UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2023

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

For the transition period from _________ to __________

Commission file number: 001-39153

Healthcare Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	38-3888962
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

___________________________________________________ __________________________________________________

(Address of principal executive offices) (Zip Code)

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

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

Securities registered pursuant to section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share	HTIA	The Nasdaq Global Market
7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share	HTIBP	The Nasdaq Global Market

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

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

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

As of July 31, 2023, the registrant had 109,928,083 shares of common stock outstanding.

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets as ofJune30, 2023 and December 31, 2022 (Unaudited)	3
Consolidated Statements of Comprehensive Income (Loss) for the Threeand SixMonths EndedJune30, 2023 and 2022 (Unaudited)	4
Consolidated Statements of Changes in Equity for theThree andSixMonths EndedJune30, 2023(Unaudited)	5
Consolidated Statements of Changes in Equity for the Three andSixMonths EndedJune30, 2022(Unaudited)	6
Consolidated Statements of Cash Flows for theSixMonths EndedJune30, 2023 and 2022 (Unaudited)	7
Notes to Consolidated Financial Statements (Unaudited)	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	44
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	65
Item 4. Controls and Procedures.	65
PART II - OTHER INFORMATION	66
Item 1. Legal Proceedings.	66
Item 1A. Risk Factors.	66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	66
Item 3. Defaults Upon Senior Securities.	66
Item 4. Mine Safety Disclosures.	66
Item 5. Other Information.	66
Item 6. Exhibits.	67
Signatures.	68

Table of Contents

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements.

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	June 30,<br>2023		December 31, 2022
ASSETS	(Unaudited)		(Unaudited)
Real estate investments, at cost:
Land	$	207,307	$	206,454
Buildings, fixtures and improvements	2,105,607		2,089,133
Acquired intangible assets	292,150		292,034
Total real estate investments, at cost	2,605,064		2,587,621
Less: accumulated depreciation and amortization	(643,677)		(609,324)
Total real estate investments, net	1,961,387		1,978,297
Cash and cash equivalents	71,705		53,654
Restricted cash	33,800		22,884
Derivative assets, at fair value	36,776		40,647
Straight-line rent receivable, net	25,864		25,276
Operating lease right-of-use assets	7,764		7,814
Prepaid expenses and other assets (including $2,262 of prepayments to related parties as of June 30, 2023)	33,125		34,554
Deferred costs, net	14,856		17,223
Total assets	$	2,185,277	$	2,180,349
LIABILITIES AND EQUITY
Mortgage notes payable, net	$	808,513	$	578,700
Credit facilities, net	349,162		530,297
Market lease intangible liabilities, net	8,639		9,407
Accounts payable and accrued expenses (including $47 due to related parties as of December 31, 2022)	42,348		45,247
Operating lease liabilities	8,063		8,087
Deferred rent	5,478		5,925
Distributions payable	3,496		3,496
Total liabilities	1,225,699		1,181,159
Stockholders’ Equity
7.375% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, 4,740,000 authorized; 3,977,144 issued and outstanding as of June 30, 2023 and December 31, 2022	40		40
7.125% Series B cumulative redeemable perpetual preferred stock, $0.01 par value, 3,680,000 authorized; 3,630,000 issued and outstanding as of June 30, 2023 and December 31, 2022	36		36
Common stock, $0.01 par value, 300,000,000 shares authorized, 108,284,434 shares and 105,080,531 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	1,082		1,051
Additional paid-in capital	2,462,523		2,417,059
Accumulated other comprehensive income	34,945		36,910
Distributions in excess of accumulated earnings	(1,545,708)		(1,462,457)
Total stockholders’ equity	952,918		992,639
Non-controlling interests	6,660		6,551
Total equity	959,578		999,190
Total liabilities and equity	$	2,185,277	$	2,180,349

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue from tenants	$	86,104	$	83,826	$	173,459	$	167,476
Operating expenses:
Property operating and maintenance	53,569		52,592		107,452		105,682
Impairment charges	—		6,193		—		16,837
Operating fees to related parties	6,369		6,352		12,756		12,670
Acquisition and transaction related	148		375		211		954
General and administrative	4,331		3,999		9,352		8,898
Depreciation and amortization	20,568		20,251		40,744		40,671
Total expenses	84,985		89,762		170,515		185,712
Operating income (loss) before loss on sale of real estate investments	1,119		(5,936)		2,944		(18,236)
Loss on sale of real estate investments	(306)		—		(191)		(303)
Operating income (loss)	813		(5,936)		2,753		(18,539)
Other income (expense):
Interest expense	(18,703)		(12,050)		(34,488)		(23,814)
Interest and other income	313		2		318		14
Gain on non-designated derivatives	286		392		104		1,386
Total other expenses	(18,104)		(11,656)		(34,066)		(22,414)
Loss before income taxes	(17,291)		(17,592)		(31,313)		(40,953)
Income tax expense	(41)		(43)		(87)		(82)
Net loss	(17,332)		(17,635)		(31,400)		(41,035)
Net loss attributable to non-controlling interests	22		29		31		78
Allocation for preferred stock	(3,449)		(3,449)		(6,899)		(6,899)
Net loss attributable to common stockholders	(20,759)		(21,055)		(38,268)		(47,856)
Other comprehensive income (loss):
Unrealized gain (loss) on designated derivatives	5,466		10,170		(1,965)		36,436
Comprehensive loss attributable to common stockholders	$	(15,293)	$	(10,885)	$	(40,233)	$	(11,420)
Weighted-average shares outstanding — Basic and Diluted (1)	109,727,785		109,653,175		109,727,785		109,653,175
Net loss per common share attributable to common stockholders — Basic and Diluted (1)	$	(0.19)	$	(0.19)	$	(0.35)	$	(0.44)

_____

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

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

(Unaudited)

	Six Months Ended June 30, 2023
	Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income
	Number of<br><br>Shares	Par Value		Number of<br><br>Shares	Par Value		Number of<br>Shares	Par Value		Additional <br>Paid-in<br>Capital				Distributions in excess of accumulated earnings			Total Stockholders Equity			Non-controlling Interests			Total Equity
Balance, December 31, 2022	3,977,144	40		3,630,000	$	36	105,080,531	$	1,051	$	2,417,059	$	36,910		$	(1,462,457)		$	992,639		$	6,551		$	999,190
Share-based compensation, net	—	—		—	—		—	—		460		—			—			460			—			460
Distributions declared in common stock, $0.42 per share	—	—		—	—		3,203,903	31		44,952		—			(44,983)			—			—			—
Distributions declared on Series A Preferred Stock, $0.92 per share	—	—		—	—		—	—		—		—			(3,666)			(3,666)			—			(3,666)
Distributions declared on Series B Preferred Stock, $0.90 per share	—	—		—	—		—	—		—		—			(3,233)			(3,233)			—			(3,233)
Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—			—			—			(92)			(92)
Net loss	—	—		—	—		—	—		—		—			(31,369)			(31,369)			(31)			(31,400)
Unrealized loss on designated derivatives	—	—		—	—		—	—		—		(1,965)			—			(1,965)			—			(1,965)
Contributions from minority interests	—	—		—	—		—	—		—		—			—			—			284			284
Rebalancing of ownership percentage	—	—		—	—		—	—		52		—			—			52			(52)			—
Balance, June 30, 2023	3,977,144	$	40	3,630,000	$	36	108,284,434	$	1,082	$	2,462,523	$	34,945		$	(1,545,708)		$	952,918		$	6,660		$	959,578
	Three Months Ended June 30, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income
	Number of<br><br>Shares	Par Value		Number of<br><br>Shares	Par Value		Number of<br>Shares	Par Value		Additional <br>Paid-in<br>Capital				Distributions in excess of accumulated earnings			Total Stockholders Equity			Non-controlling Interests			Total Equity
Balance, March 31, 2023	3,977,144	$	40	3,630,000	$	36	106,668,245	$	1,066	$	2,439,662	$	29,479		$	(1,502,299)		$	967,984		$	6,441		$	974,425
Issuance of Preferred Stock, net	—	—		—	—		—	—		2		—			—			2			—			2
Share-based compensation, net	—	—		—	—		—	—		230		—			—			230			—			230
Distributions declared in common stock, $0.21 per share	—	—		—	—		1,616,189	16		22,632		—			(22,648)			—			—			—
Distributions declared on Series A Preferred Stock, $0.46 per share	—	—		—	—		—	—		—		—			(1,834)			(1,834)			—			(1,834)
Distributions declared on Series B Preferred Stock, $0.45 per share	—	—		—	—		—	—		—		—			(1,617)			(1,617)			—			(1,617)
Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—			—			—			(46)			(46)
Net loss	—	—		—	—		—	—		—		—			(17,310)			(17,310)			(22)			(17,332)
Unrealized gain on designated derivatives	—	—		—	—		—	—		—		5,466			—			5,466			—			5,466
Contributions from minority interests	—	—		—	—		—	—		—		—			—			—			284			284
Rebalancing of ownership percentage	—	—		—	—		—	—		(3)		—			—			(3)			3			—
Balance, June 30, 2023	3,977,144	$	40	3,630,000	$	36	108,284,434	$	1,082	$	2,462,523	$	34,945		$	(1,545,708)		$	952,918		$	6,660		$	959,578

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

(Unaudited)

				Six Months Ended June 30, 2022
	Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive (Loss) Income
	Number of<br>Shares	Par Value		Number of<br>Shares	Par Value		Number of<br>Shares	Par Value		Additional <br>Paid-in<br>Capital				Distributions in Excess of Accumulated Earnings			Total Stockholders Equity			Non-controlling Interests			Total Equity
Balance, December 31, 2021	3,977,144	$	40	3,630,000	$	36	99,281,754	$	993	$	2,329,839	$	(14,341)		$	(1,282,871)		$	1,033,696		$	6,704		$	1,040,400
Issuance of Preferred Stock, net	—	—		—	—		—	—		(11)		—			—			(11)			—			(11)
Share-based compensation, net	—	—		—	—		—	—		664		—			—			664			—			664
Distributions declared in common stock, $0.42 per share	—	—		—	—		2,882,917	29		42,540		—			(42,569)			—			—			—
Distributions declared on Series A Preferred Stock, $0.92 per share	—	—		—	—		—	—		—		—			(3,666)			(3,666)			—			(3,666)
Distributions declared on Series B Preferred Stock, $0.90 per share	—	—		—	—		—	—		—		—			(3,233)			(3,233)			—			(3,233)
Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—			—			—			(92)			(92)
Net loss	—	—		—	—		—	—		—		—			(40,957)			(40,957)			(78)			(41,035)
Unrealized gain on designated derivatives	—	—		—	—		—	—		—		36,436			—			36,436			—			36,436
Rebalancing of ownership percentage	—	—		—	—		—	—		(143)		—			—			(143)			143			—
Balance, June 30, 2022	3,977,144	$	40	3,630,000	$	36	102,164,671	$	1,022	$	2,372,889	$	22,095		$	(1,373,296)		$	1,022,786		$	6,677		$	1,029,463
				Three Months Ended June 30, 2022
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income
	Number of<br>Shares	Par Value		Number of<br>Shares	Par Value		Number of<br>Shares	Par Value		Additional <br>Paid-in<br>Capital				Distributions in Excess of Accumulated Earnings			Total Stockholders Equity			Non-controlling Interests			Total Equity
Balance, March 31, 2022	3,977,144	$	40	3,630,000	$	36	100,737,224	$	1,007	$	2,350,902	$	11,925		$	(1,330,730)		$	1,033,180		$	6,914		$	1,040,094
Issuance of Preferred Stock, net	—	—		—	—		—	—		43		—			—			43			—			43
Share-based compensation, net	—	—		—	—		—	—		332		—			—			332			—			332
Distributions declared in common stock, $0.21 per share	—	—		—	—		1,427,447	15		21,450		—			(21,465)			—			—			—
Distributions declared on Series A Preferred Stock, $0.46 per share	—	—		—	—		—	—		—		—			(1,789)			(1,789)			—			(1,789)
Distributions declared on Series B Preferred Stock, $0.45 per share	—	—		—	—		—	—		—		—			(1,706)			(1,706)			—			(1,706)
Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—			—			—			(46)			(46)
Net loss	—	—		—	—		—	—		—		—			(17,606)			(17,606)			(29)			(17,635)
Unrealized gain on designated derivatives	—	—		—	—		—	—		—		10,170			—			10,170			—			10,170
Rebalancing of ownership percentage	—	—		—	—		—	—		162		—			—			162			(162)			—
Balance, June 30, 2022	3,977,144	$	40	3,630,000	$	36	102,164,671	$	1,022	$	2,372,889	$	22,095		$	(1,373,296)		$	1,022,786		$	6,677		$	1,029,463

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(31,400)	$	(41,035)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	40,744		40,671
Amortization of deferred financing costs	5,210		2,333
(Accretion) amortization of terminated swap	(1,125)		423
Amortization of mortgage premiums and discounts, net	46		5
Accretion of market lease and other intangibles, net	(471)		(245)
Bad debt expense	695		865
Equity-based compensation	460		664
Loss on sale of real estate investments, net	191		303
Cash received from non-designated derivative instruments	2,301		—
Gain on non-designated derivative instruments	(104)		(1,386)
Impairment charges	—		16,837
Changes in assets and liabilities:
Straight-line rent receivable	(605)		(1,053)
Prepaid expenses and other assets	909		1,892
Accounts payable, accrued expenses and other liabilities	(5,728)		(4,736)
Deferred rent	(446)		(1,801)
Net cash provided by operating activities	10,677		13,737
Cash flows from investing activities:
Property acquisitions	(25,443)		(17,799)
Capital expenditures	(9,140)		(9,075)
Investments in non-designated interest rate caps	(4,580)		—
Proceeds from sales of real estate investments	4,803		11,759
Net cash used in investing activities	(34,360)		(15,115)
Cash flows from financing activities:
Payments on credit facilities	(197,717)		—
Proceeds from credit facilities	20,000		—
Proceeds from mortgage notes payable	240,000		—
Payments on mortgage notes payable	(565)		(7,199)
Proceeds from termination of (payments for) derivative instruments	5,413		(39)
Payments of deferred financing costs	(7,774)		(277)
Preferred stock issuance costs	—		(6)
Contributions from non-controlling interests	284		—
Dividends paid on Series A Preferred stock	(3,666)		(3,666)
Dividends paid on Series B Preferred stock	(3,233)		(3,233)
Distributions to non-controlling interest holders	(92)		(92)
Net cash provided by (used in) financing activities	52,650		(14,512)
Net change in cash, cash equivalents and restricted cash	28,967		(15,890)
Cash, cash equivalents and restricted cash, beginning of period	76,538		85,382
Cash, cash equivalents and restricted cash, end of period	$	105,505	$	69,492

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2023		2022
Cash, cash equivalents, end of period	$	71,705	$	42,664
Restricted cash, end of period	33,800		26,828
Cash, cash equivalents and restricted cash, end of period	$	105,505	$	69,492
Supplemental disclosures of cash flow information:
Cash paid for interest	$	28,093	$	20,987
Cash paid for income and franchise taxes	415		565
Non-cash investing and financing activities:
Common stock issued through stock dividends	$	44,983	$	42,569
Proceeds from real estate sales used to repay mortgage notes payable	$	2,663	$	—
Mortgage notes payable repaid with proceeds from real estate sales	$	(2,663)	$	—
Proceeds from real estate sales used to repay amounts outstanding under the Prior Credit Facility	$	5,167	$	—
Amounts outstanding under the Prior Credit Facility repaid with proceeds from real estate sales	$	(5,167)	$	—

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Note 1 — Organization

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

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

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

The Company operates in two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs. In its MOB operating segment, the Company owns, manages, and leases single- and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. The Property Manager or third-party managers manage the Company’s MOBs. In its SHOP segment, the Company invests in seniors housing properties using the RIDEA structure. As of June 30, 2023, the Company had four eligible independent contractors operating 46 SHOPs. All of the Company’s properties across both business segments are located throughout the United States.

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

On March 31, 2023, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2022. The Estimated Per-Share NAV published on March 31, 2023 has not been adjusted since publication and will not be adjusted until the board of directors (the “Board”) determines a new Estimated Per-Share NAV. Issuing dividends in additional shares of common stock will, all things equal, cause the value of each share to decline because the number of shares outstanding increases when shares of common stock are issued in respect of a Stock Dividend; however, because each stockholder will receive the same number of new shares, the total value of a common stockholder’s investment, all things equal, will not change assuming no sales or other transfers. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless the Company lists its common stock.

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Note 2 — Summary of Significant Accounting Policies

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

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

Principles of Consolidation and Basis of Presentation

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

Use of Estimates

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

Impacts of the COVID-19 Pandemic and its Aftermath

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

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

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

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

COVID-19 Impact — MOB Segment

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

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

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

COVID-19 Impact — SHOP Segment

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

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

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

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

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

Revenue Recognition

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

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

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

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

As of June 30, 2023:

(In thousands)	Future <br>Base Rent Payments
2023 (remainder)	$	54,165
2024	105,063
2025	94,324
2026	86,414
2027	68,157
Thereafter	232,411
Total	$	640,534

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

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

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

Investments in Real Estate

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

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

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

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

Purchase Price Allocation

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

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

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

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

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

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

Accounting for Leases

Lessor Accounting

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

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

Lessee Accounting

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

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

For lessees, the accounting standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction. For additional information and disclosures related to the Company’s operating leases, see Note 16 — Commitments and Contingencies.

Impairment of Long-Lived Assets

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

Reportable Segments

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

Depreciation and Amortization

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

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

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

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

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

Income Taxes

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

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

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

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

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

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

CARES Act Grants

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

Recently Issued Accounting Pronouncements

Adopted as of January 1, 2022:

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

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consolidated financial statements.

Not yet Fully Adopted as of June 30, 2023:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period from March 12, 2020 through June 30, 2023 as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to (i) the assertion that the Company’s hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of the Company’s derivatives, which will be consistent with the Company’s past presentation. The Company will continue to evaluate the impact of the guidance and may apply other elections, as applicable, as additional changes in the market occur.

Note 3 — Real Estate Investments, Net

Property Acquisitions

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

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

	Six Months Ended June 30,
(In thousands)	2023		2022
Real estate investments, at cost:
Land	$	2,085	$	4,199
Buildings, fixtures and improvements	19,440		10,662
Total tangible assets	21,525		14,861
Acquired intangibles:
In-place leases and other intangible assets	3,912		2,670
Market lease and other intangible assets	33		268
Market lease liabilities	(27)		—
Total intangible assets and liabilities	3,918		2,938
Cash paid for real estate investments, including acquisitions	$	25,443	$	17,799
Number of properties purchased	5		3

Significant Tenants

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

	June 30,
State	2023	2022
Florida	19.7%	18.5%
Pennsylvania	10.7%	*

_________

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

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Intangible Assets and Liabilities

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Amortization of in-place leases and other intangible assets (1)	$	3,500	$	3,821	$	6,960	$	7,687
Accretion of above -and below-market leases, net (2)	$	(300)	$	(166)	$	(551)	$	(330)
Amortization of above -and below-market ground leases, net (3)	$	40	$	40	$	80	$	80

________

(1)Reflected within depreciation and amortization expense.

(2)Reflected within rental income.

(3)Reflected within property operating and maintenance expense.

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

(In thousands)	2023 (remainder)		2024		2025		2026		2027
In-place lease assets	$	6,612	$	11,722	$	10,134	$	8,889	$	5,379
Other intangible assets	10		10		10		10		10
Total to be added to amortization expense	$	6,622	$	11,732	$	10,144	$	8,899	$	5,389
Above-market lease assets	$	(231)	$	(419)	$	(366)	$	(331)	$	(243)
Below-market lease liabilities	674		1,267		1,096		941		623
Total to be added to revenue from tenants	$	443	$	848	$	730	$	610	$	380

Dispositions

Three and Six Months Ended June 30, 2023

During the second quarter of 2023, the Company disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of the four disposed SHOPs were impaired by $6.2 million in the second quarter of 2022 (see below). As a result, the Company recorded an aggregate loss on sale of $0.2 million, which is presented in the Company’s consolidated statement of operations and comprehensive loss for the six months ended June 30, 2023.

Three and Six Months Ended June 30, 2022

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

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Assets Held for Sale

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

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

Assets Held for Use

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

Impairment Charges

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

	Six Months Ended June 30,
(In thousands)		2022
MOB Segment:
Illinois skilled nursing facilities (1)		$	10,644
Total MOB impairment charges		10,644
SHOP Segment:
Various held for use SHOPs (2)		6,193
Total SHOP impairment charges		6,193
Total impairment charges		$	16,837

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

(2)Consists of two properties that were impaired as a result of the Company reassessing the holding period for the properties. These properties were sold in the second quarter of 2023.

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Note 4 — Mortgage Notes Payable, Net

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

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

_____________

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

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

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

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

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

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

Barclay’s MOB Loan

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

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

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

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

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

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

Note 5 — Credit Facilities

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

			Outstanding Facility <br>Amount as of				Effective Interest Rate (8)
Credit Facilities	Encumbered Properties (1)		June 30,<br>2023		December 31, 2022		June 30,<br>2023			December 31, 2022			Interest Rate		Maturity
			(In thousands)		(In thousands)
Prior Credit Facility:
Revolving Credit Facility			$	—	$	30,000	—	%		7.26	%		Variable		Mar. 2024	(7)
Term Loan			—		150,000		—	%		5.11	%		Fixed	(5)	Mar. 2024
Deferred financing costs			—		(1,750)
Term Loan, net			—		148,250
Total Prior Credit Facility	—		$	—	$	178,250
Fannie Mae Master Credit Facilities:
Capital One Facility	11	(2)	$	208,713	$	210,483	7.61	%		5.90	%		Variable	(6)	Nov. 2026
KeyBank Facility	10	(3)	140,449		141,564		7.65	%		6.60	%		Variable	(6)	Nov. 2026
Total Fannie Mae Master Credit Facilities	21		$	349,162	$	352,047
Total Credit Facilities	21		$	349,162	$	530,297	7.63	%	(4)	5.94	%	(4)

________

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

(2)Secured by first-priority mortgages on 11 of the Company’s seniors housing properties as of June 30, 2023 with a carrying value of $0.3 million.

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

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

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

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

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

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

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

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

Prior Credit Facility

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

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

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

Fannie Mae Master Credit Facilities

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

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

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

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

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

Subsequent to June 30, 2023, the Company made a $5.1 million cash deposit to Fannie Mae because the debt service coverage ratios of the underlying properties of each facility were below the minimum required amount per the debt agreements. This amount will be recorded as restricted cash and is pledged as additional collateral for the Fannie Mae Master Credit Facilities. This deposit will be refunded the earlier of the Company’s achievement of a debt service coverage ratio above the minimum required amount of 1.40 or the maturity of the Fannie Mae Master Credit Facilities.

Future Principal Payments

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

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

LIBOR Transition

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

As of June 30, 2023, the Company had $349.2 million of variable-rate, LIBOR-based borrowings under the Fannie Mae Master Credit Facilities, which automatically transitioned to variable-rate, SOFR-based borrowings on July 1, 2023. During the

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

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

Note 6 — Fair Value of Financial Instruments

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

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

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

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

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

Financial Instruments Measured at Fair Value on a Recurring Basis

Derivative Instruments

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

The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

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

(In thousands)	Quoted Prices in Active Markets<br>Level 1		Significant<br>Other Observable Inputs<br>Level 2		Significant Unobservable Inputs<br>Level 3		Total
June 30, 2023
Derivative assets, at fair value (non-designated)	$	—	$	6,106	$	—	$	6,106
Derivative assets, at fair value (designated)	—		30,670		—		30,670
Total	$	—	$	36,776	$	—	$	36,776
December 31, 2022
Derivative assets, at fair value (non-designated)	$	—	$	3,737	$	—	$	3,737
Derivative assets, at fair value (designated)	—		36,910		—		36,910
Total	$	—	$	40,647	$	—	$	40,647

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

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

Real Estate Investments - Held for Use

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

As of June 30, 2023, the Company owned 18 held for use properties (10 MOBs and eight SHOPs) for which the Company had reconsidered their expected holding periods, of which five properties (one MOB and four SHOPs) are being marketed for sale. As a result, the Company evaluated the impact on its ability to recover the carrying values of the respective properties, and has previously recorded impairment charges on 10 properties (eight MOBs and two SHOPs) to reduce the carrying values to their estimated fair values during the year ended December 31, 2022.

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

Real Estate Investments - Held for Sale

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

Financial Instruments not Measured at Fair Value

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

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

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

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

Note 7 — Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

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

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

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

(In thousands)	Balance Sheet Location	June 30,<br>2023		December 31, 2022
Derivatives designated as hedging instruments:
Interest rate “pay-fixed” swaps	Derivative assets, at fair value	$	30,670	$	36,910
Derivatives not designated as hedging instruments:
Interest rate caps	Derivative assets, at fair value	$	6,106	$	3,737

Cash Flow Hedges of Interest Rate Risk

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

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

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives	$	10,131	$	8,397	$	6,660	$	32,009
Amount of gain (loss) reclassified from accumulated other comprehensive income into income as interest expense	$	4,665	$	(1,773)	$	8,626	$	(4,427)
Total amount of interest expense presented in the<br>consolidated statements of operations and comprehensive loss	$	(18,703)	$	(12,050)	$	(34,488)	$	(23,814)

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

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

MOB Loan Swap Termination

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

Prior Credit Facility Swap Terminations

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

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

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Non-Designated Derivatives

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

	June 30, 2023			December 31, 2022
Interest Rate Derivatives	Number of Instruments	Notional Amount (1)		Number of Instruments	Notional Amount (1)
		(In thousands)			(In thousands)
Interest rate caps (2)	9	$	353,829	7	$	354,624

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

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

These derivatives are used to limit the Company’s exposure to interest rate movements for economic purposes, however, the Company has not elected to apply hedge accounting. As of June 30, 2023 and December 31, 2022, the Company had entered into nine and seven LIBOR-based interest rate caps, respectively, with notional amounts of $353.8 million and $354.6 million, respectively, (of which six caps were active as of June 30, 2023 and December 31, 2022) which limited 30-day LIBOR borrowings to 3.50% and have varying maturities through July 2025. The Company paid premiums of $4.6 million to renew three caps which matured in the three months ended June 30, 2023. All of the Company’s LIBOR-based interest rate caps were transitioned to SOFR-based contracts effective July 1, 2023.

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

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

Offsetting Derivatives

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

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

Credit-risk-related Contingent Features

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

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

Note 8 — Stockholders’ Equity

Common Stock

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

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

Share Repurchase Program

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

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

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

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

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

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

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Distribution Reinvestment Plan

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

Stockholder Rights Plan

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

Preferred Stock and Preferred Units

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

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

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

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

Distributions and Dividends

Common Stock

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

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

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Stock Dividend Declaration Date	Stock Dividend Issue Date	Quarterly Stock Dividend Rate (per share)
October 1, 2020	October 15, 2020	0.013492
January 4, 2021	January 15, 2021	0.013492
April 2, 2021	April 15, 2021	0.014655
July 1, 2021	July 15, 2021	0.014655
October 1, 2021	October 15, 2021	0.014655
January 3, 2022	January 15, 2022	0.014655
April 1, 2022	April 18, 2022	0.014167
July 1, 2022	July 15, 2022	0.014167
October 3, 2022	October 17, 2022	0.014167
January 3, 2023	January 18, 2023	0.014167
April 3, 2023	April 17, 2023	0.015179
July 3, 2023	July 17, 2023	0.015179

Note 9 — Related Party Transactions and Arrangements

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

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

Fees Incurred in Connection with the Operations of the Company

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

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

Acquisition Expense Reimbursements

The Advisor may be reimbursed for services provided for which it incurs investment-related expenses, or insourced expenses. The amount reimbursed for insourced expenses may not exceed 0.5% of the contract purchase price of each acquired property or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimburses the Advisor for third-party acquisition expenses. Under the Second A&R Advisory Agreement, total acquisition expenses may not exceed 4.5% of the contract purchase price of the Company’s portfolio or 4.5% of the amount advanced for all loans or other investments. This threshold has not been exceeded through June 30, 2023.

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Asset Management Fees and Variable Management/Incentive Fees

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

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

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

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

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

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

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

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

Property Management Fees

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

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

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

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

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Professional Fees and Other Reimbursements

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

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

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

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

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

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

Summary of fees, expenses and related payables

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

	Three Months Ended June 30,					Six Months Ended June 30,			Payable (Prepayments) as of
	2023		2022			2023	2022
(In thousands)	Incurred			Incurred			Incurred			Incurred		June 30,<br>2023		December 31, 2022
Non-recurring fees and reimbursements:
Acquisition cost reimbursements	$	—		$	18		$	21		$	18	$	—	$	5
Ongoing fees and reimbursements:
Asset management fees	5,458			5,458			10,916			10,916		(1,819)		—
Property management and fees (2)	911			929			1,840			1,957		(410)		3
Professional fees and other reimbursements (1)	2,373			2,124			4,759			4,350		(33)		39
Total related party operation fees and reimbursements	$	8,742		$	8,529		$	17,536		$	17,241	$	(2,262)	$	47

___________

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

(2)Includes $0.1 million and $0.2 million of leasing commissions which are capitalized and included in prepaid expenses and other assets.

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

Fees Incurred in Connection with a Listing

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

Subordinated Participation in Net Sales Proceeds

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

Termination Fees

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

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

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

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

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

Note 10 — Economic Dependency

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

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

Note 11 — Equity-Based Compensation

Restricted Share Plan

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

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

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

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

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(Unaudited)

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

Other Share-Based Compensation

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

Note 12 — Accumulated Other Comprehensive Income

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

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

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

Note 13 — Non-controlling Interests

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

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

Non-Controlling Interests in the OP

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

Series A Preferred Units

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

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

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

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

Common OP Units

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

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

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

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

Non-Controlling Interests in Property Owning Subsidiaries

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

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

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

_______

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

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Note 14 — Net Loss Per Share

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss attributable to common stockholders (in thousands)	$	(20,759)	$	(21,055)	$	(38,268)	$	(47,856)
Basic and diluted weighted-average shares outstanding (1)	109,727,785		109,653,175		109,727,785		109,653,175
Basic and diluted net loss per share (1)	$	(0.19)	$	(0.19)	$	(0.35)	$	(0.44)

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

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

	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Unvested restricted shares (1)	100,626	176,362	100,626	176,362
Common OP Units (2)	481,919	481,919	481,919	481,919
Class B Units (3)	426,429	426,429	426,429	426,429
Total weighted average antidilutive common stock equivalents	1,008,974	1,084,710	1,008,974	1,084,710

________

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

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

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

Note 15 — Segment Reporting

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

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

Net Operating Income

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

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

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

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

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

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

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

(In thousands)	June 30, 2023		December 31, 2022
ASSETS
Investments in real estate, net:
Medical office buildings	$	1,126,415	$	1,121,857
Seniors housing — operating properties	834,972		856,440
Total investments in real estate, net	1,961,387		1,978,297
Cash and cash equivalents	71,705		53,654
Restricted cash	33,800		22,884
Derivative assets, at fair value	36,776		40,647
Straight-line rent receivable, net	25,864		25,276
Operating lease right-of-use assets	7,764		7,814
Prepaid expenses and other assets	33,125		34,554
Deferred costs, net	14,856		17,223
Total assets	$	2,185,277	$	2,180,349

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Medical office buildings	$	1,742	$	2,484	$	2,964	$	3,672
Seniors housing — operating properties	3,764		3,280		6,176		5,403
Total capital expenditures	$	5,506	$	5,764	$	9,140	$	9,075

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Note 16 — Commitments and Contingencies

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

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

The Company’s ground operating leases have a weighted-average remaining lease term, including assumed renewals, of 34.2 years and a weighted-average discount rate of 7.37% as of June 30, 2023. For the three and six months ended June 30, 2023 and 2022, the Company paid cash of $0.2 million and $0.4 million, respectively, for amounts included in the measurement of lease liabilities and recorded expense of $0.2 million and $0.4 million, respectively, on a straight-line basis in accordance with the current accounting guidance. The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss. The following table reflects the base cash rental payments due from the Company for the next five years as of June 30, 2023:

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

_______

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

Litigation and Regulatory Matters

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

Environmental Matters

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

Note 17 — Subsequent Events

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

Dividend Declaration

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

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

Other Subsequent Events

In July 2023, the Company provided a $5.1 million cash deposit to Fannie Mae. This deposit was provided because the debt service coverage ratio of the underlying properties of each facility were below the minimum required amount per the debt agreements. This deposit will be refunded the earlier of the Company’s achievement of a debt service coverage ratio above the minimum required amount of 1.40 or the maturity of the Fannie Mae Master Credit Facilities.

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

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

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Healthcare Trust, Inc. (“we,” “our” or “us”) and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2022 as well as Part II — Other Information, Item IA — Risk Factors below.

Overview

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

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

We operate in two reportable business segments for management and financial reporting purposes: medical office and other health-care related buildings (“MOBs”) and senior housing operating properties (“SHOPs”). In our MOB operating segment, we own, manage, and lease single- and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. Our Property Manager or third-party managers manage our MOBs. In our SHOP segment, we invest in seniors housing properties using the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure. As of June 30, 2023, we had four eligible independent contractors operating 46 SHOPs (excluding two land parcels). All of our properties across both business segments are located throughout the United States.

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

On March 31, 2023, we published a new Estimated Per-Share NAV equal to $14.00 as of December 31, 2022. Our previous Estimated Per-Share NAV was equal to $15.00 as of December 31, 2021. The Estimated Per-Share NAV has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV. Dividends paid in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when dividends paid in stock are issued; however, because each stockholder will receive the same number of new shares, the total value of our common stockholder’s investment, all things equal, will not change assuming no sales or other transfers. We intend to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless we list our common stock.

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

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

Seniors Housing Properties

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

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

________

(1)Exclusive of two land parcels.

Contract Labor and Wage Expenses

Beginning with the second quarter of 2021, our occupancy and operating costs in our SHOP portfolio have been relatively stable. During the year ended December 31, 2022, our third party operators needed to increase their use of temporary contract labor and agencies, and the amount paid for overtime wages and bonuses, in response to a shortage of workers, the cost of labor generally and lack of qualified personnel that our third party operators are able to employ on a permanent basis. During the six months ended June 30, 2023, these costs declined. In particular, costs incurred from contract labor and agencies for care providers decreased in our SHOP segment by $2.1 million and $3.5 million, from $2.8 million and $4.9 million in the three and six months ended June 30, 2022, respectively, to $0.7 million and $1.4 million as compared to the three and six months ended June 30, 2023, respectively. However, these costs were offset by increased wage costs for direct employees of our third party operators of $1.9 million and $4.2 million in the three and six months ended June 30, 2023 compared to the same periods ended June 30, 2022. Likewise, occupancy levels have not recovered to their pre-pandemic rates (as noted in the table above), thus our results of operations in our SHOP segment have been significantly adversely affected by the increase in labor costs even though resident fees have increased.

Rent Concessions

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

The CARES Act

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

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

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

Significant Accounting Estimates and Critical Accounting Policies

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

Recently Issued Accounting Pronouncements

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

Properties

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

Portfolio	Number<br>of Properties		Rentable <br>Square Feet	Percentage Leased(1)		Weighted Average Remaining<br><br>Lease Term in Years (2)	Gross Asset Value (3)
							(In thousands)
Medical Office and Other Healthcare Related Buildings	154		5,132,166	91.5%		4.8	$	1,448,862
Seniors Housing — Operating Properties	48	(4)	3,857,652	73.3%	(5)	N/A	1,126,844
Total Portfolio	202		8,989,818				$	2,575,706

________

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

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

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

(4)Includes two parcels of land

(5)Weighted by unit count as of June 30, 2023. As of June 30, 2023, we had 4,164 rentable units in our SHOP segment. Excludes land parcels.

N/A    Not applicable.

Same Store Properties

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

Table of Contents

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

	MOB	SHOP	Total
Number of properties, January 1, 2022	146	56	202
Acquisition activity during the year ended December 31, 2022	4	—	4
Disposition activity during the year ended December 31, 2022	—	(4)	(4)
Number of properties, December 31, 2022	150	52	202
Acquisition activity during the six months ended June 30, 2023	5	—	5
Disposition activity during the six months ended June 30, 2023	(1)	(4)	(5)
Number of properties, June 30, 2023	154	48	202
Number of Same Store Properties	145	48	193
Number of Acquired Properties	9	—	9
Number of Disposed Properties	1	8	9

Results of Operations

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

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

	Three Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2023		2022
Revenue from tenants	$	86,104	$	83,826
Operating expenses:
Property operating and maintenance	53,569		52,592		977
Impairment charges	—		6,193		(6,193)
Operating fees to related parties	6,369		6,352		17
Acquisition and transaction related	148		375		(227)
General and administrative	4,331		3,999		332
Depreciation and amortization	20,568		20,251		317
Total expenses	84,985		89,762		(4,777)
Operating income (loss) before loss on sale of real estate investments	1,119		(5,936)		7,055
Loss on sale of real estate investments	(306)		—		(306)
Operating income (loss)	813		(5,936)		6,749
Other income (expense):
Interest expense	(18,703)		(12,050)		(6,653)
Interest and other income	313		2		311
Gain on non-designated derivatives	286		392		(106)
Total other expenses	(18,104)		(11,656)		(6,448)
Loss before income taxes	(17,291)		(17,592)		301
Income tax expense	(41)		(43)		2
Net loss	(17,332)		(17,635)		303
Net loss attributable to non-controlling interests	22		29		(7)
Allocation for preferred stock	(3,449)		(3,449)		—
Net loss attributable to common stockholders	$	(20,759)	$	(21,055)

All values are in US Dollars.

Net Operating Income

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

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

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

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

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

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

(In thousands)	Same Store				Acquisitions				Dispositions				Non-Property Specific		Total
	MOBs		SHOPs		MOBs		SHOPs		MOBs		SHOPs
Net income (loss) attributable to common stockholders (in accordance with GAAP)	$	11,438	$	323	$	427	$	—	$	(298)	$	(341)	$	(32,308)	$	(20,759)
Operating fees to related parties	—		—		—		—		—		—		6,369		6,369
Acquisition and transaction related	—		—		—		—		—		—		148		148
General and administrative	26		—		—		—		—		—		4,305		4,331
Depreciation and amortization	12,082		7,863		495		—		32		96		—		20,568
Interest expense	21		332		—		—		—		—		18,350		18,703
Interest and other income	(1)		(266)		—		—		—		—		(46)		(313)
Gain on sale of real estate investments	—		(12)		—		—		260		58		—		306
Loss on non-designated derivative instruments	—		—		—		—		—		—		(286)		(286)
Income tax (benefit) expense	—		—		—		—		—		—		41		41
Allocation for preferred stock	—		—		—		—		—		—		3,449		3,449
Net loss attributable to non-controlling interests	—		—		—		—		—		—		(22)		(22)
NOI	$	23,566	$	8,240	$	922	$	—	$	(6)	$	(187)	$	—	$	32,535

The following table reflects the items deducted from or added to net loss attributable to stockholders in our calculation of Same Store Properties, Acquired Properties and Disposed Properties NOI for the three months ended June 30, 2022:

(In thousands)	Same Store				Acquisitions				Dispositions				Non-Property Specific		Total
	MOBs		SHOPs		MOBs		SHOPs		MOBs		SHOPs
Net income (loss) attributable to common stockholders (in accordance with GAAP)	$	11,623	$	(204)	$	48	$	—	$	(77)	$	(6,946)	$	(25,499)	$	(21,055)
Impairment charges	—		—		—		—		—		6,193		—		6,193
Operating fees to related parties	—		—		—		—		—		—		6,352		6,352
Acquisition and transaction related	76		—		—		—		—		—		299		375
General and administrative	22		3		—		—		—		—		3,974		3,999
Depreciation and amortization	12,381		7,597		30		—		31		212		—		20,251
Interest expense	8		238		—		—		—		—		11,804		12,050
Interest and other income	(1)		—		—		—		—		—		(1)		(2)
Gain on non-designated derivative instruments	—		—		—		—		—		—		(392)		(392)
Income tax (benefit) expense	—		—		—		—		—		—		43		43
Allocation for preferred stock	—		—		—		—		—		—		3,449		3,449
Net income attributable to non-controlling interests	—		—		—		—		—		—		(29)		(29)
NOI	$	24,109	$	7,634	$	78	$	—	$	(46)	$	(541)	$	—	$	31,234

Segment Results — Medical Office Buildings

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

	Same Store (1)					Acquisitions (2)					Dispositions (3)					Segment Total (4)
	Three Months Ended June 30,				Increase (Decrease)	Three Months Ended June 30,				Increase (Decrease)	Three Months Ended June 30,				Increase (Decrease)	Three Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2023		2022			2023		2022			2023		2022			2023		2022
Revenue from tenants	$	32,856	$	32,404		$	1,010	$	82		$	54	$	7		$	33,920	$	32,493
Less: Property operating and maintenance	9,290		8,295		995	88		4		84	60		53		7	9,438		8,352		1,086
NOI	$	23,566	$	24,109		$	922	$	78		$	(6)	$	(46)		$	24,482	$	24,141

All values are in US Dollars.

_______________

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

(2)Our MOB segment included nine Acquired Properties.

(3)Our MOB segment included one Disposed Property.

(4)Our MOB segment included 154 total properties.

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

Revenue from Tenants

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

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

Property Operating and Maintenance

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

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

Segment Results — Seniors Housing Operating Properties

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

	Same Store (1)					Acquisitions (2)					Dispositions (3)					Segment Total (4)
	Three Months Ended June 30,				Increase (Decrease)	Three Months Ended June 30,				Increase (Decrease)	Three Months Ended June 30,				Increase (Decrease)	Three Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2023		2022			2023		2022			2023		2022			2023		2022
Revenue from tenants	$	51,312	$	49,250		$	—	$	—		$	872	$	2,083		$	52,184	$	51,333
Less: Property operating and maintenance	43,072		41,616		1,456	—		—		—	1,059		2,624		(1,565)	44,131		44,240		(109)
NOI	$	8,240	$	7,634		$	—	$	—		$	(187)	$	(541)		$	8,053	$	7,093

All values are in US Dollars.

________

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

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

(3)Our SHOP segment included eight Disposed Properties.

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

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

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

Revenue from Tenants

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

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

Property Operating and Maintenance

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

Our Same Store properties operating and maintenance expenses increased in the quarter ended June 30, 2023 compared to the same period last year, primarily from increased amounts our third party operators pay for overtime wages and bonuses of $1.9 million, as well as overall inflation on utilities and supplies which increased our property maintenance and operating costs by $1.4 million. The three months ended June 30, 2022 also includes $0.2 million of funds received through the CARES Act, which serve to reduce property operating expenses in the period received. There were no such receipts from the CARES Act in the three months ended June 30, 2023. These increased costs were partially offset by a decrease in contract labor and agencies at our Same Store Properties of $2.0 million.

Other Results of Operations

Impairment Charges

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

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

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

Operating Fees to Related Parties

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

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

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

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

Acquisition and Transaction Related Expenses

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

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

General and Administrative Expenses

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

Depreciation and Amortization Expenses

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

Gains on Sale of Real Estate Investments

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

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

Interest Expense

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

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

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

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $0.3 million and $2,000 for the three months ended June 30, 2023 and 2022, respectively.

Gains (Losses) on Non-Designated Derivatives

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

Income Tax Expense

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

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

Net Loss Attributable to Non-Controlling Interests

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

Allocation for Preferred Stock Dividends

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

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

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

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

All values are in US Dollars.

Net Operating Income

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

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

The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store, Acquisitions and Dispositions NOI for the six months ended June 30, 2022:

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

Segment Results — Medical Office Buildings

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

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

All values are in US Dollars.

_______________

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

(2)Our MOB segment included nine Acquisition properties.

(3)Our MOB segment included one Disposition property.

(4)Our MOB segment included 154 properties.

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

Revenue from Tenants

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

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

Property Operating and Maintenance

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

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

Segment Results — Seniors Housing - Operating Properties

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

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

All values are in US Dollars.

_______________

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

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

(3) Our SHOP segment included eight Disposed Properties.

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

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

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

Revenue from Tenants

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

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

Property Operating and Maintenance

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

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

Other Results of Operations

Impairment Charges

We did not record any impairment charges during the six months ended June 30, 2023.

We recorded $16.8 million of impairment charges for the six months ended June 30, 2022. The impairment charges recorded during the six months ended June 30, 2022 related to (i) two SHOP properties for which we reconsidered our holding period and recorded impairment charges of $6.2 million, which were disposed in the six months ended June 30, 2023 and (ii) seven SNF properties in our MOB segment located in Illinois for which we reduced the carrying values on these properties to their estimated fair values as determined by a tenant’s $50.5 million offer to purchase these properties and recorded impairment charges of $10.6 million.

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

Operating Fees to Related Parties

Operating fees to related parties were $12.8 million and $12.7 million for the six months ended June 30, 2023 and 2022, respectively.

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis (see — Results of Operations — Comparison of the Three Months Ended June 30, 2023 and 2022 for additional information). Asset management fees were $10.9 million and $10.9 million for the six months ended June 30, 2023 and 2022, respectively. Variable asset management fees will further increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the six months ended June 30, 2023 or 2022.

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

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

Acquisition and Transaction Related Expenses

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

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

General and Administrative Expenses

General and administrative expenses increased $0.5 million to $9.4 million for the six months ended June 30, 2023 compared to $8.9 million for the six months ended June 30, 2022, which includes $4.8 million and $4.4 million for the six months ended June 30, 2023 and 2022, respectively, incurred in expense reimbursements.

Depreciation and Amortization Expenses

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

Gain (Loss) on Sale of Real Estate Investments

During the six months ended June 30, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of the SHOPs were impaired by $6.2 million in the six months ended June 30, 2022 (see above). As a result, we recorded an aggregate loss of $0.2 million in the six months ended June 30, 2023.

We recorded a loss on sale of $0.3 million for the six months ended June 30, 2022 for the sale of the LaSalle properties. We had previously recorded $34.0 million of impairment charges on the LaSalle Properties in the year ended December 31, 2021.

Interest Expense

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

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

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

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $0.3 million for the six months ended June 30, 2023 and approximately $14,000 for the six months ended June 30, 2022.

Gain (Loss) on Non-Designated Derivatives

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

Income Tax Benefit (Expense)

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

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

Net Loss (Income) Attributable to Non-Controlling Interests

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

Allocation for Preferred Stock

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

Cash Flows from Operating Activities

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

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

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

Cash Flows from Investing Activities

Net cash used in investing activities during the six months ended June 30, 2023 was $34.4 million. The cash used in investing activities included $25.4 million for the acquisition of five properties, $9.1 million in capital expenditures and $4.6 million in non-designated interest rate cap investments. These outflows were partially offset by $4.8 million of proceeds from real estate dispositions.

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

Cash Flows from Financing Activities

Net cash provided by financing activities during the six months ended June 30, 2023 was $52.7 million. Cash inflows consisted of (i) proceeds from mortgage notes payable of $240.0 million, (ii) proceeds from borrowings under our Revolving Credit Facility of $20.0 million, (iii) proceeds from terminated “pay-fixed” interest rate swaps of $5.4 million and (iv) contributions from non-controlling interests of $0.3 million. Cash outflows consisted of (i) payments our credit facilities of $197.7 million, (ii) payments for deferred financing costs of $7.8 million, (iii) dividends paid to holders of Series A Preferred Stock of $3.7 million, (iv) dividends paid to holders of Series B Preferred Stock of $3.2 million, (v) principal payments on our mortgages of $0.6 million and (vi) distributions to our non-controlling interests of $0.1 million.

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

Liquidity and Capital Resources

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

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

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

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

Financings

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

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

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

As of June 30, 2023, we had total gross borrowings of $1.2 billion, at a weighted-average interest rate of 5.49%. The weighted-average interest rates in both periods include the impact of “pay-fixed” swaps that are designated as hedging instruments on a portion of our variable-rate debt, but does not include the impact of our non-designated interest rate caps.

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

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

Mortgage Notes Payable

As of June 30, 2023, we had $822.0 million in mortgage notes payable outstanding. Future scheduled principal payments on our mortgage notes payable for the remainder of 2023 and 2024 are $0.6 million and $1.2 million, respectively.

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

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

Prior Credit Facility

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

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

Fannie Mae Master Credit Facilities

As of June 30, 2023, $349.2 million was outstanding under the Fannie Mae Master Credit Facilities. We may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. We do not expect to draw any further amounts on the Fannie Mae Master Credit Facilities. Borrowings under the Fannie Mae Master Credit Facilities bear annual interest at a rate that varies on a monthly basis and is equal to the sum of the current LIBOR for one month U.S. dollar-denominated deposits and a spread (2.41% and 2.46% for the Capitol One Facility and the KeyBank Facility, respectively) with a combined floor of 2.62%. The Fannie Mae Master Credit Facilities mature on November 1, 2026. Future scheduled principal payments on our Fannie Mae Master Credit Facilities for the remainder of 2023 and 2024 are $2.9 million and $5.8 million, respectively.

Subsequent to June 30, 2023, we provided a $5.1 million cash deposit to Key Bank and Capital One. This deposit was provided because the debt service coverage ratios of the underlying properties of each facility were below those of the minimum required amounts per the debt agreements. This deposit will be refunded if we achieve debt service coverage ratios above those of the minimum required amounts.

Capital Expenditures

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

Acquisitions — Three and Six Months Ended June 30, 2023

During the six months ended June 30, 2023, we acquired five single-tenant MOBs for an aggregate contract purchase price of $25.2 million. These acquisitions were funded with $20.0 million of borrowings from our Prior Credit Facility and the remainder with cash on hand.

Acquisitions — Subsequent to June 30, 2023

We have not acquired any properties subsequent to June 30, 2023. However, we have entered into one non-binding letter of intent to acquire two MOBs for a contract purchase price of $9.8 million. There can be no assurance that the acquisition of these properties will be completed on its contemplated terms, or at all.

Dispositions — Three and Six Months Ended June 30, 2023

During the three and six months ended June 30, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Pursuant to the terms of the Prior Credit Facility, $5.2 million of net proceeds were used to repay amounts then outstanding, and $2.7 million of net proceeds were used to partially repay the Multi-Property CMBS Loan mortgage note.

Dispositions — Subsequent to June 30, 2023

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

Share Repurchase Program

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

Non-GAAP Financial Measures

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

Funds from Operations and Modified Funds from Operations

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

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

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

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

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

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

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

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

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

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

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

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Net loss attributable to common stockholders (in accordance with GAAP)	$	(20,759)	$	(21,055)	$	(38,268)	$	(47,856)
Depreciation and amortization (1)	19,915		19,896		39,523		39,947
Impairment charges	—		6,193		—		16,837
Loss on sale of real estate investment	306		—		191		303
Adjustments for non-controlling interests (3)	(108)		(117)		(201)		(262)
FFO (as defined by NAREIT) attributable to stockholders	(646)		4,917		1,245		8,969
Acquisition and transaction related	148		375		211		954
Accretion of market lease and other intangibles, net	(260)		(123)		(471)		(245)
Straight-line rent adjustments	(388)		(664)		(605)		(1,053)
Amortization (accretion) of mortgage premiums and discounts, net	23		(102)		46		5
Gain on non-designated derivatives	(286)		(392)		(104)		(1,386)
Cash received from non-designated derivative instruments	1,375		—		2,301		—
Deferred tax asset valuation allowance (2)	283		587		991		1,142
Adjustments for non-controlling interests (3)	19		1		14		5
MFFO attributable to stockholders	$	268	$	4,599	$	3,628	$	8,391

_______

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

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

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

Dividends and Other Distributions

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

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

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

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

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

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

	Three Months Ended						Year-To-Date
	March 31, 2023			June 30, 2023				June 30, 2023
(In thousands)	Amounts		Percentage of Distributions	Amounts		Percentage of Distributions			Amounts		Percentage of Distributions
Distributions:
Dividends to holders of Series A Preferred Stock	$	1,832	52.4%	$	1,834	52.5%			$	3,666	52.5%
Dividends to holders of Series B Preferred Stock	1,616		46.3%	1,617		46.2%			3,233		46.2%
Distributions paid to holders of Series A Preferred Units	46		1.3%	46		1.3%			92		1.3%
Total cash distributions	$	3,494	100.0%	$	3,497	100.0%			$	6,991	100.0%
Source of distribution coverage:
Cash flows provided by operations (1)	$	3,494	100.0%	$	3,497	100.0%			$	6,991	100.0%
Available cash on hand	—		—%	—		—%			—		—%
Total source of distribution coverage	$	3,494	100.0%	$	3,497	100.0%			$	6,991	100.0%
Cash flows provided by operations (in accordance with GAAP)	$	4,989		$	5,688				$	10,677
Net loss (in accordance with GAAP)	$	(14,068)		$	(3,264)				$	(17,332)

______

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

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

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

Election as a REIT

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

Inflation

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

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

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

Related-Party Transactions and Agreements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

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

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Effective August 9, 2023, our Board approved the Second Amended and Restated Bylaws. The revisions to the Second Amended and Restated Bylaws include changes to, among other things, Article II, Section 11 to address procedural issues related to the new universal proxy rules of Rule 14a-19 under the Exchange Act of 1934, including (i) requiring representations and notifications regarding compliance with the requirements of Rule 14a-19, (ii) prohibiting additional or substitute nominations following the expiration of the nomination period, (iii) designating the white proxy card for exclusive use by the Board of the Company, and (iv) updating other requirements for valid nominations and clarifying the treatment of defective nominations.

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

Table of Contents

Item 6. Exhibits.

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

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

______

*    Filed herewith.

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

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

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

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

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

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

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

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

HEALTHCARE TRUST, INC.
By:	/s/ Edward M. Weil, Jr.
	Edward M. Weil, Jr.
	Chief Executive Officer and President<br>(Principal Executive Officer)
By:	/s/ Scott M. Lappetito
	Scott M. Lappetito
	Chief Financial Officer, Treasurer and Secretary<br>(Principal Financial Officer and Principal Accounting Officer)

Dated: August 11, 2023

68

Document

EXHIBIT 3.2

HEALTHCARE TRUST, INC.

SECOND AMENDED AND RESTATED BYLAWS

ARTICLE I

OFFICES

Section 1.    PRINCIPAL OFFICE. The principal office of the Corporation in the State of Maryland shall be located at such place as the Board of Directors may from time to time designate.

Section 2.    ADDITIONAL OFFICES. The Corporation may have additional offices, including a principal executive office, at such places as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1.    PLACE. All meetings of stockholders shall be held at the principal executive office of the Corporation or at such other place as shall be set in accordance with these Bylaws and stated in the notice of the meeting. The Board of Directors may determine that a meeting not be held at any place, but instead may be held partially or solely by means of remote communication. In accordance with these Bylaws and subject to any guidelines and procedures adopted by the Board of Directors, stockholders and proxy holders may participate in any meeting of stockholders held by means of remote communication and may vote at such meeting as permitted by Maryland law. Participation in a meeting by these means constitutes presence in person at the meeting.

Section 2.    ANNUAL MEETING. An annual meeting of stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on the date and at the time and place set by the Board of Directors.

Section 3.    SPECIAL MEETINGS.

(a)    General. Each of the chairman of the board, chief executive officer, president and Board of Directors may call a special meeting of stockholders. Except as provided in subsection (b)(4) of this Section 3, a special meeting of stockholders shall be held on the date and at the time and place set by the chairman of the board, chief executive officer, president or Board of Directors, whoever has called the meeting. Subject to subsection (b) of this Section 3, a special meeting of stockholders shall also be called by the secretary of the Corporation to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting.

(b)    Stockholder-Requested Special Meetings.

(1)    Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the secretary (the “Record Date Request Notice”) by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the “Request Record Date”).

The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more stockholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such stockholder (or such agent) and shall set forth all information relating to each such stockholder and each matter proposed to be acted on at the meeting that would be required to be disclosed in connection with the solicitation of proxies for the election of directors in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”). Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which a Record Date Request Notice is received by the secretary.

(2)    In order for any stockholder to request a special meeting to act on any matter that may properly be considered at a meeting of stockholders, one or more written requests for a special meeting (collectively, the “Special Meeting Request”) signed by stockholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority of all of the votes entitled to be cast on such matter at such meeting (the “Special Meeting Percentage”) shall be delivered to the secretary. In addition, the Special Meeting Request shall (a) set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the secretary), (b) bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, (c) set forth (i) the name and address, as they appear in the Corporation’s books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed), (ii) the class, series and number of all shares of stock of the Corporation which are owned (beneficially or of record) by each such stockholder and (iii) the nominee holder for, and number of, shares of stock of the Corporation owned beneficially but not of record by such stockholder, (d) be sent to the secretary by registered mail, return receipt requested, and (e) be received by the secretary within 60 days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the secretary.

(3)    The secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing or delivering the notice of the meeting (including the Corporation’s proxy materials). The secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Section 3(b), the secretary receives payment of such reasonably estimated cost prior to the preparation and mailing or delivery of such notice of the meeting.

(4)    In the case of any special meeting called by the secretary upon the request of stockholders (a “Stockholder-Requested Meeting”), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any Stockholder-Requested Meeting shall be not more than ninety (90) days after the record date for such meeting (the “Meeting Record Date”); and provided further that if the Board of Directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the secretary (the “Delivery Date”), a date and time for a Stockholder-Requested Meeting, then such meeting shall be held at 2:00 p.m., local time, on the 90th day after the Meeting Record Date or, if such 90th day is not a Business Day (as defined below), on the

first preceding Business Day; and provided further that in the event that the Board of Directors fails to designate a place for a Stockholder-Requested Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for a Stockholder-Requested Meeting, the Board of Directors may consider such factors as it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or a special meeting. In the case of any Stockholder-Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within thirty (30) days after the Delivery Date, then the close of business on the 30th day after the Delivery Date shall be the Meeting Record Date. The Board of Directors may revoke the notice for any Stockholder-Requested Meeting in the event that the requesting stockholders fail to comply with the provisions of paragraph (3) of this Section 3(b).

(5)    If written revocations of the Special Meeting Request have been delivered to the secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting on the matter to the secretary: (i) if the notice of meeting has not already been delivered, the secretary shall refrain from delivering the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for a special meeting on the matter, or (ii) if the notice of meeting has been delivered and if the secretary first sends to all requesting stockholders who have not revoked requests for a special meeting on the matter written notice of any revocation of a request for the special meeting and written notice of the Corporation’s intention to revoke the notice of the meeting or for the chairman of the meeting to adjourn the meeting without action on the matter, (A) the secretary may revoke the notice of the meeting at any time before ten days before the commencement of the meeting or (B) the chairman of the meeting may call the meeting to order and adjourn the meeting from time to time without acting on the matter. Any request for a special meeting received after a revocation by the secretary of a notice of a meeting shall be considered a request for a new special meeting.

(6)    The chairman of the board, chief executive officer, president or Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the secretary. For the purpose of permitting the inspectors to perform such review, no such purported Special Meeting Request shall be deemed to have been received by the secretary until the earlier of (i) five Business Days after actual receipt by the secretary of such purported request and (ii) such date as the independent inspectors certify to the Corporation that the valid requests received by the secretary represent, as of the Request Record Date, stockholders of record entitled to cast not less than the Special Meeting Percentage. Nothing contained in this paragraph (6) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

(7)    For purposes of these Bylaws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

Section 4.    NOTICE. Not less than ten (10) nor more than ninety (90) days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting notice in writing or by electronic transmission stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for

which the meeting is called, by mail, by presenting it to such stockholder personally, by leaving it at the stockholder’s residence or usual place of business, by electronic transmission or by any other means permitted by Maryland law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder’s address as it appears on the records of the Corporation, with postage thereon prepaid. If transmitted electronically, such notice shall be deemed to be given when transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. The Corporation may give a single notice to all stockholders who share an address, which single notice shall be effective as to any stockholder at such address, unless such stockholder objects to receiving such single notice or revokes a prior consent to receiving such single notice. Failure to give notice of any meeting to one or more stockholders, or any irregularity in such notice, shall not affect the validity of any meeting fixed in accordance with this Article II or the validity of any proceedings at any such meeting.

Subject to Section 11(a) of this Article II, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice. The Corporation may postpone or cancel a meeting of stockholders by making a public announcement (as defined in Section 11(c)(4) of this Article II) of such postponement or cancellation prior to the meeting. Notice of the date, time and place to which the meeting is postponed shall be given not less than ten (10) days prior to such date and otherwise in the manner set forth in this Section 4.

Section 5.     ORGANIZATION AND CONDUCT. Every meeting of stockholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment or appointed individual, by the chairman of the board or, in the case of a vacancy in the office or absence of the chairman of the board, by one of the following individuals present at the meeting in the following order: the vice chairman of the board, if there is one, the chief executive officer, the president, the vice presidents in their order of rank and, within each rank, in their order of seniority, the secretary or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy. The secretary or, in the case of a vacancy in the office or absence of the secretary, an assistant secretary or, in the absence of both the secretary and all assistant secretaries, an individual appointed by the Board of Directors or, in the absence of such appointment or appointed individuals, an individual appointed by the chairman of the meeting shall act as secretary. In the event that the secretary presides at a meeting of stockholders, an assistant secretary or, in the absence of all assistant secretaries, an individual appointed by the Board of Directors or the chairman of the meeting, shall record the minutes of the meeting. Even if present at the meeting, the individual holding the office named herein may delegate to another individual the power to act as chair or secretary of the meeting. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of the chairman and without any action by the stockholders, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance or participation at the meeting to stockholders of record of the Corporation, their duly authorized proxies and such other individuals as the chairman of the meeting may determine; (c) recognizing speakers at the meeting and determining when and how long speakers and any individual speaker may address the meeting; (d) determining when and for how long the polls should be opened and when the polls should be closed and when announcement of the results should be made; (e) maintaining order and security at the meeting; (f) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (g) concluding a meeting or recessing or

adjourning the meeting, whether or not a quorum is present, to a later date and time and at a place either (i) announced at the meeting or (ii) provided at a future time through means announced at the meeting; and (h) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with any rules of parliamentary procedure.

Section 6.     QUORUM. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter shall constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the Corporation (the “Charter”) for the vote necessary for the approval of any matter. If such quorum is not established at any meeting of the stockholders, the chairman of the meeting may adjourn the meeting sine die or from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. The date, time and place of the meeting, as reconvened, shall be either (a) announced at the meeting or (b) provided at a future time through means announced at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

The stockholders present either in person or by proxy, at a meeting which has been duly called and at which a quorum has been established, may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough stockholders to leave fewer than would be required to establish a quorum.

Section 7.    VOTING. A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the holder is entitled to vote. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Charter. Unless otherwise provided by statute or by the Charter, each outstanding share of stock, regardless of class, entitles the holder thereof to cast one (1) vote on each matter submitted to a vote at a meeting of stockholders. Voting on any question or in any election may be viva voce unless the chairman of the meeting shall order that voting be by ballot or otherwise.

Section 8.    PROXIES. A holder of record of shares of stock of the Corporation may cast votes in person or by proxy that is (a) executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by applicable law, (b) compliant with Maryland law and these Bylaws and (c) filed in accordance with the procedures established by the Corporation. Such proxy or evidence of authorization of such proxy shall be filed with the record of the proceedings of the meeting. No proxy shall be valid more than eleven (11) months after its date unless otherwise provided in the proxy.

Any stockholder directly or indirectly soliciting proxies from other stockholders must use a proxy card color other than white, which shall be reserved for the exclusive use by the Board of Directors.

Section 9.    VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation registered in the name of a corporation, limited liability company, partnership, joint venture, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, managing member, manager, general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation

or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any trustee or fiduciary, in such capacity, may vote stock registered in such trustee’s or fiduciary’s name, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date, the time after the record date within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or appropriate. On receipt by the secretary of the Corporation of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification.

Section 10.    INSPECTORS. The Board of Directors or the chairman of the meeting may appoint, before or at the meeting, one or more inspectors for the meeting and any successor to the inspector. Except as otherwise provided by the chairman of the meeting, the inspectors, if any, shall (i) determine the number of shares of stock represented at the meeting, in person or by proxy, and the validity and effect of proxies, (ii) receive and tabulate all votes, ballots or consents, (iii) report such tabulation to the chairman of the meeting, (iv) hear and determine all challenges and questions arising in connection with the right to vote, and (v) do such acts as are proper to fairly conduct the election or vote. Each such report shall be in writing and signed by the inspector or by a majority of them if there is more than one (1) inspector acting at such meeting. If there is more than one (1) inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 11.    ADVANCE NOTICE OF STOCKHOLDER NOMINEES FOR DIRECTOR AND OTHER STOCKHOLDER PROPOSALS.

(a)    Annual Meetings of Stockholders.

(1)    Nominations of individuals for election to the Board of Directors and proposals of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record at the record date set by the Board of Directors for the purpose of determining stockholders entitled to vote at the annual meeting, at the time of giving of notice by the stockholder as provided for in this Section 11(a) and at the time of the annual meeting (and any postponement or adjournment thereof), who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with this Section 11(a).

(2)    For any nomination or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 11,

the stockholder must have given timely notice thereof in writing to the secretary of the Corporation and any such other business must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder’s notice shall set forth all information and representations required under this Section 11 and shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement (as defined in Section 11(c)(4) of this Article II) for the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced or delayed by more than thirty (30) days from the first anniversary of the date of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 150th day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of such annual meeting, as originally convened, or the tenth day following the day on which public announcement of the date of such meeting is first made. The postponement or adjournment of an annual meeting (or the public announcement thereof) shall not commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(3)    Such stockholder’s notice shall set forth:

(i)    as to each individual whom the stockholder proposes to nominate for election or reelection as a director (each, a “Proposed Nominee”), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act (including the Proposed Nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected);

(ii)    as to any other business that the stockholder proposes to bring before the meeting, (A) a description of such business (including the text of any proposal) , the stockholder’s reasons for proposing such business at the meeting and any material interest in such business of such stockholder or any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder or the Stockholder Associated Person therefrom and (B) any other information relating to such business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Regulation 14A (or any successor provision) of the Exchange Act;

(iii)    as to the stockholder giving the notice, any Proposed Nominee and any Stockholder Associated Person,

(A)    the class, series and number of all shares of stock or other securities of the Corporation or any affiliate thereof (collectively, the “Company Securities”), if any, which are owned (beneficially or of record) by such stockholder, Proposed Nominee or Stockholder Associated Person, the date on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person,

(B)    the nominee holder for, and number of, any Company Securities owned beneficially but not of record by such stockholder, Proposed Nominee or Stockholder Associated Person,

(C)    whether and the extent to which such stockholder, Proposed Nominee or Stockholder Associated Person, directly or indirectly (through brokers, nominees or otherwise), is subject to or during the last six (6) months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (I) manage risk or benefit of changes in the price of (x) Company Securities or (y) any security of any entity that was listed in the Peer Group in the Stock Performance Graph in the most recent annual report to security holders of the Corporation (a “Peer Group Company”) for such stockholder, Proposed Nominee or Stockholder Associated Person or (II) increase or decrease the voting power of such stockholder, Proposed Nominee or Stockholder Associated Person in the Corporation or any affiliate thereof (or, as applicable, in any Peer Group Company) disproportionately to such person’s economic interest in the Company Securities (or, as applicable, in any Peer Group Company) and

(D)    any substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Corporation), by security holdings or otherwise, of such stockholder, Proposed Nominee or Stockholder Associated Person, in the Corporation or any affiliate thereof, other than an interest arising from the ownership of Company Securities where such stockholder, Proposed Nominee or Stockholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series;

(iv)    as to the stockholder giving the notice, any Stockholder Associated Person with an interest or ownership referred to in clauses (ii) or (iii) of this paragraph (3) of this Section 11(a) and any Proposed Nominee,

(A)    the name and address of such stockholder, as they appear on the Corporation’s stock ledger, and the current name and address, if different, of each such Stockholder Associated Person and any Proposed Nominee and

(B)    the investment strategy or objective, if any, of such stockholder and each such Stockholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such stockholder and each such Stockholder Associated Person;

(v)    the name and address of any person who contacted or was contacted by the stockholder giving the notice or any Stockholder Associated Person about the Proposed Nominee or other business proposal;

(vi)    to the extent known by the stockholder giving the notice, the name and address of any other person supporting the nominee for election or reelection as a director or the proposal of other business;

(vii) if the stockholder is proposing one or more Proposed Nominees, a representation that such stockholder, any Proposed Nominee or any Stockholder Associated Person intends or is part of a group which intends to solicit the holders of shares of stock of the Corporation representing at least 67% of the voting power of shares of stock entitled to vote on the election of directors in support of each Proposed Nominee in accordance with Rule 14a-19 of the Exchange Act; and

(viii) all other information regarding the stockholder giving the notice and each Stockholder Associated Person that would be required to be disclosed by the stockholder in connection with the solicitation of proxies for the election of directors in an election contest (even if an election contest is not involved), or would otherwise be required in connection with

such a solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act.

(4)    Such stockholder’s notice shall, with respect to any Proposed Nominee, be accompanied by :

(i) a written representation executed by the Proposed Nominee

(A) that such Proposed Nominee (I) is not, and will not become, a party to any agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director that has not been disclosed to the Corporation, (II) consents to be named in a proxy statement as a nominee, (III) consents to serve as a director of the Corporation if elected (IV) will notify the Corporation simultaneously with the notification to any stockholder of the Proposed Nominee’s actual or potential unwillingness or inability to serve as a director and (V) does not need any permission or consent from any third party (including any employer or any other board or governing body on which such Proposed Nominee serves) to serve as a director of the Corporation, if elected, that has not been obtained,

(B) attaching copies of any and all requisite permissions or consents and

(C) attaching a completed Proposed Nominee questionnaire (which questionnaire shall be provided by the Corporation, upon request, to the stockholder providing the notice, and shall include all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder, or would be required pursuant to the rules of any national securities exchange on which any securities of the Corporation are listed or over-the-counter market on which any securities of the Corporation are traded) and

(ii) a written representation executed by the stockholder that such stockholder will:

(A) comply with Rule 14a-19 promulgated under the Exchange Act in connection with such stockholder’s solicitation of proxies in support of any Proposed Nominee,

(B) notify the Corporation as promptly as practicable of any determination by the stockholder to no longer solicit proxies for the election of any Proposed Nominee as a director at the annual meeting,

(C) furnish such other or additional information as the Corporation may request for the purpose of determining whether the requirements of this Section 11 have been satisfied or of evaluating any nomination or other business described in the stockholder’s notice and

(D) appear in person or by proxy at the meeting to present each Proposed Nominee or to bring such business before the meeting, as applicable, and acknowledging that if the stockholder does not so appear in person or by proxy at the meeting to present each Proposed Nominee or bring such business before the meeting, as applicable, the Corporation need not bring such Proposed Nominee or such business for a vote at such meeting

and any proxies or votes cast in favor of the election of any Proposed Nominee or any proposal related to such other business need not be counted or considered.

(5)    Notwithstanding anything in this subsection (a) of this Section 11 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased, and there is no public announcement of such action at least 130 days prior to the first anniversary of the date of the proxy statement (as defined in Section 11(c)(4) of this Article II) for the preceding year’s annual meeting, a stockholder’s notice required by clause (iii) of paragraph (a)(1) of this Section 11 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive office of the Corporation not later than 5:00 p.m., Eastern Time, on the tenth day following the day on which such public announcement is first made by the Corporation.

(6)    For purposes of this Section 11, “Stockholder Associated Person” of any stockholder shall mean (i) any person acting in concert with such stockholder or another Stockholder Associated Person or who is otherwise a participant (as defined in Instruction 3 to Item 4 of Schedule 14A under the Exchange Act) in any solicitation of proxies, (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder (other than a stockholder that is a depositary) and (iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such stockholder or such Stockholder Associated Person.

(b)    Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. No stockholder may make a proposal of other business to be considered at a special meeting or, except as contemplated by and in accordance with the next two sentences of this Section 11(b), nominate an individual for election to the Board of Directors at a special meeting. Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) provided that the special meeting has been called in accordance with Section 3(a) of this Article II for the purpose of electing directors, by any stockholder of the Corporation who is a stockholder of record at the record date set by the Board of Directors for the purpose of determining stockholders entitled to vote at the special meeting, at the time of giving of notice provided for in this Section 11 and at the time of the special meeting (and any postponement or adjournment thereof), who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the notice procedures set forth in this Section 11. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one (1) or more individuals to the Board of Directors, any stockholder may nominate an individual or individuals (as the case may be) for election as a director as specified in the Corporation’s notice of meeting, if the stockholder’s notice, containing the information and representations required by paragraphs (a)(3) and (4) of this Section 11, is delivered to the secretary at the principal executive office of the Corporation not earlier than the 120th day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting. The postponement or adjournment of a special meeting (or a public announcement thereof) shall not commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(c)    General.

(1)    If any information or representation submitted pursuant to this Section 11 by any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders, including any information or representation from a Proposed

Nominee, shall be inaccurate in any material respect, such information or representation may be deemed not to have been provided in accordance with this Section 11. Any such stockholder shall notify the Corporation of any inaccuracy or change (within two (2) Business Days of becoming aware of such inaccuracy or change) in any such information or representation. Upon written request by the secretary or the Board of Directors, any stockholder or Proposed Nominee shall provide, within five (5) Business Days of delivery of such request (or such other period as may be specified in such request), (A) written verification, satisfactory, in the discretion of the Board of Directors or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 11, (B) a written update of any information (including, if requested by the Corporation, written confirmation by such stockholder that it continues to intend to bring such nomination or other business proposal before the meeting and, if applicable, satisfy the requirements of Rule 14a-19(a)(3) under the Exchange Act) submitted by the stockholder pursuant to this Section 11 as of an earlier date and (C) an updated representation by each Proposed Nominee that such individual will serve as a director of the Corporation if elected. If a stockholder or Proposed Nominee fails to provide such written verification, update or representation within such period, the information as to which such written verification, update or representation was requested may be deemed not to have been provided in accordance with this Section 11.

(2)    Only such individuals who are nominated in accordance with this Section 11 shall be eligible for election by stockholders as directors, and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with this Section 11. A stockholder proposing a Proposed Nominee shall have no right to (i) nominate a number of Proposed Nominees that exceeds the number of directors to be elected at the meeting or (ii) substitute or replace any Proposed Nominee unless such substitute or replacement is nominated in accordance with this Section 11 (including the timely provision of all information and representations with respect to such substitute or replacement Proposed Nominee in accordance with the deadlines set forth in this Section 11). If the Corporation provides notice to a stockholder that the number of Proposed Nominees proposed by such stockholder exceeds the number of directors to be elected at a meeting, the stockholder must provide written notice to the Corporation within five Business Days stating the names of the Proposed Nominees that have been withdrawn so that the number of Proposed Nominees proposed by such stockholder no longer exceeds the number of directors to be elected at a meeting. If any individual who is nominated in accordance with this Section 11 becomes unwilling or unable to serve on the Board of Directors, then the nomination with respect to such individual shall no longer be valid and no votes may validly be cast for such individual. The chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 11.

(3)    Notwithstanding the foregoing provisions of this Section 11, the Corporation shall disregard any proxy authority granted in favor of, or votes for, director nominees other than the Corporation’s nominees if the stockholder or Stockholder Associated Person (each, a “Soliciting Stockholder”) soliciting proxies in support of such director nominees abandons the solicitation or does not (i) comply with Rule 14a-19 promulgated under the Exchange Act, including any failure by the Soliciting Stockholder to (A) provide the Corporation with any notices required thereunder in a timely manner or (B) comply with the requirements of Rule 14a-19(a)(2) and Rule 14a-19(a)(3) promulgated under the Exchange Act, or (ii) timely provide evidence in accordance with the following sentence that is sufficient, in the discretion of the Board of Directors, to demonstrate that such Soliciting Stockholder has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act. Upon request by the Corporation, such Soliciting Stockholder shall deliver to the Corporation, no later than five Business Days prior to the applicable meeting of stockholders, evidence that is sufficient, in the discretion of the Board

of Directors, to demonstrate that such Soliciting Stockholder has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act.

(4) For purposes of this Section 11, “the date of the proxy statement” shall have the same meaning as “the date of the company’s proxy statement released to shareholders” as used in Rule 14a-8(e) promulgated under the Exchange Act, as interpreted by the United States Securities and Exchange Commission from time to time. “Public announcement” shall mean disclosure in (i) a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or other widely circulated news or wire service or (ii) a document publicly filed by the Corporation with the United States Securities and Exchange Commission pursuant to the Exchange Act.

(5)    Notwithstanding the foregoing provisions of this Section 11, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act with respect to the matters set forth in this Section 11. Nothing in this Section 11 shall be deemed to affect any right of a stockholder to request inclusion of a proposal in, or the right of the Corporation to omit a proposal from, any proxy statement filed by the Corporation with the United States Securities and Exchange Commission pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act. Nothing in this Section 11 shall require disclosure of revocable proxies received by, or routine solicitation contacts made by or on behalf of, the stockholder or Stockholder Associated Person pursuant to a solicitation of proxies after the filing of a definitive proxy statement on Schedule 14A by such stockholder or Stockholder Associated Person.

(6)    Notwithstanding anything in these Bylaws to the contrary, except as otherwise determined by the chairman of the meeting, if the stockholder giving notice as provided for in this Section 11 does not appear in person or by proxy at such annual or special meeting to present each nominee for election as a director or the proposed business, as applicable, such matter shall not be considered at the meeting.

Section 12.    STOCKHOLDERS’ CONSENT IN LIEU OF MEETING. Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if a unanimous consent setting forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter and filed with the minutes of proceedings of the stockholders.

Section 13.    CONTROL SHARE ACQUISITION ACT. Notwithstanding any other provision of the Charter or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law (the “MGCL”) (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

ARTICLE III

DIRECTORS

Section 1.    GENERAL POWERS. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors.

Section 2.    NUMBER, TENURE, QUALIFICATION AND RESIGNATION. A majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than the minimum number required by the MGCL, nor more than fifteen (15), and further provided that the tenure of office of a director

shall not be affected by any decrease in the number of directors. At any time that the number of directors comprising the board is less than five, one director shall be a managing director, as defined in this section. At any time that the number of directors comprising the Board of Directors is five or more, up to two directors shall be managing directors; provided, however, that if only one managing director is identified by the Corporation’s advisor (currently Healthcare Trust Advisors, LLC) (the “Advisor”), the Board of Directors will include one managing director. If at any time the Board of Directors does not include the number of managing directors required under this section, the Board of Directors shall take all action necessary to cure such condition. To qualify for nomination or election as a director, an individual at the time of nomination and election shall meet the qualifications of an independent director or a managing director, as the case may be, depending on the position for which such individual may be nominated or elected. An “independent director” shall mean an individual who meets the qualifications of an independent director set forth in the Exchange Act and applicable SEC rules, as amended from time to time. A “managing director” shall mean an individual identified by the Advisor or, in the absence of such identification, the individual then serving as the chief executive officer of the Corporation shall constitute a managing director. Any director of the Corporation may resign at any time by delivering his or her resignation to the Board of Directors, the chairman of the board or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation.

Section 3.    ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of Directors may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. The Board of Directors may provide, by resolution, the time and place of regular meetings of the Board of Directors without other notice than such resolution.

Section 4.    SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the chairman of the board, the chief executive officer, the president or a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the time and place of any special meeting of the Board of Directors called by them. The Board of Directors may provide, by resolution, the time and place of special meetings of the Board of Directors without other notice than such resolution.

Section 5.    NOTICE. Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, courier or United States mail to each director at his or her business or residence address. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least twenty-four (24) hours prior to the meeting. Notice by United States mail shall be given at least three (3) days prior to the meeting. Notice by courier shall be given at least two (2) days prior to the meeting. Telephone notice shall be deemed to be given when the director or his or her agent is personally given such notice in a telephone call to which the director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 6.    QUORUM. A majority of the directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such directors is present at such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to applicable law, the Charter or these Bylaws, the vote of a majority or other percentage of a specified group of directors is required for action, a quorum must also include a majority or such other percentage of such group.

The directors present at a meeting which has been duly called and at which a quorum has been established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough directors to leave fewer than required to establish a quorum.

Section 7.    VOTING. The action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these Bylaws. If enough directors have withdrawn from a meeting to leave fewer than required to establish a quorum but the meeting is not adjourned, the action of the majority of that number of directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these Bylaws.

Section 8.    ORGANIZATION. At each meeting of the Board of Directors, the chairman of the board or, in the absence of the chairman, the vice chairman of the board, if any, shall act as chairman of the meeting. Even if present at the meeting, such director may designate another director to act as chairman of the meeting. In the absence of both the chairman and vice chairman of the board, the chief executive officer or, in the absence of the chief executive officer, the president or, in the absence of the president, a director chosen by a majority of the directors present shall act as chairman of the meeting. The secretary or, in his or her absence, an assistant secretary of the Corporation or, in the absence of the secretary and all assistant secretaries, an individual appointed by the chairman of the meeting shall act as secretary of the meeting.

Section 9.     MEETINGS BY REMOTE COMMUNICATION. Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 10.    CONSENT BY DIRECTORS WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each director and is filed with the minutes of proceedings of the Board of Directors.

Section 11.    VACANCIES. If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder. Except as may be provided by the Board of Directors in setting the terms of any class or series of preferred stock, any vacancy on the Board of Directors may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum. Any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies.

Section 12.     COMPENSATION. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the

Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they perform or engage in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor.

Section 13.    RELIANCE. Each director and officer of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by an officer or employee of the Corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented, by a lawyer, certified public accountant or other person, as to a matter which the director or officer reasonably believes to be within the person’s professional or expert competence, or with respect to a director, by a committee of the Board of Directors on which the director does not serve, as to a matter within its designated authority, if the director reasonably believes the committee to merit confidence.

Section 14.    RATIFICATION. The Board of Directors or the stockholders may ratify any act, omission, failure to act or determination made not to act (an “Act”) by the Corporation or its officers to the extent that the Board of Directors or the stockholders could have originally authorized the Act and, if so ratified, such Act shall have the same force and effect as if originally duly authorized, and such ratification shall be binding upon the Corporation and its stockholders. Any Act questioned in any proceeding on the ground of lack of authority, defective or irregular execution, adverse interest of a director, officer or stockholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise may be ratified, before or after judgment, by the Board of Directors or by the stockholders, and such ratification shall constitute a bar to any claim or execution of any judgment in respect of such questioned Act.

Section 15.    CERTAIN RIGHTS OF DIRECTORS. A director who is not also an officer of the Corporation shall have no responsibility to devote his or her full time to the affairs of the Corporation. Any director or officer, in his or her personal capacity or in a capacity as an affiliate, employee or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to or in competition with those of or relating to the Corporation.

Section 16.    EMERGENCY PROVISIONS. Notwithstanding any other provision in the Charter or these Bylaws, this Section 16 shall apply during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors under Article III of these Bylaws cannot readily be obtained (an “Emergency”). During any Emergency, unless otherwise provided by the Board of Directors, (i) a meeting of the Board of Directors or a committee thereof may be called by any director or officer by any means feasible under the circumstances; (ii) notice of any meeting of the Board of Directors during such an Emergency may be given less than twenty-four (24) hours prior to the meeting to as many directors and by such means as may be feasible at the time, including publication, television or radio; and (iii) the number of directors necessary to constitute a quorum shall be one-third of the entire Board of Directors.

ARTICLE IV

COMMITTEES

Section 1.    NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may appoint from among its members committees, composed of one (1) or more directors, to serve at the pleasure of the Board of Directors. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member.

Section 2.    POWERS. The Board of Directors may delegate to committees appointed under Section 1 of this Article IV any of the powers of the Board of Directors, except as prohibited by law. Except as may be otherwise provided by the Board of Directors, any committee may delegate some or all of its power and authority to one or more subcommittees, composed of one or more directors, as the committee deems appropriate in its sole discretion.

Section 3.    MEETINGS. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors or, in the absence of such designation, the applicable committee may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two (2) members of any committee (if there are at least two (2) members of the committee) may fix the time and place of its meeting unless the Board shall otherwise provide. Each committee shall keep minutes of its proceedings.

Section 4.     MEETINGS BY REMOTE COMMUNICATION. Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 5.    CONSENT BY COMMITTEES WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and is filed with the minutes of proceedings of such committee.

Section 6.    CHANGES. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to appoint the chair of any committee, to fill any vacancy, to designate an alternate member to replace any absent or disqualified member, to dissolve any such committee or to withdraw or add to any powers previously delegated to a committee.

ARTICLE V

OFFICERS

Section 1.    GENERAL PROVISIONS. The officers of the Corporation shall include a president, a secretary and a treasurer and may include a chairman of the board, a vice chairman of the board, a chief executive officer, one or more vice presidents, a chief operating officer, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time elect such other officers with such powers and duties as it shall deem necessary or appropriate. The officers of the Corporation shall be elected annually by the Board of Directors, except that the chief executive officer or president may from time to time appoint one or more vice presidents, assistant secretaries and assistant treasurers or other officers. Each officer shall serve until his or her successor is elected and qualifies or until his or her death, or his or her resignation or removal in the manner hereinafter provided. Any two (2) or more offices, except president and vice president, may be held by the

same person. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

Section 2.    REMOVAL AND RESIGNATION. Any officer or agent of the Corporation may be removed, with or without cause, by the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by delivering his or her resignation to the Board of Directors, the chairman of the board, the chief executive officer, the president or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 3.    VACANCIES. A vacancy in any office may be filled by the Board of Directors for the balance of the term.

Section 4.    CHIEF EXECUTIVE OFFICER. The Board of Directors may designate a chief executive officer. In the absence of such designation, the chairman of the board shall be the chief executive officer of the Corporation. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time.

Section 5.    CHIEF OPERATING OFFICER. The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as determined by the Board of Directors or the chief executive officer.

Section 6.    CHIEF FINANCIAL OFFICER. The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as determined by the Board of Directors or the chief executive officer.

Section 7.    CHAIRMAN OF THE BOARD. The Board of Directors may designate from among its members a chairman of the board, who shall not, solely by reason of these Bylaws, be an officer of the Corporation. The Board of Directors may designate the chairman of the board as an executive or non-executive chairman. The chairman of the board shall preside over the meetings of the Board of Directors. The chairman of the board shall perform such other duties as may be assigned to him or her by these Bylaws or the Board of Directors.

Section 8.    PRESIDENT. In the absence of a chief executive officer, the president shall in general supervise and control all of the business and affairs of the Corporation. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time.

Section 9.    VICE PRESIDENTS. In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one (1) vice

president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to such vice president by the chief executive officer, the president or the Board of Directors. The Board of Directors may designate one (1) or more vice presidents as executive vice president, senior vice president or vice president for particular areas of responsibility.

Section 10.    SECRETARY. The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one (1) or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Directors.

Section 11.    TREASURER. The treasurer shall have the custody of the funds and securities of the Corporation, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation.

The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his or her transactions as treasurer and of the financial condition of the Corporation.

Section 12.    ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the chief executive officer, the president or the Board of Directors.

Section 13.    COMPENSATION. The compensation of the officers shall be fixed from time to time by or under the authority of the Board of Directors and no officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a director.

ARTICLE VI

CONTRACTS, CHECKS AND DEPOSITS

Section 1.    CONTRACTS. The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Corporation when duly authorized or ratified by action of the Board of Directors and executed by an authorized person.

Section 2.    CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

Section 3.    DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited or invested from time to time to the credit of the Corporation as the Board of Directors, the chief executive officer, the president, the chief financial officer or any other officer designated by the Board of Directors may determine.

ARTICLE VII

STOCK

Section 1.    CERTIFICATES. Except as may be otherwise provided by the Board of Directors or any officer of the Corporation, stockholders of the Corporation are not entitled to certificates representing the shares of stock held by them. In the event that the Corporation issues shares of stock represented by certificates, such certificates shall be in such form as prescribed by the Board of Directors or a duly authorized officer, shall contain the statements and information required by the MGCL and shall be signed by the officers of the Corporation in any manner permitted by the MGCL. In the event that the Corporation issues shares of stock without certificates, to the extent then required by the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates. There shall be no difference in the rights and obligations of stockholders based on whether or not their shares are represented by certificates.

Section 2.    TRANSFERS. All transfers of shares of stock shall be made on the books of the Corporation in such manner as the Board of Directors or any officer of the Corporation may prescribe and, if such shares are certificated, upon surrender of certificates duly endorsed. The issuance of a new certificate upon the transfer of certificated shares is subject to the determination of the Board of Directors or an officer of the Corporation that such shares shall no longer be represented by certificates. Upon the transfer of any uncertificated shares, the Corporation shall provide to the record holders of such shares, to the extent then required by the MGCL, a written statement of the information required by the MGCL to be included on stock certificates.

The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Maryland.

Notwithstanding the foregoing, transfers of shares of any class or series of stock will be subject in all respects to the Charter and all of the terms and conditions contained therein.

Section 3.    REPLACEMENT CERTIFICATE. Any officer of the Corporation may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, destroyed, stolen or mutilated, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, destroyed, stolen or mutilated; provided, however, if such shares have ceased to be certificated, no new certificate shall be issued unless requested in writing by such stockholder and the Board of Directors or an officer of the Corporation has determined that such certificates may be issued. Unless otherwise determined by an officer of the Corporation, the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his or her legal representative, shall be required,

as a condition precedent to the issuance of a new certificate or certificates, to give the Corporation a bond in such sums as it may direct as indemnity against any claim that may be made against the Corporation.

Section 4.    FIXING OF RECORD DATE. The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such record date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than ninety (90) days and, in the case of a meeting of stockholders, not less than ten (10) days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken.

When a record date for the determination of stockholders entitled to notice of or to vote at any meeting of stockholders has been set as provided in this section, such record date shall continue to apply to the meeting if adjourned or postponed, except if the meeting is adjourned or postponed to a date more than 120 days after the record date originally fixed for the meeting, in which case a new record date for such meeting shall be determined as set forth herein.

Section 5.    STOCK LEDGER. The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.

Section 6.    FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may authorize the Corporation to issue fractional shares of stock or authorize the issuance of scrip, all on such terms and under such conditions as it may determine. Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may authorize the issuance of units consisting of different securities of the Corporation.

ARTICLE VIII

ACCOUNTING YEAR

The fiscal year of the Corporation shall end on December 31st of each calendar year, unless otherwise determined by the Board of Directors by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 1.    AUTHORIZATION. Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the Charter.

Section 2.    CONTINGENCIES. Before payment of any dividend or other distribution, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its sole discretion, think proper as a reserve fund for contingencies, for equalizing dividends, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine, and the Board of Directors may modify or abolish any such reserve.

ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the Charter, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 1.    SEAL. The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words “Incorporated Maryland.” The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 2.    AFFIXING SEAL. Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

ARTICLE XII

INDEMNIFICATION AND ADVANCE OF EXPENSES

To the maximum extent permitted by Maryland law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity and (c) American Realty Capital Healthcare II Advisors, LLC and its affiliates from and against any claim, liability or expense to which they may become subject or which they may incur by reason of their service as advisor to the Corporation. The rights of a director or officer to indemnification and advance of expenses provided by the Charter and these Bylaws shall vest immediately upon election of such director or officer. The Corporation may, with the approval of its Board of Directors, provide such indemnification and advance for expenses to an individual who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation or American Realty Capital Healthcare II Advisors, LLC. The indemnification and payment or reimbursement of expenses provided in these Bylaws shall not be deemed exclusive of or limit in any way other rights to which any person seeking indemnification or payment or reimbursement of expenses may be or may become entitled under any bylaw, resolution, insurance, agreement or otherwise.

Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Charter or these Bylaws inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

ARTICLE XIII

WAIVER OF NOTICE

Whenever any notice of a meeting is required to be given pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver thereof in writing or by electronic transmission, given by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice of such meeting, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened.

ARTICLE XIV

EXCLUSIVE FORUM FOR CERTAIN LITIGATION

Unless the Corporation consents in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division, shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, other than actions arising under federal securities laws, (b) any Internal Corporate Claim, as such term is defined in the MGCL, or any successor provision thereof, including, without limitation, (i) any action asserting a claim of breach of any duty owed by any director or officer or other employee of the Corporation to the Corporation or to the stockholders of the Corporation or (ii) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the MGCL, the Charter or these Bylaws, or (c) any other action asserting a claim against the Corporation or any director or officer or other employee of the Corporation that is governed by the internal affairs doctrine.  None of the foregoing actions, claims or proceedings may be brought in any court sitting outside the State of Maryland unless the Corporation consents in writing to such court.

Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.

ARTICLE XV

AMENDMENT OF BYLAWS

The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.

22

Document

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Edward M. Weil, Jr., certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Healthcare Trust, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 11th day of August, 2023	/s/ Edward M. Weil, Jr.
	Edward M. Weil, Jr.
	Chief Executive Officer and President
	(Principal Executive Officer)

Document

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Scott M. Lappetito, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Healthcare Trust, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 11th day of August, 2023	/s/ Scott M. Lappetito
	Scott M. Lappetito
	Chief Financial Officer, Treasurer and Secretary
	(Principal Financial Officer and Principal Accounting Officer)

Document

Exhibit 32

SECTION 1350 CERTIFICATIONS

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

The undersigned, who are the Chief Executive Officer and Chief Financial Officer of Healthcare Trust, Inc. (the “Company”), each hereby certify as follows:

The Quarterly report on Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 11th day of August, 2023

/s/ Edward M. Weil, Jr.
Edward M. Weil, Jr.
Chief Executive Officer and President
(Principal Executive Officer)
/s/ Scott M. Lappetito
Scott M. Lappetito
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)