National Healthcare Properties, Inc 10-Q for FY2025 Q3
National Healthcare Properties, Inc. (NHP)
10-Q
2025-11-05
For: 2025-09-30
View Original
Added on
April 08, 2026
About this 10-Q
National Healthcare Properties, Inc filed this 10-Q on November 5, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $86.03M
- down 3.3% from $88.94M a year earlier
- Net loss
- $12.53M
- compared with a net loss of $40.77M a year earlier
- Diluted EPS
- -$0.56
- compared with -$1.56 a year earlier
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 September 30, 2025
| 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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
Registrant’s telephone number, including area code: (212 ) 415-6500
| Securities registered pursuant to section 12(b) of the Act: | ||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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 | ☐ | |||||||||||
☒ | 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 October 30, 2025, the registrant had 28,426,694 shares of common stock outstanding.
1
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |||||
2
Item 1. Financial Statements.
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
| September 30, 2025 | December 31, 2024 | |||||||||||||
| ASSETS | ||||||||||||||
| Real estate investments, at cost: | ||||||||||||||
| Land | $ | $ | ||||||||||||
| Buildings, fixtures and improvements | ||||||||||||||
| Acquired intangible assets | ||||||||||||||
| Construction in progress | ||||||||||||||
| Total real estate investments, at cost | ||||||||||||||
| Less: accumulated depreciation and amortization | ( | ( | ||||||||||||
| Total real estate investments, net | ||||||||||||||
Assets held-for-sale | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Restricted cash | ||||||||||||||
| Derivative assets, at fair value | ||||||||||||||
| Straight-line rent receivable, net | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Prepaid expenses and other assets | ||||||||||||||
| Accounts receivable, net | ||||||||||||||
| Deferred costs, net | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Mortgage notes payable, net | $ | $ | ||||||||||||
Fannie Mae secured debt | ||||||||||||||
| Market lease intangible liabilities, net | ||||||||||||||
Accounts payable and accrued expenses (including $ | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Deferred rent | ||||||||||||||
| Distributions payable | ||||||||||||||
| Total liabilities | ||||||||||||||
| Stockholders’ Equity | ||||||||||||||
Common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||
| Distributions in excess of accumulated earnings | ( | ( | ||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Non-controlling interests | ||||||||||||||
| Total equity | ||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||
Share and per share data have been adjusted for all periods presented to reflect a one-for-four reverse stock split effective September 30, 2024.
The accompanying notes are an integral part of these consolidated financial statements.
3
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Revenue from tenants | $ | $ | $ | $ | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Property operating and maintenance | ||||||||||||||||||||||||||
| Impairment charges | ||||||||||||||||||||||||||
Operating fees to related parties | ||||||||||||||||||||||||||
Termination fees to related parties | ||||||||||||||||||||||||||
| Acquisition and transaction related | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Total expenses | ||||||||||||||||||||||||||
Operating gain (loss) before gain on sale of real estate investments | ( | ( | ( | |||||||||||||||||||||||
Gain on sale of real estate investments | ||||||||||||||||||||||||||
Operating income (loss) | ( | ( | ||||||||||||||||||||||||
Other expense: | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
Interest and other income | ||||||||||||||||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||||||||||||
(Loss) gain on non-designated derivatives | ( | ( | ( | |||||||||||||||||||||||
Total other expenses, net | ( | ( | ( | ( | ||||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||
Income tax benefit | ( | ( | ( | |||||||||||||||||||||||
Net loss | ( | ( | ( | ( | ||||||||||||||||||||||
Net (income) loss attributable to non-controlling interests | ( | ( | ||||||||||||||||||||||||
| Allocation for preferred stock | ( | ( | ( | ( | ||||||||||||||||||||||
Net loss attributable to common stockholders | ( | ( | ( | ( | ||||||||||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||||||||
Unrealized loss on designated derivatives | ( | ( | ( | ( | ||||||||||||||||||||||
Comprehensive loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Weighted-average shares outstanding — Basic and Diluted(1) | ||||||||||||||||||||||||||
Net loss per share attributable to common stockholders — Basic and Diluted(1) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
____________
(1)Retroactively adjusted for the effects of previous stock dividends (see Note 1 — Organization).
Share and per share data have been adjusted for all periods presented to reflect a one-for-four reverse stock split effective September 30, 2024.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Par Value | Number of Shares | Par Value | Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Distributions in excess of accumulated earnings | Total Stockholders Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issuance, net of tax withholdings | — | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on Series A Preferred Stock, $ | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on Series B Preferred Stock, $ | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders | — | — | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of Series A Preferred Stock | ( | ( | — | — | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of Series B Preferred Stock | — | — | ( | ( | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized loss on designated derivatives | — | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rebalancing of ownership percentage | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Par Value | Number of Shares | Par Value | Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Distributions in excess of accumulated earnings | Total Stockholders Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issuance, net of tax withholdings | — | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on Series A Preferred Stock, $ | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on Series B Preferred Stock, $ | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders | — | — | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of Series A Preferred Stock | ( | ( | — | — | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of Series B Preferred Stock | — | — | ( | — | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | ( | 21 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized loss on designated derivatives | — | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rebalancing of ownership percentage | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share and per share data have been adjusted for all periods presented to reflect a one-for-four reverse stock split effective September 30, 2024.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Par Value | Number of Shares | Par Value | Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) Income | Distributions in Excess of Accumulated Earnings | Total Stockholders Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared in common stock, $ | — | — | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on Series A Preferred Stock, $ | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on Series B Preferred Stock, $ | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders | — | — | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized loss on designated derivatives | — | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rebalancing of ownership percentage | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Par Value | Number of Shares | Par Value | Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Distributions in Excess of Accumulated Earnings | Total Stockholders Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared in common stock, $ | — | — | — | — | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on Series A Preferred Stock, $ | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions declared on Series B Preferred Stock, $ | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest holders | — | — | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on designated derivatives | — | — | — | — | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rebalancing of ownership percentage | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share and per share data have been adjusted for all periods presented to reflect a one-for-four reverse stock split effective September 30, 2024.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Amortization of deferred financing costs | ||||||||||||||
| Accretion of terminated swap | ( | |||||||||||||
| Amortization of mortgage premiums and discounts, net | ||||||||||||||
| Amortization (accretion) of market lease and other intangibles, net | ( | |||||||||||||
| Bad debt expense | ||||||||||||||
| Equity-based compensation | ||||||||||||||
Gain on sale of real estate investments | ( | ( | ||||||||||||
| Cash received from non-designated derivative instruments | ||||||||||||||
Loss (gain) on non-designated derivative instruments | ( | |||||||||||||
| Impairment charges | ||||||||||||||
| Gain on extinguishment of debt | ( | |||||||||||||
| Deferred tax valuation allowance | ||||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Straight-line rent receivable | ( | ( | ||||||||||||
| Prepaid expenses and other assets | ( | ( | ||||||||||||
| Termination fees payable to related parties | ||||||||||||||
| Accounts receivable, net | ||||||||||||||
| Accounts payable, accrued expenses and other liabilities | ( | |||||||||||||
| Deferred leasing costs | ( | |||||||||||||
| Deferred rent | ( | |||||||||||||
Net cash used in operating activities | ( | ( | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Property acquisitions | ( | ( | ||||||||||||
| Capital expenditures | ( | ( | ||||||||||||
| Investments in non-designated interest rate caps | ( | |||||||||||||
| Proceeds from sales of real estate investments | ||||||||||||||
Net cash provided by investing activities | ||||||||||||||
| Cash flows from financing activities: | ||||||||||||||
Payments on Fannie Mae and other secured debt | ( | ( | ||||||||||||
Proceeds from Fannie Mae and other secured debt | ||||||||||||||
| Payments on mortgage notes payable | ( | ( | ||||||||||||
| Payments of deferred financing costs | ( | ( | ||||||||||||
| Proceeds from promissory note | ||||||||||||||
| Repurchase of preferred stock | ( | |||||||||||||
| Distributions paid on Series A Preferred Stock | ( | ( | ||||||||||||
| Distributions paid on Series B Preferred Stock | ( | ( | ||||||||||||
| Distributions to non-controlling interest holders | ( | ( | ||||||||||||
Net cash (used in) provided by financing activities | ( | |||||||||||||
| Net change in cash, cash equivalents and restricted cash | $ | $ | ( | |||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||||||||
7
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||||||||
| Restricted cash, end of period | ||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||||
| Cash paid for interest | $ | $ | ||||||||||||
| Cash paid for income and franchise taxes | ||||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||
| Common stock issued through stock dividends | $ | $ | ||||||||||||
Preferred stock dividend declared | $ | ( | $ | |||||||||||
| Mortgages issued with acquisition of real estate investments | $ | $ | ||||||||||||
| Proceeds from real estate sales used to repay mortgage notes payable | $ | $ | ||||||||||||
| Mortgage notes payable repaid with proceeds from real estate sales | $ | ( | $ | |||||||||||
| Net change in accrued capital expenditures for the period | $ | $ | ||||||||||||
Share and per share data have been adjusted for all periods presented to reflect a one-for-four reverse stock split effective September 30, 2024.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Note 1 — Organization
National Healthcare Properties, Inc. (including, as required by context, National Healthcare Properties Operating Partnership, L.P. (the “OP”) and its subsidiaries, the “Company”) is a real estate investment trust (“REIT”) for U.S. federal income tax purposes. The Company acquires, owns and manages a diversified portfolio of healthcare-related real estate, focused on outpatient medical facilities (“OMFs”) and senior housing operating properties (“SHOPs”).
As of September 30, 2025, the Company owned 174 properties (including one land parcel and one property classified as held-for-sale) located in 30 states and comprised of 7.3 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 (“TRSs”). Prior to the consummation of the Internalization (as defined below) on September 27, 2024, the Company’s former advisor, Healthcare Trust Advisors, LLC (the “Advisor”), managed its day-to-day business with the assistance of its property manager, Healthcare Trust Properties, LLC (the “Property Manager”); the former Advisor and Property Manager were under common control with AR Global Investments, LLC (the “Advisor Parent”), and these related parties received compensation and fees for providing services to the Company. See the “Internalization” section in this Note for additional information.
As of September 30, 2025, the Company owned 40 (including one property classified as held-for-sale) SHOPs 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 TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor”. As of September 30, 2025, the Company had four eligible independent contractors operating 39 SHOPs.
The Company has two
From October 2020 through January 2024, the Company issued an aggregate of approximately 5.2 million shares of common stock as stock dividends (as adjusted to reflect the Reverse Stock Split (as defined below)). 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. 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 January 2024, and are noted as such throughout the accompanying financial statements and notes. See Note 8 — Stockholders’ Equity for additional information on the stock dividends.
On March 26, 2025, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2024. The Estimated Per-Share NAV published on March 26, 2025 has not been adjusted since publication and will not be adjusted until the Company’s board of directors (the “Board”) determines a new Estimated Per-Share NAV. 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 on a national securities exchange.
Internalization
On September 27, 2024 (the “Closing Date”), the Company consummated (the “Closing”) the transactions (the “Internalization”) contemplated by that certain merger agreement dated August 6, 2024 (the “Internalization Agreement”) by and among the Company, HTI Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), the former Advisor and the former Advisor Parent.
Consummation of the Internalization resulted in the internalization of the Company’s management through the merger of the former Advisor with and into Merger Sub, with the former Advisor being the surviving entity and the termination of the Company’s prior arrangement for advisory management services provided by the former Advisor. All assets, contracts and employees necessary for the Company to conduct its business were contributed by the former Advisor Parent to the former Advisor prior to the Closing Date, including all of the equity interests in the Property Manager, which became a wholly-owned subsidiary of the Company following the Internalization.
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NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Pursuant to the Internalization Agreement, on the Closing Date, (i) the outstanding membership interests of the former Advisor were converted into the right to receive from the Company an internalization fee of $98.2 million and (ii) the former Advisor Parent received (x) an asset management fee of $5.5 million, representing the aggregate base management fee that the Company would have been required to pay to the former Advisor during the remaining three month notice period required to terminate the advisory agreement, and (y) a property management fee of $2.9 million, representing the aggregate management fees that the Company would have been required to pay to the Property Manager through the property management agreement, in each case subject to certain other adjustments (collectively, the “Closing Payments” in an aggregate amount of $106.6 million).
Pursuant to the Internalization Agreement, because the Closing Payments exceeded the Company’s Available Cash (as defined in the Internalization Agreement), the Company paid the former Advisor Parent an aggregate cash consideration of $75.0 million (such cash amount, the “Closing Date Cash Consideration”), and the Company issued to the former Advisor Parent an unsecured promissory note (the “Promissory Note”) in a principal amount of $30.3 million, equal to the difference between the Closing Date Cash Consideration and the Closing Payments, which Promissory Note was repaid in full in January 2025.
Reverse Stock Split, Name Change and Common Stock Par Value Adjustment
On September 26, 2024, the Company filed Articles of Amendment to the Company’s articles of amendment and restatement (as amended to date, the “Charter”) with the State Department of Assessments and Taxation of Maryland (“SDAT”) to effect a reverse stock split of the Company’s common stock at a ratio of one-for-four, which became effective on September 30, 2024 (the “Reverse Stock Split”). As a result of the Reverse Stock Split, the par value of the common stock adjusted to $0.04 per share. The number of authorized shares of common stock under the Charter remains unchanged.
On September 26, 2024, the Company filed another Articles of Amendment to the Company’s Charter with the SDAT to (i) change the Company’s name to “National Healthcare Properties, Inc.” from “Healthcare Trust, Inc.” and (ii) adjust the par value of the Company’s common stock back to $0.01 per share following the Reverse Stock Split, both of which became effective on September 30, 2024. In connection with its name change, the Company, as the general partner of the OP, caused the name of the OP to be changed to “National Healthcare Properties Operating Partnership, L.P.” from “Healthcare Trust Operating Partnership, L.P.”
All share and per share data in this Quarterly Report on Form 10-Q have been adjusted for all periods presented to reflect the Reverse Stock Split.
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 three and nine months ended September 30, 2025 and 2024 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, 2024, which are included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on February 27, 2025. 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 three and nine months ended September 30, 2025.
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.
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NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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.
Revenue Recognition
The Company’s revenues, which are derived primarily from lease contracts, include rent received from tenants in its OMF segment. As of September 30, 2025, these leases had a weighted average remaining lease term of 5.5 years. Rent from tenants in the Company’s OMF segment 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 the Company’s OMF 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 as of September 30, 2025. 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.
| (In thousands) | Future Base Rent Payments | |||||||
| 2025 (remainder) | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
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NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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 circumstances affecting the credit risk of the tenant. 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 current accounting rules, in the Company’s consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.
The Company recorded reductions in revenue of $0.7 million for uncollectable amounts during the nine months ended September 30, 2025, and $0.1 million and $0.9 million for uncollectable amounts during the three and nine months ended September 30, 2024, respectively. Reductions in revenue for the three months ended September 30, 2025 was not material.
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 and nine months ended September 30, 2025 and 2024. 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 was one SHOP property classified as held-for-sale as of September 30, 2025. Amounts related to this property are recorded in “assets held-for-sale” on the Company’s consolidated balance sheets. There were no properties classified as held-for-sale as of December 31, 2024.
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. During the nine months ended September 30, 2024, the Company acquired four properties. During the nine months ended September 30, 2025, the Company did no t acquire any properties. All acquisitions during the nine months ended September 30, 2024 were asset acquisitions.
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NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
For acquired properties with leases classified as operating leases, the Company allocates the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed, based on their respective fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of the Company’s pre-acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
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, market rental 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 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 market rental 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 nine months ended September 30, 2025 or 2024.
Accounting for Leases
Lessor Accounting
The Company evaluates new leases (by the Company or by a predecessor lessor/owner) pursuant to ASC 842: Leases to determine lease classification. A lease 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 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.
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NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Lessee Accounting
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 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 loss 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 loss because recording an impairment loss results in an immediate negative adjustment to earnings. For additional information, see Note 3 — Real Estate Investments, Net.
Reportable Segments
The Company’s reportable segments, based on how it evaluates its business and allocates resources, are as follows: (i) OMFs and (ii) SHOPs. 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 and building improvements, 15 years for land improvements and fixtures 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 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.
14
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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 four subsequent taxable years. The Company had no
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 September 30, 2025, the Company owned 40 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 September 30, 2025 and December 31, 2024 consisted of deferred rent and net operating loss carryforwards.
Because of the TRS’s historical operating losses and the adverse economic impacts from increases in the rate of inflation in recent years 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 $11.7 million as of September 30, 2025. 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, 2024, the Company had a deferred tax asset of $10.5 million with a full valuation allowance.
Stock-Based Compensation
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NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Recently Issued Accounting Pronouncements
Adopted:
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting — Improvements to Reportable Segment Disclosures, which requires incremental disclosures related to a public entity’s reportable segments. Required disclosures include, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount for other segment items (which is the difference between segment revenue less segment expenses and less segment profit or loss) and a description of its composition, the title and position of the Company’s CODM, and an explanation of how the Company’s CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard also permits disclosure of more than one measure of segment profit. The ASU should be adopted retrospectively unless it is impracticable to do so. The Company has adopted both the annual and interim requirements under ASU 2023-07. The Company has included financial statement disclosures in accordance with ASU 2023-07 within Note 15 — Segment Reporting in this report.
Not yet adopted:
In December 2023, the FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 is effective for fiscal years beginning after December 15, 2025. The Company is evaluating the impact of the adoption of ASU 2023-09 on its consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires public business entities (PBEs) to provide disaggregated disclosure in tabular format in the notes to financial statements of specific expenses, including but not limited to: (i) employee compensation, (ii) depreciation, and (iii) intangible asset amortization. In January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact of the adoption of these ASUs on its consolidated financial statements.
Reclassifications
To conform to the current year presentation, amounts related to “construction in progress” and “accounts receivable, net” for the comparative periods have been reclassified from “prepaid expenses and other assets” and presented separately on the Company’s consolidated balance sheets.
Note 3 — Real Estate Investments, Net
Property Acquisitions
The Company invests in healthcare-related facilities, primarily OMFs and SHOPs, which expand and diversify its portfolio and revenue base. The Company owned 174 properties (including one land parcel and one SHOP held-for-sale) as of September 30, 2025. No properties were acquired during the nine months ended September 30, 2025.
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NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Significant Concentrations
As of September 30, 2025 and 2024, the Company had one tenant (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10
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 September 30, 2025 and 2024:
| September 30, | ||||||||||||||
| State | 2025 | 2024 | ||||||||||||
| Florida | ||||||||||||||
| Georgia | ||||||||||||||
| Pennsylvania | ||||||||||||||
| Iowa | * | |||||||||||||
* Not greater than 10%.
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 September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
Amortization of in-place leases and other intangible assets (1) | $ | $ | $ | $ | ||||||||||||||||||||||
Accretion of above- and below-market leases, net (2) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Amortization of above- and below-market ground leases, net (3) | $ | $ | $ | $ | ||||||||||||||||||||||
________
(1)Reflected within depreciation and amortization expense.
(2)Reflected within revenue from tenants.
(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) | 2025 (remainder) | 2026 | 2027 | 2028 | 2029 | |||||||||||||||||||||||||||
| In-place lease assets | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Other intangible assets | ||||||||||||||||||||||||||||||||
| Total to be added to amortization expense | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Above-market lease assets | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||
| Below-market lease liabilities | ||||||||||||||||||||||||||||||||
Total to be added to revenue from tenants | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
17
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Dispositions
Three and Nine Months Ended September 30, 2025
The Company disposed of one held-for-sale SHOP during the three months ended September 30, 2025 for a contract sales price of $1.8 million. This disposition resulted in a gain on sale of $0.1 million, which is included in the Company’s consolidated statements of operations and comprehensive loss for the three months ended September 30, 2025.
The Company disposed of 15 held-for-use OMFs and four SHOPs (three held-for-use and one held-for-sale) during the nine months ended September 30, 2025 for an aggregate contract sales price of $191.6 million. These dispositions resulted in an aggregate gain on sale of $28.3 million, which is presented in the Company’s consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2025.
Three and Nine Months Ended September 30, 2024
The Company disposed of seven held-for-use OMFs, one held-for-use SHOP and one land parcel during the three months ended September 30, 2024 for an aggregate contract sales price of $79.3 million. These dispositions resulted in an aggregate gain on sale of $1.6 million, which is presented in the Company’s consolidated statements of operations and comprehensive loss for the three months ended September 30, 2024.
The Company disposed of seven held-for-use OMFs, two held-for-use SHOPs and one land parcel during the nine months ended September 30, 2024 for an aggregate contract sales price of $82.6 million. These dispositions resulted in an aggregate gain on sale of $1.4 million, which is presented in the Company’s consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2024.
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 sales price as fair market value.
There was one SHOP classified as held-for-sale as of September 30, 2025. There were no properties classified as held-for-sale as of December 31, 2024.
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 or 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.
18
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Impairment Charges
The following table presents impairment charges by segment recorded during the three and nine months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
OMF | $ | $ | $ | $ | ||||||||||||||||||||||
SHOP | ||||||||||||||||||||||||||
Total impairment charges(1) | $ | $ | $ | $ | ||||||||||||||||||||||
(1)Amounts presented for the nine months ended September 30, 2025 primarily relate to held-for-use properties. These properties were impaired to their contractual sales price as determined by their purchase and sale agreements or estimated fair value and were subsequently sold or expected to be sold.
Note 4 — Mortgage Notes Payable, Net
The following table reflects the Company’s mortgage notes payable as of September 30, 2025 and December 31, 2024:
| Outstanding Loan Amount as of | Effective Interest Rate (1) as of | |||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio | Encumbered Properties | September 30, 2025 | December 31, 2024 | September 30, 2025 | December 31, 2024 | Interest Rate | Maturity | Formerly known as: | ||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||
Secured Term Loan 1 due 2028(4) | % | % | Fixed | May 2028 | Multi-Property CMBS Loan | |||||||||||||||||||||||||||||||||||||||||||||
Secured Term Loan 2 due 2026 (2)(4) | % | % | Fixed | Dec. 2026 | Capital One OMF Loan | |||||||||||||||||||||||||||||||||||||||||||||
Secured Term Loan 3 due 2031 | % | % | Fixed | Dec. 2031 | BMO CMBS Loan | |||||||||||||||||||||||||||||||||||||||||||||
Secured Term Loan 4 due 2033 | % | % | Fixed | June 2033 | Barclays OMF Loan | |||||||||||||||||||||||||||||||||||||||||||||
Single Property Mortgage 1 due 2047 | $ | $ | % | % | Fixed | May 2047 | Fox Ridge Bryant | |||||||||||||||||||||||||||||||||||||||||||
Single Property Mortgage 2 due 2049 | % | % | Fixed | May 2049 | Fox Ridge Chenal | |||||||||||||||||||||||||||||||||||||||||||||
Single Property Mortgage 3 due 2049 | % | % | Fixed | May 2049 | Fox Ridge North Little Rock | |||||||||||||||||||||||||||||||||||||||||||||
Multi Property Mortgage 1 due 2034 | $ | $ | % | % | Fixed | March 2034 | BMO CPC Mortgage | |||||||||||||||||||||||||||||||||||||||||||
| Gross mortgage notes payable | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Deferred financing costs, net of accumulated amortization (3) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage premiums and discounts, net | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage notes payable, net | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
(1)Calculated on a weighted average basis over 365 days for all mortgages outstanding as of September 30, 2025 and December 31, 2024.
(2)Variable rate loan, based on daily SOFR (as defined below) as of September 30, 2025 and December 31, 2024, which is fixed as a result of entering into “pay-fixed” interest rate swap agreements. The Company allocated $330.2 million and $378.5 million of its “pay-fixed” interest rate swaps to this mortgage consistently as of September 30, 2025 and December 31, 2024, respectively. In December 2024, the Company proactively executed an amendment to the hedged notional amount to match the expected prospective loan balance of $364.0 million. This amendment became effective in January 2025.
(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.
(4)2025 amounts include debt paydowns related to dispositions of $33.7 million on the Capital One OMF Loan, $30.6 million on the Multi-Property CMBS Loan and $14.7 million on the Barclays OMF Loan.
19
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
As of September 30, 2025, the Company had pledged $1.2 billion in total real estate investments, at cost, as collateral for its $705.9 million 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. Notably, the Barclays OMF 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. As of September 30, 2025, the Company was in compliance with these financial covenants.
See Note 5 — -Future Principal Payments for a schedule of principal payment requirements of the Company’s mortgage notes and other secured debt.
Note 5 — Fannie Mae and Other Secured Debt
| Outstanding Facility Amount as of | Effective Interest Rate (2) (3) | |||||||||||||||||||||||||||||||||||||||||||||||||
Fannie Mae Secured Debt | Encumbered Properties (1) | September 30, 2025 | December 31, 2024 | September 30, 2025 | December 31, 2024 | Interest Rate | Maturity | Formerly known as: | ||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||
Secured Fannie Mae Loan 1 due 2026 | $ | $ | % | % | Variable | Nov. 2026 | Capital One Facility | |||||||||||||||||||||||||||||||||||||||||||
Secured Fannie Mae Loan 2 due 2026 | % | % | Variable | Nov. 2026 | KeyBank Facility | |||||||||||||||||||||||||||||||||||||||||||||
Total Fannie Mae Secured Debt | $ | $ | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
OMF Warehouse Facility(4) | % | % | Variable | Dec. 2026 | ||||||||||||||||||||||||||||||||||||||||||||||
Total Fannie Mae and Other Secured Debt | $ | $ | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
________
(1)Encumbered properties are as of September 30, 2025.
(2)Calculated on a weighted average basis over 365 days for all outstanding amount as of September 30, 2025 and December 31, 2024, respectively.
(3)The Company has six active non-designated interest rate cap agreements with an aggregate notional amount of $342.8 million which limited one-month SOFR 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 in the consolidated statements of operations and comprehensive loss (see Note 7 — Derivatives and Hedging Activities for additional details). Inclusive of the impact of these non-designated derivatives, the economic interest rates on the Fannie Mae and other secured debt were 6.00 % and 5.99 %, as of September 30, 2025 and December 31, 2024, respectively.
(4)The Company repaid in full and terminated the OMF Warehouse Facility in April 2025.
As of September 30, 2025, the Company had pledged $625.0 million in total real estate investments, at cost as collateral under its Fannie Mae and other secured debt. All of the real estate assets pledged to secure borrowings under the Company’s Fannie Mae and other secured debt 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 September 30, 2025 were $418.9 million, 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 and other secured debt or other future financings.
Fannie Mae Secured Debt
On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master secured debt agreement with KeyBank (the “KeyBank Secured Debt”) and a master secured debt agreement with Capital One Multifamily Finance LLC, an affiliate of Capital One (the “Capital One Secured Debt” and, together with the KeyBank Secured Debt, “Fannie Mae Secured Debt”). Advances made under these agreements were assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.
20
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
The Company may request future advances under the Fannie Mae Secured Debt 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 Secured Debt bore 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 Secured Debt and the KeyBank Secured Debt, respectively. The Fannie Mae Secured Debt matures on November 1, 2026.
Through September 30, 2025, the Company had provided cash deposits totaling $12.1 million to Fannie Mae because the debt service coverage ratios of the underlying properties of each facility were below the minimum required amounts per the debt agreements. These deposits are recorded as restricted cash on the Company’s consolidated balance sheets and are pledged as additional collateral for the Fannie Mae Secured Debt. These deposits will be refunded upon 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 Secured Debt.
OMF Warehouse Facility
On December 22, 2023, the Company, through wholly-owned subsidiaries of the OP, entered into a loan agreement with Capital One to provide up to $50.0 million of variable-rate financing. In April 2025, the Company repaid in full and terminated the facility.
Non-Designated Interest Rate Caps
As of September 30, 2025 the Company had six non-designated interest rate cap agreements with an aggregate notional amount of $342.8 million which caps SOFR at 3.50 % with terms through November 2026. The Company does not apply hedge accounting to these non-designated interest cap agreements, and changes in value as well as any cash received are presented within (loss) gain on non-designated derivatives in the Company’s consolidated statements of comprehensive loss. See Note 7 — Derivatives and Hedging Activities for additional information regarding the Company’s derivatives.
In connection with the Fannie Mae Secured Debt, the Company was required to enter into interest rate cap agreements which the Company periodically renews upon their expiration.
In April 2025, the Company terminated two interest rate caps with a notional of $21.7 million related to the OMF Warehouse Facility upon the facility’s full repayment.
In June 2025, the Company purchased three interest rate caps with a notional of $133.8 million for $1.1 million that limit one-month SOFR to 3.50 % and mature in November 2026 related to the Fannie Mae Secured Debt. These interest rate caps were purchased in advance of interest rate caps set to expire.
Future Principal Payments
The following table summarizes the scheduled aggregate principal payments for the five years subsequent to September 30, 2025 and thereafter, on all of the Company’s outstanding mortgage notes payable and other secured debt:
Future Principal Payments | ||||||||||||||||||||
| (In thousands) | Mortgage Notes Payable | Fannie Mae Secured Debt | Total | |||||||||||||||||
| 2025 (remainder) | $ | $ | $ | |||||||||||||||||
| 2026 | ||||||||||||||||||||
| 2027 | ||||||||||||||||||||
| 2028 | ||||||||||||||||||||
| 2029 | ||||||||||||||||||||
| Thereafter | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
21
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
The Company’s existing principal demands for cash are to fund acquisitions, capital expenditures, the payment of its operating and administrative expenses, debt service obligations (including principal repayment) and distributions to holders of its Series A Preferred Stock and Series B Preferred Stock. The Company closely monitors its current and anticipated liquidity position relative to its current and anticipated demands for cash and believes that it has sufficient current liquidity to meet its financial obligations for at least the next twelve months. The Company expects to fund its future short-term operating liquidity requirements, including distributions to holders of Series A Preferred Stock and Series B Preferred Stock, through a combination of current cash on hand, net cash provided by its operating activities, net cash provided by its property dispositions and potential new financings utilizing certain of its currently unencumbered properties.
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 September 30, 2025, 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.
22
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
The following table presents information about the Company’s assets and liabilities measured at fair value as of September 30, 2025 and December 31, 2024, aggregated by the level in the fair value hierarchy within which those instruments fall.
| (In thousands) | Quoted Prices in Active Markets Level 1 | Significant Other Observable Inputs Level 2 | Significant Unobservable Inputs Level 3 | Total | ||||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||||||||
| Derivative assets, at fair value (non-designated) | $ | $ | $ | $ | ||||||||||||||||||||||
| Derivative assets, at fair value (designated) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Derivative assets, at fair value (non-designated) | $ | $ | $ | $ | ||||||||||||||||||||||
| Derivative assets, at fair value (designated) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
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 has been no transfer into or out of Level 3 financial instruments during the periods presented.
Real Estate Investments Measured at Fair Value on a Non-Recurring Basis
Real Estate Investments - Held-for-Use
The Company has 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 September 30, 2025 and December 31, 2024.
See Note 3 — Real Estate Investments, Net - Assets Held-for-Use and Impairment Charges 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 classified one property as held-for-sale as of September 30, 2025 and none as of December 31, 2024.
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.
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:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| (In thousands) | Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||||||
Gross mortgage notes payable and mortgage premium and discounts, net | 3 | $ | $ | $ | $ | |||||||||||||||||||||||||||
Other secured debt | 3 | |||||||||||||||||||||||||||||||
| Total debt | $ | $ | $ | $ | ||||||||||||||||||||||||||||
The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Company’s experience with similar types of borrowing arrangements, excluding the value of derivatives.
23
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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 September 30, 2025 and December 31, 2024:
| (In thousands) | Balance Sheet Location | September 30, 2025 | December 31, 2024 | |||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||
| Interest rate “pay-fixed” swaps | Derivative assets, at fair value | $ | $ | |||||||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||||
| Interest rate caps | Derivative assets, at fair value | $ | $ | |||||||||||||||||
Cash Flow Hedges of Interest Rate Risk
As of September 30, 2025 and December 31, 2024, the Company had one 330.2 million and $378.5 million, respectively, designated as a cash flow hedges of interest rate risk. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. This derivative was used to hedge the variable cash flows associated with variable-rate debt.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
Amounts reported in accumulated other comprehensive loss 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 October 1, 2025 through September 30, 2026, the Company estimates that $6.5 million will be reclassified from other comprehensive income as a decrease to interest expense.
During the nine months ended September 30, 2025, the Company received $1.5 million in connection with the partial unwind of a derivative. In conjunction with the partial unwind, the Company accelerated the reclassification of gains of $1.5 million from other comprehensive income to earnings as a result of the hedged forecasted transactions becoming probable not to occur. This gain was recorded as a reduction in interest expense in its consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2025.
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:
24
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
Amount of gain (loss) recognized in accumulated other comprehensive income on interest rate derivatives | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||
| Amount of gain reclassified from accumulated other comprehensive income into income as interest expense | $ | $ | $ | $ | ||||||||||||||||||||||
| Total amount of interest expense presented in the consolidated statements of operations and comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Non-Designated Derivatives
These derivatives are used to manage the Company’s exposure to interest rate movements, but do not meet the strict hedge accounting requirements to be classified as hedging instruments. Changes in the fair value of derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net income and recorded in gain on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.
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 September 30, 2025 and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Interest Rate Derivatives | Number of Instruments | Notional Amount (1) | Number of Instruments | Notional Amount (1) | ||||||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||||
Interest rate caps (2) | $ | $ | ||||||||||||||||||||||||
__________
(1)Notional amount represents the currently active interest rate cap contracts.
(2)All of the Company’s interest rate cap agreements limited one-month SOFR to 3.50 % with terms through November 2026. The actual one-month SOFR rates during the three months ended September 30, 2025 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 on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.
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.
Beginning in the year ended December 31, 2022, SOFR 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 Fannie Mae and other secured debt. 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 on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.
25
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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 September 30, 2025 and December 31, 2024. 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 | |||||||||||||||||||||||||||||||||||||
| September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Credit-risk-related Contingent Features
The Company has agreements in place with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
As of September 30, 2025, 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 September 30, 2025 and December 31, 2024, the Company had 28,426,694 and 28,296,439 shares of common stock outstanding, respectively, including 119,229 shares of unvested restricted stock outstanding as of September 30, 2025, shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases and shares issued as stock dividends from October 2020 and through January 2024. From October 2020 and through January 2024, the Company issued an aggregate of 5.2 million shares (as adjusted to reflect the Reverse Stock Split) in respect to the stock dividends. Except for restricted shares awarded under the Plan (as defined below), no no other additional shares of common stock were issued during the year ended December 31, 2024.
References made to weighted-average shares and per-share amounts in the consolidated statements of operations and comprehensive income or loss have been retroactively adjusted to reflect the cumulative increase in shares outstanding due to the stock dividends and are noted as such throughout the accompanying financial statements and notes. In addition, on March 26, 2025, the Company published a new Estimated Per-Share NAV as of December 31, 2024, which was approved by the Board on March 26, 2025. See Note 1 — Organization for additional information.
Distribution Reinvestment Plan
Pursuant to the DRIP, stockholders may elect to reinvest distributions paid in cash by the Company into shares of common stock. 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 nine months ended September 30, 2025 and the year ended December 31, 2024, the Company did no
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. During the year ended December 31, 2023, The Company extended the expiration date of the stockholders rights plan from May 18, 2023 to May 18, 2026.
26
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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 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 an 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 in October 2021 as authorized shares of its Series B Preferred Stock.
The Company also had 100,000
Preferred Stock Repurchase Program
On May 2, 2025, the Board authorized a stock repurchase program for up to an aggregate amount of $50.0 million of the Series A Preferred Stock and Series B Preferred Stock. During the three months ended September 30, 2025, the Company repurchased and retired 74,713 shares of Series A Preferred Stock at an average price of $16.10 and 97,670 shares of Series B Preferred Stock at an average price of $16.03 , inclusive of commissions. During the nine months ended September 30, 2025, the Company repurchased and retired 131,629 shares of Series A Preferred Stock at an average price of $15.39 and 163,883 shares of Series B Preferred Stock at an average price of $15.14 , inclusive of commissions. Any repurchased shares are treated as authorized and unissued shares of preferred stock without designation as to class or series in accordance with Maryland law and the terms of the Series A Preferred Stock and Series B Preferred Stock and shown as a reduction of stockholder’s equity at cost.
Distributions and Dividends
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 were issued 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. The Company has not declared a quarterly stock dividend since January 2024, and does not intend to declare any further stock dividends in the future.
Note 9 — Related Party Transactions and Arrangements
Fees Incurred in Connection with the Operations of the Company Prior to the Internalization
Prior to September 2024, the former Advisor managed the Company’s day-to-day business and received compensation and fees for providing services to the Company pursuant to an advisory agreement. Immediately following the Internalization, the Company and the former Advisor (now a wholly owned subsidiary of the Company following the Internalization) terminated the advisory agreement by mutual agreement. The following describes certain expenses and fees that the Company was obligated to pay under the advisory agreement prior to its termination.
Asset Management Fees
Under the limited partnership agreement of the OP (as amended from time to time, the “LPA”) and the previous advisory agreement and until March 31, 2015, for its asset management services, the Company issued the former Advisor an asset management subordinated participation by causing the OP to issue to the former 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 former Advisor is still providing advisory services to the Company (the “Performance Condition”). Unvested Class B Units would 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.
27
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
The Board previously approved the issuance of 359,250 Class B Units to the former Advisor in connection with this arrangement. 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 September 30, 2025, the Company determined that achieving the Performance Condition was not yet considered probable for accounting purposes. 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. In connection with the Internalization, immediately prior to Closing, the former Advisor transferred 359,250 Class B Units to the former Advisor Parent.
The advisory agreement also required the Company to pay the former Advisor a base management fee. The fixed portion of the base management fee was equal to $1.625 million per month, while the variable portion of the base management fee was equal to one-twelfth of 1.25 % of the cumulative net proceeds of any equity issued by the Company and its subsidiaries subsequent to February 17, 2017 per month. In addition, the advisory agreement required the Company to pay the former Advisor certain variable management/incentive fee quarterly in arrears. No incentive fee was incurred for the nine months ended September 30, 2024. Upon termination of the advisory agreement, the Company is no longer obligated to pay the base management fee or the variable management/incentive fee.
In connection with the Internalization, on the Closing Date, the former Advisor Parent received an asset management fee of $10.9 million, representing the aggregate base management fee that the Company would have been required to pay to the former Advisor during the month notice period required to terminate the advisory agreement, inclusive of $5.5 million of base management fees that the Company would have been required to pay to the former Advisor during the remaining three month notice period following the Closing Date.
Professional Fees and Other Reimbursements
Prior to the termination of the advisory agreement, the Company reimbursed the former Advisor’s costs of providing administrative services including personnel costs. During the three and nine months ended September 30, 2024, the Company incurred $2.7 million and $9.1 million, respectively, of reimbursement expenses from the former Advisor for providing administrative services. These reimbursement expenses were included in general and administrative expense in the consolidated statements of operations and comprehensive loss. The former Advisor was also reimbursed for services provided for which it incurred investment-related expenses or insourced expenses.
Property Management Fees
Until the Property Manager became the Company’s wholly-owned subsidiary as part of the Internalization, the Company paid 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 reimbursed the Property Manager for property level expenses incurred by the Property Manager.
28
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Summary of Related Party Expenses and Payables
The following table details amounts incurred and payable in connection with the Company’s operations-related services described above as of and for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | Payable (Prepayments) as of | |||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | Incurred | Incurred | Incurred | Incurred | September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
Non-recurring fees and reimbursements: | |||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition cost reimbursements | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
Termination fees (1) | |||||||||||||||||||||||||||||||||||||||||||||||
Ongoing fees and reimbursements: | |||||||||||||||||||||||||||||||||||||||||||||||
| Asset management fees | |||||||||||||||||||||||||||||||||||||||||||||||
Professional fees and other reimbursements (2) | |||||||||||||||||||||||||||||||||||||||||||||||
Property management fees (3) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total related party operation fees and reimbursements | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
(1)Reflects the Promissory Note issued to the former Advisor Parent in connection with the Internalization, which was repaid in full in January 2025.
(2)Included in general and administrative expenses in the consolidated statements of operations.
(3)The three months and nine ended September 30, 2024 include $0.1 million and $0.8 million, respectively, of leasing commissions which are capitalized and included in deferred costs, net on the Company’s consolidated balance sheets.
Internalization
For details regarding the terms of the Internalization, see Note 1 — Organization — Internalization.
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
Under the LPA, if the common stock of the Company is listed on a national securities exchange, an affiliate of the former Advisor Parent 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 (i) the market value of all issued and outstanding shares of common stock at the time of listing plus distributions since the Company’s initial public offering of common stock in 2013 exceeds (ii) the aggregate capital contributed by the original investors plus an amount equal to a 6.0 % cumulative, pre-tax non-compounded annual return to the original investors in the Company’s initial public offering of common stock in 2013. None of these distributions has been earned through the date of this Quarterly Report on Form 10-Q and no such distribution was incurred during the three and nine months ended September 30, 2025 or 2024. The Company currently expects it is highly unlikely that the OP will be obligated to make such a subordinated incentive listing distribution.
Subordinated Participation in Net Sales Proceeds
Under the LPA, upon a liquidation or sale of all or substantially all of the Company’s assets, including through a merger or sale of stock, an affiliate of the former Advisor Parent 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 the original investors in the Company’s initial public offering of common stock in 2013 plus payment to investors of a 6.0 % cumulative, pre-tax non-compounded annual return on the capital contributed by investors. None of these distributions has been earned through the date of this Quarterly Report on Form 10-Q and no such participation in net sales proceeds became due and payable during the three and nine months ended September 30, 2025 or 2024.
29
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Termination Fees
Under the LPA, upon termination or non-renewal of the advisory agreement with the former Advisor, with or without cause, an affiliate of the former Advisor Parent was 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 in 2013. However, in accordance with the terms of the LPA, in connection with the Internalization and the Company’s termination of the advisory agreement, the affiliate of the former Advisor Parent deferred its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs. None of these fees has been earned through the date of this Quarterly Report on Form 10-Q and no such fees became due and payable during the nine months ended September 30, 2025 or 2024. The Company currently expects it is highly unlikely that the OP will be obligated to make such subordinated termination distributions.
Note 10 — Economic Dependency
Under various agreements, prior to the Internalization, the Company engaged the former Advisor, its affiliates and entities under common control with the former Advisor to provide certain services that were 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 was dependent upon the former Advisor and its affiliates prior to the Internalization.
Note 11 — Equity-Based Compensation
Stock-Based Compensation
On May 22, 2025, the Company’s stockholders approved the 2025 Omnibus Incentive Compensation Plan of National Healthcare Properties, Inc. (the “Plan”). The Plan provides for the granting of stock-based compensation to employees and directors, including restricted shares of common stock, restricted stock units (“RSUs”) and long-term incentive partnership units in the OP. The maximum number of shares of common stock reserved for awards under the Plan is 1.9 million shares plus 6.5 % of any shares issued and sold by the Company in any private or public offering that occurs following the approval of the Plan through, and including, an initial public offering of the Company’s common stock pursuant to an effective registration statement filed with the SEC. As of September 30, 2025, 1.7 million of the reserve shares are available for future equity rewards.
Under the Plan, the fair market value of restricted shares of common stock is expensed over the vesting period. Time-based restricted shares granted to the Board, executive officers and employees, which vest based solely upon passage of time, generally vest on a graded schedule over a period of to three years . The fair value of time-based restricted shares is based on the Company’s most recently published NAV.
Performance-based RSUs granted to the executive officers and certain other employees may be earned and vest, if at all, at the end of a three-year performance period subject to continued employment through the performance period and the achievement of performance goals set forth in the related award agreements. The number of shares that ultimately vest based on performance can be either 0 % or vary from 50 % to 200 % of target depending on the level of achievement of the performance criteria. The fair value of performance-based RSUs is determined based on the Company’s most recently published NAV and management’s expectation of the amount of RSUs to be earned and vested at the end of the performance period.
The total grant date fair value of time-based restricted shares and performance-based RSUs granted during the nine months ended September 30, 2025 was $6.4 million, net of forfeitures. No awards were granted during the three months ended September 30, 2025.
Upon vesting of restricted shares and RSUs, the participant is required to pay the related tax withholding obligation, as applicable. The Company generally reduces the number of shares of common stock delivered to pay the employee tax withholding obligation. The value of the shares withheld is dependent on the Company’s most recently published NAV.
The following table summarizes stock-based compensation activity for the nine months ended September 30, 2025 (units in thousands):
30
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
| Number of Restricted Shares or RSUs | Weighted-Average Issue Price | |||||||||||||
Unvested, January 1, 2025 | $ | |||||||||||||
| Vested | ( | $ | ||||||||||||
| Granted | $ | |||||||||||||
| Forfeitures | ( | $ | ||||||||||||
Unvested, September 30, 2025 | $ | |||||||||||||
Total stock-based compensation cost was $1.3 million and $1.9 million for the three and nine months September 30, 2025, respectively, which was recognized in general and administrative expense in the Company’s consolidated statements of operations and comprehensive loss. As of September 30, 2025 there was $6.1 million of future expenses related to unvested stock-based compensation arrangements granted under the Plan, which is expected to be recognized over a weighted average period of 2.1 years.
Previous Restricted Share Plan
The Company previously adopted an employee and director incentive restricted share plan (the “RSP”), which provided the Company with the ability to grant awards of restricted shares of common stock (“restricted shares”). The RSP expired in February 2023. As of September 30, 2025, there were no unvested shares under the RSP and the Company did not have any remaining unrecognized compensation cost related to unvested restricted share awards granted under the RSP. Compensation expense related to restricted shares was $0.2 million and $0.6 million for the three and nine months ended September 30, 2024, respectively.
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 on Designated Derivative | |||||||
Balance, December 31, 2024 | $ | |||||||
| Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives | ( | |||||||
| Amount of gain reclassified from accumulated other comprehensive income | ( | |||||||
Balance, September 30, 2025 | $ | |||||||
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, previously designated hedges were terminated and the termination costs are being amortized over the term of the hedged item.
31
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Series A Preferred Units held by third parties | $ | $ | ||||||||||||
| Common OP Units held by third parties | ||||||||||||||
Total Non-controlling Interests in the OP | ||||||||||||||
| Non-controlling Interests in property owning subsidiaries | ||||||||||||||
| Total Non-controlling interests | $ | $ | ||||||||||||
Net loss attributable to non-controlling interests in the Company’s consolidated statements of operations and comprehensive loss are comprised of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Income attributable to Series A Preferred Units held by third parties | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Loss attributable to Common OP Units held by third parties | ||||||||||||||||||||||||||
| Net loss attributable to non-controlling interests in the OP | ( | ( | ||||||||||||||||||||||||
| Income attributable to non-controlling interests in property-owning subsidiaries | ( | ( | ( | |||||||||||||||||||||||
| Net loss attributable to non-controlling interests | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
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 OMF 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, which earn dividends at a rate equal to 7.375 % of its face value. After holding the Series A Preferred Units for a period of one year , a holder of Series A Preferred Units has the right to redeem Series A Preferred Units for, at the option of the OP, the corresponding number of shares of the Company’s Series A Preferred Stock, or the cash equivalent. The remaining rights of the limited partners in the 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 three and nine months ended September 30, 2025 and 2024, Series A Preferred Unit holders were paid $46,000 0.1
Common OP Units
The Company is the sole general partner and holds substantially all of the Common OP Units. In November 2014, the Company partially funded the purchase of an OMF 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.
32
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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 nine months ended September 30, 2025 and 2024, Common OP Unit non-controlling interest holders were no
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 September 30, 2025 would be redeemable for 124,161 shares of common stock, giving effect to adjustments for the impact of the stock dividends through January 2024 and the Reverse Stock Split.
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 September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Property Name (Dollar amounts in thousands) | Investment Date | September 30, 2025 | September 30, 2025 | September 30, 2025 | December 31, 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
Plaza Del Rio Outpatient Medical Campus Portfolio (1) | May 2015 | $ | % | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
_______
(1)Of the six total properties in the Plaza Del Rio Outpatient Medical Campus Portfolio, three properties were encumbered under the Capital One OMF Loan and one property was encumbered under the Multi-Property CMBS Loan. See Note 4 — Mortgage Notes Payable, Net and Note 5 — for additional information.
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 and the Reverse Stock Split (see Note 1 — Organization and Note 8 — Stockholders’ Equity for additional details):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Net loss attributable to common stockholders (in thousands) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Basic and diluted weighted-average shares outstanding | ||||||||||||||||||||||||||
Basic and diluted net loss per share | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
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.
33
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
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 and the Reverse Stock Split (see Note 1 — Organization for additional details):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Unvested restricted shares (1) | ||||||||||||||||||||||||||
Common OP Units (2) | ||||||||||||||||||||||||||
Class B Units (3) | ||||||||||||||||||||||||||
Total weighted average antidilutive common stock equivalents | ||||||||||||||||||||||||||
________
(1)Weighted average number of antidilutive unvested restricted shares outstanding for the periods presented. There were 200,422 and zero unvested restricted shares outstanding as of September 30, 2025 and 2024, 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 and the Reverse Stock Split (see Note 1 — Organization for additional details). There were 405,998
(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 and the Reverse Stock Split (see Note 1 — Organization for additional details). There were 359,250
Note 15 — Segment Reporting
The Company has two two
The Company’s CODM is provided financial data on a periodic basis which includes net operating income (“NOI”) for each of the reportable business segments. This serves as the profit or loss measure used by the CODM for performance assessment and resource allocation.
The Company’s CODM is its Chief Executive Officer. The Company, through its CODM, evaluates performance and makes resource allocations based on its two
Net Operating Income
The Company evaluates the performance of the combined properties in each segment using NOI, which is defined as total revenues from tenants, less property operating costs. As such, this excludes all other items of expense and income included in the consolidated financial statements in calculating consolidated income (loss) before income taxes. 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 consolidated income (loss) before income taxes.
NOI excludes certain components from consolidated income (loss) before income taxes 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.
34
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
The following table presents the operating financial information for the Company’s two business segments for the three months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
OMFs(1): | ||||||||||||||||||||||||||
| Revenue from tenants | $ | $ | $ | $ | ||||||||||||||||||||||
| Less: Property operating and maintenance | ||||||||||||||||||||||||||
| NOI | $ | $ | $ | $ | ||||||||||||||||||||||
| SHOPs: | ||||||||||||||||||||||||||
| Revenue from tenants | $ | $ | $ | $ | ||||||||||||||||||||||
| Less: Property operating and maintenance | ||||||||||||||||||||||||||
Compensation related expenses(2) | ||||||||||||||||||||||||||
Other property operating and maintenance(3) | ||||||||||||||||||||||||||
| NOI | $ | $ | $ | $ | ||||||||||||||||||||||
(1) The CODM uses NOI to evaluate performance of the OMF segment as a large portion of the property-level operating expenses is recovered from tenants.
(2) Includes costs incurred for salaries, benefits and other labor related costs.
(3) Includes costs incurred for supplies, management fees, taxes, insurance and overhead.
35
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
Reconciliation to Consolidated Financial Information
A reconciliation of the total reportable segments’ NOI to consolidated net loss attributable to common stockholders is presented below:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Net loss attributable to common stockholders: | ||||||||||||||||||||||||||
Net Operating Income: | ||||||||||||||||||||||||||
| OMFs | $ | $ | ||||||||||||||||||||||||
| SHOPs | ||||||||||||||||||||||||||
Total NOI | ||||||||||||||||||||||||||
| Impairment charges | ( | ( | ( | ( | ||||||||||||||||||||||
Operating fees to related parties | ( | ( | ||||||||||||||||||||||||
Termination fees to related parties | ( | ( | ||||||||||||||||||||||||
| Acquisition and transaction related | ( | ( | ( | ( | ||||||||||||||||||||||
| General and administrative | ( | ( | ( | ( | ||||||||||||||||||||||
| Depreciation and amortization | ( | ( | ( | ( | ||||||||||||||||||||||
Gain (loss) on sale of real estate investment | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
Interest and other income | ||||||||||||||||||||||||||
Gain on extinguishment of debt | ||||||||||||||||||||||||||
Gain on non-designated derivatives | ( | ( | ( | |||||||||||||||||||||||
Loss before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||
Income tax expense (benefit) | ( | ( | ( | |||||||||||||||||||||||
Net loss | ( | ( | ( | ( | ||||||||||||||||||||||
Net loss (gain) attributable to non-controlling interests | ( | ( | ||||||||||||||||||||||||
Preferred stock distributions | ( | ( | ( | ( | ||||||||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
36
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
The following table reconciles investments in real estate, net by segment to consolidated total assets as of the periods presented:
| (In thousands) | September 30, 2025 | December 31, 2024 | ||||||||||||
| ASSETS | ||||||||||||||
| Investments in real estate, net: | ||||||||||||||
| OMF Segment | $ | $ | ||||||||||||
| SHOP Segment | ||||||||||||||
| Total investments in real estate, net | ||||||||||||||
Assets held-for-sale | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Restricted cash | ||||||||||||||
| Derivative assets, at fair value | ||||||||||||||
| Straight-line rent receivable, net | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Prepaid expenses and other assets | ||||||||||||||
| Deferred costs, net | ||||||||||||||
Accounts receivable, net | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
Note 16 — Commitments and Contingencies
As of September 30, 2025, the Company had six operating and five direct financing lease agreements. The six operating leases have durations, including assumed renewals, ranging from 17.1 years to 36.1 years, excluding an adjacent parking lot lease with a term of 1.0 year. The Company did not enter into any additional ground leases during the nine months ended September 30, 2025.
As of September 30, 2025, the Company had ROU assets and liabilities of $7.3 million and $8.3 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively, on the Company’s consolidated balance sheets. 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 29.2 years and a weighted-average discount rate of 7.37 % as of September 30, 2025. For each of the three months ended September 30, 2025 and 2024, the Company paid cash of $0.2 0.2 0.6 0.6
37
NATIONAL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
The following table reflects the base cash rental payments due from the Company for the next five years as of September 30, 2025:
| Future Base Rent Payments | ||||||||||||||
| (In thousands) | Operating Leases | Direct Financing Leases (1) | ||||||||||||
| 2025 (remainder) | $ | $ | ||||||||||||
| 2026 | ||||||||||||||
| 2027 | ||||||||||||||
| 2028 | ||||||||||||||
| 2029 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total minimum lease payments | ||||||||||||||
| Less: amounts representing interest | ( | ( | ||||||||||||
| Total present value of minimum lease payments | $ | $ | ||||||||||||
_______
(1)The direct finance lease liability is included in on the balance sheet as of September 30, 2025. 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. As of September 30, 2025, 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 September 30, 2025, 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 those listed below:
Subsequent to September 30, 2025, the Company disposed of one SHOP in Georgia, for a contract sales price of $6.3 million. As of September 30, 2025, the SHOP was classified as held-for-sale.
Subsequent to September 30, 2025, the Company entered into separate purchase and sale agreements to sell four properties consisting of two SHOPs and two OMFs for an aggregate contract sales price of $4.7 million. The Company can provide no assurance that these dispositions will close on the expected timeline or at all.
In October 2025, the Company purchased two interest rate caps with a notional of $146.1 million for $0.4 million that limit one-month SOFR to 3.50 % and mature in November 2026 related to the Fannie Mae Secured Debt. These interest rate caps were purchased in advance of interest rate caps set to expire.
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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 National Healthcare Properties, Inc. and the notes thereto. As used herein, the terms the “Company,” “we,” “our” and “us” refer to National Healthcare Properties, Inc., a Maryland corporation, including, as required by context, National Healthcare Properties Operating Partnership, LP (our “OP”), a Delaware limited partnership, and its subsidiaries. Prior to consummation of the Internalization (as defined below), the Company was externally managed by Healthcare Trust Advisors, LLC (the “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
This Quarterly Report on Form 10-Q contains “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,”, “projects,” “potential,” “predicts,” “intends,” “would,” “could,” “should” or similar expressions, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those contemplated by such forward-looking statements. We believe these forward-looking statements are reasonable; however, you should not place undue reliance on any forward-looking statements, which are based on current expectations. 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. We intend that all forward-looking statements be subject to the safe-harbor provisions of the PSLRA.
These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the risks associated with the internalization of our property management and advisory functions; the geopolitical instability due to the ongoing military conflicts between Russia and Ukraine, including related impact on us, our tenants, operators and the global economy and financial markets; the increased economic and political uncertainties due to the tariffs imposed by, or imposed on, the United States and its trading relationships; and that our ongoing or potential future transactions are subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all. Some of the additional 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, 2024, in Part II — Other Information, Item IA — Risk Factors of this Quarterly Report on Form 10-Q and as described from time to time in our other filings with the Securities and Exchange Commission.
Overview
We are a real estate investment trust (“REIT”) for U.S. federal income tax purposes. We acquire, own and manage a diversified portfolio of healthcare-related real estate focused on outpatient medical facilities (“OMFs”) and senior housing operating properties (“SHOPs”). As of September 30, 2025, we owned 174 properties (including one land parcel and one property classified as held-for-sale) located in 30 states and comprised of 7.3 million rentable square feet.
Substantially all of our business is conducted through the OP and its wholly-owned subsidiaries. Prior to consummation of the Internalization on September 27, 2024, our former Advisor managed our day-to-day business with the assistance of our property manager, Healthcare Trust Properties, LLC (the “Property Manager”); the former Advisor and Property Manager were under common control with AR Global Investments, LLC (the “Advisor Parent”) and these related parties received compensation and fees for providing services to us. In connection with the Internalization, we internalized our advisory and property management functions with our own dedicated workforce; the Property Manager became our wholly-owned subsidiary as a result of the Internalization (See Note 1 - Organization and Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q).
We operate in two reportable business segments for management and financial reporting purposes: OMFs and SHOPs. All of our properties across both business segments are located throughout the United States. In our OMF operating segment, we own, manage and lease single- and multi-tenant OMFs where tenants are generally 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 OMFs. In our SHOP segment, we invest in seniors housing properties through the REIT Investment Diversification and Empowerment Act of 2007 structure. As of September 30, 2025, we had four eligible independent contractors operating 39 SHOPs.
39
We declared and issued quarterly dividends entirely in shares of our common stock from October 2020 through January 2024. We do not intend to declare any further stock dividends in the future.
On March 26, 2025, we published a new Estimated Per-Share NAV equal to $32.15 as of December 31, 2024. The Estimated Per-Share NAV has not been adjusted since publication and will not be adjusted until our board of directors (“Board”) determines a new Estimated Per-Share NAV. We intend to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless and until we list our common stock.
Reverse Stock Split
Effective September 30, 2024, we effected a reverse stock split of our common stock (the “Reverse Stock Split”). Upon the effectiveness of the Reverse Stock Split, every four shares of our issued and outstanding common stock automatically combined and reclassified into one issued and outstanding share of common stock. All share and per share data in this Quarterly Report on Form 10-Q have been adjusted for all periods presented to reflect the Reverse Stock Split.
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, 2024 filed with the SEC on February 27, 2025. 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
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 September 30, 2025:
| Portfolio | Number of Properties | Rentable Square Feet | Percentage Leased (1) | Weighted Average Remaining Lease Term in Years (2) | Gross Asset Value (3) | |||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
| OMF Segment | 133 | 3,771,395 | 90.6% | (5) | 5.5 | $ | 1,165,275 | |||||||||||||||||||||||||
| SHOP Segment | 41 | (4) | 3,538,285 | 84.9% | (5) | N/A | 1,043,136 | |||||||||||||||||||||||||
| Total Portfolio | 174 | 7,309,680 | $ | 2,208,411 | ||||||||||||||||||||||||||||
________
(1)Percentage leased as of September 30, 2025.
(2)Weighted-average remaining lease term in years is calculated based on square feet as of September 30, 2025.
(3)Gross asset value represents total real estate investments, at cost ($2.2 billion total as of September 30, 2025) net of gross market lease intangible liabilities ($19.9 million total as of September 30, 2025). Cumulative impairment charges are reflected within gross asset value.
(4)Includes one parcel of land. As of September 30, 2025, we had 3,730 rentable units in our SHOP segment. The SHOP segment excludes one vacant SHOP property.
(5)Percentage leased for the OMF segment is presented as of the end of the period shown; percentage leased for the SHOP segment represents occupancy as of the end of the period shown.
40
Results of Operations
Comparison of the Three Months Ended September 30, 2025 and 2024
Net loss attributable to common stockholders was $15.9 million and $44.1 million, respectively, for the three months ended September 30, 2025 and 2024. The following table shows our results of operations for the three months ended September 30, 2025 and 2024 and the period to period change by line item of the consolidated statements of operations:
| Three Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | $ | |||||||||||||||||
| Revenue from tenants | $ | 86,026 | $ | 88,940 | $ | (2,914) | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Property operating and maintenance | 53,845 | 56,407 | (2,562) | |||||||||||||||||
| Impairment charges | 6,641 | 8,829 | (2,188) | |||||||||||||||||
Operating fees to related parties | — | 6,391 | (6,391) | |||||||||||||||||
Termination fees to related parties | — | 8,409 | (8,409) | |||||||||||||||||
| Acquisition and transaction related | 91 | 5,187 | (5,096) | |||||||||||||||||
| General and administrative | 5,671 | 5,502 | 169 | |||||||||||||||||
| Depreciation and amortization | 18,029 | 20,720 | (2,691) | |||||||||||||||||
| Total expenses | 84,277 | 111,445 | (27,168) | |||||||||||||||||
| Operating loss before loss on sale of real estate investments | 1,749 | (22,505) | 24,254 | |||||||||||||||||
Gain on sale of real estate investments | 626 | 1,579 | (953) | |||||||||||||||||
Operating income (loss) | 2,375 | (20,926) | 23,301 | |||||||||||||||||
Other expense: | ||||||||||||||||||||
| Interest expense | (15,060) | (18,007) | 2,947 | |||||||||||||||||
Interest and other income | 294 | 548 | (254) | |||||||||||||||||
Gain on non-designated derivatives | (77) | (2,384) | 2,307 | |||||||||||||||||
| Total other expenses | (14,843) | (19,843) | 5,000 | |||||||||||||||||
| Loss before income taxes | (12,468) | (40,769) | 28,301 | |||||||||||||||||
Income tax benefit | (66) | — | (66) | |||||||||||||||||
| Net loss | (12,534) | (40,769) | 28,235 | |||||||||||||||||
| Net loss attributable to non-controlling interests | (21) | 77 | (98) | |||||||||||||||||
| Allocation for preferred stock | (3,326) | (3,450) | 124 | |||||||||||||||||
| Net loss attributable to common stockholders | $ | (15,881) | $ | (44,142) | $ | 28,261 | ||||||||||||||
41
Segment Results — Outpatient Medical Facilities
The following table presents the revenue and property operating and maintenance expense and the period to period change within our OMF segment for the three months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Increase (Decrease) to NOI | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from tenants | $ | 29,022 | $ | 34,303 | $ | (5,281) | (15.4) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Property operating and maintenance | 8,391 | 10,656 | (2,265) | (21.3) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOI | $ | 20,631 | $ | 23,647 | $ | (3,016) | (12.8) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Properties at September 30, | Ending Occupancy at September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Total Portfolio | 133 | 153 | 90.6 | % | 90.5 | % | ||||||||||||||||||||
Revenue from tenants primarily reflects contractual rent received from tenants in our OMFs and operating expense reimbursements. These reimbursements generally increase in proportion with the increase in property operating and maintenance expenses in our OMF segment. Pursuant to many of our lease agreements in our OMFs, tenants are generally required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, certain capital expenditures, and salaries in addition to base rent. Property operating and maintenance expenses reflect the costs associated with our OMFs, including real estate taxes, utilities, repairs, maintenance and property management fees.
The OMF net operating income (“NOI”) decrease for the three months ended September 30, 2025 over the same period in 2024 was primarily driven by OMF dispositions subsequent to September 30, 2024, which was partially offset by increased expense recovery from tenants (See Note 15 - Segment Reporting to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on our presentation of NOI for the segments).
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 September 30, 2025 and 2024:
| Three Months Ended September 30, | Increase (Decrease) to NOI | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from tenants | $ | 57,004 | $ | 54,637 | $ | 2,367 | 4.3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Property operating and maintenance | 45,454 | 45,751 | (297) | (0.6) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOI | $ | 11,550 | $ | 8,886 | $ | 2,664 | 30.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Properties at September 30, | Average Occupancy for the Three Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Total Portfolio (1) | 41 | 45 | 83.2 | % | 77.5 | % | ||||||||||||||||||||
(1)Includes one land parcel for both the three months ended September 30, 2025 and 2024.
Revenues from tenants within our SHOP segment are generated in connection with rent and services offered to residents 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.
The SHOP NOI increase for the three months ended September 30, 2025 over the same period in 2024 was primarily due to positive trends in revenue driven by occupancy gains and lower insurance expenses in 2025, which were partially offset by dispositions subsequent to September 30, 2024.
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Other Results of Operations
Impairment Charges
We recorded $6.6 million of impairment charges during the three months ended September 30, 2025. This impairment was recorded to reduce the carrying value of two SHOPs and two OMFs to their estimated fair value.
We recorded $8.8 million of impairment charges during the three months ended September 30, 2024. This impairment was recorded to reduce the carrying value of a held-for-use OMF to its estimated fair value.
See Note 3 — Real Estate Investments, Net 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
Prior to the consummation of the Internalization, our former Advisor and the Property Manager were paid for asset management and property management services for managing our properties on a day-to-day basis. Following the consummation of the Internalization, we are no longer paying the above-referenced fees to the related parties.
Operating fees to these related parties were $6.4 million for the three months ended September 30, 2024. No operating fees to related parties were incurred during the three months ended September 30, 2025 as a result of the Internalization.
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 to our former Advisor.
Termination Fees to Related Parties
We recorded $8.4 million of termination fees to related parties in the three months ended September 30, 2024 as a result of our termination of the advisory agreement with the former Advisor and our transition to self-management through the Internalization.
Acquisition and Transaction Related Expenses
Acquisition and transaction related expenses decreased by $5.1 million to $0.1 million for the three months ended September 30, 2025 from $5.2 million for the three months ended September 30, 2024, primarily due to advisory, legal and other professional costs and non-recurring employee transition expenses directly related to the Internalization incurred in 2024.
General and Administrative Expenses
General and administrative expenses increased by $0.2 million to $5.7 million for the three months ended September 30, 2025 from $5.5 million for the three months ended September 30, 2024, primarily due to the stock-based compensation expense incurred in the three months ended September 30, 2025. This increase was partially offset by lower professional fees for the three months ended September 30, 2025.
See Note 11 — Equity-Based Compensation to our consolidated financial statements in this Quarterly Report on Form 10-Q which provides detail on stock-based compensation.
Depreciation and Amortization Expenses
Depreciation and amortization expense decreased by $2.7 million to $18.0 million for the three months ended September 30, 2025 from $20.7 million for the three months ended September 30, 2024. The decrease was primarily attributable to property dispositions subsequent to the third quarter of 2024.
Gain on Sale of Real Estate Investments
Gain on sale of real estate investments decreased by $1.0 million to $0.6 million for the three months ended September 30, 2025 from $1.6 million for the three months ended September 30, 2024, primarily due to the disposal of seven OMFs, one SHOP and one land parcel for an aggregate contract sales price of $79.3 million and an aggregate gain on sale of $1.6 million in 2024.
Interest Expense
Interest expense decreased by $2.9 million to $15.1 million for the three months ended September 30, 2025 from $18.0 million for the three months ended September 30, 2024. The decrease in interest expense was mainly due to lower average balances of our indebtedness during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.
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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). Continued high 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 decreased by $0.3 million to $0.3 million for the three months ended September 30, 2025 from $0.5 million for the three months ended September 30, 2024. This decrease is due to excess insurance reimbursement in September 30, 2024, partially offset by higher interest rates on, and balances of, our cash accounts during the three months ended September 30, 2025.
Gain (loss) on Non-Designated Derivatives
The gain (loss) in the three months ended September 30, 2025 and 2024 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 Secured Debt, 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 Benefit
Income taxes generally relate to our SHOPs, which are leased to our TRS. We recorded an income tax benefit of approximately $0.1 million for the three months ended September 30, 2025. Income tax benefit for the three months ended September 30, 2024 was not material.
Because of our TRS’s recent operating history of losses and the adverse economic impacts from increases in the rate of inflation in recent years on the results of operations of our SHOP assets, we are not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets; thus we have recorded a 100% valuation allowance on our net deferred tax assets through September 30, 2025. 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.
Allocation for Preferred Stock Distributions
Allocation for preferred stock decreased by $0.1 million to $3.3 million for the three months ended September 30, 2025 from $3.5 million for the three months ended September 30, 2024. The decrease is due to repurchases of our preferred stock during the three months ended September 30, 2025.
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Comparison of the Nine Months Ended September 30, 2025 and 2024
Net loss attributable to common stockholders was $45.1 million and $183.1 million, respectively, for the nine months ended September 30, 2025 and 2024. The following table shows our results of operations for the nine months ended September 30, 2025 and 2024 and the period to period change by line item of the consolidated statements of operations:
| Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||||||||
| Revenue from tenants | $ | 257,801 | $ | 266,056 | $ | (8,255) | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Property operating and maintenance | 165,880 | 166,557 | (677) | |||||||||||||||||
| Impairment charges | 33,752 | 11,498 | 22,254 | |||||||||||||||||
Operating fees to related parties | — | 19,181 | (19,181) | |||||||||||||||||
Termination fees to related parties | — | 106,650 | (106,650) | |||||||||||||||||
| Acquisition and transaction related | 639 | 5,686 | (5,047) | |||||||||||||||||
| General and administrative | 15,642 | 16,938 | (1,296) | |||||||||||||||||
| Depreciation and amortization | 60,274 | 63,386 | (3,112) | |||||||||||||||||
Total expenses | 276,187 | 389,896 | (113,709) | |||||||||||||||||
Operating loss before gain/ (loss) on sale of real estate investments | (18,386) | (123,840) | 105,454 | |||||||||||||||||
Gain on sale of real estate investments | 28,267 | 1,354 | 26,913 | |||||||||||||||||
Operating income (loss) | 9,881 | (122,486) | 132,367 | |||||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Interest expense | (45,425) | (52,142) | 6,717 | |||||||||||||||||
Interest and other income | 512 | 1,077 | (565) | |||||||||||||||||
| Gain on extinguishment of debt | 257 | — | 257 | |||||||||||||||||
(Loss) gain on non-designated derivatives | (46) | 449 | (495) | |||||||||||||||||
Total other expenses | (44,702) | (50,616) | 5,914 | |||||||||||||||||
| Loss before income taxes | (34,821) | (173,102) | 138,281 | |||||||||||||||||
| Income tax expense | (60) | (135) | 75 | |||||||||||||||||
| Net loss | (34,881) | (173,237) | 138,356 | |||||||||||||||||
Net (income) loss attributable to non-controlling interests | (44) | 529 | (573) | |||||||||||||||||
| Allocation for preferred stock | (10,162) | (10,350) | 188 | |||||||||||||||||
| Net loss attributable to common stockholders | $ | (45,087) | $ | (183,058) | $ | 137,971 | ||||||||||||||
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Segment Results — Outpatient Medical Facilities
The following table presents the revenue and property operating and maintenance expense and the period to period change within our OMF segment for the nine months ended September 30, 2025 and 2024:
| Nine Months Ended September 30, | Increase (Decrease) to NOI | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from tenants | $ | 88,908 | $ | 103,573 | $ | (14,665) | (14.2) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Property operating and maintenance | 28,219 | 30,083 | (1,864) | (6.2) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOI | $ | 60,689 | $ | 73,490 | $ | (12,801) | (17.4) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Properties at September 30, | Ending Occupancy at September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Total Portfolio | 133 | 153 | 90.6 | % | 90.5 | % | ||||||||||||||||||||
Revenue from tenants primarily reflects contractual rent received from tenants in our OMFs and operating expense reimbursements. These reimbursements generally increase in proportion with the increase in property operating and maintenance expenses in our OMF segment. Pursuant to many of our lease agreements in our OMFs, tenants are generally required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, certain capital expenditures, and salaries in addition to base rent. Property operating and maintenance expenses reflect the costs associated with our OMFs, including real estate taxes, utilities, repairs, maintenance and property management fees.
The OMF NOI decrease for the nine months ended September 30, 2025 over the same period in 2024 was primarily driven by OMF dispositions subsequent to September 30, 2024, which was partially offset by increased expense recovery from tenants.
Segment Results — Seniors Housing - Operating Properties
The following table presents the revenue and property operating and maintenance expense and the period to period change within our SHOP segment for the nine months ended September 30, 2025 and 2024:
| Nine Months Ended September 30, | Increase (Decrease) to NOI | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from tenants | $ | 168,893 | $ | 162,483 | $ | 6,410 | 3.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Property operating and maintenance | 137,661 | 136,474 | 1,187 | 0.9 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOI | $ | 31,232 | $ | 26,009 | $ | 5,223 | 20.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Properties at September 30, | Average Occupancy for the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Total Portfolio (1) | 41 | 45 | 81.0 | % | 76.4 | % | ||||||||||||||||||||
(1)Includes one land parcel for both the nine months ended September 30, 2025 and 2024,.
Revenues from tenants within our SHOP segment are generated in connection with rent and services offered to residents 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.
The SHOP NOI increase for the nine months ended September 30, 2025 over the same period in 2024 was primarily due to positive trends in revenue driven by occupancy gains and lower insurance expenses in 2025, which were partially offset by dispositions subsequent to September 30, 2024.
Other Results of Operations
Impairment Charges
We recorded $33.8 million of impairment charges during the nine months ended September 30, 2025 on five SHOPs and four OMFs. These properties were impaired to their contractual sales price as determined by their purchase and sale agreements or estimated fair value.
We recorded $11.5 million of impairment charges during the nine months ended September 30, 2024 on two OMFs and one SHOP which were disposed in the nine months ended September 30, 2024.
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See Note 3 — Real Estate Investments, Net to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges for the nine months ended September 30, 2025 and 2024.
Operating Fees to Related Parties
Operating fees to these related parties were $19.2 million for the nine months ended September 30, 2024. No operating fees to related parties were incurred during the nine months ended September 30, 2025 as a result of the Internalization.
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 to our former Advisor.
Termination Fees to Related Parties
We recorded $106.7 million of termination fees to related parties in the nine months ended September 30, 2024 as a result of our termination of the advisory agreement with the former Advisor and our transition to self-management through the Internalization.
Acquisition and Transaction Related Expenses
Acquisition and transaction related expenses decreased by $5.0 million to $0.6 million for the nine months ended September 30, 2025 compared to $5.7 million for the nine months ended September 30, 2024. The decrease is primarily due to advisory, legal and other professional costs and non-recurring employee transition expenses directly related to the Internalization incurred in 2024.
General and Administrative Expenses
General and administrative expenses decreased by $1.3 million to $15.6 million for the nine months ended September 30, 2025 compared to $16.9 million for the nine months ended September 30, 2024. The decrease in general and administrative expenses was primarily due to $0.7 million of severance payments incurred in the nine months ended September 30, 2024 made to employees of the former Advisor and lower professional fees in the nine months ended September 30, 2025. This was partially offset by the stock-based compensation incurred in the nine months ended September 30, 2025.
Depreciation and Amortization Expenses
Depreciation and amortization expense decreased by $3.1 million to $60.3 million for the nine months ended September 30, 2025 as compared with $63.4 million for the nine months ended September 30, 2024. The decrease was primarily attributable to property dispositions subsequent to the third quarter of 2024, which was partly offset by amortization of deferred leasing commissions.
Gain on Sale of Real Estate Investments
During the nine months ended September 30, 2025, we disposed of 15 held-for-use OMFs and four SHOPs (three held-for-use and one held-for-sale) for an aggregate contract sales price of $191.6 million and recorded an an aggregate gain on sale of $28.3 million.
During the nine months ended September 30, 2024, we disposed of seven OMFs, two SHOPs and one land parcel for an aggregate contract sales price of $82.6 million and recorded an aggregate gain on sale of $1.4 million.
Interest Expense
Interest expense decreased by $6.7 million to $45.4 million for the nine months ended September 30, 2025 from $52.1 million for the nine months ended September 30, 2024. The decrease in interest expense was mainly due to lower average balances of our indebtedness nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.
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). Continued high 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 decreased by $0.6 million to $0.5 million for the nine months ended September 30, 2025 from $1.1 million. This decrease is due to excess insurance reimbursement in September 30, 2024.
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Gain on extinguishment of debt
We recorded a $0.3 million gain on extinguishment of debt the nine months ended September 30, 2025 in connection with the repayment of a loan prior to maturity relating to the sale of a property.
Gain on Non-Designated Derivatives
Gain on non-designated derivative instruments for the nine months ended September 30, 2025 and 2024 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with the Fannie Mae Secured Debt, which have floating interest rates.
Income Tax 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 both nine months ended September 30, 2025 and 2024.
Allocation for Preferred Stock
Allocation for preferred stock decreased by $0.2 million to $10.2 million for the nine months ended September 30, 2025 from $10.4 million for the nine months ended September 30, 2024. The decrease is due to repurchases of our preferred stock during the nine months ended September 30, 2025.
Cash Flows
The following table presents a reconciliation of our net cash provided by operations from our net loss for the nine months ended September 30, 2025 and 2024:
| Nine Months Ended September 30, | Increase | |||||||||||||||||||
(in thousands) | 2025 | 2024 | (Decrease) | |||||||||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | $ | 74,095 | $ | 91,316 | $ | (17,221) | ||||||||||||||
| Net cash used in operating activities | (3,008) | (86,300) | 83,292 | |||||||||||||||||
| Net cash provided by investing activities | 73,137 | 58,563 | 14,574 | |||||||||||||||||
| Net cash (used in) provided by financing activities | (41,688) | 21,333 | (63,021) | |||||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 102,536 | $ | 84,912 | $ | 17,624 | ||||||||||||||
Cash Flows from Operating Activities
Cash flows provided by operating activities increased by $83.3 million during the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to payments to the former Advisor Parent including partial repayment of the promissory note issued in connection with the Internalization (the “Promissory Note”) of $76.4 million in 2024.
Cash Flows from Investing Activities
Cash flows provided by investing activities increased by $14.6 million during the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to proceeds from the sale of 15 held-for-use OMFs and four held-for-use SHOPs during the nine months ended September 30, 2025 and lower costs incurred relating to property acquisitions in 2025.
Cash Flows from Financing Activities
Cash flows used in financing activities decreased by $63.0 million during the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the incurrence of the $30.3 million balance on the Promissory Note in 2024, full repayment of the OMF Warehouse Facility for $21.7 million in 2025 and preferred stock repurchases of $4.5 million in 2025 under our preferred stock repurchase program discussed below.
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 distributions to holders of our Series A Preferred Stock and Series B Preferred Stock. We closely 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 twelve months.
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Our future liquidity requirements and available liquidity, however, depend on many factors, such as recent and continuing increases in inflation, labor shortages, supply chain disruptions and higher property insurance, property tax and interest rates, all of which have and may continue to have adverse impacts on our results of operations and thus ultimately our liquidity. Moreover, these adverse impacts, as well as the increased economic and political uncertainties due to the ongoing wars in Ukraine, Israel and related sanctions and the tariffs imposed by, or imposed on, the United States and its trading relationships, may also adversely impact our tenants’ and residents’ ability to pay rent and thus our cash flows.
We expect to fund our future short-term operating liquidity requirements, including distributions to holders of Series A Preferred Stock and Series B Preferred Stock, through a combination of current cash on hand, net cash provided by our operating activities, net cash provided by our property dispositions (as discussed below) and potential new financings utilizing certain of our currently unencumbered properties.
As of September 30, 2025, we had $47.1 million of cash and cash equivalents. The Barclays OMF Loan Agreement requires us to maintain a minimum balance of cash and cash equivalents of $12.5 million at all times.
Internalization
Pursuant to the merger agreement dated August 6, 2024 (the “Internalization Agreement”) effecting the Internalization, (i) the outstanding membership interests of the former Advisor were converted into the right to receive from us an internalization fee of $98.2 million and (ii) the former Advisor Parent received (x) an asset management fee of $5.5 million, representing the aggregate base management fee that we would have been required to pay to our former Advisor during the remaining three month notice period required to terminate the advisory agreement, and (y) a property management fee of $2.9 million, representing the aggregate management fees that we would have been required to pay to the Property Manager through the current term of the property management agreement, subject to certain other adjustments (collectively, the “Closing Payments” in an aggregate amount of $106.6 million). For more information regarding the Internalization, including the fees paid therewith, see Note 1 — Organization and Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q.
Following the Internalization, we are no longer required to pay asset management and property management fees to the former Advisor Parent.
Financings
As of September 30, 2025, our total debt leverage ratio (total debt divided by total gross asset value) was approximately 45.1%. Net debt totaled $1.0 billion, which represents gross debt ($1.0 billion) less cash and cash equivalents ($47.1 million). Gross asset value totaled $2.2 billion, which represents total real estate investments, at cost ($2.2 billion) net of gross market lease intangible liabilities ($19.9 million). Cumulative impairment charges are reflected within gross asset value.
As of September 30, 2025, we had total gross borrowings of $1.0 billion, at a weighted-average interest rate of 5.44% and a weighted-average remaining term of 3.5 years. The weighted-average interest rate includes 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 (discussed below). Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on our total gross borrowings was 5.11% as of September 30, 2025.
As of September 30, 2025, the carrying value of our real estate investments, at cost was $2.2 billion, with $1.2 billion of this asset value pledged as collateral for mortgage notes payable and $625.0 million of this asset value pledged to secure advances under our Fannie Mae and other secured debt. 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 associated with the property is satisfied or the property is removed from the borrowing base of the Fannie Mae and other secured debt, which would impact availability thereunder.
Unencumbered real estate investments, at cost as of September 30, 2025 was $418.9 million. There can be no assurance as to the amount of liquidity we would be able to generate from leveraging these unencumbered real estate investments, if we are able to leverage them at all.
Mortgage Notes Payable
As of September 30, 2025, we had $705.9 million in mortgage notes payable outstanding, all of which is either fixed-rate or effectively fixed through our interest rate swap at a weighted-average annual interest rate of 4.70% and a weighted-average remaining term of 4.6 years.
Fannie Mae and Other Secured Debt
As of September 30, 2025, $336.2 million was outstanding under our Fannie Mae and other secured debt, which bore interest at a weighted-average annual rate of 7.00% and had a weighted-average remaining term of 1.1 years. Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate was 6.00% as of September 30, 2025.
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In April 2025, we repaid the OMF Warehouse Facility in full in the amount of $21.7 million plus unpaid interest and terminated the facility.
Non-Designated Interest Rate Caps
Our interest rate caps are used to limit our exposure to interest rate movements on our Fannie Mae Secured Debt for economic purposes, however, we do not elect to apply hedge accounting to these instruments. As of September 30, 2025, we had six SOFR-based interest rate caps with an aggregate notional amount of $342.8 million, which limits one-month SOFR to 3.50% and have varying maturities through November 2026. Although these interest rate caps are not designated hedging instruments, we consider them economically related to our variable-rate secured debt.
As SOFR has increased beyond 3.50%, we received cash payments of $2.6 million in the nine months ended September 30, 2025. We received $5.4 million of cash payments in the nine months ended September 30, 2024.
In April 2025, we terminated two interest rate caps with a notional of $21.7 million.
In June 2025, we purchased three interest rate caps with a notional of $133.8 million for $1.1 million that limit one-month SOFR to 3.50% and mature in November 2026 related to the Fannie Mae Secured Debt. These interest rate caps were purchased in advance of interest rate caps set to expire.
In October 2025, we purchased two interest rate caps with a notional of $146.1 million for $0.4 million that limit one-month SOFR to 3.50% and mature in November 2026 related to the Fannie Mae Secured Debt. These interest rate caps were purchased in advance of interest rate caps set to expire.
Capital Expenditures
During the nine months ended September 30, 2025, our aggregate capital expenditures were $17.0 million. We anticipate our quarterly rate of capital expenditures for the OMF and SHOP segments throughout the remainder of 2025 to be relatively consistent with the prior quarters.
Dispositions — Three and Nine Months Ended September 30, 2025
We disposed of one held-for-sale SHOP during the three months ended September 30, 2025 for a contract sales price of $1.8 million. This disposition resulted in a gain on sale of $0.1 million, which is included in our consolidated statements of operations and comprehensive loss for the three months ended September 30, 2025.
We disposed of 15 held-for-use OMFs and four SHOPs (three held-for-use and one held-for-sale) during the nine months ended September 30, 2025 for an aggregate contract sales price of $191.6 million. These dispositions resulted in an aggregate gain on sale of $28.3 million, which is included in our consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2025.
Dispositions — Subsequent to September 30, 2025
Subsequent to September 30, 2025, we disposed of one SHOP in Georgia for a contract sales price of $6.3 million. As of September 30, 2025, the SHOP was classified as held-for-sale.
Preferred Stock Repurchase Program
On May 2, 2025, our Board authorized a stock repurchase program for up to an aggregate amount of $50.0 million of our Series A Preferred Stock and Series B Preferred Stock. Under the program, which does not have a stated expiration date, we may repurchase shares of Series A Preferred Stock and Series B Preferred Stock from time to time through open market purchases, including pursuant to Rule 10b5-1 pre-set trading plans, block trades, privately negotiated transactions, accelerated share repurchase transactions entered into with one or more counterparties or otherwise, in compliance with applicable securities laws and other legal requirements. The timing, volume, and nature of repurchases are subject to market conditions, applicable securities laws and other factors, and the program may be amended, suspended or discontinued at any time. The program does not obligate us to repurchase any specific number of shares of Series A Preferred Stock and Series B Preferred Stock.
During the three months ended September 30, 2025, we repurchased and retired 74,713 shares of Series A Preferred Stock at an average price of $16.10 and 97,670 shares of Series B Preferred Stock at an average price of $16.03, inclusive of commissions. During the nine months ended September 30, 2025, we repurchased and retired 131,629 shares of Series A Preferred Stock at an average price of $15.39 and 163,883 shares of Series B Preferred Stock at an average price of $15.14, inclusive of commissions.
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Non-GAAP Financial Measures
This section discusses certain of the non-GAAP financial measures we use to evaluate our performance, including Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”). A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net loss attributable to common stockholders, are provided below.
We consider FFO and AFFO to be useful supplemental measures for reviewing comparative operating and financial performance because, by excluding the applicable items listed below, FFO and AFFO can help investors compare our operating performance between periods or as compared to other companies. While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent, nor are they meant to replace, cash flows from operations and net income or loss as defined by GAAP, and should not be considered alternatives to those measures in evaluating our liquidity or operating performance. Rather, FFO and AFFO should be reviewed in conjunction with these and other GAAP measurements as an indication of our operational performance and are not necessarily indicative of cash available to fund our future cash requirements, including our ability to pay dividends and other distributions to our stockholders. Additionally, our computation of FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition or that interpret the current NAREIT definition or define AFFO differently than we do.
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 AFFO, and the adjustments to GAAP in calculating FFO and AFFO.
Funds from Operations
Our consolidated financial statements are presented in accordance with GAAP, utilizing historical cost accounting which, among other things, requires depreciation of real estate investments. As a result, our operating results imply that the value of our real estate investments will decrease predictably over a set time period. However, we believe that the value of our real estate investments will fluctuate over time based on various market conditions and as such, depreciation under historical cost accounting may be less informative. FFO is a standard REIT industry metric defined by NAREIT as net income or loss (computed in accordance with GAAP), adjusted for (i) real estate-related depreciation and amortization, (ii) impairment charges on depreciable real property, (iii) gains or losses from sales of depreciable real property and (iv) similar adjustments for non-controlling interests and unconsolidated entities.
We believe that the use of FFO provides a more complete understanding of our operating performance to investors and to management, and when compared year-over-year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, which may not be immediately apparent from net loss.
Adjusted Funds from Operations
We also believe that AFFO is a meaningful supplemental non-GAAP measure of our operating results. We calculate AFFO by further adjusting FFO to reflect the performance of our portfolio for items we believe are not directly attributable to our operations. We believe that AFFO is a beneficial indicator of our ongoing portfolio performance and isolates the financial results of our operations. Our adjustments to FFO to arrive at AFFO include removing the impacts of (i) acquisition and transaction related costs (including certain expenses directly related to the Internalization and the Reverse Stock-Split), (ii) amortization of market-lease intangible assets and liabilities, (iii) adjustments for straight-line rent, (iv) termination fees to related parties, (v) equity-based compensation expense, (vi) depreciation and amortization related to non-real estate related assets, (vii) mark-to-market gains and losses from our non-designated derivatives, (viii) non-cash components of interest expense, (ix) casualty-related charges, (x) gains or losses on extinguishment of debt and (xi) similar adjustments for non-controlling interests and unconsolidated entities. We believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry and is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies.
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The table below reflects the items deducted from or added to net loss attributable to stockholders in our calculation of FFO and AFFO for the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
Net loss attributable to common stockholders (in accordance with GAAP) | $ | (15,881) | $ | (44,142) | $ | (45,087) | $ | (183,058) | ||||||||||||||||||
| Depreciation and amortization related to real estate assets | 16,647 | 19,293 | 56,055 | 59,944 | ||||||||||||||||||||||
| Impairment charges | 6,641 | 8,829 | 33,752 | 11,498 | ||||||||||||||||||||||
(Gain) loss on sale of real estate investments | (626) | (1,579) | (28,267) | (1,354) | ||||||||||||||||||||||
Adjustments for non-controlling interests | (73) | (64) | (275) | (285) | ||||||||||||||||||||||
FFO (as defined by NAREIT) attributable to stockholders | 6,708 | (17,663) | 16,178 | (113,255) | ||||||||||||||||||||||
(Amortization) accretion of market lease and other intangibles, net | (174) | (134) | 2,022 | (822) | ||||||||||||||||||||||
Straight-line rent adjustments | (753) | (458) | (2,411) | (360) | ||||||||||||||||||||||
Acquisition and transaction related (1) | 91 | 5,187 | 639 | 5,686 | ||||||||||||||||||||||
Termination fees to related parties | — | 8,409 | — | 106,650 | ||||||||||||||||||||||
| Equity-based compensation | 1,333 | 153 | 1,903 | 613 | ||||||||||||||||||||||
| Depreciation and amortization on non-real estate assets | 1,382 | 1,427 | 4,218 | 3,442 | ||||||||||||||||||||||
Mark-to-market losses from derivatives (2) | 911 | 4,224 | 2,655 | 4,956 | ||||||||||||||||||||||
Non-cash components of interest expense (3) | 761 | 880 | 3,100 | 1,368 | ||||||||||||||||||||||
Adjustments for non-controlling interests | (10) | (91) | (42) | (540) | ||||||||||||||||||||||
Gain on extinguishment | — | — | (257) | — | ||||||||||||||||||||||
Casualty-related charges (4) | 115 | 2 | 237 | 77 | ||||||||||||||||||||||
| AFFO attributable to stockholders | $ | 10,364 | $ | 1,936 | $ | 28,242 | $ | 7,815 | ||||||||||||||||||
_______
(1)Includes certain advisory, legal, accounting, information technology, tax and other professional expenses and other non-recurring employee transition expenses that were directly related to the Internalization and the Reverse Stock Split. We do not consider these expenses to be indicative of our performance given their unique and non-recurring nature.
(2)Presented as total gains or losses from our non-designated derivatives net of cash received.
(3)Non-cash components of interest expense include (i) deferred financing cost amortization, (ii) mortgage discount and premium amortization and (iii) amortized gains or losses from terminated hedging instruments.
(4)Includes labor, supplies and evacuation expenses from natural disasters not covered by insurance.
Dividends and Other Distributions
Distributions 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. Distributions 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. Distributions on the Series A Preferred Stock and 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 and declared by us.
Since mid-2020, we have not paid cash dividends on our shares of common stock but we issued stock dividends to the holders from October 2020 until January 2024. The stock dividends were declared quarterly using a rate of $3.40 (as adjusted to reflect the Reverse Stock Split) per share per year. The number of shares issued with each dividend was based on the estimated per share asset value in effect on the applicable date. We do not intend to declare further stock dividends in the future.
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 distributions payable with respect to the Series A Preferred Stock or Series B Preferred Stock become part of the liquidation preference thereof.
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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 three months ended September 30, 2025.
| Three Months Ended | Year-To-Date | |||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2025 | June 30, 2025 | September 30, 2025 | September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amounts | Percentage of Distributions | Amounts | Percentage of Distributions | Amounts | Percentage of Distributions | Amounts | Percentage of Distributions | ||||||||||||||||||||||||||||||||||||||||||
| Distributions: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to holders of Series A Preferred Stock | $ | 1,834 | 52.4% | $ | 1,800 | 52.5% | $ | 1,776 | 52.6% | $ | 5,410 | 52.6% | ||||||||||||||||||||||||||||||||||||||
Distributions to holders of Series B Preferred Stock | 1,616 | 46.2% | 1,584 | 46.2% | 1,552 | 46.1% | 4,752 | 46.1% | ||||||||||||||||||||||||||||||||||||||||||
| Distributions paid to holders of Series A Preferred Units | 47 | 1.4% | 46 | 1.3% | 46 | 1.4% | 139 | 1.3% | ||||||||||||||||||||||||||||||||||||||||||
| Total cash distributions | $ | 3,497 | 100.0% | $ | 3,430 | 100.0% | $ | 3,374 | 100.1% | $ | 10,301 | 100.0% | ||||||||||||||||||||||||||||||||||||||
| Source of distribution coverage: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash flows used in operations (1) | $ | — | —% | $ | — | —% | $ | 3,374 | 100.0% | $ | — | —% | ||||||||||||||||||||||||||||||||||||||
Available cash on hand (2) | 3,497 | 100.0% | 3,430 | 100.0% | — | —% | 10,301 | 100.0% | ||||||||||||||||||||||||||||||||||||||||||
| Total source of distribution coverage | $ | 3,497 | 100.0% | $ | 3,430 | 100.0% | $ | 3,374 | 100.0% | $ | 10,301 | 100.0% | ||||||||||||||||||||||||||||||||||||||
Cash flows used in operations (in accordance with GAAP) | $ | (21,229) | $ | (13,177) | $ | 31,398 | $ | (3,008) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss (in accordance with GAAP) | $ | (1,515) | $ | (20,834) | $ | (12,534) | $ | (34,881) | ||||||||||||||||||||||||||||||||||||||||||
______
(1)Assumes the use of available cash flows from operations before any other sources.
(2)Cash available cash on hand also includes proceeds from property dispositions and additional secured financings and borrowings.
For the nine months ended September 30, 2025, cash flows used in operations were $3.0 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 distributions to holders of Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units with available cash on hand.
Our ability to pay distributions 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 but not limited to 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.
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Inflation
We may be adversely impacted by inflation on the leases with tenants in our OMF 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. Recent increases in inflation, driven by factors such as labor shortages, supply chain disruptions, higher property insurance, property tax and interest rates and increased economic and political uncertainties due to the tariffs imposed by, or imposed on, the United States, have and may continue to have adverse impacts on our results of operations and our liquidity as well as our tenants’ and residents’ ability to pay rent. As of September 30, 2025, the increase to the 12-month Consumer Price Index 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 OMF 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 OMF 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, OMF 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
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 nine months ended September 30, 2025. 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 year ended December 31, 2024, filed with the SEC on February 27, 2025.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, together with other members of our management, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of September 30, 2025 at a reasonable level of assurance.
Changes in Internal Control Over Financial Reporting
During the three months ended September 30, 2025, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 1A. Risk Factors.
There have been no material changes to the risk factors disclosed in Part I — Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025, and we direct your attention to those risk factors.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.
All of the repurchases below were made on the open market at prevailing market prices plus related expenses under our preferred stock repurchase program, which authorizes the repurchase of up to $50 million of our preferred stock. We publicly announced this program on May 8, 2025 (dollars in thousands, except per share information).
7.375% Series A Cumulative Redeemable Perpetual Preferred Stock | ||||||||||||||||||||||||||
Month | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly announced Plans or Programs | Maximum Dollar Value that May Yet be Purchased Under the Plans or Programs | ||||||||||||||||||||||
July 1, 2025 to July 31, 2025 | 52,213 | $15.81 | $52.213 | $— | ||||||||||||||||||||||
August 1, 2025 to August 31, 2025 | 22,500 | 16.77 | 22,500 | — | ||||||||||||||||||||||
September 1, 2025 to September 30, 2025 | — | — | — | — | ||||||||||||||||||||||
| 74,713 | $16.10 | 74,713 | $— | |||||||||||||||||||||||
7.125% Series B Cumulative Redeemable Perpetual Preferred Stock | ||||||||||||||||||||||||||
Month | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly announced Plans or Programs | Maximum Dollar Value that May Yet be Purchased Under the Plans or Programs | ||||||||||||||||||||||
July 1, 2025 to July 31, 2025 | 33,523 | $15.43 | 33,523 | $— | ||||||||||||||||||||||
August 1, 2025 to August 31, 2025 | 64,147 | 16.34 | 64,147 | — | ||||||||||||||||||||||
September 1, 2025 to September 30, 2025 | — | — | — | — | ||||||||||||||||||||||
| 97,670 | $16.03 | 97,670 | $— | |||||||||||||||||||||||
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Trading Plans
During our last fiscal quarter, no director or officer, as defined in Rule 16a-1(f), adopted terminated
55
Item 6. Exhibits.
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 (and are numbered in accordance with Item 601 of Regulation S-K):
| Exhibit No. | Description | |||||||||||||||||||||||||||||||
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.
** Furnished herewith.
56
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.
| NATIONAL HEALTHCARE PROPERTIES, INC. | ||||||||
| By: | /s/ Michael Anderson | |||||||
| Michael Anderson | ||||||||
Chief Executive Officer, President and Director (Principal Executive Officer) | ||||||||
| By: | /s/ Scott M. Lappetito | |||||||
| Scott M. Lappetito | ||||||||
Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) | ||||||||
Dated: November 5, 2025
57
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Michael Anderson, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of National Healthcare Properties, 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 5th day of November 2025 | /s/ Michael Anderson | |||||||
| Michael Anderson | ||||||||
| Chief Executive Officer and President | ||||||||
| (Principal Executive Officer) | ||||||||
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 National Healthcare Properties, 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 5th day of November 2025 | /s/ Scott M. Lappetito | |||||||
Scott M. Lappetito | ||||||||
| Chief Financial Officer and Treasurer | ||||||||
| (Principal Financial Officer and Principal Accounting Officer) | ||||||||
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 National Healthcare Properties, 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 5th day of November 2025
| /s/ Michael Anderson | |||||
| Michael Anderson | |||||
| Chief Executive Officer and President | |||||
| (Principal Executive Officer) | |||||
| /s/ Scott M. Lappetito | |||||
| Scott M. Lappetito | |||||
Chief Financial Officer and Treasurer | |||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||