3
Professional fees and other reimbursements (1)	Professional fees and other reimbursements (1)	2,373			2,124			4,759			4,350			(33)			39			Professional fees and other reimbursements (1)		2,824			2,398		7,584		6,748		494		39

Total related party operation fees and reimbursements	Total related party operation fees and reimbursements	$	8,742		$	8,529		$	17,536		$	17,241		$	(2,262)		$	47		Total related party operation fees and reimbursements		$	9,447		$	8,957	$	27,121	$	26,198	$	665	$	47

___________

(1)Included in general and administrative expenses in the consolidated statements of operations. Includes ~~$1.7~~$2.0 million and ~~$3.2~~$5.2 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2023, ~~respectively,~~ and ~~$1.4~~$1.7 million and ~~$2.9~~$4.6 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2022, ~~respectively,~~ subject to the Capped Reimbursement.

(2)~~Includ~~The three and nine months ended September 30, 2023 includes ~~$0.1~~$0.2 million and ~~$0.2~~$0.4 million of leasing commissions, respectively, which are capitalized and included in prepaid expenses and other ~~assets.~~assets as of September 30, 2023.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Fees and Participations Incurred in Connection with a Listing or the Liquidation of the Company’s Real Estate Assets

Fees Incurred in Connection with a Listing

If the common stock of the Company is listed on a national securities exchange, the Special Limited Partner will be entitled to receive a promissory note as evidence of its right to receive a subordinated incentive listing distribution from the OP equal to 15.0% of the amount by which the market value of all issued and outstanding shares of common stock plus distributions exceeds the aggregate capital contributed plus an amount equal to a 6.0% cumulative, pre-tax non-compounded annual return to investors in the Company’s initial public offering of common stock. No such distribution was incurred during the ~~six~~nine months ended ~~June~~September 30, 2023 or 2022. If the Special Limited Partner or any of its affiliates receives the subordinated incentive listing distribution, the Special Limited Partner and its affiliates will no longer be entitled to receive the subordinated participation in net sales proceeds or the subordinated incentive termination distribution described below.

Subordinated Participation in Net Sales Proceeds

Upon a liquidation or sale of all or substantially all of the Company’s assets, including through a merger or sale of stock, the Special Limited Partner will be entitled to receive a subordinated participation in the net sales proceeds of the sale of real estate assets from the OP equal to 15.0% of remaining net sale proceeds after return of capital contributions to investors in the Company’s initial public offering of common stock plus payment to investors of a 6.0% cumulative, pre-tax non-compounded annual return on the capital contributed by investors. No such participation in net sales proceeds became due and payable during the ~~six~~nine months ended ~~June~~September 30, 2023 or 2022. Any amount of net sales proceeds paid to the Special Limited Partner or any of its affiliates prior to the Company’s listing or termination or non-renewal of the advisory agreement with the Advisor, as applicable, will reduce dollar for dollar the amount of the subordinated incentive listing distribution described above and subordinated incentive termination distribution described below.

Termination Fees

Under the operating partnership agreement of the OP, upon termination or non-renewal of the advisory agreement with the Advisor, with or without cause, the Special Limited Partner will be entitled to receive a promissory note as evidence of its right to receive subordinated termination distributions from the OP equal to 15.0% of the amount by which the sum of the Company’s market value plus distributions exceeds the sum of the aggregate capital contributed plus an amount equal to a 6.0% cumulative, pre-tax, non-compounded annual return to investors in the Company’s initial public offering of common stock. The Special Limited Partner is able to elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs. If the Special Limited Partner or any of its affiliates receives the subordinated incentive termination distribution, the Special Limited Partner and its affiliates will no longer be entitled to receive the subordinated participation in net sales proceeds or the subordinated incentive listing distribution described above.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

Under the Advisory Agreement Amendment, upon the termination or non-renewal of the agreement, the Advisor will be entitled to receive from the Company all amounts due to the Advisor, including any change of control fee and transition fee (both described below), as well as the then-present fair market value of the Advisor’s interest in the Company. All fees will be due within 30 days after the effective date of the termination or non-renewal of the Advisory Agreement Amendment.

Upon a termination by either party in connection with a change of control (as defined in the Advisory Agreement Amendment), the Company would be required to pay the Advisor a change of control fee equal to the product of four and the “Subject Fees” described below.

Upon a termination by the Company in connection with a transition to self-management, the Company would be required to pay the Advisor a transition fee equal to (i) $15.0 million plus (ii) the product of four multiplied by the Subject Fees, provided that the transition fee shall not exceed an amount equal to 4.5 multiplied by the Subject Fees.

The Subject Fees are equal to (i) the product of four multiplied by the actual base management fee plus (ii) the product of four multiplied by the actual variable management/incentive fee, in each of clauses (i) and (ii), payable for the fiscal quarter immediately prior to the fiscal quarter in which the change of control occurs or the transition to self-management, as applicable, is consummated, plus (iii) without duplication, the annual increase in the base management fee resulting from the cumulative net proceeds of any equity raised (but excluding proceeds from the DRIP) in respect to the fiscal quarter immediately prior to the fiscal quarter in which the change of control occurs or the transition to self-management, as applicable, is consummated.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 10 — Economic Dependency

Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common control with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company and asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and investor relations.

As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that the Advisor and its affiliates are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.

Note 11 — Equity-Based Compensation

Restricted Share Plan

The Company has adopted an employee and director incentive restricted share plan (as amended from time to time, the “RSP”), which provides the Company with the ability to grant awards of restricted shares of common stock (“restricted shares”) to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company. The total number of shares of common stock that may be subject to awards granted under the RSP may not exceed 5.0% of the Company’s outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 3.6 million shares (as such number may be further adjusted for stock splits, stock dividends, combinations and similar events).

Restricted shares vest on a straight-line basis over periods of three to five years and may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in shares of common stock are subject to the same restrictions as the underlying restricted shares.

The following table reflects the amount of restricted shares outstanding as of ~~June~~September 30, 2023 and activity for the period presented:

Number of Shares of Common Stock Weighted Average Issue Price
Unvested, December 31, 2022 97,343 $ 18.89
Stock dividend 2,878 14.48
Vested — —
Unvested, June 30, 2023 100,221 $ 18.76

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~


	Number of Shares of Common Stock	Weighted Average Issue Price
Unvested, December 31, 2022	97,343	$	18.89
Stock dividend	4,399	14.32
Vested	(50,871)	20.40


Unvested, September 30, 2023	50,871	$	16.98

As of ~~June~~September 30, 2023, the Company had ~~$1.1~~$0.8 million of unrecognized compensation cost related to unvested restricted share awards granted under the RSP. This cost will be recognized over a weighted-average period of ~~1.1~~0.9 years. Compensation expense related to restricted shares was $0.2 million and ~~$0.5~~$0.7 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2023, ~~respectively,~~ and $0.3 million and ~~$0.7~~$1.0 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, ~~2022, respectively.~~2022.

Other Share-Based Compensation

The Company may issue common stock in lieu of cash to pay fees earned by the Company’s directors at the respective director’s election. There are no restrictions on shares issued in lieu of cash compensation since these payments in lieu of cash relate to fees earned for services performed. No such shares were issued during the ~~six~~nine months ended ~~June~~September 30, 2023 or 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 12 — Accumulated Other Comprehensive Income

The following table illustrates the changes in accumulated other comprehensive income as of and for the period presented:


(In thousands)	Unrealized Gain (loss) on Designated Derivative
Balance, December 31, 2022	$	36,910
Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives	~~6,661~~12,078
Amount of gain reclassified from accumulated other comprehensive income	~~(8,626)~~(13,648)
Rebalancing of ownership percentage	—
Balance, ~~June~~September 30, 2023	$	~~34,945~~35,340

Accumulated other comprehensive income predominately relates to the unrealized gains (losses) on designated derivatives, however, as previously discussed in Note 7 — Derivatives and Hedging Activities, a previously designated hedge was terminated and the termination costs are being amortized over the term of the hedged item.

Note 13 — Non-controlling Interests

Non-controlling interests on the Company’s consolidated balance sheets is comprised of the following:


		Balance as of					Balance as of
(In thousands)	(In thousands)	June 30, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
Series A Preferred Units held by third parties	Series A Preferred Units held by third parties	$	2,578	$	2,578	Series A Preferred Units held by third parties	$	2,578	$	2,578
Common OP Units held by third parties	Common OP Units held by third parties	3,398		3,584		Common OP Units held by third parties	3,316		3,584
Total Non-controlling Interests in the OP	Total Non-controlling Interests in the OP	5,976		6,162		Total Non-controlling Interests in the OP	5,894		6,162
Non-controlling Interests in property owning subsidiaries	Non-controlling Interests in property owning subsidiaries	684		389		Non-controlling Interests in property owning subsidiaries	689		389
Total Non-controlling interests	Total Non-controlling interests	$	6,660	$	6,551	Total Non-controlling interests	$	6,583	$	6,551

Non-Controlling Interests in the OP

For preferred and common shares issued by the Company, the Company typically issues mirror securities with substantially equivalent economic rights between the Company and the OP. The securities held by the Company are eliminated in consolidation.

Series A Preferred Units

The Company is the sole general partner and holds substantially all of the Series A Preferred Units (except as discussed below). All common and preferred units in the OP held by the Company are eliminated in consolidation.

In September 2021, the Company partially funded the purchase of an MOB from an unaffiliated third party by causing the OP to issue 100,000 Series A Preferred Units to the unaffiliated third party, with a face value of $25.00 per unit, which were recorded at issuance at a then fair value of $2.6 million, or $25.78 per unit, to the unaffiliated third party.

A holder of Series A Preferred Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s Series A Preferred ~~Stock.~~Stock, which earn dividends at a rate equal to 7.375% of its face value. After holding the Series A Preferred Units for a period of one year, a holder of Series A Preferred Units has the right to redeem Series A Preferred Units for, at the option of the OP, the corresponding number of shares of the Company’s Series A Preferred Stock, or the cash equivalent. The remaining rights of the limited partners in the

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~~HEALTHCARE TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. During both the three months ended ~~June~~September 30, 2023 and 2022, Series A Preferred Unit holders were paid $0.1 million.

Common OP Units

The Company is the sole general partner and holds substantially all of the Common OP Units. As of ~~June~~September 30, 2023 and December 31, 2022, the Advisor held 90 Common OP Units, which represents a nominal percentage of the aggregate ownership in the OP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

In November 2014, the Company partially funded the purchase of an MOB from an unaffiliated third party by causing the OP to issue 405,908 Common OP Units, with a value of $10.1 million, or $25.00 per unit, to the unaffiliated third party.

A holder of Common OP Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s common stock in an amount retroactively adjusted to reflect the stock dividends, other stock dividends and other similar events. After holding the Common OP Units for a period of one year, a holder of Common OP Units has the right to redeem Common OP Units for, at the option of the OP, the corresponding number of shares of the Company’s common stock, as retroactively adjusted for the stock dividends, other stock dividends and other similar events, or the cash equivalent. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. During the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, Common OP Unit non-controlling interest holders were not paid any cash distributions.

Stock dividends do not cause the OP to issue additional Common OP Units, rather, the redemption ratio to common stock is adjusted. The 405,998 Common OP Units outstanding as of ~~June~~September 30, 2023 would be redeemable for ~~481,919~~489,233 shares of common stock, giving effect to adjustments for the impact of the stock dividends through ~~July~~October 2023.

Non-Controlling Interests in Property Owning Subsidiaries

The Company also has investment arrangements with other unaffiliated third parties whereby such investors receive an ownership interest in certain of the Company’s property-owning subsidiaries and are entitled to receive a proportionate share of the net operating cash flow derived from the subsidiaries’ property. Upon disposition of a property subject to non-controlling interest, the investor will receive a proportionate share of the net proceeds from the sale of the property. The investor has no recourse to any other assets of the Company. Due to the nature of the Company’s involvement with these arrangements and the significance of its investment in relation to the investment of the third party, the Company has determined that it controls each entity in these arrangements and therefore the entities related to these arrangements are consolidated within the Company’s financial statements. A non-controlling interest is recorded for the investor’s ownership interest in the properties.

The following table summarizes the activity related to investment arrangements with the unaffiliated third parties:


											Distributions										Distributions
			Third Party Net Investment Amount		Non-Controlling Ownership Percentage		Net Real Estate Assets Subject to Investment Arrangement				Three Months Ended June 30,			Third Party Net Investment Amount	Non-Controlling Ownership Percentage		Net Real Estate Assets Subject to Investment Arrangement				Three Months Ended September 30,
Property Name (Dollar amounts in thousands)	Property Name (Dollar amounts in thousands)	Investment Date	June 30, 2023		June 30, 2023		June 30, 2023		As of December 31, 2022		2023	2022	Property Name (Dollar amounts in thousands)	Investment Date	September 30, 2023		September 30, 2023		September 30, 2023		As of December 31, 2022		2023	2022
Plaza Del Rio Medical Office Campus Portfolio (1)	Plaza Del Rio Medical Office Campus Portfolio (1)	May 2015	$	684	4.4	%	$	12,528	$	12,455	—	—	Plaza Del Rio Medical Office Campus Portfolio (1)	May 2015	$	689	4.4	%	$	12,426	$	12,455	—	—

_______

(1)One property within the Plaza Del Rio Medical Office Campus Portfolio was pledged to secure the Multi-Property CMBS Loan. See Note 4 - Mortgage Notes Payable, net for additional information. In the ~~three~~nine months ended ~~June~~September 30, 2023, the unaffiliated third party contributed $0.3 million to increase its ownership from 2.6% to 4.4%.

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~~HEALTHCARE TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

Note 14 — Net Loss Per Share

The following is a summary of the basic and diluted net loss per share computation for the periods presented and has been retroactively adjusted to reflect the stock dividends (see Note 1 — Organization for additional details):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022			2023		2022		2023		2022
Net loss attributable to common stockholders (in thousands)	Net loss attributable to common stockholders (in thousands)	$	(20,759)	$	(21,055)	$	(38,268)	$	(47,856)	Net loss attributable to common stockholders (in thousands)	$	(19,561)	$	(23,303)	$	(57,829)	$	(71,159)
Basic and diluted weighted-average shares outstanding (1)	Basic and diluted weighted-average shares outstanding (1)	109,727,785		109,653,175		109,727,785		109,653,175		Basic and diluted weighted-average shares outstanding (1)	111,426,241		111,365,461		111,404,655		111,333,801
Basic and diluted net loss per share (1)	Basic and diluted net loss per share (1)	$	(0.19)	$	(0.19)	$	(0.35)	$	(0.44)	Basic and diluted net loss per share (1)	$	(0.18)	$	(0.21)	$	(0.52)	$	(0.64)

(1)Retroactively adjusted for the effects of the stock dividends (see Note 1 — Organization and Note 8 — Stockholders’ Equity for additional information).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Diluted net loss per share assumes the conversion of all common stock equivalents into an equivalent number of shares of common stock, unless the effect is antidilutive. The Company considers unvested restricted shares, Common OP Units and Class B Units to be common share equivalents. Series A Preferred Units are non-participating. The Company had the following common stock equivalents on a weighted-average basis that were excluded from the calculation of diluted net loss per share attributable to stockholders as their effect would have been antidilutive. The amounts in the table below have been retroactively adjusted to reflect the stock dividends (see Note 1 — Organization for additional details):


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2023	2022	2023	2022		2023	2022	2023	2022
Unvested restricted shares (1)	Unvested restricted shares (1)	100,626	176,362	100,626	176,362	Unvested restricted shares (1)	70,730	131,279	92,316	162,938
Common OP Units (2)	Common OP Units (2)	481,919	481,919	481,919	481,919	Common OP Units (2)	489,233	489,233	489,233	489,233
Class B Units (3)	Class B Units (3)	426,429	426,429	426,429	426,429	Class B Units (3)	432,901	432,901	432,901	432,901
Total weighted average antidilutive common stock equivalents	Total weighted average antidilutive common stock equivalents	1,008,974	1,084,710	1,008,974	1,084,710	Total weighted average antidilutive common stock equivalents	992,864	1,053,413	1,014,450	1,085,072

________

(1)Weighted average number of antidilutive unvested restricted shares outstanding for the periods presented. There were ~~100,221~~50,871 and ~~164,055~~95,983 unvested restricted shares outstanding, respectively, as of ~~June~~September 30, 2023 and ~~2022, respectively.~~2022.

(2)Weighted average number of antidilutive Common OP Units presented as shares outstanding for the periods presented, at the current redemption rate reflecting adjustments for the effect of the stock dividends (see Note 1 — Organization for additional details). There were 405,998 Common OP Units outstanding as of ~~June~~September 30, 2023 and 2022. The securities held by the Company are eliminated in consolidation.

(3)Weighted average number of antidilutive Class B Units presented as shares outstanding for the periods presented, at the current redemption rate reflecting adjustments for the effect of the stock dividends (see Note 1 — Organization for additional details). There were 359,250 Class B Units outstanding as of ~~June~~September 30, 2023 and 2022. These Class B Units were unvested as of ~~June~~September 30, 2023 and 2022 (see Note 9 — Related Party Transactions for additional information).

Note 15 — Segment Reporting

The disclosures below for the three and nine months ended ~~June~~September 30, 2023 and 2022 are presented for the Company’s two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs.

The Company evaluates performance and makes resource allocations based on its two business segments. The medical office building segment primarily consists of MOBs leased to healthcare-related tenants under long-term leases, which may require such tenants to pay a pro rata share of property-related expenses as well as seniors housing properties, hospitals, inpatient rehabilitation facilities and skilled nursing facilities ~~(“SNF”)~~ under long-term leases, under which tenants are generally responsible to directly pay property-related expenses. The SHOP segment consists of direct investments in seniors housing properties, primarily providing assisted living, independent living and memory care services, which are operated through engaging independent third-party operators.

Net Operating Income

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

The Company evaluates the performance of the combined properties in each segment based on net operating income (“NOI”). NOI is defined as total revenues from tenants, less property operating and maintenance expense. NOI excludes all other items of expense and income included in the financial statements in calculating net loss. The Company uses NOI to assess and compare property level performance and to make decisions concerning the operation of the properties. The Company believes that NOI is useful as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net loss.

NOI excludes certain components from net loss in order to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate ~~asset and is often incurred at the corporate level.~~asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs that define NOI differently. The Company believes that in order to facilitate a clear understanding of the Company’s operating results, NOI should be examined in conjunction with net loss as presented in the Company’s consolidated financial statements. NOI should not be considered as an alternative to net loss as an indication of the Company’s performance or to cash flows as a measure of the Company’s liquidity or ability to pay distributions.

~~The following tables reconcile the segment activity to consolidated net loss for the periods presented:~~

Three Months Ended June 30, Three Months Ended June 30,
2023 2022
(In thousands) Medical Office Buildings Seniors Housing — Operating Properties Consolidated Medical Office Buildings Seniors Housing — Operating Properties Consolidated
Revenue from tenants $ 33,920 $ 52,184 $ 86,104 $ 32,493 $ 51,333 $ 83,826
Property operating and maintenance 9,438 44,131 53,569 8,352 44,240 52,592
NOI $ 24,482 $ 8,053 32,535 $ 24,141 $ 7,093 31,234
Impairment charges — (6,193)
Operating fees to related parties (6,369) (6,352)
Acquisition and transaction related (148) (375)
General and administrative (4,331) (3,999)
Depreciation and amortization (20,568) (20,251)
Interest expense (18,703) (12,050)
Interest and other income 313 2
Loss on sale of real estate investments (306) —
Gain on non-designated derivatives 286 392
Income tax expense (41) (43)
Net loss attributable to non-controlling interests 22 29
Allocation for preferred stock (3,449) (3,449)
Net loss attributable to common stockholders $ (20,759) $ (21,055)

4041

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2023

(Unaudited)

Six Months Ended June 30, Six Months Ended June 30,
2023 2022
(In thousands) Medical Office Buildings Seniors Housing — Operating Properties Consolidated Medical Office Buildings Seniors Housing — Operating Properties Consolidated
Revenue from tenants $ 67,530 $ 105,929 $ 173,459 $ 64,841 $ 102,635 $ 167,476
Property operating and maintenance 18,393 89,059 107,452 17,041 88,641 105,682
NOI $ 49,137 $ 16,870 66,007 $ 47,800 $ 13,994 61,794
Impairment charges — (16,837)
Operating fees to related parties (12,756) (12,670)
Acquisition and transaction related (211) (954)
General and administrative (9,352) (8,898)
Depreciation and amortization (40,744) (40,671)
Interest expense (34,488) (23,814)
Interest and other income 318 14
Loss on sale of real estate investments (191) (303)
Gain on non-designated derivatives 104 1,386
Income tax expense (87) (82)
Net loss attributable to non-controlling interests 31 78
Allocation for preferred stock (6,899) (6,899)
Net loss attributable to common stockholders $ (38,268) $ (47,856)

The following tables reconcile the segment activity to consolidated net loss for the periods presented:


	Three Months Ended September 30,						Three Months Ended September 30,
	2023						2022
(In thousands)	Medical Office Buildings		Seniors Housing — Operating Properties		Consolidated		Medical Office Buildings		Seniors Housing — Operating Properties		Consolidated
Revenue from tenants	$	33,657	$	52,029	$	85,686	$	33,185	$	50,275	$	83,460
Property operating and maintenance	9,379		44,947		54,326		9,377		41,821		51,198
NOI	$	24,278	$	7,082	31,360		$	23,808	$	8,454	32,262
Impairment charges					—						(8,949)
Operating fees to related parties					(6,397)						(6,333)
Acquisition and transaction related					(173)						(199)
General and administrative					(4,753)						(4,471)
Depreciation and amortization					(20,776)						(20,854)
Interest expense					(15,720)						(13,284)
Interest and other income					258						10
(Loss) gain on sale of real estate investments					(173)						194
Gain on non-designated derivatives					406						1,826
Income tax expense					(157)						(77)
Net loss attributable to non-controlling interests					14						22
Allocation for preferred stock					(3,450)						(3,450)
Net loss attributable to common stockholders					$	(19,561)					$	(23,303)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2023						2022
(In thousands)	Medical Office Buildings		Seniors Housing — Operating Properties		Consolidated		Medical Office Buildings		Seniors Housing — Operating Properties		Consolidated
Revenue from tenants	$	101,187	$	157,958	$	259,145	$	98,026	$	152,910	$	250,936
Property operating and maintenance	27,772		134,006		161,778		26,417		130,463		156,880
NOI	$	73,415	$	23,952	97,367		$	71,609	$	22,447	94,056
Impairment charges					—						(25,786)
Operating fees to related parties					(19,153)						(19,003)
Acquisition and transaction related					(384)						(1,153)
General and administrative					(14,105)						(13,369)
Depreciation and amortization					(61,520)						(61,525)
Interest expense					(50,208)						(37,098)
Interest and other income					576						24
Loss on sale of real estate investments					(364)						(109)
Gain on non-designated derivatives					510						3,212
Income tax expense					(244)						(159)
Net loss attributable to non-controlling interests					45						100
Allocation for preferred stock					(10,349)						(10,349)
Net loss attributable to common stockholders					$	(57,829)					$	(71,159)

Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

The following table reconciles the segment activity to consolidated total assets as of the periods presented:


(In thousands)	(In thousands)	June 30, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Investments in real estate, net:	Investments in real estate, net:					Investments in real estate, net:
Medical office buildings		$	1,126,415	$	1,121,857
Seniors housing — operating properties		834,972		856,440
MOB Segment						MOB Segment	$	1,126,677	$	1,121,857
SHOP Segment						SHOP Segment	831,475		856,440
Total investments in real estate, net	Total investments in real estate, net	1,961,387		1,978,297		Total investments in real estate, net	1,958,152		1,978,297

Cash and cash equivalents	Cash and cash equivalents	71,705		53,654		Cash and cash equivalents	51,041		53,654
Restricted cash	Restricted cash	33,800		22,884		Restricted cash	40,245		22,884
Derivative assets, at fair value	Derivative assets, at fair value	36,776		40,647		Derivative assets, at fair value	37,547		40,647
Straight-line rent receivable, net	Straight-line rent receivable, net	25,864		25,276		Straight-line rent receivable, net	26,214		25,276
Operating lease right-of-use assets	Operating lease right-of-use assets	7,764		7,814		Operating lease right-of-use assets	7,739		7,814
Prepaid expenses and other assets	Prepaid expenses and other assets	33,125		34,554		Prepaid expenses and other assets	36,019		34,554
Deferred costs, net	Deferred costs, net	14,856		17,223		Deferred costs, net	15,300		17,223
Total assets	Total assets	$	2,185,277	$	2,180,349	Total assets	$	2,172,257	$	2,180,349

The following table reconciles capital expenditures by reportable business segment, excluding corporate non-real estate expenditures, for the periods presented:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		2023		2022		(In thousands)	2023		2022		2023		2022
Medical office buildings		$	1,742	$	2,484	$	2,964	$	3,672
Seniors housing — operating properties		3,764		3,280		6,176		5,403
MOB Segment										MOB Segment	$	1,686	$	2,309	$	4,650	$	5,981
SHOP Segment										SHOP Segment	3,172		5,323		9,348		10,726
Total capital expenditures	Total capital expenditures	$	5,506	$	5,764	$	9,140	$	9,075	Total capital expenditures	$	4,858	$	7,632	$	13,998	$	16,707

~~Table of Contents~~

~~HEALTHCARE TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

Note 16 — Commitments and Contingencies

As of ~~June~~September 30, 2023, the Company had seven operating and six direct financing lease agreements. The seven operating leases have durations, including assumed renewals, ranging from ~~19.4~~19.1 years to ~~84.2~~84.0 years, excluding an adjacent parking lot lease with a term of ~~1.3 years.~~1.0 year. The Company did not enter into any additional ground leases during the ~~six~~nine months ended ~~June~~September 30, 2023.

As of ~~June~~September 30, 2023, the Company’s balance sheet included ROU assets and liabilities of ~~$7.8~~$7.7 million and $8.1 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively. In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the lease guidance issued in 2019, as well as for new operating leases in the current period, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. Because the terms of the Company’s ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the Company’s estimate of this rate required significant judgment.

The Company’s ground operating leases have a weighted-average remaining lease term, including assumed renewals, of ~~34.2~~33.6 years and a weighted-average discount rate of 7.37% as of ~~June~~September 30, 2023. For each of the three ~~and six~~ months ended ~~June~~September 30, 2023 and 2022, the Company paid cash of $0.2 million ~~and $0.4 million, respectively,~~ for amounts included in the measurement of lease liabilities and recorded expense of $0.2 million ~~and $0.4 million, respectively,~~ on a straight-line basis in accordance with the current accounting guidance. For the nine months ended September 30, 2023, the Company paid cash of $0.6 million for amounts included in the measurement of lease liabilities and recorded expense of $0.6 million. For the nine months ended September 30, 2022, the Company paid cash of $0.7 million for amounts included in the measurement of lease liabilities and recorded expense of $0.7 million. The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss.

The following table reflects the base cash rental payments due from the Company for the next five years as of ~~June~~September 30, 2023:

Future Base Rent Payments
(In thousands) Operating Leases
Direct Financing Leases (1)
2023 (remainder) $ 323 $ 44
2024 632 90
2025 588 93
2026 599 95
2027 617 97
Thereafter 21,942 7,215
Total minimum lease payments 24,701 7,634
Less: amounts representing interest (16,638) (2,799)
Total present value of minimum lease payments $ 8,063 $ 4,835

Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)


	Future Base Rent Payments
(In thousands)	Operating Leases		Direct Financing Leases (1)
2023 (remainder)	$	162	$	22
2024	632		90
2025	588		93
2026	599		95
2027	617		97
Thereafter	21,943		7,215
Total minimum lease payments	24,541		7,612
Less: amounts representing interest	(16,490)		(2,778)
Total present value of minimum lease payments	$	8,051	$	4,834

_______

(1)The direct finance lease liability is included in a~~ccounts~~accounts payable and accrued expenses on the balance sheet as of ~~June~~September 30, 2023. The direct financing lease asset is included as part of building and improvements as the land component was not required to be bifurcated under ASU 840.

Litigation and Regulatory Matters

In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or known to be contemplated against the Company or its properties.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. As of ~~June~~September 30, 2023, the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.

Note 17 — Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements except for the following:

Dividend Declaration

~~Table of Contents~~

~~HEALTHCARE TRUST, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2023~~

~~(Unaudited)~~

On ~~July 3,~~October 2, 2023, the Company announced the declaration of a stock dividend of 0.015179 shares of the Company’s common stock, on each share of the Company’s outstanding common stock. The stock dividend was issued on ~~July 17,~~October 16, 2023 to holders of record of the Company’s common stock at the close of business on ~~July 13,~~October 12, 2023.

Other Subsequent Events

~~In July~~Subsequent to September 30, 2023, the Company renewed two interest rate caps, which matured on November 1, 2023, with an aggregate notional amount of $150.9 million and a strike price of 3.50% for $5.0 million. Additionally, the Company provided a ~~$5.1~~$6.7 million cash deposit to Fannie Mae. This deposit was provided because the debt service coverage ratio of the underlying properties of each facility were below the minimum required amount per the debt agreements. This deposit will be refunded at the earlier of the Company’s achievement of a debt service coverage ratio above the minimum required amount of 1.40 or the maturity of the Fannie Mae Master Credit Facilities.

4344

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Healthcare Trust, Inc. and the notes thereto. As used herein, the terms the “Company,” “we,” “our” and “us” refer to Healthcare Trust, Inc., a Maryland corporation, including, as required by context, Healthcare Trust Operating Partnership, LP (our “OP”), a Delaware limited partnership, and its subsidiaries. The Company is externally managed by Healthcare Trust Advisors, LLC (our “Advisor”), a Delaware limited liability company. Capitalized terms used herein, but not otherwise defined, have the meaning ascribed to those terms in “Part I — Financial Information” included in the notes to the consolidated financial statements and contained herein.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts may be forward-looking statements. ~~Those~~Such forward-looking statements include ~~statements regarding~~ the intent, belief or current expectations of Healthcare Trust, Inc. (“we,” “our” or “us”) and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,”, “projects,” “potential,” “predicts,” “intends,” “would,” “could,” “should” or similar ~~expressions.~~expressions, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the risks associated with the geopolitical instability due to the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, including related sanctions and other penalties imposed by the U.S. and European Union, and the related impact on us, our tenants and the global economy and financial markets; that any potential future acquisition by the Company is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2022 as well as Part II — Other Information, Item IA — Risk Factors below.

Overview

We are an externally managed entity that for U.S. federal income tax purposes has qualified as a real estate investment trust (“REIT”). We acquire, own and manage a diversified portfolio of healthcare-related real estate focused on medical office and other healthcare-related buildings and senior housing operating properties. As of ~~June~~September 30, 2023, we owned ~~202~~204 properties located in 33 states and comprised of 9.0 million rentable square feet.

Substantially all of our business is conducted through the OP, a Delaware limited partnership, and its wholly-owned subsidiaries. Our Advisor manages our day-to-day business with the assistance of Healthcare Trust Properties, LLC (our “Property Manager”). Our Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us. We also reimburse these entities for certain expenses they incur in providing these services to us. Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, also has an interest in us through ownership of interests in our OP.

We operate in two reportable business segments for management and financial reporting purposes: medical office and other health-care related buildings (“MOBs”) and senior housing operating properties (“SHOPs”). All of our properties across both business segments are located throughout the United States. In our MOB operating segment, we own, manage, and lease single- and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. Our Property Manager or third-party managers manage our MOBs. In our SHOP segment, we invest in seniors housing properties ~~using~~through the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure. As of ~~June~~September 30, 2023, we had four eligible independent contractors operating 46 SHOPs, ~~(excluding two land parcels). All~~although effective on September 30, 2023, we terminated our contract with one independent contractor which managed 20 SHOPs. We are in the process of ~~our properties across both business segments are located throughout~~transferring the ~~United States.~~management of these 20 SHOPs to a new independent contractor, which we expect to be completed before December 31, 2023. There were no material costs incurred by this termination in the three or nine months ended September 30, 2023.

We have declared and paid quarterly dividends entirely in shares of our common stock since October 2020.

On March 31, 2023, we published a new Estimated Per-Share NAV equal to $14.00 as of December 31, 2022. Our previous Estimated Per-Share NAV was equal to $15.00 as of December 31, 2021. The Estimated Per-Share NAV has not been

adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV. Dividends paid in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when dividends paid in stock are issued; however, because each stockholder will receive the same number of new shares, the total value of our common stockholder’s investment, all things equal, will not change assuming no sales or other transfers. We intend to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless and until we list our common stock.

Management Update on the Continuing Impacts of the COVID-19 Pandemic ~~and its Aftermath~~

The COVID-19 global pandemic created several risks and uncertainties that have impacted our business, including our financial condition, future results of operations and our liquidity.

Seniors Housing Properties

Beginning in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect us in a number of ways. Occupancy in our SHOP portfolio trended lower from 85.1% as of December 31, 2019 to a low of 72.0% as of March 31, 2021, and stabilized until December 31, 2022. As of ~~June~~September 30, 2023, occupancy in this segment reached ~~73.3%~~74.1%, representing a decline from December 31, 2022 of ~~1.5%~~1.0%. The below table presents SHOP occupancy since the onset of our downward occupancy trends, which was exacerbated by the COVID-19 pandemic in March 2020:


As of	As of	Number of Properties(1)	Rentable Units	Percentage Leased	As of	Number of Properties(1)	Rentable Units	Percentage Leased
December 31, 2019	December 31, 2019	59	4,926	85.1%	December 31, 2019	59	4,926	85.1%
March 31, 2020	March 31, 2020	63	5,198	84.4%	March 31, 2020	63	5,198	84.4%
June 30, 2020	June 30, 2020	63	5,198	79.2%	June 30, 2020	63	5,198	79.2%
September 30, 2020	September 30, 2020	67	5,350	77.4%	September 30, 2020	67	5,350	77.4%
December 31, 2020	December 31, 2020	59	4,878	74.5%	December 31, 2020	59	4,878	74.5%
March 31, 2021	March 31, 2021	55	4,682	72.0%	March 31, 2021	55	4,682	72.0%
June 30, 2021	June 30, 2021	54	4,530	73.2%	June 30, 2021	54	4,530	73.2%
September 30, 2021	September 30, 2021	54	4,494	74.3%	September 30, 2021	54	4,494	74.3%
December 31, 2021	December 31, 2021	54	4,494	74.1%	December 31, 2021	54	4,494	74.1%
March 31, 2022	March 31, 2022	50	4,378	75.9%	March 31, 2022	50	4,378	75.9%
June 30, 2022	June 30, 2022	50	4,374	76.3%	June 30, 2022	50	4,374	76.3%
September 30, 2022	September 30, 2022	50	4,374	75.8%	September 30, 2022	50	4,374	75.8%
December 31, 2022	December 31, 2022	50	4,374	75.1%	December 31, 2022	50	4,374	75.1%
March 31, 2023	March 31, 2023	50	4,374	73.3%	March 31, 2023	50	4,374	73.3%
June 30, 2023(2)	June 30, 2023(2)	46	4,164	73.3%	June 30, 2023(2)	46	4,164	73.3%
September 30, 2023 (2)					September 30, 2023 (2)	46	4,164	74.1%

________

(1)Exclusive of two land parcels.

(2)Inclusive of one SHOP with 39 rentable units which was closed in May 2023.

Contract Labor and Wage Expenses

Beginning with the second quarter of 2021, our occupancy and operating costs in our SHOP portfolio ~~have been~~were relatively stable. During the year ended December 31, 2022, our third party operators needed to increase their use of temporary contract labor and agencies, and the amount paid for overtime, ~~wages~~training and ~~bonuses,~~bonus wages, in response to a shortage of workers, the cost of labor generally, ~~and~~ lack of qualified personnel that our third party operators are able to employ on a permanent ~~basis.~~basis and training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor. During the ~~six~~nine months ended ~~June~~September 30, 2023, these contract and agency costs declined. In particular, costs incurred from contract labor and agencies for care providers decreased in our SHOP segment by ~~$2.1~~$2.9 million and ~~$3.5~~$5.1 million, from ~~$2.8~~$3.2 million and ~~$4.9~~$6.7 million, respectively, in the three and ~~six~~nine months ended ~~June~~September 30, 2022, ~~respectively,~~ to ~~$0.7~~$0.3 million and ~~$1.4~~$1.6 million, respectively, as compared to the three and ~~six~~nine months ended ~~June~~September 30, ~~2023, respectively.~~ 2023.

However, these costs were offset by increased wage costs for direct employees of our third party operators of ~~$1.9~~$0.8 million and ~~$4.2~~$4.9 million, respectively, in the three and ~~six~~nine months ended ~~June~~September 30, 2023 compared to the ~~same periods~~three and nine months ended ~~June~~September 30, 2022. Likewise, occupancy levels have not recovered to their pre-pandemic rates (as noted in the table above), thus ~~our~~the results of operations in our SHOP segment have been significantly adversely affected by the increase in labor costs even though resident fees have increased.

Rent Concessions

We have also granted rent concessions since the onset of the COVID-19 pandemic which serve to reduce revenue in our SHOP segment. We offered $0.8 million and ~~$1.4~~$2.3 million rent concessions during the three and ~~six~~nine months ended ~~June~~September 30, 2023, ~~respectively,~~ and $0.7 million and ~~$2.0~~$2.7 million during the three and ~~six~~nine months ended ~~June~~September 30, 2022.

The CARES Act

The adverse financial impacts of the COVID-19 pandemic were partially offset by funds we received under the CARES Act in prior years, however, no such funds have been received or are expected in 2023. On March 27, 2020, the CARES Act

was signed into law and it provided funding to Medicare providers in order to alleviate financial hardship during the COVID-19 pandemic. Funds provided under the program were to be used for the preparation, prevention, and medical response to COVID-19, and were designed to reimburse providers for healthcare-related expenses and lost revenues attributable to COVID-19. We did not receive any funding from the CARES Act during the three and ~~six~~nine months ended ~~June~~September 30, 2023. We received ~~$0.2~~$4.3 million and $4.5 million, respectively, of funds through the CARES Act for the three and ~~six~~nine months ended ~~June~~September 30, 2022. For accounting purposes, the CARES Act funds are treated as a grant contribution from the government. We recognized funding under this program as a reduction of property operating and maintenance expenses in our consolidated statements of operations to offset the negative impacts of COVID-19. There can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.

Future developments in the course of inflation increases, labor shortages and supply chain disruptions may cause further adverse impacts on our occupancy and cost levels.

Significant Accounting Estimates and Critical Accounting Policies

For a discussion about our significant accounting estimates and critical accounting policies, see the “Significant Accounting Estimates and Critical Accounting Policies” section of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 17, 2023. Except for those required by new accounting pronouncements discussed below, there have been no material changes from these significant accounting estimates and critical accounting policies.

Recently Issued Accounting Pronouncements

Please see Note 2 — Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements to our consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.

Properties

The following table presents certain additional information about the properties we owned as of ~~June~~September 30, 2023:


Portfolio	Portfolio	Number of Properties		Rentable Square Feet	Percentage Leased(1)		Weighted Average Remaining Lease Term in Years (2)	Gross Asset Value (3)		Portfolio	Number of Properties		Rentable Square Feet	Percentage Leased(1)		Weighted Average Remaining Lease Term in Years (2)	Gross Asset Value (3)
								(In thousands)									(In thousands)
Medical Office and Other Healthcare Related Buildings		154		5,132,166	91.5%		4.8	$	1,448,862
Seniors Housing — Operating Properties		48	(4)	3,857,652	73.3%	(5)	N/A	1,126,844
MOB Segment										MOB Segment	156		5,153,419	90.9%		4.8	$	1,465,516
SHOP Segment										SHOP Segment	48	(4)	3,857,652	74.1%	(5)	N/A	1,132,650
Total Portfolio	Total Portfolio	202		8,989,818				$	2,575,706	Total Portfolio	204		9,011,071				$	2,598,166

________

(1)Inclusive of leases signed but not yet commenced as of ~~June~~September 30, 2023.

(2)Weighted-average remaining lease term in years is calculated based on square feet as of ~~June~~September 30, 2023.

(3)Gross asset value represents total real estate investments, at cost ($2.6 billion total as of ~~June~~September 30, 2023) net of gross market lease intangible liabilities ($~~29.4~~23.5 million total as of ~~June~~September 30, 2023). Impairment charges are already reflected within gross asset value.

(4)Includes two parcels of land

(5)Weighted by unit count as of ~~June~~September 30, 2023. As of ~~June~~September 30, 2023, we had 4,164 rentable units in our SHOP segment. ~~Excludes~~The SHOP segment includes one closed SHOP with 30 rentable units, and excludes land parcels.

N/A Not applicable.

Table of Contents

Same Store Properties

Information based on Same Store Properties, Acquired Properties and Disposed Properties (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered. As of ~~June~~September 30, 2023, we owned ~~202~~204 properties. There were 193 properties owned for the entire year ended December 31, 2022 and the ~~six~~nine months ended ~~June~~September 30, 2023 (our “Same Store Properties), including two vacant land parcels. Since January 1, 2022, we acquired ~~nine~~eleven properties (our “Acquired Properties”) and disposed of nine properties (our “Disposed Properties”).

~~Table of Contents~~

The following table presents a roll-forward of our properties owned from January 1, 2022 to ~~June~~September 30, 2023:


		MOB	SHOP	Total		MOB	SHOP	Total
Number of properties, January 1, 2022	Number of properties, January 1, 2022	146	56	202	Number of properties, January 1, 2022	146	56	202
Acquisition activity during the year ended December 31, 2022	Acquisition activity during the year ended December 31, 2022	4	—	4	Acquisition activity during the year ended December 31, 2022	4	—	4
Disposition activity during the year ended December 31, 2022	Disposition activity during the year ended December 31, 2022	—	(4)	(4)	Disposition activity during the year ended December 31, 2022	—	(4)	(4)
Number of properties, December 31, 2022	Number of properties, December 31, 2022	150	52	202	Number of properties, December 31, 2022	150	52	202
Acquisition activity during the six months ended June 30, 2023		5	—	5
Disposition activity during the six months ended June 30, 2023		(1)	(4)	(5)
Number of properties, June 30, 2023		154	48	202
Acquisition activity during the nine months ended September 30, 2023					Acquisition activity during the nine months ended September 30, 2023	7	—	7
Disposition activity during the nine months ended September 30, 2023					Disposition activity during the nine months ended September 30, 2023	(1)	(4)	(5)
Number of properties, September 30, 2023					Number of properties, September 30, 2023	156	48	204

Number of Same Store Properties	Number of Same Store Properties	145	48	193	Number of Same Store Properties	145	48	193
Number of Acquired Properties	Number of Acquired Properties	9	—	9	Number of Acquired Properties	11	—	11
Number of Disposed Properties	Number of Disposed Properties	1	8	9	Number of Disposed Properties	1	8	9

4748

Results of Operations

Comparison of the Three Months Ended ~~June~~September 30, 2023 and 2022

Net loss attributable to common stockholders was ~~$20.8~~$19.6 million and ~~$21.1~~$23.3 million, respectively, for the three months ended ~~June~~September 30, 2023, and ~~2022, respectively.~~2022. The following table shows our results of operations for the three months ended ~~June~~September 30, 2023 and 2022 and the period to period change by line item of the consolidated statements of operations:


		Three Months Ended June 30,				Increase (Decrease)			Three Months Ended September 30,				Increase (Decrease)
(Dollars in thousands)	(Dollars in thousands)	2023		2022		$		(Dollars in thousands)	2023		2022		$
Revenue from tenants	Revenue from tenants	$	86,104	$	83,826	$	2,278	Revenue from tenants	$	85,686	$	83,460	$	2,226

Operating expenses:	Operating expenses:							Operating expenses:
Property operating and maintenance	Property operating and maintenance	53,569		52,592		977		Property operating and maintenance	54,326		51,198		3,128
Impairment charges	Impairment charges	—		6,193		(6,193)		Impairment charges	—		8,949		(8,949)
Operating fees to related parties	Operating fees to related parties	6,369		6,352		17		Operating fees to related parties	6,397		6,333		64
Acquisition and transaction related	Acquisition and transaction related	148		375		(227)		Acquisition and transaction related	173		199		(26)
General and administrative	General and administrative	4,331		3,999		332		General and administrative	4,753		4,471		282
Depreciation and amortization	Depreciation and amortization	20,568		20,251		317		Depreciation and amortization	20,776		20,854		(78)
Total expenses	Total expenses	84,985		89,762		(4,777)		Total expenses	86,425		92,004		(5,579)
Operating income (loss) before loss on sale of real estate investments		1,119		(5,936)		7,055
Loss on sale of real estate investments		(306)		—		(306)
Operating income (loss)		813		(5,936)		6,749
Operating loss before (loss) gain on sale of real estate investments								Operating loss before (loss) gain on sale of real estate investments	(739)		(8,544)		7,805
(Loss) gain on sale of real estate investments								(Loss) gain on sale of real estate investments	(173)		194		(367)
Operating loss								Operating loss	(912)		(8,350)		7,438
Other income (expense):	Other income (expense):							Other income (expense):
Interest expense	Interest expense	(18,703)		(12,050)		(6,653)		Interest expense	(15,720)		(13,284)		(2,436)
Interest and other income	Interest and other income	313		2		311		Interest and other income	258		10		248
Gain on non-designated derivatives	Gain on non-designated derivatives	286		392		(106)		Gain on non-designated derivatives	406		1,826		(1,420)
Total other expenses	Total other expenses	(18,104)		(11,656)		(6,448)		Total other expenses	(15,056)		(11,448)		(3,608)
Loss before income taxes	Loss before income taxes	(17,291)		(17,592)		301		Loss before income taxes	(15,968)		(19,798)		3,830
Income tax expense	Income tax expense	(41)		(43)		2		Income tax expense	(157)		(77)		(80)
Net loss	Net loss	(17,332)		(17,635)		303		Net loss	(16,125)		(19,875)		3,750
Net loss attributable to non-controlling interests	Net loss attributable to non-controlling interests	22		29		(7)		Net loss attributable to non-controlling interests	14		22		(8)
Allocation for preferred stock	Allocation for preferred stock	(3,449)		(3,449)		—		Allocation for preferred stock	(3,450)		(3,450)		—
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(20,759)	$	(21,055)	$	296	Net loss attributable to common stockholders	$	(19,561)	$	(23,303)	$	3,742

Net Operating Income

NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio. NOI is equal to revenue from tenants less property operating and maintenance expenses. NOI excludes all other items of expense and income included in the financial statements in calculating net loss attributable to common stockholders.

We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property-level and presents such items on an unlevered basis. We use NOI to assess and compare property-level performance and to make decisions concerning the operation of the properties. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net loss attributable to common stockholders.

NOI excludes certain components from net loss to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate ~~asset and is often incurred at the corporate-level.~~asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property-level.

NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net loss to common stockholders as presented in our consolidated statements of operations. NOI should not be considered as an alternative

4849

to net loss attributable to common stockholders as an indication of our performance, or to cash flows as a measure of our liquidity or ability to pay distributions.

The following table reflects the items deducted from or added to net loss attributable to stockholders in our calculation of Same Store Properties, Acquired Properties and Disposed Properties NOI for the three months ended ~~June~~September 30, 2023:


(In thousands)	(In thousands)	Same Store				Acquisitions				Dispositions				Non-Property Specific				Total		(In thousands)			Same Store						Acquisitions						Dispositions						Non-Property Specific			Total
		MOBs		SHOPs		MOBs		SHOPs		MOBs		SHOPs								MOBs				SHOPs			MOBs			SHOPs			MOBs			SHOPs
Net income (loss) attributable to common stockholders (in accordance with GAAP)	Net income (loss) attributable to common stockholders (in accordance with GAAP)	$	11,438	$	323	$	427	$	—	$	(298)	$	(341)			$	(32,308)				$	(20,759)	Net income (loss) attributable to common stockholders (in accordance with GAAP)		$	11,119		$	(1,423)		$	492		$	—		$	(4)		$	(141)		$	(29,604)		$	(19,561)

Operating fees to related parties	Operating fees to related parties	—		—		—		—		—		—		6,369				6,369		Operating fees to related parties			—			—			—			—			—			—			6,397			6,397
Acquisition and transaction related	Acquisition and transaction related	—		—		—		—		—		—		148				148		Acquisition and transaction related			—			—			—			—			—			—			173			173
General and administrative	General and administrative	26		—		—		—		—		—		4,305				4,331		General and administrative			21			—			—			—			—			—			4,732			4,753
Depreciation and amortization	Depreciation and amortization	12,082		7,863		495		—		32		96		—				20,568		Depreciation and amortization			12,152			8,146			478			—			—			—			—			20,776
Interest expense	Interest expense	21		332		—		—		—		—		18,350				18,703		Interest expense			21			329			—			—			—			—			15,370			15,720
Interest and other income	Interest and other income	(1)		(266)		—		—		—		—		(46)				(313)		Interest and other income			(1)			(2)			—			—			—			—			(255)			(258)
Gain on sale of real estate investments	Gain on sale of real estate investments	—		(12)		—		—		260		58		—				306		Gain on sale of real estate investments			—			55			—			—			—			118			—			173
Loss on non-designated derivative instruments	Loss on non-designated derivative instruments	—		—		—		—		—		—		(286)				(286)		Loss on non-designated derivative instruments			—			—			—			—			—			—			(406)			(406)
Income tax (benefit) expense	Income tax (benefit) expense	—		—		—		—		—		—		41				41		Income tax (benefit) expense			—			—			—			—			—			—			157			157
Allocation for preferred stock	Allocation for preferred stock	—		—		—		—		—		—		3,449				3,449		Allocation for preferred stock			—			—			—			—			—			—			3,450			3,450
Net loss attributable to non-controlling interests	Net loss attributable to non-controlling interests	—		—		—		—		—		—		(22)				(22)		Net loss attributable to non-controlling interests			—			—			—			—			—			—			(14)			(14)
NOI	NOI	$	23,566	$	8,240	$	922	$	—	$	(6)	$	(187)	$	—			$	32,535	NOI			$	23,312		$	7,105		$	970		$	—		$	(4)		$	(23)		$	—		$	31,360


(In thousands)	(In thousands)	Same Store				Acquisitions				Dispositions				Non-Property Specific				Total		(In thousands)			Same Store						Acquisitions						Dispositions						Non-Property Specific			Total
		MOBs		SHOPs		MOBs		SHOPs		MOBs		SHOPs								MOBs				SHOPs			MOBs			SHOPs			MOBs			SHOPs
Net income (loss) attributable to common stockholders (in accordance with GAAP)	Net income (loss) attributable to common stockholders (in accordance with GAAP)	$	11,623	$	(204)	$	48	$	—	$	(77)	$	(6,946)			$	(25,499)				$	(21,055)	Net income (loss) attributable to common stockholders (in accordance with GAAP)		$	10,696		$	(2,970)		$	170		$	—		$	(79)		$	(5,545)		$	(25,575)		$	(23,303)
Impairment charges	Impairment charges	—		—		—		—		—		6,193		—				6,193		Impairment charges			—			4,108			—			—			—			4,841			—			8,949
Operating fees to related parties	Operating fees to related parties	—		—		—		—		—		—		6,352				6,352		Operating fees to related parties			—			—			—			—			—			—			6,333			6,333
Acquisition and transaction related	Acquisition and transaction related	76		—		—		—		—		—		299				375		Acquisition and transaction related			—			—			1			—			—			—			198			199
General and administrative	General and administrative	22		3		—		—		—		—		3,974				3,999		General and administrative			22			—			—			—			—			—			4,449			4,471
Depreciation and amortization	Depreciation and amortization	12,381		7,597		30		—		31		212		—				20,251		Depreciation and amortization			12,753			7,668			194			—			31			208			—			20,854
Interest expense	Interest expense	8		238		—		—		—		—		11,804				12,050		Interest expense			21			338			—			—			—			—			12,925			13,284
Interest and other income	Interest and other income	(1)		—		—		—		—		—		(1)				(2)		Interest and other income			(1)			—			—			—			—			—			(9)			(10)

Loss on sale of real estate investments																				Loss on sale of real estate investments			—			—			—			—			—			(194)			—			(194)
Gain on non-designated derivative instruments	Gain on non-designated derivative instruments	—		—		—		—		—		—		(392)				(392)		Gain on non-designated derivative instruments			—			—			—			—			—			—			(1,826)			(1,826)
Income tax (benefit) expense	Income tax (benefit) expense	—		—		—		—		—		—		43				43		Income tax (benefit) expense			—			—			—			—			—			—			77			77
Allocation for preferred stock	Allocation for preferred stock	—		—		—		—		—		—		3,449				3,449		Allocation for preferred stock			—			—			—			—			—			—			3,450			3,450
Net income attributable to non-controlling interests	Net income attributable to non-controlling interests	—		—		—		—		—		—		(29)				(29)		Net income attributable to non-controlling interests			—			—			—			—			—			—			(22)			(22)
NOI	NOI	$	24,109	$	7,634	$	78	$	—	$	(46)	$	(541)	$	—			$	31,234	NOI			$	23,491		$	9,144		$	365		$	—		$	(48)		$	(690)		$	—		$	32,262

4950

Segment Results — Medical Office Buildings

The following table presents the revenue and property operating and maintenance expense and the period to period change within our MOB segment for the three months ended ~~June~~September 30, 2023 and 2022:


		Same Store (1)						Acquisitions (2)						Dispositions (3)						Segment Total (4)							Same Store (1)						Acquisitions (2)						Dispositions (3)						Segment Total (4)
		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)			Three Months Ended September 30,				Increase (Decrease)		Three Months Ended September 30,				Increase (Decrease)		Three Months Ended September 30,				Increase (Decrease)		Three Months Ended September 30,				Increase (Decrease)
(Dollars in thousands)	(Dollars in thousands)	2023		2022		$		2023		2022		$		2023		2022		$		2023		2022		$		(Dollars in thousands)	2023		2022		$		2023		2022		$		2023		2022		$		2023		2022		$
Revenue from tenants	Revenue from tenants	$	32,856	$	32,404	$	452	$	1,010	$	82	$	928	$	54	$	7	$	47	$	33,920	$	32,493	$	1,427	Revenue from tenants	$	32,594	$	32,779	$	(185)	$	1,063	$	403	$	660	$	—	$	3	$	(3)	$	33,657	$	33,185	$	472
Less: Property operating and maintenance	Less: Property operating and maintenance	9,290		8,295		995		88		4		84		60		53		7		9,438		8,352		1,086		Less: Property operating and maintenance	9,282		9,288		(6)		93		38		55		4		51		(47)		9,379		9,377		2
NOI	NOI	$	23,566	$	24,109	$	(543)	$	922	$	78	$	844	$	(6)	$	(46)	$	40	$	24,482	$	24,141	$	341	NOI	$	23,312	$	23,491	$	(179)	$	970	$	365	$	605	$	(4)	$	(48)	$	44	$	24,278	$	23,808	$	470

_______________

(1)Our MOB segment included 145 Same Store Properties.

(2)Our MOB segment included ~~nine~~11 Acquired Properties.

(3)Our MOB segment included one Disposed Property.

(4)Our MOB segment included ~~154~~156 total properties.

Revenue from tenants primarily reflects contractual rent received from tenants in our MOBs and operating expense reimbursements. These reimbursements generally increase in proportion with the increase in property operating and maintenance expenses in our MOB segment. Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, in addition to base rent.

Revenue from Tenants

During the three months ended ~~June~~September 30, 2023, revenue from tenants increased by ~~$1.4~~$0.5 million in our MOB segment as compared to the three months ended ~~June~~September 30, 2022, which was primarily driven by an increase in revenue from tenants of ~~$0.9~~$0.7 million due to our Acquired Properties, ~~and an increase~~partially offset by a decrease in revenue from tenants of ~~$0.5~~$0.2 million due to our Same Store Properties.

The ~~increase~~decrease in our Same Store properties revenue from tenants was primarily ~~driven by an increase of operating expense reimbursement revenue from increased property, operating and maintenance expenses, as well as from~~due to marginally ~~higher~~lower occupancy in these properties in the three months ended ~~June~~September 30, 2023 as compared to ~~June~~the three months ended September 30, 2022.

Property Operating and Maintenance

Property operating and maintenance expenses reflect the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third-party property management fees. ~~During the quarter ended June 30, 2023, property operating and maintenance costs in our~~Our MOB segment increased by $1.1 million as compared to the same period last year, primarily as a result of increased costs from our Same Store Properties of $1.0 million and increased costs from our Acquired Properties of $0.1 million.

~~The increase in~~had consistent property operating and maintenance expenses ~~from our Same Store properties is primarily the result~~of $9.4 million in each of the ~~impacts of inflation on utility~~three months ended September 30, 2023 and ~~maintenance costs, which are largely reimbursed by tenants.~~2022.

Segment Results — Seniors Housing Operating Properties

The following table presents the revenue and property operating and maintenance expenses and the period to period change within our SHOP segment for the three months ended ~~June~~September 30, 2023 and 2022:


		Same Store (1)						Acquisitions (2)						Dispositions (3)						Segment Total (4)							Same Store (1)						Acquisitions (2)						Dispositions (3)						Segment Total (4)
		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)			Three Months Ended September 30,				Increase (Decrease)		Three Months Ended September 30,				Increase (Decrease)		Three Months Ended September 30,				Increase (Decrease)		Three Months Ended September 30,				Increase (Decrease)
(Dollars in thousands)	(Dollars in thousands)	2023		2022		$		2023		2022		$		2023		2022		$		2023		2022		$		(Dollars in thousands)	2023		2022		$		2023		2022		$		2023		2022		$		2023		2022		$
Revenue from tenants	Revenue from tenants	$	51,312	$	49,250	$	2,062	$	—	$	—	$	—	$	872	$	2,083	$	(1,211)	$	52,184	$	51,333	$	851	Revenue from tenants	$	52,034	$	49,667	$	2,367	$	—	$	—	$	—	$	(5)	$	608	$	(613)	$	52,029	$	50,275	$	1,754
Less: Property operating and maintenance	Less: Property operating and maintenance	43,072		41,616		1,456		—		—		—		1,059		2,624		(1,565)		44,131		44,240		(109)		Less: Property operating and maintenance	44,929		40,523		4,406		—		—		—		18		1,298		(1,280)		44,947		41,821		3,126
NOI	NOI	$	8,240	$	7,634	$	606	$	—	$	—	$	—	$	(187)	$	(541)	$	354	$	8,053	$	7,093	$	960	NOI	$	7,105	$	9,144	$	(2,039)	$	—	$	—	$	—	$	(23)	$	(690)	$	667	$	7,082	$	8,454	$	(1,372)

________

(1)Our SHOP segment included 48 Same Store Properties (including two land parcels).

(2)Our SHOP segment did not include any Acquired Properties.

(3)Our SHOP segment included eight Disposed Properties.

(4)Our SHOP segment included 48 total properties (including two land parcels).

Revenue from tenants within our SHOP segment are generated in connection with rent and services offered to residents in our SHOPs depending on the level of care required, as well as fees associated with other ancillary services. Property operating

and maintenance expenses relate to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third-party operators, and costs associated with maintaining the physical site.

Revenue from Tenants

During the three months ended ~~June~~September 30, 2023, revenue from tenants increased by ~~$0.9~~$1.8 million in our SHOP segment as compared to the three months ended ~~June~~September 30, 2022, which was due to an increase in revenue from tenants of ~~$2.1~~$2.4 million from our Same Store Properties, partially offset by a decrease in revenue from tenants of ~~$1.2~~$0.6 million from our Disposed Properties.

The increase to our Same Store properties revenue from tenants was primarily driven by higher leasing rates during the three months ended ~~June~~September 30, 2023 as compared to the three months ended ~~June~~September 30, 2022, partially offset by marginally lower occupancy in the three months ended ~~June~~September 30, 2023 as compared to the three months ended ~~June~~September 30, 2022. Additionally, we offered more rent concessions during the three months ended ~~June~~September 30, 2023, which amounted to $0.8 million as compared to $0.7 million of rent concessions offered during the three months ended ~~June~~September 30, 2022.

Property Operating and Maintenance

During the three months ended ~~June~~September 30, 2023, property operating and maintenance expenses ~~decreased $0.1~~increased $3.1 million in our SHOP segment as compared to the three months ended ~~June~~September 30, 2022, primarily due to ~~a decrease of $1.6 million from our Disposed Properties, partially offset by~~ an increase in property operating and maintenance expenses of ~~$1.5~~$4.4 million in our Same Store Properties, partially offset by a decrease of $1.3 million from our Disposed Properties.

Our Same Store ~~properties~~Properties property operating and maintenance expenses increased in the quarter ended ~~June~~September 30, 2023 compared to the same period last year, primarily from increased amounts our third party operators pay for overtime wages and bonuses of $1.9 million, as well as overall inflation on utilities and supplies which increased our property maintenance and operating costs by $1.4 million. The three months ended June 30, 2022 also includes $0.2$3.5 million of funds received through the CARES Act in the three months ended September 30, 2022 (of a total $4.3 million received from the CARES Act during that period), which serve to reduce property operating expenses in the period received. There were no such receipts from the CARES Act in the three months ended ~~June~~September 30, 2023. ~~These~~The increase was also due to (i) $1.6 million of increased costs for overtime, training and bonus wages paid to employees of our third party operators, (ii) $1.1 million of increased management fees paid to our third party operators, (iii) $0.7 million of higher insurance expense, (iv) $0.3 million of costs directly related to the termination of one SHOP operator effective September 30, 2023 and (v) the effects of inflation which raised the general costs of food, supplies, and utilities generally. These increases to property operating and maintenance expenses were partially offset by ~~a decrease in~~decreased costs for contract labor ~~and agencies at our Same Store Properties~~ of ~~$2.0~~$2.8 million.

~~Other Results of Operations~~

~~Impairment Charges~~

~~We did not record any impairment charges during the quarter ended June 30, 2023.~~

During the three months ended June 30, 2022, we incurred $6.2 million of impairment charges to reduce the carrying value of two SHOPs to their estimated fair value after reconsidering our intended holding. The projected cash flows for these two properties, on an undiscounted basis over the intended holding periods did not recover their respective carrying values, and therefore concluded that these two properties were impaired. These properties were sold in the second quarter of 2023.

~~See~~ ~~Note 3~~ ~~— Real Estate Investments~~ ~~to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges.~~

~~Operating Fees to Related Parties~~

~~Operating fees to related parties were consistent at $6.4 million for the three months ended June 30, 2023 and 2022, respectively.~~

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis. We pay a fixed base management fee equal to $1.6 million per month, while the variable portion of the base management fee is equal, per month, to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised subsequent to February 17, 2017. Asset management fees were $5.5 million for both the three months ended June 30, 2023 and 2022. Variable asset management fees will increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the three months ended June 30, 2023 or 2022.

Property management fees were consistent at $0.9 million for the three months ended June 30, 2023 and 2022. Property management fees increase or decrease in direct correlation with gross revenues of the properties managed and depending on the mix of properties managed, as the fee payable for different types of properties varies.

~~See~~ ~~Note 9~~— ~~Related Party Transactions and Arrangements~~ ~~to our consolidated financial statements in this Quarterly Report on Form 10-Q which provides detail on our fees and expense reimbursements.~~

~~Acquisition and Transaction Related Expenses~~

Acquisition and transaction related expenses decreased by $0.2 million, to $0.1 million for the three months ended June 30, 2023, compared to $0.4 million for the three months ended June 30, 2022. The decrease was due to $0.1 million of decreased

~~dead deal costs, as well as from and $0.1 million of termination fees paid to former SHOP operators which were incurred in the three months ended June 30, 2022.~~

~~General and Administrative Expenses~~

General and administrative expenses increased by $0.3 million to $4.3 million for the three months ended June 30, 2023 compared to $4.0 million for the three months ended June 30, 2022, which includes $2.4 million and $2.1 million for the three months ended June 30, 2023 and June 30, 2022, respectively, incurred in expense reimbursements.

~~Depreciation and Amortization Expenses~~

~~Depreciation and amortization expense increased $0.3 million to $20.6 million for the three months ended June 30, 2023 from $20.3 million for the three months ended June 30, 2022.~~

~~Gains on Sale of Real Estate Investments~~

During the second quarter of 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of these SHOPs were impaired by $6.2 million in the second quarter of 2022 (see above). As a result, we recorded an aggregate loss on sale of $0.3 million in th~~e three months ended~~ ~~June 30, 2023~~.

~~We did not dispose of any properties in the three months ended June 30, 2022.~~

~~Interest Expense~~

Interest expense increased by $6.7 million to $18.7 million for the three months ended June 30, 2023 from $12.1 million for the three months ended June 30, 2022. The increase in interest expense mainly resulted from the acceleration of deferred financing costs of $2.6 million from the termination of our Prior Credit Facility, as well as from higher average rates and higher average balances of our indebtedness during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. These increases were partially offset by the amortization of our terminated swaps, which reduced interest expense in the three months ended June 30, 2023 by $0.9 million but increased interest expense by $0.2 million in the three months ended June 30, 2022.

As of June 30, 2023, our outstanding debt obligations were $1.2 billion at a weighted average interest rate of 5.49% per year. As of June 30, 2022, we had total borrowings of $1.1 billion, at a weighted average interest rate of 3.76% per year. The weighted-average interest rates include the impact of our “pay-fixed” interest rate swaps which are designated as hedges on a portion of our variable-rate borrowings.

Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings, among other factors (including the impact of variable rates to the extent such borrowings are not hedged). Recent and continuing increases in interest rates may adversely impact the terms on which we may borrow in the future and thus our results of operations.

~~Interest and Other Income~~

~~Gains (Losses) on Non-Designated Derivatives~~

The loss in the three months ended June 30, 2023 and June 30, 2022 on non-designated derivative instruments related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our Fannie Mae Master Credit Facilities, which have floating interest rates. The relevant amounts in each period represent the change in value and any cash received on the non-designated derivatives.

~~Income Tax Expense~~

~~Income taxes generally relate to our SHOPs, which are leased to our TRS. We recorded an income tax expense of $41,000 and $43,000 for the three months ended June 30, 2023 and 2022, respectively.~~

Because of our TRS’s recent operating history of losses and the impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, in the third quarter of 2020, we were not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance. Since that time, our TRS’s operating performance has not significantly improved and thus we have recorded a 100% valuation allowance on our net deferred tax assets as of June 30, 2023. If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive loss.

~~Net Loss Attributable to Non-Controlling Interests~~

Net loss attributable to non-controlling interests was approximately $22,000 for the three months ended June 30, 2023 and net loss attributable to non-controlling interests was approximately $29,000 for the three months ended June 30, 2022. These amounts represent the portion of our net loss that is related to the Series A Preferred Units held by third parties, Common OP Units held by third parties, and non-controlling interest holders in our subsidiaries that own certain properties.

~~Allocation for Preferred Stock Dividends~~

Allocation for preferred stock was $3.4 million for the three months ended June 30, 2023 and 2022. These amounts represent the allocation of our net loss that is attributable to holders of Series A Preferred Stock and holders of Series B Preferred Stock.

~~Comparison of the Six Months Ended June 30, 2023 and 2022~~

Information based on Same Store, Acquisitions and Dispositions allows us to evaluate the performance of our portfolio based on a consistent population of properties. Net loss attributable to common stockholders was $38.3 million and $47.9 million for the six months ended June 30, 2023 and 2022, respectively. The following table shows our results of operations for the six months ended June 30, 2023 and 2022 and the period to period change by line item of the consolidated statements of operations:

Six Months Ended June 30, Increase (Decrease)
(Dollars in thousands) 2023 2022 $
Revenue from tenants $ 173,459 $ 167,476 $ 5,983
Operating expenses:
Property operating and maintenance 107,452 105,682 1,770
Impairment charges — 16,837 (16,837)
Operating fees to related parties 12,756 12,670 86
Acquisition and transaction related 211 954 (743)
General and administrative 9,352 8,898 454
Depreciation and amortization 40,744 40,671 73
Total expenses 170,515 185,712 (15,197)
Operating income (loss) before loss on sale of real estate investments 2,944 (18,236) 21,180
Loss on sale of real estate investments (191) (303) 112
Operating loss 2,753 (18,539) 21,292
Other income (expense):
Interest expense (34,488) (23,814) (10,674)
Interest and other income 318 14 304
Gain on non-designated derivatives 104 1,386 (1,282)
Total other expenses (34,066) (22,414) (11,652)
Loss before income taxes (31,313) (40,953) 9,640
Income tax expense (87) (82) (5)
Net loss (31,400) (41,035) 9,635
Net loss attributable to non-controlling interests 31 78 (47)
Allocation for preferred stock (6,899) (6,899) —
Net loss attributable to common stockholders $ (38,268) $ (47,856) $ 9,588

~~Net Operating Income~~

The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store, Acquisitions and Dispositions NOI for the six months ended June 30, 2023:

(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total
MOBs SHOPs MOBs SHOPs MOBs SHOPs
Net income (loss) attributable to common stockholders (in accordance with GAAP) $ 23,351 $ 1,073 $ 825 $ — $ (348) $ (370) $ (62,799) $ (38,268)
Operating fees to related parties — — — — — — 12,756 12,756
Acquisition and transaction related — — — — — — 211 211
General and administrative 76 26 — — — — 9,250 9,352
Depreciation and amortization 24,056 15,598 814 — 63 213 — 40,744
Interest expense 42 666 — — — — 33,780 34,488
Interest and other income (2) (267) — — — — (49) (318)
Loss on sale of real estate investments — (12) — — 260 (57) — 191
Gain on non-designated derivative instruments — — — — — — (104) (104)
Income tax (benefit) expense — — — — — — 87 87
Allocation for preferred stock — — — — — — 6,899 6,899
Net loss attributable to non-controlling interests — — — — — — (31) (31)
NOI $ 47,523 $ 17,084 $ 1,639 $ — $ (25) $ (214) $ — $ 66,007

(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total
MOBs SHOPs MOBs SHOPs MOBs SHOPs
Net income (loss) attributable to common stockholders (in accordance with GAAP) $ 12,173 $ (892) $ 48 $ — $ (170) $ (8,207) $ (50,808) $ (47,856)
Impairment charges 10,644 — — — — 6,193 — 16,837
Operating fees to related parties — — — — — — 12,670 12,670
Acquisition and transaction related 211 — — — — — 743 954
General and administrative 43 2 — — — — 8,853 8,898
Depreciation and amortization 24,697 15,118 30 — 61 765 — 40,671
Interest expense 74 712 — — — — 23,028 23,814
Interest and other income (2) — — — (9) — (3) (14)
Loss on sale of real estate investments — — — — — 303 — 303
Gain on non-designated derivative instruments — — — — — — (1,386) (1,386)
Income tax (benefit) expense — — — — — — 82 82
Allocation for preferred stock — — — — — — 6,899 6,899
Net loss attributable to non-controlling interests — — — — — — (78) (78)
NOI $ 47,840 $ 14,940 $ 78 $ — $ (118) $ (946) $ — $ 61,794

~~Segment Results — Medical Office Buildings~~

~~The following table presents the components of NOI and the period to period change within our MOB segment for the six months ended June 30, 2023 and 2022:~~

Same Store(1)
Acquisitions(2)
Dispositions(3)
Segment Total
Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease)
(Dollars in thousands) 2023 2022 $ 2023 2022 $ 2023 2022 $ 2023 2022 $
Revenue from tenants $ 65,695 $ 64,778 $ 917 $ 1,774 $ 82 $ 1,692 $ 61 $ (19) $ 80 $ 67,530 $ 64,841 $ 2,689
Less: Property operating and maintenance 18,172 16,938 1,234 135 4 131 86 99 (13) 18,393 17,041 1,352
NOI $ 47,523 $ 47,840 $ (317) $ 1,639 $ 78 $ 1,561 $ (25) $ (118) $ 93 $ 49,137 $ 47,800 $ 1,337

~~_______________~~

~~(1)Our MOB segment included 145 Same Store properties.~~

~~(2)Our MOB segment included nine Acquisition properties.~~

~~(3)Our MOB segment included one Disposition property.~~

~~(4)Our MOB segment included 154 properties.~~

~~Revenue from Tenants~~

During the six months ended June 30, 2023, revenue from tenants increased by $2.7 million in our MOB segment as compared to the six months ended June 30, 2022, primarily as a result of increased revenue from tenants of $1.7 million due to our Acquired Properties and an increase in venue from tenants of $0.9 million from our Same Store Properties, and an increase in revenue from tenants of $0.1 million due to our Disposed Properties.

The increase in our Same Store Properties revenue from tenants was primarily driven by an increase of operating expense reimbursement revenue from increased property, operating and maintenance expenses, as well as from marginally higher occupancy in the six months ended June 30, 2023, as compared to June 30, 2022.

~~Property Operating and Maintenance~~

Property operating and maintenance expenses reflect the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third-party property management fees. During the six months ended June 30, 2023, property operating and maintenance costs in our MOB segment increased by $1.4 million as compared to the same period last year, primarily as a result of increased costs from our Same Store Properties of $1.2 million.

The increase in property operating and maintenance expenses from our Same Store properties is primarily the result of the impacts of inflation on utility and maintenance costs, which are largely reimbursed by tenants.

~~Segment Results — Seniors Housing - Operating Properties~~

~~The following table presents the components of NOI and the period to period change within our SHOP segment for the six months ended June 30, 2023 and 2022:~~

Same Store (1)
Acquisitions (2)
Dispositions (3)
Segment Total
Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease)
(Dollars in thousands) 2023 2022 $ 2023 2022 $ 2023 2022 $ 2023 2022 $
Revenue from tenants $ 103,163 $ 97,390 $ 5,773 $ — $ — $ — $ 2,766 $ 5,245 $ (2,479) $ 105,929 $ 102,635 $ 3,294
Less: Property operating and maintenance 86,079 82,450 3,629 — — — 2,980 6,191 (3,211) 89,059 88,641 418
NOI $ 17,084 $ 14,940 $ 2,144 $ — $ — $ — $ (214) $ (946) $ 732 $ 16,870 $ 13,994 $ 2,876

~~_______________~~

~~(1)Our SHOP segment included 48 Same Store properties (including two land parcels.~~

~~(2)Our SHOP segment did not include any Acquired Properties.~~

~~(3)Our SHOP segment included eight Disposed Properties.~~

~~(4)Our SHOP segment included 48 total properties (including two land parcels).~~

Revenues from tenants within our SHOP segment are generated in connection with rent and services offered to residents in our SHOPs depending on the level of care required, as well as fees associated with other ancillary services. Property operating

~~Revenue from Tenants~~

During the six months ended June 30, 2023, revenue from tenants increased by $3.3 million in our SHOP segment as compared to the six months ended June 30, 2022, which was primarily driven by an increase in revenue from tenants of $5.8 million due to our Same Store Properties, partially offset by a decrease in revenue from tenants of $2.5 million due to our Disposed Properties.

The increase to our Same Store properties revenue from tenants was primarily driven by less rent concessions during the six months ended June 30, 2023, which amounted to $1.4 million as compared to $4.9 million of rent concessions offered during the six months ended June 30, 2022. The increase was also attributable to higher leasing rates during the six months ended June 30, 2023, as compared to the same period last year, partially offset by marginally lower occupancy in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

~~Property Operating and Maintenance~~

During the six months ended June 30, 2023, property operating and maintenance expenses increased $0.4 million in our SHOP segment as compared to the six months ended June 30, 2022, primarily due to an increase in property operating and maintenance expenses of $3.6 million from our Same Store Properties, partially offset by a decrease of $3.2 million from our Disposed Properties.

Our Same Store properties operating and maintenance expenses increased in the quarter ended March 31, 2023 compared to the same period last year, primarily from amounts our third party operators pay for overtime wages and bonuses, as well as overall inflation on utilities and supplies which increased our property maintenance and operating costs by $2.7 million. These increased costs were partially offset by a decrease in contract labor and agencies at our Same Store Properties of $0.5 million.

Other Results of Operations

Impairment Charges

We did not record any impairment charges during the ~~six~~quarter ended September 30, 2023.

During the three months ended ~~June~~September 30, ~~2023.~~

~~We recorded $16.8~~2022, we incurred $8.9 million of impairment charges which related to six held for ~~the six months ended June 30, 2022. The~~use SHOP properties of eight total properties that we were actively marketing for sale. These impairment charges were recorded ~~during the six months ended June 30, 2022 related~~ to (i) two SHOP properties for which we reconsidered our holding period and recorded impairment charges of $6.2 million, which were disposed in the six months ended June 30, 2023 and (ii) seven SNF properties in our MOB segment located in Illinois for which we reducedreduce the carrying ~~values on~~value of these six properties to their ~~estimated~~ fair values, respectively, as determined by ~~a tenant’s $50.5 million offer to purchase these properties and recorded impairment charges of $10.6 million.~~estimated discounted cash flows over our intended holding period.

See Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment ~~charges for the six months ended June 30, 2023 and 2022.~~charges.

Operating Fees to Related Parties

Operating fees to related parties were ~~$12.8~~consistent at $6.4 million and ~~$12.7~~$6.3 million, respectively, for the ~~six~~three months ended ~~June~~September 30, 2023 and 2022, respectively.

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day ~~basis (see —~~ ~~Results of Operations~~ — ~~Comparison~~basis. We pay a fixed base management fee equal to $1.6 million per month, while the variable portion of the ~~Three Months Ended June 30, 2023 and 2022~~ ~~for additional information).~~base management fee is equal, per month, to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised subsequent to February 17, 2017. Asset management fees were ~~$10.9 million and $10.9~~$5.5 million for both the ~~six~~three months ended ~~June~~September 30, 2023 and ~~2022, respectively.~~2022. Variable asset management fees will ~~further~~ increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the ~~six~~three months ended ~~June~~September 30, 2023 or 2022.

Property management fees ~~decreased $0.1 million to $1.8~~were consistent at $0.9 million for the ~~six~~three months ended ~~June~~September 30, 2023 ~~from $2.0 million for the six months ended June 30,~~and 2022. Property management fees increase or decrease in direct correlation with gross revenues of the properties managed and depending on the mix of properties managed, as the fee payable for different types of properties varies.

See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q which provides detail on our fees and expense reimbursements.

Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses ~~decreased by $0.7 million, to~~were consistent at $0.2 million for the ~~six~~three months ended ~~June~~September 30, 2023 ~~from $1.0 million for the six months ended June 30,~~and 2022. ~~This decrease was due to (i) $0.4 million of decreased dead~~

5652

deal costs, as well as from (ii) $0.1 million of prepayment penalties on our mortgage repayments and $0.2 million of termination fees paid to former SHOP operators which were incurred in the six months ended June 30, 2022.

General and Administrative Expenses

General and administrative expenses increased ~~$0.5~~by $0.3 million to ~~$9.4~~$4.8 million for the ~~six~~three months ended ~~June~~September 30, 2023 compared to ~~$8.9~~$4.5 million for the ~~six~~three months ended ~~June~~September 30, 2022, which includes ~~$4.8~~$2.8 million and ~~$4.4~~$2.4 million, respectively, for the ~~six~~three months ended ~~June~~September 30, 2023 and September 30, 2022, ~~respectively,~~ incurred in expense reimbursements. The increase in general and administrative expenses was primarily attributable to $0.3 million of severance payments incurred in the three months ended September 30, 2023 made to former employees of the Advisor.

Depreciation and Amortization Expenses

Depreciation and amortization expense increased $0.1 million to ~~$40.7~~$20.8 million for the ~~six~~three months ended ~~June~~September 30, 2023 from ~~$40.7~~$20.9 million for the ~~six~~three months ended ~~June~~September 30, 2022.

~~Gain (Loss)~~Loss on Sale of Real Estate Investments

During the ~~six~~three months ended ~~June~~September 30, 2023 and 2022, we ~~disposed~~did not dispose of ~~four SHOPs and one MOB for an aggregate contract sales price~~any properties. However, we did record a loss on sale of ~~$13.8 million. Two of~~$0.2 million during the ~~SHOPs were impaired by $6.2 million in the six~~three months ended ~~June~~September 30, ~~2022 (see above). As a result, we recorded an aggregate loss~~2023 and gain on sale of $0.2 million in the ~~six months ende~~d ~~June 30, 2023~~.

~~We recorded a loss on sale of $0.3 million for the six~~three months ended ~~June~~September 30, 2022, ~~for the sale~~related to various settlements of ~~the LaSalle~~liens and accruals on formerly disposed properties. ~~We had previously recorded $34.0 million of impairment charges on the LaSalle Properties in the year ended December 31, 2021.~~

Interest Expense

Interest expense increased ~~$10.7~~by $2.4 million to ~~$34.5~~$15.7 million for the ~~six~~three months ended ~~June~~September 30, 2023 from ~~$23.8~~$13.3 million for the ~~six~~three months ended ~~June~~September 30, 2022. The increase in interest expense mainly resulted from ~~the acceleration of deferred financing costs of $2.6 million from the termination of our Prior Credit Facility, as well as from~~ higher average rates and higher average balances of ~~amounts outstanding under~~ our indebtedness during the ~~six~~three months ended ~~June~~September 30, 2023 as compared to the ~~six~~three months ended ~~June~~September 30, 2022. These increases were partially offset by the amortization of our terminated swaps, which reduced interest expense in the ~~six~~three months ended ~~June~~September 30, 2023 by ~~$1.1~~$1.5 million ~~but increased interest expense~~as well as by ~~$0.4~~a decrease in deferred financing cost amortization of $0.5 million in the ~~six~~three months ended ~~June~~September 30, 2023 as compared to the three months ended September 30, 2022.

As of ~~June~~September 30, 2023, our outstanding debt obligations were $1.2 billion at a weighted average interest rate of ~~5.49%~~5.56% per year. As of ~~June~~September 30, 2022, we had total borrowings of $1.1 billion, at a weighted average interest rate of ~~3.76%~~4.29% per year. The weighted-average interest rates include the impact of our “pay-fixed” interest rate swaps which are designated as hedges on a portion of our variable-rate borrowings.

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $0.3 million and $10,000, respectively, for the ~~six~~three months ended ~~June~~September 30, 2023 and 2022. Interest income increased in the three months ended September 30, 2023 due to a higher balance of cash (including restricted cash) as well as higher interest rates on our cash accounts.

Gains (Losses) on Non-Designated Derivatives

The loss in the three months ended September 30, 2023 and September 30, 2022 on non-designated derivative instruments related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our Fannie Mae Master Credit Facilities, which have floating interest rates. The relevant amounts in each period represent the change in value and any cash received on the non-designated derivatives.

Income Tax Expense

Income taxes generally relate to our SHOPs, which are leased to our TRS. We recorded an income tax expense of $0.2 million and $0.1 million, respectively, for the three months ended September 30, 2023 and 2022.

Because of our TRS’s recent operating history of losses and the continuing impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, in the third quarter of 2020, we were not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance. Since that time, our TRS’s operating performance has not significantly improved and thus we have recorded a 100% valuation allowance on our net deferred tax assets as of September 30, 2023. If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive loss.

Net Loss Attributable to Non-Controlling Interests

Net loss attributable to non-controlling interests was approximately $14,000 for the three months ended September 30, 2023 and net loss attributable to non-controlling interests was approximately $22,000 for the three months ended September 30, 2022. These amounts represent the portion of our net loss that is related to the Series A Preferred Units held by third parties, Common OP Units held by third parties, and non-controlling interest holders in our subsidiaries that own certain properties.

Allocation for Preferred Stock Dividends

Allocation for preferred stock was $3.5 million for the three months ended September 30, 2023 and 2022. These amounts represent the allocation of our net loss that is attributable to holders of Series A Preferred Stock and holders of Series B Preferred Stock.

Comparison of the Nine Months Ended September 30, 2023 and 2022

Information based on Same Store, Acquisitions and Dispositions allows us to evaluate the performance of our portfolio based on a consistent population of properties. Net loss attributable to common stockholders was $57.8 million and $71.2 million, respectively, for the nine months ended September 30, 2023 and 2022. The following table shows our results of operations for the nine months ended September 30, 2023 and 2022 and the period to period change by line item of the consolidated statements of operations:


	Nine Months Ended September 30,				Increase (Decrease)
(Dollars in thousands)	2023		2022		$
Revenue from tenants	$	259,145	$	250,936	$	8,209

Operating expenses:
Property operating and maintenance	161,778		156,880		4,898
Impairment charges	—		25,786		(25,786)
Operating fees to related parties	19,153		19,003		150
Acquisition and transaction related	384		1,153		(769)
General and administrative	14,105		13,369		736
Depreciation and amortization	61,520		61,525		(5)
Total expenses	256,940		277,716		(20,776)
Operating income (loss) before loss on sale of real estate investments	2,205		(26,780)		28,985
Loss on sale of real estate investments	(364)		(109)		(255)
Operating income (loss)	1,841		(26,889)		28,730
Other income (expense):
Interest expense	(50,208)		(37,098)		(13,110)
Interest and other income	576		24		552
Gain on non-designated derivatives	510		3,212		(2,702)
Total other expenses	(49,122)		(33,862)		(15,260)
Loss before income taxes	(47,281)		(60,751)		13,470
Income tax expense	(244)		(159)		(85)
Net loss	(47,525)		(60,910)		13,385
Net loss attributable to non-controlling interests	45		100		(55)
Allocation for preferred stock	(10,349)		(10,349)		—
Net loss attributable to common stockholders	$	(57,829)	$	(71,159)	$	13,330

Net Operating Income


(In thousands)	Same Store				Acquisitions				Dispositions				Non-Property Specific		Total
	MOBs		SHOPs		MOBs		SHOPs		MOBs		SHOPs
Net income (loss) attributable to common stockholders (in accordance with GAAP)	$	34,463	$	(349)	$	1,324	$	—	$	(352)	$	(511)	$	(92,404)	$	(57,829)

Operating fees to related parties	—		—		—		—		—		—		19,153		19,153
Acquisition and transaction related	—		—		—		—		—		—		384		384
General and administrative	97		26		—		—		—		—		13,982		14,105
Depreciation and amortization	36,208		23,744		1,292		—		63		213		—		61,520
Interest expense	64		995		—		—		—		—		49,149		50,208
Interest and other income	(4)		(270)		—		—		—		—		(302)		(576)
Loss on sale of real estate investments	—		43		—		—		260		61		—		364
Gain on non-designated derivative instruments	—		—		—		—		—		—		(510)		(510)
Income tax (benefit) expense	—		—		—		—		—		—		244		244
Allocation for preferred stock	—		—		—		—		—		—		10,349		10,349
Net loss attributable to non-controlling interests	—		—		—		—		—		—		(45)		(45)
NOI	$	70,828	$	24,189	$	2,616	$	—	$	(29)	$	(237)	$	—	$	97,367


(In thousands)	Same Store				Acquisitions				Dispositions				Non-Property Specific		Total
	MOBs		SHOPs		MOBs		SHOPs		MOBs		SHOPs
Net income (loss) attributable to common stockholders (in accordance with GAAP)	$	22,870	$	(3,861)	$	218	$	—	$	(249)	$	(13,755)	$	(76,382)	$	(71,159)
Impairment charges	10,644		4,108		—		—		—		11,034		—		25,786
Operating fees to related parties	—		—		—		—		—		—		19,003		19,003
Acquisition and transaction related	212		—		1		—		—		—		940		1,153
General and administrative	65		2		—		—		—		2		13,300		13,369
Depreciation and amortization	37,450		22,785		224		—		92		974		—		61,525
Interest expense	95		1,050		—		—		—		—		35,953		37,098
Interest and other income	(4)		(1)		—		—		(9)		—		(10)		(24)
Loss on sale of real estate investments	—		—		—		—		—		109		—		109
Gain on non-designated derivative instruments	—		—		—		—		—		—		(3,212)		(3,212)
Income tax (benefit) expense	—		—		—		—		—		—		159		159
Allocation for preferred stock	—		—		—		—		—		—		10,349		10,349
Net loss attributable to non-controlling interests	—		—		—		—		—		—		(100)		(100)
NOI	$	71,332	$	24,083	$	443	$	—	$	(166)	$	(1,636)	$	—	$	94,056

Segment Results — Medical Office Buildings

The following table presents the components of NOI and the period to period change within our MOB segment for the nine months ended September 30, 2023 and 2022:


	Same Store(1)						Acquisitions(2)						Dispositions(3)						Segment Total
	Nine Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)
(Dollars in thousands)	2023		2022		$		2023		2022		$		2023		2022		$		2023		2022		$
Revenue from tenants	$	98,282	$	97,557	$	725	$	2,844	$	485	$	2,359	$	61	$	(16)	$	77	$	101,187	$	98,026	$	3,161
Less: Property operating and maintenance	27,454		26,225		1,229		228		42		186		90		150		(60)		27,772		26,417		1,355
NOI	$	70,828	$	71,332	$	(504)	$	2,616	$	443	$	2,173	$	(29)	$	(166)	$	137	$	73,415	$	71,609	$	1,806

_______________

(1)Our MOB segment included 145 Same Store properties.

(2)Our MOB segment included 11 Acquisition properties.

(3)Our MOB segment included one Disposition property.

(4)Our MOB segment included 156 properties.

Revenue from Tenants

During the nine months ended September 30, 2023, revenue from tenants increased by $3.2 million in our MOB segment as compared to the nine months ended September 30, 2022, primarily as a result of increased revenue from tenants of $2.4 million due to our Acquired Properties and an increase in revenue from tenants of $0.7 million from our Same Store Properties, and an increase in revenue from tenants of $0.1 million due to our Disposed Properties.

The increase in our Same Store Properties revenue from tenants was primarily driven by an increase of operating expense reimbursement revenue from increased property, operating and maintenance expenses, as well as from marginally higher occupancy in the nine months ended September 30, 2023, as compared to September 30, 2022.

Property Operating and Maintenance

Property operating and maintenance expenses reflect the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third-party property management fees. During the nine months ended September 30, 2023, property operating and maintenance costs in our MOB segment increased by $1.4 million as compared to the same period last year, primarily as a result of increased costs from our Same Store Properties of $1.2 million.

Segment Results — Seniors Housing - Operating Properties

The following table presents the components of NOI and the period to period change within our SHOP segment for the nine months ended September 30, 2023 and 2022:


	Same Store (1)						Acquisitions (2)						Dispositions (3)						Segment Total
	Nine Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)
(Dollars in thousands)	2023		2022		$		2023		2022		$		2023		2022		$		2023		2022		$
Revenue from tenants	$	155,197	$	147,057	$	8,140	$	—	$	—	$	—	$	2,761	$	5,853	$	(3,092)	$	157,958	$	152,910	$	5,048
Less: Property operating and maintenance	131,008		122,974		8,034		—		—		—		2,998		7,489		(4,491)		134,006		130,463		3,543
NOI	$	24,189	$	24,083	$	106	$	—	$	—	$	—	$	(237)	$	(1,636)	$	1,399	$	23,952	$	22,447	$	1,505

_______________

(1)Our SHOP segment included 48 Same Store properties (including two land parcels.

(2)Our SHOP segment did not include any Acquired Properties.

(3)Our SHOP segment included eight Disposed Properties.

(4)Our SHOP segment included 48 total properties (including two land parcels).

Revenue from Tenants

During the nine months ended September 30, 2023, revenue from tenants increased by $5.0 million in our SHOP segment as compared to the nine months ended September 30, 2022, which was primarily driven by an increase in revenue from tenants of $8.1 million due to our Same Store Properties, partially offset by a decrease in revenue from tenants of $3.1 million due to our Disposed Properties.

The increase to our Same Store properties revenue from tenants was primarily driven by higher leasing rates during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, as well as by $1.6 million of less rent concessions offered during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. These increases were partially offset by marginally lower occupancy in the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Property Operating and Maintenance

During the nine months ended September 30, 2023, property operating and maintenance expenses increased $3.5 million in our SHOP segment as compared to the nine months ended September 30, 2022, primarily due to an increase in property operating and maintenance expenses of $8.0 million from our Same Store Properties, partially offset by a decrease of $4.5 million from our Disposed Properties.

Our Same Store properties operating and maintenance expenses increased in the nine months ended September 30, 2023 compared to the same period last year, primarily from $3.7 million of funds received through the CARES Act in the nine months ended September 30, 2022 (of a total $4.5 million received from the CARES Act in that period), which serve to reduce property operating expenses in the period received. There were no such receipts from the CARES Act in the nine months ended September 30, 2023. The increase was also due to (i) $6.6 million of increased costs for overtime, training and bonus wages paid to employees of our third party operators, (ii) $1.3 million of increased management fees paid to our third party operators, (iii) $0.4 million of higher insurance expense, (iv) $0.3 million of costs directly related to the termination of one SHOP operator effective September 30, 2023 and (v) the effects of inflation which raised the general costs of food, supplies, and utilities generally. These increases to property operating and maintenance expenses were partially offset by decreased costs for contract labor of $4.9 million.

Other Results of Operations

Impairment Charges

We did not record any impairment charges during the nine months ended September 30, 2023. We recorded impairment charges of $25.8 million during the nine months ended September 30, 2022, of which $10.6 million related to seven skilled nursing facilities in our MOB segment located in Illinois, and $15.1 million related to six held for use SHOP properties of eight total properties that we were actively marketing for sale. All of these impairment charges were recorded to reduce the carrying value of the properties to their fair values, respectively, as determined by estimated discounted cash flows over our intended holding periods.

See Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges for the nine months ended September 30, 2023 and 2022.

Operating Fees to Related Parties

Operating fees to related parties were $19.2 million and $19.0 million, respectively, for the nine months ended September 30, 2023 and 2022.

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis (see — Results of Operations — Comparison of the Three Months Ended September 30, 2023 and 2022 for additional information). Asset management fees were $16.4 million for both the nine months ended September 30, 2023 and 2022. Variable asset management fees will further increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the nine months ended September 30, 2023 or 2022.

Property management fees were consistent at $2.8 million and $2.6 million, respectively, for the nine months ended September 30, 2023 and 2022. Property management fees increase or decrease in direct correlation with gross revenues of the properties managed and depending on the mix of properties managed, as the fee payable for different types of properties varies.

See Note 9— Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q which provides detail on our fees and expense reimbursements.

Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses decreased by $0.8 million, to $0.4 million for the nine months ended September 30, 2023 from $1.2 million for the nine months ended September 30, 2022. This decrease was due to $0.6 million of less dead deal costs, $0.1 million of less legal costs from terminated SHOP operators and $0.1 million of less mortgage prepayment penalties.

General and Administrative Expenses

General and administrative expenses increased $0.7 million to $14.1 million for the nine months ended September 30, 2023 compared to $13.4 million for the nine months ended September 30, 2022, which includes $7.6 million and $6.7 million, respectively, for the nine months ended September 30, 2023 and 2022, incurred in expense reimbursements. The increase in general and administrative expenses was primarily attributable to $0.3 million of severance payments incurred in the nine months ended September 30, 2023 made to former employees of the Advisor.

Depreciation and Amortization Expenses

Depreciation and amortization expense was consistent at $61.5 million for the nine months ended September 30, 2023 and 2022.

Gain (Loss) on Sale of Real Estate Investments

During the nine months ended September 30, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of the four disposed SHOPs were impaired by $15.1 million in the nine months ended September 30, 2022 (see above). As a result, the Company recorded an aggregate loss on sale of $0.4 million in the nine months ended September 30, 2023.

During the nine months ended September 30, 2022, we recorded a loss on sale of real estate investments of $0.1 million. This was comprised of a loss on sale of $0.3 million for the sale of the LaSalle Properties, partially offset by a gain of $0.2 million related to the settlement of a lien on formerly disposed properties. We had previously recorded $34.0 million of impairment charges on the LaSalle Properties in the year ended December 31, 2021.

Interest Expense

Interest expense increased $13.1 million to $50.2 million for the nine months ended September 30, 2023 from $37.1 million for the nine months ended September 30, 2022. The increase in interest expense mainly resulted from the acceleration of deferred financing costs of $2.6 million from the termination of our Prior Credit Facility, as well as from higher average rates and higher average balances of amounts outstanding under our indebtedness during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. These increases were partially offset by the amortization of our terminated swaps, which reduced interest expense in the nine months ended September 30, 2023 by $1.1 million but increased interest expense by $0.4 million in the nine months ended September 30, 2022.

As of September 30, 2023, our outstanding debt obligations were $1.2 billion, at a weighted average interest rate of 5.56% per year. As of September 30, 2022, we had total borrowings of $1.1 billion, at a weighted average interest rate of 4.29% per year. The weighted-average interest rates include the impact of our “pay-fixed” interest rate swaps which are designated as hedges on a portion of our variable-rate borrowings.

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $0.6 million for the nine months ended September 30, 2023 and approximately ~~$14,000~~$24,000 for the ~~six~~nine months ended ~~June~~September 30, 2022. Interest income increased in the nine months ended September 30, 2023 due to a higher balance of cash (including restricted cash) as well as higher interest rates on our cash accounts.

Gain (Loss) on Non-Designated Derivatives

Gain (loss) on non-designated derivative instruments for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with the Fannie Mae Master Credit Facilities, which have floating interest rates. The gain recorded in the ~~six~~nine months ended ~~June~~September 30, 2023 was due to significant increases in interest rates during the period.

Income Tax Benefit (Expense)

Income taxes generally relate to our SHOPs, which are leased to our TRS. We recorded an income tax expense of approximately ~~$0.1~~$0.2 million for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.

Because of our TRS’s recent operating history of losses and the impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, in the third quarter of 2020, we were not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance. Since that time, our TRS’s operating performance has not significantly improved and thus we have recorded a 100% valuation allowance on our net deferred tax assets through ~~June~~September 30, 2023. If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive income (loss).

Net Loss (Income) Attributable to Non-Controlling Interests

Net loss attributable to non-controlling interests was approximately ~~$31,000~~$45,000 for the ~~six~~nine months ended ~~June~~September 30, 2023 and net loss attributable to non-controlling interests was approximately $0.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022, which represents the portion of our net income that is related to the Series A Preferred Units held by third parties (issued in connection with a property acquisition in September, 2021), Common OP Units held by third parties, and other non-controlling interest holders in our subsidiaries that own certain properties.

Allocation for Preferred Stock

Allocation for preferred stock was ~~$6.9~~$10.3 million for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022. These amounts represent the allocation of our net loss that is attributable to holders of Series A Preferred Stock and holders of Series B Preferred Stock.

Cash Flows from Operating Activities

The level of cash flows used in or provided by operating activities is affected by, among other things, the number of properties owned, the performance of those properties, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses.

During the ~~six~~nine months ended ~~June~~September 30, 2023, net cash provided by operating activities was ~~$10.7~~$16.4 million. Cash inflows included non-cash items of ~~$14.2~~$18.1 million (net loss of ~~$31.4~~$47.5 million adjusted for non-cash items including: (i) depreciation and amortization of tangible and intangible assets, (ii) amortization of deferred financing costs, (iii) accretion of terminated swaps, (iv) net amortization of mortgage premiums and discounts, (v) accretion of market lease intangibles, (vi) bad debt expense, (vii) equity-based compensation, (viii) loss on sale of real estate investments, (ix) gain on non-designated derivatives and (x) impairment charges), cash received from non-designated derivative instruments of ~~$2.3~~$3.9 million, and a decrease in prepaid expenses and other assets of ~~$0.9~~$4.2 million. These cash inflows were partially offset by a decrease in accounts payable and accrued expenses of ~~$5.7~~$1.5 million, an increase in unbilled receivables recorded in accordance with straight-line basis accounting of ~~$0.6~~$0.9 million and a decrease in deferred rent and other liabilities of ~~$0.4~~$1.0 million.

During the ~~six~~nine months ended ~~June~~September 30, 2022, net cash provided by operating activities was ~~$13.7~~$21.1 million. Cash inflows included non-cash items of ~~$19.4~~$30.4 million (net loss of ~~$41.0~~$60.9 million adjusted for non-cash items including depreciation and amortization of tangible and identifiable intangible real estate assets, deferred financing costs and mortgage premiums and discounts, bad debt expense, equity-based compensation, gain on non-designated derivatives and impairment charges) and, a decrease in prepaid expenses and other assets of ~~$1.9~~$1.0 million. These cash inflows were partially offset by a decrease in accounts payable and accrued expenses of ~~$4.7~~$4.9 million related to timing of payments for real estate taxes, property operating expenses and professional and legal fees, a decrease in deferred rent and other liabilities of ~~$1.8~~$2.2 million and by a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of ~~$1.1~~$1.2 million.

Cash Flows from Investing Activities

Net cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~$34.4~~$49.0 million. The cash used in investing activities included ~~$25.4~~(i) $35.3 million for the acquisition of ~~five~~seven properties, ~~$9.1~~(ii) $14.0 million in capital expenditures and ~~$4.6 million in~~(iii) payments for non-designated ~~interest rate cap investments.~~derivative instruments of $4.6 million. These outflows were partially offset by $4.8 million of proceeds from real estate dispositions.

Net cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$15.1~~$22.7 million. The cash used in investing activities included $17.8 million for the acquisition of three properties and ~~$9.1~~$16.7 million in capital expenditures, partially offset by $11.8 million from the sale of the four LaSalle Properties.

Cash Flows from Financing Activities

Net cash provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~$52.7~~$47.4 million. Cash inflows consisted of (i) proceeds from mortgage notes payable of $240.0 million, (ii) proceeds from borrowings under our

Revolving Credit Facility of $20.0 million, (iii) proceeds from terminated “pay-fixed” interest rate swaps of $5.4 million and (iv) contributions from non-controlling interests of $0.3 million. Cash outflows consisted of (i) payments our credit facilities of ~~$197.7~~$199.2 million, (ii) payments for deferred financing costs of $7.8 million, (iii) dividends paid to holders of Series A Preferred Stock of ~~$3.7~~$5.5 million, (iv) dividends paid to holders of Series B Preferred Stock of ~~$3.2~~$4.8 million, (v) principal payments on our mortgages of ~~$0.6~~$0.9 million and (vi) distributions to our non-controlling interests of $0.1 million.

Net cash used in financing activities of ~~$14.5~~$19.8 million during the ~~six~~nine months ended ~~June~~September 30, 2022 was comprised of cash outflows of payments of deferred financing costs of ~~$0.3~~$0.9 million, dividends paid to holders of Series A Preferred Stock of ~~$3.7~~$5.5 million, dividends to paid holders of Series B Preferred Stock of ~~$3.2~~$4.8 million, payments for derivative instruments of $39,000 and principal payments on mortgages of ~~$7.2~~$8.3 million.

Liquidity and Capital Resources

Our existing principal demands for cash are to fund acquisitions, capital expenditures, the payment of our operating and administrative expenses, debt service obligations (including principal repayment), and dividends to holders of our Series A Preferred Stock and holders of our Series B Preferred Stock. We monitor our current and anticipated liquidity position relative to our current and anticipated demands for cash and believe that we have sufficient current liquidity to meet our financial obligations for at least the next 12 months. Our future liquidity requirements, and available liquidity, however, depend on many factors. Further, recent and continuing increases in inflation brought about by labor shortages, supply chain disruptions and increases in interest rates may adversely impact our results of operations and thus ultimately our liquidity. Supply chain disruptions and increases in interest rates may also impact our tenants’ ability to pay rent and hence our results of operations and liquidity.

We expect to fund our future short-term operating liquidity requirements, including dividends to holders of Series A Preferred Stock and holders of Series B Preferred Stock, through a combination of current cash on hand, net cash provided by our property operations, potential borrowings secured by currently unencumbered real estate assets (see below), potential future advances under our Fannie Mae Master Credit Facilities and net cash provided by our dispositions.

The ~~Barclay’s~~Barclays MOB Loan Agreement requires us to maintain a minimum balance of cash and cash equivalents of $12.5 million at all times. As of ~~June~~September 30, 2023, we had ~~$71.7~~$51.0 million of cash and cash equivalents.

At the closing of the ~~Barclay’s~~Barclays MOB Loan (see below), we applied $194.8 million of the ~~Barclay’s~~Barclays MOB Loan proceeds to repay and terminate our then-existing credit facility (the “Prior Credit Facility”). We also terminated the interest rate swap contracts that formerly hedged interest rate changes under the Prior Credit Facility (see Note 7 — Derivatives and Hedging Activities to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information). The remaining proceeds of approximately $39.0 million (after the payment of ~~Barclay’s~~Barclays MOB Loan closing costs and reimbursement of deposits) ~~are~~were available for general corporate purposes, subject to the terms of the ~~Barclay’s~~Barclays MOB Loan Agreement. Additionally, by terminating the Prior Credit Facility, we are no longer subject to certain restrictive covenants previously imposed by the Prior Credit Facility (see Note 5 — Credit Facilities to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information).

Financings

On May 24, 2023, we, through certain subsidiaries of our OP, entered into a non-recourse loan agreement (the ~~“Barclay’s~~“Barclays MOB Loan Agreement”), with (i) Barclays Capital Real Estate Inc., (ii) Société Générale Financial Corporation and (iii) KeyBank National Association (each individually, a “Lender,” and collectively, the “Lenders”), in the aggregate amount of $240.0 million (the ~~“Barclay’s~~“Barclays MOB Loan”). In connection with the ~~Barclay’s~~Barclays MOB Loan Agreement, we entered into a Guaranty Agreement (the “Guaranty”) and an Environmental Indemnity Agreement (the “Environmental Indemnity”) for the benefit of the Lenders.

The ~~Barclay’s~~Barclays MOB Loan is secured by, among other things, first priority mortgages on the Company’s interests in 62 MOBs, which had a carrying value of ~~$414.8~~$416.8 million as of ~~June~~September 30, 2023. The ~~Barclay’s~~Barclays MOB Loan has a 10-year term and is interest-only at a fixed rate of 6.453% per year. The Barclays MOB Loan Agreement requires us to pay interest on a monthly basis with the principal balance due on the maturity date of June 6, 2033. The ~~Barclay’s~~Barclays MOB Loan Agreement requires us to comply with certain covenants, including, among other things, a requirement to maintain at all times a combination of cash and cash equivalents totaling at least $12.5 million.

As of ~~June~~September 30, 2023, our total debt leverage ratio (total debt divided by total gross asset value) was approximately ~~42.7%~~43.0%. Net debt totaled $1.1 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($~~71.7~~51.0 million). Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion) net of gross market lease intangible liabilities ($~~29.4~~23.5 million). Cumulative impairment charges are ~~already~~ reflected within gross asset value.

As of ~~June~~September 30, 2023, we had total gross borrowings of $1.2 billion, at a weighted-average interest rate of ~~5.49%~~5.56%. The weighted-average interest rates in both periods include the impact of “pay-fixed” swaps that are designated as hedging

instruments on a portion of our variable-rate debt, but does not include the impact of our non-designated interest rate ~~caps.~~caps (discussed below).

As of ~~June~~September 30, 2023, the carrying value of our real estate investments, at cost was $2.6 billion, with $1.3 billion of this asset value pledged as collateral for mortgage notes payable and $0.6 billion of this asset value pledged to secure advances under the Fannie Mae Master Credit Facilities. These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, as applicable, unless the existing indebtedness is repaid or the collateral is released from the pledge associated with the secured debt.

Unencumbered real estate investments, at cost as of ~~June~~September 30, 2023 was ~~$0.6~~$0.7 billion. There can be no assurance as to the amount of liquidity we would be able to generate from using these unencumbered assets as collateral for future mortgage loans, future advances under the Fannie Mae Master Credit Facilities, or other future financings.

Non-Designated Interest Rate Caps

Our interest rate caps are used to limit our exposure to interest rate movements on our Fannie Mae Master Credit Facilities for economic purposes, however, we do not elect to apply hedge accounting to these instruments. As of September 30, 2023, we had six SOFR-based interest rate caps with an aggregate notional amount of $351.6 million, which limits 30-day SOFR to 3.50% and have varying maturities through July 2025.

As SOFR has increased beyond 3.50%, we have received cash payments of $3.9 million in the nine months ended September 30, 2023. We did not receive such payments in the nine months ended September 30, 2022.

We paid premiums of $4.6 million to renew three caps with an aggregate notional amount of $138.5 million which matured in the nine months ended September 30, 2023. Subsequent to September 30, 2023, we paid premiums of $5.0 million to renew two maturing interest rate caps with an aggregate notional amount of $150.9 million. We have one interest rate cap with a notional amount of $60.0 million which matures in April 2024, which represents the next maturing interest rate cap, excluding those renewed subsequent to September 30, 2023.

Upon the maturity and renewal of our interest rate caps, we have been obligated to provide a cash deposit to Fannie Mae because the debt service coverage ratios of the underlying properties of each facility were below those of the minimum required amounts per the debt agreements. In the nine months ended September 30, 2023, we provided a cash deposit of $5.1 million, and we provided another cash deposit of $6.7 million subsequent to September 30, 2023, bringing the total deposit to $11.8 million. We expect to provide another deposit upon the maturity of one interest rate cap in April 2024. Please see Fannie Mae Master Credit Facilities section below for additional information.

Mortgage Notes Payable

As of ~~June~~September 30, 2023, we had ~~$822.0~~$821.7 million in mortgage notes payable ~~outstanding.~~outstanding, all of which is either fixed-rate or effectively fixed through our interest rate swap contracts. Future scheduled principal payments on our mortgage notes payable for the remainder of 2023 and 2024 are ~~$0.6~~$0.3 million and $1.2 million, respectively.

On May 24, 2023, we, through certain subsidiaries of our OP, entered into the Barclay’s MOB Loan Agreement, with the Lenders, in the aggregate amount of $240.0 million. In connection with the Barclay’s MOB Loan Agreement, our OP entered into the “Guaranty and the “Environmental Indemnity for the benefit of the Lenders.

The Barclay’s MOB Loan is secured by, among other things, first priority mortgages on the Company’s interests in 62 MOBs, which had a carrying value of $0.4 billion as of June 30, 2023. The Barclay’s MOB Loan has a 10-year term and is interest-only at a fixed rate of 6.453% per year. Under the Barclays MOB Loan Agreement requires to pay interest on a monthly basis with the principal balance due on the maturity date of June 6, 2033. The Barclay’s MOB Loan Agreement requires our OP to comply with certain covenants, including, among other things, a requirement to maintain at all times a combination of cash and cash equivalents totaling at least $12.5 million at all times.

Prior Credit Facility

Our Prior Credit Facility consisted of two components, the Revolving Credit Facility and our Term Loan. The Revolving Credit Facility and Term Loan were interest-only and would have matured on March 13, 2024. The Prior Credit Facility was fully repaid in May 2023 with net proceeds provided by the Barclay’s MOB Loan (see Note 4 — Mortgage Notes Payable, Net to our consolidated financial statements in this Quarterly Report on Form 10-Q for details).

The Prior Credit Facility contained various restrictions which are no longer in affect since its repayment. These restrictions included, but were not limited to, (i) a minimum cash and cash equivalents balance, (ii) maintaining a certain fixed charge coverage ratio, (iii) dividend restrictions (on both common stock and preferred stock), (iv) share repurchases and (v) use of net proceeds from real estate dispositions.

Fannie Mae Master Credit Facilities

As of ~~June~~September 30, 2023, ~~$349.2~~$347.7 million was outstanding under the Fannie Mae Master Credit Facilities. We may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool subject to

customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. We do not expect to draw any further amounts on the Fannie Mae Master Credit Facilities. Borrowings under the Fannie Mae Master Credit Facilities bear annual interest at a rate that varies on a monthly basis and is equal to the sum of the current ~~LIBOR~~SOFR for one month U.S. dollar-denominated deposits and a spread (2.41% and 2.46% for the ~~Capitol~~Capital One Facility and the KeyBank Facility, respectively) with a combined floor of 2.62%. The Fannie Mae Master Credit Facilities mature on November 1, 2026. Future scheduled principal payments on our Fannie Mae Master Credit Facilities for the remainder of 2023 and 2024 are ~~$2.9~~$1.4 million and $5.8 million, respectively.

~~Subsequent to June 30,~~In July 2023, we provided a $5.1 million cash deposit to ~~Key Bank and Capital One.~~Fannie Mae. This deposit was provided because the debt service coverage ratios of the underlying properties of each facility were below those of the minimum required amounts per the debt agreements. This deposit will be refunded if we achieve debt service coverage ratios above those of the minimum required amounts. Subsequent to September 30, 2023, we provided an additional $6.7 million deposit to Fannie Mae which brought the total deposit to $11.8 million.

Capital Expenditures

During the ~~six~~nine months ended ~~June~~September 30, 2023, our capital expenditures were ~~$9.1~~$14.0 million, of which ~~$3.0~~$4.7 million related to our MOB segment and ~~$6.2~~$9.3 million related to our SHOP segment. We anticipate this rate of capital expenditures for the MOB and SHOP segments throughout 2023.

Acquisitions — Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2023

During the ~~six~~three months ended ~~June~~September 30, 2023, we acquired ~~five~~two single-tenant MOBs for an aggregate contract purchase price of ~~$25.2~~$9.8 million, funded with cash on hand.

During the nine months ended September 30, 2023, we acquired seven single-tenant MOBs for an aggregate contract purchase price of $34.9 million. These acquisitions were funded with $20.0 million of borrowings from our Prior Credit Facility and the remainder with cash on hand.

Acquisitions — Subsequent to ~~June~~September 30, 2023

We have not acquired any properties subsequent to ~~June~~September 30, 2023. ~~However, we~~We have ~~entered into~~signed one ~~non-binding~~ letter of intent to acquire ~~two MOBs~~four properties for a contract purchase ~~price~~ of ~~$9.8~~$12.6 million. There can be no assurance ~~that the~~we will complete this acquisition ~~of these properties will be completed~~ on its contemplated terms, or at all. We anticipate primarily using cash on hand to fund the consideration required to complete this acquisition.

Dispositions — Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2023

We did not dispose of any properties during the three months ended September 30, 2023. During the ~~three and six~~nine months ended ~~June~~September 30, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Pursuant to the terms of the Prior Credit Facility, $5.2 million of net proceeds were used to repay amounts then outstanding, and $2.7 million of net proceeds were used to partially repay the Multi-Property CMBS Loan mortgage note.

Dispositions — Subsequent to ~~June~~September 30, 2023

We have not disposed of any properties subsequent to ~~June~~September 30, 2023. However, we have entered into one purchase and sale agreement to dispose of one SHOP for a contract sales price of $8.0 million. There can be no assurance that the sale of this property will be completed on its contemplated terms, or at all.

Share Repurchase Program

We did not repurchase any shares during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and ~~June 30,~~ 2022.

Non-GAAP Financial Measures

This section discusses the non-GAAP financial measures we use to evaluate our performance including Funds from Operations (“FFO”) and Modified Funds from Operations (“MFFO”). For additional information on Net Operating Income, another non-GAAP financial measure we use to evaluate our performance, see Results of Operations — Net Operating Income above. While NOI is a property-level measure, MFFO is based on our total performance as a company and therefore reflects the impact of other items not specifically associated with NOI such as, interest expense, general and administrative expenses and operating fees to related parties. Additionally, NOI as defined herein, includes straight-line rent adjustments which isare excluded from MFFO.

Funds from Operations and Modified Funds from Operations

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings, improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time. We believe that, because real estate values historically rise and fall with market conditions, including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be less informative.

Because of these factors, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has published a standardized measure of performance known as FFO, which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance. FFO is not equivalent to our net income or loss as determined under GAAP.

We calculate FFO, a non-GAAP measure, consistent with the standards established over time by the Board of Governors of NAREIT, as restated in a White Paper approved by the Board of Governors of NAREIT effective in December 2018 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sales of certain real estate assets, gains and losses from changes in control and impairment charges of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect our proportionate share of FFO attributable to our stockholders. Our FFO calculation complies with NAREIT’s definition.

We believe that the use of FFO provides a more complete understanding of our operating performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT’s definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries. These changes had a particularly significant impact on publicly registered, non-listed REITs, which typically have a significant amount of acquisition activity in the early part of their existence, particularly during the period when they are raising capital through ongoing initial public offerings.

Because of these factors, the Institute of Portfolio Alternatives (“IPA”), an industry trade group, has published a standardized measure of performance known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs. MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. MFFO is not equivalent to our net income or loss as determined under GAAP.

We calculate MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the

IPA in November 2010, except that we adjust for deferred tax asset allowances based on management’s determination. The Practice Guideline defines MFFO as FFO further adjusted for acquisition fees and expenses and other items. In calculating MFFO, we follow the Practice Guideline (with the added adjustment for deferred tax asset allowances based on management’s determination as noted above) and exclude acquisition fees and expenses, amortization of above- and below-market leases and other intangible lease assets and liabilities, amounts relating to straight-line rent adjustments (in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the lease and rental payments), contingent purchase price consideration, accretion of discounts and amortization of premiums on debt, mark-to-market adjustments included in net loss, gains or losses included in net loss from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and adjustments for unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. We also exclude other non-operating items in calculating MFFO, such as transaction-related fees and expenses and capitalized interest.

We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.

Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to pay dividends and other distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.

Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, updates to the White Paper or the Practice Guideline may be published or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.

The table below reflects the items deducted from or added to net loss attributable to stockholders in our calculation of FFO and MFFO for the periods indicated. In calculating our FFO and MFFO, we exclude the impact of amounts attributable to our non-controlling interests.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		2023		2022		(In thousands)	2023		2022		2023		2022
Net loss attributable to common stockholders (in accordance with GAAP)	Net loss attributable to common stockholders (in accordance with GAAP)	$	(20,759)	$	(21,055)	$	(38,268)	$	(47,856)	Net loss attributable to common stockholders (in accordance with GAAP)	$	(19,561)	$	(23,303)	$	(57,829)	$	(71,159)
Depreciation and amortization (1)	Depreciation and amortization (1)	19,915		19,896		39,523		39,947		Depreciation and amortization (1)	19,960		20,361		59,483		60,308
Impairment charges	Impairment charges	—		6,193		—		16,837		Impairment charges	—		8,949		—		25,786
Loss on sale of real estate investment		306		—		191		303
Loss (gain) on sale of real estate investment										Loss (gain) on sale of real estate investment	173		(194)		364		109
Adjustments for non-controlling interests (3)	Adjustments for non-controlling interests (3)	(108)		(117)		(201)		(262)		Adjustments for non-controlling interests (3)	(97)		(124)		(298)		(386)
FFO (as defined by NAREIT) attributable to stockholders	FFO (as defined by NAREIT) attributable to stockholders	(646)		4,917		1,245		8,969		FFO (as defined by NAREIT) attributable to stockholders	475		5,689		1,720		14,658
Acquisition and transaction related	Acquisition and transaction related	148		375		211		954		Acquisition and transaction related	173		199		384		1,153
Accretion of market lease and other intangibles, net	Accretion of market lease and other intangibles, net	(260)		(123)		(471)		(245)		Accretion of market lease and other intangibles, net	(204)		(176)		(675)		(421)
Straight-line rent adjustments	Straight-line rent adjustments	(388)		(664)		(605)		(1,053)		Straight-line rent adjustments	(352)		(183)		(938)		(1,236)

Amortization (accretion) of mortgage premiums and discounts, net	Amortization (accretion) of mortgage premiums and discounts, net	23		(102)		46		5		Amortization (accretion) of mortgage premiums and discounts, net	23		23		69		28
Gain on non-designated derivatives	Gain on non-designated derivatives	(286)		(392)		(104)		(1,386)		Gain on non-designated derivatives	(406)		(1,826)		(510)		(3,212)
Cash received from non-designated derivative instruments	Cash received from non-designated derivative instruments	1,375		—		2,301		—		Cash received from non-designated derivative instruments	1,565		—		3,866		—
Deferred tax asset valuation allowance (2)	Deferred tax asset valuation allowance (2)	283		587		991		1,142		Deferred tax asset valuation allowance (2)	(265)		216		726		1,358
Adjustments for non-controlling interests (3)	Adjustments for non-controlling interests (3)	19		1		14		5		Adjustments for non-controlling interests (3)	2		9		16		14
MFFO attributable to stockholders	MFFO attributable to stockholders	$	268	$	4,599	$	3,628	$	8,391	MFFO attributable to stockholders	$	1,011	$	3,951	$	4,658	$	12,342

_______

(1)Excludes non-real estate depreciation and amortization.

(2)This is a non-cash item and is added back as it is not considered a part of operating performance.

(3)Represents the portion of the adjustments allocable to non-controlling interests.

Dividends and Other Distributions

Dividends on our Series A Preferred Stock are declared quarterly in an amount equal to $1.84375 per share each year ($0.460938 per share per quarter) to holders of Series A Preferred Stock, which is equivalent to 7.375% of per annum in the $25.00 liquidation preference per share of Series A Preferred Stock. Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.

Dividends on our Series B Preferred Stock are declared quarterly in an amount equal to $1.78125 per share each year ($0.445313 per share per quarter) to holders of Series B Preferred Stock, which is equivalent to 7.125% of per annum in the $25.00 liquidation preference per share of Series B Preferred Stock. Dividends on the Series B Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the

next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.

Since mid-2020, we have not paid cash dividends on our shares of common stock but have issues stock dividends to the holders. The stock dividends have been declared quarterly using a rate of $0.85 per share per year. The number of shares issued with each ~~dividends~~dividend is based on the estimated per share asset value in effect on the applicable date.

The amount of dividends and other distributions payable to our stockholders is determined by the Board and is dependent on a number of factors, including funds available for distribution, our financial condition, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986 (the “Code”). Distribution payments are dependent on the availability of funds. The Board may reduce the amount of dividends or distributions paid or suspend dividend or distribution payments at any time and therefore dividend and distribution payments are not assured. Any accrued and unpaid dividends payable with respect to the Series A Preferred Stock or Series B Preferred Stock become part of the liquidation preference thereof.

The following table shows the sources for the payment of distributions to preferred stockholders, including distributions on unvested restricted shares and Common OP Units, but excluding distributions related to Class B Units as these distributions are recorded as an expense in our consolidated statements of operations and comprehensive loss, for the periods indicated. No cash

distributions were made to common stockholders, restricted shareholders, holders of Common OP Units or holders of Class B Units in the six months ended June 30, 2023.


		Three Months Ended						Year-To-Date				Three Months Ended										Year-To-Date
		March 31, 2023			June 30, 2023				June 30, 2023					March 31, 2023				June 30, 2023			September 30, 2023			September 30, 2023
(In thousands)	(In thousands)	Amounts		Percentage of Distributions	Amounts		Percentage of Distributions			Amounts			Percentage of Distributions		(In thousands)	Amounts		Percentage of Distributions	Amounts		Percentage of Distributions	Amounts		Percentage of Distributions	Amounts		Percentage of Distributions
Distributions:	Distributions:														Distributions:
Dividends to holders of Series A Preferred Stock	Dividends to holders of Series A Preferred Stock	$	1,832	52.4%	$	1,834	52.5%			$	3,666		52.5%		Dividends to holders of Series A Preferred Stock	$	1,832	52.4%	$	1,834	52.5%	$	1,834	52.5%	$	5,500	52.5%
Dividends to holders of Series B Preferred Stock	Dividends to holders of Series B Preferred Stock	1,616		46.3%	1,617		46.2%			3,233			46.2%		Dividends to holders of Series B Preferred Stock	1,616		46.3%	1,617		46.2%	1,616		46.2%	4,849		46.2%
Distributions paid to holders of Series A Preferred Units	Distributions paid to holders of Series A Preferred Units	46		1.3%	46		1.3%			92			1.3%		Distributions paid to holders of Series A Preferred Units	46		1.3%	46		1.3%	46		1.3%	138		1.3%
Total cash distributions	Total cash distributions	$	3,494	100.0%	$	3,497	100.0%			$	6,991		100.0%		Total cash distributions	$	3,494	100.0%	$	3,497	100.0%	$	3,496	100.0%	$	10,487	100.0%

Source of distribution coverage:	Source of distribution coverage:														Source of distribution coverage:
Cash flows provided by operations (1)	Cash flows provided by operations (1)	$	3,494	100.0%	$	3,497	100.0%			$	6,991		100.0%		Cash flows provided by operations (1)	$	3,494	100.0%	$	3,497	100.0%	$	3,496	100.0%	$	10,487	100.0%

Available cash on hand	Available cash on hand	—		—%	—		—%			—			—%		Available cash on hand	—		—%	—		—%	—		—%	—		—%
Total source of distribution coverage	Total source of distribution coverage	$	3,494	100.0%	$	3,497	100.0%			$	6,991		100.0%		Total source of distribution coverage	$	3,494	100.0%	$	3,497	100.0%	$	3,496	100.0%	$	10,487	100.0%

Cash flows provided by operations (in accordance with GAAP)	Cash flows provided by operations (in accordance with GAAP)	$	4,989		$	5,688				$	10,677				Cash flows provided by operations (in accordance with GAAP)	$	4,989		$	5,688		$	5,681		$	16,358
Net loss (in accordance with GAAP)	Net loss (in accordance with GAAP)	$	(14,068)		$	(3,264)				$	(17,332)				Net loss (in accordance with GAAP)	$	(14,068)		$	(17,332)		$	(16,125)		$	(47,525)

______

(1)Assumes the use of available cash flows from operations before any other sources.

For the ~~six~~nine months ended ~~June~~September 30, 2023, cash flows provided by operations were ~~$10.7~~$16.4 million. We had not historically generated sufficient cash flows from operations to fund the payment of dividends and other distributions at the current rate prior to switching from paying cash dividends to stock dividends on our common stock. As shown in the table above, we funded dividends to holders of Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units with cash flows provided by operations. Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as we pay distributions in stock instead of cash.

Our ability to pay dividends on our Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units and other distributions depends on our ability to increase the amount of cash we generate from property operations which in turn depends on a variety of factors, including the duration and scope of the COVID-19 pandemic and its impact on our tenants and properties, our ability to complete acquisitions of new properties and our ability to improve operations at our existing properties. There can be no assurance that we will complete acquisitions on a timely basis or on acceptable terms and conditions, if at all. Our ability to improve operations at our existing properties is also subject to a variety of risks and uncertainties, many of which are beyond our control, and there can be no assurance we will be successful in achieving this objective.

Election as a REIT

We elected to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2013. Commencing with that taxable year, we have been organized and operated in a manner so that we qualify as a REIT under the Code. We intend to continue to operate in such a manner but we can provide no assurances that we will operate in a manner so as to remain qualified for taxation as a REIT. To continue to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP) determined without regard to the deduction for dividends paid and excluding net capital gains, and comply with a number of other organizational and operational requirements. If we continue to qualify as a REIT, we generally will not be subject to U.S. federal corporate income tax on the portion of our REIT taxable income that we distribute to our stockholders. Even if we continue to qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties as well as U.S. federal income and excise taxes on our undistributed income.

Inflation

We may be adversely impacted by inflation on the leases with tenants in our MOB segment that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates. As of ~~June~~September 30, 2023, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was ~~3.0%~~3.7%. To help mitigate the adverse impact of inflation, most of our leases with our tenants in our MOB segment contain rent escalation provisions which increase the cash that is due under these leases over time. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). Although most of our leases with tenants in our MOB segment contain rent escalation provisions, these rates are generally below the current rate of inflation.

In addition to base rent, depending on the specific lease, MOB tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases. Property operating and maintenance expenses include common area maintenance costs, real estate taxes and insurance. Increased operating costs paid by our tenants under these net leases could have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’ ability to pay rent owed to us or property expenses to be paid, or reimbursed to us, by our tenants. Renewals of leases or future leases for our net lease properties may not be negotiated on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs. If we are unable to lease properties on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs.

Leases with residents at our SHOPs typically do not have rent escalations, however, we are able to renew leases at market rates as they mature due to their short-term nature. As inflation rates increase or persist at high levels, the cost of providing medical care at our SHOPs, particularly labor costs, will increase. If we are unable to admit new residents or renew resident leases at market rates, while bearing these increased costs from providing services to our residents, our results of operations may be affected.

Related-Party Transactions and Agreements

Please see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There has been no material change in our exposure to market risk during the ~~six~~nine months ended ~~June~~September 30, 2023. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 17, 2023.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended ~~June~~September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors.

There have been no material changes to the risk factors disclosed in Part I — Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 17, 2023, and we direct your attention to those risk factors.

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of ~~Proceeds.~~Proceeds and Issuer Purchases of Equity Securities.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~Effective August~~Trading Plans

During our last fiscal quarter, no director or officer, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.

Indemnification Agreement

On November 9, 2023, we entered into an indemnification agreement with our ~~Board approved~~Chief Executive Officer (the “Indemnification Agreement”). The Indemnification Agreement is in the ~~Second Amended~~same form as the indemnification agreements we have entered into with our directors and Restated Bylaws. The revisions to the Second Amended and Restated Bylaws include changes to, among other things, Article II, Section 11 to address procedural issues related to the new universal proxy rules of Rule 14a-19 under the Exchange Act of 1934, including (i) requiring representations and notifications regarding complianceofficers, which forms have been filed with the ~~requirements~~SEC.

Change of ~~Rule 14a-19, (ii) prohibiting additional or substitute nominations following~~Corporate Address

Effective November 8, 2023, we changed the ~~expiration~~address of the nomination period, (iii) designating the white proxy card for exclusive use by the Board of the Company, and (iv) updating other requirements for valid nominations and clarifying the treatment of defective nominations.our principal executive corporate office. The new address is 222 Bellevue Ave., Newport, RI 02840.

This description of the Second Amended and Restated Bylaws is qualified in its entirety by reference to the complete text of the Second Amended and Restated Bylaws, a copy of which is filed herewith as Exhibit 3.2 to this Quarterly Report on Form 10-Q.

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Table of Contents

Item 6. Exhibits.

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2023 (and are numbered in accordance with Item 601 of Regulation S-K):


Exhibit No.						Description
3.1 (1)						Articles of Amendment and Restatement for Healthcare Trust, Inc.
3.2 *(2)						Second Amended and Restated Bylaws of Healthcare Trust, Inc.
3.3 ~~(2)~~(3)						Articles Supplementary of Healthcare Trust, Inc. relating to election to be subject to Section 3-803 of the Maryland General Corporation Law, dated November 9, 2017.
3.4 ~~(3)~~(4)						Articles Supplementary relating to the designation of shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, dated December 6, 2019.
3.5 ~~(4)~~(5)						Articles Supplementary designating additional shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, dated September 15, 2020.
3.6 ~~(5)~~(6)						Articles Supplementary relating to the designation of shares of 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, dated October 4, 2021.
4.1 ~~(5)~~(6)						Sixth Amendment, dated October 4, 2021, to the Agreement of Limited Partnership of Healthcare Trust Operating Partnership, L.P., dated February 14, 2013.
~~4.2(6)~~						~~Amendment No. 1, dated May 18, 2023, to the Rights Agreement, dated May 18, 2020, between Healthcare Trust, Inc., and Computershare Trust Company, N.A., as Rights Agent.~~
~~10.1(7)~~						~~Loan Agreement, dated as of May 24, 2023, among the borrower entities party thereto, Barclays Capital Real Estate Inc., Société Générale Financial Corporation, and KeyBank National Association.~~
~~10.2(7)~~						Guaranty Agreement, dated as of May 24, 2023, by Healthcare Trust Operating Partnership, L.P. in favor of Barclays Capital Real Estate Inc., Société Générale Financial Corporation, and KeyBank National Association.
~~10.3(7)~~						Environmental Indemnity Agreement, dated as of May 24, 2023, by Healthcare Trust Operating Partnership, L.P. and the borrower entities party thereto, for the benefit of Barclays Capital Real Estate Inc., Société Générale Financial Corporation, and KeyBank National Association.
31.1 *						Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *						Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *						Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH *						Inline XBRL Taxonomy Extension Schema Document.
101.CAL *						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE *						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 *						Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

______

* Filed herewith.

(1)Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 11, 2016, and incorporated by reference herein.

(2)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed with the SEC on August 11, 2023, and incorporated by reference herein.

(3)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 filed with the SEC on November 14, 2017, and incorporated by reference herein.

~~(3)~~(4)Filed as an exhibit to the Company’s Registration Statement on Form 8-A filed with the SEC on December 6, 2019, and incorporated by reference herein.

~~(4)~~(5)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on September 15, 2020, and incorporated by reference herein.

~~(5)~~(6)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on October 4, 2021, and incorporated by reference herein.

~~(6)Filed as an exhibit to the Company’s Current Report on Form 8-A filed with the SEC on May 19, 2023, and incorporated by reference herein.~~

~~(7)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on May 31, 2023, and incorporated by reference herein.~~

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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			HEALTHCARE TRUST, INC.
			By:			/s/ ~~Edward M. Weil, Jr.~~Michael Anderson
						~~Edward M. Weil, Jr.~~Michael Anderson
						Chief Executive Officer ~~and President~~ (Principal Executive Officer)

			By:			/s/ Scott M. Lappetito
						Scott M. Lappetito
						Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)

Dated: ~~August 11,~~November 13, 2023

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