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Item 7. Management’s Discussion and Analysis

2022-03-25 compared with 2021-03-26 · 420 added, 306 removed, 192 unchanged (79% of the section changed)

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

The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT IV, Inc.

and its subsidiaries, including Griffin-American Healthcare REIT IV Holdings, LP, except where otherwise noted.

The following discussion should be read in conjunction with our accompanying consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K.

The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT III, Inc.

and its subsidiaries, including Griffin-American Healthcare REIT III Holdings, LP, for periods prior to the Merger, as defined below, and American Healthcare REIT, Inc.

(formerly known as Griffin-American Healthcare REIT IV, Inc.) and its subsidiaries, including American Healthcare REIT Holdings, LP (formerly known as Griffin-American Healthcare REIT III Holdings, LP), for periods following the Merger, except where otherwise noted.

Certain historical information of Griffin-American Healthcare REIT IV, Inc.

is included for background purposes.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to promote understanding of our results of operations and financial condition.

The following discussion is provided as a supplement to, and should be read in conjunction with our accompanying consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K.

Such consolidated financial statements and information have been prepared to reflect our financial position as of December 31, 2021 and 2020, together with our results of operations and cash flows for the years ended December 31, 2021, 2020 and 2019.

This section discusses the results of operations and cash flows for fiscal year 2021 compared to fiscal year 2020.

We have omitted the discussion related to the results of operations and changes in financial condition for fiscal year 2020 compared to fiscal year 2019 from this Annual Report on Form 10-K, but such discussion may be found in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our fiscal year 2020 Annual Report Form 10-K, which was filed with the United States Securities and Exchange Commission, or the SEC, on March 25, 2021.

In connection with the Merger as discussed and defined below, Griffin-American Healthcare REIT IV, Inc., or GAHR IV, was the legal acquiror of Griffin-American Healthcare REIT III, Inc., or GAHR III, whereas GAHR III was the accounting acquiror of GAHR IV in accordance with accounting principles generally accepted in the United States of America, or GAAP, and as discussed in Note 3, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Thus, the financial information set forth herein subsequent to the Merger reflects results of the Combined Company (as defined below), and the financial information set forth herein prior to the Merger reflects GAHR III’s results.

For this reason, period to period comparisons may not be meaningful.

Forward-Looking Statements

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changes in economic conditions generally and the real estate market specifically;

the effects of the coronavirus, or COVID-19, pandemic, including its effects on the healthcare industry, senior housing and skilled nursing facilities and the economy in general;

the continuing adverse effects of the coronavirus, or COVID-19, pandemic, including its effects on the healthcare industry, senior housing and skilled nursing facilities and the economy in general;

legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs;

the availability of capital;

changes in interest rates;

changes in interest rates and foreign currency risk;

uncertainty from the discontinuance of the London Inter-bank Offered Rate, or LIBOR, and the transition to the Secured Overnight Financing Rate, or SOFR;

competition in the real estate industry;

changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to REITs;

changes in GAAP policies and guidelines applicable to REITs;

the success of our investment strategy;

the availability of financing;

the negotiation or consummation of any potential strategic transaction evaluated by our special committee of our board of directors;

and our ongoing relationship with American Healthcare Investors, LLC, or American Healthcare Investors, and Griffin Capital Company, LLC, or Griffin Capital, or collectively, our co-sponsors, and their affiliates.

our ability to retain our executives and key employees;

and unexpected labor costs and inflationary pressures.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

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We undertake no obligation to update any such statements that may become untrue because of subsequent events.

Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the United States Securities and Exchange Commission, or the SEC.

Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview and Background

Griffin-American Healthcare REIT IV, Inc., a Maryland corporation, invests in a diversified portfolio of real estate properties, focusing primarily on medical office buildings, skilled nursing facilities and senior housing facilities that produce current income.

American Healthcare REIT, Inc., a Maryland corporation, owns a diversified portfolio of clinical healthcare real estate properties, focusing primarily on medical office buildings, skilled nursing facilities, senior housing, hospitals and other healthcare-related facilities.

We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008).

We qualified to be taxed as a REIT under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to qualify to be taxed as a REIT.

We raised $754,118,000 through a best efforts initial public offering, or our initial offering, and issued 75,639,681 aggregate shares of our Class T and Class I shares of our common stock.

In addition, during our initial offering, we issued 3,253,535 aggregate shares of our Class T and Class I common stock pursuant to our distribution reinvestment plan, as amended, or the DRIP, for a total of $31,021,000 in distributions reinvested.

Following the deregistration of our initial offering, we continued issuing shares of our common stock pursuant to the DRIP through a subsequent offering, or the 2019 DRIP Offering.

We commenced offering shares pursuant to the 2019 DRIP Offering on March 1, 2019, following the termination of our initial offering on February 15, 2019.

On March 18, 2021, our board of directors, or our board, authorized the suspension of the DRIP, effective as of April 1, 2021.

As of December 31, 2020, a total of $41,471,000 in distributions were reinvested that resulted in 4,342,059 shares of our common stock being issued pursuant to the 2019 DRIP Offering.

We collectively refer to the DRIP portion of our initial offering and the 2019 DRIP Offering as our DRIP Offerings.

Since March 2020, the COVID-19 pandemic has been dramatically impacting the United States, which has resulted in an aggressive worldwide effort to contain the spread of the virus.

These efforts have significantly and adversely disrupted economic markets and impacted commercial activity worldwide, including markets in which we own and/or operate properties, and the prolonged economic impact remains uncertain.

In addition, the continuously evolving nature of the COVID-19 pandemic makes it difficult to ascertain the long-term impact it will have on real estate markets and our portfolio of

Considerable uncertainty still surrounds the COVID-19 pandemic and its effects on the population, as well as the effectiveness of any responses taken on national and local levels by government and public health authorities and businesses to contain and combat the outbreak and spread of the virus, including the widespread availability and use of effective vaccines.

In particular, government-imposed business closures and re-opening restrictions, as well as self-imposed restrictions of discretionary activities, have dramatically impacted the operations of our real estate investments and our tenants across the country, such as creating significant declines in resident occupancy.

Further, our senior housing facilities have also experienced dramatic increases and may continue to experience increases in costs to care for residents;

particularly labor costs to maintain staffing levels to care for the aged population during this crisis, costs of COVID-19 testing of employees and residents and costs to procure the volume of personal protective equipment, or PPE, and other supplies required.

We received and recognized in our accompanying consolidated financial statements stimulus funds through economic relief programs of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, as discussed at Note 2, Summary of Significant Accounting Policies — Government Grants, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

We have also taken actions to strengthen our balance sheet and preserve liquidity in response to the COVID-19 pandemic risks.

From March to December 2020, we postponed non-essential capital expenditures.

In addition, in March 2020, we reduced the stockholder distribution rate and partially suspended our share repurchase plan.

We believe that the long-term stability of our portfolio will return once the virus has been controlled.

In states where lockdown orders have been lifted or modified, the downward trends in our portfolio appear to have somewhat moderated, but we have not yet witnessed a significant rebound.

We are continuously monitoring the impact of the COVID-19 pandemic on our business, residents, tenants, operating partners, managers, portfolio of investments and on the United States and global economies.

The prolonged duration and impact of the COVID-19 pandemic has materially disrupted, and may continue to materially disrupt, our business operations and impact our financial performance.

See the “Factors Which May Influence Results of Operations,” “Results of Operations” and “Liquidity and Capital Resources” sections below for a further discussion.

Our healthcare facilities operated under a RIDEA structure include our senior housing operating properties, or SHOP (formerly known as senior housing — RIDEA), and our integrated senior health campuses.

We have originated and acquired secured loans and may also originate and acquire other real estate-related investments on an infrequent and opportunistic basis.

We generally seek investments that produce current income;

however, we have selectively developed, and may continue to selectively develop, real estate properties.

We qualified to be taxed as a real estate investment trust, or REIT, under the Code for federal income tax purposes, and we intend to continue to qualify to be taxed as a REIT.

Merger of Griffin-American Healthcare REIT III, Inc.

and Griffin-American Healthcare REIT IV, Inc.

On June 23, 2021, GAHR III, Griffin-American Healthcare REIT III Holdings, LP, a Delaware limited partnership, or our operating partnership that subsequent to the Merger on October 1, 2021 described below is also referred to as the surviving partnership, GAHR IV, its subsidiary Griffin-American Healthcare REIT IV Holdings, LP, a Delaware limited partnership, or GAHR IV Operating Partnership, and Continental Merger Sub, LLC, a Maryland limited liability company and a newly formed wholly owned subsidiary of GAHR IV, or Merger Sub, entered into an Agreement and Plan of Merger, or the Merger Agreement.

On October 1, 2021, pursuant to the Merger Agreement, (i) GAHR III merged with and into Merger Sub, with Merger Sub being the surviving company, or the REIT Merger, and (ii) GAHR IV Operating Partnership merged with and into our operating partnership, with our operating partnership being the surviving entity and being renamed American Healthcare REIT Holdings, LP, or the Partnership Merger, and, together with the REIT Merger, the Merger.

Following the Merger on October 1, 2021, our company, or the Combined Company, was renamed American Healthcare REIT, Inc.

The REIT Merger was intended to qualify as a reorganization under, and within the meaning of, Section 368(a) of the Code.

As a result of and at the effective time of the Merger, the separate corporate existence of GAHR III and GAHR IV Operating Partnership ceased.

At the effective time of the REIT Merger, each issued and outstanding share of GAHR III’s common stock, $0.01 par value per share, converted into the right to receive 0.9266 shares of GAHR IV’s Class I common stock, $0.01 par value per share.

Further, at the effective time of the Partnership Merger, (i) each unit of limited partnership interest in the surviving partnership outstanding as of immediately prior to the effective time of the Partnership Merger was converted automatically into the right to receive 0.9266 of a Partnership Class I Unit, as defined in the agreement of limited partnership, as amended, of the surviving partnership, and (ii) each unit of limited partnership interest in GAHR IV Operating Partnership outstanding as of immediately prior to the effective time of the Partnership Merger was converted automatically into the right to receive one unit of limited partnership interest of the surviving partnership of like class.

AHI Acquisition

Also on June 23, 2021, GAHR III;

our operating partnership;

American Healthcare Investors, LLC, or AHI;

Griffin Capital Company, LLC, or Griffin Capital;

Platform Healthcare Investor T-II, LLC;

Flaherty Trust;

and Jeffrey T.

Hanson, our former Chief Executive Officer and current Executive Chairman of the Board of Directors, Danny Prosky, our former Chief Operating Officer and current Chief Executive Officer and President, and Mathieu B.

Streiff, our former Executive Vice President, General Counsel and current Chief Operating Officer, or collectively, the AHI Principals, entered into a contribution and exchange agreement, or the Contribution Agreement, pursuant to which, among other things, GAHR III agreed to acquire a newly formed entity, American Healthcare Opps Holdings, LLC, or NewCo, which we refer to as the AHI Acquisition.

NewCo owned substantially all of the business and operations of AHI, as well as all of the equity interests in (i) Griffin-American Healthcare REIT IV Advisor, LLC, or GAHR IV Advisor, a subsidiary of AHI that served as the external advisor of GAHR IV, and (ii) Griffin-American Healthcare REIT III Advisor, LLC, or GAHR III Advisor, also referred to as our former advisor, a subsidiary of AHI that served as the external advisor of GAHR III.

See “Operating Partnership and Former Advisor” below for a further discussion.

On October 1, 2021, the AHI Acquisition closed immediately prior to the consummation of the Merger, and pursuant to the Contribution Agreement, AHI contributed substantially all of its business and operations to the surviving partnership, including its interest in GAHR III Advisor and GAHR IV Advisor, and Griffin Capital contributed its then-current ownership interest in GAHR III Advisor and GAHR IV Advisor to the surviving partnership.

In exchange for these contributions, the surviving partnership issued limited partnership units, or surviving partnership OP units.

Subject to working capital and other customary adjustments, the total approximate value of these surviving partnership OP units at the time of consummation of the transactions contemplated by the Contribution Agreement was approximately $131,674,000, with a reference value for

purposes thereof of $8.71 per unit, such that the surviving partnership issued 15,117,529 surviving partnership OP units as consideration, or the Closing Date Consideration.

Following the consummation of the Merger and the AHI Acquisition, the Combined Company has become self-managed.

As of December 31, 2021, such surviving partnership OP units are owned by AHI Group Holdings, LLC, or AHI Group Holdings, which is owned and controlled by the AHI Principals, Platform Healthcare Investor T-II, LLC, Flaherty Trust and a wholly owned subsidiary of Griffin Capital, or collectively, the NewCo Sellers.

In addition to the Closing Date Consideration, pursuant to the Contribution Agreement, we may in the future pay cash “earnout” consideration to AHI based on the fees that we may earn from our potential sponsorship of, and investment advisory services rendered to, American Healthcare RE Fund, L.P., a healthcare-related, real-estate-focused, private investment fund under consideration by AHI, or the Earnout Consideration.

The Earnout Consideration is uncapped in amount and, if ever payable by us to AHI, will be due on the seventh anniversary of the closing of the AHI Acquisition (subject to acceleration in certain events, including if we achieve certain fee-generation milestones from our sponsorship of the private investment fund).

AHI’s ability to receive the Earnout Consideration is also subject to vesting conditions relating to the private investment fund’s deployed equity capital and the continuous employment of at least two of the AHI Principals throughout the vesting period.

As of December 31, 2021, the fair value of such cash earnout consideration was estimated to be $0.

The AHI Acquisition was treated as a business combination for accounting purposes, with GAHR III as both the legal and accounting acquiror of NewCo.

While GAHR IV was the legal acquiror of GAHR III in the REIT Merger, GAHR III was determined to be the accounting acquiror in the REIT Merger in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 805, Business Combinations , or ASC Topic 805, after considering the relative share ownership and the composition of the governing body of the Combined Company.

Thus, the financial information set forth herein subsequent to the consummation of the Merger and the AHI Acquisition reflects results of the Combined Company, and the financial information set forth herein prior to the Merger and the AHI Acquisition reflects GAHR III’s results.

For this reason, period to period comparisons may not be meaningful.

Please see Note 3, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of the Merger and the AHI Acquisition.

Operating Partnership and Former Advisor

We conduct substantially all of our operations through our operating partnership.

Through September 30, 2021, we were externally advised by our former advisor pursuant to an advisory agreement, as amended, or the Advisory Agreement, between us and our former advisor.

On June 23, 2021, we also entered into a Mutual Consent Regarding Waiver of Subordination of Asset Management Fees, or the Mutual Consent, pursuant to which, for the period from the date the Mutual Consent was entered into until the earlier to occur of (i) the closing of the Merger, or (ii) the termination of the Merger Agreement, the parties waived the requirement in the Advisory Agreement that our stockholders receive distributions in an amount equal to 5.0% per annum, cumulative, non-compounded, of their invested capital before we would be obligated to pay an asset management fee.

Our former advisor used its best efforts, subject to the oversight and review of our board of directors, or our board, to, among other things, provide asset management, property management, acquisition, disposition and other advisory services on our behalf consistent with our investment policies and objectives.

Following the Merger and AHI Acquisition, we became self-managed and are no longer externally advised.

As a result, any fees that would have otherwise been payable to our former advisor, are no longer being paid.

Prior to the Merger and AHI Acquisition, our former advisor was 75.0% owned and managed by wholly owned subsidiaries of AHI, and 25.0% owned by a wholly owned subsidiary of Griffin Capital, or collectively, our former co-sponsors.

Prior to the AHI Acquisition, AHI was 47.1% owned by AHI Group Holdings, 45.1% indirectly owned by Digital Bridge Group, Inc.

DBRG) (formerly known as Colony Capital, Inc.), or Digital Bridge, and 7.8% owned by James F.

Flaherty III, a former partner of Colony Capital.

We were not affiliated with Griffin Capital, Digital Bridge or Mr.

however, we were affiliated with our former advisor, AHI and AHI Group Holdings.

Please see the “Merger of Griffin-American Healthcare REIT III, Inc.

and Griffin-American Healthcare REIT IV, Inc.” and “AHI Acquisition” sections above for a further discussion of our operations effective October 1, 2021.

As a result of the Merger and the AHI Acquisition on October 1, 2021, we, through our direct and indirect subsidiaries, own approximately 94.9% of our operating partnership and the remaining 5.1% is owned by the NewCo Sellers.

See Note 13, Redeemable Noncontrolling Interests, and Note 14, Equity – Noncontrolling Interests in Total Equity, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

Public Offering

GAHR IV raised $754,118,000 through a best efforts initial public offering, or the initial offering, and issued 75,639,681 aggregate shares of its Class T and Class I common stock.

In addition, during the initial offering, GAHR IV issued 3,253,535 aggregate shares of its Class T and Class I common stock pursuant to GAHR IV’s distribution reinvestment plan, as amended,

or the DRIP, for a total of $31,021,000 in distributions reinvested.

Following the deregistration of the initial offering, GAHR IV continued issuing shares of its common stock pursuant to the DRIP through a subsequent offering, or the 2019 GAHR IV DRIP Offering.

GAHR IV commenced offering shares pursuant to the 2019 GAHR IV DRIP Offering on March 1, 2019, following the termination of the initial offering on February 15, 2019.

On March 18, 2021, the GAHR IV board of directors authorized the suspension of the DRIP, effective as of April 1, 2021.

On October 4, 2021, our board of directors, or our board, authorized the reinstatement of the DRIP.

We continue to offer up to $1 00,000,000 of shares of our common stock to be issued pursuant to the DRIP under an existing Registration Statement on Form S-3 under the Securities Act of 1933, as amended, or the Securities Act, filed by GAHR IV.

As of December 31, 2021, a total of $54,637,000 in distributions were reinvested that resulted in 5,755,013 shares of common stock being issued pursuant to the 2019 GAHR IV DRIP Offering.

We collectively refer to the DRIP portion of GAHR IV’s initial offering and the 2019 GAHR IV DRIP Offering as our DRIP Offerings.

See Note 14, Equity — Distribution Reinvestment Plan, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

On March 24, 2022, our board, at the recommendation of the audit committee of our board, comprised solely of independent directors, unanimously approved and established an updated estimated per share net asset value, or NAV, of our common stock of $9.29.

We provided this updated estimated per share NAV to assist broker-dealers in connection with their obligations under Financial Industry Regulatory Authority, or FINRA, Rule 2231 with respect to customer account statements.

The updated estimated per share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of September 30, 2020.

The valuation was performed in accordance with the methodology provided in Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs , or the Practice Guideline, issued by the Institute for Portfolio Alternatives, or the IPA, in April 2013, in addition to guidance from the SEC.

On April 2, 2020, the board previously determined an estimated per share NAV of our common stock of $9.54 calculated as of December 31, 2019.

We provide this updated estimated per share NAV annually to assist broker-dealers in connection with their obligations under Financial Industry Regulatory Authority, or FINRA, Rule 2231 with respect to customer account statements.

The valuation was performed in accordance with the methodology provided in Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives, or the IPA, in April 2013, in addition to guidance from the SEC.

See our Current Report on Form 8-K filed with the SEC on March 25, 2022 for more information on the methodologies and assumptions used to determine, and the limitations and risks of, our updated estimated per share NAV.

We conduct substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership.

We are externally advised by Griffin-American Healthcare REIT IV Advisor, LLC, or our advisor, pursuant to an advisory agreement, or the Advisory Agreement, between us and our advisor.

The Advisory Agreement was effective as of February 16, 2016 and had a one-year initial term, subject to successive one-year renewals upon the mutual consent of the parties.

The Advisory Agreement was last renewed pursuant to the mutual consent of the parties on February 11, 2021 and expires on February 16, 2022.

Our advisor uses its best efforts, subject to the oversight and review of our board, to, among other things, research, identify, review and make investments in and dispositions of properties and securities on our behalf consistent with our investment policies and objectives.

Our advisor performs its duties and responsibilities under the Advisory Agreement as our fiduciary.

Our advisor is 75.0% owned and managed by wholly owned subsidiaries of American Healthcare Investors and 25.0% owned by a wholly owned subsidiary of Griffin Capital.

American Healthcare Investors is 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Colony Capital, Inc.

CLNY), or Colony Capital, and 7.8% owned by James F.

Flaherty III, a former partner of Colony Capital.

We are not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Colony Capital or Mr.

however, we are affiliated with our advisor, American Healthcare Investors and AHI Group Holdings.

In October 2020, we established a special committee of our board, which consists of all of our independent directors, to investigate and analyze strategic alternatives, including but not limited to, the sale of our assets, a listing of our shares on a national securities exchange, or a merger with another entity, including a merger with another unlisted entity that we expect would enhance our value.

There can be no assurance that this strategic alternative review process will result in a transaction being pursued, or if pursued, that any such transaction would ultimately be consummated.

For a further discussion, see Part III, Item 10, Directors, Executive Officers and Corporate Governance.

In connection with the strategic alternative review process and in order to facilitate a strategic transaction, on March 18, 2021, our board authorized the suspension of the DRIP, effective as of April 1, 2021, until such time, if any, as our board determines to reinstate the DRIP.

As a consequence of the suspension

of the DRIP, beginning with the April 2021 distributions, which will be payable on or about May 1, 2021, there will be no further issuances of shares pursuant to the DRIP, and stockholders who are participants in the DRIP will receive cash distributions instead.

In addition, on March 18, 2021, our board approved the suspension of our share repurchase plan with respect to all repurchase requests received by us after February 28, 2021, including repurchases resulting from the death or qualifying disability of stockholders, until such time, if any, as our board determines to reinstate our share repurchase plan.

We currently operate through four reportable business segments:

medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities.

As of December 31, 2020, we owned 89 properties, comprising 94 buildings, or approximately 4,863,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $1,089,431,000.

As of December 31, 2020, we also owned a 6.0% interest in a joint venture which owns a portfolio of integrated senior health campuses and ancillary businesses.

Critical Accounting Policies

We believe that our critical accounting policies are those that require significant judgments and estimates such as those related to revenue and grant income recognition, allowance for credit losses, accounting for property acquisitions, impairment of long-lived and intangible assets, properties held for sale and qualification as a REIT.

These estimates are made and evaluated on an on-going basis using information that is available as well as various other assumptions believed to be reasonable under the circumstances.

Our Real Estate Investments Portfolio

We currently operate through six reportable business segments:

medical office buildings, integrated senior health campuses, skilled nursing facilities, SHOP, senior housing and hospitals.

As of December 31, 2021, we owned and/or operated 182 properties, comprising 191 buildings, and 122 integrated senior health campuses including completed development projects, or approximately 19,178,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,292,371,000.

In addition, as of December 31, 2021, we also owned a real estate-related debt investment purchased for $60,429,000.

Critical Accounting Estimates

Our critical accounting policies are those that will have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates.

We believe that our judgments and estimates are consistently applied and produce financial information that fairly present our results of operations.

Our most critical accounting policies that involve judgments and estimates include (1) real estate investments purchase price allocation, (2) impairment of long-lived assets, (3) goodwill, (4) revenue recognition and grant income, (5) resident receivable allowances and (6) income taxes.

These critical accounting policies involve estimates that may require complex judgment in their application and are evaluated on an on-going basis using information that is available as well as various other assumptions believed to be reasonable under the circumstances.

However, if our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, we may have applied a different accounting treatment, resulting in a different presentation of our financial statements.

We believe that our critical accounting policies affect our more significant estimates and judgments used in the preparation of our financial statements.

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2020, in Note 2, Summary of Significant Accounting Policies.

There have been no significant changes to our critical accounting policies during 2020 other than those resulting from the adoption of new accounting standards.

A discussion of our significant accounting policies is included within Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

There have been no significant changes to our critical accounting policies during 2021.

The following is a summary of the key judgments and estimates used in our critical accounting policies:

Real Estate Investments Purchase Price Allocation

Upon the acquisition of real estate properties or other entities owning real estate properties, we determine whether the transaction is a business combination, which requires that the assets acquired and liabilities assumed constitute a business.

If the assets acquired and liabilities assumed are not a business, we account for the transaction as an asset acquisition.

Under both methods, we recognize the identifiable assets acquired and liabilities assumed;

however, for a transaction accounted for as an asset acquisition, we capitalize transaction costs and allocate the purchase price using a relative fair value method allocating all accumulated costs.

Whereas, for a transaction accounted for as a business combination, we immediately expense transaction

costs incurred associated with the business combination and allocate the purchase price based on the estimated fair value of each separately identifiable asset and liability.

In accounting for asset acquisitions and business combinations, we, with assistance from independent valuation specialists, measure the fair value of tangible and intangible identified assets and liabilities, as applicable, based on their respective fair values for acquired properties, which is then allocated to acquired investments in real estate.

The fair value and its allocation require significant judgment and in some cases involve complex calculations.

These allocation assessments directly impact our financial condition and results of operations.

Impairment of Long-Lived Assets

We also periodically perform analysis that requires us to judge whether indicators of impairment exist and to estimate the likely future cash flows.

Projections of expected future operating cash flows require that we estimate future revenue amounts, future property operating expenses and the number of years the property is held for investment, among other factors.

The subjectivity of assumptions used in the future cash flow analysis, including discount rates, where applicable, could result in an incorrect assessment of the real estate fair value and could result in the misstatement of the carrying value of our real estate assets and net income (loss).

Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of a business acquired.

This allocation is based upon our determination of the value of the acquired assets and assumed liabilities, which requires judgment and some of the estimates involve complex calculations.

These allocation assessments have a direct impact on our financial condition and results of operations.

Our goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Such evaluation could involve estimated future cash flows, which is highly subjective, and is based in part on assumptions regarding future events.

We compare the fair value of a reporting segment with its carrying amount.

We recognize an impairment loss to the extent the carrying value of goodwill exceeds the implied value in the current period.

We take a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting segment in step one of the impairment test.

Revenue Recognition and Grant Income

A significant portion of resident fees and services revenue represents healthcare service revenue that is reported at the amount that we expect to be entitled to in exchange for providing patient care.

These amounts are due from patients, third-party payors (including health insurers and government programs), other healthcare facilities, and others and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

Such variable consideration is included in the determination of the estimated transaction price for providing care.

These settlements include estimates based on the terms of the payment agreement with the payor, correspondence from the payor and our historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved.

Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available), or as years are settled or are no longer subject to such audits, reviews and investigations.

We recognize government grants as grant income or as a reduction of property operating expenses, as applicable, when there is reasonable assurance that the grants will be received and all conditions to retain the funds will be met.

We adjust our estimates and assumptions of such grants based on the applicable guidance provided by the government and the best available information that we have.

Resident Receivable Allowances

An allowance is maintained for estimated losses resulting from the inability of residents and payors to meet the contractual obligations under their lease or service agreements.

Substantially all of such allowances are recorded as direct reductions of resident fees and services revenue as contractual adjustments provided to third-party payors or implicit price concessions in our accompanying consolidated statements of operations and comprehensive income (loss).

Our determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, the residents’ financial condition, security deposits, cash collection patterns by payor and by state, current economic conditions, future expectations in estimating credit losses and other relevant factors.

We qualified and elected to be taxed as a REIT under the Code for federal income tax purposes, and we intend to continue to qualify to be taxed as a REIT.

To maintain our qualification as a REIT, we must meet certain organizational and

operational requirements, including a requirement to currently distribute at least 90.0% of our annual taxable income, excluding net capital gains, to stockholders.

This process involves using preliminary financial information and assumptions in order to estimate earnings and profits.

As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.

If we fail to maintain our qualification as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the IRS grants us relief under certain statutory provisions.

Such an event could have a material adverse effect on our net income and net cash available for distribution to stockholders.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see Note 2, Summary of Significant Accounting Policies — Recently Issued Accounting Pronouncements, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Acquisitions in 2020, 2019 and 2018

For a discussion of our property acquisitions in 2020, 2019, and 2018, see Note 3, Real Estate Investments, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Acquisitions and Dispositions in 2021, 2020 and 2019

For a discussion of our acquisitions and dispositions of investments in 2021, 2020 and 2019, see Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, and Note 4, Real Estate Investments, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Factors Which May Influence Results of Operations

In connection with the Merger, GAHR IV was the legal acquiror and GAHR III was the accounting acquiror for financial reporting purposes, as discussed in Note 3, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Thus, the financial information set forth herein subsequent to the Merger reflects results of the Combined Company, and the financial information set forth herein prior to the Merger reflects GAHR III’s results.

Furthermore, as a result of the closing of the AHI Acquisition on October 1, 2021, and following the Merger, our company is now self-managed and employs all the employees necessary to operate as a self-managed company.

The impact of being a self-managed company on our results of operations is predominantly an increase in general and administrative costs related to hiring the workforce necessary to operate as a self-managed company and cost savings associated with no longer paying advisory fees to our former advisor.

For these reasons, period to period comparisons may not be meaningful.

Other than the effects of the Merger and AHI Acquisition discussed above, and the COVID-19 pandemic discussed below, as well as other national economic conditions affecting real estate generally, we are not aware of any material trends or uncertainties that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, disposition, management and operation of our properties.

In addition, see Part I, Item 1A, Risk Factors, of this Annual Report on Form 10-K.

Due to the ongoing COVID-19 pandemic in the United States and globally, since March 2020, our residents, tenants, operating partners and managers have been materially impacted.

The situation continues to present a meaningful challenge for us as an owner and operator of healthcare facilities, as the impact of the virus continues to result in a massive strain throughout the healthcare system.

COVID-19 is particularly dangerous among the senior population and results in heightened risk to our senior housing and skilled nursing facilities, and we continue to work diligently to implement aggressive protocols at such facilities in line with the Centers for Disease Control and Prevention and Centers for Medicare and Medicaid Services guidelines to limit the exposure and spread of COVID-19.

Each type of real estate asset we own has been impacted by COVID-19 to varying degrees.

The COVID-19 pandemic has negatively impacted the businesses of our medical office tenants and their ability to pay rent on a timely basis.

In the early months of the pandemic when many of the states had implemented “stay at home” orders, in excess of 50.0% of our tenants in medical office buildings had been classified by state governments as “non-essential” and were ordered to either shut down entirely, or significantly limit hours of operations, which prevented or significantly limited our tenants from seeing patients in their offices and thereby creating unprecedented revenue pressure on such tenants.

Substantially all of our physician practices and other medical service providers of non-essential and elective services in our medical office buildings are now open.

However, the number of patients returning to such offices varies across practice types and geographic markets as people may continue to delay office visits due to the fears or uncertainties associated with COVID-19 despite the availability of services.

Additionally, while restrictions have been at least partially lifted or modified in many states, there remains a risk of reclosures in states where infection rates rise, or where a resurgence of COVID-19 emerges, which may put additional pressure on our operations.

For our managed senior housing — RIDEA facilities, based on preliminary information available to management as of February 26, 2021, we have experienced an approximate 16.0% decline in our resident occupancies since February 2020 largely

due to a decline in move-ins of prospective residents because of shelter-in-place, re-opening and other quarantine restrictions imposed by government regulations and guidelines, as well as the resurgence of the COVID-19 pandemic in late 2020 and into early 2021.

In addition, we continue to experience challenges in attracting prospective residents to our senior housing — RIDEA facilities because they are choosing to delay moving into communities until the threat posed by the virus has declined.

Our facilities have adopted phased-in approaches to facility operations depending on the market in which they operate, which range from stringent restrictions of essential visitors and frequent testing of staff and residents to allowing screened visitors and limited activities.

At the same time that our managed senior housing — RIDEA facilities are facing a reduction in revenue associated with lower resident occupancies, they are also experiencing a significant increase in costs to care for residents, particularly increased labor costs to maintain staffing levels to care for the aged population during this crisis, costs of testing employees and residents for COVID-19 and costs to procure the volume of PPE and other supplies required to maintain health and safety measures and protocols.

Since March 2020, our leased, non-RIDEA senior housing and skilled nursing facility tenants have also experienced and may continue to experience similar pressures related to occupancy declines and expense increases, which may impact their ability to pay rent and have an adverse effect on our operations.

Therefore, our immediate focus for 2021 continues to be on resident occupancy recovery and operating expense management.

Beginning in the fourth quarter of 2020, there have been recent developments around the production, availability and widespread distribution and use of effective COVID-19 vaccines, which we believe will be important to a rebound in our resident occupancy levels over time.

The rise of the Delta and Omicron variants of COVID-19, and government and public health agencies’ responses to potential future resurgences in the virus, further contributes to the prolonged economic impact and uncertainties caused by the COVID-19 pandemic.

There is also uncertainty regarding the acceptance of available vaccines and boosters and the public’s receptiveness to those measures.

As the COVID-19 pandemic is still impacting the healthcare system, it continues to present challenges for us as an owner and operator of healthcare facilities, making it difficult to ascertain the long-term impact the COVID-19 pandemic will have on real estate markets in which we own and/or operate properties and our portfolio of investments.

COVID-19 is particularly dangerous among the senior population and results in heightened risk to our senior housing and skilled nursing facilities, and we continue to work diligently to implement and maintain aggressive protocols at such facilities as well as actively collaborate with our tenants, operating partners and managers to respond and take action to mitigate the impact of the COVID-19 pandemic.

We have evaluated the impacts of the COVID-19 pandemic on our business thus far and incorporated information concerning such impacts into our assessments of liquidity, impairment and collectability from tenants and residents as of December 31, 2021.

We will continue to monitor such impacts and will adjust our estimates and assumptions based on the best available information.

Since March 2020, we have taken actions to strengthen our balance sheet and preserve liquidity in response to the COVID-19 pandemic, including reducing the stockholder distribution rate and temporarily suspending our share repurchase plan.

We believe that the long-term stability of our portfolio of investments will return once the virus has been controlled.

type of real estate asset we own has been impacted by the COVID-19 pandemic to varying degrees.

In the early months of the pandemic, the businesses of our medical office tenants were negatively impacted when many of the states had implemented “stay at home” orders, thereby creating unprecedented revenue pressure on such tenants and their ability to pay rent on a timely basis.

However, substantially all of our physician practices and other medical service providers of non-essential and elective services in our medical office buildings are now open and as a result, our medical office building segment rebounded quickly from the initial shock of the pandemic and has demonstrated remarkable resilience.

This trend has continued despite the emergence of the Delta and Omicron variants in the latter half of 2021.

The COVID-19 pandemic has resulted in a significant decline in resident occupancies at our senior housing facilities, SHOP, integrated senior health campuses and skilled nursing facilities, and an increase in COVID-19 related operating expenses with more costly short-term hires due to the shortage of healthcare personnel.

Therefore, our focus at such properties continues to be on resident occupancy recovery and operating expense management.

While resident occupancies at our integrated senior health campuses and skilled nursing facilities have gradually improved to near pre-pandemic levels, our SHOP have been slower to recover.

This has been primarily due to the emergence of the Delta and Omicron variants since the third quarter of 2021 through January 2022, when we were seeing case counts reach levels not seen since January 2021, thereby impacting resident occupancies in these facilities.

Based on information available to management as of March 4, 2022, resident occupancy at our SHOP have declined by approximately 11.9% since February 2020, prior to COVID-19 shutdowns.

In the fourth quarter of 2020, COVID-19 vaccines became available, followed by COVID-19 boosters being available to certain parts of the population in the fourth quarter of 2021, which we believe is an important factor for a rebound in our resident occupancy levels over time.

As of March 1, 2022, based on information provided by our operators, the majority of our residents at our healthcare-related facilities have been fully vaccinated and also received booster shots.

To date, the impacts of the COVID-19 pandemic have been significant, rapidly evolving and may continue into the future.

Managers of our RIDEA properties continue to evaluate their options for financial assistance such as utilizing programs within the CARES Act passed by the federal government on March 27, 2020, as well as other state and local government relief programs.

The CARES Act includes multiple opportunities for immediate cash relief in the form of grants and tax benefits.

Some of our tenants within our non-RIDEA properties have sought financial assistance from the CARES Act through programs such as the Payroll Protection Program and deferral of payroll tax payments.

However, these government assistance programs are not expected to fully offset the negative financial impact of the COVID-19 pandemic, and there can be no assurance that these programs will continue or the extent to which they will be expanded.

Managers of our SHOP continue to evaluate their options for financial assistance, such as utilizing programs within the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, passed by the federal government on March 27, 2020, as well as other state and local government relief programs.

The CARES Act includes multiple opportunities for immediate cash relief in the form of grants, tax benefits and Medicare reimbursement programs.

Some of our tenants within our non-SHOP properties have sought financial assistance from the CARES Act through programs such as the Payroll Protection Program and deferral of payroll tax payments.

However, these government assistance programs are not expected to fully offset the negative financial impact of the ongoing COVID-19 pandemic, and there can be no assurance that these programs will continue or the extent to which they will be expanded.

Therefore, the ultimate impact of such relief from the CARES Act and other enacted and future legislation and regulation, including the extent to which relief funds from such programs will provide meaningful support for lost revenue and increasing costs, is uncertain.

The information in this Annual Report on Form 10-K is based on data currently available to us and will likely change as the COVID-19 pandemic progresses.

Although almost all of the initial restrictions imposed at the onset of the pandemic in the U.S.

have been relaxed or lifted as a result of the distribution of vaccines and COVID-19 boosters, there was a resurgence of COVID-19 cases at the start of 2022 fueled by the Omicron and Delta variants.

Many states throughout the U.S.

experienced record-breaking levels of COVID-19 cases due to the accelerated spread of these variants, which led some state and local governments to reinstitute measures and restrictions to slow the transmission and mitigate public health risks in certain jurisdictions.

As of the date of filing this Annual Report on Form 10-K, such measures and restrictions have been lifted.

Similar future actions could disrupt our business, activities and operations, the extent to which are highly uncertain.

We continue to closely monitor COVID-19 developments and are continuously assessing the implications to our business, residents, tenants, operating partners, managers and our portfolio of investments.

We anticipate that the government-imposed or self-imposed lockdowns and restrictions have created pent-up demand for doctors’ visits and move-ins into senior housing facilities;

however, we cannot predict with reasonable certainty when such demand will return to pre-COVID-19 pandemic levels.

The medical community understands COVID-19 far better today than it did just a few months ago, and we are now equipped with greater therapeutics and other treatments to mitigate its impact.

Likewise, we are optimistic about the recent favorable reports regarding the efficacy of vaccines.

The COVID-19 pandemic has had, and may continue to have, an adverse effect on the operations of our business, and therefore, we are unable to predict the full extent or nature of the future impact to our financial condition and results of operations at this time.

We expect the trends discussed above with respect to the impact of the COVID-19 pandemic to continue.

Thus, the lasting impact of the COVID-19 pandemic over the next 12 months could be significant and will largely depend on future developments, including the duration of the crisis and the success of efforts to contain or treat COVID-19, such as the widespread availability and use of effective vaccines, which cannot be predicted with confidence at this time.

While our medical office buildings segment rebounded quickly from the initial shock of the pandemic, we cannot predict with reasonable certainty when demand for healthcare services at our senior housing and skilled nursing facility segments will return to pre-COVID-19 pandemic levels.

The lasting effect of the COVID-19 pandemic over the next 12 months could be significant and will largely depend on future developments, including COVID-19 vaccination and booster rates;

the long term efficacy of COVID-19 vaccinations and boosters;

and the potential emergence of new, more transmissible or severe variants, which cannot be predicted with confidence at this time.

See the “Results of Operations” and “Liquidity and Capital Resources” sections below, as well as Part I, Item 1A, Risk Factors, of this Annual Report on Form 10-K, for a further discussion.

Scheduled Lease Expirations

Excluding our senior housing — RIDEA facilities, as of December 31, 2020, our properties were 95.7% leased and during 2021, 3.2% of the leased GLA is scheduled to expire.

Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next 12 months.

Excluding our SHOP and integrated senior health campuses, as of December 31, 2021, our properties were 94.3% leased and during 2022, 9.3% of the leased GLA is scheduled to expire.

Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next twelve months.

In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy.

As of December 31, 2020, our remaining weighted average lease term was 8.3 years, excluding our senior housing — RIDEA facilities.

Our senior housing— RIDEA facilities were 74.9% leased for the year ended December 31, 2020 and substantially all of our leases with residents at such properties are for a term of one year or less.

As of December 31, 2021, our remaining weighted average lease term was 7.6 years, excluding our SHOP and integrated senior health campuses.

Our combined SHOP and integrated senior health campuses were 77.9% leased as of December 31, 2021.

Substantially all of our leases with residents at such properties are for a term of one year or less.

Results of Operations

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Our operating results are primarily comprised of income derived from our portfolio of properties and expenses in connection with the acquisition and operation of such properties.

In general, we expect amounts related to our portfolio of operating properties to increase in the future based on a full year of operations of recently acquired properties.

Our primary sources of revenue include rent generated by our leased, non-RIDEA properties, and resident fees and services revenue from our RIDEA properties.

Our primary expenses include property operating expenses and rental expenses.

In addition, in the fourth quarter of 2021, following the AHI Acquisition that resulted in our company being self managed, general and administrative expenses include payroll and other corporate operating expenses but no longer include advisory fees to our former advisor.

In general, and under a normal operating environment without the disruption of the COVID-19 pandemic, we expect amounts related to our portfolio of operating properties to increase in the future due to fixed annual rent escalations on our portfolio of properties.

The ability to compare one period to another is also impacted by the closing of the AHI Acquisition and the increase in size of our real estate portfolio as a result of the Merger.

See Note 3, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions.

As of December 31, 2020, we operated through four reportable business segments, with activities related to investing in medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities.

As of December 31, 2021, we operated through six reportable business segments:

medical office buildings, integrated senior health campuses, skilled nursing facilities, SHOP, senior housing and hospitals.

The COVID-19 pandemic has had a significant adverse impact on the operations of our real estate portfolio.

Although we have experienced some delays in receiving rent payments from our tenants, as of December 31, 2020, we have collec ted 100% of contractual rent from our leased, non-RIDEA senior housing and skilled nursing facility tenants.

Most of our skilled nursing facilities provide behavioral health services with resident occupancies that are less impacted by either the COVID-19 pandemic or restrictions on elective surgeries than traditional skilled nursing facilities.

In addition, substantially all of the contractual rent through December 2020 fr om our medical office building tenants has been received.

However, given the significant ongoing uncertainty of the impact of the COVID-19 pandemic over the next 12 months, we are unable to predict the impact it will have on such tenants’ continued ability to pay rent.

We received lease concession requests from some of our medical office building tenants primarily during the second quarter of 2020 that resulted in an insignificant number of concessions granted, such as in the form of rent abatements, in conjunction with a lease term extension for up to five years, or rent payment deferrals requiring repayment within one year.

Such lease term extensions related to lease concessions that benefited us and do not have a material impact to our consolidated financial statements.

No contractual rent for our medical office building tenants was forgiven.

Changes in our consolidated operating results are primarily due to owning 94 buildings as of December 31, 2020, as compared to 87 buildings as of December 31, 2019 and as compared to 69 buildings as of December 31, 2018.

In addition, there are changes in our operating results by reporting segment due to transitioning the operations of the two senior housing facilities within Lafayette Assisted Living Portfolio to a RIDEA structure in February 2019 and the five senior housing facilities within Northern California Senior Housing Portfolio to a RIDEA structure in March 2020.

As of December 31, 2020, 2019 and 2018, we owned the following types of properties:

2020 2019 2018

Buildings Aggregate

Purchase Price Leased

Buildings Aggregate

Although we experienced some delays in receiving rent payments from our tenants, substantially all of the contractual rent through December 2021 from our medical office building tenants has been received.

However, given the ongoing uncertainty of the impact of the COVID-19 pandemic over the next 12 months, we are unable to predict the impact it will have on such tenants’ continued ability to pay rent.

Except where otherwise noted, the changes in our consolidated results of operations for 2021 as compared to 2020 are primarily due to the acquisition of GAHR IV’s portfolio of 87 properties, comprising 92 buildings, or approximately 4,799,000 square feet of GLA, as a result of the Merger on October 1, 2021, the disruption to our normal operations as a result of the COVID-19 pandemic, grant income received and transitioning the operations of th e four senior housing facilities withi n Delta Valley ALF Portfolio to a RIDEA structure in December 2021.

As of December 31, 2021 and 2020, we owned and/or operated the following types of properties:

Campuses Aggregate

Purchase Price Leased

Buildings Aggregate

Campuses Aggregate

Purchase Price Leased

Integrated senior health campuses

122 $ 1,787,698,000 (1) 119 $ 1,626,950,000 (1)

Medical office buildings

Senior housing — RIDEA 26 264,709,000 (2) (3) 14 153,850,000 (3) 12 137,100,000 (3)

105 1,249,658,000 92.0 % 63 657,885,000 89.0 %

SHOP 47 708,050,000 (2) 20 433,891,000 (2)

Senior housing

20 169,885,000 100 % 9 89,535,000 100 %

Skilled nursing facilities

17 237,300,000 100 % 7 128,000,000 100 %

2 139,780,000 100 % 2 139,780,000 100 %

Total/weighted average(3) 313 $ 4,292,371,000 94.3 % 220 $ 3,076,041,000 91.9 %

(1) Includes a $1,483,000 earn-out paid in June 2020 in connection with our property acquisition of Overland Park MOB in August 2019.

See Note 3, Real Estate Investments, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of such earn-out.

(2) Includes a $360,000 earn-out paid in December 2020 in connection with our property acquisition of Catalina Madera ALF in January 2020.

See Note 3, Real Estate Investments, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of such earn-out.

(3) For the years ended December 31, 2020, 2019 and 2018, the leased percentage for the resident units of our senior housing RIDEA facilities was 74.9%, 83.2.% and 77.7%, respectively, based on daily average occupancy of licensed beds/units.

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

(1) The leased percentage for the resident units of our integrated senior health campuses was 78.1% and 66.9% as of December 31, 2021 and 2020, respectively.

(2) The leased percentage for the resident units of our SHOP was 72.4% and 70.0% as of December 31, 2021 and 2020, respectively.

(3) Leased percentage excludes our SHOP and integrated senior health campuses.

Revenues and Grant Income

Our primary sources of revenue include rent generated by our leased, non-RIDEA properties, and resident fees and services revenue from our RIDEA properties.

The amount of revenue generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease available space at the then existing market rates.

The amount of revenues generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease available space at the then existing rental rates.

We also receive grant income.

Revenues and grant income by reportable segment consisted of the following for the periods then ended:

Years Ended December 31,

Resident Fees and Services Revenue

Integrated senior health campuses

$ 1,025,699,000 $ 983,169,000

SHOP 98,236,000 85,904,000

Total resident fees and services revenue 1,123,935,000 1,069,073,000

Real Estate Revenue

Medical office buildings

97,297,000 78,424,000

Skilled nursing facilities 17,309,000 16,107,000

Senior housing

16,530,000 14,524,000

10,232,000 10,992,000

Total real estate revenue 141,368,000 120,047,000

Resident Fees and Services Revenue

Senior housing — RIDEA 67,793,000 46,160,000 36,857,000

Total resident fees and services revenue 67,793,000 46,160,000 36,857,000

Senior housing — RIDEA 1,005,000 — —

Integrated senior health campuses 13,911,000 53,855,000

SHOP 3,040,000 1,326,000

Total grant income 16,951,000 55,181,000

Total revenues and grant income $ 1,282,254,000 $ 1,244,301,000

For the years ended December 31, 2020, 2019 and 2018, real estate revenue primarily comprised of base rent of $63,615,000, $56,373,000 and $35,340,000, respectively, and expense recoveries of $18,196,000, $14,453,000 and $8,933,000, respectively.

For the years ended December 31, 2020, 2019 and 2018, resident fees and services consisted of rental fees related to resident leases and extended health care fees.

The increase in resident fees and services for the year ended December 31, 2020, compared to the year ended December 31, 2019, is primarily due to the acquisition of seven senior housing — RIDEA facilities subsequent to December 31, 2019 and the transition of five senior housing facilities within Northern California Senior Housing Portfolio to a RIDEA structure in March 2020.

The increase in resident fees and services for the year ended December 31, 2019, compared to the year ended December 31, 2018, was primarily due to a full year of operations during 2019 for two senior housing — RIDEA facilities acquired during the year ended December 31, 2018.

For the year ended December 31, 2020, we recognized $1,005,000 of grant income at our senior housing — RIDEA facilities related to government grants through CARES Act economic stimulus programs.

For the years ended December 31, 2021 and 2020, resident fees and services revenue primarily consisted of rental fees

related to resident leases, extended health care fees and other ancillary services, and real estate revenue primarily consisted of base rent and expense recoveries.

For the year ended December 31, 2021, $14,211,000 in resident fees and services revenue for our SHOP was due to the increase in the size of our portfolio as a result of the Merger.

The remaining increase in resident fees and services revenue was primarily attributable to improved occupancy and higher reimbursement rates from both Medicare and Medicaid programs for our integrated senior health campuses.

In addition, for the year ended December 31, 2021, $21,682,000 of real estate revenue was primarily due to the increase in the size of our portfolio as a result of the Merger.

For the years ended December 31, 2021 and 2020, we recognized $16,951,000 and $55,181,000, respectively, of grant income at our integrated senior health campuses and SHOP related to government grants received through the CARES Act economic stimulus programs.

See Note 2, Summary of Significant Accounting Policies — Government Grants, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

Rental Expenses and Property Operating Expenses

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

Property Operating Expenses and Rental Expenses

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

Years Ended December 31,

2020 2019 2018

Property Operating Expenses

Integrated senior health campuses $ 943,743,000 90.8 % $ 929,897,000 89.7 %

SHOP 86,450,000 85.4 % 63,830,000 73.2 %

Total property operating expenses $ 1,030,193,000 90.3 % $ 993,727,000 88.4 %

Rental Expenses

Medical office buildings $ 36,375,000 37.4 % $ 30,216,000 38.5 %

Senior housing 806,000 9.1 % 1,142,000 13.6 % 1,214,000 13.5 %

Skilled nursing facilities 1,507,000 8.7 % 1,572,000 9.8 %

Hospitals 477,000 4.7 % 446,000 4.1 %

Senior housing 366,000 2.2 % 64,000 0.4 %

Total rental expenses $ 38,725,000 27.4 % $ 32,298,000 26.9 %

Property Operating Expenses

Senior housing — RIDEA $ 60,224,000 87.5 % $ 37,434,000 81.1 % $ 30,023,000 81.5 %

Total property operating expenses $ 60,224,000 87.5 % $ 37,434,000 81.1 % $ 30,023,000 81.5 %

For the years ended December 31, 2020, 2019 and 2018, property operating expenses primarily consisted of administration and benefits expense of $46,406,000, $28,844,000 and $23,128,000, respectively.

The increase in property operating expenses for the year ended December 31, 2020, compared to the corresponding prior year period, is primarily due to the acquisition of seven senior housing — RIDEA facilities subsequent to December 31, 2019 and the transition of five senior housing facilities within Northern California Senior Housing Portfolio to a RIDEA structure in March 2020.

Overall, property operating expenses have also significantly increased in 2020 compared to prior years due to labor costs, the single largest expense line item for senior housing — RIDEA facilities, as well as the costs of COVID-19 testing of employees and residents and the costs of PPE and other supplies required as a result of the COVID-19 pandemic.

Senior housing — RIDEA facilities typically have a higher percentage of direct operating expenses to revenue than medical office buildings, skilled nursing facilities and leased, non-RIDEA senior housing facilities due to the nature of RIDEA facilities where we conduct day-to-day operations.

Integrated senior health campuses and SHOP typically have a higher percentage of direct operating expenses to revenue than medical office buildings, hospitals, and leased senior housing and skilled nursing facilities due to the nature of RIDEA — type facilities where we conduct day-to-day operations.

For the year ended December 31, 2021, as compared to the year ended December 31, 2020, rental expenses increased by $6,025,000 and property operating expenses increased by $15,836,000 for our SHOP due to the increase in the size of our portfolio as a result of the Merger.

Further, the remaining increase in total property operating expenses of $20,630,000 was due to an increase in labor costs at our SHOP and integrated senior health campuses.

General and Administrative

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

Years Ended December 31,

2020 2019 2018

Asset management and property management oversight fees — affiliates $ 10,063,000 $ 8,276,000 $ 4,975,000

Professional and legal fees 3,454,000 3,664,000 1,436,000

Bank charges 678,000 268,000 240,000

Board of directors fees 599,000 255,000 253,000

Bad debt expense 510,000 1,482,000 1,274,000

Transfer agent services

493,000 524,000 362,000

Directors’ and officers’ liability insurance

259,000 244,000 212,000

Franchise taxes

253,000 129,000 100,000

Restricted stock compensation

215,000 207,000 185,000

167,000 186,000 135,000

$ 16,691,000 $ 15,235,000 $ 9,172,000

The increase in general and administrative expenses in 2020 as compared to 2019 is primarily due to the purchase of additional properties in 2019 and 2020 and thus, incurring higher asset management and property management oversight fees to our advisor or its affiliates, as well as $641,000 in professional and legal fees and fees to the special committee of our board related to the investigation and analysis of strategic alternatives.

Such increases in general and administrative expenses were partially offset by a decrease in bad debt expense for our accounts receivable as a result of a change in lease accounting guidance in 2019.

The increase in general and administrative expenses in 2019 as compared to 2018 was primarily due to the purchase of additional properties in 2018 and 2019 and thus incurring higher asset management and property management oversight fees to our advisor or its affiliates and higher professional and legal fees.

General and administrative expenses also

increased by $1,731,000 in 2019 as compared to 2018 in connection with transitioning the operations of two senior housing facilities within Lafayette Assisted Living Portfolio and Northern California Senior Housing Portfolio to a RIDEA structure.

Acquisition Related Expenses

For the years ended December 31, 2020 and 2019, acquisition related expenses were $(160,000) and $1,974,000, respectively, which primarily related to net costs recovered or incurred in pursuit of properties that did not result in an acquisition.

For the year ended December 31, 2018, acquisition related expenses were $2,795,000, which were related primarily to the acquisition fee paid upon the purchase of 6.0% of the total membership interests in Trilogy REIT Holdings, LLC on October 1, 2018.

For the year ended December 31, 2021, general and administrative expenses were $43,199,000 compared to $27,007,000 for the year ended December 31, 2020.

The increase in general and administrative expenses of $16,192,000 was primarily the result of an increase of:

(i) $10,845,000 in stock compensation expense in connection with profit interests redemptions;

(ii) $4,449,000 in payroll costs for the acquired employees as a result of the AHI Acquisition;

(iii) $1,317,000 in operator transition expenses at certain of our SHOP;

and (iv) $1,062,000 in corporate operating expenses.

Such increases were partially offset by a decrease in our asset management and property management oversight fees of $4,812,000 as a result of the AHI Acquisition.

For a discussion of the 2021 profit interests redemptions, see Note 14, Equity — Noncontrolling Interests in Total Equity, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Business Acquisition Expenses

For the years ended December 31, 2021 and 2020, we recorded business acquisition expenses of $13,022,000 and $290,000, respectively.

For the year ended December 31, 2021, such expenses were primarily due to $12,873,000 in third-party legal costs and professional services incurred related to the Merger and the AHI Acquisition.

Depreciation and Amortization

For the years ended December 31, 2020, 2019 and 2018, depreciation and amortization was $50,304,000, $45,626,000 and $32,658,000, respectively, and consisted primarily of depreciation on our operating properties of $31,563,000, $27,435,000 and $16,723,000, respectively, and amortization on our identified intangible assets of $18,459,000, $18,074,000 and $15,874,000, respectively.

Included during the year ended December 31, 2019 is $6,226,000 of amortization expense and $1,013,000 of depreciation expense related to the write-off of lease commissions and tenant improvements, respectively, in connection with the termination of a management services agreement with an operator in February 2019.

For the years ended December 31, 2021 and 2020, depreciation and amortization was $133,191,000 and $98,858,000, respectively, which primarily consisted of depreciation on our operating properties of $109,036,000 and $90,997,000, respectively, and amortization of our identified intangible assets of $21,111,000 and $6,258,000, respectively.

The increase in depreciation and amortization of $34,333,000 was primarily the result of an increase of (i) $25,690,000 in depreciable assets in our portfolio as a result of the Merger;

and (ii) $2,380,000 due to the write-off of tenant improvements and in-place leases in connection with the transition of senior housing facilities within Delta Valley ALF Portfolio to a RIDEA structure on December 1, 2021.

Interest Expense

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Years Ended December 31,

2020 2019 2018

Interest expense:

Line of credit and term loans and derivative financial instruments

$ 17,193,000 $ 13,014,000 $ 4,984,000

Lines of credit and term loans and derivative financial instruments $ 33,966,000 $ 31,499,000

Mortgage loans payable 36,253,000 32,568,000

Amortization of deferred financing costs:

Line of credit and term loans 1,880,000 2,028,000 1,000,000

Lines of credit and term loans 4,261,000 3,559,000

Mortgage loans payable 1,652,000 1,171,000

Loss in fair value of derivative financial instruments 870,000 4,385,000 —

Amortization of debt discount/premium 49,000 41,000 13,000

Amortization of debt discount/premium, net

773,000 826,000

The increase in interest expense in 2020 compared to 2019 is primarily related to an increase in debt balances on our line of credit and term loans.

Such increase was partially offset by the decrease in loss in fair value recognized on our derivative financial instruments that we entered into in February 2019 and August 2020, as well as the January 2020 payoff of one mortgage loan payable with a principal balance of $7,738,000 and a decline in interest rates on our line of credit and term loans.

The increase in interest expense in 2019 compared to 2018 is primarily related to an increase in debt balances on our line of credit and term loans, as well as an increase in loss in fair value recognized on our derivative financial instruments that we entered into in February 2019.

See Note 6, Mortgage Loans Payable, Net, Note 7, Line of Credit and Term Loans, and Note 8, Derivative Financial Instruments, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

Impairment of Real Estate Investments

For the year ended December 31, 2020, we recognized an aggregate impairment charge of $3,642,000 on two senior housing facilities within Northern California Senior Housing Portfolio.

The remaining carrying values of such facilities were reclassified to properties held for sale.

See Note 3, Real Estate Investments, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

No impairment charges on real estate investments were recognized for the years ended December 31, 2019 and 2018.

(Gain) loss in fair value of derivative financial instruments (8,200,000) 3,906,000

Loss on extinguishment of debt 2,655,000 —

Interest expense on financing obligations and other liabilities

1,377,000 1,655,000

Total $ 72,737,000 $ 75,184,000

For the year ended December 31, 2021, interest expense was $72,737,000 compared to $75,184,000 for the year ended December 31, 2020.

The decrease in interest expense was primarily related to the change to a gain in fair value recognized on our derivative financial instruments, partially offset by the loss on debt extinguishment of $2,655,000 and the increase in interest expense of $3,852,000 due to the larger portfolio of mortgage loans payable and lines of credit and term loans as a result of the Merger.

See Note 8, Mortgage Loans Payable, Net, and Note 9, Lines of Credit and Term Loans, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion on debt extinguishments.

Liquidity and Capital Resources

In the normal course of business, our material cash requirements consist of payment of operating expenses, capital improvement expenditures, interest on our indebtedness, distributions to our stockholders and repurchases of our common stock .

Our sources of funds primarily consist of operating cash flows and borrowings.

In the normal course of business, our principal demands for funds are for payment of operating expenses, capital improvement expenditures, interest on our indebtedness, distributions to our stockholders and repurchases of our common stock.

We estimate that we will require approximately $10,139,000 to pay interest on our outstanding indebtedness in 2021, based on interest rates in effect as of December 31, 2020, and that we will require $477,507,000 to pay principal on our outstanding indebtedness in 2021.

Such principal on our outstanding indebtedness includes $476,900,000 of outstanding principal as of December 31, 2020 on our line of credit and term loans that are scheduled to mature on November 19, 2021;

however, we intend to satisfy certain conditions pursuant to the related credit agreement and pay the required fee in order to exercise our option to extend the maturity date for one year.

We also require resources to make certain payments to our advisor and its affiliates.

See Note 13, Related Party Transactions, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K for a further discussion of our payments to our advisor and its affiliates.

Generally, cash needs for such items will be met primarily from operations and also through borrowings, as needed.

Our total capacity to pay operating expenses, capital improvement expenditures, interest, distributions and repurchases is a function of our current cash position, our borrowing capacity on our line of credit, as well as any future indebtedness that we may incur.

Due to the impact the COVID-19 pandemic has had on the United States and globally, and the uncertainty of the severity and duration of the COVID-19 pandemic and its effects, beginning in March 2020, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects by decreasing our distributions to stockholders and suspending our share repurchase plan.

Consequently, our board approved a reduced daily distribution rate for April 2020 through April 2021 equal to $0.001095890 per share of our Class T and Class I common stock, which is equal to an annualized distribution rate of $0.40 per share, a decrease from the annualized rate of $0.60 per share previously paid by us.

See the “Distributions” section below for a further discussion.

In addition, on March 31, 2020, our board suspended our share repurchase plan with respect to all repurchase requests other than repurchases resulting from the death or qualifying disability of stockholders, beginning with share repurchase requests submitted for repurchase during the second quarter of 2020.

Furthermore, in connection with our board’s strategic alternative review process and in order to facilitate a strategic transaction, on March 18, 2021, our board authorized the suspension of the DRIP, effective as of April 1, 2021, and also approved the suspension of our share repurchase plan with respect to all repurchase requests received by us after February 28, 2021, including repurchases resulting from the death or qualifying disability of stockholders.

Our board shall determine if and when it is in the best interest of our company and stockholders to reinstate our DRIP or share repurchase plan.

As of December 31, 2020, our cash on hand was $17,411,000 and we had $53,100,000 available on our line of credit.

We believe that these resources will be sufficient to satisfy our cash requirements for the foreseeable future, and we do not anticipate a need to raise funds from other sources within the next 12 months.

Absent our requirements to make distributions to maintain our REIT qualification (as more fully described in Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K) and our current contractual commitments discussed below, we do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Material Cash Requirements

Capital Improvement Expenditures

A capital plan for each investment is established upon acquisition that contemplates the estimated capital needs of that investment, including costs of refurbishment, tenant improvements or other major capital expenditures.

The capital plan also sets forth the anticipated sources of the necessary capital, which may include operating cash generated by the investment, capital reserves, a line of credit or other loan established with respect to the investment, other borrowings or additional equity investments from us or joint venture partners.

The capital plan for each investment is adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs.

Based on the budget for the properties we own as of December 31, 2020, we estimate that our discretionary expenditures for capital and tenant improvements could require up to $9,385,000 within the next 12 months.

As of December 31, 2021, we had $16,822,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures.

Other Liquidity Needs

In the event that there is a shortfall in net cash available due to various factors, including, without limitation, the timing of distributions or the collection of receivables, we may seek to obtain capital to pay distributions by means of secured or unsecured debt financing through one or more third parties, or our advisor or its affiliates.

There are currently no limits or restrictions on the use of proceeds from our advisor or its affiliates which would prohibit us from making the proceeds available for distribution.

We may also pay distributions from cash from capital transactions, including, without limitation, the sale of one or more of our properties.

Based on the budget for the properties we own as of December 31, 2021, we estimate that our discretionary expenditures for capital and tenant improvements could require up to $108,803,000 within the next 12 months.

Contractual Obligations

The following table provides information with respect to:

(i) the maturity and scheduled principal repayment of our secured mortgage loans payable and our lines of credit and term loans;

(ii) interest payments on our mortgage loans payable, lines of credit and term loans;

(iii) ground and other lease obligations;

and (iv) financing obligations as of December 31, 2021:

Payments Due by Period

2022 2023-2024 2025-2026 Thereafter Total

Principal payments — fixed-rate debt

$ 65,147,000 $ 105,579,000 $ 182,402,000 $ 492,376,000 $ 845,504,000

Interest payments — fixed-rate debt

26,899,000 47,066,000 38,793,000 213,407,000 326,165,000

Principal payments — variable-rate debt

982,439,000 483,053,000 12,751,000 19,103,000 1,497,346,000

Interest payments — variable-rate debt (based on rates in effect as of December 31, 2021)

17,646,000 12,130,000 1,159,000 1,997,000 32,932,000

Ground and other lease obligations

19,188,000 37,460,000 34,248,000 163,816,000 254,712,000

Financing obligations 15,031,000 5,313,000 3,048,000 16,243,000 39,635,000

$ 1,126,350,000 $ 690,601,000 $ 272,401,000 $ 906,942,000 $ 2,996,294,000

Distributions and Share Repurchases

For information on distributions, see Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions, and the “Distributions” section below.

For information on our share repurchase plan, see Note 14, Equity — Share Repurchase Plan, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Credit Facilities

On October 1, 2021, upon consummation of the Merger, we amended the 2019 Corporate Credit Agreement, or the 2019 Corporate Credit Agreement, with respect to an amended credit facility with a maximum principal amount of $480,000,000, or the 2019 Credit Facility, which was set to mature on January 25, 2022.

In addition, upon consummation of the Merger, we are subject to an amended and restated loan agreement regarding a senior secured revolving credit facility with an aggregate maximum principal amount of $360,000,000, or the 2019 Trilogy Credit Facility.

We also amended our credit agreement for our line of credit and term loans with an aggregate maximum principal amount of $530,000,000, or the 2018 Credit Facility, which was set to mature on November 19, 2021, but was extended for an additional 12-month term to mature on November 19, 2022 after paying an extension fee of $795,000.

On January 19, 2022, we terminated the 2018 Credit Facility, and, through our operating partnership, entered into an agreement that supersedes and replaces the 2019 Credit Facility with a credit facility with an aggregate maximum principal amount of up to $1,050,000,000, or the 2022 Credit Facility.

See Note 9, Lines of Credit and Term Loans, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion, our Current Report on Form 8-K filed with the SEC on October 5, 2021 and our Current Report on Form 8-K filed with the SEC on January 25, 2022 for more information.

Our total capacity to pay operating expenses, capital improvement expenditures, interest, distributions and repurchases is a function of our current cash position, our borrowing capacity on our lines of credit and term loans, as well as any future indebtedness that we may incur.

As of December 31, 2021, our aggregate borrowing capacity under the 2018 Credit Facility, the 2019 Credit Facility and the 2019 Trilogy Credit Facility was $1,370,000,000.

As of December 31, 2021, our aggregate borrowings outstanding under our credit facilities was $1,226,634,000 and we had an aggregate of $143,366,000 available on such facilities.

We believe that the resources described above will be sufficient to satisfy our cash requirements for the foreseeable future.

The following table sets forth changes in cash flows:

Years Ended December 31,

2020 2019 2018

Cash, cash equivalents and restricted cash — beginning of period $ 152,190,000 $ 89,880,000

Net cash provided by operating activities 17,913,000 219,156,000

35,495,000 39,540,000 15,423,000

Net cash used in investing activities (138,652,000) (147,945,000)

(76,456,000) (199,934,000) (411,554,000)

Net cash provided by financing activities

Net cash provided by (used in) financing activities 94,109,000 (8,811,000)

Effect of foreign currency translation on cash, cash equivalents and restricted cash

(74,000) (90,000)

Cash, cash equivalents and restricted cash — end of period $ 125,486,000 $ 152,190,000

The following summary discussion of our changes in our cash flows is based on our consolidated statements of cash flows appearing elsewhere in this Annual Report on Form 10-K and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

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

In connection with the Merger, GAHR IV was the legal acquiror of GAHR III, while GAHR III was the accounting acquiror of GAHR IV in accordance with GAAP and as discussed in Note 3, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

For this reason, period to period comparisons may not be meaningful.

Operating Activities

For the years ended December 31, 2020, 2019 and 2018, cash flows provided by operating activities primarily related to the cash flows provided by our property operations and $1,005,000 of grant income, offset by payments of general and administrative expenses.

See the “Results of Operations” section above for a further discussion.

In general, cash flows provided by operating activities will be affected by the timing of cash receipts and payments.

The change in net cash provided by operating activities of $201,243,000 was primarily due to a decrease in grant income of $38,230,000 and an increase in general and administrative expenses and interest payments on our outstanding indebtedness due to the Merger and the AHI Acquisition during the year ended December 31, 2021, as compared to the prior year period.

In addition, the decrease in net cash provided by operating activities was due to $52,322,000 in Medicare advance payments that

were received in the prior year, as well as the payment of deferred payroll taxes related to the CARES Act of $20,388,000 and the payment of costs related to the Merger of $12,873,000 during the year ended December 31, 2021.

Investing Activities

For the year ended December 31, 2020, cash flows used in investing activities related primarily to our 2020 property acquisitions in the amount of $68,509,000 and the payment of $8,308,000 for capital expenditures.

For the year ended December 31, 2019, cash flows used in investing activities related primarily to our 2019 property acquisitions in the amount of $195,249,000 and the payment of $6,497,000 for capital expenditures.

For the year ended December 31, 2018, cash flows used in investing activities related primarily to our 2018 acquisitions in the amount of $355,070,000, our investment in an unconsolidated entity for $48,000,000 and the payment of $4,257,000 for capital expenditures.

We anticipate that cash flows used in investing activities will primarily be affected by the timing of capital expenditures, and generally will decrease as compared to prior years as we have substantially completed the acquisition phase of our real estate investment strategy.

The change in net cash used in investing activities of $9,293,000 was primarily due to a decrease in developments and capital expenditures of $48,607,000 during the year ended December 31, 2021, compared to the year ended December 31, 2020, and cash, cash equivalents and restricted cash acquired in connection with the Merger on October 1, 2021 of $17,852,000, partially offset by an increase of $49,557,000 in investing activities related to our property acquisitions and a decrease in proceeds from dispositions of real estate of $8,026,000 during the year ended December 31, 2021, compared to the year ended December 31, 2020.

Financing Activities

For the year ended December 31, 2020, cash flows provided by financing activities related primarily to net borrowings on our line of credit of $80,100,000, partially offset by $17,837,000 in distributions to our common stockholders, the January 2020 payoff of one mortgage loan payable with a principal balance of $7,738,000 and share repurchases of $6,214,000.

For the year ended December 31, 2019, cash flows provided by financing activities related primarily to net borrowings on our line of credit and term loans of $121,800,000 as well as funds raised from investors in our initial offering in the amount of $90,438,000, partially offset by $20,905,000 in distributions to our common stockholders, the payment of offering costs of $19,136,000 in connection with our initial offering and 2019 DRIP Offering and $8,609,000 in share repurchases.

For the year ended December 31, 2018, cash flows provided by financing activities related primarily to funds raised from investors in our initial offering in the amount of $254,017,000 and net borrowings on our line of credit and term loans of $190,900,000, partially offset by the payment of offering costs of $19,817,000 in connection with our initial offering, distributions to our common stockholders of $13,989,000, the payment of deferred financing costs of $4,092,000 in connection with our line of credit and mortgage loans payable and $3,312,000 in repurchases of common stock.

Overall, we anticipate cash flows from financing activities to decrease in the future since we terminated our initial offering in February 2019.

The change from net cash used in financing activities to net cash provided by financing activities of $102,920,000 was primarily due to an increase in net borrowings under our mortgage loans payable of $243,490,000, a decrease in share repurchases of $22,725,000 and a decrease in distributions paid to common stockholders of $4,209,000.

Such increases in financing activities were partially offset by a decrease in net borrowings under our lines of credit of $133,655,000, an increase in distributions to noncontrolling interests of $9,412,000, an increase in repurchases of stock warrants and redeemable noncontrolling interests of $8,783,000 and an increase in payments on financing and lease obligations of $6,232,000 during the year ended December 31, 2021 as compared to the year ended December 31, 2020, as well as $11,000,000 received in connection with the issuance of noncontrolling interests in the prior year.

The decrease in share repurchases was due to the suspension of the GAHR III share repurchase plan from May 31, 2020 through October 4, 2021, when the partial reinstatement of our share repurchase plan was approved by our board.

The decrease in distributions paid to common stockholders was due to the suspension of all stockholder distributions on May 29, 2020 in response to the impact of the COVID-19 pandemic;

the board of directors of GAHR III reinstated stockholder distributions in June 2021 at an annualized distribution rate of $0.20 per share, which distributions were further increased, as approved by our board, to an annualized distribution rate of $0.40 per share starting with distributions declared for the month of October 2021.

Distributions

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Years Ended December 31,

2020 2019 2018

Ordinary income $ 7,989,000 26.3 % $ — — %

3 unchanged sentences

Amounts listed above do not include distributions paid on nonvested shares of our restricted common stock which have been separately reported.

See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions, for a further discussion of our distributions.

We anticipate that our overall leverage will approximate 50.0% of the combined market value of all of our properties and other real estate-related investments, as determined at the end of each calendar year.

For these purposes, the fair market value of each asset will be equal to the purchase price paid for the asset or, if the asset was appraised subsequent to the date of purchase, then the fair market value will be equal to the value reported in the most recent independent appraisal of the asset.

The distributions paid for the years ended December 31, 2021 and 2020, along with the amount of distributions reinvested pursuant to our DRIP Offerings, and the sources of our distributions as compared to cash flows from operations were as follows:

Years Ended December 31,

Distributions paid in cash $ 22,788,000 $ 26,997,000

Distributions reinvested 7,666,000 21,861,000

$ 30,454,000 $ 48,858,000

Sources of distributions:

Cash flows from operations $ 17,913,000 58.8 % $ 48,858,000 100 %

Proceeds from borrowings 12,541,000 41.2 — —

$ 30,454,000 100 % $ 48,858,000 100 %

For the years ended December 31, 2021 and 2020, any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and all or any portion of a distribution to our stockholders may have been paid from borrowings.

The payment of any distributions from our borrowings reduced the amount of capital we ultimately invested in assets and negatively impacted the amount of income available for future distributions.

Years Ended December 31,

Distributions paid in cash $ 22,788,000 $ 26,997,000

Distributions reinvested 7,666,000 21,861,000

$ 30,454,000 $ 48,858,000

Sources of distributions:

FFO attributable to controlling interest $ 30,454,000 100 % $ 48,858,000 100 %

Proceeds from borrowings — — — —

$ 30,454,000 100 % $ 48,858,000 100 %

The payment of distributions from sources other than FFO may reduce the amount of proceeds available for investment and operations or may cause us to incur additional interest expense as a result of borrowed funds.

For a further discussion of FFO, a non-GAAP financial measure, including a reconciliation of our GAAP net income (loss) to FFO, see “Funds from Operations and Modified Funds from Operations” below.

For information on future distributions of the Combined Company, see Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions.

We anticipate that our overall leverage will not exceed 50.0% of the combined fair market value of all of our properties, including the properties acquired as part of the Merger, and other real estate-related investments, as determined at the end of each calendar year.

For these purposes, the market value of each asset will be equal to the contract purchase price paid for the asset or, if the asset was appraised subsequent to the date of purchase, then the market value will be equal to the value reported in the most recent independent appraisal of the asset.

Our policies do not limit the amount we may borrow with respect to any individual investment.

As of December 31, 2020, our aggregate borrowings were 39.5% of the combined market value of all of our real estate investments.

Under our charter, we have a limitation on borrowing that precludes us from borrowing in excess of 300% of our net assets without the approval of a majority of our independent directors.

Net assets for purposes of this calculation are defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation, amortization, bad debt and other non-cash reserves, less total liabilities.

Generally, the preceding calculation is expected to approximate 75.0% of the aggregate cost of our real estate and real estate-related investments before depreciation, amortization, bad debt and other similar non-cash reserves.

In addition, we may incur mortgage debt and pledge some or all of our real properties as security for that debt to obtain funds to acquire additional real estate or for working capital.

Furthermore, we may borrow if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes.

As of March 26, 2021 and December 31, 2020, our leverage did not exceed 300% of the value of our net assets.

As of December 31, 2021, our aggregate borrowings were 46.8% of the combined market value of all of our real estate and real estate-related investments.

Mortgage Loans Payable, Net

For a discussion of our mortgage loans payable, net, see Note 6, Mortgage Loans Payable, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Line of Credit and Term Loans

For a discussion of our line of credit and term loans, see Note 7, Line of Credit and Term Loans, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

For a discussion of our mortgage loans payable, see Note 8, Mortgage Loans Payable, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Lines of Credit and Term Loans

For a discussion of our lines of credit and term loans, see Note 9, Lines of Credit and Term Loans, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

REIT Requirements

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In general, to qualify under the safe harbor, each stockholder must elect to receive either cash or stock, and the aggregate cash component of the distribution to stockholders must represent at least 20.0% of the total distribution .

In May 2020, the IRS issued similar guidance that lowered the cash component of the distribution to 10.0% for dividends declared between April 1, 2020 and December 31, 2020 .

In the event that there is a shortfall in net cash available due to factors including, without limitation, the timing of such distributions or the timing of the collection of receivables, we may seek to obtain capital to pay distributions by means of secured and unsecured debt financing through one or more unaffiliated third parties.

4 unchanged sentences

A significant liquidity need is the payment of principal and interest on our outstanding indebtedness.

As of December 31, 2020, we had $18,766,000 ($17,827,000, net of discount/premium and deferred financing costs) of fixed-rate mortgage loans payable outstanding secured by our properties.

As of December 31, 2020, we had $476,900,000 outstanding, and $53,100,000 remained available under our line of credit.

See Note 6, Mortgage Loans Payable, Net, and Note 7, Line of Credit and Term Loans, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

We are required by the terms of certain loan documents to meet certain reporting requirements and covenants, such as leverage ratios, net worth ratios, debt service coverage ratios and fixed charge coverage ratios.

As of December 31, 2020, we were in compliance with all such covenants and requirements on our mortgage loans payable and our line of credit and term loans.

As of December 31, 2020, the weighted average effective interest rate on our outstanding debt, factoring in our fixed-rate interest rate swaps, was 3.38% per annum.

Contractual Obligations

The following table provides information with respect to:

(i) the maturity and scheduled principal repayment of our secured mortgage loans payable and our line of credit and term loans;

(ii) interest payments on our mortgage loans payable and our line of credit and term loans;

and (iii) ground lease obligations as of December 31, 2020:

Payments Due by Period

2021 2022-2023 2024-2025 Thereafter Total

Principal payments — fixed-rate debt

$ 607,000 $ 1,331,000 $ 6,589,000 $ 10,239,000 $ 18,766,000

Interest payments — fixed-rate debt

729,000 1,370,000 1,113,000 4,969,000 8,181,000

Principal payments — variable-rate debt

476,900,000 — — — 476,900,000

Interest payments — variable-rate debt (based on rates in effect as of December 31, 2020) 9,410,000 — — — 9,410,000

Ground lease obligations 523,000 1,056,000 1,072,000 46,565,000 49,216,000

$ 488,169,000 $ 3,757,000 $ 8,774,000 $ 61,773,000 $ 562,473,000

Off-Balance Sheet Arrangements

As of December 31, 2020, we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.

During the year ended December 31, 2020, inflation has not significantly affected our operations because of the moderate inflation rate;

however, we expect to be exposed to inflation risk as income from future long-term tenant leases will be the primary source of our cash flows from operations.

As of December 31, 2021, we had $1,116,216,000 ($1,095,594,000, net of discount/premium and deferred financing costs) of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties.

As of December 31, 2021, we had $1,226,634,000 outstanding and $143,366,000 remained available under our lines of credit, and the weighted average effective interest rate on our outstanding debt, factoring in our fixed-rate interest rate swaps and interest rate cap, was 3.18% per annum.

See Note 8, Mortgage Loans Payable, Net and Note 9, Lines of Credit and Term Loans, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

We are required by the terms of certain loan documents to meet various financial and non-financial covenants, such as leverage ratios, net worth ratios, debt service coverage ratios and fixed charge coverage ratios.

Except as explained below, as of December 31, 2021, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loans.

Some of our mortgage loan agreements include a standard loan term requiring lender approval for a change of control event, which was triggered upon the closing of the Merger.

All of our mortgage lenders and loan servicers approved such event, except for the servicers of two of our mortgage loans with an aggregate principal balance of $14,229,000.

We have been closely working with such servicers to address their requirements to receive final approval;

however, we have not received notice from such servicers to accelerate our debt obligations.

The extent and severity of the COVID-19 pandemic on our business continues to evolve, and any continued future deterioration of operations in excess of management's projections as a result of COVID-19 could impact future compliance with these covenants.

If any future covenants are violated, we anticipate seeking a waiver or amending the debt covenants with the lenders when and if such event should occur.

However, there can be no assurances that management will be able to effectively achieve such plans.

During the years ended December 31, 2021 and 2020, inflation has not significantly affected our operations because of the predominantly moderate inflation rate;

however, the annual rate of inflation in the United States reached 7.5% in January 2022, the highest rate in more than three decades, as measured by the Consumer Price Index, and while we believe inflation has not significantly impacted our operations, we have experienced, and continue to experience, increases in the cost of labor, services and PPE and therefore continued inflationary pressures could impact our profitability in future periods.

There are provisions in the majority of our tenant leases that will protect us from the impact of inflation.

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Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, a non-GAAP measure, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT.

The use of funds from operations is recommended by the REIT industry as a supplemental performance measure, and our management uses funds from operations attributable to controlling interest, or FFO, to evaluate our performance over time.

The use of funds from operations is recommended by the REIT industry as a supplemental performance measure, and our management uses FFO to evaluate our performance over time.

FFO is not equivalent to our net income (loss) as determined under GAAP.

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Nevertheless, we believe that the use of FFO, which excludes the impact of real estate-related depreciation and amortization and impairments, provides a further understanding of our performance to investors and to our management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, which may not be immediately apparent from net income (loss).

However, FFO and modified funds from operations attributable to controlling interest, or MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance.

However, FFO and modified funds from operations, or MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance.

The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

The IPA, an industry trade group, has standardized a measure known as modified funds from operations, which the IPA has recommended as a supplemental performance measure for publicly registered, non-listed REITs and which we believe to be another appropriate supplemental performance measure to reflect the operating performance of a publicly registered, non-listed REIT having the characteristics described above.

The Institute for Portfolio Alternatives, or the IPA, an industry trade group, has standardized a measure known as modified funds from operations, which the IPA has recommended as a supplemental performance measure for publicly registered, non-listed REITs and which we believe to be another appropriate supplemental performance measure to reflect the operating performance of a publicly registered, non-listed REIT having the characteristics described above.

MFFO is not equivalent to our net income (loss) as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended.

We believe that, because MFFO excludes expensed acquisition fees and expenses that affect our operations only in periods in which properties are acquired and that we consider more reflective of investing activities, as well as other non-operating items included in FFO, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place.

By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our initial offering stage has been completed and our properties have been acquired.

We also believe that MFFO is a recognized measure of sustainable operating performance by the publicly registered, non-listed REIT industry.

Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our initial offering stage and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities.

Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our initial offering stage has been completed and properties have been acquired, as it excludes expensed acquisition fees and expenses that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP measure, consistent with the Practice Guideline issued by the IPA.

By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after the initial offering stage has been completed and our properties have been acquired.

We also believe that MFFO is a recognized measure of sustainable operating

performance by the publicly registered, non-listed REIT industry.

Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering stage and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities.

Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after the initial offering stage has been completed and properties have been acquired, as it excludes expensed acquisition fees and expenses that have a negative effect on our initial operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Practice Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs:

Modified Funds from Operations , or the Practice Guideline, issued by the IPA in November 2010.

The Practice Guideline defines modified funds from operations as funds from operations further adjusted for the following items included in the determination of GAAP net income (loss):

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In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the publicly registered, non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.

For the year ended December 31, 2020, we recognized government grants through economic stimulus programs of the CARES Act as grant income and within income or loss from an unconsolidated entity.

Such amounts were established for eligible healthcare providers to preserve liquidity in response to the impact of the COVID-19 pandemic.

For the years ended December 31, 2021 and 2020, we recognized government grants as grant income or as a reduction of property operating expenses, as applicable, and within loss from unconsolidated entities.

Such amounts were granted through federal and state government programs, such as through the CARES Act, and which were established for eligible healthcare providers to preserve liquidity in response to the COVID-19 pandemic.

See the “Results of Operations” section above for a further discussion.

The government grants helped mitigate some of the negative impact that the COVID-19 pandemic had on our financial condition and results of operations.

Without such relief proceeds, the COVID-19 pandemic impact would have had a material adverse impact to our FFO and MFFO.

For the year ended December 31, 2020, FFO would have been approximately $34,124,000, excluding government grants recognized.

For the year ended December 31, 2020, MFFO would have been approximately $31,054,000, excluding government grants recognized.

Without such relief funds, the COVID-19 pandemic impact would have had a material adverse impact to our FFO and MFFO.

For the years ended December 31, 2021 and 2020, FFO would have been approximately $54,516,000 and $54,872,000, respectively, excluding government grants recognized.

For the years ended December 31, 2021 and 2020, MFFO would have been approximately $62,480,000 and $55,869,000, respectively, excluding government grants recognized.

The following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to FFO and MFFO for the periods presented below:

Years Ended December 31,

2020 2019 2018 2017 2016

Net (loss) income $ (53,269,000) $ 8,863,000

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133,191,000 98,858,000

Depreciation and amortization related to real estate — unconsolidated entity

3,517,000 3,365,000 891,000 — —

Depreciation and amortization related to real estate — unconsolidated entities 3,116,000 2,992,000

Impairment of real estate investments — consolidated properties 3,335,000 11,069,000

Impairments and gain on disposition of real estate investments, net — unconsolidated entity 78,000 — — — —

Net loss attributable to noncontrolling interests 885,000 82,000 232,000 33,000 —

Depreciation, amortization and impairments — noncontrolling interests (980,000) (113,000) (272,000) (46,000) —

Loss (gain) on dispositions of real estate investments — consolidated properties 100,000 (1,395,000)

Net loss (income) attributable to noncontrolling interests 5,475,000 (6,700,000)

Depreciation, amortization, impairments and gain/loss on dispositions — noncontrolling interests (22,270,000) (18,012,000)

FFO attributable to controlling interest

$ 69,678,000 $ 95,675,000

Acquisition related expenses(1) $ (160,000) $ 1,974,000 $ 2,795,000 $ 655,000 $ 4,745,000

Business acquisition expenses(1) $ 13,022,000 $ 290,000

Amortization of above- and below-market leases(2) 953,000 124,000

Amortization of loan and closing costs(3) 201,000 170,000

Change in deferred rent(4) (20,000) (1,479,000)

Loss in fair value of derivative financial instruments(4) 870,000 4,385,000 — — —

Adjustments for unconsolidated entity(5) 301,000 486,000 99,000 — —

Loss on debt extinguishments(5) 2,655,000 —

(Gain) loss in fair value of derivative financial instruments(6) (8,200,000) 3,906,000

Foreign currency loss (gain)(7) 564,000 (1,469,000)

Adjustments for unconsolidated entities(8) 573,000 941,000

Adjustments for noncontrolling interests(8) (1,784,000) (1,486,000)

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$ 77,642,000 $ 96,672,000

Weighted average Class T and Class I common shares outstanding — basic and diluted

Weighted average common shares outstanding — basic and diluted

200,324,561 179,916,841

Net (loss) income per Class T and Class I common share — basic and diluted $ (0.23) $ (0.24) $ (0.16) $ 0.02 $ (1.75)

FFO attributable to controlling interest per Class T and Class I common share — basic and diluted

Net (loss) income per common share — basic and diluted $ (0.27) $ 0.05

FFO attributable to controlling interest per common share — basic and diluted

$ 0.35 $ 0.53

MFFO attributable to controlling interest per Class T and Class I common share — basic and diluted

MFFO attributable to controlling interest per common share — basic and diluted

$ 0.39 $ 0.54

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Such information would be comparable only for publicly registered, non-listed REITs that have completed their acquisition activity and have other similar operating characteristics.

By excluding expensed acquisition related expenses, we believe MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties.

Acquisition fees and expenses include payments to our advisor or its affiliates and third parties.

By excluding business acquisition expenses that have been deducted as expenses in the determination of GAAP net income or loss, we believe MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties.

Business acquisition expenses include payments to our former advisor or its affiliates and third parties.

(2) Under GAAP, above- and below-market leases are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate related assets that are excluded from FFO.

However, because real estate values and market lease rates historically rise or fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, we believe that by excluding charges relating to the amortization of above- and below-market leases, MFFO may provide useful supplemental information on the performance of the real estate.

(3) Under GAAP, closing costs are amortized over the term of our debt security investment as an adjustment to the yield on our debt security investment.

This may result in income recognition that is different than the contractual cash flows under our debt security investment.

By adjusting for the amortization of the closing costs, MFFO may provide useful supplemental information on the realized economic impact of our debt security investment, providing insight on the expected contractual cash flows of such investment, and aligns results with management’s analysis of operating performance.

(4) Under GAAP, as a lessor, rental revenue is recognized on a straight-line basis over the terms of the related lease (including rent holidays).

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This may result in income or expense recognition that is significantly different than the underlying contract terms.

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

By adjusting such amounts, MFFO may provide useful supplemental information on the realized

economic impact of lease terms, providing insight on the expected contractual cash flows of such lease terms, and aligns results with management’s analysis of operating performance.

(5) The loss associated with the early extinguishment of debt primarily relates to the write-off of unamortized deferred financing fees, write-off of unamortized debt discount, penalties, or other fees incurred.

We believe that adjusting for such non-recurring losses provides useful supplemental information because such charges (or losses) may not be reflective of on-going business transactions and operations and is consistent with management’s analysis of our operating performance.

(6) Under GAAP, we are required to include changes in fair value of our derivative financial instruments in the determination of net income or loss.

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The need to reflect the change in fair value of our derivative financial instruments is a continuous process and is analyzed on a quarterly basis in accordance with GAAP.

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

(7) We believe that adjusting for the change in foreign currency exchange rates provides useful information because such adjustments may not be reflective of on-going operations.

(8) Includes all adjustments to eliminate the unconsolidated entities’ share or noncontrolling interests’ share, as applicable, of the adjustments described in notes (1) – (7) above to convert our FFO to MFFO.

Net Operating Income

Net operating income, or NOI, is a non-GAAP financial measure that is defined as net income (loss), computed in accordance with GAAP, generated from properties before general and administrative expenses, acquisition related expenses, depreciation and amortization, interest expense, impairment of real estate investments, income or loss from unconsolidated entity, other income and income tax benefit or expense.

NOI is a non-GAAP financial measure that is defined as net income (loss), computed in accordance with GAAP, generated from properties before general and administrative expenses, business acquisition expenses, depreciation and amortization, interest expense, gain or loss on dispositions, impairment of real estate investments, income or loss from unconsolidated entities, foreign currency gain or loss, other income and income tax benefit or expense.

NOI is not equivalent to our net income (loss) as determined under GAAP and may not be a useful measure in measuring operational income or cash flows.

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NOI should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance.

Investors are also cautioned that NOI should only be used to assess our operational performance in periods in which we have not incurred or accrued any acquisition related expenses.

Investors are also cautioned that NOI should only be used to assess our operational performance in periods in which we have not incurred or accrued any business acquisition expenses.

We believe that NOI is an appropriate supplemental performance measure to reflect the performance of our operating assets because NOI excludes certain items that are not associated with the operations of the properties.

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However, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

For the year ended December 31, 2020, we recognized government grants through economic stimulus programs of the CARES Act as grant income.

For the years ended December 31, 2021 and 2020, we recognized government grants as grant income or as a reduction of property operating expenses, as applicable.

The government grants helped mitigate some of the negative impact that the COVID-19 pandemic had on our financial condition and results of operations.

For the year ended December 31, 2020, NOI would have been approximately $70,440,000, excluding government grants recognized.

Without such relief funds, the COVID-19 pandemic impact would have had a material adverse impact to our NOI.

For the years ended December 31, 2021 and 2020, NOI would have been approximately $196,385,000 and $162,576,000, respectively, excluding government grants recognized.

To facilitate understanding of this financial measure, the following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to NOI for the periods presented below:

Years Ended December 31,

2020 2019 2018 2017 2016

Net (loss) income $ (53,269,000) $ 8,863,000

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43,199,000 27,007,000

Acquisition related expenses (160,000) 1,974,000 2,795,000 655,000 4,745,000

Business acquisition expenses 13,022,000 290,000

Depreciation and amortization 133,191,000 98,858,000

Interest expense 72,737,000 75,184,000

Loss (gain) on dispositions of real estate investments 100,000 (1,395,000)

Impairment of real estate investments 3,335,000 11,069,000

(Income) loss from unconsolidated entity (629,000) (267,000) 110,000 — —

Loss from unconsolidated entities 1,355,000 4,517,000

Foreign currency loss (gain) 564,000 (1,469,000)

Other income (1,854,000) (1,570,000)

Income tax (benefit) expense — (8,000) 8,000 — —

Income tax expense (benefit) 956,000 (3,078,000)

Net operating income $ 213,336,000 $ 218,276,000

Subsequent Events

For a discussion of subsequent events, see Note 22, Subsequent Events, to our accompanying consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis