UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, ~~2019~~2020



¨☐			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: 000-55775

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

(Exact name of registrant as specified in its charter)



Maryland						47-2887436
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

18191 Von Karman Avenue, Suite 300 Irvine, California						92612
(Address of principal executive offices)						(Zip Code)

(949) 270-9200

(Registrant’s telephone number, including area code)

Not Applicable

(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

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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.x ☒ 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). x☒ 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

o☐

Accelerated filer

o☐

Non-accelerated filer

x☒

Smaller reporting company

o☐

Emerging growth company

x☒

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. x☒

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

As of November ~~8, 2019,~~6, 2020, there were ~~74,267,894~~75,552,866 shares of Class T common stock and ~~5,667,251~~5,642,478 shares of Class I common stock of Griffin-American Healthcare REIT IV, Inc. outstanding.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

(A Maryland Corporation)

TABLE OF CONTENTS



			Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019			3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019			5
Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019			6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019			8
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			4342
Item 3. Quantitative and Qualitative Disclosures About Market Risk			5859
Item 4. Controls and Procedures			5960

PART II — OTHER INFORMATION

Item 1. Legal Proceedings			6061
Item 1A. Risk Factors			6061
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6367
Item 3. Defaults Upon Senior Securities			6467
Item 4. Mine Safety Disclosures			6467
Item 5. Other Information			6468
Item 6. Exhibits			6568
Signatures			6669

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, ~~2019~~2020 and December 31, ~~2018~~2019

(Unaudited)


	September 30, 2020		December 31, 2019
ASSETS
Real estate investments, net	$	928,066,000	$	895,060,000
Cash and cash equivalents	22,690,000		15,290,000
Accounts and other receivables, net	3,262,000		4,608,000
Restricted cash	706,000		556,000
Real estate deposits	0		1,915,000
Identified intangible assets, net	68,636,000		74,023,000
Operating lease right-of-use assets, net	14,163,000		14,255,000
Other assets, net	73,967,000		62,620,000
Total assets	$	1,111,490,000	$	1,068,327,000

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgage loans payable, net(1)	$	17,974,000	$	26,070,000
Line of credit and term loans(1)	479,500,000		396,800,000
Accounts payable and accrued liabilities(1)	27,436,000		32,033,000
Accounts payable due to affiliates(1)	987,000		1,016,000
Identified intangible liabilities, net	1,362,000		1,601,000
Operating lease liabilities(1)	9,975,000		9,858,000
Security deposits, prepaid rent and other liabilities(1)	12,343,000		9,408,000
Total liabilities	549,577,000		476,786,000

Commitments and contingencies (Note 10)

Redeemable noncontrolling interests (Note 11)	2,697,000		1,462,000

Equity:
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; 0ne issued and outstanding	0		0
Class T common stock, $0.01 par value per share; 900,000,000 shares authorized; 75,357,680 and 74,244,823 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	753,000		742,000
Class I common stock, $0.01 par value per share; 100,000,000 shares authorized; 5,630,314 and 5,655,051 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	56,000		56,000
Additional paid-in capital	729,923,000		719,894,000
Accumulated deficit	(172,436,000)		(130,613,000)
Total stockholders’ equity	558,296,000		590,079,000
Noncontrolling interest (Note 12)	920,000		0
Total equity	559,216,000		590,079,000
Total liabilities, redeemable noncontrolling interests and equity	$	1,111,490,000	$	1,068,327,000

September 30, 2019 December 31, 2018
ASSETS
Real estate investments, net $ 860,456,000
$ 731,676,000
Cash and cash equivalents 22,448,000
14,388,000
Accounts and other receivables, net 5,725,000
11,249,000
Restricted cash 420,000
202,000
Real estate deposits 1,353,000
3,900,000
Identified intangible assets, net 73,423,000
74,723,000
Operating lease right-of-use assets 13,371,000
—
Other assets, net 60,419,000
60,234,000
Total assets $ 1,037,615,000
$ 896,372,000

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage loans payable, net(1) $ 26,229,000
$ 16,892,000
Line of credit and term loans(1) 357,500,000
275,000,000
Accounts payable and accrued liabilities(1) 34,810,000
32,395,000
Accounts payable due to affiliates(1) 946,000
8,588,000
Identified intangible liabilities, net 1,511,000
1,627,000
Operating lease liabilities(1) 8,961,000
—
Security deposits, prepaid rent and other liabilities(1) 9,250,000
2,827,000
Total liabilities 439,207,000
337,329,000

Commitments and contingencies (Note 10)

Redeemable noncontrolling interests (Note 11) 1,511,000
1,371,000

Stockholders’ equity:
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; none issued and outstanding —
—
Class T common stock, $0.01 par value per share; 900,000,000 shares authorized; 73,831,901 and 64,996,843 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively 738,000
650,000
Class I common stock, $0.01 par value per share; 100,000,000 shares authorized; 5,648,911 and 4,258,128 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively 57,000
42,000
Additional paid-in capital 715,949,000
621,759,000
Accumulated deficit (119,847,000 ) (64,779,000 )
Total stockholders’ equity 596,897,000
557,672,000
Total liabilities, redeemable noncontrolling interests and stockholders’ equity $ 1,037,615,000
$ 896,372,000

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)

As of September 30, ~~2019~~2020 and December 31, ~~2018~~2019

(Unaudited)

___________

(1)Such liabilities of Griffin-American Healthcare REIT IV, Inc. as of September 30, 2020 and December 31, 2019 represented liabilities of Griffin American Healthcare REIT IV Holdings, LP or its consolidated subsidiaries. Griffin-American Healthcare REIT IV Holdings, LP is a variable interest entity, or VIE, and a consolidated subsidiary of Griffin-American Healthcare REIT IV, Inc. The creditors of Griffin-American Healthcare REIT IV Holdings, LP or its consolidated subsidiaries do not have recourse against Griffin-American Healthcare REIT IV, Inc., except for the 2018 Credit Facility, as defined in Note 7, held by Griffin-American Healthcare REIT IV Holdings, LP in the amount of $479,500,000 and $396,800,000 as of September 30, 2020 and December 31, 2019, respectively, which is guaranteed by Griffin-American Healthcare REIT IV, Inc.

~~(1)~~

Such liabilities of Griffin-American Healthcare REIT IV, Inc. as of September 30, 2019 and December 31, 2018 represented liabilities of Griffin-American Healthcare REIT IV Holdings, LP or its consolidated subsidiaries. Griffin-American Healthcare REIT IV Holdings, LP is a variable interest entity, or VIE, and a consolidated subsidiary of Griffin-American Healthcare REIT IV, Inc. The creditors of Griffin-American Healthcare REIT IV Holdings, LP or its consolidated subsidiaries do not have recourse against Griffin-American Healthcare REIT IV, Inc., except for the 2018 Credit Facility, as defined in Note 7, held by Griffin-American Healthcare REIT IV Holdings, LP in the amount of $357,500,000 and $275,000,000 as of September 30, 2019 and December 31, 2018, respectively, which is guaranteed by Griffin-American Healthcare REIT IV, Inc.

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

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues and grant income:
Real estate revenue	$	21,519,000	$	19,253,000	$	64,824,000	$	53,280,000
Resident fees and services	18,948,000		11,865,000		51,863,000		34,053,000
Grant income	864,000		0		864,000		0
Total revenues and grant income	41,331,000		31,118,000		117,551,000		87,333,000
Expenses:
Rental expenses	5,905,000		4,929,000		17,723,000		14,238,000
Property operating expenses	17,397,000		9,884,000		44,856,000		28,194,000
General and administrative	3,672,000		3,982,000		11,960,000		11,413,000
Acquisition related expenses	57,000		74,000		74,000		1,492,000
Depreciation and amortization	12,669,000		9,552,000		37,919,000		35,561,000
Total expenses	39,700,000		28,421,000		112,532,000		90,898,000
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)	(4,839,000)		(4,140,000)		(15,123,000)		(11,532,000)
Gain (loss) in fair value of derivative financial instruments	1,450,000		(402,000)		(2,302,000)		(5,401,000)
Impairment of real estate investments	(3,064,000)		0		(3,064,000)		0
(Loss) income from unconsolidated entity	(377,000)		(79,000)		952,000		185,000
Other income	8,000		13,000		278,000		162,000
Loss before income taxes	(5,191,000)		(1,911,000)		(14,240,000)		(20,151,000)
Income tax benefit (expense)	39,000		(7,000)		0		(17,000)
Net loss	(5,152,000)		(1,918,000)		(14,240,000)		(20,168,000)
Less: net loss attributable to noncontrolling interests	232,000		19,000		608,000		76,000
Net loss attributable to controlling interest	$	(4,920,000)	$	(1,899,000)	$	(13,632,000)	$	(20,092,000)
Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted	$	(0.06)	$	(0.02)	$	(0.17)	$	(0.26)
Weighted average number of Class T and Class I common shares outstanding — basic and diluted	80,788,359		79,502,193		80,498,693		77,894,326

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Revenues:
Real estate revenue $ 19,253,000
$ 12,512,000
$ 53,280,000
$ 32,529,000
Resident fees and services 11,865,000
9,769,000
34,053,000
26,604,000
Total revenues 31,118,000
22,281,000
87,333,000
59,133,000
Expenses:
Rental expenses 4,929,000
3,187,000
14,238,000
8,090,000
Property operating expenses 9,884,000
7,987,000
28,194,000
21,986,000
General and administrative 3,982,000
2,105,000
11,413,000
5,803,000
Acquisition related expenses 74,000
98,000
1,492,000
254,000
Depreciation and amortization 9,552,000
9,007,000
35,561,000
24,053,000
Total expenses 28,421,000

22,384,000
90,898,000
60,186,000
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium) (4,140,000 ) (1,602,000 ) (11,532,000 ) (3,846,000 )
Loss in fair value of derivative financial instruments (402,000 ) —
(5,401,000 ) —
(Loss) income from unconsolidated entity (79,000 ) —
185,000
—
Other income 13,000
6,000
162,000
6,000
Loss before income taxes (1,911,000 ) (1,699,000 ) (20,151,000 ) (4,893,000 )
Income tax expense (7,000 ) (4,000 ) (17,000 ) (4,000 )
Net loss (1,918,000 ) (1,703,000 ) (20,168,000 ) (4,897,000 )
Less: net loss attributable to redeemable noncontrolling interests 19,000
72,000
76,000
197,000
Net loss attributable to controlling interest $ (1,899,000 ) $ (1,631,000 ) $ (20,092,000 ) $ (4,700,000 )
Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted $ (0.02 ) $ (0.03 ) $ (0.26 ) $ (0.09 )
Weighted average number of Class T and Class I common shares outstanding — basic and diluted 79,502,193
57,769,964
77,894,326
51,441,064

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

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

(Unaudited)


	Three Months Ended September 30, 2020
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
BALANCE — June 30, 2020	80,599,306	$	805,000	$	726,516,000	$	(159,366,000)	$	567,955,000	$	1,047,000	$	569,002,000
Offering costs — common stock	—	—		5,000		—		5,000		—		5,000
Issuance of common stock under the DRIP	445,239	4,000		4,243,000		—		4,247,000		—		4,247,000
Issuance of vested and nonvested restricted common stock	15,000	—		29,000		—		29,000		—		29,000
Amortization of nonvested common stock compensation	—	—		44,000		—		44,000		—		44,000
Repurchase of common stock	(71,551)	0		(706,000)		—		(706,000)		—		(706,000)
Distributions to noncontrolling interest	—	—		—		—		—		(22,000)		(22,000)
Fair value adjustment to redeemable noncontrolling interests	—	—		(208,000)		—		(208,000)		—		(208,000)
Distributions declared ($0.10 per share)	—	—		—		(8,150,000)		(8,150,000)		—		(8,150,000)
Net loss	—	—		—		(4,920,000)		(4,920,000)		(105,000)		(5,025,000)		(1)
BALANCE — September 30, 2020	80,987,994	$	809,000	$	729,923,000	$	(172,436,000)	$	558,296,000	$	920,000	$	559,216,000


	Three Months Ended September 30, 2019
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
BALANCE — June 30, 2019	79,084,339	$	791,000	$	712,076,000	$	(105,918,000)	$	606,949,000
Issuance of common stock	(1,393)	—		(14,000)		—		(14,000)
Offering costs — common stock	—	—		66,000		—		66,000
Issuance of common stock under the DRIP	691,703	7,000		6,592,000		—		6,599,000
Issuance of vested and nonvested restricted common stock	15,000	—		29,000		—		29,000
Amortization of nonvested common stock compensation	—	—		43,000		—		43,000
Repurchase of common stock	(308,837)	(3,000)		(2,820,000)		—		(2,823,000)
Fair value adjustment to redeemable noncontrolling interests	—	—		(23,000)		—		(23,000)
Distributions declared ($0.15 per share)	—	—		—��		(12,030,000)		(12,030,000)
Net loss	—	—		—		(1,899,000)		(1,899,000)		(1)
BALANCE — September 30, 2019	79,480,812	$	795,000	$	715,949,000	$	(119,847,000)	$	596,897,000

Three Months Ended September 30, 2019
Class T and Class I Common Stock

Number
of Shares
Amount
Additional
Paid-In Capital

Accumulated
Deficit

Total
Stockholders’
Equity

BALANCE — June 30, 2019 79,084,339
$ 791,000
$ 712,076,000
$ (105,918,000 ) $ 606,949,000

Issuance of common stock (1,393 ) —
(14,000 ) —
(14,000 )
Offering costs — common stock —
—
66,000
—
66,000

Issuance of common stock under the DRIP 691,703
7,000
6,592,000
—
6,599,000

Issuance of vested and nonvested restricted common stock 15,000
—
29,000
—
29,000

Amortization of nonvested common stock compensation —
—
43,000
—
43,000

Repurchase of common stock (308,837 ) (3,000 ) (2,820,000 ) —
(2,823,000 )
Fair value adjustment to redeemable noncontrolling interests —
—
(23,000 ) —
(23,000 )
Distributions declared ($0.15 per share) —
—
—
(12,030,000 ) (12,030,000 )
Net loss —
—
—
(1,899,000 ) (1,899,000 ) (1)
BALANCE — September 30, 2019 79,480,812
$ 795,000
$ 715,949,000
$ (119,847,000 ) $ 596,897,000

Three Months Ended September 30, 2018
Class T and Class I Common Stock

Number
of Shares
Amount
Additional
Paid-In Capital

Accumulated
Deficit

Total
Stockholders’
Equity

BALANCE — June 30, 2018 54,443,429
$ 544,000
$ 486,789,000
$ (40,918,000 ) $ 446,415,000

Issuance of common stock 6,259,145
62,000
62,631,000
—
62,693,000

Offering costs — common stock —
—
(5,751,000 ) —
(5,751,000 )
Issuance of common stock under the DRIP 483,737
5,000
4,663,000
—
4,668,000

Issuance of vested and nonvested restricted common stock 15,000
—
30,000
—
30,000

Amortization of nonvested common stock compensation —
—
40,000
—
40,000

Repurchase of common stock (115,847 ) (1,000 ) (1,109,000 ) —
(1,110,000 )
Fair value adjustment to redeemable noncontrolling interests —
—
(72,000 ) —
(72,000 )
Distributions declared ($0.15 per share) —
—
—
(8,744,000 ) (8,744,000 )
Net loss —
—
—
(1,631,000 ) (1,631,000 ) (1)
BALANCE — September 30, 2018 61,085,464
$ 610,000
$ 547,221,000
$ (51,293,000 ) $ 496,538,000

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY — (Continued)

For the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

(Unaudited)


	Nine Months Ended September 30, 2020
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
BALANCE — December 31, 2019	79,899,874	$	798,000	$	719,894,000	$	(130,613,000)	$	590,079,000	$	0	$	590,079,000
Offering costs — common stock	—	—		67,000		—		67,000		—		67,000
Issuance of common stock under the DRIP	1,643,731	16,000		15,665,000		—		15,681,000		—		15,681,000
Issuance of vested and nonvested restricted common stock	22,500	—		43,000		—		43,000		—		43,000
Amortization of nonvested common stock compensation	—	—		128,000		—		128,000		—		128,000
Repurchase of common stock	(578,111)	(5,000)		(5,344,000)		—		(5,349,000)		—		(5,349,000)
Contribution from noncontrolling interest	—	—		—		—		—		1,250,000		1,250,000
Distributions to noncontrolling interest	—	—		—		—		—		(54,000)		(54,000)
Fair value adjustment to redeemable noncontrolling interests	—	—		(530,000)		—		(530,000)		—		(530,000)
Distributions declared ($0.35 per share)	—	—		—		(28,191,000)		(28,191,000)		—		(28,191,000)
Net loss	—	—		—		(13,632,000)		(13,632,000)		(276,000)		(13,908,000)		(1)
BALANCE — September 30, 2020	80,987,994	$	809,000	$	729,923,000	$	(172,436,000)	$	558,296,000	$	920,000	$	559,216,000

Nine Months Ended September 30, 2019
Class T and Class I Common Stock

Number
of Shares
Amount
Additional
Paid-In Capital

Accumulated
Deficit

Total
Stockholders’
Equity

BALANCE — December 31, 2018 69,254,971
$ 692,000
$ 621,759,000
$ (64,779,000 ) $ 557,672,000

Issuance of common stock 8,884,165
89,000
88,626,000
—
88,715,000

Offering costs — common stock —
—
(7,385,000 ) —
(7,385,000 )
Issuance of common stock under the DRIP 1,987,822
20,000
19,036,000
—
19,056,000

Issuance of vested and nonvested restricted common stock 22,500
—
43,000
—
43,000

Amortization of nonvested common stock compensation —
—
121,000
—
121,000

Repurchase of common stock (668,646 ) (6,000 ) (6,186,000 ) —
(6,192,000 )
Fair value adjustment to redeemable noncontrolling interests —
—
(65,000 ) —
(65,000 )
Distributions declared ($0.45 per share) —
—
—
(34,976,000 ) (34,976,000 )
Net loss —
—
—
(20,092,000 ) (20,092,000 ) (1)
BALANCE — September 30, 2019 79,480,812
$ 795,000
$ 715,949,000
$ (119,847,000 ) $ 596,897,000


	Nine Months Ended September 30, 2018																Nine Months Ended September 30, 2019
	Class T and Class I Common Stock																Stockholders’ Equity
	Number of Shares		Amount			Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity					Class T and Class I Common Stock
BALANCE — December 31, 2017	42,207,160		$	422,000		$	376,284,000		$	(23,482,000	)	$	353,224,000
																	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
BALANCE — December 31, 2018																BALANCE — December 31, 2018	69,254,971	$	692,000	$	621,759,000	$	(64,779,000)	$	557,672,000
Issuance of common stock	17,789,763		177,000			177,486,000			—			177,663,000				Issuance of common stock	8,884,165	89,000		88,626,000		—		88,715,000
Offering costs — common stock	—		—			(16,679,000		)	—			(16,679,000		)		Offering costs — common stock	—	—		(7,385,000)		—		(7,385,000)
Issuance of common stock under the DRIP	1,302,271		13,000			12,422,000			—			12,435,000				Issuance of common stock under the DRIP	1,987,822	20,000		19,036,000		—		19,056,000
Issuance of vested and nonvested restricted common stock	22,500		—			45,000			—			45,000				Issuance of vested and nonvested restricted common stock	22,500	—		43,000		—		43,000
Amortization of nonvested common stock compensation	—		—			100,000			—			100,000				Amortization of nonvested common stock compensation	—	—		121,000		—		121,000
Repurchase of common stock	(236,230	)	(2,000		)	(2,240,000		)	—			(2,242,000		)		Repurchase of common stock	(668,646)	(6,000)		(6,186,000)		—		(6,192,000)

Fair value adjustment to redeemable noncontrolling interests	—		—			(197,000		)	—			(197,000		)		Fair value adjustment to redeemable noncontrolling interests	—	—		(65,000)		—		(65,000)
Distributions declared ($0.45 per share)	—		—			—			(23,111,000		)	(23,111,000		)		Distributions declared ($0.45 per share)	—	—		—		(34,976,000)		(34,976,000)
Net loss	—		—			—			(4,700,000		)	(4,700,000		)	(1)	Net loss	—	—		—		(20,092,000)		(20,092,000)		(1)
BALANCE — September 30, 2018	61,085,464		$	610,000		$	547,221,000		$	(51,293,000	)	$	496,538,000

BALANCE — September 30, 2019																BALANCE — September 30, 2019	79,480,812	$	795,000	$	715,949,000	$	(119,847,000)	$	596,897,000

___________


~~(1)~~	~~Amount excludes$19,000 and $72,000 for the three months ended September 30, 2019 and 2018, respectively, and~~$76,000 and $197,000 for the nine months ended September 30, 2019 and 2018, respectively, of net loss attributable to redeemable noncontrolling interests. See Note 11, Redeemable Noncontrolling Interests, for a further discussion.

(1)Amount excludes $127,000 and $19,000 for the three months ended September 30, 2020 and 2019, respectively, and $332,000 and $76,000 for the nine months ended September 30, 2020 and 2019, respectively, of net loss attributable to redeemable noncontrolling interests. See Note 11, Redeemable Noncontrolling Interests, for a further discussion.

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

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

(Unaudited)


	Nine Months Ended September 30,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(14,240,000)	$	(20,168,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	37,919,000		35,561,000

Other amortization	2,084,000		1,869,000
Deferred rent	(3,440,000)		(1,886,000)
Stock based compensation	171,000		164,000
Income from unconsolidated entity	(952,000)		(185,000)
Distributions of earnings from unconsolidated entity	0		75,000
Change in fair value of derivative financial instruments	2,302,000		5,401,000
Impairment of real estate investments	3,064,000		0
Changes in operating assets and liabilities:
Accounts and other receivables	1,347,000		3,854,000
Other assets	(1,654,000)		256,000
Accounts payable and accrued liabilities	3,436,000		6,023,000
Accounts payable due to affiliates	27,000		142,000
Security deposits, prepaid rent, operating lease and other liabilities	(121,000)		(674,000)
Net cash provided by operating activities	29,943,000		30,432,000
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of real estate investments	(68,032,000)		(153,923,000)
Capital expenditures	(6,729,000)		(4,388,000)
Investment in unconsolidated entity	0		(600,000)
Distributions in excess of earnings from unconsolidated entity	0		1,013,000
Real estate deposits	0		2,547,000
Pre-acquisition expenses	0		(179,000)
Net cash used in investing activities	(74,761,000)		(155,530,000)
CASH FLOWS FROM FINANCING ACTIVITIES

Payments on mortgage loans payable	(8,166,000)		(459,000)
Borrowings under the line of credit and term loans	140,800,000		165,600,000
Payments on the line of credit and term loans	(58,100,000)		(83,100,000)
Deferred financing costs	(43,000)		(65,000)
Proceeds from issuance of common stock	0		90,438,000
Payment of offering costs	(4,876,000)		(17,457,000)
Distributions paid	(13,932,000)		(15,446,000)
Repurchase of common stock	(5,349,000)		(6,192,000)
Contribution from noncontrolling interest	1,250,000		0
Distributions to noncontrolling interest	(54,000)		0
Contributions from redeemable noncontrolling interest	1,118,000		151,000
Distributions to redeemable noncontrolling interests	(81,000)		0
Security deposits	(199,000)		(94,000)
Net cash provided by financing activities	52,368,000		133,376,000
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	7,550,000		8,278,000
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	15,846,000		14,590,000
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	23,396,000	$	22,868,000

Nine Months Ended September 30,
2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (20,168,000 ) $ (4,897,000 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 35,561,000
24,053,000
Other amortization 1,869,000
620,000
Deferred rent (1,886,000 ) (2,045,000 )
Stock based compensation 164,000
145,000
Income from unconsolidated entity (185,000 ) —
Distributions of earnings from unconsolidated entity 75,000
—
Bad debt expense, net 982,000
181,000
Change in fair value of derivative financial instruments 5,401,000
—
Changes in operating assets and liabilities:
Accounts and other receivables 2,872,000
(5,863,000 )
Other assets 256,000
(430,000 )
Accounts payable and accrued liabilities 6,023,000
4,176,000
Accounts payable due to affiliates 142,000
217,000
Security deposits, prepaid rent, operating lease and other liabilities (674,000 ) (480,000 )
Net cash provided by operating activities 30,432,000
15,677,000
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of real estate investments (153,923,000 ) (248,423,000 )
Investment in unconsolidated entity (600,000 ) —
Distributions in excess of earnings from unconsolidated entity 1,013,000
—
Capital expenditures (4,388,000 ) (5,166,000 )
Real estate deposits 2,547,000
(3,750,000 )
Pre-acquisition expenses (179,000 ) (422,000 )
Net cash used in investing activities (155,530,000 )
(257,761,000 )
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgage loans payable (459,000 ) (323,000 )
Borrowings under the line of credit and term loans 165,600,000
425,500,000
Payments on the line of credit and term loans (83,100,000 ) (309,600,000 )
Deferred financing costs (65,000 ) (145,000 )
Proceeds from issuance of common stock 90,438,000
176,417,000
Repurchase of common stock (6,192,000 ) (2,242,000 )
Contribution from redeemable noncontrolling interest 151,000
276,000
Payment of offering costs (17,457,000 ) (14,030,000 )
Security deposits (94,000 ) (16,000 )
Distributions paid (15,446,000 ) (9,833,000 )
Net cash provided by financing activities 133,376,000
266,004,000
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 8,278,000
23,920,000
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period 14,590,000
7,103,000
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period $ 22,868,000
$ 31,023,000

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

For the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

(Unaudited)


						Nine Months Ended September 30,
	Nine Months Ended September 30,					2020		2019
	2019		2018
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH					RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period:					Beginning of period:
Cash and cash equivalents	$	14,388,000	$	7,087,000	Cash and cash equivalents	$	15,290,000	$	14,388,000
Restricted cash	202,000		16,000		Restricted cash	556,000		202,000
Cash, cash equivalents and restricted cash	$	14,590,000	$	7,103,000	Cash, cash equivalents and restricted cash	$	15,846,000	$	14,590,000
End of period:					End of period:
Cash and cash equivalents	$	22,448,000	$	30,841,000	Cash and cash equivalents	$	22,690,000	$	22,448,000
Restricted cash	420,000		182,000		Restricted cash	706,000		420,000
Cash, cash equivalents and restricted cash	$	22,868,000	$	31,023,000	Cash, cash equivalents and restricted cash	$	23,396,000	$	22,868,000

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for:					Cash paid for:
Interest	$	9,369,000	$	3,010,000	Interest	$	13,777,000	$	9,369,000
Income taxes	$	21,000	$	12,000	Income taxes	$	88,000	$	21,000
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES					SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Investing Activities:					Investing Activities:
Accrued capital expenditures	$	4,205,000	$	2,531,000	Accrued capital expenditures	$	2,182,000	$	4,205,000
Tenant improvement overage					Tenant improvement overage	$	636,000	$	195,000
Accrued pre-acquisition expenses	$	184,000	$	805,000	Accrued pre-acquisition expenses	$	0	$	184,000
Tenant improvement overage	$	195,000	$	435,000
The following represents the increase in certain assets and liabilities in connection with our acquisitions of real estate investments:					The following represents the increase in certain assets and liabilities in connection with our acquisitions of real estate investments:
Right-of-use asset	$	2,196,000	$	—	Right-of-use asset	$	0	$	2,196,000
Other assets	$	86,000	$	200,000	Other assets	$	196,000	$	86,000
Mortgage loans payable, net	$	9,735,000	$	5,808,000
Mortgage loan payable, net					Mortgage loan payable, net	$	0	$	9,735,000
Accounts payable and accrued liabilities	$	783,000	$	589,000	Accounts payable and accrued liabilities	$	201,000	$	783,000
Operating lease liability	$	3,552,000	$	—	Operating lease liability	$	0	$	4,489,000
Security deposits and prepaid rent	$	1,343,000	$	1,592,000	Security deposits and prepaid rent	$	11,000	$	1,343,000
Financing Activities:					Financing Activities:
Issuance of common stock under the DRIP	$	19,056,000	$	12,435,000	Issuance of common stock under the DRIP	$	15,681,000	$	19,056,000
Distributions declared but not paid	$	3,933,000	$	2,960,000	Distributions declared but not paid	$	2,664,000	$	3,933,000
Accrued Contingent Advisor Payment	$	—	$	7,750,000
Accrued stockholder servicing fee	$	14,241,000	$	15,203,000	Accrued stockholder servicing fee	$	7,667,000	$	14,241,000
Receivable from transfer agent	$	—	$	1,667,000

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

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT IV, Inc. and its subsidiaries, including Griffin-American Healthcare REIT IV Holdings, LP, except where otherwise noted.

1. Organization and Description of Business

Griffin-American Healthcare REIT IV, Inc., a Maryland corporation, was incorporated on January 23, 2015 and therefore we consider that our date of inception. We were initially capitalized on February 6, 2015. We invest in a diversified portfolio of real estate properties, focusing primarily on medical office buildings, ~~hospitals,~~ skilled nursing facilities, senior housing and other healthcare-related facilities. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). ~~We may also originate and acquire secured loans and real estate-related investments on an infrequent and opportunistic basis.~~ We generally seek investments that produce current income. We qualified to be taxed as a real estate investment trust, or REIT, under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to qualify to be taxed as a REIT.

On February 16, 2016, we commenced our initial public offering, or our initial offering, in which we were initially offering to the public up to $3,150,000,000 in shares of our Class T common stock, consisting of up to $3,000,000,000 in shares of our Class T common stock in the primary portion of our initial offering and up to $150,000,000 in shares of our Class T common stock pursuant to our distribution reinvestment plan, as amended, or the DRIP. Effective June 17, 2016, we reallocated certain of the unsold shares of Class T common stock being offered and began offering shares of Class I common stock, such that we were offering up to approximately $2,800,000,000 in shares of Class T common stock and $200,000,000 in shares of Class I common stock in the primary portion of our initial offering, and up to an aggregate of $150,000,000 in shares of our Class T and Class I common stock pursuant to the DRIP, aggregating up to $3,150,000,000. On February 15, 2019, we terminated our initial offering, and as of such date, we sold 75,639,681 aggregate shares of our Class T and Class I common stock, or approximately $754,118,000, and a total of $31,021,000 in distributions were reinvested that resulted in 3,253,535 shares of our common stock being issued pursuant to the DRIP portion of our initial offering. ~~See Note 12, Equity — Common Stock, for a further discussion.~~

On January 18, 2019, we filed a Registration Statement on Form S-3 under the Securities Act of 1933, as amended, or the Securities Act, to register a maximum of $100,000,000 of additional shares of our common stock to be issued pursuant to the DRIP, or the 2019 DRIP Offering. The Registration Statement on Form S-3 was automatically effective with the United States Securities and Exchange Commission, or the SEC, upon its filing. We commenced offering shares pursuant to the 2019 DRIP Offering on March 1, 2019, following the termination of our initial offering on February 15, 2019. See Note 12, Equity — Distribution Reinvestment Plan, for a further discussion. As of September 30, 2020, a total of $37,290,000 in distributions were reinvested that resulted in 3,903,895 shares of our common stock being issued pursuant to the 2019 DRIP Offering. We collectively refer to the DRIP portion of our initial offering and the 2019 DRIP Offering as our DRIP Offerings. ~~As of September 30, 2019, a total of $15,131,000 in distributions were reinvested that resulted in 1,581,073 shares of our common stock being issued pursuant to the 2019 DRIP Offering.~~

We conduct substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership. We are externally advised by Griffin-American Healthcare REIT IV Advisor, LLC, or our advisor, pursuant to an advisory agreement, or the Advisory Agreement, between us and our advisor. The Advisory Agreement was effective as of February 16, 2016 and had a one-year initial term, subject to successive one-year renewals upon the mutual consent of the parties. The Advisory Agreement was last renewed pursuant to the mutual consent of the parties on February 12, ~~2019~~2020 and expires on February 16, ~~2020.~~2021. Our advisor uses its best efforts, subject to the oversight and review of our board of directors, or our board, to, among other things, research, identify, review and make investments in and dispositions of properties and securities on our behalf consistent with our investment policies and objectives. Our advisor performs its duties and responsibilities under the Advisory Agreement as our fiduciary. Our advisor is 75.0% owned and managed by wholly owned subsidiaries of American Healthcare Investors, LLC, or American Healthcare Investors, and 25.0% owned by a wholly owned subsidiary of Griffin Capital Company, LLC, or Griffin Capital, or collectively, our co-sponsors. American Healthcare Investors is 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Colony Capital, Inc. (NYSE: CLNY), or Colony Capital, and 7.8% owned by James F. Flaherty III, a former partner of Colony Capital. We are not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Colony Capital or Mr. Flaherty; however, we are affiliated with ~~Griffin-American Healthcare REIT IV Advisor, LLC,~~our advisor, American Healthcare Investors and AHI Group Holdings.

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

We currently operate through ~~four~~4 reportable business segments: medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities. As of September 30, ~~2019,~~2020, we had completed 4146 property acquisitions whereby we owned 7889 properties, comprising 8394 buildings, or approximately ~~4,359,000~~4,863,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of ~~$981,689,000.~~$1,089,071,000. As of September 30, ~~2019,~~2020, we also ~~own~~owned a 6.0% interest in a joint venture which owns a portfolio of integrated senior health campuses and ancillary businesses.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

2. Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding our accompanying condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes thereto are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying condensed consolidated financial statements.

Basis of Presentation

Our accompanying condensed consolidated financial statements include our accounts and those of our operating partnership and the wholly owned subsidiaries of our operating partnership, as well as any VIEs in which we are the primary beneficiary. We evaluate our ability to control an entity, and whether the entity is a VIE and we are the primary beneficiary, by considering substantive terms of the arrangement and identifying which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance.

We operate and intend to continue to operate in an umbrella partnership REIT structure in which our operating partnership, or wholly owned subsidiaries of our operating partnership, will own substantially all of the interests in properties acquired on our behalf. We are the sole general partner of our operating partnership, and as of both September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we owned greater than a 99.99% general partnership interest therein. Our advisor is a limited partner, and as of both September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, owned less than a 0.01% noncontrolling limited partnership interest in our operating partnership.

Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our accompanying condensed consolidated financial statements. All intercompany accounts and transactions are eliminated in consolidation.

Interim Unaudited Financial Data

Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to ~~SEC~~the SEC’s rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results that may be expected for the full year; such full year results may be less favorable.

In preparing our accompanying condensed consolidated financial statements, management has evaluated subsequent events through the financial statement issuance date. We believe that although the disclosures contained herein are adequate to prevent the information presented from being misleading, our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our ~~2018~~2019 Annual Report on Form 10-K, as filed with the SEC on March ~~18, 2019.~~19, 2020.

Use of Estimates

The preparation of our accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities, at the date of our condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the initial and recurring valuation of certain assets acquired and liabilities assumed through

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

property acquisitions, revenues and grant income, allowance for ~~uncollectible accounts,~~credit losses, impairment of long-lived assets and contingencies. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.

~~Leases~~

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Revenue Recognition — Resident Fees and Services Revenue

Disaggregation of Resident Fees and Services Revenue

The following tables disaggregate our resident fees and services revenue by line of business, according to whether such revenue is recognized at a point in time or over time:


	Three Months Ended September 30,
	2020						2019
	Point in Time		Over Time		Total		Point in Time		Over Time		Total
Senior housing — RIDEA	$	174,000	$	18,774,000	$	18,948,000	$	144,000	$	11,721,000	$	11,865,000


	Nine Months Ended September 30,
	2020						2019
	Point in Time		Over Time		Total		Point in Time		Over Time		Total
Senior housing — RIDEA	$	746,000	$	51,117,000	$	51,863,000	$	501,000	$	33,552,000	$	34,053,000

The following tables disaggregate our resident fees and services revenue by payor class:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Private and other payors	$	17,300,000	$	10,451,000	$	46,766,000	$	29,553,000
Medicaid	1,648,000		1,414,000		5,097,000		4,500,000
Total resident fees and services	$	18,948,000	$	11,865,000	$	51,863,000	$	34,053,000

Accounts Receivable, Net — Resident Fees and Services

The beginning and ending balances of accounts receivable, net— resident fees and services are as follows:


	Medicaid		Private and Other Payors		Total
Beginning balance — January 1, 2020	$	3,154,000	$	650,000	$	3,804,000
Ending balance — September 30, 2020	2,317,000		1,234,000		3,551,000
(Decrease)/increase	$	(837,000)	$	584,000	$	(253,000)

Government Grants

We have been granted stimulus funds through various federal and state government programs, such as through the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, passed by the federal government on March 27, 2020, which were established for eligible healthcare providers to preserve liquidity in response to lost revenues and/or increased healthcare expenses (as such terms are defined in the applicable regulatory guidance) associated with the coronavirus, or COVID-19, pandemic. Such grants are not loans and, as such, are not required to be repaid, subject to certain conditions. We recognize government grants as grant income or as a reduction of property operating expenses, as applicable, in our accompanying condensed consolidated statements of operations when there is reasonable assurance that the grants will be received and all conditions to retain the funds will be met. We adjust our estimates and assumptions based on the applicable guidance provided by the government and the best available information that we have. Any stimulus or other relief funds received that are not expected to be used in accordance with such terms and conditions will be returned to the government. For both the three and nine months ended September 30, 2020, we recognized government grants of $864,000as grant income. For both the three and nine months ended September 30, 2019, we did 0t recognize any government grants.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Tenant and Resident Receivables and Allowances

On January 1, ~~2019,~~2020, we adopted Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic ~~842,~~ ~~Leases~~326, Financial Instruments Credit Losses, or ASC Topic ~~842. ASC Topic 842 supersedes ASC Topic 840,~~ ~~Leases, or ASC Topic 840.~~326. We adopted ASC Topic ~~842~~326 using the modified retrospective approach whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net cumulative effect adjustment to retained earnings as of January 1, 2019 as a result of this adoption. Therefore, with respect to our leases as both lessees and lessors, information is presented under ASC Topic 842 as of and for the three and nine months ended September 30, 2019, and under ASC Topic 840 as of December 31, 2018 and for the three and nine months ended September 30, 2018. In addition, ASC Topic 842 provides a practical expedient package that allows an entity to not reassess the following upon adoption (must be elected as a group): (i) whether an expired or existing contract contains a lease arrangement; (ii) the lease classification related to expired or existing lease arrangements; or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs. We elected such practical expedient package upon our adoption of ASC Topic 842 on January 1, 2019. We determine if a contract is a lease upon inception of the lease. We maintain a distinction between finance and operating leases, which is substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance.

~~Lessee:~~ Pursuant to ASC Topic 842, lessees are required to recognize the following for all leases with terms greater than 12 months at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The lease liability is calculated by using either the implicit rate of the lease or the incremental borrowing rate. As a result of the adoption of ASC Topic 842 on January 1, 2019, we recognized an initial amount of operating lease liabilities of $5,334,000 in our condensed consolidated balance sheet for all of our ground leases. In addition, we recorded corresponding right-of-use assets of $11,239,000, which are the lease liabilities, net of the existing accrued straight-line rent liabilities and adjusted for unamortized above/below market ground lease intangibles. The accretion of lease liabilities and amortization expense on right-of-use assets for our operating leases are included in rental expenses in our accompanying condensed consolidated statements of operations.~~Operating lease liabilities are calculated using our incremental borrowing rate based on the information available as of the lease commencement date.~~

~~Lessor:~~ Pursuant to ASC Topic 842, lessors bifurcate lease revenues into lease components and non-lease components and separately recognize and disclose non-lease components that are executory in nature. Lease components continue to be recognized on a straight-line basis over the lease term and certain non-lease components may be accounted for under the new revenue recognition guidance in ASC Topic 606, ~~Revenue from Contracts with Customers,~~ or ASC Topic 606. See “Revenue Recognition” section below. ASC Topic 842 also provides for a practical expedient that permits lessors to not separate non-lease components from the associated lease component if certain conditions are met. Such practical expedient is limited to circumstances in which: (i) the timing and pattern of transfer are the same for the non-lease component and the related lease component; and (ii) the lease component, if accounted for separately, would be classified as an operating lease. In addition, such practical expedient causes an entity to assess whether a contract is predominately lease or service based, and recognize the revenue from the entire contract under the relevant accounting guidance. Effective upon our adoption of ASC Topic 842 on January 1, 2019, we recognize revenue for our medical office buildings, senior housing and skilled nursing facilities segments under ASC Topic 842 as real estate revenue. Minimum annual rental revenue is recognized on a straight-line basis over the term of the related lease (including rent holidays). Differences between real estate revenue recognized and cash amounts contractually due from tenants under the lease agreements are recorded to deferred rent receivable. Tenant reimbursement revenue, which comprises additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, are considered non-lease components. We qualified for and elected the practical expedient as outlined above to combine the non-lease component with the lease component, which is the predominant component, and therefore is recognized as part of real estate revenue. In addition, as lessors, we exclude certain lessor costs (i.e., property taxes and insurance) paid directly by a lessee to third parties on our behalf from our measurement of variable lease revenue and associated expense (i.e., no gross up of revenue and expense for these costs); and include lessor costs that we paid and are reimbursed by the lessee in our measurement of variable lease revenue and associated expense (i.e., gross up revenue and expense for these costs). Therefore, we no longer record revenue or expense when the lessee pays the property taxes and insurance directly to a third party.

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

~~Our senior housing~~ — RIDEA facilities offer residents room and board (lease component), standard meals and monthly healthcare services (non-lease component), and certain ancillary services that are not contemplated in the lease with each resident (i.e., laundry, guest meals, etc.). For our senior housing — RIDEA facilities, we recognize revenue under ASC Topic 606 as resident fees and services, based on our predominance assessment from electing the practical expedient outlined above. See “Revenue Recognition” section below.

~~See Note 16, Leases, for a further discussion.~~

~~Revenue Recognition~~

On January 1, 2018, we adopted ASC Topic 606, applying the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The adoption of ASC Topic 606 did not have a material impact on the measurement nor on the recognition of revenue as of January 1, 2018; therefore, no cumulative adjustment has been made to the opening balance of retained earnings at the beginning of 2018.

~~Real estate revenue~~

Prior to January 1, 2019, minimum annual rental revenue was recognized on a straight-line basis over the term of the related lease (including rent holidays) in accordance with ASC Topic 840. Differences between real estate revenue recognized and cash amounts contractually due from tenants under the lease agreements were recorded to deferred rent receivable. Tenant reimbursement revenue was recognized as revenue in the period in which the related expenses were incurred. Tenant reimbursements were recognized and presented in accordance with ASC Subtopic 606-10-55-36, ~~Revenue Recognition~~ — ~~Principal Versus Agent Consideration,~~ or ASC Subtopic 606. ASC Subtopic 606 requires that these reimbursements be recorded on a gross basis as we are generally primarily responsible to fulfill the promise to provide specified goods and services. We recognized lease termination fees at such time when there was a signed termination letter agreement, all of the conditions of such agreement had been met and the tenant was no longer occupying the property.

~~Effective January 1, 2019, we recognize real estate revenue in accordance with ASC Topic 842. See “Leases” section above.~~

~~Resident fees and services revenue~~

~~Disaggregation of Resident Fees and Services Revenue~~

Resident fees and services revenue includes fees for basic housing and assisted living care. We record revenue when services are rendered at amounts billable to individual residents. Residency agreements are generally for a term of 30 days, with resident fees billed monthly in advance. For patients under reimbursement arrangements with Medicaid, revenue is recorded based on contractually agreed-upon amounts or rates on a per resident, daily basis or as services are rendered. The following tables disaggregate our resident fees and services revenue by line of business, according to whether such revenue is recognized at a point in time or over time:

Three Months Ended September 30,
2019 2018
Point in Time Over Time Total Point in Time Over Time Total
Senior housing — RIDEA $ 144,000
$ 11,721,000
$ 11,865,000
$ 219,000
$ 9,550,000
$ 9,769,000

Nine Months Ended September 30,

2019
2018

Point in Time
Over Time
Total
Point in Time
Over Time
Total
Senior housing — RIDEA
$ 501,000

$ 33,552,000

$ 34,053,000

$ 639,000

$ 25,965,000

$ 26,604,000

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

~~The following tables disaggregate our resident fees and services revenue by payor class:~~

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Medicaid $ 1,414,000
$ 1,498,000
$ 4,500,000
$ 4,495,000
Private and other payors 10,451,000
8,271,000
29,553,000
22,109,000
Total resident fees and services $ 11,865,000
$ 9,769,000
$ 34,053,000
$ 26,604,000

~~Accounts Receivable, Net~~ — ~~Resident Fees and Services~~

~~The beginning and ending balances of accounts receivable, net~~— ~~resident fees and services are as follows:~~

Medicaid
Private
and
Other Payors
Total
Beginning balance — January 1, 2019
$ 6,098,000
$ 644,000
$ 6,742,000
Ending balance — September 30, 2019
4,011,000
931,000
4,942,000
(Decrease)/increase $ (2,087,000 ) $ 287,000
$ (1,800,000 )

~~Financing Component~~

We have elected the practical expedient allowed under ASC Topic 606-10-32-18 and, therefore, we do not adjust the promised amount of consideration from patients and third-party payors for the effects of a significant financing component due to our expectation that the period between the time the service is provided to a patient and the time that the patient or a third-party payor pays for that service will be one year or less.

~~Contract Costs~~

We have applied the practical expedient provided by ASC Topic 340-40-25-4 and, therefore, all incremental customer contract acquisition costs are expensed as they are incurred since the amortization period of the asset that we otherwise would have recognized is one year or less in duration.

~~Tenant and Resident Receivables and Allowance for Uncollectible Accounts~~2020.

Resident receivables are carried net of an allowance for ~~uncollectible amounts.~~credit losses. An allowance is maintained for estimated losses resulting from the inability of residents and payors to meet the contractual obligations under their lease or service agreements. ~~Upon our adoption of ASC Topic 606, substantially~~Substantially all of such allowances are recorded as direct reductions of resident fees and services revenue as contractual adjustments provided to third-party payors or implicit price concessions in our accompanying condensed consolidated statements of operations. Our determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, the residents’ financial condition, security deposits, cash collection patterns by payor and by state, current economic conditions, future expectations in estimating credit losses and other relevant factors.

~~Prior to our adoption of ASC Topic 842, tenant~~ Tenant receivables and unbilled deferred rent receivables ~~were~~are reduced for uncollectible ~~amounts. Such~~ amounts, ~~were charged to bad debt expense,~~ which ~~was included in general and administrative in our accompanying condensed consolidated statements of operations. Effective upon our adoption of ASC Topic 842 on January 1, 2019, such amounts~~ are recognized as direct reductions of real estate revenue in our accompanying condensed consolidated statements of operations.

~~Derivative Financial Instruments~~As of September 30, 2020 and December 31, 2019, we had $1,653,000 and $902,000, respectively, in allowances, which were determined necessary to reduce receivables by our expected future credit losses. For the nine months ended September 30, 2020 and 2019, we increased allowances by $937,000 and $1,776,000, respectively, and reduced allowances for collections or adjustments by $126,000 and $766,000, respectively. For the nine months ended September 30, 2020 and 2019, $60,000 and $346,000, respectively, of our receivables were written off against the related allowances.

Income Taxes

We qualified, and elected to be taxed, as a REIT under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to qualify to be taxed as a REIT. To maintain our qualification as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute to our stockholders a minimum of 90.0% of our annual taxable income, excluding net capital gains. Such distributions are ~~exposed~~required to be paid at least 20.0% in cash and 80.0% in stock. In May 2020, in response to the COVID-19 pandemic, the Internal Revenue Service, or IRS, temporarily reduced the cash distribution requirement to a minimum of 10.0%, which is applicable with respect to the aggregate distributions declared on or after April 1, 2020 until December 31, 2020. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.

If we fail to maintain our qualification as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the IRS grants us relief under certain statutory provisions. Such an event could have a material adverse effect ~~of interest rate changes~~on our net income and net cash available for distribution to our stockholders.

We may be subject to certain state and local income taxes on our income, property or net worth in some jurisdictions, and in certain circumstances we may also be subject to federal excise taxes on undistributed income. In addition, certain activities that we undertake are conducted by subsidiaries, which we elected to be treated as taxable REIT subsidiaries, or TRS, to allow us to provide services that would otherwise be considered impermissible for REITs. Accordingly, we recognize income tax benefit or expense for the ~~normal course of business.~~ federal, state and local income taxes incurred by our TRS.

We ~~seek~~follow ASC Topic 740, Income Taxes, to ~~mitigate these risks by following established risk management policies~~recognize, measure, present and procedures, which include the occasional use of derivatives. Our primary strategy in entering into derivative contracts, such as fixed interest rate swaps, is to add stability to interest expense and to manage our exposure to interest rate movements by effectively converting a portion of our variable-rate debt to fixed-rate debt. We do not enter into derivative instruments for speculative purposes.

~~Derivatives are recognized as either assets or liabilities~~disclose in our accompanying condensed consolidated ~~balance sheets~~financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of and for the nine months ended September 30, 2020 and 2019, we did not have any tax benefits or liabilities for uncertain tax positions that we believe should be recognized in our accompanying condensed consolidated financial statements.

We account for deferred income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are ~~measured at fair value~~expected to reverse. Deferred tax assets reflect the impact of the future deductibility of operating loss carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in ~~accordance with ASC Topic 815,~~ ~~Derivatives~~the valuation allowance that results from a change in circumstances, and ~~Hedging, or ASC Topic 815. ASC Topic 815~~

that causes us to change our judgment about the realizability of the related deferred tax asset, is included in

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

~~establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded~~income tax benefit or expense in ~~other contracts and for hedging activities. Since~~ our ~~derivative instruments are not designated as hedge instruments, they do not qualify for hedge accounting under ASC Topic 815. Changes~~accompanying condensed consolidated statements of operations when such changes occur. Any increase or decrease in the ~~fair value~~deferred tax liability that results from a change in circumstances, and that causes us to change our judgment about expected future tax consequences of ~~derivative financial instruments are~~events, is recorded ~~as a component of interest~~in income tax benefit or expense ~~in gain or loss in fair value of derivative financial instruments~~ in our accompanying condensed consolidated statements of operations.

Deferred tax assets are included in other assets, net, and deferred tax liabilities are included in security deposits, prepaid rent and other liabilities, in our accompanying condensed consolidated balance sheets.

See Note ~~8, Derivative Financial Instruments, and Note 14, Fair Value Measurements,~~15, Income Taxes, for a further ~~discussion of our derivative financial instruments.~~discussion.

Recently Issued Accounting Pronouncements

In ~~June 2016,~~March 2020, the FASB issued Accounting Standards Update, or ASU, ~~2016-13,~~ ~~Measurement~~2020-04, Facilitation of ~~Credit Losses~~the Effects of Reference Rate Reform on Financial ~~Instruments,~~ Reporting, orASU 2020-04, which provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Inter-bank Offered Rate, or LIBOR, or another reference rate expected to be discontinued. ASU 2016-13, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. Subsequently, in November 2018, the FASB issued ASU 2018-19, ~~Codification Improvements to Topic 326, Financial Instruments~~ — ~~Credit Losses,~~ ~~or ASU 2018-19~~, ~~which amended the scope of ASU 2016-13 to clarify that operating lease receivables should be accounted for under the new leasing standard ASC Topic 842. In April 2019, the FASB issued ASU 2019-04,~~ ~~Codification Improvements to Topic 326, Financial Instruments~~ — ~~Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,~~ ~~or ASU 2019-04~~, ~~to increase stakeholders’ awareness of the amendments and to expedite improvements to the Accounting Standards Codification. In May 2019, the FASB issued ASU 2019-05,~~ ~~Targeted Transition Relief,~~ or ASU 2019-05, to address certain stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. ASU 2016-13, ASU 2018-19, ASU 2019-04 and ASU 2019-05 are effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted. We do not expect the adoption of such accounting pronouncements on January 1, 2020 to have a material impact to our consolidated financial statements and disclosures based on our ongoing evaluation.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Changes to the Disclosure Requirements for Fair Value Measurement,~~ or~~ASU 2018-13, which modifies the disclosure requirements in ASC Topic 820,~~ ~~Fair Value Measurements and Disclosures~~, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. ASU 2018-132020-04 is effective for fiscal years and interim periods beginning after March 12, 2020 through December ~~15, 2019. Early adoption~~31, 2022. We are currently evaluating this guidance to determine the impact on our disclosures.

In April 2020, the FASB issued a question and answer document, or the Lease Modification Q&A, to provide guidance for the application of lease accounting modifications within ASC Topic 842, Leases, or ASC Topic 842, to lease concessions granted by lessors related to the effects of the COVID-19 pandemic. Lease accounting modification guidance in ASC Topic 842 addresses routine changes or enforceable rights and obligations to lease terms as a result of negotiations between the lessor and the lessee; however, the guidance does not take into consideration concessions granted to address sudden liquidity constraints of lessees arising from the COVID-19 pandemic. The underlying premise of ASC Topic 842 requires a modified lease to be accounted for as a new lease if the modified terms and conditions affect the economics of the lease for the remainder of the lease term. Further, a lease modification resulting from lease concessions would require the application of the modification framework pursuant to ASC Topic 842 on a lease-by-lease basis. The potential large volume of contracts to be assessed due to the COVID-19 pandemic may be burdensome and complex for entities to evaluate the lease modification accounting for each lease. Therefore, the Lease Modification Q&A allows entities to elect to account for lease concessions related to the effects of the COVID-19 pandemic as if they were granted under the enforceable rights included in the original contract and are outside of the lease modification framework pursuant to ASC Topic 842. Such election is ~~permitted~~available for ~~any removed or modified disclosures. We~~lease concessions that do not ~~expect~~result in a substantial increase in the ~~adoption~~rights of ~~ASU 2018-13 on January 1, 2020~~the lessor or the obligations of the lessee (e.g., total payments required by the modified contract being substantially the same as or less than total payments required by the original contract) and is to be applied consistently to leases with similar characteristics and circumstances.

As a result of the COVID-19 pandemic, we have granted lease concessions to an insignificant number of tenants within our medical office building segment, such as in the form of rent abatements with lease term extensions and rent payment deferrals requiring payment within one year. Such concessions were not material to our condensed consolidated financial statements, and as such, we elected not to apply the relief from lease modification accounting provided in the Lease Modification Q&A. We evaluate each lease concession granted as a result of the COVID-19 pandemic to determine whether the concession reflects: (i) a resolution of contractual rights in the original lease and is thus outside of the lease modification framework of ASC Topic 842; or (ii) a modification for which we would be required to apply the lease modification framework of ASC Topic 842. The application of the lease modification framework of ASC Topic 842 to lease concessions granted due to the effects of the COVID-19 pandemic did not have a material impact toon our condensed consolidated financial ~~statement disclosures.~~

~~3. Real Estate Investments, Net~~

~~Our real estate investments, net consisted of the following as of~~ ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018:~~statements.

September 30,
2019

December 31,
2018
Building and improvements $ 799,475,000
$ 668,814,000
Land 98,822,000
83,084,000
Furniture, fixtures and equipment 6,088,000
5,090,000
904,385,000
756,988,000
Less: accumulated depreciation (43,929,000 ) (25,312,000 )
Total $ 860,456,000
$ 731,676,000

~~Depreciation expense for the three months ended September 30, 2019 and 2018 was~~ ~~$6,806,000~~ ~~and $4,384,000, respectively, and for the nine months ended September 30, 2019 and 2018 was~~ ~~$20,256,000~~ and $11,581,000, respectively. In addition to the property acquisitions discussed below, for the three and nine months ended September 30, 2019, we incurred capital expenditures of $1,344,000 and $2,190,000, respectively, for our medical office buildings and $309,000 and $1,207,000, respectively, for our senior housing — RIDEA facilities. We did not incur any capital expenditures for our senior housing facilities or skilled nursing facilities for the three and nine months ended September 30, 2019.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

3. Real Estate Investments, Net

Our real estate investments, net consisted of the following as of September 30, 2020 and December 31, 2019:



	September 30, 2020		December 31, 2019
Building and improvements	$	883,849,000	$	836,091,000
Land	109,420,000		103,371,000
Furniture, fixtures and equipment	8,241,000		6,656,000
	1,001,510,000		946,118,000
Less: accumulated depreciation	(73,444,000)		(51,058,000)
Total	$	928,066,000	$	895,060,000

Depreciation expense for the three months ended September 30, 2020 and 2019 was $7,966,000 and $6,806,000, respectively, and for the nine months ended September 30, 2020 and 2019 was $23,698,000 and $20,256,000, respectively. We determined that 2 senior housing — RIDEA facilities were impaired and recognized an aggregate impairment charge of $3,064,000 for both the three and nine months ended September 30, 2020, which reduced the total aggregate carrying value of such assets to $6,993,000. The carrying values of such senior housing — RIDEA facilities were then reclassified to properties held for sale, which is included in other assets, net in our accompanying condensed consolidated balance sheets. The fair values of such facilities were based on their projected sales prices obtained from an independent third party using comparable market information and adjusted for anticipated selling costs of such facilities, which were considered Level 2 measurements within the fair value hierarchy. We did 0t recognize impairment charges on long-lived assets for both the three and nine months ended September 30, 2019.

In addition to the property acquisition transactions discussed below, for the three and nine months ended September 30, 2020, we incurred capital expenditures of $1,681,000 and $4,628,000, respectively, for our medical office buildings, $316,000 and $1,682,000, respectively, for our senior housing — RIDEA facilities and $0 and $657,000, respectively, for our skilled nursing facilities. We did 0t incur any capital expenditures for our senior housing facilities for the three and nine months ended September 30, 2020.

In June 2020, we paid an earn-out of $1,483,000 in connection with Overland Park MOB, originally purchased in August 2019, which we capitalized and included in real estate investments, net in our accompanying condensed consolidated balance sheets. Such amount was paid upon the condition being met for an existing tenant to lease and occupy additional space. In addition, we paid our advisor a base acquisition fee, as defined in Note 13, Related Party Transactions — Acquisition and Development Stage — Acquisition Fee, of $34,000, or 2.25% of the earn-out amount.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Acquisitions in ~~2019~~2020

For the nine months ended September 30, ~~2019,~~2020, using ~~net proceeds from our initial offering~~cash on hand and debt financing, we completed the acquisition of 147 buildings from unaffiliated third parties. The following is a summary of our property acquisitions for the nine months ended September 30, ~~2019:~~

2020:

Acquisition(1) Location Type
Date
Acquired

Contract
Purchase
Price

Mortgage
Loan
Payable(2)

Line of
Credit(3)

Total
Acquisition
Fee(4)
Lithonia MOB Lithonia, GA Medical Office 03/05/19 $ 10,600,000
$ —
$ —
$ 477,000
West Des Moines SNF West Des Moines, IA Skilled Nursing 03/24/19 7,000,000
—
—
315,000
Great Nord MOB Portfolio Tinley Park, IL; Chesterton and Crown Point, IN; and Plymouth, MN Medical Office 04/08/19 44,000,000
—
15,000,000
1,011,000
Michigan ALF Portfolio(5) Grand Rapids, MI Senior Housing 05/01/19 14,000,000
10,493,000
3,500,000
315,000
Overland Park MOB Overland Park, KS Medical Office 08/05/19 28,350,000
—
28,700,000
638,000
Blue Badger MOB Marysville, OH Medical Office 08/09/19 13,650,000
—
12,000,000
307,000
Bloomington MOB Bloomington, IL Medical Office 08/13/19 18,200,000
—
17,400,000
409,000
Memphis MOB Memphis, TN Medical Office 08/15/19 8,700,000
—
8,600,000
196,000
Haverhill MOB Haverhill, MA Medical Office 08/27/19 15,500,000
—
15,450,000
349,000
Total $ 160,000,000
$ 10,493,000
$ 100,650,000
$ 4,017,000


Acquisition	Location	Type	Date Acquired	Contract Purchase Price		Line of Credit(1)		Total Acquisition Fee(2)
Catalina West Haven ALF(3)	West Haven, UT	Senior Housing — RIDEA	01/01/20	$	12,799,000	$	12,700,000	$	278,000
Louisiana Senior Housing Portfolio(4)	Gonzales, Monroe, New Iberia, Shreveport and Slidell, LA	Senior Housing — RIDEA	01/03/20	34,000,000		32,700,000		737,000
Catalina Madera ALF(3)	Madera, CA	Senior Housing — RIDEA	01/31/20	17,900,000		17,300,000		389,000


Total				$	64,699,000	$	62,700,000	$	1,404,000

___________

(1)Represents a borrowing under the 2018 Credit Facility, as defined in Note 7, Line of Credit and Term Loans, at the time of acquisition.

(2)Our advisor was paid, as compensation for services rendered in connection with the investigation, selection and acquisition of our properties, a base acquisition fee, as defined in Note 13, Related Party Transactions — Acquisition and Development Stage — Acquisition Fee, of 2.25% of the contract purchase price paid by us.

(3)On January 1, 2020 and January 31, 2020, we completed the acquisitions of Catalina West Haven ALF and Catalina Madera ALF, respectively, pursuant to a joint venture with an affiliate of Avalon Health Care, Inc., or Avalon, an unaffiliated third party. Our ownership of the joint venture is approximately 90.0%.

(4)On January 3, 2020, we completed the acquisition of Louisiana Senior Housing Portfolio pursuant to a joint venture with an affiliate of Senior Solutions Management Group, or SSMG, an unaffiliated third party. Our ownership of the joint venture is approximately 90.0%.

We accounted for our property acquisitions completed for the nine months ended September 30, 2020 as asset acquisitions. We incurred and capitalized base acquisition fees and direct acquisition related expenses of $2,538,000. The following table summarizes the purchase price of the assets acquired at the time of acquisition from our property acquisitions in 2020 based on their relative fair values:

~~(1)~~

~~We own 100% of our properties acquired for the nine months ended September 30, 2019.~~

2020
Acquisitions

~~(2)~~Building and improvements

~~Represents the principal balance of the mortgage loan payable assumed by us at the time of acquisition.~~

$	49,792,000
~~(3)~~Land			~~Represents a borrowing under the 2018 Credit Facility, as defined in Note 7, Line of Credit and Term Loans, at the time of acquisition.~~

7,632,000

~~(4)~~

Our advisor was paid, as compensation for services rendered in connection with the investigation, selection and acquisition of our properties, a base acquisition fee of 2.25% of the contract purchase price paid by us. In addition, the total acquisition fee may include a Contingent Advisor Payment, as defined in Note 13, Related Party Transactions, up to 2.25% of the contract purchase price paid by us. See Note 13, Related Party Transactions — Acquisition and Development Stage — Acquisition Fee, for a further discussion.


~~(5)~~In-place leases	~~We added three buildings to our existing Michigan ALF Portfolio. The other six buildings in the Michigan ALF Portfolio were~~	8,974,000


Furniture, fixtures and equipment		854,000

Total assets acquired ~~in December 2018.~~		$	67,252,000

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

We accounted for our property acquisitions we completed for the nine months ended September 30, 2019 as asset acquisitions. We incurred and capitalized base acquisition fees and direct acquisition related expenses of $5,192,000. In addition, we incurred Contingent Advisor Payments of $417,000 to our advisor for such property acquisitions. The following table summarizes the purchase price of the assets acquired and liabilities assumed at the time of acquisition from our property acquisitions in 2019 based on their relative fair values:

2019
Acquisitions
Building and improvements $ 129,871,000
Land 15,737,000
In-place leases 18,008,000
Above-market leases 2,406,000
Right-of-use asset 2,196,000
Total assets acquired 168,218,000
Mortgage loan payable (including debt discount of $758,000) (9,735,000 )
Below-market leases (687,000 )
Operating lease liability (3,552,000 )
Total liabilities assumed (13,974,000 )
Net assets acquired $ 154,244,000

4. Identified Intangible Assets, Net

Identified intangible assets, net consisted of the following as of September 30, ~~2019~~2020 and December 31, ~~2018:~~

2019:


	September 30, 2019		December 31, 2018			September 30, 2020		December 31, 2019
Amortized intangible assets:					Amortized intangible assets:
In-place leases, net of accumulated amortization of $15,647,000 and $11,299,000 as of September 30, 2019 and December 31, 2018, respectively (with a weighted average remaining life of 9.9 years and 10.3 years as of September 30, 2019 and December 31, 2018, respectively)	$	70,116,000	$	67,332,000
Above-market leases, net of accumulated amortization of $528,000 and $323,000 as of September 30, 2019 and December 31, 2018, respectively (with a weighted average remaining life of 10.0 years and 4.5 years as of September 30, 2019 and December 31, 2018, respectively)	2,959,000		755,000
Leasehold interests, net of accumulated amortization of $217,000 as of December 31, 2018 (with a weighted average remaining life of 69.1 years as of December 31, 2018)(1)	—		6,288,000
In-place leases, net of accumulated amortization of $28,935,000 and $18,273,000 as of September 30, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 8.8 years and 9.5 years as of September 30, 2020 and December 31, 2019, respectively)					In-place leases, net of accumulated amortization of $28,935,000 and $18,273,000 as of September 30, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 8.8 years and 9.5 years as of September 30, 2020 and December 31, 2019, respectively)	$	65,593,000	$	70,650,000
Above-market leases, net of accumulated amortization of $938,000 and $609,000 as of September 30, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 9.1 years and 9.5 years as of September 30, 2020 and December 31, 2019, respectively)					Above-market leases, net of accumulated amortization of $938,000 and $609,000 as of September 30, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 9.1 years and 9.5 years as of September 30, 2020 and December 31, 2019, respectively)	2,695,000		3,025,000
Unamortized intangible assets:					Unamortized intangible assets:
Certificates of need	348,000		348,000		Certificates of need	348,000		348,000
Total	$	73,423,000	$	74,723,000	Total	$	68,636,000	$	74,023,000

~~___________~~

~~(1)~~

Such amount related to our ownership of fee simple interests in the building and improvements of eight of our buildings that are subject to respective ground leases. Upon our adoption of ASC Topic 842 on January 1, 2019, such amount was reclassed to operating lease right-of-use assets in our accompanying condensed consolidated balance sheet. See Note 2, Summary of Significant Accounting Policies — Leases, and Note 16, Leases, for a further discussion.

Amortization expense on identified intangible assets for the three months ended September 30, 2020 and 2019 was $4,728,000 and ~~2018 was~~ ~~$2,807,000~~ ~~and $4,673,000,~~$2,807,000, respectively, which included ~~$90,000~~$109,000 and ~~$47,000,~~$90,000, respectively, of amortization recorded against real estate revenue for above-market leases ~~and $0 and $24,000, respectively, of amortization recorded to rental expenses for leasehold interests~~ in our accompanying condensed consolidated statements of operations. Amortization expense on identified intangible assets for the nine months ended September 30, 2020 and 2019 was $14,361,000 and $15,429,000, respectively, which included $329,000 and $205,000, respectively, of amortization recorded against real estate revenue for above-market leases in our accompanying condensed consolidated statements of operations.

The aggregate weighted average remaining life of the identified intangible assets was 8.8 years and 9.5 years as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020, estimated amortization expense on the identified intangible assets for the three months ending December 31, 2020 and for each of the next four years ending December 31 and thereafter was as follows:


Year	Amount
2020	$	4,535,000
2021	11,920,000
2022	8,648,000
2023	7,384,000
2024	6,155,000
Thereafter	29,646,000
Total	$	68,288,000

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

~~Amortization expense on identified intangible assets for the nine months ended September 30, 2019 and 2018 was~~ ~~$15,429,000~~ ~~and $12,630,000, respectively, which included~~ ~~$205,000~~ and $124,000, respectively, of amortization recorded against real estate revenue for above-market leases and $0 and $73,000, respectively, of amortization recorded to rental expenses for leasehold interests in our accompanying condensed consolidated statements of operations.

The aggregate weighted average remaining life of the identified intangible assets was 9.9 years and 15.3 years as of September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019, estimated amortization expense on the identified intangible assets for the three months ending December 31, 2019 and for each of the next four years ending December 31 and thereafter was as follows:

Year Amount
2019 $ 2,806,000
2020 10,459,000
2021 9,333,000
2022 8,148,000
2023 7,080,000
Thereafter 35,249,000
Total $ 73,075,000

5. Other Assets, Net

Other assets, net consisted of the following as of September 30, ~~2019~~2020 and December 31, ~~2018:~~2019:


	September 30, 2019		December 31, 2018			September 30, 2020		December 31, 2019
Investment in unconsolidated entity	$	47,297,000	$	47,600,000	Investment in unconsolidated entity	$	47,968,000	$	47,016,000
Deferred rent receivables	6,827,000		4,941,000		Deferred rent receivables	11,458,000		8,018,000
Deferred financing costs, net of accumulated amortization of $3,160,000 and $1,554,000 as of September 30, 2019 and December 31, 2018, respectively(1)	2,865,000		2,682,000
Prepaid expenses and deposits	2,279,000		4,447,000
Lease commissions, net of accumulated amortization of $138,000 and $64,000 as of September 30, 2019 and December 31, 2018, respectively	1,151,000		564,000
Prepaid expenses, deposits and other assets					Prepaid expenses, deposits and other assets	10,007,000		2,380,000
Lease commissions, net of accumulated amortization of $336,000 and $174,000 as of September 30, 2020 and December 31, 2019, respectively					Lease commissions, net of accumulated amortization of $336,000 and $174,000 as of September 30, 2020 and December 31, 2019, respectively	2,340,000		1,623,000
Deferred financing costs, net of accumulated amortization of $2,927,000 and $1,517,000 as of September 30, 2020 and December 31, 2019, respectively(1)					Deferred financing costs, net of accumulated amortization of $2,927,000 and $1,517,000 as of September 30, 2020 and December 31, 2019, respectively(1)	2,194,000		3,583,000
Total	$	60,419,000	$	60,234,000	Total	$	73,967,000	$	62,620,000

___________


~~(1)~~	~~Deferred financing costs only include costs related to our line of credit and term loans. See Note 7, Line of Credit and Term Loans, for a further discussion.~~

(1)Deferred financing costs only include costs related to our line of credit and term loans. See Note 7, Line of Credit and Term Loans, for a further discussion.

Amortization expense on deferred financing costs of our line of credit and term loans for the three months ended September 30, 2020 and 2019 was $471,000 and ~~2018 was~~ ~~$484,000~~ ~~and $221,000,~~$484,000, respectively, and for the nine months ended September 30, 2020 and 2019 was $1,410,000 and ~~2018 was~~ $1,606,000, ~~and $658,000,~~ respectively, which is recorded to interest expense in our accompanying condensed consolidated statements of operations. Amortization expense on lease commissions for the three months ended September 30, 2020 and 2019 was $84,000 and ~~2018 was~~ $29,000, ~~and $21,000,~~ respectively, and for the nine months ended September 30, 2020 and 2019 was $189,000 and ~~2018 was~~ $81,000, ~~and $39,000,~~ respectively.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the unamortized basis difference of our joint venture investment in an unconsolidated entity of ~~$17,362,000~~$16,905,000 and ~~$17,704,000,~~$17,248,000, respectively, is primarily attributable to the difference between the amount for which we purchased our interest in the entity, including transaction costs, and the historical carrying value of the net assets of the entity. This difference is being amortized over the remaining useful life of the related assets and included in income or loss from unconsolidated entity in our accompanying condensed consolidated statements of operations.

6. Mortgage Loans Payable, Net

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, mortgage loans payable were ~~$27,290,000~~$18,933,000 ($~~26,229,000,~~17,974,000, net of discount/premium and deferred financing costs) and ~~$17,256,000~~$27,099,000 ($~~16,892,000,~~26,070,000, net of discount/premium and deferred financing costs), respectively. As of September 30, ~~2019,~~2020, we ~~had four~~had 3 fixed-rate mortgage loans with interest rates ranging from

~~Table~~ 3.67% to 5.25% per annum, maturity dates ranging from April 1, 2025 to February 1, 2051 and a weighted average effective interest rate of ~~Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

3.94%. As of December 31, 2019, we had 4 fixed-rate mortgage loans with interest rates ranging from 3.67% to 5.25% per annum, maturity dates ranging from April 1, 2020 to February 1, 2051 and a weighted average effective interest rate of 4.18%. As

Table of ~~December 31, 2018,~~Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

In January 2020, we paid off a mortgage loan payable with a principal balance of $7,738,000, which had ~~three fixed-rate mortgage loans with interest rates ranging from 3.75% to 5.25% per annum,~~an original maturity ~~dates ranging from~~date of April 1, ~~2020 to August 1, 2029 and a weighted average effective interest rate of 4.51%.~~

2020. We did not incur any prepayment penalties or fees in connection with such payoff. The following table reflects the changes in the carrying amount of mortgage loans payable, net for the nine months ended September 30, ~~2019~~2020 and ~~2018:~~

2019:


	Nine Months Ended September 30,							Nine Months Ended September 30,
	2019			2018				2020		2019
Beginning balance	$	16,892,000		$	11,567,000		Beginning balance	$	26,070,000	$	16,892,000
Additions:							Additions:
Assumption of mortgage loans payable, net	9,735,000			5,808,000
Assumption of mortgage loan payable, net							Assumption of mortgage loan payable, net	0		9,735,000
Amortization of deferred financing costs	58,000			53,000			Amortization of deferred financing costs	33,000		58,000
Amortization of discount/premium on mortgage loans payable	29,000			6,000			Amortization of discount/premium on mortgage loans payable	37,000		29,000
Deductions:							Deductions:
Scheduled principal payments on mortgage loans payable							Scheduled principal payments on mortgage loans payable	(8,166,000)		(459,000)
Deferred financing costs	(26,000		)	(123,000		)	Deferred financing costs	0		(26,000)
Scheduled principal payments on mortgage loans payable	(459,000		)	(323,000		)
Ending balance	$	26,229,000		$	16,988,000		Ending balance	$	17,974,000	$	26,229,000

As of September 30, ~~2019,~~2020, the principal payments due on our mortgage loans payable for the three months ending December 31, ~~2019~~2020 and for each of the next four years ending December 31 and thereafter were as follows:


Year	Amount
2020	$	151,000
2021	622,000
2022	651,000
2023	680,000
2024	711,000
Thereafter	16,118,000
Total	$	18,933,000

Year Amount
2019 $ 177,000
2020 8,332,000
2021 622,000
2022 651,000
2023 680,000
Thereafter 16,828,000
Total $ 27,290,000

7. Line of Credit and Term Loans

On August 25, 2016, we, through our operating partnership, as borrower, and certain of our subsidiaries, or the subsidiary guarantors, and us, collectively as guarantors, entered into a credit agreement, or the 2016 Credit Agreement, with Bank of America, N.A., or Bank of America, as administrative agent, swing line lender and letters of credit issuer; and KeyBank, National Association, or KeyBank, as syndication agent and letters of credit issuer, to obtain a revolving line of credit with an aggregate maximum principal amount of $100,000,000, or the 2016 Line of Credit, subject to certain terms and conditions.

On August 25, 2016, we also entered into separate revolving notes, or the Revolving Notes, with each of Bank of America and KeyBank, whereby we promised to pay the principal amount of each revolving loan and accrued interest to the respective lender or its registered assigns, in accordance with the terms and conditions of the 2016 Credit Agreement.

On October 31, 2017, we entered into an amendment to the 2016 Credit Agreement, or the Amendment, with Bank of America, as administrative agent, and the subsidiary guarantors and lenders named therein. The material terms of the Amendment provided for: (i) a $50,000,000 increase in the revolving line of credit from an aggregate principal amount of $100,000,000 to $150,000,000; (ii) a term loan with an aggregate maximum principal amount of $50,000,000, that would have matured on August 25, 2019; (iii) our right, upon at least five business days’ prior written notice to Bank of America, to increase the 2016 Line of Credit or term loan provided that the aggregate principal amount of all such increases and additions would not have exceeded $300,000,000; (iv) a revision to the definition of Threshold Amount, as defined in the 2016 Credit Agreement, to reflect an increase in such amount for any Recourse Indebtedness, as defined in the 2016 Credit Agreement, to $20,000,000, and an increase in such amount for any Non-Recourse Indebtedness, as defined in the 2016 Credit Agreement, to

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

$50,000,000; (v) the revision of certain Unencumbered Property Pool Criteria, as defined in the 2016 Credit Agreement; and (vi) an increase in the maximum Consolidated Secured Leverage Ratio, as defined in the 2016 Credit Agreement, to be equal to or less than 40.0%. As a result of the Amendment, our aggregate borrowing capacity under the 2016 Line of Credit and the term loan, or collectively, the 2017 Credit Facility, was $200,000,000.

On September 28, 2018, we entered into a second amendment to 2016 Credit Agreement, or the Second Amendment, with Bank of America, as administrative agent, and the subsidiary guarantors and lenders named therein. The material terms of the Second Amendment provided for an increase in the term loan commitment by an aggregate amount equal to $150,000,000. As a result of the Second Amendment, the aggregate borrowing capacity under the 2017 Credit Facility was $350,000,000. Except as modified by the Second Amendment, the material terms of the 2016 Credit Agreement, as amended, remained in full force and effect.

On November 20, 2018, we, through our operating partnership, terminated the 2016 Credit Agreement, as amended, and related separate revolving notes with each of Bank of America and KeyBank and entered into the 2018 Credit Agreement as described below. We currently do not have any obligations under the 2016 Credit Agreement, as amended, and related separate revolving notes.

On November 20, 2018, we, through our operating partnership as borrower, and certain of our subsidiaries, or the subsidiary guarantors, and us, collectively as guarantors, entered into a credit agreement, or the 2018 Credit Agreement, with Bank of America, N.A., or Bank of America, as administrative agent, swing line lender and letters of credit issuer; KeyBank, National Association, or KeyBank, as syndication agent and letters of credit issuer; Citizens Bank, National Association, as syndication agent, joint lead arranger and joint bookrunner; Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arranger and joint bookrunner; KeyBanc Capital Markets, as joint lead arranger and joint bookrunner; and the lenders named therein, to obtain a credit facility with an initial aggregate maximum principal amount of $400,000,000, or the 2018 Credit Facility. The 2018 Credit Facility initially consisted of a senior unsecured revolving credit facility in the initial aggregate amount of $150,000,000 and a senior unsecured term loan ~~facility~~facilities in the initial aggregate amount of $250,000,000, which consisted of: (i) a $200,000,000 term loan made on November 20, 2018 and (ii) an up to $50,000,000 delayed-draw term loan made one additional time during the Term Loan Delayed Draw Commitment Period, as defined in the 2018 Credit Agreement. Such delayed draw was made on January 18, 2019. The proceeds of loans made under the 2018 Credit Facility may be used for refinancing existing indebtedness and for general corporate purposes including for working capital, capital expenditures and other corporate purposes not inconsistent with obligations under the 2018 Credit Agreement.$250,000,000. We may obtain up to $20,000,000 in the form of standby letters of credit and up to $50,000,000 in the form of swing line loans. On November 1, 2019, we entered into an amendment to the 2018 Credit Agreement, or the 2019 Amendment, with Bank of America, KeyBank and a syndicate of other banks, as lenders, which increased the term loan commitment by $45,000,000 and increased the revolving credit facility by $85,000,000. As a result of the 2019 Amendment, the aggregate borrowing capacity under the 2018 Credit Facility was $530,000,000. Except as modified by the 2019 Amendment, the material terms of the 2018 Credit Agreement, as amended, remain in full force and effect.

The maximum principal amount of the 2018 Credit Facility may be increased by up to $120,000,000, for a total principal amount of $650,000,000, subject to: (i) the terms of the 2018 Credit Agreement, as amended; and (ii) at least five business days prior written notice to Bank of America. The 2018 Credit Facility matures on November 19, 2021 and may be extended for one 12-month period during the term of the 2018 Credit Agreement, as amended, subject to satisfaction of certain conditions, including payment of an extension fee.

~~The maximum principal amount~~

Table of the 2018 Credit Facility may have been increased by up to $250,000,000, for a total principal amount of $650,000,000, subject to: (i) the terms of the 2018 Credit Agreement; and (ii) at least five business days prior written notice to Bank of America.Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

At our option, the 2018 Credit Facility bears interest at per annum rates equal to (a)(i) the Eurodollar Rate, as defined in the 2018 Credit Agreement, as amended, plus (ii) a margin ranging from 1.70% to 2.20% based on our Consolidated Leverage Ratio, as defined in the 2018 Credit Agreement, as amended, or (b)(i) the greater of: (1) the prime rate publicly announced by Bank of America, (2) the Federal Funds Rate, as defined in the 2018 Credit Agreement, as amended, plus 0.50%, (3) the one-month Eurodollar Rate plus 1.00%, and (4) 0.00%, plus (ii) a margin ranging from 0.70% to 1.20% based on our Consolidated Leverage Ratio. Accrued interest on the 2018 Credit Facility is payable monthly. The loans may be repaid in whole or in part without prepayment premium or penalty, subject to certain conditions.

We are required to pay a fee on the unused portion of the lenders’ commitments under the 2018 Credit Agreement, as amended, at a per annum rate equal to 0.20% if the average daily used amount is greater than ~~50.0%~~50.00% of the commitments and 0.25% if the average daily used amount is less than or equal to ~~50.0%~~50.00% of the commitments, which fee shall be measured and payable on a quarterly basis.

The 2018 Credit Agreement contains various affirmative and negative covenants that are customary for credit facilities and transactions of this type, including limitations on the incurrence of debt by our operating partnership and its subsidiaries and limitations on secured recourse indebtedness. The 2018 Credit Agreement also imposes certain financial covenants based on the following criteria, which are specifically defined in the 2018 Credit Agreement: (a) Consolidated Leverage Ratio; (b) Consolidated Secured Leverage Ratio; (c) Consolidated Tangible Net Worth; (d) Consolidated Fixed Charge Coverage Ratio;

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

~~(e) Secured Recourse Indebtedness; (f) Consolidated Unencumbered Leverage Ratio; (g) Consolidated Unencumbered Interest Coverage Ratio; and (h) Unencumbered Indebtedness Yield.~~

In the event of default, Bank of America has the right to terminate the commitment of each Lender, as defined in the 2018 Credit Agreement, to make Loans, as defined in the 2018 Credit Agreement, and any obligation of the L/C Issuer, as defined in the 2018 Credit Agreement, to make L/C Credit Extensions, as defined in the 2018 Credit Agreement, under the 2018 Credit Agreement, and to accelerate the payment on any unpaid principal amount of all outstanding loans and interest thereon.

As of both September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, our aggregate borrowing capacity under the 2018 Credit Facility was ~~$400,000,000.~~$530,000,000. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, borrowings outstanding totaled ~~$357,500,000~~$479,500,000 and ~~$275,000,000,~~$396,800,000, respectively, and the weighted average interest rate on such borrowings outstanding was ~~3.76%~~2.12% and ~~4.25%~~3.50%, respectively, per annum, respectively. On November 1, 2019, we entered into an amendment to the 2018 Credit Agreement. See Note 20, Subsequent Events — Amendment to the 2018 Corporate Line of Credit, for a further discussion.annum.

8. Derivative Financial Instruments

We record derivative financial instruments in our accompanying condensed consolidated balance sheets as either an asset or a liability measured at fair value. ~~We did not have any derivative financial instruments as of December 31, 2018.~~ The following table lists the derivative financial instruments held by us as of September 30, 2020 and December 31, 2019, which are included in security deposits, prepaid rent and other liabilities in our accompanying condensed consolidated balance sheets:


						Fair Value
Instrument	Notional Amount		Index	Interest Rate	Maturity Date	September 30, 2020		December 31, 2019
Swap	$	139,500,000	one month LIBOR	2.49%	11/19/21	$	(3,713,000)	$	(2,441,000)
Swap	58,800,000		one month LIBOR	2.49%	11/19/21	(1,565,000)		(1,029,000)
Swap	45,000,000		one month LIBOR	0.20%	11/19/21	(27,000)		0
Swap	36,700,000		one month LIBOR	2.49%	11/19/21	(977,000)		(642,000)
Swap	15,000,000		one month LIBOR	2.53%	11/19/21	(405,000)		(273,000)
	$	295,000,000				$	(6,687,000)	$	(4,385,000)

Instrument Notional Amount Index Interest Rate Maturity Date Fair Value
Swap $ 139,500,000
one month LIBOR 2.49% 11/19/21 $ 3,008,000
Swap 58,800,000
one month LIBOR 2.49% 11/19/21 1,268,000
Swap 36,700,000
one month LIBOR 2.49% 11/19/21 790,000
Swap 15,000,000
one month LIBOR 2.53% 11/19/21 335,000
$ 250,000,000
$ 5,401,000

ASC Topic 815 permits special hedge accounting if certain requirements are met. Hedge accounting allows for gains and losses on derivatives designated as hedges to be offset by the change in value of the hedged item or items or to be deferred in other comprehensive income (loss). As of both September 30, 2020 and December 31, 2019, none of our derivative financial instruments were designated as hedges. Derivative financial instruments not designated as hedges are not speculative and are used to manage our exposure to interest rate movements, but do not meet the strict hedge accounting requirements of ASC Topic 815. Changes in the fair value of derivative financial instruments are recorded as a component of interest expense in gain or loss in fair value of derivative financial instruments in our accompanying condensed consolidated statements of operations. For the three months ended September 30, 2020 and 2019, we recorded $1,450,000 and $(402,000), respectively, and for the nine months ended September 30, ~~2018, we did not have any derivative financial instruments. For the three~~2020 and ~~nine months ended September 30,~~ 2019, we recorded ~~$402,000~~$(2,302,000) and ~~$5,401,000,~~$(5,401,000), respectively, as ~~an increase~~a decrease (increase) to interest expense in our accompanying condensed consolidated statements of operations related to the change in the fair value of our derivative financial instruments.

See Note 14, Fair Value Measurements, for a further discussion of the fair value of our derivative financial instruments.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

9. Identified Intangible Liabilities, Net

~~Identified~~As of September 30, 2020 and December 31, 2019, identified intangible liabilities, net consisted of ~~the following as~~below-market leases of ~~September 30, 2019~~$1,362,000 and ~~December 31, 2018:~~

September 30,
2019

December 31,
2018
Below-market leases, net of accumulated amortization of $647,000 and $678,000 as of September 30, 2019 and December 31, 2018, respectively (with a weighted average remaining life of 6.5 years and 5.7 years as of September 30, 2019 and December 31, 2018, respectively) $ 1,511,000
$ 1,245,000
Above-market leasehold interests, net of accumulated amortization of $13,000 as of December 31, 2018 (with a weighted average remaining life of 51.2 years as of December 31, 2018)(1) —
382,000
Total $ 1,511,000
$ 1,627,000

~~___________~~

~~(1)~~

$1,601,000, respectively, net of accumulated amortization of $586,000 and $702,000, respectively. Amortization expense on ~~identified intangible liabilities~~below-market leases for the three months ended September 30, 2020 and 2019 was $78,000 and ~~2018~~$212,000, respectively, and for the nine months ended September 30, 2020 and 2019 was ~~$212,000~~$239,000 and ~~$170,000,~~$421,000, respectively, which ~~included $212,000 and $168,000, respectively, of amortization~~was recorded to real estate revenue ~~for below-market leases and $0 and $2,000, respectively, of amortization recorded to rental expenses for above-market leasehold interests~~ in our accompanying condensed consolidated statements of operations.

Amortization expense on identified intangible liabilities for the nine months ended September 30, 2019 and 2018 was $421,000 and $294,000, respectively, which included $421,000 and $288,000, respectively, of amortization recorded to real estate revenue for below-market leases and $0 and $6,000, respectively, of amortization recorded to rental expenses for above-market leasehold interests in our accompanying condensed consolidated statements of operations.

The ~~aggregate~~ weighted average remaining life of ~~the identified intangible liabilities~~below-market leases was ~~6.5~~11.6 years and ~~16.4~~11.3 years as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. As of September 30, ~~2019,~~2020, estimated amortization expense on ~~identified intangible liabilities~~below-market leases for the three months ending December 31, ~~2019~~2020 and for each of the next four years ending December 31 and thereafter was as follows:


Year	Amount
2020	$	66,000
2021	236,000
2022	217,000
2023	207,000
2024	161,000
Thereafter	475,000
Total	$	1,362,000

Year Amount
2019 $ 95,000
2020 291,000
2021 235,000
2022 209,000
2023 199,000
Thereafter 482,000
Total $ 1,511,000

10. Commitments and Contingencies

Litigation

We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Environmental Matters

We follow a policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our consolidated financial position,

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Other

Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business, which include calls/puts to sell/acquire properties. In our view, these matters are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic is dramatically impacting the United States and has resulted in an aggressive worldwide effort to contain the spread of the virus. These efforts have significantly and adversely disrupted economic markets and impacted commercial activity worldwide, including markets in which we own and/or operate properties, and the prolonged economic impact remains uncertain. In addition, the continuously evolving nature of the COVID-19 pandemic makes it difficult to ascertain the long-term impact it will have on real estate markets and our portfolio of investments. Considerable uncertainty still surrounds the COVID-19 pandemic and its effects on the population, as well as the effectiveness of any responses taken on a national and local level by government and public health authorities and businesses to contain and combat the outbreak and spread of the virus. In particular, government-imposed business closures and re-opening restrictions have dramatically impacted the operations of our real estate investments and our tenants across the country, such as creating declines in resident occupancy. Further, our senior housing facilities have also experienced dramatic increases and continue to experience increases in costs to care for residents, particularly increased labor costs to maintain staffing levels to care for the aged population during this crisis,

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

costs of COVID-19 testing of employees and residents and costs to procure the volume of personal protective equipment and other supplies required.

We received and recognized in our accompanying condensed consolidated financial statements stimulus funds through economic relief programs of the CARES Act, as discussed at Note 2, Summary of Significant Accounting Policies — Government Grants. We have also taken actions to strengthen our balance sheet and preserve liquidity in response to the COVID-19 pandemic risks. Since March 2020, we have postponed non-essential capital expenditures, reduced the stockholder distribution rate and partially suspended our share repurchase plan. We are continuously monitoring the impact of the COVID-19 pandemic on our business, residents, tenants, operating partners, managers, portfolio of investments and on the United States and global economies. See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Which May Influence Results of Operations, for a further discussion of the adverse impact the COVID-19 pandemic has had on our business operations.

11. Redeemable Noncontrolling Interests

As of both September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, our advisor owned all of ~~our~~ the 208 ~~Class T~~ limited partnership units outstanding in our operating partnership. As of both September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we owned greater than a 99.99% general partnership interest in our operating partnership, and our advisor owned less than a 0.01% limited partnership interest in our operating partnership. Our advisor is entitled to special redemption rights of its limited partnership units. The noncontrolling interest of our advisor in our operating partnership, which has redemption features outside of our control, is accounted for as a redeemable noncontrolling interest and is presented outside of permanent equity in our accompanying condensed consolidated balance sheets. See Note 13, Related Party Transactions — Liquidity Stage — Subordinated Participation Interest — Subordinated Distribution Upon Listing, and Note 13, Related Party Transactions — Subordinated Distribution Upon Termination, for a further discussion of the redemption features of the limited partnership units.

In connection with our acquisitions of Central Florida Senior Housing Portfolio, Pinnacle Beaumont ALF and Pinnacle Warrenton ALF, we own approximately ~~98%~~98.0% of the joint ventures with an affiliate of Meridian Senior Living, LLC, or Meridian. In connection with our acquisitions of Catalina West Haven ALF and Catalina Madera ALF, we own approximately 90.0% of the joint venture with Avalon. The noncontrolling interests held by Meridian and Avalon have redemption features outside of our control and are accounted for as redeemable noncontrolling interests in our accompanying condensed consolidated balance sheets.

We record the carrying amount of redeemable noncontrolling interests at the greater of: (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss and distributions; or (ii) the redemption value. The changes in the carrying amount of redeemable noncontrolling interests consisted of the following for the nine months ended September 30, ~~2019~~2020 and ~~2018:~~2019:


	Nine Months Ended September 30,
	2020		2019
Beginning balance	$	1,462,000	$	1,371,000
Additions	1,118,000		151,000
Distributions	(81,000)		0
Fair value adjustment to redemption value	530,000		65,000
Net loss attributable to redeemable noncontrolling interests	(332,000)		(76,000)
Ending balance	$	2,697,000	$	1,511,000

Nine Months Ended September 30,

2019
2018
Beginning balance
$ 1,371,000

$ 1,002,000
Additions
151,000

276,000
Fair value adjustment to redemption value 65,000
197,000
Net loss attributable to redeemable noncontrolling interests
(76,000 )
(197,000 )
Ending balance
$ 1,511,000

$ 1,278,000

12. Equity

Preferred Stock

Our charter authorizes us to issue 200,000,000 shares of our preferred stock, par value ~~$0.01~~$0.01 per share. As of both September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, no shares of our preferred stock were issued and outstanding.

Common Stock

Our charter authorizes us to issue 1,000,000,000 shares of our common stock, par value $0.01 per ~~share.~~share, whereby 900,000,000 shares are classified as Class T common stock and 100,000,000 shares are classified as Class I common stock. Each share of our common stock, regardless of class, will be entitled to one vote per share on matters presented to the common

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

stockholders for approval; provided, however, that stockholders of one share class shall have exclusive voting rights on any amendment to our charter that would alter only the contract rights of that share class, and no stockholders of another share class shall be entitled to vote thereon. On February 6, 2015, our advisor acquired shares of our Class T common stock for total cash consideration of $200,000 and was admitted as our initial stockholder. We used the proceeds from the sale of shares of our Class T common stock to our advisor to make an initial capital contribution to our operating partnership. As of both September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, our advisor owned 20,833 shares of our Class T common stock. We commenced our initial offering of shares of our common stock on February 16, 2016, and as of such date we were initially offering to the public up to $3,150,000,000 in shares of our Class T common stock, consisting of up to $3,000,000,000 in shares of our Class T common stock at a price of $10.00 per share in the primary portion of our initial offering and up to $150,000,000 in shares of our Class T common stock for $9.50 per share pursuant to the DRIP. Effective June 17, 2016, we reallocated certain of the unsold shares of our Class T common stock being offered and began

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

offering shares of our Class I common stock, such that we were offering up to approximately $2,800,000,000 in shares of Class T common stock and $200,000,000 in shares of Class I common stock in the primary portion of our initial offering, and up to an aggregate of $150,000,000 in shares of our Class T and Class I common stock pursuant to the DRIP. Subsequent to the reallocation, of the 1,000,000,000 shares of common stock authorized pursuant to our charter, 900,000,000 shares are classified as Class T common stock and 100,000,000 shares are classified as Class I common stock.

The shares of our Class T common stock in the primary portion of our initial offering were being offered at a price of $10.00 per share prior to April 11, 2018. The shares of our Class I common stock in the primary portion of our initial offering were being offered at a price of $9.30 per share prior to March 1, 2017 and $9.21 per share from March 1, 2017 to April 10, 2018. The shares of our Class T and Class I common stock issued pursuant to the DRIP were sold at a price of $9.50 per share prior to January 1, 2017 and $9.40 per share from January 1, 2017 to April 10, 2018. On April 6, 2018, our board, at the recommendation of the audit committee of our board, comprised solely of independent directors, unanimously approved and established an estimated per share net asset value, or NAV, of our common stock of $9.65. As a result, on April 6, 2018, our board unanimously approved revised offering prices for each class of shares of our common stock to be sold in our initial offering based on the estimated per share NAV of our Class T and Class I common stock of $9.65 plus any applicable per share up-front selling commissions and dealer manager fees funded by us, effective April 11, 2018. Accordingly, the revised offering price for shares of our Class T common stock and Class I common stock sold pursuant to the primary portion of our initial offering on or after April 11, 2018 was $10.05 per share and $9.65 per share, respectively. On February 15, 2019, we terminated our initial offering. We continue to offer shares of our common stock pursuant to the 2019 DRIP Offering. See the “Distribution Reinvestment Plan” section below for a further discussion.

Each share of our common stock, regardless of class, will be entitled to one vote per share on matters presented to the common stockholders for approval; provided, however, that stockholders of one share class shall have exclusive voting rights on any amendment to our charter that would alter only the contract rights of that share class, and no stockholders of another share class shall be entitled to vote thereon.

Through September 30, ~~2019,~~2020, we had issued 75,639,681 aggregate shares of our Class T and Class I common stock in connection with the primary portion of our initial offering and ~~4,834,608~~7,157,430 aggregate shares of our Class T and Class I common stock pursuant to our DRIP Offerings. We also granted an aggregate of ~~82,500~~105,000 shares of our restricted Class T common stock to our independent directors and repurchased ~~1,096,810~~1,934,950 shares of our common stock under our share repurchase plan through September 30, ~~2019.~~2020. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had ~~79,480,812~~80,987,994 and ~~69,254,971~~79,899,874 aggregate shares of our Class T and Class I common stock, respectively, issued and outstanding.

Distribution Reinvestment Plan

We had registered and reserved $150,000,000 in shares of our common stock for sale pursuant to the DRIP in our initial offering. The DRIP allows stockholders to purchase additional Class T shares and Class I shares of our common stock through the reinvestment of distributions during our initial offering. Pursuant to the DRIP, distributions with respect to Class T shares are reinvested in Class T shares and distributions with respect to Class I shares are reinvested in Class I shares. On February 15, 2019, we terminated our initial offering. We continue to offer up to $100,000,000 in shares of our common stock pursuant to the 2019 DRIP Offering.

Since April 6, 2018, our board has approved and established an estimated per share net asset value, or NAV, on at least an annual basis. Commencing with the distribution payment to stockholders paid in the month following such board approval, shares of our common stock issued pursuant the DRIP were or will be issued at the current estimated per share NAV until such time as our board determines an updated estimated per share NAV. The following is a summary of our historical and current estimated per share ~~NAV:~~NAV of our Class T and Class I common stock:

Approval Date by our Board
Established Per
Share NAV
(Unaudited)
04/06/18 $ 9.65
04/04/19 $ 9.54

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~


Approval Date by our Board	Established Per Share NAV (Unaudited)
04/06/18	$	9.65
04/04/19	$	9.54
04/02/20	$	9.54

For the three months ended September 30, 2020 and 2019, $4,247,000 and ~~2018,~~ $6,599,000, ~~and $4,668,000,~~ respectively, in distributions were reinvested and ~~691,703~~445,239 and ~~483,737~~691,703 shares of our common stock, respectively, were issued pursuant to our DRIP Offerings. For the nine months ended September 30, 2020 and 2019, $15,681,000 and ~~2018,~~ $19,056,000, ~~and $12,435,000,~~ respectively, in distributions were reinvested and ~~1,987,822~~1,643,731 and ~~1,302,271~~1,987,822 shares of our common stock, respectively, were issued pursuant to our DRIP Offerings. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, a total of ~~$46,153,000~~$68,311,000 and ~~$27,097,000,~~$52,630,000, respectively, in distributions were cumulatively reinvested that resulted in ~~4,834,608~~7,157,430 and ~~2,846,786~~5,513,699 shares of our common stock, respectively, being issued pursuant to our DRIP Offerings.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Share Repurchase Plan

~~In February 2016, our board approved a share repurchase plan. The~~Our share repurchase plan allows for repurchases of shares of our common stock by us when certain criteria are met. Share repurchases will be made at the sole discretion of our board. Subject to the availability of the funds for share repurchases, we will limit the number of shares of our common stock repurchased during any calendar year to 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year; provided, however, that shares subject to a repurchase requested upon the death of a stockholder will not be subject to this cap. Funds for the repurchase of shares of our common stock ~~will~~ come exclusively from the cumulative proceeds we receive from the sale of shares of our common stock pursuant to our DRIP Offerings.

All repurchases of our shares of common stock are subject to a one-year holding period, except for repurchases made in connection with a stockholder’s death or “qualifying disability,” as defined in our share repurchase plan. Further, all share repurchases are repurchased following a one-year holding period at a price between 92.5% to 100% of each stockholder’s repurchase amount depending on the period of time their shares have been held. During our initial offering and with respect to shares repurchased for the quarter ending March 31, 2019, the repurchase amount for shares repurchased under our share repurchase plan was equal to the lesser of (i) the amount per share that a stockholder paid for their shares of our common stock, or (ii) the per share offering price in our initial offering. Commencing with shares repurchased for the quarter ending June 30, 2019, the repurchase amount for shares repurchased under our share repurchase plan is the lesser of (i) the amount per share the stockholder paid for their shares of our common stock, or (ii) the most recent estimated value of one share of the applicable class of common stock as determined by our board. See the “Distribution Reinvestment Plan” section above for a summary of our historical and current estimated per share ~~NAV in the “Distribution Reinvestment Plan” section above.~~NAV. However, if shares of our common stock are repurchased in connection with a stockholder’s death or qualifying disability, the repurchase price will be no less than 100% of the price paid to acquire the shares of our common stock from us. Furthermore, our share repurchase plan provides that if there are insufficient funds to honor all repurchase requests, pending requests will be honored among all requests for repurchase in any given repurchase period, as follows: first, pro rata as to repurchases sought upon a stockholder’s death; next, pro rata as to repurchases sought by stockholders with a qualifying disability; and, finally, pro rata as to other repurchase requests.

Due to the impact the COVID-19 pandemic has had on the United States and globally, and the ongoing uncertainty of the severity and duration of the COVID-19 pandemic and its effects, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects. As a result, on March 31, 2020 our board suspended our share repurchase plan with respect to all repurchase requests other than repurchases resulting from the death or qualifying disability of stockholders, beginning with share repurchase requests submitted for repurchase during the second quarter of 2020. Repurchase requests resulting from the death or qualifying disability of stockholders are not suspended, but shall remain subject to all terms and conditions of our share repurchase plan, including our board’s discretion to determine whether we have sufficient funds available to repurchase any shares. Our board shall determine if and when it is in the best interest of our company and stockholders to reinstate our share repurchase plan for additional stockholders.

For the three months ended September 30, 2020 and 2019, we repurchased 71,551and ~~2018, we received share repurchase requests and repurchased~~ 308,837 ~~and 115,847~~ shares of our common stock, respectively, for an aggregate of ~~$2,823,000~~$706,000 and ~~$1,110,000,~~$2,823,000, respectively, at an average repurchase price of ~~$9.14~~$9.87 and ~~$9.58~~$9.14 per share, respectively. For the nine months ended September 30, 2020 and 2019, we repurchased 578,111 and ~~2018, we received share repurchase requests and repurchased~~ 668,646 ~~and 236,230~~ shares of our common stock, respectively, for an aggregate of ~~$6,192,000~~$5,349,000 and ~~$2,242,000,~~$6,192,000, respectively, at an average repurchase price of ~~$9.26~~$9.25 and ~~$9.49~~$9.26 per share, respectively.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we ~~received share repurchase requests~~cumulatively repurchased 1,934,950 and ~~repurchased 1,096,810 and 428,164~~1,356,839 shares of our common stock, respectively, for an aggregate of ~~$10,239,000~~$18,005,000 and ~~$4,047,000,~~$12,656,000, respectively, at an average repurchase price of ~~$9.34~~$9.31 and ~~$9.45~~$9.33 per share, respectively.In October 2020, we repurchased 86,821 shares of our common stock, for an aggregate of $865,000, at an average repurchase price of $9.95 per share. All shares were repurchased using the cumulative proceeds we received from the sale of shares of our common stock pursuant to our DRIP Offerings.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

2015 Incentive Plan

We adopted the 2015 Incentive Plan, or our incentive plan, pursuant to which our board, or a committee of our independent directors, may make grants of options, restricted shares of common stock, stock purchase rights, stock appreciation rights or other awards to our independent directors, employees and consultants. The maximum number of shares of our common stock that may be issued pursuant to our incentive plan is 4,000,000 shares. For both the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we granted an ~~aggregate~~aggregate of 22,500 shares of our restricted Class T common stock at a weighted average grant date fair value of $9.54 ~~and $10.05~~ per share ~~respectively,~~ to our ~~independent~~independent directors in connection with their re-election to our board orand in consideration for their past services rendered. Such shares vested 20.0% immediately on the grant date and 20.0% will vest on each of the first four anniversaries of the grant date. For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we recognized stock compensation expense of ~~$72,000~~$73,000 and ~~$70,000,~~$72,000, respectively, and for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ we

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

recognized stock compensation expense of ~~$164,000~~$171,000 and ~~$145,000,~~$164,000, respectively, which is included in general and administrative in our accompanying condensed consolidated statements of operations.

Offering Costs

Selling Commissions

WeThrough the termination of our initial offering on February 15, 2019, we generally paid our dealer manager selling commissions of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to the primary portion of our initial offering. Our dealer manager was permitted to enter into participating dealer agreements with participating dealers that provided for a reduction or waiver of selling commissions. To the extent that selling commissions were less than 3.0% of the gross offering proceeds for any Class T shares sold, such reduction in selling commissions was accompanied by a corresponding reduction in the applicable per share purchase price for purchases of such shares. No selling commissions were payable on Class I shares or shares of our common stock sold pursuant to our DRIP Offerings. ~~Our dealer manager was permitted to re-allow all or a portion~~Following the termination of ~~these fees to participating broker-dealers.~~our initial offering on February 15, 2019, we no longer incur additional selling commissions. For ~~the three months ended September 30, 2019 and 2018, we incurred $0 and $1,717,000, respectively, and for~~ the nine months ended September 30, 2019, ~~and 2018,~~ we incurred $2,241,000 ~~and $4,858,000, respectively,~~ in selling commissions to our dealer manager. Such commissions were charged to stockholders’ equity as such amounts were paid to our dealer manager from the gross proceeds of our initial offering.

Dealer Manager Fee

~~With~~Through the termination of our initial offering on February 15, 2019, with respect to shares of our Class T common stock, our dealer manager generally received a dealer manager fee of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to our initial offering, of which 1.0% of the gross offering proceeds was funded by us and up to an amount equal to 2.0% of the gross offering proceeds was funded by our advisor. With respect to shares of our Class I common stock, prior to March 1, 2017, our dealer manager generally received a dealer manager fee up to 3.0% of the gross offering proceeds from the sale of Class I shares of our common stock pursuant to the primary portion of our initial offering, of which 1.0% of the gross offering proceeds was funded by us and an amount equal to 2.0% of the gross offering proceeds was funded by our advisor. Effective March 1, 2017 and through the termination of our initial offering on February 15, 2019, our dealer manager generally received a dealer manager fee up to an amount equal to 1.5% of the gross offering proceeds from the sale of Class I shares of our common stock pursuant to the primary portion of our initial offering, all of which was funded by our advisor. Our dealer manager was permitted to enter into participating dealer agreements with participating dealers that provided for a reduction or waiver of dealer manager fees. To the extent that the dealer manager fee was less than 3.0% of the gross offering proceeds for any Class T shares sold and less than 1.5% of the gross offering proceeds for any Class I shares sold, such reduction was applied first to the portion of the dealer manager fee funded by our advisor. To the extent that any reduction in dealer manager fee exceeded the portion of the dealer manager fee funded by our advisor, such excess reduction was accompanied by a corresponding reduction in the applicable per share purchase price for purchases of such shares. No dealer manager fee was payable on shares of our common stock sold pursuant to our DRIP Offerings. ~~Our~~

Following the termination of our initial offering on February 15, 2019, we no longer incur additional dealer manager ~~was permitted to re-allow all or a portion of these fees to participating broker-dealers.~~

fees. For ~~the three months ended September 30, 2019 and 2018, we incurred $0 and $587,000, respectively, and for~~ the nine months ended September 30, 2019, ~~and 2018,~~ we incurred $759,000 ~~and $1,648,000, respectively,~~ in dealer manager fees to our dealer manager. Such fees were charged to stockholders’ equity as such amounts were paid to our dealer manager or its affiliates from the gross proceeds of our initial offering. See Note 13, Related Party Transactions — Offering Stage — Dealer Manager Fee, for a further discussion of the dealer manager fee funded by our advisor.

Stockholder Servicing Fee

We pay our dealer manager a quarterly stockholder servicing fee with respect to our Class T shares sold as additional compensation to the dealer manager and participating broker-dealers. No stockholder servicing fee is paid with respect to Class I shares or shares of our common stock sold pursuant to our DRIP Offerings. The stockholder servicing fee accrues daily in an amount equal to 1/365th of 1.0% of the purchase price per share of our Class T shares sold in the primary portion of our initial offering and, in the aggregate will not exceed an amount equal to 4.0% of the gross proceeds from the sale of Class T shares in the primary portion of our initial offering. We will cease paying the stockholder servicing fee with respect to our Class T shares sold in the primary portion of our initial offering upon the occurrence of certain defined events. Our dealer manager may re-allow to participating broker-dealers all or a portion of the stockholder servicing fee for services that such participating broker-dealers perform in connection with the shares of our Class T common stock. By agreement with participating broker-dealers, such stockholder servicing fee may be reduced or limited.

2625

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Following the termination of our initial offering on February 15, 2019, we no longer incur additional stockholder servicing fees. For the nine months ended September 30, 2019, ~~and 2018,~~ we incurred $2,536,000 ~~and $5,602,000, respectively,~~ in stockholder servicing fees to our dealer manager. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we accrued ~~$14,241,000~~$7,667,000 and ~~$16,395,000,~~$12,610,000, respectively, in connection with the stockholder servicing fee payable, which is included in accounts payable and accrued liabilities with a corresponding offset to stockholders’ equity in our accompanying condensed consolidated balance sheets.

Noncontrolling Interest

In connection with our acquisition of Louisiana Senior Housing Portfolio in January 2020, as of September 30, 2020 we owned an approximate 90.0% interest in our consolidated joint venture with SSMG that owns such properties. As such, 10.0% of the net earnings of the joint venture were allocated to noncontrolling interests in our accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2020, and the carrying amount of such noncontrolling interest is presented in total equity in our accompanying condensed consolidated balance sheets as of September 30, 2020. We did not have any noncontrolling interest in total equity for the nine months ended September 30, 2019.

13. Related Party Transactions

Fees and Expenses Paid to Affiliates

All of our executive officers and one of our non-independent directors are also executive officers and employees and/or holders of a direct or indirect interest in our advisor, one of our co-sponsors or other affiliated entities. We are affiliated with our advisor, American Healthcare Investors and AHI Group Holdings; however, we are not affiliated with Griffin Capital, our dealer manager, Colony Capital or Mr. Flaherty. We entered into the Advisory Agreement, which entitles our advisor and its affiliates to specified compensation for certain services, as well as reimbursement of certain expenses. Our board, including a majority of our independent directors, has reviewed the material transactions between our affiliates and us during the ~~three and~~ nine months ended September 30, ~~2019 and 2018.~~2020. Set forth below is a description of the transactions with affiliates. We believe that we have executed all of the transactions set forth below on terms that are fair and reasonable to us and on terms no less favorable to us than those available from unaffiliated third parties. For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred ~~$4,478,000~~$3,045,000 and ~~$6,968,000,~~$4,478,000, respectively, and for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred ~~$12,626,000~~$10,344,000 and ~~$14,097,000,~~$12,626,000, respectively, in fees and expenses to our affiliates as detailed below.

Offering Stage

Dealer Manager Fee

~~With~~Through the termination of our initial offering on February 15, 2019, with respect to shares of our Class T common stock, our dealer manager generally received a dealer manager fee of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to the primary portion of our initial offering, of which 1.0% of the gross offering proceeds was funded by us and up to an amount equal to 2.0% of the gross offering proceeds was funded by our advisor. With respect to shares of our Class I common stock, prior to March 1, 2017, our dealer manager generally received a dealer manager fee up to 3.0% of the gross offering proceeds from the sale of Class I shares of our common stock pursuant to the primary portion of our initial offering, of which 1.0% of the gross offering proceeds was funded by us and an amount equal to 2.0% of the gross offering proceeds was funded by our advisor. Effective March 1, 2017 and through the termination of our initial offering on February 15, 2019, our dealer manager generally received a dealer manager fee up to an amount equal to 1.5% of the gross offering proceeds from the sale of Class I shares of our common stock pursuant to the primary portion of our initial offering, all of which was funded by our advisor. Our dealer manager was permitted to enter into participating dealer agreements with participating dealers that provided for a reduction or waiver of dealer manager fees. To the extent that the dealer manager fee was less than 3.0% of the gross offering proceeds for any Class T shares sold and less than 1.5% of the gross offering proceeds for any Class I shares sold, such reduction was applied first toadvisor recouped the portion of the dealer manager fee it funded ~~by our advisor. To~~through the ~~extent that any reduction in dealer manager fee exceeded the portion~~receipt from us of the ~~dealer manager fee funded by our advisor, such excess reduction was accompanied by a corresponding reduction in~~Contingent Advisor Payment, as defined below, through the ~~applicable per share purchase price for purchases~~payment of ~~such shares.~~acquisition fees as described below. No dealer manager fee was payable on shares of our common stock sold pursuant to our DRIP Offerings. ~~Our advisor recouped~~

Following the ~~portion~~termination of ~~the~~our initial offering on February 15, 2019, we no longer incur additional dealer manager ~~fee it funded through the receipt of the Contingent Advisor Payment from us, as described below, through the payment of acquisition~~ fees.

For ~~the three months ended September 30, 2019 and 2018, we incurred $0 and $1,193,000, respectively, and for~~ the nine months ended September 30, 2019, ~~and 2018,~~ we incurred $1,687,000 ~~and $3,393,000, respectively,~~ payable to our advisor as part of the Contingent Advisor Payment in connection with the dealer manager fee that our advisor had incurred. Such fee was charged to stockholders’ equity as incurred with a corresponding offset to accounts payable due to affiliates in our accompanying condensed consolidated balance sheets. See Note 12, Equity — Offering Costs — Dealer Manager Fee, for a further discussion of the dealer manager fee funded by us.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Other Organizational and Offering Expenses

~~Our~~Through the termination of our initial offering on February 15, 2019, we incurred other organizational and offering expenses ~~incurred~~ in connection with the primary portion of our initial offering (other than selling commissions, the dealer manager fee and the stockholder servicing fee) ~~are~~that were funded by our advisor. Our advisor ~~recoups~~recouped such expenses it funded through the receipt of the Contingent Advisor Payment from us, as described below,

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

through the payment of acquisition fees. No other organizational and offering expenses were paid with respect to shares of our common stock sold pursuant to our DRIP Offerings.

~~For~~Following the ~~three months ended September 30,~~termination of our initial offering on February 15, 2019, we no longer incur additional other organizational and ~~2018, we incurred $0 and $270,000, respectively, and for~~offering expenses. For the nine months ended September 30, 2019, ~~and 2018,~~ we incurred $112,000 ~~and $1,178,000, respectively,~~ payable to our advisor as part of the Contingent Advisor Payment in connection with the other organizational and offering expenses that our advisor had incurred. Such expenses were charged to stockholders’ equity as incurred with a corresponding offset to accounts payable due to affiliates in our accompanying condensed consolidated balance sheets.

Acquisition and Development Stage

Acquisition Fee

We pay our advisor or its affiliates an acquisition fee of up to 4.50% of the contract purchase price, including any contingent or earn-out payments that may be paid, of each property we acquire or, with respect to any real estate-related investment we originate or acquire, up to 4.25% of the origination or acquisition price, including any contingent or earn-out payments that may be paid. The 4.50% or 4.25% acquisition fees consist of a 2.25% or 2.00% base acquisition fee, or the base acquisition fee, for real estate and real estate-related acquisitions, respectively, and an additional 2.25% contingent advisor payment, or the Contingent Advisor ~~Payment.~~Payment, as applicable. The Contingent Advisor Payment ~~allows~~allowed our advisor to recoup the portion of the dealer manager fee and other organizational and offering expenses funded by our advisor. Therefore, the amount of the Contingent Advisor Payment paid upon the closing of an acquisition ~~shall~~did not exceed the then outstanding amounts paid by our advisor for dealer manager fees and other organizational and offering expenses at the time of such closing. For these purposes, the amounts paid by our advisor and considered as “outstanding” were reduced by the amount of the Contingent Advisor Payment previously paid. Notwithstanding the foregoing, the initial $7,500,000 of amounts paid by our advisor to fund the dealer manager fee and other organizational and offering expenses, or the Contingent Advisor Payment Holdback, was retained by us until February 2019, the termination of our initial offering and the third anniversary of the commencement date of our initial offering, at which time such amount was paid to our advisor. Our advisor or its affiliates are entitled to receive these acquisition fees for properties and real estate-related investments acquired with funds raised in our initial offering, including acquisitions completed after the termination of the Advisory Agreement (including imputed leverage of 50.0% on funds raised in our initial offering), or funded with net proceeds from the sale of a property or real estate-related investment, subject to certain conditions. Our advisor may waive or defer all or a portion of the acquisition fee at any time and from time to time, in our advisor’s sole discretion.

The base acquisition fee in connection with the acquisition of real estate investments accounted for as business combinations is expensed as incurred and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. The base acquisition fee in connection with the acquisition of properties accounted for as asset acquisitions or the acquisition of real estate-related investments is capitalized as part of the associated investment in our accompanying condensed consolidated balance sheets. For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred base acquisition fees of ~~$1,922,000~~$35,000 and ~~$4,007,000,~~$1,922,000, respectively, and for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred base acquisition fees of ~~$3,663,000~~$1,475,000 and ~~$5,581,000,~~$3,663,000, respectively, to our advisor. As of both September 30, ~~2019~~2020 and December 31, 2018, we recorded $0 and $7,866,000, respectively, as part of the Contingent Advisor Payment, which is included in accounts payable due to affiliates with a corresponding offset to stockholders’ equity in our accompanying condensed consolidated balance sheets. As of September 30, 2019, we have paid ~~$20,980,000~~$20,982,000 in Contingent Advisor Payments to our advisor and do not have any amounts outstanding due to our advisor. For a further discussion of amounts paid in connection with the Contingent Advisor Payment, see “Dealer Manager Fee” and “Other Organizational and Offering Expenses,” ~~sections~~ above. ~~In addition, see Note 3, Real Estate Investments, Net, and Note 20, Subsequent Events, for a further discussion.~~

Development Fee

In the event our advisor or its affiliates provide development-related services, we pay our advisor or its affiliates a development fee in an amount that is usual and customary for comparable services rendered for similar projects in the geographic market where the services are provided; however, we will not pay a development fee to our advisor or its affiliates if our advisor or its affiliates elect to receive an acquisition fee based on the cost of such development.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

For the three ~~and nine~~ months ended September 30, 2020 and 2019, we incurred development fees of $22,000 and $0, respectively, and for the nine months ended September 30, 2020 and 2019, we incurred development fees of $24,000 and $14,000, respectively, to our advisor, which was expensed as incurred and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. ~~For the three and nine months ended September 30, 2018, we did not incur any development fees to our advisor or its affiliates.~~

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

Reimbursement of Acquisition Expenses

We reimburse our advisor or its affiliates for acquisition expenses related to selecting, evaluating and acquiring assets, which are reimbursed regardless of whether an asset is acquired. The reimbursement of acquisition expenses, acquisition fees, total development costs and real estate commissions paid to unaffiliated third parties will not exceed, in the aggregate, 6.0% of the contract purchase price of the property or real estate-related investments, unless fees in excess of such limits are approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in the transaction. For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, such fees and expenses paid did not exceed 6.0% of the contract purchase price of our property acquisitions, except with respect to our acquisitions of ~~Athens MOB Portfolio, Northern California Senior Housing Portfolio,~~ Pinnacle Warrenton ALF, Glendale MOB, Missouri SNF Portfolio, Flemington MOB Portfolio and West Des Moines SNF, which excess fees and expenses were approved by our directors as set forth above.

Reimbursements of acquisition expenses in connection with the acquisition of real estate investments accounted for as business combinations are expensed as incurred and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. Reimbursements of acquisition expenses in connection with the acquisition of properties accounted for as asset acquisitions or the acquisition of real estate-related investments are capitalized as part of the associated investment in our accompanying condensed consolidated balance ~~sheets.~~sheets. For the three and nine months ended September 30, ~~2019,~~2020, we ~~did not incur any~~incurred $0 and $1,000, respectively, in acquisition expenses ~~payable~~ to our advisor or its affiliates. For the three and nine months ended September 30, ~~2018,~~2019, we ~~incurred $0 and $1,000, respectively, in~~did 0t incur any acquisition expenses payable to our advisor or its affiliates.

Operational Stage

Asset Management Fee

We pay our advisor or its affiliates a monthly fee for services rendered in connection with the management of our assets equal to one-twelfth of 0.80% of average invested assets. For such purposes, average invested assets means the average of the aggregate book value of our assets invested in real estate investments and real estate-related investments, before deducting depreciation, amortization, bad debt and other similar non-cash reserves, computed by taking the average of such values at the end of each month during the period of calculation.

For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred ~~$2,120,000~~asset management fees of $2,446,000 and ~~$1,271,000,~~$2,120,000, respectively, and for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred ~~$6,012,000 and $3,299,000, respectively, in~~ asset management fees of $7,292,000 and $6,012,000, respectively, to our advisor, which are included in general and administrative in our accompanying condensed consolidated statements of operations.

Property Management Fee

American Healthcare Investors or its designated personnel may provide property management services with respect to our properties or may sub-contract these duties to any third party and provide oversight of such third-party property manager. We pay American Healthcare Investors a monthly management fee equal to a percentage of the gross monthly cash receipts of such property as follows: (i) a property management oversight fee of 1.0% of the gross monthly cash receipts of any stand-alone, single-tenant, net leased property, except for such properties operated utilizing a RIDEA structure, for which we pay a property management oversight fee of 1.5% of the gross monthly cash receipts with respect to such property; (ii) a property management oversight fee of 1.5% of the gross monthly cash receipts of any property that is not a stand-alone, single-tenant, net leased property and for which American Healthcare Investors or its designated personnel provide oversight of a third party that performs the duties of a property manager with respect to such property; or (iii) a fair and reasonable property management fee that is approved by a majority of our directors, including a majority of our independent directors, that is not less favorable to us than terms available from unaffiliated third parties for any property that is not a stand-alone, single-tenant, net leased property and for which American Healthcare Investors or its designated personnel directly serve as the property manager without sub-contracting such duties to a third party.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Property management fees are included in ~~property operating~~rental expenses and ~~rental~~general and administrative expenses in our accompanying condensed consolidated statements of operations. For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred property management fees of ~~$318,000~~$376,000 and ~~$200,000,~~$318,000, respectively, and for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred property management fees of ~~$871,000~~$1,100,000 and ~~$506,000,~~$871,000, respectively, to American Healthcare Investors.

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

Lease Fees

We ~~may~~ pay our advisor or its affiliates a separate fee for any leasing activities 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 as determined by a survey of brokers and agents in such area. Such fee is generally expected to range from 3.0% to 6.0% of the gross revenues generated during the initial term of the lease.

Lease fees are capitalized as lease commissions, which are included in other assets, net in our accompanying condensed consolidated balance sheets, and amortized over the term of the lease. For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred lease fees of ~~$21,000~~$117,000 and ~~$6,000,~~$21,000, respectively, and for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred lease fees of ~~$71,000~~$254,000 and ~~$83,000,~~$71,000, respectively.

Construction Management Fee

In the event that our advisor or its affiliates assist with planning and coordinating the construction of any capital or tenant improvements, we pay our advisor or its affiliates a construction management fee of up to 5.0% of the cost of such improvements. Construction management fees are capitalized as part of the associated asset and included in real estate investments, net in our accompanying condensed consolidated balance sheets or are expensed and included in our accompanying condensed consolidated statements of operations, as applicable. For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred construction management fees of ~~$73,000~~$12,000 and ~~$11,000,~~$73,000, respectively, and for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we incurred construction management fees of ~~$99,000~~$76,000 and ~~$13,000,~~$99,000, respectively.

Operating Expenses

We reimburse our advisor or its affiliates for operating expenses incurred in rendering services to us, subject to certain limitations. However, we cannot reimburse our advisor or its affiliates at the end of any fiscal quarter for total operating expenses that, in the ~~four~~4 consecutive fiscal quarters then ended, exceed the greater of: (i) 2.0% of our average invested assets, as defined in the Advisory Agreement; or (ii) 25.0% of our net income, as defined in the Advisory Agreement, unless our independent directors determined that such excess expenses were justified based on unusual and nonrecurring factors which they deem sufficient.

The following table reflects our operating expenses as a percentage of average invested assets and as a percentage of net income for the 12 month periods then ended:


	12 months ended September 30,					12 months ended September 30,
	2019		2018			2020		2019
Operating expenses as a percentage of average invested assets	1.2	%	1.3	%	Operating expenses as a percentage of average invested assets	1.1	%	1.2	%
Operating expenses as a percentage of net income	42.0	%	26.6	%	Operating expenses as a percentage of net income	32.7	%	42.0	%

For the 12 months ended September 30, ~~2019~~2020 and ~~2018,~~2019, our operating expenses did not exceed the aforementioned limitations as 2.0% of our average invested assets was greater than 25.0% of our net income. For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, our advisor incurred operating expenses on our behalf of ~~$24,000~~$37,000 and ~~$10,000,~~$24,000, respectively, and for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, our advisor incurred operating expenses on our behalf of ~~$97,000~~$122,000 and ~~$43,000,~~$97,000, respectively. Operating expenses are generally included in general and administrative in our accompanying condensed consolidated statements of operations.

Compensation for Additional Services

We pay our advisor and its affiliates for services performed for us other than those required to be rendered by our advisor or its affiliates under the Advisory Agreement. The rate of compensation for these services has to be approved by a majority of our board, including a majority of our independent directors, and cannot exceed an amount that would be paid to unaffiliated parties for similar services. For the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, our advisor and its affiliates were not compensated for any additional services.

3029

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Liquidity Stage

Disposition Fees

For services relating to the sale of one or more properties, we pay our advisor or its affiliates a disposition fee up to the lesser of 2.0% of the contract sales price or 50.0% of a customary competitive real estate commission given the circumstances surrounding the sale, in each case as determined by our board, including a majority of our independent directors, upon the provision of a substantial amount of the services in the sales effort. The amount of disposition fees paid, when added to the real estate commissions paid to unaffiliated ~~third~~ parties, will not exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price. For the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we did not incur any disposition fees to our advisor or its affiliates.

Subordinated Participation Interest

Subordinated Distribution of Net Sales Proceeds

In the event of liquidation, we will pay our advisor a subordinated distribution of net sales proceeds. The distribution will be equal to 15.0% of the remaining net proceeds from the sales of properties, after distributions to our stockholders, in the aggregate, of: (i) a full return of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan); plus (ii) an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock, as adjusted for distributions of net sales proceeds. Actual amounts to be received depend on the sale prices of properties upon liquidation. For the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we did not pay any such distributions to our advisor.

Subordinated Distribution Upon Listing

Upon the listing of shares of our common stock on a national securities exchange, in redemption of our advisor’s limited partnership units, we will pay our advisor a distribution equal to 15.0% of the amount by which: (i) the market value of our outstanding common stock at listing plus distributions paid prior to listing exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the amount of cash equal to an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the date of listing. Actual amounts to be received depend upon the market value of our outstanding stock at the time of listing, among other factors. For the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we did not pay any such distributions to our advisor.

Subordinated Distribution Upon Termination

Pursuant to the Agreement of Limited Partnership, as amended, of our operating partnership upon termination or non-renewal of the Advisory Agreement, our advisor will also be entitled to a subordinated distribution in redemption of its limited partnership units from our operating partnership equal to 15.0% of the amount, if any, by which: (i) the appraised value of our assets on the termination date, less any indebtedness secured by such assets, plus total distributions paid through the termination date, exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the total amount of cash equal to an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the termination date. In addition, our advisor may elect to defer its right to receive a subordinated distribution upon termination until either a listing or other liquidity event, including a liquidation, sale of substantially all of our assets or merger in which our stockholders receive in exchange for their shares of our common stock, shares of a company that are traded on a national securities exchange.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we did not have any liability related to the subordinated distribution upon termination.

Stock Purchase Plans

On December 31, 2017, our Chief Executive Officer and Chairman of the Board of Directors, Jeffrey T. Hanson, our President and Chief Operating Officer, Danny Prosky, and our Executive Vice President and General Counsel, Mathieu B. Streiff, each executed stock purchase plans, or the 2018 Stock Purchase Plans, whereby they each irrevocably agreed to invest 100% of their net after-tax base salary and cash bonus compensation earned as employees of American Healthcare Investors directly into our company by purchasing shares of our Class I common stock. In addition, on December 31, 2017, four Executive Vice Presidents of American Healthcare Investors, including our Executive Vice President of Acquisitions, Stefan K.L. Oh, our ~~Vice Presidents of Asset Management,~~Chief Financial Officer, Brian S. Peay, as well as Wendie Newman and Christopher M. Belford, ~~and our Chief Financial Officer,~~

both of whom

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

~~Brian S. Peay,~~were our Vice Presidents of Asset Management as of September 30, 2020, each executed similar 2018 Stock Purchase Plans whereby they each irrevocably agreed to invest a portion of their net after-tax base salary or a portion of their net after-tax base salary and cash bonus compensation, ranging from 5.0% to 15.0%, earned on or after January 1, 2018 as employees of American Healthcare Investors directly into shares of our Class I common stock. ~~Pursuant to their terms, the~~The 2018 Stock Purchase Plans terminated on December 31, 2018.

Purchases of shares of our Class I common stock pursuant to the 2018 Stock Purchase Plans commenced beginning with the first regularly scheduled payroll payment on January 22, ~~2018.~~2018, and concluded with the regularly scheduled payroll payment on January 7, 2019. The shares of Class I common stock were purchased pursuant to the 2018 Stock Purchase Plans at a per share purchase price equal to the per share purchase price of our Class I common stock, which was ~~$9.21 per share prior to April 11, 2018 and~~ $9.65 per share effective as of April 11, 2018. No selling commissions, dealer manager fees (including the portion of such dealer manager fees funded by our advisor) or stockholder servicing fees were paid with respect to such sales of our Class I common stock pursuant to the 2018 Stock Purchase Plans.

For the ~~three and~~ nine months ended September 30, 2019, ~~and 2018,~~ our officers invested the following amounts and we issued the following shares of our Class I common stock pursuant to the 2018 Stock Purchase Plans:


		Three Months Ended September 30,						Nine Months Ended September 30,
		2019			2018			2019			2018					Nine Months Ended September 30, 2019
Officer’s Name	Title	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Officer’s Name	Title	Amount		Shares
Jeffrey T. Hanson	Chief Executive Officer and Chairman of the Board of Directors	$	—	—	$	70,000	7,292	$	10,000	995	$	258,000	27,398	Jeffrey T. Hanson	Chief Executive Officer and Chairman of the Board of Directors	$	10,000	995
Danny Prosky	President and Chief Operating Officer	—		—	78,000		7,993	11,000		1,103	275,000		29,118	Danny Prosky	President and Chief Operating Officer	11,000		1,103
Mathieu B. Streiff	Executive Vice President and General Counsel	—		—	66,000		6,826	10,000		999	254,000		26,971	Mathieu B. Streiff	Executive Vice President and General Counsel	10,000		999
Brian S. Peay	Chief Financial Officer	—		—	5,000		578	1,000		88	24,000		2,565	Brian S. Peay	Chief Financial Officer	1,000		88
Stefan K.L. Oh	Executive Vice President of Acquisitions	—		—	8,000		886	1,000		127	25,000		2,648	Stefan K.L. Oh	Executive Vice President of Acquisitions	1,000		127
Christopher M. Belford	Vice President of Asset Management	—		—	7,000		657	1,000		102	49,000		5,209	Christopher M. Belford	Vice President of Asset Management	1,000		102
Wendie Newman	Vice President of Asset Management	—		—	3,000		249	1,000		34	7,000		718	Wendie Newman	Vice President of Asset Management	1,000		34
Total		$	—	—	$	237,000	24,481	$	35,000	3,448	$	892,000	94,627	Total		$	35,000	3,448

Accounts Payable Due to Affiliates

The following amounts were outstanding to our affiliates as of September 30, ~~2019~~2020 and December 31, ~~2018:~~2019:


Fee	September 30, 2020		December 31, 2019
Asset management fees	$	815,000	$	768,000
Property management fees	128,000		145,000
Construction management fees	31,000		65,000
Operating expenses	11,000		12,000
Acquisition and development fees	2,000		5,000
Lease commissions	0		21,000
Total	$	987,000	$	1,016,000

Fee
September 30,
2019

December 31,
2018
Asset management fees $ 737,000
$ 595,000
Property management fees 105,000
97,000
Construction management fees 68,000
18,000
Lease commissions 31,000
—
Operating expenses 5,000
6,000
Contingent Advisor Payment —
7,866,000
Development fees —
6,000
Total $ 946,000
$ 8,588,000

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

14. Fair Value Measurements

Assets and Liabilities Reported at Fair Value

The table below presents our assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2019,~~2020, aggregated by the level in the fair value hierarchy within which those measurements ~~fall. We did not have any~~fall:


	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total


Liabilities:
Derivative financial instruments	$	0	$	6,687,000	$	0	$	6,687,000

The table below presents our assets and liabilities measured at fair value on a recurring basis as of December 31, ~~2018.~~

2019, aggregated by the level in the fair value hierarchy within which those measurements fall:


	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Liabilities:									Liabilities:
Derivative financial instruments	$	—	$	5,401,000	$	—	$	5,401,000	Derivative financial instruments	$	0	$	4,385,000	$	0	$	4,385,000

There were no transfers into or out of fair value measurement levels during the nine months ended September 30, 2020 and 2019.

Derivative Financial Instruments

We use interest rate swaps to manage interest rate risk associated with variable-rate debt. The valuation of these instruments is determined using widely accepted valuation techniques including 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, and uses observable market-based inputs, including interest rate curves, as well as option volatility. The fair values of interest rate swaps are determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates derived from observable market interest rate curves.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Although we have determined that the majority of the inputs used to value our derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparty. However, as of September 30, ~~2019,~~2020, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Financial Instruments Disclosed at Fair Value

Our accompanying condensed consolidated balance sheets include the following financial instruments: cash and cash equivalents, accounts and other receivables, restricted cash, real estate deposits, accounts payable and accrued liabilities, accounts payable due to affiliates, mortgage loans payable and borrowings under the 2018 Credit Facility.

We consider the carrying values of cash and cash equivalents, accounts and other receivables, restricted cash, real estate deposits and accounts payable and accrued liabilities to approximate the fair values for these financial instruments based upon the short period of time between origination of the instruments and their expected realization. The fair value of accounts payable due to affiliates is not determinable due to the related party nature of the accounts payable. These financial assets and liabilities are measured at fair value on a recurring basis based on quoted prices in active markets for identical assets and liabilities, and therefore are classified as Level 1 in the fair value hierarchy.

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

The fair ~~value~~values of our mortgage loans payable and the 2018 Credit Facility isare estimated using a discounted cash flow ~~analysis~~analyses using borrowing rates available to us for debt instruments with similar terms and maturities. We have determined that our mortgage loans payable and the 2018 Credit Facility are classified in Level 2 within the fair value hierarchy as reliance is placed on inputs other than quoted prices that are observable, such as interest rates and yield curves. The carrying amounts and estimated fair values of such financial instruments as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows:


										September 30, 2020				December 31, 2019
										Carrying Amount(1)		Fair Value		Carrying Amount(1)		Fair Value

	September 30, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Liabilities:									Financial Liabilities:
Mortgage loans payable	$	26,229,000	$	26,970,000	$	16,892,000	$	16,920,000	Mortgage loans payable	$	17,974,000	$	21,944,000	$	26,070,000	$	26,677,000
Line of credit and term loans	$	354,635,000	$	357,751,000	$	270,553,000	$	275,124,000	Line of credit and term loans	$	477,306,000	$	480,348,000	$	393,217,000	$	396,891,000

___________

(1)Carrying amount is net of any discount/premium and deferred financing costs.

15. Income Taxes

As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders. We have elected to treat certain of our consolidated subsidiaries as ~~wholly-owned taxable REIT subsidiaries, or~~ TRS, pursuant to the Code. TRS may participate in services that would otherwise be considered impermissible for REITs and are subject to federal and state income tax at regular corporate tax rates.

On ~~December 22, 2017,~~March 27, 2020, the ~~U.S.~~federal government ~~enacted comprehensive tax legislation pursuant~~passed the CARES Act which contains economic stimulus provisions, including the temporary removal of limitations on the deductibility of net operating losses, or NOL, modifications to the ~~Tax Cuts~~carryback periods of NOL, modifications to the business interest deduction limitations and ~~Jobs~~technical corrections to the tax depreciation recovery period for qualified improvement property. Accordingly, tax law changes within the CARES Act may impact income taxes accrued, deferred tax assets or liabilities and the associated valuation allowances included in our condensed consolidated financial statements, if any. We do not anticipate that tax law changes in the CARES Act will materially impact the computation of ~~2017, or~~our taxable income, including our TRS. We also do not expect that we will realize a material tax benefit as a result of the ~~Tax Act. The Tax Act makes broad and complex~~ changes to the ~~U.S.~~provisions of the Code made by the CARES Act. We will continue to evaluate the tax ~~code, including, but not limited to, reducing~~impact of the ~~U.S. federal corporate tax rate to 21.0%, eliminating~~CARES Act and any guidance provided by the ~~corporate alternative minimum tax and changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.~~

The Tax Act is still unclear in some respects and could be subject to potential amendments and technical corrections. The federal income tax rules dealing with U.S. federal income taxation and REITs are constantly under review by persons involved in the legislative process,United States Treasury Department, the IRS and ~~the U.S. Treasury Department, which results in statutory changes as well as frequent revisions~~other state and local regulatory authorities to ~~regulations and interpretations. As a result, the long-term impact~~our condensed consolidated financial statements.

Table of the Tax Act on the overall economy, government revenues, our tenants, us, and the real estate industry cannot be reliably predicted at this time. We continue to work with our tax advisors to determine the full impact that the recent tax legislation as a whole will have on us.Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

The components of income tax (benefit) expense for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2019			2018			2019			2018				2020		2019		2020		2019
Federal deferred	$	(290,000	)	$	(796,000	)	$	(958,000	)	$	(2,178,000	)	Federal deferred	$	(863,000)	$	(290,000)	$	(2,134,000)	$	(958,000)
State deferred	(68,000		)	(146,000		)	(250,000		)	(432,000		)	State deferred	(327,000)		(68,000)		(721,000)		(250,000)
Federal current													Federal current	(37,000)		0		0		0
State current	16,000			4,000			26,000			4,000			State current	(2,000)		16,000		0		26,000
Valuation allowance	349,000			942,000			1,199,000			2,610,000			Valuation allowance	1,190,000		349,000		2,855,000		1,199,000
Total income tax expense	$	7,000		$	4,000		$	17,000		$	4,000
Total income tax (benefit) expense													Total income tax (benefit) expense	$	(39,000)	$	7,000	$	0	$	17,000

Current Income Tax

Federal and state income taxes are generally a function of the level of income recognized by our TRS.

Deferred Taxes

Deferred income tax is generally a function of the period’s temporary differences (primarily basis differences between tax and financial reporting for real estate assets and equity investments) and generation of tax ~~net operating losses~~NOL that may be realized in future periods depending on sufficient taxable income.

We recognize the financial statement effects of an uncertain tax position when it is more likely than not, based on the technical merits of the tax position, that such a position will be sustained upon examination by the relevant tax authorities. If the tax benefit meets the “more likely than not” threshold, the measurement of the tax benefit will be based on our estimate of the ultimate tax benefit to be sustained if audited by the taxing authority. As of both September 30, ~~2019~~2020 and December 31, ~~2018,~~

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

2019, we did not have any tax benefits or liabilities for uncertain tax positions that we believe should be recognized in our accompanying condensed consolidated financial statements.

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A valuation allowance is established if we believe it is more likely than not that all or a portion of the deferred tax assets are not realizable. As of both September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, our valuation allowance fully reserves the net deferred tax asset due to inherent uncertainty of future income. We will continue to monitor industry and economic conditions, and our ability to generate taxable income based on our business plan and available tax planning strategies, which would allow us to utilize the tax benefits of the net deferred tax assets and thereby allow us to reverse all, or a portion of, our valuation allowance in the future.

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

16. Leases

Lessor

We have operating leases with tenants that expire at various dates through 2040. For the three months ended September 30, 2020 and 2019, we recognized $21,519,000 and $19,253,000 of real estate revenue, respectively, related to operating lease payments, of which $4,592,000 and $3,718,000, respectively, was for variable lease payments. For the nine months ended September 30, 2020 and 2019, we recognized ~~$19,253,000~~$64,824,000 and $53,280,000 of real estate revenue, respectively, related to operating lease payments, of which ~~$3,718,000~~$13,861,000 and $10,426,000, respectively, was for variable lease payments. ~~The~~As of September 30, 2020, the following table sets forth the undiscounted cash flows for future minimum base rents due under operating leases for the three months ended December 31, ~~2019~~2020 and for each of the next four years ending December 31 and thereafter for the properties that we wholly own:

Year Amount
2019 $ 15,174,000
2020 59,881,000
2021 58,793,000
2022 55,823,000
2023 51,315,000
Thereafter 340,891,000
Total $ 581,877,000

~~Future minimum base rents due under operating leases as of December 31, 2018 for each of the next five years ending December 31 and thereafter was as follows:~~


Year	Amount		Year	Amount
2019	$	52,764,000
2020	52,207,000		2020	$	16,049,000
2021	50,886,000		2021	64,178,000
2022	48,249,000		2022	61,520,000
2023	44,397,000		2023	57,017,000
2024			2024	51,410,000
Thereafter	290,103,000		Thereafter	310,613,000
Total	$	538,606,000	Total	$	560,787,000

Lessee

We have ground lease obligations that generally require fixed annual rental payments and may also include escalation clauses and renewal options. These leases expire at various dates through 2107, excluding extension options. Certain of our lease agreements include rental payments that are adjusted periodically based on the United States Bureau of Labor Statistics’ Consumer Price Index, and may include other variable lease costs (i.e., common area maintenance, property taxes and insurance). Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

For the three months ended September 30, 2020 and 2019, operating lease costs were $206,000 and $177,000, respectively, and for the nine months ended September 30, 2020 and 2019, operating lease costs were ~~$177,000~~$643,000 and $478,000, respectively, which are included in rental expenses in our accompanying condensed consolidated statements of operations. Such costs also include ~~short-term leases and~~ variable lease costs, which are immaterial. Additional information related to our operating leases ~~as of and~~ for the ~~nine months ended September 30, 2019~~periods presented below was as follows:


	September 30, 2020		December 31, 2019
Weighted average remaining lease term (in years)	79.7		80.4
Weighted average discount rate	5.74	%	5.74	%


	Nine Months Ended September 30,
	2020		2019
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash outflows related to operating leases	$	306,000	$	252,000
Right-of-use assets obtained in exchange for operating lease liabilities	$	0	$	4,489,000

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Amount
Right-of-use assets obtained in exchange for new operating lease liabilities $ 3,552,000
Weighted average remaining lease term (in years)
80.4
Weighted average discount rate
5.73 %
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases $ 252,000

~~The~~As of September 30, 2020, the following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments for the three months ended December 31, ~~2019~~2020 and for each of the next four years ending December 31 and thereafter, as well as the reconciliation of those cash flows to operating lease ~~liabilities:~~liabilities on our accompanying condensed consolidated balance sheet:


Year	Amount
2020	$	212,000
2021	523,000
2022	526,000
2023	530,000
2024	534,000
Thereafter	47,103,000
Total operating lease payments	49,428,000
Less: interest	39,453,000
Present value of operating lease liabilities	$	9,975,000

Year
Amount
2019
$ 207,000
2020
514,000
2021
514,000
2022
514,000
2023
514,000
Thereafter
39,470,000
Total operating lease payments
41,733,000
Less: interest
32,772,000
Present value of operating lease liabilities
$ 8,961,000

~~Future minimum operating lease obligations under non-cancelable ground lease obligations as of December 31, 2018 for each of the next five years ending December 31 and thereafter was as follows:~~

Year Amount
2019 $ 307,000
2020 307,000
2021 307,000
2022 307,000
2023 307,000
Thereafter 11,978,000
Total $ 13,513,000

17. Segment Reporting

As of September 30, ~~2019,~~2020, we evaluated our business and made resource allocations based on ~~four~~4 reportable business ~~segments:~~segments — medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities. Our medical office buildings are typically leased to multiple tenants under separate leases, thus requiring active management and responsibility for many of the associated operating expenses (much of which are, or can effectively be, passed through to the tenants). Our senior housing ~~facilities~~ and skilled nursing facilities are primarily single-tenant properties for which we lease the facilities to unaffiliated tenants under triple-net and generally master leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. Our senior housing — RIDEA properties include senior housing facilities that are owned and operated utilizing a RIDEA structure.

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

We evaluate performance based upon segment net operating income. We define segment net operating income as total revenues and grant income, less rental expenses and property operating expenses, which excludes depreciation and amortization, general and administrative expenses, acquisition related expenses, interest expense, income or loss from unconsolidated entity, other income and income tax expense for each segment. We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measurement. However, we believe that segment net operating income serves as an appropriate supplemental performance measure to net income (loss) because it allows investors and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies and between periods on a consistent basis.

Interest expense, depreciation and amortization and other expenses not attributable to individual properties are not allocated to individual segments for purposes of assessing segment performance. Non-segment assets primarily consist of corporate assets including our joint venture investment in an unconsolidated entity, cash and cash equivalents, other receivables, real estate deposits and other assets not attributable to individual properties.

~~Summary information for the reportable segments during the three and nine months ended September 30, 2019 and 2018 was as follows:~~

Medical
Office
Buildings
Senior
Housing —
RIDEA
Senior
Housing
Skilled
Nursing
Facilities

Three Months
Ended
September 30, 2019
Revenues:

Real estate revenue
$ 14,144,000

$ —
$ 2,180,000
$ 2,929,000

$ 19,253,000
Resident fees and services —
11,865,000
—
—
11,865,000
Total revenues 14,144,000
11,865,000
2,180,000
2,929,000
31,118,000
Expenses:

Rental expenses
4,581,000

—
213,000
135,000

4,929,000
Property operating expenses —
9,884,000
—
—
9,884,000
Segment net operating income
$ 9,563,000

$ 1,981,000
$ 1,967,000
$ 2,794,000

$ 16,305,000
Expenses:

General and administrative

$ 3,982,000
Acquisition related expenses

74,000
Depreciation and amortization

9,552,000
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)
(4,140,000 )
Loss in fair value derivative financial instruments (402,000 )
Loss from unconsolidated entity (79,000 )
Other income

13,000
Loss before income taxes (1,911,000 )
Income tax expense (7,000 )
Net loss

$ (1,918,000 )

3736

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Summary information for the reportable segments during the three and nine months ended September 30, 2020 and 2019 was as follows:


	Medical Office Buildings		Senior Housing — RIDEA		Skilled Nursing Facilities		Senior Housing		Three Months Ended September 30, 2020
Revenues and grant income:
Real estate revenue	$	16,338,000	$	—	$	2,979,000	$	2,202,000	$	21,519,000
Resident fees and services	—		18,948,000		—		—		18,948,000
Grant income	—		864,000		—		—		864,000
Total revenues and grant income	16,338,000		19,812,000		2,979,000		2,202,000		41,331,000
Expenses:
Rental expenses	5,607,000		—		125,000		173,000		5,905,000
Property operating expenses	—		17,397,000		—		—		17,397,000
Segment net operating income	$	10,731,000	$	2,415,000	$	2,854,000	$	2,029,000	$	18,029,000
Expenses:
General and administrative									$	3,672,000
Acquisition related expenses									57,000
Depreciation and amortization									12,669,000
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)									(4,839,000)
Gain in fair value of derivative financial instruments									1,450,000
Impairment of real estate investments									(3,064,000)
Loss from unconsolidated entity									(377,000)
Other income									8,000
Loss before income taxes									(5,191,000)
Income tax benefit									39,000
Net loss									$	(5,152,000)

Medical
Office
Buildings

Senior
Housing —
RIDEA

Senior
Housing

Skilled
Nursing
Facilities

Three Months
Ended
September 30, 2018
Revenues:
Real estate revenue $ 9,580,000
$ —
$ 2,259,000
$ 673,000
$ 12,512,000
Resident fees and services —
9,769,000
—
—
9,769,000
Total revenues 9,580,000
9,769,000
2,259,000
673,000
22,281,000
Expenses:
Rental expenses 2,812,000
—
270,000
105,000
3,187,000
Property operating expenses —
7,987,000
—
—
7,987,000
Segment net operating income $ 6,768,000
$ 1,782,000
$ 1,989,000
$ 568,000
$ 11,107,000
Expenses:
General and administrative $ 2,105,000
Acquisition related expenses 98,000
Depreciation and amortization 9,007,000
Other income (expense):
Interest expense (including amortization of deferred financing costs and debt discount/premium) (1,602,000 )
Other income 6,000
Loss before income taxes (1,699,000 )
Income tax expense (4,000 )
Net loss $ (1,703,000 )

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)


	Medical Office Buildings		Senior Housing — RIDEA		Skilled Nursing Facilities		Senior Housing		Three Months Ended September 30, 2019
Revenues:
Real estate revenue	$	14,144,000	$	—	$	2,929,000	$	2,180,000	$	19,253,000
Resident fees and services	—		11,865,000		—		—		11,865,000
Total revenues	14,144,000		11,865,000		2,929,000		2,180,000		31,118,000
Expenses:
Rental expenses	4,581,000		—		135,000		213,000		4,929,000
Property operating expenses	—		9,884,000		—		—		9,884,000
Segment net operating income	$	9,563,000	$	1,981,000	$	2,794,000	$	1,967,000	$	16,305,000
Expenses:
General and administrative									$	3,982,000
Acquisition related expenses									74,000
Depreciation and amortization									9,552,000
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)									(4,140,000)
Loss in fair value of derivative financial instruments									(402,000)
Loss from unconsolidated entity									(79,000)
Other income									13,000
Loss before income taxes									(1,911,000)
Income tax expense									(7,000)
Net loss									$	(1,918,000)

Medical
Office
Buildings

Senior
Housing —
RIDEA

Senior
Housing

Skilled
Nursing
Facilities

Nine Months
Ended
September 30, 2019
Revenues:
Real estate revenue $ 38,802,000
$ —
$ 5,746,000
$ 8,732,000
$ 53,280,000
Resident fees and services —
34,053,000
—
—
34,053,000
Total revenues 38,802,000
34,053,000
5,746,000
8,732,000
87,333,000
Expenses:
Rental expenses 12,814,000
—
989,000
435,000
14,238,000
Property operating expenses —
28,194,000
—
—
28,194,000
Segment net operating income $ 25,988,000
$ 5,859,000
$ 4,757,000
$ 8,297,000
$ 44,901,000
Expenses:
General and administrative $ 11,413,000
Acquisition related expenses 1,492,000
Depreciation and amortization 35,561,000
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium) (11,532,000 )
Loss in fair value derivative financial instruments (5,401,000 )
Income from unconsolidated entity 185,000
Other income 162,000
Loss before income taxes (20,151,000 )
Income tax expense (17,000 )
Net loss $ (20,168,000 )

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)


	Medical Office Buildings		Senior Housing — RIDEA		Skilled Nursing Facilities		Senior Housing		Nine Months Ended September 30, 2020
Revenues and grant income:
Real estate revenue	$	49,184,000	$	—	$	8,984,000	$	6,656,000	$	64,824,000
Resident fees and services	—		51,863,000		—		—		51,863,000
Grant income	—		864,000		—		—		864,000
Total revenues and grant income	49,184,000		52,727,000		8,984,000		6,656,000		117,551,000
Expenses:
Rental expenses	16,616,000		—		459,000		648,000		17,723,000
Property operating expenses	—		44,856,000		—		—		44,856,000
Segment net operating income	$	32,568,000	$	7,871,000	$	8,525,000	$	6,008,000	$	54,972,000
Expenses:
General and administrative									$	11,960,000
Acquisition related expenses									74,000
Depreciation and amortization									37,919,000
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)									(15,123,000)
Loss in fair value of derivative financial instruments									(2,302,000)
Impairment of real estate investments									(3,064,000)
Income from unconsolidated entity									952,000
Other income									278,000
Net loss									$	(14,240,000)

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)


		Medical Office Buildings		Senior Housing — RIDEA			Senior Housing		Skilled Nursing Facilities		Nine Months Ended September 30, 2018				Medical Office Buildings		Senior Housing — RIDEA		Skilled Nursing Facilities		Senior Housing		Nine Months Ended September 30, 2019
Revenues:														Revenues:
Real estate revenue		$	24,299,000	$	—		$	6,757,000	$	1,473,000	$	32,529,000		Real estate revenue	$	38,802,000	$	—	$	8,732,000	$	5,746,000	$	53,280,000
Resident fees and services		—		26,604,000			—		—		26,604,000			Resident fees and services	—		34,053,000		—		—		34,053,000
Total revenues		24,299,000		26,604,000			6,757,000		1,473,000		59,133,000			Total revenues	38,802,000		34,053,000		8,732,000		5,746,000		87,333,000
Expenses:														Expenses:
Rental expenses		6,901,000		—		��	951,000		238,000		8,090,000			Rental expenses	12,814,000		—		435,000		989,000		14,238,000
Property operating expenses		—		21,986,000			—		—		21,986,000			Property operating expenses	—		28,194,000		—		—		28,194,000
Segment net operating income		$	17,398,000	$	4,618,000		$	5,806,000	$	1,235,000	$	29,057,000		Segment net operating income	$	25,988,000	$	5,859,000	$	8,297,000	$	4,757,000	$	44,901,000
Expenses:														Expenses:
General and administrative											$	5,803,000		General and administrative									$	11,413,000
Acquisition related expenses											254,000			Acquisition related expenses									1,492,000
Depreciation and amortization											24,053,000			Depreciation and amortization									35,561,000
Other income (expense):														Other income (expense):
Interest expense:														Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)	Interest expense (including amortization of deferred financing costs and debt discount/premium)										(3,846,000		)	Interest expense (including amortization of deferred financing costs and debt discount/premium)									(11,532,000)
Loss in fair value of derivative financial instruments														Loss in fair value of derivative financial instruments									(5,401,000)
Income from unconsolidated entity														Income from unconsolidated entity									185,000
Other income											6,000			Other income									162,000
Loss before income taxes											(4,893,000		)	Loss before income taxes									(20,151,000)
Income tax expense											(4,000		)	Income tax expense									(17,000)
Net loss											$	(4,897,000	)	Net loss									$	(20,168,000)

Assets by reportable segment as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows:


	September 30, 2020		December 31, 2019
Medical office buildings	$	590,075,000	$	600,048,000
Senior housing — RIDEA	247,972,000		149,055,000
Skilled nursing facilities	120,219,000		121,749,000
Senior housing	101,225,000		142,982,000
Other	51,999,000		54,493,000
Total assets	$	1,111,490,000	$	1,068,327,000

September 30,
2019

December 31,
2018
Medical office buildings $ 560,071,000
$ 417,708,000
Senior housing — RIDEA 159,062,000
146,965,000
Senior housing 143,598,000
154,716,000
Skilled nursing facilities 121,441,000
115,657,000
Other 53,443,000
61,326,000
Total assets $ 1,037,615,000
$ 896,372,000

Table of Contents

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

18. Concentration of Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily cash and cash equivalents, accounts and other receivables, restricted cash and real estate deposits. Cash and cash equivalents are generally invested in investment-grade, short-term instruments with a maturity of three months or less when purchased. We have cash and cash equivalents in financial institutions that are insured by the Federal Deposit Insurance Corporation, or FDIC. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had cash and cash equivalents in excess of FDIC insured limits. We believe this risk is not significant. Concentration of credit risk with respect to accounts receivable from tenants is limited. In general, we perform credit evaluations of prospective tenants and security deposits are obtained at the time of property acquisition and upon lease execution.

Based on leases in effect as of September 30, ~~2019, two states~~2020, 1 state in the United States accounted for 10.0% or more of our total property portfolio’s annualized base rent or annualized net operating income. Our properties located in Missouri ~~and Michigan~~ accounted for ~~12.0%, and 10.2%, respectively,~~approximately 11.4% of our total property portfolio’s annualized base rent or annualized net operating income. Accordingly, there is a geographic concentration of risk subject to fluctuations in ~~each~~such state’s economy.

~~Table of Contents~~

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

Based on leases in effect as of September 30, ~~2019,~~2020, our four reportable business segments, medical office buildings, senior housing — RIDEA, skilled nursing facilities and senior housing ~~— RIDEA,~~ accounted for ~~60.3%~~62.6%, ~~14.7%~~14.0%, ~~14.1%~~13.7% and ~~10.9%~~9.7%, respectively, of our total property portfolio’s annualized base rent or annualized net operating income.

As of September 30, ~~2019,~~2020, we had ~~one~~1 tenant that accounted for 10.0% or more of our total property portfolio’s annualized base rent or annualized net operating income, as follows:

Tenant Annualized
Base Rent(1)
Percentage of
Annualized Base
Rent
Acquisition
Reportable
Segment
GLA
(Sq Ft) Lease Expiration
Date
RC Tier Properties, LLC $ 7,629,000
10.8% Missouri SNF Portfolio Skilled Nursing 385,000
09/30/33

~~___________~~


~~(1)~~	Annualized base rent is based on contractual base rent from leases in effect as of September 30, 2019. The loss of this tenant or its inability to pay rent could have a material adverse effect on our business and results of operations.

Tenant

Annualized
Base Rent(1)

Percentage of
Annualized
Base Rent

Acquisition

Reportable
Segment

GLA
(Sq Ft)

Lease Expiration
Date

RC Tier Properties, LLC

7,782,000

10.4%

Missouri SNF Portfolio

Skilled Nursing

385,000

09/30/33

___________

(1)Annualized base rent is based on contractual base rent from leases in effect as of September 30, 2020, inclusive of our senior housing — RIDEA facilities. The loss of this tenant or its inability to pay rent could have a material adverse effect on our business and results of operations.

19. Per Share Data

Basic earnings (loss) per share for all periods presented are computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of our common stock outstanding during the period. Net income (loss) applicable to common stock is calculated as net income (loss) attributable to controlling interest less distributions allocated to participating securities of ~~$7,000~~$4,000 and ~~$6,000,~~$7,000, respectively, for the three months ended September 30, 2020 and 2019, and ~~2018,~~$15,000 and $18,000, ~~and $14,000,~~ respectively, for the nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019. Diluted earnings (loss) per share are computed based on the weighted average number of shares of our common stock and all potentially dilutive securities, if any. Nonvested shares of our restricted common stock and redeemable limited partnership units of our operating partnership are participating securities and give rise to potentially dilutive shares of our common stock. As of September 30, ~~2019~~2020 and ~~2018,~~2019, there were ~~43,500~~45,000 and ~~37,500~~43,500 nonvested shares, respectively, of our restricted common stock outstanding, but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during these periods. As of ~~both~~ September 30, ~~2019~~2020 and ~~2018,~~2019, there were 208 ~~units of~~ redeemable limited partnership units of our operating partnership outstanding, but such units were excluded from the computation of diluted earnings per share because such units were anti-dilutive during these periods.

~~20. Subsequent Events~~

~~Property Acquisition~~

Subsequent to September 30, 2019, we completed the acquisition of one building from an unaffiliated third party. The following is a summary of our property acquisition subsequent to September 30, 2019:

Acquisition(1) Location Type
Date
Acquired

Contract
Purchase
Price

Line of
Credit(2)

Total
Acquisition
Fee(3)
Fresno MOB Fresno, CA Medical Office 10/30/19 $ 10,000,000
$ 9,950,000
$ 225,000

~~___________~~


~~(1)~~	~~We own 100% of our property acquired subsequent to September 30, 2019.~~


~~(2)~~	~~Represents a borrowing under the 2018 Credit Facility, as defined in Note 7, Line of Credit and Term Loans, at the time of acquisition.~~


~~(3)~~	Our advisor was paid, as compensation for services rendered in connection with the investigation, selection and acquisition of our property, a base acquisition fee of 2.25% of the contract purchase price paid by us. See Note 13, Related Party Transactions — Acquisition and Development Stage — Acquisition Fee, for a further discussion.

Table of Contents

~~GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)~~

~~Amendment to the 2018 Corporate Line of Credit~~

On November 1, 2019, we entered into an amendment to the 2018 Credit Agreement, or the 2019 Amendment, with Bank of America, KeyBank and a syndicate of other banks, as lenders. The material terms of the 2019 Amendment provide for an increase in the term loan commitment by $45,000,000 and an increase to the revolving credit facility by $85,000,000. As a result of the 2019 Amendment, the aggregate borrowing capacity under the 2018 Credit Facility is $530,000,000. Except as modified by the 2019 Amendment, the material terms of the 2018 Credit Agreement remain in full force and effect.

~~Table of Contents~~

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

The following discussion should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our ~~2018~~2019 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or the SEC, on March ~~18, 2019.~~19, 2020. Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, together with our results of operations and cash flows for the three and nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019.

Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations. Our statements contained in this report that are not historical facts are forward-looking. Actual results may differ materially from those included in the forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations, are generally identifiable by use of the words “expect,” “project,” “may,” “will,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential,” “seek” and any other comparable and derivative terms or the negatives thereof. Our ability to predict results or the actual effect of future plans orand strategies is inherently uncertain. Factors which could have a material adverse effect on our operations ~~and future investments~~ on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; the effects of the coronavirus, or COVID-19, pandemic, including its effects on the healthcare industry, senior housing and skilled nursing facilities and the economy in general; legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs; the availability of capital; changes in interest rates; competition in the real estate industry; ~~the supply and demand for operating properties in our proposed market areas;~~ changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to REITs; the success of our investment strategy; ~~the availability of properties to acquire;~~ the availability of financing; and our ongoing relationship with American Healthcare Investors, LLC, or American Healthcare Investors, and Griffin Capital Company, LLC, or Griffin Capital, or collectively, our co-sponsors, and their affiliates. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date on which such statements were made, and undue reliance should not be placed on such statements. We undertake no obligation to update any such statements that may become untrue because of subsequent events. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview and Background

Griffin-American Healthcare REIT IV, Inc., a Maryland corporation, was incorporated on January 23, 2015 and therefore we consider that our date of inception. We were initially capitalized on February 6, 2015. We invest in a diversified portfolio of real estate properties, focusing primarily on medical office buildings, ~~hospitals,~~ skilled nursing facilities, senior housing and other healthcare-related facilities. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). ~~We may also originate and acquire secured loans and real estate-related investments on an infrequent and opportunistic basis.~~ We generally seek investments that produce current income. We qualified to be taxed as a REIT under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to qualify to be taxed as a REIT.

Table of Contents

On January 18, 2019, we filed a Registration Statement on Form S-3 under the Securities Act of 1933, as amended, or the Securities Act, to register a maximum of $100,000,000 of additional shares of our common stock to be issued pursuant to the DRIP, or the 2019 DRIP Offering. The Registration Statement on Form S-3 was automatically effective with the SEC upon its filing. We commenced offering shares pursuant to the 2019 DRIP Offering on March 1, 2019, following the termination of our initial offering on February 15, 2019. ~~See Note 12, Equity — Distribution Reinvestment Plan, for~~As of September 30, 2020, a ~~further discussion.~~total of $37,290,000 in distributions were reinvested that resulted in 3,903,895 shares of our common stock being issued pursuant to the 2019 DRIP Offering. We collectively refer to the DRIP portion of our initial offering and the 2019 DRIP Offering as our DRIP Offerings. ~~As of September 30, 2019, a total of $15,131,000 in distributions were reinvested that~~

The COVID-19 pandemic is dramatically impacting the United States and has resulted in ~~1,581,073 shares~~an aggressive worldwide effort to contain the spread of the virus. These efforts have significantly and adversely disrupted economic markets and impacted commercial activity worldwide, including markets in which we own and/or operate properties, and the prolonged economic impact remains uncertain. In addition, the continuously evolving nature of the COVID-19 pandemic makes it difficult to ascertain the long-term impact it will have on real estate markets and our portfolio of investments. Considerable uncertainty still surrounds the COVID-19 pandemic and its effects on the population, as well as the effectiveness of any responses taken on a national and local level by government and public health authorities and businesses to contain and combat the outbreak and spread of the virus. In particular, government-imposed business closures and re-opening restrictions have dramatically impacted the operations of our ~~common stock being issued pursuant~~real estate investments and our tenants across the country, such as creating declines in resident occupancy. Further, our senior housing facilities have also experienced dramatic increases and continue to experience increases in costs to care for residents, particularly labor costs to maintain staffing levels to care for the aged population during this crisis, costs of COVID-19 testing of employees and residents and costs to procure the volume of personal protective equipment, or PPE, and other supplies required.

We received and recognized in our accompanying condensed consolidated financial statements stimulus funds through economic relief programs of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, as discussed at Note 2, Summary of Significant Accounting Policies — Government Grants, to our accompanying condensed consolidated financial statements. We have also taken actions to strengthen our balance sheet and preserve liquidity in response to the ~~2019 DRIP Offering.~~COVID-19 pandemic risks. Since March 2020, we have postponed non-essential capital expenditures, reduced the stockholder distribution rate and partially suspended our share repurchase plan. We believe that the long-term stability of our portfolio will return once the virus has been controlled. In states where lockdown orders have been lifted, the downward trends in our portfolio appear to have somewhat moderated, but we have not yet witnessed a significant rebound. We are continuously monitoring the impact of the COVID-19 pandemic on our business, residents, tenants, operating partners, managers, portfolio of investments and on the United States and global economies. The prolonged duration and impact of the COVID-19 pandemic has materially disrupted, and may continue to materially disrupt, our business operations and impact our financial performance. See the “Factors Which May Influence Results of Operations,” “Results of Operations” and “Liquidity and Capital Resources” sections below for a further discussion.

On April ~~4, 2019,~~2, 2020, our board of directors, or our board, at the recommendation of the audit committee of our board, comprised solely of independent directors, and after considering the uncertainties presented by the COVID-19 pandemic, unanimously approved and established an ~~updated~~ estimated per share net asset value, or NAV, of our common stock of $9.54. We provide this estimated per share NAV to assist broker-dealers in connection with their obligations under Financial Industry Regulatory Authority, or FINRA, Rule 2231 with respect to customer account statements. The estimated per share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of December 31, ~~2018.~~2019. This valuation was performed in accordance with the methodology provided in Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs,, or the Practice Guideline, issued by the Institute for Portfolio Alternatives, or the IPA, in April 2013, in addition to guidance from the SEC. WeThe valuation was calculated as of December 31, 2019, prior to the reported emergence of COVID-19 in the United States. The impact of the COVID-19 pandemic on the value of our assets may be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat COVID-19 and reactions by consumers, companies, governmental entities and capital markets. Therefore, although we intend ~~to continue~~ to publish an updated estimated per share NAV on at least an annual ~~basis.~~basis, we may be required to reevaluate the estimated per share NAV sooner if the COVID-19 pandemic has a material adverse impact on our residents, tenants, operating partners, managers, portfolio of investments or us. The estimated per share NAV of our common stock of $9.54 is within the range of estimated values, but lower than the mid-point of $9.75 provided by the independent third party valuation firm that conducted a valuation analysis of our assets, and is the same estimated per share NAV previously determined by the board on April 4, 2019 and calculated as of December 31, 2018. See our Current Report on Form 8-K filed with the SEC on April ~~8, 2019,~~3, 2020 for more information on the methodologies and assumptions used to determine, and the limitations and risks of, our ~~updated~~ estimated per share NAV.

Table of Contents

We conduct substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership. We are externally advised by Griffin-American Healthcare REIT IV Advisor, LLC, or our advisor, pursuant to an advisory agreement, or the Advisory Agreement, between us and our advisor. The Advisory Agreement was effective as of February 16, 2016 and had a one-year initial term, subject to successive one-year renewals upon the mutual consent of the parties. The Advisory Agreement was last renewed pursuant to the mutual consent of the parties on February 12, ~~2019~~2020 and expires on February 16, ~~2020.~~2021. Our advisor uses its best efforts, subject to the oversight and review of our board, to, among other things, research, identify, review and make investments in and dispositions of properties and securities on our behalf consistent with our investment policies and objectives. Our advisor performs its duties and responsibilities under the Advisory Agreement as our fiduciary. Our advisor is 75.0% owned and managed by wholly owned subsidiaries of American Healthcare Investors and 25.0% owned by a wholly owned subsidiary of Griffin Capital. American Healthcare Investors is 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Colony Capital, Inc. (NYSE: CLNY), or Colony Capital, and 7.8% owned by James F. Flaherty III, a former partner of Colony Capital. We are not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Colony Capital or Mr. Flaherty; however, we are affiliated with ~~Griffin-American Healthcare REIT IV Advisor, LLC,~~our advisor, American Healthcare Investors and AHI Group Holdings.

We currently operate through four reportable business segments: medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities. As of September 30, ~~2019,~~2020, we had completed 4146 property acquisitions whereby we owned 7889 properties, comprising 8394 buildings, or approximately ~~4,359,000~~4,863,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of ~~$981,689,000.~~$1,089,071,000. As of September 30, ~~2019,~~2020, we also ~~own~~owned a 6.0% interest in a joint venture which owns a portfolio of integrated senior health campuses and ancillary businesses.

Critical Accounting Policies

The complete listing of our Critical Accounting Policies was previously disclosed in our ~~2018~~2019 Annual Report on Form 10-K, as filed with the SEC on March ~~18, 2019,~~19, 2020, and there have been no material changes to our Critical Accounting Policies as disclosed therein, except as included within Note 2, Summary of Significant Accounting Policies, to our accompanying condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see Note 2, Summary of Significant Accounting Policies — Recently Issued Accounting Pronouncements, to our accompanying condensed consolidated financial statements.

Acquisitions in ~~2019~~2020

For a discussion of our property acquisitions in ~~2019,~~2020, see Note 3, Real Estate Investments, Net, ~~and Note 20, Subsequent Events,~~ to our accompanying condensed consolidated financial statements.

~~Table of Contents~~

Factors Which May Influence Results of Operations

WeDue to the ongoing COVID-19 pandemic in the United States and globally, our residents, tenants, managers and operating partners have been materially impacted. The situation continues to present a meaningful challenge for us as an owner and operator of healthcare facilities, as the impact of the virus continues to result in a massive strain throughout the healthcare system. COVID-19 is particularly dangerous among the senior population and results in heightened risk to our senior housing facilities, and we continue to work diligently to implement aggressive safety and infection control protocols at such facilities in line with the Centers for Disease Control and Prevention and Centers for Medicare and Medicaid Services guidelines to limit the exposure and spread of COVID-19.

Each type of real estate asset we own has been impacted by COVID-19 to varying degrees. The COVID-19 pandemic has negatively impacted the businesses of our medical office tenants and their ability to pay rent on a timely basis. In the early months of the pandemic when many of the states had implemented “stay at home” orders, in excess of 50.0% of our tenants in medical office buildings had been classified by state governments as “non-essential” and were ordered to either shut down entirely, or significantly limit hours of operations, which prevented or significantly limited our tenants from seeing patients in their offices and thereby creating unprecedented revenue pressure on such tenants. Substantially all of our physician practices and other medical service providers of non-essential and elective services in our medical office buildings are now open. However, the number of patients returning to such offices varies across practice types and geographic markets as people continue to delay office visits indefinitely due to the fears or uncertainties associated with COVID-19 despite the availability of services. Additionally, while restrictions have been at least partially lifted in many states, there remains a risk of reclosures in states where infection rates continue to rise, which may put additional pressure on our operations.

Table of Contents

For our managed senior housing — RIDEA facilities, based on preliminary information available to management as of October 31, 2020, we have experienced an approximate 14.4% decline in our resident occupancies since February 2020 largely due to a decline in move-ins of prospective residents because of shelter-in-place, re-opening and other quarantine restrictions imposed by government regulations and guidelines. In addition, we continue to experience challenges in attracting prospective residents to our senior housing — RIDEA facilities because they are choosing to delay moving into communities until the threat posed by the virus has declined. Our facilities have adopted phased-in approaches to facility operations depending on the market in which they operate, which range from stringent restrictions of essential visitors and frequent testing of staff and residents to allowing screened visitors and limited activities. At the same time that our managed senior housing — RIDEA facilities are facing a reduction in revenue associated with lower resident occupancies, they are also experiencing up to a 30.0% increase in costs to care for residents, particularly increased labor costs to maintain staffing levels to care for the aged population during this crisis, costs of testing employees and residents for COVID-19 and costs to procure the volume of PPE and other supplies required to maintain health and safety measures and protocols. Such costs have begun to moderate somewhat during the third quarter 2020. Our leased, non-RIDEA senior housing and skilled nursing facility tenants have also experienced and may continue to experience similar pressures related to occupancy declines and expense increases, which may impact their ability to pay rent and have an adverse effect on our operations. Therefore, our immediate focus continues to be on resident occupancy recovery and operating expense management.

The impacts of the COVID-19 pandemic have been significant, rapidly evolving and may continue into the future. Managers of our RIDEA properties continue to evaluate their options for financial assistance such as utilizing programs within the CARES Act passed by the federal government on March 27, 2020, as well as other state and local government relief programs. The CARES Act includes multiple opportunities for immediate cash relief in the form of grants and tax benefits. Some of our tenants within our non-RIDEA properties have sought financial assistance from the CARES Act through programs such as the Payroll Protection Program and deferral of payroll tax payments. However, these government assistance programs are not ~~aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally, that may reasonably be~~ expected to ~~have a material~~fully offset the negative financial impact ~~favorable~~of the COVID-19 pandemic, and there can be no assurance that these programs will continue or ~~unfavorable, on revenues or income~~the extent to which they will be expanded. Therefore, the ultimate impact of such relief from the ~~acquisition, management~~CARES Act and ~~operation~~other enacted and future legislation and regulation, including the extent to which relief funds from such programs will provide meaningful support for lost revenue and increasing costs, is uncertain.

The information in this Quarterly Report on Form 10-Q is based on data currently available to us and will likely change as the COVID-19 pandemic progresses. We continue to closely monitor COVID-19 developments and are continuously assessing the implications to our business, residents, tenants, operating partners, managers and our portfolio of ~~properties other than those listed in~~investments. We anticipate that the government-imposed or self-imposed lockdowns and restrictions have created pent-up demand for doctors’ visits and move-ins into senior housing facilities, however, we cannot predict with reasonable certainty when such demand will return to pre-COVID-19 levels. The COVID-19 pandemic has had, and may continue to have, an adverse effect on the operations of our business, and therefore, we are unable to predict the full extent or nature of the future impact to our financial condition and results of operations at this time. We expect the trends discussed above with respect to the impact of the COVID-19 pandemic to continue. Thus, the lasting impact of the COVID-19 pandemic on our future results could be significant and will largely depend on future developments, including the duration of the crisis and the success of efforts to contain it, which are highly uncertain and cannot be predicted with confidence at this time. See the “Results of Operations” and “Liquidity and Capital Resources” sections below, as well as Part II, Item ~~1A.~~1A, Risk Factors, of this Quarterly Report on Form 10-Q ~~and those Risk Factors previously disclosed in our 2018 Annual Report on Form 10-K, as filed with the SEC on March 18, 2019.~~

~~Revenues~~

The amount of revenue generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease available space at the then existing market rates. Negative trends in one or more of these factors could adversely affect our revenue in the future.for a further discussion.

Scheduled Lease Expirations

Excluding our senior housing — RIDEA facilities, as of September 30, ~~2019,~~2020, our properties were 95.4% leased and during the remainder of ~~2019, 5.2%~~2020, 0.7% of the leased GLA is scheduled to expire. Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next 12 months. In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy. As of September 30, ~~2019,~~2020, our remaining weighted average lease term was ~~8.9~~8.4 years, excluding our senior housing — RIDEA facilities.

For the three and nine months ended September 30, ~~2019,~~2020, our senior housing — RIDEA facilities were ~~84.2%~~71.6% and ~~82.8%~~77.2% leased, respectively. Substantially all of our leases with residents at such properties are for a term of one year or less.

Table of Contents

Results of Operations

Comparison of the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

Our operating results are primarily comprised of income derived from our portfolio of properties and expenses in connection with the acquisition and operation of such properties. In general, we expect amounts related to our portfolio of operating properties to increase in the future based on a full year of operations of ~~newly~~recently acquired ~~properties as well as any additional real estate and real estate-related investments we may acquire.~~properties.

We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions. Accordingly, when we acquired our first medical office building in June 2016; senior housing facility in December 2016; senior housing — RIDEA facility in November 2017; and skilled nursing facility in March 2018, we added a new reporting segment at each such time. As of September 30, ~~2019,~~2020, we operated through four reportable business segments, with activities related to investing in medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities.

The COVID-19 pandemic has had a significant impact on the operations of our real estate portfolio. Although we have experienced a delay in receiving rent payments from our tenants, as of September 30, 2020, we have collected 100% of contractual rent from our leased, non-RIDEA senior housing and skilled nursing facility tenants.Most of our skilled nursing facilities provide behavioral health services with resident occupancies that are less impacted by either the COVID-19 pandemic or restrictions on elective surgeries than traditional skilled nursing facilities. In addition, substantially all of the contractual rent through September 2020 from our medical office building tenants has been received. However, given the significant uncertainty of the impact of the COVID-19 pandemic, we are unable to predict the impact it will have on such tenants’ continued ability to pay rent. We received lease concession requests from some of our medical office building tenants primarily during the second quarter of 2020 that resulted in an insignificant number of concessions granted, such as in the form of rent abatements, in conjunction with a lease term extension for up to five years, or rent payment deferrals requiring repayment within one year. Such lease concessions granted do not have a material impact to our consolidated financial statements. No contractual rent for our medical office building tenants was forgiven.

Changes in our consolidated operating results are primarily due to owning 94 buildings as of September 30, 2020, as compared to owning 83 buildings as of September 30, 2019. In addition, there are changes in our operating results by reporting segment due to transitioning the operations of the two senior housing facilities within Lafayette Assisted Living Portfolio to a RIDEA structure in February 2019 ~~as compared~~and the five senior housing facilities within Northern California Senior Housing Portfolio to ~~owning 58 buildings as of September 30, 2018.~~a RIDEA structure in March 2020. As of September 30, ~~2019~~2020 and ~~2018,~~2019, we owned the following types of properties:


	September 30,											September 30,
	2019					2018						2020						2019
	Number of Buildings	Aggregate Contract Purchase Price		Leased %		Number of Buildings	Aggregate Contract Purchase Price		Leased %			Number of Buildings	Aggregate Contract Purchase Price			Leased %		Number of Buildings	Aggregate Contract Purchase Price		Leased %
Medical office buildings	39	$	562,439,000	92.5	%	24	$	372,240,000	93.1	%	Medical office buildings	43	$	605,122,000	(1)	93.0	%	39	$	562,439,000	92.5	%
Senior housing — RIDEA											Senior housing — RIDEA	26	264,349,000			(2)		14	153,850,000		(2)
Senior housing	19	147,600,000		100	%	12	94,350,000		100	%	Senior housing	14	101,800,000			100	%	19	147,600,000		100	%
Senior housing — RIDEA	14	153,850,000		(1	)	12	137,100,000		(1	)
Skilled nursing facilities	11	117,800,000		100	%	10	110,800,000		100	%	Skilled nursing facilities	11	117,800,000			100	%	11	117,800,000		100	%
Total/weighted average(2)	83	$	981,689,000	95.4	%	58	$	714,490,000	95.1	%
Total/weighted average(3)											Total/weighted average(3)	94	$	1,089,071,000		95.4	%	83	$	981,689,000	95.4	%

___________

~~(1)~~

For the three months ended September 30, 2019 and 2018, the leased percentage for the resident units of our senior housing — RIDEA facilities was 84.2% and 77.0%, respectively, and for the nine months ended September 30, 2019 and 2018, the leased percentage for the resident units of our senior housing — RIDEA facilities was 82.8% and 76.7%, respectively, based on daily average occupancy of licensed beds/units.


~~(2)~~	~~Leased percentage excludes our senior housing — RIDEA facilities.~~

(1)Includes a $1,483,000 earn-out paid in June 2020 in connection with our property acquisition of Overland Park MOB in August 2019. See Note 3, Real Estate Investments, Net, to our accompanying condensed consolidated financial statements for a further discussion of such earn-out.

(2)For the three months ended September 30, 2020 and 2019, the leased percentage for the resident units of our senior housing — RIDEA facilities was 71.6% and 84.2%, respectively, and for the nine months ended September 30, 2020 and 2019, the leased percentage for the resident units of our senior housing — RIDEA facilities was 77.2% and 82.8%, respectively, based on daily average occupancy of licensed beds/units.

(3)Leased percentage excludes our senior housing — RIDEA facilities.

Table of Contents

Revenues and Grant Income

~~Revenues~~

Our primary sources of revenue include rent and resident fees and services from our properties. ~~Revenue~~The amount of revenue generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease available space at the then existing market rates. Revenues and grant income by reportable segment consisted of the following for the periods then ended:


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018			2020		2019		2020		2019
Real Estate Revenue									Real Estate Revenue
Medical office buildings	$	14,144,000	$	9,580,000	$	38,802,000	$	24,299,000	Medical office buildings	$	16,338,000	$	14,144,000	$	49,184,000	$	38,802,000
Skilled nursing facilities	2,929,000		673,000		8,732,000		1,473,000		Skilled nursing facilities	2,979,000		2,929,000		8,984,000		8,732,000
Senior housing	2,180,000		2,259,000		5,746,000		6,757,000		Senior housing	2,202,000		2,180,000		6,656,000		5,746,000
Total real estate revenue	19,253,000		12,512,000		53,280,000		32,529,000		Total real estate revenue	21,519,000		19,253,000		64,824,000		53,280,000
Resident Fees and Services									Resident Fees and Services
Senior housing — RIDEA	11,865,000		9,769,000		34,053,000		26,604,000		Senior housing — RIDEA	18,948,000		11,865,000		51,863,000		34,053,000
Total resident fees and services	11,865,000		9,769,000		34,053,000		26,604,000		Total resident fees and services	18,948,000		11,865,000		51,863,000		34,053,000
Total revenues	$	31,118,000	$	22,281,000	$	87,333,000	$	59,133,000
Grant Income									Grant Income
Senior housing — RIDEA									Senior housing — RIDEA	864,000		—		864,000		—
Total grant income									Total grant income	864,000		—		864,000		—
Total revenues and grant income									Total revenues and grant income	$	41,331,000	$	31,118,000	$	117,551,000	$	87,333,000

For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, real estate revenue was ~~$19,253,000 and $12,512,000, respectively, and~~ primarily comprised of base rent of ~~$14,240,000~~$15,847,000 and ~~$9,138,000,~~$14,240,000, respectively, and expense recoveries of ~~$3,701,000~~$4,575,000 and ~~$2,599,000,~~$3,701,000, respectively. For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, real estate revenue was ~~$53,280,000 and $32,529,000, respectively, and~~ primarily comprised of base rent of ~~$40,696,000~~$47,544,000 and ~~$23,915,000,~~$40,696,000, respectively, and expense recoveries of $13,697,000 and $10,372,000, ~~and $6,336,000,~~ respectively. ~~The increase in real estate revenue for~~

For the three and nine months ended September 30, 2020 and 2019, ~~compared~~resident fees and services consisted of rental fees related to ~~the corresponding prior year period, is primarily due to the acquisition of 15 medical office buildings, one skilled nursing facility~~resident leases and ~~five senior housing facilities subsequent to September 30, 2018.~~

extended health care fees. The increase in resident fees and services for the three and nine months ended September 30, ~~2019,~~2020, compared to the corresponding prior ~~year~~ period, is primarily due to ~~a full year~~the acquisition of ~~operations during 2019 for two~~seven senior housing — RIDEA facilities ~~acquired during~~subsequent to September 30, 2019 and the transition of five senior housing facilities within Northern California Senior Housing Portfolio to a RIDEA structure in March 2020.

For the three and nine months ended September 30, ~~2018.~~2020, we recognized $864,000 of grant income at our senior housing — RIDEA facilities related to government grants through CARES Act economic stimulus programs. See Note 2, Summary of Significant Accounting Policies — Government Grants, to our accompanying condensed consolidated financial statements for a further discussion.

Table of Contents

Rental Expenses and Property Operating Expenses

Rental expenses and rental expenses as a percentage of real estate revenue, as well as property operating expenses and property operating expenses as a percentage of resident fees and services and grant income, by reportable segment consisted of the following for the periods then ended:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
Rental Expenses
Medical office buildings	$	5,607,000	34.3	%	$	4,581,000	32.4	%	$	16,616,000	33.8	%	$	12,814,000	33.0	%
Senior housing	173,000		7.9	%	213,000		9.8	%	648,000		9.7	%	989,000		17.2	%
Skilled nursing facilities	125,000		4.2	%	135,000		4.6	%	459,000		5.1	%	435,000		5.0	%
Total rental expenses	$	5,905,000	27.4	%	$	4,929,000	25.6	%	$	17,723,000	27.3	%	$	14,238,000	26.7	%
Property Operating Expenses
Senior housing — RIDEA	$	17,397,000	87.8	%	$	9,884,000	83.3	%	$	44,856,000	85.1	%	$	28,194,000	82.8	%
Total property operating expenses	$	17,397,000	87.8	%	$	9,884,000	83.3	%	$	44,856,000	85.1	%	$	28,194,000	82.8	%

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Rental Expenses
Medical office buildings $ 4,581,000
32.4 % $ 2,812,000
29.4 % $ 12,814,000
33.0 % $ 6,901,000
28.4 %
Senior housing 213,000
9.8 % 270,000
12.0 % 989,000
17.2 % 951,000
14.1 %
Skilled nursing facilities 135,000
4.6 % 105,000
15.6 % 435,000
5.0 % 238,000
16.2 %
Total rental expenses $ 4,929,000
25.6 % $ 3,187,000
25.5 % $ 14,238,000
26.7 % $ 8,090,000
24.9 %
Property Operating Expenses
Senior housing — RIDEA $ 9,884,000
83.3 % $ 7,987,000
81.8 % $ 28,194,000
82.8 % $ 21,986,000
82.6 %
Total property operating expenses $ 9,884,000
83.3 % $ 7,987,000
81.8 % $ 28,194,000
82.8 % $ 21,986,000
82.6 %

For the three months ended September 30, 2020 and 2019, property operating expenses primarily consisted of administration and benefits expense of $8,634,000 and $5,359,000, respectively, and for the nine months ended September 30, 2020 and 2019, property operating expenses primarily consisted of administration and benefits expense of $23,683,000 and $15,313,000, respectively. The increase in property operating expenses for the three and nine months ended September 30, 2020, compared to the corresponding prior year period, is primarily due to the acquisition of seven senior housing — RIDEA facilities subsequent to September 30, 2019 and the transition of five senior housing facilities within Northern California Senior Housing Portfolio to a RIDEA structure in March 2020. Overall, property operating expenses have also significantly increased due to labor costs, the single largest expense line item for skilled nursing and senior housing facilities, as well as the costs of COVID-19 testing of employees and residents and the costs of PPE and other supplies required as a result of the COVID-19 pandemic. Senior housing — RIDEA facilities typically have a higher percentage of direct operating expenses to revenue than medical office buildings, ~~senior housing~~skilled nursing facilities and ~~skilled nursing~~leased, non-RIDEA senior housing facilities due to the nature of RIDEA facilities where we conduct day-to-day operations.

~~Table of Contents~~

General and Administrative

General and administrative expenses consisted of the following for the periods then ended:


											Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended September 30,					Nine Months Ended September 30,					2020		2019		2020		2019
	2019		2018			2019		2018
Asset management fees — affiliates	$	2,120,000	$	1,271,000		$	6,012,000	$	3,299,000
Asset management and property management oversight fees — affiliates										Asset management and property management oversight fees — affiliates	$	2,529,000	$	2,120,000	$	7,539,000	$	6,012,000
Professional and legal fees	1,147,000		425,000			2,974,000		1,160,000		Professional and legal fees	566,000		1,147,000		2,664,000		2,974,000
Bad debt expense, net	201,000		35,000			982,000		181,000
Bank charges										Bank charges	183,000		58,000		501,000		168,000
Transfer agent services	138,000		90,000			402,000		253,000		Transfer agent services	119,000		138,000		368,000		402,000
Franchise taxes	96,000		18,000			174,000		108,000
Restricted stock compensation	72,000		70,000			164,000		145,000		Restricted stock compensation	73,000		72,000		171,000		164,000
Directors’ and officers’ liability insurance	62,000		53,000			181,000		159,000		Directors’ and officers’ liability insurance	65,000		62,000		194,000		181,000
Board of directors fees	60,000		69,000			194,000		184,000		Board of directors fees	64,000		60,000		206,000		194,000
Bank charges	58,000		80,000			168,000		200,000
Postage and delivery	1,000		(12,000		)	60,000		69,000
Franchise taxes										Franchise taxes	54,000		96,000		170,000		174,000
Bad debt expense										Bad debt expense	—		201,000		—		982,000
Other	27,000		6,000			102,000		45,000		Other	19,000		28,000		147,000		162,000
Total	$	3,982,000	$	2,105,000		$	11,413,000	$	5,803,000	Total	$	3,672,000	$	3,982,000	$	11,960,000	$	11,413,000

The ~~increase~~decrease in general and administrative expenses for the three ~~and nine~~ months ended September 30, ~~2019,~~2020, compared to the corresponding prior year period, is primarily due to the ~~acquisition~~decrease in professional and legal fees and a decrease in bad debt expense for our accounts receivable as a result of a change in lease accounting guidance in 2019. Such decreases in general and administrative expenses were partially offset by the purchase of additional properties in ~~2018~~2019 and ~~2019~~2020 and thus, incurring higher asset management and property management oversight fees to our advisor or its ~~affiliates~~affiliates. The increase in general and ~~higher professional and legal fees. General and~~

Table of Contents

administrative expenses ~~also increased by $1,461,000~~ for the nine months ended September 30, ~~2019 related~~2020, compared to the ~~transition~~corresponding prior year period, is primarily due to the purchase of additional properties in 2019 and 2020 and thus, incurring higher asset management and property management oversight fees to our ~~senior housing facilities within Lafayette Assisted Living Portfolio and Northern California Senior Housing Portfolio to operations utilizing a RIDEA structure. We expect~~advisor or its affiliates. Such increases in general and administrative expenses ~~to continue to increase~~were partially offset by a decrease in ~~2019 as we acquire additional properties and continue the transition of operations~~bad debt expense for our ~~above mentioned facilities to~~accounts receivable as a ~~RIDEA structure.~~

~~Acquisition Related Expenses~~

For the three months ended September 30, 2019 and 2018, acquisition related expenses were $74,000 and $98,000, respectively, and for the nine months ended September 30, 2019 and 2018, acquisition related expenses were $1,492,000 and $254,000, respectively, which primarily related to costs incurredresult of a change in ~~pursuit of properties that did not result~~lease accounting guidance in ~~an acquisition.~~2019.

Depreciation and Amortization

For the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, depreciation and amortization was ~~$9,552,000~~$12,669,000 and ~~$9,007,000,~~$9,552,000, respectively, and consisted primarily of depreciation on our operating properties of ~~$6,806,000~~$7,966,000 and ~~$4,384,000,~~$6,806,000, respectively, and amortization on our identified intangible assets of ~~$2,717,000~~$4,619,000 and ~~$4,602,000,~~$2,717,000, respectively.

For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, depreciation and amortization was ~~$35,561,000~~$37,919,000 and ~~$24,053,000,~~$35,561,000, respectively, and consisted primarily of depreciation on our operating properties of ~~$20,256,000~~$23,698,000 and ~~$11,581,000,~~$20,256,000, respectively, and amortization on our identified intangible assets of $14,032,000 and $15,224,000, respectively. Included during the nine months ended September 30, 2019 is $6,226,000 of amortization expense and ~~$12,433,000, respectively.~~

~~Table~~$1,013,000 of ~~Contents~~

depreciation expense related to the write-off of lease commissions and tenant improvements, respectively, in connection with the termination of a management services agreement with an operator in February 2019.

Interest Expense

Interest expense, including gain or loss in fair value of derivative financial instruments, consisted of the following for the periods then ended:


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018			2020		2019		2020		2019
Interest expense:									Interest expense:
Line of credit and term loans and derivative financial instruments	$	3,334,000	$	1,155,000	$	9,097,000	$	2,612,000	Line of credit and term loans and derivative financial instruments	$	4,145,000	$	3,334,000	$	13,053,000	$	9,097,000
Mortgage loans payable	291,000		200,000		742,000		517,000		Mortgage loans payable	204,000		291,000		590,000		742,000
Amortization of deferred financing costs:									Amortization of deferred financing costs:
Line of credit and term loans	484,000		221,000		1,606,000		658,000		Line of credit and term loans	471,000		484,000		1,410,000		1,606,000
Mortgage loans payable	19,000		20,000		58,000		53,000		Mortgage loans payable	7,000		19,000		33,000		58,000
Loss in fair value of derivative financial instruments	402,000		—		5,401,000		—
(Gain) loss in fair value of derivative financial instruments									(Gain) loss in fair value of derivative financial instruments	(1,450,000)		402,000		2,302,000		5,401,000
Amortization of debt discount/premium	12,000		6,000		29,000		6,000		Amortization of debt discount/premium	12,000		12,000		37,000		29,000
Total	$	4,542,000	$	1,602,000	$	16,933,000	$	3,846,000	Total	$	3,389,000	$	4,542,000	$	17,425,000	$	16,933,000

The decrease in interest expense for the three months ended September 30, 2020, compared to the corresponding prior year period, is primarily related to the gain in fair value recognized on our derivative financial instruments that we entered into in February 2019 and August 2020, compared to a loss in the prior year period, as well as a decline in interest rates on our line of credit and term loans, partially offset by an increase in debt balances on our line of credit and term loans. The increase in interest expense ~~in 2019 as~~for the nine months ended September 30, 2020, compared to ~~2018 was~~the corresponding prior year period, is primarily related to ~~the~~an increase in debt balances on our line of credit and term loans, ~~as well as interest expense and~~partially offset by the decrease in loss in fair value recognized on our derivative financial instruments that we entered into in February ~~2019.~~ 2019 and August 2020, the January 2020 payoff of one mortgage loan payable with a principal balance of $7,738,000 and a decline in interest rates on our line of credit and term loans. See Note 6, Mortgage Loans Payable, Net, Note 7, Line of Credit and Term Loans and Note 8, Derivative Financial Instruments, to our accompanying condensed consolidated financial statements, for a further discussion.

Impairment of Real Estate Investments

For both the three and nine months ended September 30, 2020, we recognized an aggregate impairment charge of $3,064,000 on two senior housing facilities within Northern California Senior Housing Portfolio. The remaining carrying values of such facilities were then reclassified to properties held for sale. See Note 3, Real Estate Investments, Net, to our accompanying condensed consolidated financial statements for a further discussion. No impairment charges on real estate investments were recognized for both the three and nine months ended September 30, 2019.

Table of Contents

Liquidity and Capital Resources

Our sources of funds primarily consist of operating cash flows and borrowings. In the normal course of business, our principal demands for funds are for ~~acquisitions of real estate and real estate-related investments,~~ payment of operating expenses, capital improvement expenditures, interest on our indebtedness, ~~and~~ distributions to our ~~stockholders.~~

~~Our total capacity to pay operating expenses, capital improvement expenditures, interest~~stockholders and ~~distributions and acquire real estate and real estate-related investments is a function~~repurchases of our current cash position, our borrowing capacity on our line of credit, as well as any future indebtedness that we may incur. As of September 30, 2019, our cash on hand was $22,448,000 and we had $42,500,000 available on our line of credit and term loans. On November 1, 2019, we entered into an amendment to our line of credit and term loan with Bank of America, N.A., KeyBank, National Association and a syndicate of other banks, as lenders. The material terms of such amendment provide for an increase in the term loan commitment by $45,000,000 and an increase in the revolving line of credit by $85,000,000, which increased the aggregate borrowing capacity to $530,000,000. See Note 7, Line of Credit and Term Loans, and Note 20, Subsequent Events — Amendment to the 2018 Corporate Line of Credit, to our accompanying condensed consolidated financial statements, for a further discussion. We believe that these resources will be sufficient to satisfy our cash requirements for the foreseeable future, and we do not anticipate a need to raise funds from other sources within the next 12 months.

common stock. We estimate that we will require approximately ~~$3,688,000~~$2,760,000 to pay interest on our outstanding indebtedness for the remainder of ~~2019,~~2020, based on interest rates in effect as of September 30, ~~2019,~~2020, and that we will require ~~$177,000~~$151,000 to pay principal on our outstanding indebtedness for the remainder of ~~2019.~~2020. We also require resources to make certain payments to our advisor and its affiliates. See Note 13, Related Party Transactions, to our accompanying condensed consolidated financial statements for a further discussion of our payments to our advisor and its affiliates. Generally, cash needs for such items will be met from operations and borrowings.

Our ~~advisor evaluates potential investments~~total capacity to pay operating expenses, capital improvement expenditures, interest, distributions and ~~engages in negotiations with real estate sellers, developers, brokers, investment managers, lenders and others~~repurchases is a function of our current cash position, our borrowing capacity on our ~~behalf. When~~line of credit, as well as any future indebtedness that we ~~acquire~~may incur.

Due to the impact the COVID-19 pandemic has had on the United States and globally, and the uncertainty of the severity and duration of the COVID-19 pandemic and its effects, beginning in March 2020, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects by decreasing our distributions to stockholders and partially suspending our share repurchase plan. Consequently, our board approved a ~~property,~~daily distribution rate for April 2020 through November 2020 equal to $0.001095890 per share of our ~~advisor prepares~~Class T and Class I common stock, which is equal to an annualized distribution rate of $0.40 per share, a decrease from the annualized rate of $0.60 per share previously paid by us. See the “Distributions” section below for a further discussion. In addition, on March 31, 2020, our board suspended our share repurchase plan with respect to all repurchase requests other than repurchases resulting from the death or qualifying disability of stockholders, beginning with share repurchase requests submitted for repurchase during the second quarter of 2020. Our board shall determine if and when it is in the best interest of our company and stockholders to reinstate our share repurchase plan for additional stockholders. As of September 30, 2020, our cash on hand was $22,690,000 and we had $50,500,000 available on our line of credit. We believe that these resources will be sufficient to satisfy our cash requirements for the foreseeable future, and we do not anticipate a need to raise funds from other sources within the next 12 months.

A capital plan for each investment is established upon acquisition that contemplates the estimated capital needs of that ~~investment. In addition to operating expenses, capital needs may also include~~investment, including costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan ~~will~~ also ~~set~~sets forth the anticipated sources of the necessary capital, which may include operating cash generated by the investment, capital reserves, a line of credit or other loan established with respect to the investment, other borrowings ~~operating cash generated by the investment,~~or additional equity investments from us or joint venture ~~partners or, when necessary,~~partners. As of September 30, 2020, we had $413,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital reserves. Any capital reserve would be established from proceeds from sales of other investments, operating cash generated by other investments or other cash on hand. In some cases, a lender may require us to establish capital reserves for a particular investment.expenditures. The capital plan for each investment ~~will be~~is adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs.

~~Table~~ In light of ~~Contents~~

~~Based on~~ the ~~properties~~COVID-19 pandemic and to further preserve cash, since March 2020, we ~~own as of September 30, 2019, we estimate that our~~suspended all non-essential, discretionary expenditures for capital improvements that were anticipated during 2020 throughout our portfolio. In particular, we suspended capital expenditures that are not directly associated with the maintenance or expansion of tenant occupancy and ~~tenant improvements will~~the enhancement of net operating income, or NOI. The duration of our suspension of capital expenditures is uncertain and an update to the actual amounts forecasted to be ~~$8,362,000~~expended for the ~~remaining three months~~remainder of ~~2019. As of September 30, 2019, we had $313,000 of restricted cash in reserve accounts for such capital expenditures. We~~the year cannot ~~provide assurance, however, that we will not exceed these~~be estimated ~~expenditure and distribution levels or be able to obtain additional sources of financing on commercially favorable terms or~~ at ~~all.~~this time.

Other Liquidity Needs

In the event that there is a shortfall in net cash available due to various factors, including, without limitation, the timing of distributions or ~~the timing of~~ the collection of receivables, we may seek to obtain capital to pay distributions by means of secured or unsecured debt financing through one or more third parties, or our advisor or its affiliates. There are currently no limits or restrictions on the use of proceeds from our advisor or its affiliates which would prohibit us from making the proceeds available for distribution. We may also pay distributions from cash from capital transactions, including, without limitation, the sale of one or more of our properties.

~~If we experience lower occupancy levels, reduced rental rates, reduced revenues as a result~~

Table of asset sales, or increased capital expenditures and leasing costs compared to historical levels due to competitive market conditions for new and renewed leases, the effect would be a reduction of net cash provided by operating activities. If such a reduction of net cash provided by operating activities is realized, we may have a cash flow deficit in subsequent periods. Our estimate of net cash available is based on various assumptions which are difficult to predict, including the levels of leasing activity and related leasing costs. Any changes in these assumptions could impact our financial results and our ability to fund working capital and unanticipated cash needs.Contents

Cash Flows

The following table sets forth changes in cash flows:


	Nine Months Ended September 30,							Nine Months Ended September 30,
	2019			2018				2020		2019
Cash, cash equivalents and restricted cash — beginning of period	$	14,590,000		$	7,103,000		Cash, cash equivalents and restricted cash — beginning of period	$	15,846,000	$	14,590,000
Net cash provided by operating activities	30,432,000			15,677,000			Net cash provided by operating activities	29,943,000		30,432,000
Net cash used in investing activities	(155,530,000		)	(257,761,000		)	Net cash used in investing activities	(74,761,000)		(155,530,000)
Net cash provided by financing activities	133,376,000			266,004,000			Net cash provided by financing activities	52,368,000		133,376,000
Cash, cash equivalents and restricted cash — end of period	$	22,868,000		$	31,023,000		Cash, cash equivalents and restricted cash — end of period	$	23,396,000	$	22,868,000

The following summary discussion of our changes in our cash flows is based on our accompanying condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Operating Activities

For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, cash flows provided by operating activities primarily related to the cash flows provided by our property operations and $864,000 of grant income, offset by payments of general and administrative expenses. See the “Results of Operations” section above for a further discussion. ~~We anticipate~~In general, cash flows ~~from~~provided by operating activities ~~to increase in 2019 as we purchase additional real estate investments.~~will be affected by the timing of cash receipts and payments.

Investing Activities

For the nine months ended September 30, 2020, cash flows used in investing activities related to our property acquisitions in the amount of $68,032,000 and the payment of $6,729,000 for capital expenditures. For the nine months ended September 30, 2019, cash flows used in investing activities related primarily to our property acquisitions in the amount of $153,923,000 and the payment of $4,388,000 for capital expenditures. For the nine months ended September 30, 2018, cash flows used in investing activities related primarily to our property acquisitions in the amount of $248,423,000, the payment of $5,166,000 for capital expenditures and $3,750,000 for real estate deposits. We ~~intend to continue to acquire additional real estate and real estate-related investments, but generally~~ anticipate that cash flows used in investing activities will primarily be affected by the timing of capital expenditures, and generally will decrease ~~due~~as compared to ~~fewer anticipated acquisitions~~prior years as ~~a result of~~we have completed the ~~termination~~acquisition phase of our ~~initial offering in February 2019.~~real estate investment strategy.

Financing Activities

For the nine months ended September 30, 2020, cash flows provided by financing activities related primarily to net borrowings on our line of credit of $82,700,000, partially offset by $13,932,000 in distributions to our common stockholders, the January 2020 payoff of one mortgage loan payable with a principal balance of $7,738,000 and share repurchases of $5,349,000. For the nine months ended September 30, 2019, cash flows provided by financing activities related primarily to funds raised from investors in our initial offering in the amount of $90,438,000 as well as net borrowings on our line of credit ~~and term loans~~ of $82,500,000, partially offset by the payment of offering costs of $17,457,000 in connection with our initial offering and 2019 DRIP Offering, $15,446,000 in distributions to our common stockholders and $6,192,000 in share

~~Table of Contents~~

repurchases. For the nine months ended September 30, 2018, cash flows provided by financing activities related primarily to funds raised from investors in our initial offering in the amount of $176,417,000 as well as net borrowings on our line of credit and term loans of $115,900,000, partially offset by the payment of offering costs of $14,030,000 in connection with our initial offering and distributions to our common stockholders of $9,833,000. Overall, we anticipate cash flows from financing activities to decrease in the future since we terminated our initial offering in February 2019. ~~However, we anticipate our indebtedness to increase as we acquire additional properties and real estate-related investments.~~

Distributions

Our board authorized, on a quarterly basis, a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on May 1, 2016 and ending on ~~December~~March 31, ~~2019.~~2020. The daily distributions were ~~or will be~~ calculated based on 365 days in the calendar year and ~~are~~were equal to $0.001643836 per share of our Class T and Class I common stock, which iswas equal to an annualized distribution of $0.60 per share. These distributions were ~~or will be~~ aggregated and paid monthly in arrears in cash or shares of our common stock pursuant to our DRIP Offerings, only from legally available funds.

Due to the impact the COVID-19 pandemic has had on the United States and globally, and the uncertainty of the severity and duration of the COVID-19 pandemic and its effects, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects by decreasing our distributions to stockholders. Consequently, our board authorized a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on April 1, 2020 and ending on November 30, 2020, which was or will be calculated based on 365 days in the calendar year and is equal to $0.001095890 per share of our Class T and Class I common stock. Such daily distribution is equal to an annualized distribution rate of $0.40 per share. The distributions were or will be aggregated and paid in cash or shares of our common stock pursuant to the DRIP, on a monthly basis, in arrears, only from legally available funds.

Table of Contents

The amount of distributions paid to our stockholders is determined ~~quarterly~~ by our board and is dependent on a number of factors, including funds available for payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our qualification as a REIT under the Code. We have not established any limit on the amount of offering proceeds that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would: (i) cause us to be unable to pay our debts as they become due in the usual course of business; or (ii) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences.

The distributions paid for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, along with the amount of distributions reinvested pursuant to our DRIP Offerings and the sources of distributions as compared to cash flows from operations were as follows:

Nine Months Ended September 30,
2019 2018
Distributions paid in cash $ 15,446,000
$ 9,833,000

Distributions reinvested 19,056,000
12,435,000

$ 34,502,000
$ 22,268,000

Sources of distributions:
Cash flows from operations $ 29,106,000
84.4 % $ 15,677,000
70.4 %
Offering proceeds 5,396,000
15.6
6,591,000
29.6
$ 34,502,000
100 % $ 22,268,000
100 %

Under GAAP, certain acquisition related expenses, such as expenses incurred in connection with property acquisitions accounted for as business combinations, are expensed, and therefore, subtracted from cash flows from operations. However, these expenses may be paid from offering proceeds or debt.


	Nine Months Ended September 30,
	2020				2019
Distributions paid in cash	$	13,932,000			$	15,446,000
Distributions reinvested	15,681,000				19,056,000
	$	29,613,000			$	34,502,000
Sources of distributions:
Cash flows from operations	$	29,613,000	100	%	$	29,106,000	84.4	%


Offering proceeds	—		—		5,396,000		15.6
	$	29,613,000	100	%	$	34,502,000	100	%

As of September 30, ~~2019,~~2020, any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and all or any portion of a distribution to our stockholders may have been paid from net offering proceeds and borrowings. The payment of distributions from our net offering proceeds and borrowings have reduced the amount of capital we ultimately invested in assets and negatively impacted the amount of income available for future distributions.

As of September 30, ~~2019,~~2020, we had an amount payable of ~~$878,000~~$956,000 to our advisor or its affiliates primarily for asset management fees, which will be paid from cash flows from operations in the future as it becomes due and payable by us in the ordinary course of business consistent with our past practice. See Note 13, Related Party Transactions — ~~Acquisition and Development~~Operational Stage, ~~— Acquisition Fee,~~ to our accompanying condensed consolidated financial statements, for a further discussion.

~~Table of Contents~~

defer, waive or forgive amounts due to them, this would negatively affect our cash flows from operations, which could result in us paying distributions, or a portion thereof, using borrowed funds. As a result, the amount of proceeds from borrowings available for investment and operations would be reduced, or we may incur additional interest expense as a result of borrowed funds.

The distributions paid for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, along with the amount of distributions reinvested pursuant to our DRIP Offerings and the sources of our distributions as compared to funds from operations attributable to controlling interest, or FFO, were as follows:


	Nine Months Ended September 30,									Nine Months Ended September 30,
	2019				2018					2020				2019
Distributions paid in cash	$	15,446,000			$	9,833,000			Distributions paid in cash	$	13,932,000			$	15,446,000
Distributions reinvested	19,056,000				12,435,000				Distributions reinvested	15,681,000				19,056,000
	$	34,502,000			$	22,268,000				$	29,613,000			$	34,502,000
Sources of distributions:									Sources of distributions:
FFO attributable to controlling interest	$	17,919,000	52.0	%	$	19,132,000	85.9	%	FFO attributable to controlling interest	$	29,361,000	99.1	%	$	17,919,000	52.0	%

Proceeds from borrowings									Proceeds from borrowings	252,000		0.9		3,530,000		10.2
Offering proceeds	13,053,000		37.8		3,136,000		14.1		Offering proceeds	—		—		13,053,000		37.8
Proceeds from borrowings	3,530,000		10.2		—		—
	$	34,502,000	100	%	$	22,268,000	100	%		$	29,613,000	100	%	$	34,502,000	100	%

The payment of distributions from sources other than FFO may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds. For a further discussion of FFO, a non-GAAP financial measure, including a reconciliation of our GAAP net income (loss) to FFO, see the “Funds from Operations and Modified Funds from Operations” section below.

Table of Contents

Financing

~~We intend to continue to finance all or a portion of the purchase price of our investments in real estate and real estate-related investments by borrowing funds.~~ We anticipate that our overall leverage will not exceed 50.0% of the combined market value of all of our properties and other real estate-related investments, as determined at the end of each calendar year. For these purposes, the fair market value of each asset will be equal to the purchase price paid for the asset or, if the asset was appraised subsequent to the date of purchase, then the fair market value will be equal to the value reported in the most recent independent appraisal of the asset. Our policies do not limit the amount we may borrow with respect to any individual investment. As of September 30, ~~2019,~~2020, our aggregate borrowings were ~~34.2%~~39.3% of the combined market value of all of our real estate investments.

Under our charter, we have a limitation on borrowing that precludes us from borrowing in excess of 300% of our net assets without the approval of a majority of our independent directors. Net assets for purposes of this calculation are defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation, amortization, bad debt and other non-cash reserves, less total liabilities. Generally, the preceding calculation is expected to approximate 75.0% of the aggregate cost of our real estate and real estate-related investments before depreciation, amortization, bad debt and other similar non-cash reserves. In addition, we may incur mortgage debt and pledge some or all of our real properties as security for that debt to obtain funds to acquire additional real estate or for working capital. ~~We may also borrow funds to satisfy the REIT tax qualification requirement that we distribute at least 90.0% of our annual taxable income, excluding net capital gains, to our stockholders.~~ Furthermore, we may borrow if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes. As of November 13, ~~2019~~2020 and September 30, ~~2019,~~2020, our leverage did not exceed 300% of the value of our net assets.

Mortgage Loans Payable, Net

For a discussion of our mortgage loans payable, net, see Note 6, Mortgage Loans Payable, Net, to our accompanying condensed consolidated financial statements.

Line of Credit and Term Loans

For a discussion of our line of credit and term loans, see Note 7, Line of Credit and Term Loans, to our accompanying condensed consolidated financial statements.

~~Table of Contents~~

REIT Requirements

In order to maintain our qualification as a REIT for federal income tax purposes, we are required to ~~make distributions~~distribute to our stockholders a minimum of ~~at least~~ 90.0% of our annual taxable income, excluding net capital gains. Such distributions are required to be paid at least 20.0% in cash and 80.0% in stock. In response to the COVID-19 pandemic, the Internal Revenue Service, or IRS, temporarily reduced the cash distribution requirement to a minimum of 10.0%, which is applicable with respect to the aggregate distributions declared on or after April 1, 2020 until December 31, 2020. In the event that there is a shortfall in net cash available due to factors including, without limitation, the timing of such distributions or the timing of the collection of receivables, we may seek to obtain capital to pay distributions by means of secured and unsecured debt financing through one or more unaffiliated third parties. We may also pay distributions from cash from capital transactions including, without limitation, the sale of one or more of our properties.

Commitments and Contingencies

For a discussion of our commitments and contingencies, see Note 10, Commitments and Contingencies, to our accompanying condensed consolidated financial statements.

Debt Service Requirements

A significant liquidity need is the payment of principal and interest on our outstanding indebtedness. As of September 30, ~~2019,~~2020, we had ~~$27,290,000~~$18,933,000 ($~~26,229,000,~~17,974,000, net of discount/premium and deferred financing costs) of fixed-rate mortgage loans payable outstanding secured by our properties. As of September 30, ~~2019,~~2020, we had ~~$357,500,000~~$479,500,000 outstanding and ~~$42,500,000~~$50,500,000 remained available under our line of ~~credit and term loans.~~credit. See Note 6, Mortgage Loans Payable, Net, and Note 7, Line of Credit and Term Loans, to our accompanying condensed consolidated financial statements.

We are required by the terms of certain loan documents to meet certain reporting requirements and covenants, such as leverage ratios, net worth ratios, debt service coverage ratios and fixed charge coverage ~~ratios and reporting requirements.~~ratios. As of September 30, ~~2019,~~2020, we were in compliance with all such covenants and requirements on our mortgage loans payable and our line of credit and term loans. As of September 30, ~~2019,~~2020, the weighted average effective interest rate on our outstanding debt, factoring in our fixed-rate interest rate swaps, was ~~4.08%~~3.37% per annum.

Table of Contents

Contractual Obligations

The following table provides information with respect to: (i) the maturity and scheduled principal repayment of our secured mortgage loans payable and our line of credit and term loans; (ii) interest payments on our mortgage loans payable and our line of credit and term loans; and (iii) ground lease obligations as of September 30, ~~2019:~~

2020:


	Payments Due by Period											Payments Due by Period
	2019		2020-2021		2022-2023		Thereafter		Total			2020		2021-2022		2023-2024		Thereafter		Total
Principal payments — fixed-rate debt	$	177,000	$	8,954,000	$	1,331,000	$	16,828,000	$	27,290,000	Principal payments — fixed-rate debt	$	151,000	$	1,273,000	$	1,391,000	$	16,118,000	$	18,933,000
Interest payments — fixed-rate debt	286,000		1,610,000		1,370,000		6,083,000		9,349,000		Interest payments — fixed-rate debt	186,000		1,429,000		1,309,000		5,443,000		8,367,000
Principal payments — variable-rate debt	—		357,500,000		—		—		357,500,000		Principal payments — variable-rate debt	—		479,500,000		—		—		479,500,000
Interest payments — variable-rate debt (based on rates in effect as of September 30, 2019)	3,402,000		26,205,000		—		—		29,607,000
Interest payments — variable-rate debt (based on rates in effect as of September 30, 2020)											Interest payments — variable-rate debt (based on rates in effect as of September 30, 2020)	2,574,000		9,474,000		—		—		12,048,000
Ground lease obligations	207,000		1,028,000		1,028,000		39,470,000		41,733,000		Ground lease obligations	212,000		1,049,000		1,064,000		47,103,000		49,428,000
Total	$	4,072,000	$	395,297,000	$	3,729,000	$	62,381,000	$	465,479,000	Total	$	3,123,000	$	492,725,000	$	3,764,000	$	68,664,000	$	568,276,000

Off-Balance Sheet Arrangements

As of September 30, ~~2019,~~2020, we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.

Inflation

During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, inflation has not significantly affected our operations because of the moderate inflation rate; however, we expect to be exposed to inflation risk as income from future long-term leases will be the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that will protect us from the impact of inflation. These provisions include negotiated rental increases, reimbursement billings for operating expense pass-through charges and real estate tax and insurance ~~reimbursements on a per square foot allowance.~~reimbursements. However, due to the long-term nature of the anticipated leases, among other factors, the leases may not re-set frequently enough to cover inflation.

~~Table of Contents~~

Related Party Transactions

For a discussion of related party transactions, see Note 13, Related Party Transactions, to our accompanying condensed consolidated financial statements.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, a non-GAAP measure, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. The use of funds from operations is recommended by the REIT industry as a supplemental performance measure, and our management uses FFO to evaluate our performance over time. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on funds from operations approved by the Board of Governors of NAREIT, or the White Paper. The White Paper defines funds from operations as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets and impairment writedowns of certain real estate assets and investments, plus depreciation and amortization related to real estate, and after adjustments for unconsolidated partnerships and joint ventures. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that impairments are based on estimated future undiscounted cash flows. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, which is the case if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. In addition, we believe it is appropriate to exclude impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions, which can change over time. Testing for an impairment of an asset is a continuous process and is analyzed on a quarterly basis. If certain impairment indications exist in an asset, and if the asset’s carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property and any other ancillary cash flows at a property or group level under GAAP) from such asset, an impairment charge would be recognized. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and that we intend to have a relatively limited term of our operations, it could be difficult to recover any impairment charges through the eventual sale of the property.

Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate-related depreciation and amortization and impairments, provides a further understanding of our performance to investors and to our management, and when compared year over year, 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 (loss).

Table of Contents

However, FFO and modified funds from operations attributable to controlling interest, or MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting rules under GAAP that were put into effect and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that may be expensed as operating expenses under GAAP. We believe these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of

~~Table of Contents~~

investment and operation. While other start up entities may also experience significant acquisition activity during their initial years, we believe that publicly registered, non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases. We have used the proceeds raised in our initial offering to acquire properties, and we intend to begin the process of achieving a liquidity event (i.e., listing of our shares of common stock on a national securities exchange, a merger or sale, the sale of all or substantially all of our assets, or another similar transaction) within five years after the completion of our initial offering stage, which is generally comparable to other publicly registered, non-listed REITs. Thus, we do not intend to continuously purchase assets and intend to have a limited life. Due to the above factors and other unique features of publicly registered, non-listed REITs, theThe IPA, an industry trade group, has standardized a measure known as modified funds from operations, which the IPA has recommended as a supplemental performance measure for publicly registered, non-listed REITs and which we believe to be another appropriate supplemental performance measure to reflect the operating performance of a publicly registered, non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income (loss) as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes expensed acquisition fees and expenses that affect our operations only in periods in which properties are acquired and that we consider more reflective of investing activities, as well as other non-operating items included in FFO, 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 after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our initial offering stage has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the publicly registered, non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our initial offering stage and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our initial offering stage has been completed and properties have been acquired, as it excludes expensed acquisition fees and expenses that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP measure, consistent with ~~the IPA’s Practice Guideline 2010-01,~~ ~~Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations,~~ or the Practice Guideline issued by the IPA in November 2010. The Practice Guideline defines modified funds from operations as funds from operations further adjusted for the following items included in the determination of GAAP net income (loss): acquisition fees and expenses; amounts relating to deferred rent and amortization of above- and below-market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to closer to an expected to be received cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income (loss); gains or losses included in net income (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 after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect modified funds from operations on the same basis. The accretion of discounts and amortization of premiums on debt investments, unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income (loss) in calculating cash flows from operations and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. We are responsible for managing interest rate, hedge and foreign exchange risk, and we do not rely on another party to manage such risk. In as much as interest rate hedges will not be a fundamental part of our operations, we believe it is appropriate to exclude such gains and losses in calculating MFFO, as such gains and losses are based on market fluctuations and may not be directly related or attributable to our operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses, amortization of above- and below-market leases, change in deferred rent, fair value adjustments of derivative financial instruments and the adjustments of such items related to our joint venture investment in an unconsolidated entity and ~~redeemable~~ noncontrolling interests. The other adjustments included in the IPA’s Practice Guideline are not applicable to us for the three and nine months ended September 30, 2019 and 2018. Acquisition fees and expenses are paid in cash by us, and we have not set aside or put into escrow any specific amount to be used to fund acquisition fees and expenses. The purchase of real estate and real estate-related investments, and the corresponding expenses associated with that process, is a key operational feature of our business plan in order to generate operating revenues and cash flows to make distributions to our stockholders. However, we do not intend to fund acquisition fees and expensesperiods presented in the future from operating revenues and cash flows, nor from the sale of properties and subsequent redeployment of capital and concurrent incurring of acquisition fees and expenses. Acquisition fees and expenses include payments to our advisor or its affiliates and third parties. Such fees and expenses are not reimbursed by our advisor or its affiliates and third parties, and therefore if there is no further cash on hand, such fees and

~~Table of Contents~~

expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows. Certain acquisition related expenses under GAAP, such as expenses incurred in connection with property acquisitions accounted for as business combinations, are considered operating expenses and as expenses included in the determination of net income (loss), which is a performance measure under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. By excluding expensed acquisition fees and expenses, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. In the future, we may pay acquisition fees or reimburse acquisition expenses due to our advisor and its affiliates, or a portion thereof, with net proceeds from borrowed funds, operational earnings or cash flows, net proceeds from the sale of properties or ancillary cash flows. As a result, the amount of funds from borrowings available for investment and operations would be reduced, or we may incur additional interest expense as a result of borrowed funds. Nevertheless, our advisor or its affiliates did not accrue any claim on our assets since acquisition fees and expenses were not paid from cash on hand.table below.

Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income (loss) in determining cash flows from operations. We view fair value adjustments of derivatives and gains and losses from dispositions of assets as items which are unrealized and may not ultimately be realized or as items which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance. By excluding such charges that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Table of Contents

Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other publicly registered, non-listed REITs which intend to have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to publicly registered, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence, that the use of such measures may be useful to investors.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate funds from operations and modified funds from operations the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) as an indication of our performance, as an alternative to cash flows from operations, which is an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other measurements as an indication of our performance. MFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete. FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO and MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to 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.

For both the three and nine months ended September 30, 2020, we recognized government grants through economic stimulus programs of the CARES Act as grant income and within income or loss from an unconsolidated entity. Such amounts were established for eligible healthcare providers to preserve liquidity in response to the COVID-19 pandemic. See the “Results of Operations” section above for a further discussion. The government grants helped mitigate some of the negative impact that the COVID-19 pandemic had on our financial condition and results of operations. Without such relief proceeds, the COVID-19 pandemic impact would have had a material adverse impact to our FFO and MFFO. For the three and nine months ended September 30, 2020, FFO would have been approximately $10,662,000 and $26,563,000, respectively, excluding government grants recognized. For the three and nine months ended September 30, 2020, MFFO would have been approximately $8,200,000 and $26,028,000, respectively, excluding government grants recognized.

Table of Contents

The following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to FFO and MFFO for the ~~three and nine months ended September 30, 2019 and 2018:~~

periods presented below:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2019			2018			2019			2018				2020		2019		2020		2019
Net loss	$	(1,918,000	)	$	(1,703,000	)	$	(20,168,000	)	$	(4,897,000	)	Net loss	$	(5,152,000)	$	(1,918,000)	$	(14,240,000)	$	(20,168,000)
Add:													Add:
Depreciation and amortization related to real estate — consolidated properties	9,552,000			9,007,000			35,561,000			24,053,000			Depreciation and amortization related to real estate — consolidated properties	12,669,000		9,552,000		37,919,000		35,561,000
Depreciation and amortization related to real estate — unconsolidated entity	846,000			—			2,539,000			—			Depreciation and amortization related to real estate — unconsolidated entity	880,000		846,000		2,640,000		2,539,000
Net loss attributable to redeemable noncontrolling interests	19,000			72,000			76,000			197,000
Impairment of real estate investments — consolidated properties													Impairment of real estate investments — consolidated properties	3,064,000		—		3,064,000		—
Impairments and gain on disposition of real estate investments, net — unconsolidated entity													Impairments and gain on disposition of real estate investments, net — unconsolidated entity	99,000		—		99,000		—
Net loss attributable to noncontrolling interests													Net loss attributable to noncontrolling interests	232,000		19,000		608,000		76,000
Less:													Less:
Depreciation and amortization related to redeemable noncontrolling interests	(23,000		)	(82,000		)	(89,000		)	(221,000		)
Depreciation, amortization and impairments —noncontrolling interests													Depreciation, amortization and impairments —noncontrolling interests	(250,000)		(23,000)		(729,000)		(89,000)
FFO attributable to controlling interest	$	8,476,000		$	7,294,000		$	17,919,000		$	19,132,000		FFO attributable to controlling interest	$	11,542,000	$	8,476,000	$	29,361,000	$	17,919,000

Acquisition related expenses(1)	$	74,000		$	98,000		$	1,492,000		$	254,000		Acquisition related expenses(1)	$	57,000	$	74,000	$	74,000	$	1,492,000
Amortization of above- and below-market leases(2)	(122,000		)	(38,000		)	(216,000		)	(164,000		)	Amortization of above- and below-market leases(2)	31,000		(122,000)		90,000		(216,000)

Change in deferred rent(3)	(1,101,000		)	(709,000		)	(1,748,000		)	(2,045,000		)	Change in deferred rent(3)	(1,009,000)		(1,101,000)		(3,232,000)		(1,748,000)
Loss in fair value of derivative financial instruments(4)	402,000			—			5,401,000			—
(Gain) loss in fair value of derivative financial instruments(4)													(Gain) loss in fair value of derivative financial instruments(4)	(1,450,000)		402,000		2,302,000		5,401,000
Adjustments for unconsolidated entity(5)	199,000			—			360,000			—			Adjustments for unconsolidated entity(5)	(91,000)		199,000		237,000		360,000
Adjustments for redeemable noncontrolling interests(5)	—			—			—			—
Adjustments for noncontrolling interests(5)													Adjustments for noncontrolling interests(5)	—		—		(6,000)		—
MFFO attributable to controlling interest	$	7,928,000		$	6,645,000		$	23,208,000		$	17,177,000		MFFO attributable to controlling interest	$	9,080,000	$	7,928,000	$	28,826,000	$	23,208,000
Weighted average Class T and Class I common shares outstanding — basic and diluted	79,502,193			57,769,964			77,894,326			51,441,064			Weighted average Class T and Class I common shares outstanding — basic and diluted	80,788,359		79,502,193		80,498,693		77,894,326
Net loss per Class T and Class I common share — basic and diluted	$	(0.02	)	$	(0.03	)	$	(0.26	)	$	(0.10	)	Net loss per Class T and Class I common share — basic and diluted	$	(0.06)	$	(0.02)	$	(0.18)	$	(0.26)
FFO attributable to controlling interest per Class T and Class I common share — basic and diluted	$	0.11		$	0.13		$	0.23		$	0.37		FFO attributable to controlling interest per Class T and Class I common share — basic and diluted	$	0.14	$	0.11	$	0.36	$	0.23
MFFO attributable to controlling interest per Class T and Class I common share — basic and diluted	$	0.10		$	0.12		$	0.30		$	0.33		MFFO attributable to controlling interest per Class T and Class I common share — basic and diluted	$	0.11	$	0.10	$	0.36	$	0.30

___________

~~(1)~~

In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for publicly registered, non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition related expenses, we believe MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or its affiliates and third parties.

~~(2)~~

Under GAAP, above- and below-market leases are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate-related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, we believe that by excluding charges relating to the amortization of above- and below-market leases, MFFO may provide useful supplemental information on the performance of the real estate.

~~(3)~~

Under GAAP, as a lessor, rental revenue is recognized on a straight-line basis over the terms of the related lease (including rent holidays). As a lessee, we record amortization of right-of-use assets and accretion of lease liabilities for our operating leases. This may result in income or expense recognition that is significantly different than the underlying contract terms. By adjusting for such amounts, MFFO may provide useful supplemental information on the realized economic impact of lease terms, providing insight on the expected contractual cash flows of such lease terms, and aligns results with management’s analysis of operating performance.

(1)In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for publicly registered, non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition related expenses, we believe MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or its affiliates and third parties.

(2)Under GAAP, above- and below-market leases are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate-related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, we believe that by excluding charges relating to the amortization of above- and below-market leases, MFFO may provide useful supplemental information on the performance of the real estate.

(3)Under GAAP, as a lessor, rental revenue is recognized on a straight-line basis over the terms of the related lease (including rent holidays). As a lessee, we record amortization of right-of-use assets and accretion of lease liabilities for our operating leases. This may result in income or expense recognition that is significantly different than the underlying

Table of Contents

contract terms. By adjusting for such amounts, MFFO may provide useful supplemental information on the realized economic impact of lease terms, providing insight on the expected contractual cash flows of such lease terms, and aligns results with management’s analysis of operating performance.

~~(4)~~

Under GAAP, we are required to include changes in fair value of our derivative financial instruments in the determination of net income or loss. We believe that adjusting for the change in fair value of our derivative financial instruments is appropriate because such adjustments may not be reflective of on-going operations and reflect unrealized impacts on value based only on then current market conditions, although they may be based upon general market conditions. The need to reflect the change in fair value of our derivative financial instruments is a continuous process and is analyzed on a quarterly basis in accordance with GAAP.


~~(5)~~	Includes all adjustments to eliminate the unconsolidated entity’s share or redeemable noncontrolling interests’ share, as applicable, of the adjustments described in notes (1) – (4) above to convert our FFO to MFFO.

(4)Under GAAP, we are required to include changes in fair value of our derivative financial instruments in the determination of net income or loss. We believe that adjusting for the change in fair value of our derivative financial instruments to arrive at MFFO is appropriate because such adjustments may not be reflective of on-going operations and reflect unrealized impacts on value based only on then current market conditions, although they may be based upon general market conditions. The need to reflect the change in fair value of our derivative financial instruments is a continuous process and is analyzed on a quarterly basis in accordance with GAAP.

(5)Includes all adjustments to eliminate the unconsolidated entity’s share or noncontrolling interests’ share, as applicable, of the adjustments described in notes (1) – (4) above to convert our FFO to MFFO.

Net Operating Income

~~Net operating income, or~~ NOI is a non-GAAP financial measure that is defined as net income (loss), computed in accordance with GAAP, generated from properties before general and administrative expenses, acquisition related expenses, depreciation and amortization, interest expense, impairment of real estate investments, income or loss from unconsolidated entity, other income and income tax benefit or expense. Acquisition fees and expenses are paid in cash by us, and we have not set aside or put into escrow any specific amount to be used to fund acquisition fees and expenses. The purchase of real estate and real estate-related investments, and the corresponding expenses associated with that process, is a key operational feature of our business plan in order to generate operating revenues and cash flows to make distributions to our stockholders. However, we do not intend to fund acquisition fees and expenses in the future from operating revenues and cash flows, nor from the sale of properties and subsequent redeployment of capital and concurrent incurring of acquisition fees and expenses. Acquisition fees and expenses include payments to our advisor or its affiliates and third parties. Such fees and expenses are not reimbursed by our advisor or its affiliates and third parties, and therefore, if there is no further cash on hand to fund future acquisition fees and expenses, such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows. As a result, the amount of funds available for investment, operations and non-operating expenses would be reduced, or we may incur additional interest expense as a result of borrowed funds. Nevertheless, our advisor or its affiliates did not accrue any claim on our assets since acquisition fees and expenses were not paid from cash on hand. Certain acquisition related expenses under GAAP, such as expenses incurred in connection with property acquisitions accounted for as business combinations, are considered operating expenses and as expenses included in the determination of net income (loss), which is a performance measure under GAAP. All paid and accrued acquisition fees and expenses have negative effects on returns to investors, the potential for future distributions and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property.

NOI is not equivalent to our net income (loss) as determined under GAAP and may not be a useful measure in measuring operational income or cash flows. Furthermore, NOI ~~is not necessarily indicative of cash flow available to fund cash needs and~~ should not be considered as an alternative to net income (loss) as an indication of our performance, as an alternative to cash flows from operations, as an indication of our liquidity, or indicative of ~~funds~~cash flow available to fund our cash needs including our ability to make distributions to our stockholders. NOI should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance. Investors are also cautioned that NOI should only be used to assess our operational performance in periods in which we have not incurred or accrued any acquisition related expenses.

We believe that NOI is an appropriate supplemental performance measure to reflect the ~~operating~~ performance of our operating assets because NOI excludes certain items that are not associated with the ~~management~~operations of the properties. We believe that NOI is a widely accepted measure of comparative operating performance in the real estate community. However, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

For both the three and nine months ended September 30, 2020, we recognized government grants through economic stimulus programs of the CARES Act as grant income. The government grants helped mitigate some of the negative impact that the COVID-19 pandemic had on our financial condition. Without such relief proceeds, the negative impact of the COVID-19 pandemic would have had a material adverse impact to our NOI. For the three and nine months ended September 30, 2020, NOI would have been approximately $17,165,000 and $54,108,000, respectively, excluding government grants recognized.

~~Table of Contents~~

To facilitate understanding of this financial measure, the following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to NOI for the ~~three and nine months ended September 30, 2019 and 2018:~~periods presented below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net loss	$	(5,152,000)	$	(1,918,000)	$	(14,240,000)	$	(20,168,000)
General and administrative	3,672,000		3,982,000		11,960,000		11,413,000
Acquisition related expenses	57,000		74,000		74,000		1,492,000
Depreciation and amortization	12,669,000		9,552,000		37,919,000		35,561,000
Interest expense	3,389,000		4,542,000		17,425,000		16,933,000
Impairment of real estate investments	3,064,000		—		3,064,000		—
Loss (income) from unconsolidated entity	377,000		79,000		(952,000)		(185,000)
Other income	(8,000)		(13,000)		(278,000)		(162,000)
Income tax (benefit) expense	(39,000)		7,000		—		17,000
Net operating income	$	18,029,000	$	16,305,000	$	54,972,000	$	44,901,000

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net loss $ (1,918,000 ) $ (1,703,000 ) $ (20,168,000 ) $ (4,897,000 )
General and administrative 3,982,000
2,105,000
11,413,000
5,803,000
Acquisition related expenses 74,000
98,000
1,492,000
254,000
Depreciation and amortization 9,552,000
9,007,000
35,561,000
24,053,000
Interest expense 4,542,000
1,602,000
16,933,000
3,846,000
Loss (income) from unconsolidated entity 79,000
—
(185,000 ) —
Other income (13,000 ) (6,000 ) (162,000 ) (6,000 )
Income tax expense 7,000
4,000
17,000
4,000
Net operating income $ 16,305,000

$ 11,107,000
$ 44,901,000
$ 29,057,000

~~Subsequent Events~~

~~For a discussion~~Table of ~~subsequent events, see Note 20, Subsequent Events, to our accompanying condensed consolidated financial statements.~~Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk includes risks that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk. There were no material changes in our market risk exposures, or in the methods we use to manage market risk, from those that were provided for in our ~~2018~~2019 Annual Report on Form 10-K, as filed with the SEC on March ~~18, 2019.~~19, 2020.

Interest Rate Risk

We are exposed to the effects of interest rate changes primarily as a result of long-term debt used to acquire properties ~~and make loans~~ and other permitted investments. Our interest rate risk is monitored using a variety of techniques. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk. To achieve our objectives, we may borrow ~~or lend~~ at fixed or variable rates.

We have entered into and may continue to enter into derivative financial instruments such as interest rate swaps in order to mitigate our interest rate risk on a related financial instrument. ~~Because we~~We do not apply hedge accounting treatment to these ~~derivatives,~~derivatives; therefore, changes in the fair value of interest rate derivative financial instruments are recorded as a component of interest expense in gain or loss in fair value of derivative financial instruments in our accompanying condensed consolidated statements of operations. As of September 30, ~~2019,~~2020, our interest rate swap liabilities are recorded in our accompanying condensed consolidated balance sheets at their aggregate fair value of ~~$5,401,000.~~$6,687,000. We will not enter into derivatives or interest rate transactions for speculative purposes.

In July 2017, the Financial Conduct Authority, or FCA, that regulates the London Inter-bank Offered Rate, or LIBOR, announced its intention 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, or SOFR, as its preferred alternative to United States dollar LIBOR in derivatives and other financial contracts. We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

We have variable rate debt outstanding under our credit facilities and derivative financial instruments maturing on November 19, 2021 that are indexed to LIBOR. As such, we are monitoring and evaluating the related risks of the discontinuation of LIBOR, which include possible changes to the interest on loans or amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require negotiation with the respective counterparty. If a contract is not transitioned to an alternative rate and LIBOR is discontinued, the impact on our contracts is likely to vary. If LIBOR is discontinued or if the methods of calculating LIBOR change from their current form, interest rates on our current or future indebtedness may be adversely affected. While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

Table of Contents

As of September 30, ~~2019,~~2020, the table below presents the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.


																									Expected Maturity Date
																									2020			2021			2022			2023			2024			Thereafter			Total			Fair Value

	Expected Maturity Date
	2019			2020			2021			2022			2023			Thereafter			Total			Fair Value
Fixed-rate debt — principal payments	$	177,000		$	8,332,000		$	622,000		$	651,000		$	680,000		$	16,828,000		$	27,290,000		$	26,970,000	Fixed-rate debt — principal payments	$	151,000		$	622,000		$	651,000		$	680,000		$	711,000		$	16,118,000		$	18,933,000		$	21,944,000
Weighted average interest rate on maturing fixed-rate debt	4.53		%	4.75		%	4.48		%	4.49		%	4.49		%	3.87		%	4.18		%	—		Weighted average interest rate on maturing fixed-rate debt	4.48		%	4.48		%	4.49		%	4.49		%	4.50		%	3.84		%	3.94		%	—
Variable-rate debt — principal payments	$	—		$	—		$	357,500,000		$	—		$	—		$	—		$	357,500,000		$	357,751,000	Variable-rate debt — principal payments	$	—		$	479,500,000		$	—		$	—		$	—		$	—		$	479,500,000		$	480,348,000
Weighted average interest rate on maturing variable-rate debt (based on rates in effect as of September 30, 2019)	—		%	—		%	3.76		%	—		%	—		%	—		%	3.76		%	—
Weighted average interest rate on maturing variable-rate debt (based on rates in effect as of September 30, 2020)																								Weighted average interest rate on maturing variable-rate debt (based on rates in effect as of September 30, 2020)	—		%	2.12		%	—		%	—		%	—		%	—		%	2.12		%	—

Mortgage Loans Payable, Net and Line of Credit and Term Loans

Mortgage loans payable ~~were $27,290,000~~was $18,933,000 ($~~26,229,000,~~17,974,000, net of discount/premium and deferred financing costs) as of September 30, ~~2019.~~2020. As of September 30, ~~2019,~~2020, we had ~~four~~three fixed-rate mortgage loans payable with interest rates ranging from 3.67% to 5.25% per annum. In addition, as of September 30, ~~2019,~~2020, we had ~~$357,500,000~~$479,500,000 outstanding under our line of credit and term loans at a weighted average interest rate of ~~3.76%~~2.12% per annum.

As of September 30, ~~2019,~~2020, the weighted average effective interest rate on our outstanding debt, factoring in our fixed-rate interest rate swaps, was ~~4.08%~~3.37% per annum. An increase in the variable interest rate on our variable-rate line of credit and term loans constitutes a market risk. As of September 30, ~~2019,~~2020, a 0.50% increase in the market rates of interest would have increased our overall annualized interest expense on our variable-rate line of credit and term loans by ~~$545,000,~~$935,000, or ~~4.16%~~5.14% of total annualized interest expense on our mortgage loans payable and our line of credit and term loans. See Note 6, Mortgage Loans Payable, Net, and Note 7, Line of Credit and Term Loans, to our accompanying condensed consolidated financial statements, for a further discussion.

Other Market Risk

In addition to changes in interest rates, the value of our future investments is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants, which may affect our ability to refinance our debt if necessary.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of September 30, ~~2019~~2020 was conducted under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures, as of September 30, ~~2019,~~2020, were effective at the reasonable assurance level.

(b) Changes in internal control over financial reporting. There were no changes in internal control over financial reporting that occurred during the fiscal quarter ended September 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

~~None.~~For a discussion of our legal proceedings, see Note 10, Commitments and Contingencies — Litigation, to our accompanying condensed consolidated financial statements.

Item 1A. Risk Factors.

There were no material changes from the risk factors previously disclosed in our ~~2018~~2019 Annual Report on Form 10-K, as filed with the SEC on March ~~18, 2019,~~19, 2020, except as noted below.

Investment Risks

We have not had sufficient cash available from operations to pay distributions, and therefore, we have paid a portion of distributions from the net proceeds of our initial offering and borrowings, and in the future, may continue to pay distributions from borrowings or from other sources in anticipation of future cash ~~flows or from other sources.~~flows. Any such distributions may reduce the amount of capital we ultimately invest in assets and may negatively impact the value of our stockholders’ investment.

We have used the net proceeds from our initial offering, borrowings and certain fees payable to our advisor which have been waived, and in the future, may use borrowed funds or other sources, to pay cash distributions to our stockholders, which may reduce the amount of proceeds available for investment and ~~may~~operations, cause us to incur additional interest expense as a result of borrowed funds or cause subsequent investors to experience dilution.

Distributions payable to our stockholders may partially include a return of capital, rather than a return on capital, and we have paid a portion of our distributions from the net proceeds of our initial offering. We have not established any limit on the amount of net proceeds from our initial offering or borrowings that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would: (i) cause us to be unable to pay our debts as they become due in the usual course of business; or (ii) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences. The actual amount and timing of distributions ~~will be~~is determined by our board in its sole discretion and typically ~~will depend~~depends on the amount of funds available for distribution, which will depend on items such as our financial condition, current and projected capital expenditure requirements, tax considerations and annual distribution requirements needed to maintain our qualification as a REIT. As a result, our distribution rate and payment frequency may vary from time to time.

We have used the net proceeds from our initial offering, borrowings and our advisor has waived certain fees payable to it as discussed below, and in the future, may use borrowed funds or other sources, to pay cash distributions to our stockholders in order to maintain our qualification as a REIT, which may reduce the amount of proceeds available for investment and operations, cause us to incur additional interest expense as a result of borrowed funds or cause subsequent investors to experience dilution. Further, if the aggregate amount of cash distributed in any given year exceeds the amount of our current and accumulated earnings and profits, the excess amount will be deemed a return of capital.

~~Our~~Prior to March 31, 2020, our board authorized, on a quarterly basis, a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on May 1, 2016 and ending on ~~December~~March 31, ~~2019.~~2020. The daily distributions were ~~or will be~~ calculated based on 365 days in the calendar year and are equal to $0.001643836 per share of our Class T and Class I common stock, which is equal to an annualized distribution of $0.60 per share. These distributions were ~~or will be~~ aggregated and paid monthly in arrears in cash or shares of our common stock pursuant to our DRIP Offerings, only from legally available funds.

~~The amount~~Due to the impact the COVID-19 pandemic has had on the United States and globally, and the uncertainty of the severity and duration of the COVID-19 pandemic and its effects, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects by decreasing our distributions ~~paid~~to stockholders. Consequently, our board authorized a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on April 1, 2020 and ending on November 30, 2020, which were or will be calculated based on 365 days in the calendar year and are equal to $0.001095890 per share of our Class T and Class I common stock. Such daily distribution is ~~determined quarterly by~~equal to an annualized distribution rate of $0.40 per share. The distributions were or will be aggregated and paid in cash or shares of our ~~board and is dependent~~common stock pursuant to the DRIP, on a ~~number of factors, including funds~~monthly basis, in arrears, only from legally available for payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our qualification as a REIT under the Code. We have not established any limit on the amount of net offering proceeds that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would: (i) cause us to be unable to pay our debts as they become due in the usual course of business; or (ii) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences.funds.

Table of Contents


	Nine Months Ended September 30,
	2020				2019
Distributions paid in cash	$	13,932,000			$	15,446,000
Distributions reinvested	15,681,000				19,056,000
	$	29,613,000			$	34,502,000
Sources of distributions:
Cash flows from operations	$	29,613,000	100	%	$	29,106,000	84.4	%


Offering proceeds	—		—		5,396,000		15.6
	$	29,613,000	100	%	$	34,502,000	100	%

As of September 30, 2019, no amounts due to our advisor or its affiliates had been deferred, waived or forgiven other than $80,000 in asset management fees waived by our advisor in 2016, which was equal to the amount of distributions payable from May 1, 2016 through June 27, 2016, the day prior to our first property acquisition. Other than the waiver of such asset management fees by our advisor to provide us with additional funds to pay initial distributions to our stockholders through June 27, 2016, our advisor and its affiliates, including our co-sponsors, have no obligation to defer or forgive fees owed by us to our advisor or its affiliates or to advance any funds to us. In the future, if our advisor or its affiliates do not defer or continue to defer, waive or forgive amounts due to them, this would negatively affect our cash flows from operations, which could result in us paying distributions, or a portion thereof, using borrowed funds. As a result, the amount of proceeds from borrowings available for investment and operations would be reduced, or we may incur additional interest expense as a result of borrowed funds.

The distributions paid for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, along with the amount of distributions reinvested pursuant to our DRIP Offerings and the sources of our distributions as compared to FFO were as follows:

Nine Months Ended September 30,
2019 2018
Distributions paid in cash $ 15,446,000
$ 9,833,000

Distributions reinvested 19,056,000
12,435,000

$ 34,502,000
$ 22,268,000

Sources of distributions:
FFO attributable to controlling interest $ 17,919,000
52.0 % $ 19,132,000
85.9 %
Offering proceeds 13,053,000
37.8
3,136,000
14.1
Proceeds from borrowings 3,530,000
10.2
—
—
$ 34,502,000
100 % $ 22,268,000
100 %

~~Table of Contents~~


	Nine Months Ended September 30,
	2020				2019
Distributions paid in cash	$	13,932,000			$	15,446,000
Distributions reinvested	15,681,000				19,056,000
	$	29,613,000			$	34,502,000
Sources of distributions:
FFO attributable to controlling interest	$	29,361,000	99.1	%	$	17,919,000	52.0	%

Proceeds from borrowings	252,000		0.9		3,530,000		10.2
Offering proceeds	—		—		13,053,000		37.8
	$	29,613,000	100	%	$	34,502,000	100	%

The payment of distributions from sources other than FFO may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds. For a further discussion of FFO, a non-GAAP financial measure, including a reconciliation of our GAAP net income (loss) to FFO, see Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds from Operations and Modified Funds from Operations.

The estimated value per share ~~NAV~~of our common stock may not be an accurate reflection of the fair value of our assets and liabilities and likely will not represent the amount of net proceeds that would result if we were liquidated, or dissolved or completed a merger or other sale of our company.

On April ~~4, 2019,~~2, 2020, our board, at the recommendation of the audit committee, which is comprised solely of independent directors, and after considering the uncertainties presented by the COVID-19 pandemic, unanimously approved and ~~established~~maintained an ~~updated~~ estimated per share NAV of our common stock of $9.54. We ~~are providing~~provided this ~~updated~~ estimated per share NAV to assist broker-dealers in connection with their obligations under FINRA Rule 2231 with respect to customer account statements. The valuation was performed in accordance with the methodology provided in Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the IPA in April 2013, in addition to guidance from the SEC.

Table of Contents

The ~~updated~~ estimated per share NAV was determined after consultation with our advisor and an independent third-party valuation firm, the engagement of which was approved by the audit committee. FINRA rules provide no guidance on the methodology an issuer must use to determine its estimated per share NAV. As with any valuation methodology, our independent valuation firm’s methodology iswas based upon a number of estimates and assumptions that may not behave been accurate or complete. Different parties with different assumptions and estimates could derive a different estimated per share NAV, and these differences could be significant.

The ~~updated~~ estimated per share NAV iswas not audited or reviewed by our independent registered public accounting firm and ~~does~~did not represent the fair value of our assets or liabilities according to GAAP. In addition, the estimated per share NAV was an estimate as of a given point in time and the value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets and changes in the real estate and capital markets. Accordingly, with respect to the ~~updated~~ estimated per share NAV, we can give no assurance that:

•a stockholder would be able to resell his or her shares at our ~~updated~~ estimated per share NAV;

•a stockholder would ultimately realize distributions per share equal to our ~~updated~~ estimated per share NAV upon liquidation of our assets and settlement of our liabilities or a sale of the company;

•our shares of common stock would trade at our ~~updated~~ estimated per share NAV on a national securities exchange;

•an independent third-party appraiser or other third-party valuation firm, other than the third-party valuation firm engaged by our board to assist in its determination of the ~~updated~~ estimated per share NAV, would agree with our estimated per share NAV; or

•the methodology used to estimate our per share NAV would be acceptable to FINRA or comply with reporting requirements under the Employee Retirement Income Security Act of 1974, ~~or ERISA,~~ the Code, other applicable law, or the applicable provisions of a retirement plan or individual retirement ~~account, or IRA.~~account.

Further, the ~~updated~~ estimated per share NAV iswas based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of December 31, ~~2018. The value~~2019, prior to the reported emergence of ~~our shares may fluctuate over time in response to developments related to individual assets~~COVID-19 in the ~~portfolio~~United States. A combination of economic factors driven by the COVID-19 pandemic, including the decline in property sales and the ~~management~~temporary closure of ~~those assets and in response to~~non-essential businesses, has drastically impacted the traditional valuation methodologies for almost all types of commercial real estate, including healthcare real estate. We continue to closely monitor the impact the COVID-19 pandemic is having on our business, residents, tenants, operating partners, managers and ~~finance~~on the United States and global economies. The impact of the COVID-19 pandemic on our portfolio of investments may be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat COVID-19 and reactions by consumers, companies, governmental entities and capital markets. WeTherefore, although we intend to ~~continue to engage an independent valuation firm to assist us with publishing~~publish an updated estimated per share NAV on ~~at least~~ an annual ~~basis.~~basis, we may be required to reevaluate the estimated per share NAV sooner if the COVID-19 pandemic has a material adverse impact on our tenants, operators, managers, portfolio of investments or us. The estimated per share NAV of our Class T and Class I common stock of $9.54 is within the range of estimated values, but lower than the mid-point of $9.75 provided by the independent third party valuation firm that conducted the valuation, and is the same estimated per share NAV previously determined by the board and calculated as of December 31, 2018.

For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of the ~~updated~~ estimated per share NAV, see our Current Report on Form 8-K filed with the SEC on April ~~8, 2019.~~3, 2020.

Our results of operations, our ability to pay distributions to our stockholders and our ability to dispose of our investments are subject to national and local economic factors we cannot control or predict.

Our results of operations are subject to the risks of a national economic slowdown or downturn and other changes in local economic conditions. The following factors may have affected, and may continue to affect, income from our properties, our ability to acquire and dispose of properties and yields from our properties:

•poor economic times may result in defaults by tenants of our properties due to bankruptcy, lack of liquidity or operational failures. We have provided an insignificant number of rent concessions, and may continue to provide rent concessions, tenant improvement expenditures or reduced rental rates to maintain or increase occupancy levels;

•fluctuations in property values as a result of increases or decreases in supply and demand, occupancies and rental rates may cause the properties that we own to decrease in value. Consequently, we may not be able to recover the carrying amount of our properties, which may require us to recognize an impairment charge or record a loss on sale in earnings;

Table of Contents

•reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;

•constricted access to credit may result in tenant defaults or non-renewals under leases;

•layoffs may lead to a lower demand for medical services and cause vacancies to increase, and a lack of future population and job growth may make it difficult to maintain or increase occupancy levels;

•future disruptions in the financial markets, deterioration in economic conditions or a public health crisis, such as the COVID-19 pandemic, have resulted and may continue to result in lower occupancy in our facilities, increased vacancy rates for commercial real estate due to generally lower demand for rentable space, as well as an oversupply of rentable space;

•governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses; and

•increased insurance premiums, real estate taxes or utilities or other expenses may reduce funds available for distribution or, to the extent such increases are passed through to tenants, may lead to tenant defaults. Also, any such increased expenses may make it difficult to increase rents to tenants on turnover, which may limit our ability to increase our returns.

The length and severity of any economic slowdown or downturn cannot be predicted with confidence at this time. Our results of operations, our ability to pay distributions to our stockholders and our ability to dispose of our investments have been and we expect that we may continue to be negatively impacted to the extent an economic slowdown or downturn is prolonged or becomes more severe.

Risk Factors Related to Our Business

In light of the impact that the COVID-19 pandemic has had on our business operations, we have reduced distribution payments to our stockholders and partially suspended our share repurchase plan, and there is no assurance as to when we will be able to increase the amount of distributions to our stockholders or reinstate our share repurchase plan for additional stockholders, if at all.

In light of the impact that the COVID-19 pandemic has had on our business operations and cash flows, and the uncertainty as to the ultimate severity and duration of the outbreak and its effects, on March 31, 2020, our board reduced our monthly distributions to stockholders from an annualized rate of $0.60 per share to $0.40 per share of our common stock effective with the April 2020 distribution paid in May 2020. Our board also suspended our share repurchase plan with respect to all repurchase requests other than repurchases resulting from the death or qualifying disability of stockholders,beginning with share repurchase requests submitted for repurchase during the second quarter of 2020. Our board will continue to evaluate the ongoing and future effects of the COVID-19 pandemic on our financial condition, earnings, debt covenants and other possible needs for cash, and applicable law, in considering our ability to continue to pay or increase distributions and reinstate our share purchase plan in the future. Our stockholders have no contractual or other legal right to distributions or share repurchases that have not been authorized by our board. There can be no assurance when or if distributions and share repurchases will be authorized in the future, and if authorized, whether distributions or share repurchases will be in amounts consistent with our historical levels of distributions and share repurchases.

The COVID-19 pandemic has adversely impacted, and will likely continue to adversely impact, our business and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

In December 2019, COVID-19 was identified in Wuhan, China. This virus continues to spread globally including in the United States. As a result of the COVID-19 pandemic and related shelter-in-place, business re-opening and quarantine restrictions, our property values, NOI and revenues may decline, and our tenants, operating partners and managers have been and may continue to be limited in their ability to generate income, service patients and residents and/or properly manage our properties. In addition, based on preliminary information available to management as of October 31, 2020, we have experienced an approximate 14.4% decline in resident occupancies since February 2020, as well as an up to 30.0% increase in costs to care for residents, at our senior housing — RIDEA facilities. Such costs have begun to moderate somewhat during the third quarter of 2020. Our leased, non-RIDEA senior housing and skilled nursing facility tenants have also experienced and may continue to experience similar pressures related to occupancy declines and expense increases, which may impact their ability to pay rent and have an adverse effect on our operations. However, through October 2020, all rents have been collected from such leased, non-RIDEA senior housing and skilled nursing facility tenants. Given the significant uncertainty of the impact of the COVID-19 pandemic, we are unable to predict the impact it will have on such tenants’ continued ability to pay rent. Therefore, information provided regarding October rent collections should not serve as an indication of expected future rent collections. As

Table of Contents

such, our immediate focus continues to be on resident occupancy recovery and operating expense management. While restrictions have been at least partially lifted in many states, there remains a risk of reclosures in states where infection rates are on the rise, which may put additional pressure on our operations. Additionally, the public perception of a risk of a pandemic or media coverage of the COVID-19 pandemic and related deaths or confirmed cases, or public perception of health risks linked to perceived regional healthcare safety in our senior housing or skilled nursing facilities, particularly if focused on regions in which our properties are located, may adversely affect our business operations by reducing occupancy demand at our facilities. Furthermore, the COVID-19 pandemic has also adversely impacted and may continue to adversely impact the ability of our medical office building tenants, many of whom have been restricted in their ability to work and to pay their rent as and when due. We have also held discussions with our tenants, operating partners and managers and they have expressed that the ultimate impact of the COVID-19 pandemic on their business operations is uncertain.

Issues related to financing also are exacerbated in times of significant dislocation in the financial markets, such as those being experienced now related to the COVID-19 pandemic. It is possible our lenders will become unwilling or unable to provide us with financing, and we may not be able to replace the debt financing of such lender on favorable terms, or at all. In addition, if the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us. As a result, our lenders may revise the terms of such financings to us, which could adversely impact our liquidity and our ability to make payments on our existing obligations.

Furthermore, we and our co-sponsors and their employees that provide services to us rely on processes and activities that largely depend on people and technology, including access to information technology systems as well as information, applications, payment systems and other services provided by third parties. In response to the COVID-19 pandemic, business practices have been modified with all or a portion of our co-sponsors’ employees working remotely from their homes to have our operations uninterrupted as much as possible. Additionally, technology in such employees’ homes may not be as robust as in our co-sponsors’ offices and could cause the networks, information systems, applications and other tools available to such employees to be more limited or less reliable than in our co-sponsors’ offices. The continuation of these work-from-home measures may introduce increased cybersecurity risk. These cybersecurity risks include greater phishing, malware and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, greater risk of a security breach resulting in destruction or misuse of valuable information and potential impairment of our ability to perform certain functions, all of which could expose us to risks of data or financial loss, litigation and liability and could disrupt our operations and the operations of any impacted third-parties.

The information in this Quarterly Report on Form 10-Q is based on data currently available to us and will likely change as the COVID-19 pandemic progresses. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others. We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. For instance, government initiatives enacted to provide substantial financial support to businesses, such as the Payroll Protection Program and deferral of payroll tax payments program within the CARES Act, enacted to provide substantial financial support to businesses could provide helpful mitigation for us and certain of our tenants, operating partners and managers. However, these government assistance programs are not expected to fully offset the negative financial impact of the COVID-19 pandemic, and there can be no assurance that these programs will continue or the extent to which they will be expanded. Therefore, the ultimate impact of such relief from these programs is not yet clear. Furthermore, we expect the trends discussed above with respect to the impact of the COVID-19 pandemic to continue and, in some cases, accelerate. As such, we are continuously monitoring the impact of the COVID-19 pandemic on our business, residents, tenants, operating partners, managers, portfolio of investments and on the United States and global economies. While we are not able at this time to estimate the long-term impact of the COVID-19 pandemic on our financial and operational results, it could be material.

Risks Related to Investments in Real Estate

A significant portion of our annual base rent may be concentrated in a small number of tenants. Therefore, non-renewals, terminations or lease defaults by any of these significant tenants could reduce our net income and have a negative effect on our ability to pay distributions to our stockholders.

As of November 13, ~~2019,~~2020, rental payments by our tenant, RC Tier Properties, LLC, accounted for approximately ~~10.8%~~10.6% of our total property portfolio’s annualized base rent or annualized NOI. The success of our investments materially depends upon the financial stability of the tenants leasing the properties we own. Therefore, a non-renewal after the expiration of a lease term, termination, default or other failure to meet rental obligations by significant tenants, such as RC Tier Properties, LLC,

Table of Contents

would significantly lower our net income. These events could cause us to reduce the amount of distributions to our stockholders.

~~Table of Contents~~

A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area.

We have a concentration of properties in particular geographic areas; therefore, any adverse situation that disproportionately effects one of those areas would have a magnified adverse effect on our portfolio. As of November 13, ~~2019,~~2020, our properties located in Missouri accounted for approximately ~~11.9%~~11.6% of our total property portfolio’s annualized base rent or annualized NOI. Accordingly, there is a geographic concentration of risk subject to fluctuations in such state’s economy.

~~The current trend~~Terrorist attacks, acts of violence or war, political protests and unrest or public health crises may affect the markets in which we operate and have a material adverse effect on our financial condition, results of operations and ability to pay distributions to our stockholders.

Terrorist attacks, acts of violence or war, political protests and unrest or public health crises (including the COVID-19 pandemic) may negatively affect our operations and our stockholders’ investments. We may acquire real estate assets located in areas that are susceptible to terrorist attacks, acts of violence or war, political protests or public health crises. These events may directly impact the value of our assets through damage, destruction, loss or increased security costs. Although we may obtain terrorism insurance, we may not be able to obtain sufficient coverage to fund any losses we may incur. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for ~~seniors~~coverage against property and casualty claims. Further, certain losses resulting from these types of events are uninsurable or not insurable at reasonable costs.

More generally, any terrorist attack, other act of violence or war, political protests and unrest or public health crises could result in increased volatility in, or damage to, ~~delay moving~~the United States and worldwide financial markets and economy, all of which could adversely affect our tenants’ ability to ~~senior housing facilities until they require greater care~~pay rent on their leases or our ability to ~~forgo moving to senior housing facilities altogether~~borrow money or issue capital stock at acceptable prices, which could have a material adverse effect on our ~~business,~~ financial condition, ~~and~~ results of ~~operations.~~

Seniors have been increasingly delaying their moves to senior housing facilities, including to our leased and managed senior housing facilities, until they require greater care, and increasingly forgoing moving to senior housing facilities altogether. Further, rehabilitation therapy and other services are increasingly being provided to seniors on an outpatient basis or in seniors’ personal residences in response to market demand and government regulation, which may increase the trend for seniors to delay moving to senior housing facilities. Such delays may cause decreases in occupancy rates and increases in resident turnover rates at our senior housing facilities. Moreover, seniors may have greater care needs and require higher acuity services, which may increase our tenants’ and managers’ cost of business, expose our tenants and managers to additional liability or result in lost business and shorter stays at our leased and managed senior housing facilities if our tenants and managers are not able to provide the requisite care services or fail to adequately provide those services. These trends may negatively impact the occupancy rates, revenues, and cash flows at our leased and managed senior housing facilities and our results of operations. Further, if any of our tenants or managers are unable to offset lost revenues from these trends by providing and growing other revenue sources, such as new or increased service offerings to seniors, our senior housing facilities may be unprofitable and we may receive lower returns and rent, and the value of our senior housing facilities may decline.

~~The Healthcare Reform Law imposes additional requirements on skilled nursing facilities regarding compliance and disclosure.~~

The Health Care and Education and Reconciliation Act of 2010, or the Healthcare Reform Law, requires skilled nursing facilities to have a compliance and ethics program that is effective in preventing and detecting criminal, civil and administrative violations and in promoting quality of care. The U.S. Department of Health and Human Services included in the final rule published on October 4, 2016 the requirement for operators to implement a compliance and ethics program as a condition of participation in Medicare and Medicaid. Long-term care facilities, including skilled nursing facilities, have until November 28, 2019 to comply. If our operators fall short in their compliance and ethics programs and quality assurance and performance improvement programs, if and when required, their reputationsoperations and ability to ~~attract~~pay distributions to our stockholders.

Our business, tenants, residents ~~could be adversely affected.~~

~~A severe cold~~ and ~~flu season, epidemics or any other widespread illnesses could~~operators may face litigation and experience rising liability and insurance costs, which may adversely affect our financial condition, results of operations, liquidity or cash flows.

We currently intend to pursue insurance recovery for any losses caused by the ~~occupancy~~COVID-19 pandemic, but there can be no assurance that coverage will be available under our existing policies or if such coverage is available, which and how much of our ~~senior housing facilities.~~

~~Our revenues~~losses will be covered and ~~our operators’ revenues are dependent on occupancy. It is impossible~~what other limitations may apply. Due to ~~predict~~ the ~~severity~~likely increase in claims as a result of the ~~cold and flu season~~impact of the COVID-19 pandemic, insurance companies may limit or the occurrence of epidemics or any other widespread illnesses. The occupancy of our senior housing facilities could significantly decrease in the event of a severe cold and flu season, an epidemic or any other widespread illness. Such a decrease could affect the operating income of our senior housing facilities and the ability of our operatorsstop offering coverage to ~~make payments to us. In addition, a flu~~companies like ours for pandemic ~~could~~related claims and/or significantly increase the cost ~~burdens faced~~of insurance so that it is no longer available at commercially reasonable rates.

With respect to our senior housing — RIDEA facilities, we are ultimately responsible for operational risks and other liabilities of the facility, other than those arising out of certain actions by our operator, such as gross negligence or willful misconduct. As such, operational risks include, and our resulting revenues therefore depend on, the availability and cost of general and professional liability insurance coverage or increases in insurance policy deductibles. Furthermore, because we bear such operational risks and liabilities related to our senior housing — RIDEA facilities, we may be directly adversely impacted by potential litigation related to the COVID-19 pandemic that have occurred or may occur at those facilities, and our insurance coverage may not cover or may not be sufficient to cover any potential losses.

Additionally, as a result of the COVID-19 pandemic, the cost of insurance for our tenants, operators ~~including if they are required~~and residents is expected to ~~implement quarantines for residents,~~increase as well, and ~~adversely affect~~such insurance may not cover certain claims related to COVID-19, which could impair their ability to ~~meet their~~pay rent to us. Our exposure to COVID-19-related litigation risk may be further increased if our operators or residents of such facilities are subject to bankruptcy or insolvency. Combined with the factors above, these trends in insurance coverage may adversely affect our financial condition, results of operations, liquidity or cash flows.

Risks Related to Debt Financing

Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which LIBOR is determined may adversely affect the value of the financial obligations to be held or issued by us that are linked to LIBOR.

LIBOR and other indices which ~~would~~are deemed “benchmarks” are the subject of recent national, international and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such “benchmarks” to perform differently than in the past, or have other consequences which cannot be predicted. It currently appears that, over time, United States dollar LIBOR may be replaced by the SOFR published by the Federal Reserve Bank of New York. However, the manner and timing of this shift is currently unknown. Market participants are still considering how various types of financial instruments and securitization vehicles should react to a

Table of Contents

discontinuation of LIBOR. It is possible that not all of our assets and liabilities will transition away from LIBOR at the same time, or to the same alternative reference rate, in each case increasing the difficulty of hedging. For example, switching existing financial instruments and hedging transactions from LIBOR to SOFR requires calculations of a spread. Industry organizations are attempting to structure the spread calculation in a manner that minimizes the possibility of value transfer between counterparties, borrowers and lenders by virtue of the transition, but there is no assurance that the calculated spread will be fair and accurate or that all asset types and all types of securitization vehicles will use the same spread. We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging and risk management. The process of transition involves operational risks. It is also possible that no transition will occur for many financial instruments. At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented. Uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the market for or value of any securities on which the interest or dividend is determined by reference to LIBOR, loans, derivatives and other financial obligations or on our overall financial condition or results of operations. More generally, any of the above changes or any other consequential changes to LIBOR or any other “benchmark” as a result of international, national or other proposals for reform or other initiatives, or any further uncertainty in relation to the timing and manner of implementation of such changes, could have a material adverse effect on ~~our~~the value of financial ~~results.~~assets and liabilities based on or linked to a “benchmark.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

On July 1, ~~2019,~~2020, we issued an aggregate of 15,000 shares of restricted Class T common stock to our independent directors. These shares of restricted Class T common stock were issued pursuant to our incentive plan in a private transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The restricted Class T common stock awards vested 20.0% on the grant date and 20.0% will vest on each of the first four anniversaries of the grant date.

~~Table of Contents~~

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

Our share repurchase plan allows for repurchases of shares of our common stock by us when certain criteria are met. Share repurchases will be made at the sole discretion of our board. All share repurchases are subject to a one-year holding period, except for repurchases made in connection with a stockholder’s death or “qualifying disability,” as defined in our share repurchase plan. Funds for the repurchase of shares of our common stock will come exclusively from the cumulative proceeds we receive from the sale of shares of our common stock pursuant to our DRIP Offerings.

~~The price per~~On March 31, 2020, our board suspended our share ~~at which we will~~ repurchase ~~shares~~plan with respect to all repurchase requests other than repurchases resulting from the death or qualifying disability of stockholders, beginning with share repurchase requests submitted for repurchase during the second quarter of 2020. Shares of our common stock ~~will range from 92.5% to 100% of each stockholder’s repurchase amount depending on the period of time their shares have been held.~~During our initial offering and with respect to shares repurchased for the quarter ending March 31, 2019, the repurchase amount for shares repurchased under our share repurchase plan was equal to the lesser of (i) the amount per share that a stockholder paid for their shares of our common stock, or (ii) the per share offering price in our initial offering. Commencing with shares repurchased for the quarter ending June 30, 2019, the repurchase amount for shares repurchased under our share repurchase plan is the lesser of the amount per share the stockholder paid for its shares of common stock or the most recent estimated value of one share of the applicable class of common stock as determined by our board. However, if shares of our common stock are to be repurchased in connection with a stockholder’s death or qualifying disability ~~the repurchase price~~ will be repurchased at a price no less than 100% of the price paid to acquire the shares of our common stock from us.

During the three months ended September 30, ~~2019,~~2020, we repurchased shares of our common stock as follows:

Period

Total Number of
Shares Purchased

Average Price
Paid per Share

Total Number of Shares
Purchased As Part of
Publicly Announced
Plan or Program

Maximum Approximate
Dollar Value
of Shares that May
Yet Be Purchased
Under the
Plans or Programs
July 1, 2019 to July 31, 2019 —
$ —
—
(1 )
August 1, 2019 to August 31, 2019 —
$ —
—
(1 )
September 1, 2019 to September 30, 2019 308,837
$ 9.14
308,837
(1 )
Total 308,837
$ 9.14
308,837


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased As Part of Publicly Announced Plan or Program	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2020 to July 31, 2020	71,551	$	9.87	71,551	(1)
August 1, 2020 to August 31, 2020	—	$	—	—	(1)
September 1, 2020 to September 30, 2020	—	$	—	—	(1)
Total	71,551	$	9.87	71,551

___________


~~(1)~~	~~A description of the maximum number of shares that may be purchased under our share repurchase plan is included in the narrative preceding this table.~~

(1)A description of the maximum number of shares that may be purchased under our share repurchase plan is included in the narrative preceding this table.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Table of Contents

Item 5. Other Information.

None.

~~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 period ended September 30, ~~2019~~2020 (and are numbered in accordance with Item 601 of Regulation S-K).



3.1		Third Articles of Amendment and Restatement of Griffin-American Healthcare REIT IV, Inc., dated December 28, 2015 (included as Exhibit 3.1 to Pre-effective Amendment No. 2 to our Registration Statement on Form S-11 (File No. 333-205960) filed January 5, 2016 and incorporated herein by reference)

3.2		Articles Supplementary of Griffin-American Healthcare REIT IV, Inc. filed May 25, 2016 (included as Exhibit 3.1 to our Current Report on Form 8-K filed May 26, 2016 and incorporated herein by reference)

3.3		Second Amended and Restated Bylaws of Griffin-American Healthcare REIT IV, Inc. (included as Exhibit 3.2 to Pre-effective Amendment No. 2 to our Registration Statement on Form S-11 (File No. 333-205960) filed January 5, 2016 and incorporated herein by reference)

4.1		Form of Subscription Agreement of Griffin-American Healthcare REIT IV, Inc. (included as Exhibit 4.1 to Post-effective Amendment No. 14 to our Registration Statement on Form S-11 (File No. 333-205960) filed November 30, 2018 and incorporated herein by reference)

~~4.2~~	Amended and Restated Distribution Reinvestment Plan of Griffin-American Healthcare REIT IV, Inc. (included as Exhibit 4.6 to our Registration Statement on Form S-3 (File No. 333-229301) filed January 18, 2019 and incorporated herein by reference)

~~4.3~~10.1		~~Share Repurchase Plan~~Confirmation of swap transaction, dated August 27, 2020 from Fifth Third Bank, National Association to Griffin-American Healthcare REIT IV ~~Inc.~~Holdings, LP (included as Exhibit ~~4.3 to Post-effective Amendment No. 14~~10.1 to our ~~Registration Statement~~Current Report on Form ~~S-11 (File No. 333-205960)~~8-K filed ~~November 30, 2018~~September 1, 2020 and incorporated herein by reference)

~~4.4~~31.1*		Escrow Agreement by and among Griffin-American Healthcare REIT IV, Inc., Griffin Capital Securities, LLC and UMB Bank, N.A., dated February 16, 2016 (included as Exhibit 4.4 to our Annual Report on Form 10-K for the year ended December 31, 2015 filed March 7, 2016 and incorporated herein by reference)

31.1*	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by 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.LAB101.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

101.DEF*	~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~___________~~



104			~~Filed herewith.~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

___________


*			Filed herewith.
**			Furnished herewith. In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Griffin-American Healthcare REIT IV, Inc.

(Registrant)

November 13, 2020

By:

/s/ JEFFREYT. HANSON

Date

Jeffrey T. Hanson

Chief Executive Officer and Chairman of the Board of Directors

(Principal Executive Officer)

November 13, 2020

By:

~~Griffin-American Healthcare REIT IV, Inc.~~/s/ BRIAN S. PEAY

~~(Registrant)~~

Date

~~November 13, 2019~~

~~By:~~

~~/s/ JEFFREYT. HANSON~~

~~Date~~

~~Jeffrey T. Hanson~~

~~Chief Executive Officer and Chairman of the Board of Directors~~

~~(Principal Executive Officer)~~

~~November 13, 2019~~

~~By:~~

~~/s/ BRIAN~~ ~~S. PEAY~~

~~Date~~

Brian S. Peay

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)



	Three Months Ended September 30, 2018
	Class T and Class I Common Stock
	Number of Shares		Amount			Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity
BALANCE — June 30, 2018	54,443,429		$	544,000		$	486,789,000		$	(40,918,000	)	$	446,415,000
Issuance of common stock	6,259,145		62,000			62,631,000			—			62,693,000
Offering costs — common stock	—		—			(5,751,000		)	—			(5,751,000		)
Issuance of common stock under the DRIP	483,737		5,000			4,663,000			—			4,668,000
Issuance of vested and nonvested restricted common stock	15,000		—			30,000			—			30,000
Amortization of nonvested common stock compensation	—		—			40,000			—			40,000
Repurchase of common stock	(115,847	)	(1,000		)	(1,109,000		)	—			(1,110,000		)
Fair value adjustment to redeemable noncontrolling interests	—		—			(72,000		)	—			(72,000		)
Distributions declared ($0.15 per share)	—		—			—			(8,744,000		)	(8,744,000		)
Net loss	—		—			—			(1,631,000		)	(1,631,000		)	(1)
BALANCE — September 30, 2018	61,085,464		$	610,000		$	547,221,000		$	(51,293,000	)	$	496,538,000



Acquisition(1)	Location	Type	Date Acquired	Contract Purchase Price		Mortgage Loan Payable(2)		Line of Credit(3)		Total Acquisition Fee(4)
Lithonia MOB	Lithonia, GA	Medical Office	03/05/19	$	10,600,000	$	—	$	—	$	477,000
West Des Moines SNF	West Des Moines, IA	Skilled Nursing	03/24/19	7,000,000		—		—		315,000
Great Nord MOB Portfolio	Tinley Park, IL; Chesterton and Crown Point, IN; and Plymouth, MN	Medical Office	04/08/19	44,000,000		—		15,000,000		1,011,000
Michigan ALF Portfolio(5)	Grand Rapids, MI	Senior Housing	05/01/19	14,000,000		10,493,000		3,500,000		315,000
Overland Park MOB	Overland Park, KS	Medical Office	08/05/19	28,350,000		—		28,700,000		638,000
Blue Badger MOB	Marysville, OH	Medical Office	08/09/19	13,650,000		—		12,000,000		307,000
Bloomington MOB	Bloomington, IL	Medical Office	08/13/19	18,200,000		—		17,400,000		409,000
Memphis MOB	Memphis, TN	Medical Office	08/15/19	8,700,000		—		8,600,000		196,000
Haverhill MOB	Haverhill, MA	Medical Office	08/27/19	15,500,000		—		15,450,000		349,000
Total				$	160,000,000	$	10,493,000	$	100,650,000	$	4,017,000



	2019 Acquisitions
Building and improvements	$	129,871,000
Land	15,737,000
In-place leases	18,008,000
Above-market leases	2,406,000
Right-of-use asset	2,196,000
Total assets acquired	168,218,000
Mortgage loan payable (including debt discount of $758,000)	(9,735,000		)
Below-market leases	(687,000		)
Operating lease liability	(3,552,000		)
Total liabilities assumed	(13,974,000		)
Net assets acquired	$	154,244,000



	September 30, 2019		December 31, 2018
Below-market leases, net of accumulated amortization of $647,000 and $678,000 as of September 30, 2019 and December 31, 2018, respectively (with a weighted average remaining life of 6.5 years and 5.7 years as of September 30, 2019 and December 31, 2018, respectively)	$	1,511,000	$	1,245,000
Above-market leasehold interests, net of accumulated amortization of $13,000 as of December 31, 2018 (with a weighted average remaining life of 51.2 years as of December 31, 2018)(1)	—		382,000
Total	$	1,511,000	$	1,627,000