What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-15 · 218 added, 166 removed, 389 unchanged (50% of the section changed)

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The following discussion is provided as a supplement to, and should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our 2021 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or SEC, on March 25, 2022.

Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of June 30, 2022 and December 31, 2021, together with our results of operations and cash flows for the three and six months ended June 30, 2022 and 2021.

Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of September 30, 2022 and December 31, 2021, together with our results of operations and cash flows for the three and nine months ended September 30, 2022 and 2021.

Our results of operations and financial condition, as reflected in the accompanying condensed consolidated financial statements and related notes, are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors that could affect the ongoing viability of our tenants and residents.

In connection with the Merger (as discussed and defined below), GAHR IV was the legal acquiror of 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 1, Organization and Description of Business, to our accompanying condensed consolidated financial statements.

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Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations.

Our statements contained in this report that are not historical facts are forward-looking.

Actual results may differ materially from those included in the forward-looking statements.

Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations, are generally identifiable by use of the words “expect,” “project,” “may,” “will,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “opinion,” “predict,” “potential,” “seek” and any other comparable and derivative terms or the negatives thereof.

Our ability to predict results or the actual effect of future plans and strategies is inherently uncertain.

Factors which could have a material adverse effect on our operations on a consolidated basis include, but are not limited to:

Certain statements contained in this report, other than historical facts, may be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995 (collectively, the “Acts”).

We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts.

Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” or other similar words.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the SEC.

Any such forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, our management and involve uncertainties that could significantly affect our financial results.

Such statements include, but are not limited to:

(1) statements about our plans, strategies, initiatives and prospects;

(2) statements about the impact of the Merger;

(3) statements about the coronavirus, or COVID-19, pandemic, including its duration and potential or expected impact on our business and our view on forward trends;

and (4) statements about our future results of operations, capital expenditures and liquidity.

Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation:

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

the company’s ability to recover from 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;

the continuing adverse effects of the 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;

our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due;

our ability to maintain our qualification as a REIT for U.S.

federal income tax purposes;

changes in interest rates and foreign currency risk;

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the success of our investment strategy;

the availability of financing;

information technology security breaches;

our ability to retain our executives and key employees;

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Overview and Background

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.

American Healthcare REIT, Inc., a Maryland corporation, is a leading internally-managed real estate investment trust, or REIT, that 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 have built a fully-integrated management platform, with approximately 113 employees, that operates clinical healthcare properties throughout the United States, the United Kingdom, and the Isle of Man.

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).

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however, we have selectively developed, and may continue to selectively develop, healthcare 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.

We qualified 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.

Merger of Griffin-American Healthcare REIT III, Inc.

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and Jeffrey T.

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

Hanson, our former Chief Executive Officer and current non-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 Chief Operating Officer and current Executive Vice President, or collectively, the AHI Principals.

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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.

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 became self-managed.

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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.

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.

Our former advisor, subject to the oversight and review of our board of directors, or our board, provided asset management, property management, acquisition, disposition and other advisory services on our behalf consistent with our investment policies and objectives.

Following the Merger and the 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.

Also, on October 1, 2021 and in connection with the AHI Acquisition, we redeemed all 22,222 shares of our common stock owned by our former advisor and the 20,833 shares of our Class T common stock owned by GAHR IV Advisor in GAHR IV.

Also, on October 1, 2021 and in connection with the AHI Acquisition, our operating partnership redeemed all 22,222 shares of our common stock owned by our former advisor and the 20,833 shares of our Class T common stock owned by GAHR IV Advisor in GAHR IV.

Prior to the Merger and the 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), or Digital Bridge, and 7.8% owned by James F.

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

DBRG), or DigitalBridge, and 7.8% owned by James F.

Flaherty III.

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

We were not affiliated with Griffin Capital, DigitalBridge or Mr.

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

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See Note 13, Redeemable Noncontrolling Interests, and Note 14, Equity — Noncontrolling Interests in Total Equity, to our accompanying condensed consolidated financial statements for a further discussion of the ownership in our operating partnership.

Public Offering

Public Offerings

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.

Following the deregistration of the initial offering, GAHR IV continued issuing shares of its common stock up to $100,000,000 pursuant to the DRIP through a subsequent offering, or the 2019 GAHR IV DRIP Offering, pursuant to a Registration Statement on Form S-3 under the Securities Act.

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 authorized the reinstatement of the DRIP, as amended, or the AHR DRIP.

We continue to offer up to $100,000,000 of shares of our common stock to be issued pursuant to the AHR DRIP under an existing Registration Statement on Form S-3 under the Securities Act of 1933, as amended, or the Securities Act, previously filed by GAHR IV.

As of June 30, 2022, a total of $77,083,000 in distributions were reinvested that resulted in 8,180,513 shares of common stock being issued pursuant to the AHR DRIP.

On October 4, 2021, our board authorized the reinstatement of the DRIP, as amended, or the AHR DRIP, to offer up to $100,000,000 of shares of our common stock pursuant to a Registration Statement on Form S-3 under the Securities Act previously filed by GAHR IV, or the AHR DRIP Offering.

On November 14, 2022, our board suspended the AHR DRIP Offering beginning with the distributions declared, if any, for the quarter ending December 31, 2022.

See Note 22, Subsequent Events, to our accompanying condensed consolidated financial statements.

As of September 30, 2022, a total of $80,754,000 in distributions were reinvested that resulted in 8,575,687 shares of common stock being issued pursuant to the AHR DRIP.

See Note 14, Equity — Distribution Reinvestment Pl an, to our accompanying condensed consolidated financial statements 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.

On September 16, 2022, we filed with the SEC a Registration Statement on Form S-11 (File No.

333-267464) with respect to a proposed primary public offering of our shares of common stock in conjunction with a contemplated listing of our common stock on the New York Stock Exchange.

Such registration statement and contemplated listing are not yet effective.

The potential public offering is subject to market conditions, and there can be no assurance as to whether, or when, any such offering may be completed, or as to the size, public offering price or other terms of such offering.

On March 24, 2022, our board, at the recommendation of the audit committee of our board, which is 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 as of December 31, 2021.

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 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 December 31, 2021.

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.

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.

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We currently operate through six reportable business segments:

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

As of June 30, 2022, we owned and/or operated 313 buildings and integrated senior health campuses, or approximately 19,461,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,370,459,000, including the fair value of the properties acquired in the Merger.

In addition, as of June 30, 2022, we also owned a real estate-related debt investment purchased for $60,429,000.

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

As of September 30, 2022, we owned and/or operated 312 buildings and integrated senior health campuses, or approximately 19,432,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,548,366,000, including the fair value of the properties acquired in the Merger.

In addition, as of September 30, 2022, we also owned a real estate-related debt investment purchased for $60,429,000.

Critical Accounting Estimates

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Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.

The complete listing of our Critical Accounting Estimates was previously disclosed in our 2021 Annual Report on Form 10-K, as filed with the SEC on March 25, 2022, and there have been no material changes to our Critical Accounting Estimates as disclosed therein, except as noted below or included within Note 2, Summary of Significant Accounting Policies, to our accompanying condensed consolidated financial statements.

The complete listing of our Critical Accounting Estimates was previously disclosed in our 2021 Annual Report on Form 10-K, as filed with the SEC on March 25, 2022, and there have been no material changes to our Critical Accounting Estimates as disclosed therein, except as included within Note 2, Summary of Significant Accounting Policies, to our accompanying condensed consolidated financial statements.

Interim Unaudited Financial Data

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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 employing the workforce necessary to operate as a self-managed company and cost savings associated with no longer paying advisory fees to our former advisor.

Furthermore, as a result of the AHI Acquisition and the Merger on October 1, 2021, we employed a workforce necessary to operate as a self-managed company.

The impact on our results of operations from operating as a self-managed company is predominantly an increase in general and administrative costs related to employing the necessary workforce 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 the 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.

For a further discussion of these and other factors that could impact our future results or performance, see Part I, Item 1A, Risk Factors, previously disclosed in our 2021 Annual Report on Form 10-K, as filed with the SEC on March 25, 2022.

For a further discussion of these and other factors that could impact our future results or performance, see Part II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q and Part I, Item 1A, Risk Factors, previously disclosed in our 2021 Annual Report on Form 10-K, as filed with the SEC on March 25, 2022.

Our residents, tenants, operating partners and managers, our industry and the U.S.

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The timing and extent of the economic recovery from the COVID-19 pandemic is dependent upon many factors, including the emergence and severity of COVID-19 variants, the continued effectiveness and frequency of booster vaccinations and the duration and implications of continued restrictions and safety measures.

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.

As the COVID-19 pandemic is still impacting the healthcare system to a certain extent, 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 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 June 30, 2022.

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

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

We believe the operational recovery of our SHOP and integrated senior health campuses from the impact of the COVID-19 pandemic will generally continue and that such recovery over time towards pre-pandemic levels will drive our overall portfolio performance.

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

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We cannot predict with reasonable certainty when demand for healthcare services at our senior housing and skilled nursing facilities 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 booster rates;

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

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

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

During the nine months ended September 30, 2022 and 2021, inflation has affected our operations.

The annual rate of inflation in the United States was 7.7% in October 2022, as measured by the Consumer Price Index.

We believe inflation has impacted our operations such that, we have experienced, and continue to experience, increases in the cost of labor, services and supplies, and therefore continued inflationary pressures on our integrated senior health campuses and SHOP could continue to impact our profitability in future periods.

For properties that are not operated under a RIDEA structure, there are provisions in the majority of our tenant leases that help us mitigate the impact of inflation.

These provisions include negotiated rental increases, which historically range from 2% to 3% per year, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements.

However, due to the long-term nature of existing leases, among other factors, the leases may not reset frequently enough to cover inflation.

A period of inflation could also cause an increase in the cost of our variable rate debt.

Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk section below, for a further discussion.

Scheduled Lease Expirations

Excluding our SHOP and integrated senior health campuses, as of June 30, 2022, our properties were 93.1% leased and during the remainder of 2022, 4.8% of the leased GLA is scheduled to expire.

Excluding our SHOP and integrated senior health campuses, as of September 30, 2022, our properties were 92.6% leased and during the remainder of 2022, 3.0% 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 June 30, 2022, our remaining weighted average lease term was 7.1 years, excluding our SHOP and integrated senior health campuses.

Our combined SHOP and integrated senior health campuses were 79.5% leased as of June 30, 2022.

As of September 30, 2022, our remaining weighted average lease term was 7.4 years, excluding our SHOP and integrated senior health campuses.

Our combined SHOP and integrated senior health campuses were 81.8% leased as of September 30, 2022.

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

Results of Operations

Comparison of Three and Six Months Ended June 30, 2022 and 2021

Comparison of Three and Nine Months Ended September 30, 2022 and 2021

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.

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In addition, beginning 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.

In general, and under a normal operating environment without the disruption of the COVID-19 pandemic, we expect amounts related to our portfolio of leased, non-RIDEA properties to increase in the future due to fixed annual rent escalations and amounts related to our portfolio of RIDEA properties to increase in the future due to an overall increase in market rents and an increase in the pricing of care services provided.

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.

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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 June 30, 2022, we operated through six reportable business segments:

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

As of September 30, 2022, we operated through six reportable business segments:

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

Except where otherwise noted, the changes in our consolidated results of operations for 2022 as compared to 2021 are primarily due to the acquisition of GAHR IV’s portfolio of 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 and grant income received.

As of June 30, 2022 and 2021, we owned and/or operated the following types of properties:

As of September 30, 2022 and 2021, we owned and/or operated the following types of properties:

September 30,

Campuses Aggregate

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Total/weighted average(3) 312 $ 4,548,366,000 92.6 % 219 $ 3,194,048,000 92.7 %

(1) The leased percentage for the resident units of our integrated senior health campuses was 81.7% and 77.4% as of June 30, 2022 and 2021, respectively.

(2) The leased percentage for the resident units of our SHOP was 73.7% and 73.9% as of June 30, 2022 and 2021, respectively.

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

(1) The leased percentage for the resident units of our integrated senior health campuses was 84.0% and 77.8% as of September 30, 2022 and 2021, respectively.

(2) The leased percentage for the resident units of our SHOP was 75.3% and 76.2% as of September 30, 2022 and 2021, respectively.

(3) Leased percentage includes all third-party leased space at our non-RIDEA properties (including master leases), and excludes our SHOP and integrated senior health campuses where leased percentage represents resident occupancy on the available units/beds therein.

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.

For the three and nine months ended September 30, 2022 and 2021, 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.

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.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2022 2021 2022 2021

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$ 426,162,000 $ 317,486,000 $ 1,190,592,000 $ 916,857,000

For the three and six months ended June 30, 2022 and 2021, 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 three and six months ended June 30, 2022, $14,429,000 and $28,542,000, respectively, 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 for our integrated senior health campuses, as well as increases in occupancy and Medicaid reimbursement rates at our SHOP.

In addition, for the three and six months ended June 30, 2022, $22,297,000 and $44,629,000, respectively, of real estate revenue was primarily due to the increase in the size of our portfolio as a result of the Merger.

Such amounts were partially offset by a decrease in rental revenue for our medical office buildings segment of $1,029,000 and $910,000 for the three and six months ended June 30, 2022, respectively, primarily due to a one-time lease termination fee recognized in June 2021 for one of our medical office buildings.

For the three months ended June 30, 2022 and 2021, we recognized $10,969,000 and $1,099,000, respectively, of grant income at our integrated senior health campuses and SHOP related to government grants received through the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, economic stimulus programs.

For the six months ended June 30, 2022 and 2021, we recognized $16,183,000 and $9,328,000, respectively, of grant income at our integrated senior health campuses and SHOP related to government grants received through the CARES Act economic stimulus programs.

Resident Fees and Services Revenue

For the three and nine months ended September 30, 2022, $14,601,000 and $43,144,000 respectively, in resident fees and services revenue for our SHOP segment 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 resident occupancy and higher move-in fees, in addition to an increase of $1,610,000 and $4,561,000 for the three and nine months ended September 30, 2022, respectively, due to transitioning the leased senior housing facilities within Delta Valley ALF portfolio to a RIDEA structure and including such facilities within SHOP on December 1, 2021.

For our integrated senior health campuses segment, we experienced an increase of $27,311,000 for both the three and nine months ended September 30, 2022 in resident fees and services revenue due to our acquisition of the 50.0% controlling interest in a privately held company, RHS Partners, LLC, or RHS.

We previously held a 50.0% equity interest in RHS, which owns and/or operates 16 integrated senior health campuses located in Indiana.

For the three and nine months ended September 30, 2022, we also experienced an increase in resident fees and services revenue of $2,995,000 and $8,432,000, respectively, due to our acquisition of an integrated senior health campus in Kentucky on January 3, 2022.

See Note 4, Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion.

The remaining increase in resident fees and services revenue was primarily attributable to improved resident occupancy.

Real Estate Revenue

For the three and nine months ended September 30, 2022, $22,214,000 and $66,842,000, respectively, of real estate revenue was primarily due to the increase in the size of our portfolio as a result of the Merger.

Such amounts were partially offset by a decrease in rental revenue for our senior housing — leased segment of $628,000 and $1,576,000 for the three and nine months ended September 30, 2022, respectively, primarily due to transitioning the leased senior housing facilities within Delta Valley ALF portfolio to a RIDEA structure and including such facilities within SHOP on December 1, 2021.

In addition, for the nine months ended September 30, 2022, we experienced a decrease in rental revenue for our medical office buildings segment of $552,000, primarily due to a one-time lease termination fee recognized in June 2021 for one of our medical office buildings.

For the three months ended September 30, 2022 and 2021, we recognized $6,533,000 and $936,000, respectively, of grant income at our integrated senior health campuses and SHOP primarily related to government grants received through the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, economic stimulus programs.

For the nine months ended September 30, 2022 and 2021, we recognized $22,716,000 and $10,264,000, respectively, of grant income at our integrated senior health campuses and SHOP primarily related to government grants received through the CARES Act economic stimulus programs.

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 revenue, by reportable segment consisted of the following for the periods then ended:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2022 2021 2022 2021

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Skilled nursing facilities 437,000 6.6 % 364,000 9.9 % 1,644,000 8.4 % 1,108,000 10.1 %

Hospitals 139,000 5.8 % 126,000 4.6 % 248,000 5.1 % 260,000 4.7 %

Senior housing — leased 160,000 3.1 % 71,000 2.0 % 551,000 3.5 % 116,000 1.1 %

Hospitals 98,000 4.1 % 124,000 4.6 % 346,000 4.8 % 384,000 4.7 %

Total rental expenses

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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 three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021, rental expenses increased by $6,379,000 and $12,921,000, respectively, and property operating expenses increased by $16,212,000 and $30,671,000, respectively, 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 was due to an increase in labor costs at our SHOP and integrated senior health campuses, such as a significant increase in employee wages, agency fees and temporary labor expenses.

For the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021, rental expenses increased by $6,330,000 and $19,251,000, respectively, and property operating expenses increased by $16,602,000 and $47,273,000, respectively, for our SHOP due to the increase in the size of our portfolio as a result of the Merger.

The remaining increase in total property operating expenses for our SHOP segment was due to an increase in labor costs, such as a significant increase in employee wages, agency fees and temporary labor expenses in addition to an increase of $1,302,000 and $3,795,000 for the three and nine months ended September 30, 2022, respectively, due to transitioning the leased senior housing facilities within Delta Valley ALF portfolio to a RIDEA structure and including such facilities within SHOP on December 1, 2021.

The increase in total property operating expenses for our integrated senior health campuses segment was predominately due to higher operating expenses as a result of increased occupancy as well as due to our acquisition of the 50.0% controlling interest in RHS on August 1, 2022 and our acquisition of an integrated senior health campus on January 3, 2022.

See Note 4, Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisition of RHS.

General and Administrative

For the three months ended June 30, 2022, general and administrative expenses were $10,928,000 compared to $7,343,000 for the three months ended June 30, 2021.

For the three months ended September 30, 2022, general and administrative expenses were $9,626,000 compared to $9,008,000 for the three months ended September 30, 2021.

The increase in general and administrative expenses of $618,000 was primarily the result of an increase of:

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Such increases were partially offset by a decrease in our asset management and property management oversight fees of $5,747,000 as a result of the AHI Acquisition.

For the six months ended June 30, 2022, general and administrative expenses were $22,047,000 compared to $14,600,000 for the six months ended June 30, 2021.

The increase in general and administrative expenses;

of $7,447,000 was primarily the result of an increase of:

For the nine months ended September 30, 2022, general and administrative expenses were $31,673,000 compared to $23,608,000 for the nine months ended September 30, 2021.

The increase in general and administrative expenses of $8,065,000 was primarily the result of an increase of:

(i) $16,658,000 in payroll and compensation costs for the personnel hired as a result of the AHI Acquisition;

(ii) $3,133,000 in professional and legal fees;

(ii) $4,379,000 in professional fees, legal fees and marketing expenses;

(iii) $3,004,000 in corporate operating expenses;

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Business Acquisition Expenses

For the three months ended June 30, 2022 and 2021, we recorded business acquisition expenses of $1,757,000 and $2,750,000, respectively, and for the six months ended June 30, 2022 and 2021, we recorded business acquisition expenses of $1,930,000 and $3,998,000, respectively.

For the three and six months ended June 30, 2022, the decrease in such expenses primarily related to a decrease of $2,487,000 and $3,682,000, respectively, in third-party legal costs and professional services incurred related to the Merger and the AHI Acquisition, partially offset by $938,000 in transaction costs related to the acquisition of a pharmaceutical business in April 2022 and $556,000 and $676,000, respectively, in dead-deal costs incurred in the pursuit of real estate investments that did not close.

See Note 4, Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisition of a pharmaceutical business.

For the three months ended September 30, 2022 and 2021, we recorded business acquisition expenses of $231,000 and $3,633,000, respectively, and for the nine months ended September 30, 2022 and 2021, we recorded business acquisition expenses of $2,161,000 and $7,631,000, respectively.

For the three and nine months ended September 30, 2022, the decrease in such expenses primarily related to a decrease of $3,614,000 and $7,296,000, respectively, in third-party legal costs and professional services incurred related to the Merger and the AHI Acquisition, partially offset by $170,000 and $1,105,000, respectively, in transaction costs related to our business combinations and $42,000 and $721,000, respectively, in dead-deal costs incurred in the pursuit of real estate investments that did not close.

See Note 4, Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion.

Depreciation and Amortization

For the three months ended June 30, 2022 and 2021, depreciation and amortization was $39,971,000 and $26,357,000, respectively, which primarily consisted of depreciation on our operating properties of $34,328,000 and $24,663,000, respectively, and amortization of our identified intangible assets of $5,008,000 and $1,244,000, respectively.

For the six months ended June 30, 2022 and 2021, depreciation and amortization was $82,282,000 and $52,080,000, respectively, which primarily consisted of depreciation on our operating properties of $68,750,000 and $48,853,000, respectively, and amortization of our identified intangible assets of $12,133,000 and $2,357,000, respectively.

For the three and six months ended June 30, 2022, the increase in depreciation and amortization of $13,614,000 and $30,202,000, respectively, was primarily the result of the increase in depreciable assets in our portfolio as a result of the Merger resulting in depreciation and amortization expense of $12,432,000 and $27,386,000, respectively.

For the three months ended September 30, 2022 and 2021, depreciation and amortization was $40,422,000 and $26,334,000, respectively, which primarily consisted of depreciation on our operating properties of $35,327,000 and $24,968,000, respectively, and amortization of our identified intangible assets of $4,421,000 and $901,000, respectively.

For the nine months ended September 30, 2022 and 2021, depreciation and amortization was $122,704,000 and $78,414,000, respectively, which primarily consisted of depreciation on our operating properties of $104,077,000 and $73,821,000, respectively, and amortization of our identified intangible assets of $16,554,000 and $3,258,000, respectively.

For the three and nine months ended September 30, 2022, the increase in depreciation and amortization of $14,088,000 and $44,290,000, respectively, was primarily the result of the increase in depreciable assets in our portfolio as a result of the Merger resulting in depreciation and amortization expense of $12,386,000 and $39,772,000, respectively.

Interest Expense

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2022 2021 2022 2021

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Gain in fair value of derivative financial instruments — (1,860,000) (500,000) (5,456,000)

(Gain) loss on extinguishments of debt (181,000) 5,000 4,410,000 2,293,000

Loss on extinguishments of debt 628,000 — 5,038,000 2,293,000

Interest on finance lease liabilities 43,000 81,000 183,000 273,000

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Total $ 27,524,000 $ 17,025,000 $ 70,694,000 $ 52,284,000

For the three months ended June 30, 2022, interest expense was $20,345,000 compared to $16,715,000 for the three months ended June 30, 2021.

The increase in total interest expense was primarily related to an increase in interest expense incurred on our lines of credit and term loans and mortgage loans payable due to a larger debt portfolio as a result of the Merger, as well as a $1,775,000 decrease in the gain in fair value recognized on our interest rate swap contracts that matured on January 25, 2022.

For the six months ended June 30, 2022, interest expense was $43,170,000 compared to $35,259,000 for the six months ended June 30, 2021.

The increase in total interest expense was primarily related to an increase in interest expense incurred on our lines of credit and term loans and mortgage loans payable due to a larger debt portfolio as a result of the Merger, as well as a decrease in the gain in fair value recognized on our derivative financial instruments of $3,096,000 and an increase in loss on debt extinguishment of $2,117,000.

For the three months ended September 30, 2022, interest expense was $27,524,000 compared to $17,025,000 for the three months ended September 30, 2021.

The increase in total interest expense was primarily related to an increase in interest expense incurred on our lines of credit and term loans and mortgage loans payable due to a larger debt portfolio as a result of the Merger, as well as an increase in variable interest rates and a $1,860,000 decrease in the gain in fair value recognized on our interest rate swap contracts that matured on January 25, 2022.

For the nine months ended September 30, 2022, interest expense was $70,694,000 compared to $52,284,000 for the nine months ended September 30, 2021.

decrease in the gain in fair value recognized on our derivative financial instruments of $4,956,000 and an increase in loss on debt extinguishment of $2,745,000.

See Note 8, Mortgage Loans Payable, Net, and Note 9, Lines of Credit and Term Loans, to our accompanying condensed consolidated financial statements for a further discussion on debt extinguishments.

Impairment of Real Estate Investments

For the three and six months ended June 30, 2022, we recognized an impairment charge of $17,340,000 on four of our SHOP within the Central Florida Senior Housing Portfolio.

For the three and six months ended June 30, 2021, we recognized an impairment charge of $3,335,000 on a medical office building, Mount Dora Medical Center.

For the three and nine months ended September 30, 2022, we recognized an impairment charge of $21,851,000 and $39,191,000 on our SHOP within the Central Florida Senior Housing Portfolio, respectively.

For the nine months ended September 30, 2021, we recognized an impairment charge of $3,335,000 on a medical office building, Mount Dora Medical Center.

See Note 3, Real Estate Investments, Net, to our accompanying condensed consolidated financial statements for a further discussion.

Gain on Re-measurement of Previously Held Equity Interest

For both the three and nine months ended September 30, 2022, we recognized a $19,567,000 gain on re-measurement of the fair value of our previously held equity interest in RHS.

For the nine months ended September 30, 2021, we did not recognize a gain on re-measurement of previously held equity interest.

See Note 4, Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion.

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 (including distributions necessary to maintain our qualification as a REIT), and repurchases of our common stock .

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

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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.

As of June 30, 2022, we had $17,736,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures.

Based on the budget for the properties we owned as of June 30, 2022, we estimated that unspent discretionary expenditures for capital and tenant improvements as of such date are equal to $82,920,000 for the remaining six months of 2022, although actual expenditures are dependent on many factors which are not presently known.

As of September 30, 2022, we had $17,434,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures.

Based on the budget for the properties we owned as of September 30, 2022, we estimated that unspent discretionary expenditures for capital and tenant improvements as of such date are equal to $53,226,000 for the remaining three months of 2022, although actual expenditures are dependent on many factors which are not presently known.

Contractual Obligations

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(iii) ground and other lease obligations;

and (iv) financing obligations as of June 30, 2022:

and (iv) financing obligations as of September 30, 2022:

Payments Due by Period

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111,000 680,794,000 414,469,000 569,521,000 1,664,895,000

Interest payments — variable-rate debt (based on rates in effect as of June 30, 2022)

Interest payments — variable-rate debt (based on rates in effect as of September 30, 2022)

21,838,000 122,717,000 76,107,000 5,847,000 226,509,000

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In addition, 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.

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 June 30, 2022, our aggregate borrowing capacity under the 2022 Credit Facility and the 2019 Trilogy Credit Facility was $1,410,000,000.

As of June 30, 2022, our aggregate borrowings outstanding under our credit facilities was $1,267,634,000 and we had an aggregate of $142,366,000 available on such facilities.

Our total capacity to pay operating expenses, capital improvement expenditures, interest, distributions and general and administrative expenses 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 September 30, 2022, our aggregate borrowing capacity under the 2022 Credit Facility and the 2019 Trilogy Credit Facility was $1,410,000,000.

As of September 30, 2022, our aggregate borrowings outstanding under our credit facilities was $1,292,935,000 and we had an aggregate of $117,065,000 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:

Six Months Ended June 30,

Nine Months Ended September 30,

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

Net cash provided by operating activities 56,138,000 3,579,000

Net cash provided by (used in) operating activities 113,441,000 (1,493,000)

Net cash used in investing activities (122,539,000) (137,580,000)

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Operating Activities

The increase in net cash provided by operating activities of $52,559,000 was primarily due to the increase in the size of our portfolio as a result of the Merger on October 1, 2021, thereby increasing our net operating income during the six months ended June 30, 2022, as compared to the prior year period.

The increase in net cash provided by operating activities of $114,934,000 was primarily due to the increase in the size of our portfolio as a result of the Merger on October 1, 2021, thereby increasing our net operating income during the nine months ended September 30, 2022, as compared to the prior year period.

In general, cash flows from operating activities are affected by the timing of cash receipts and payments.

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Investing Activities

The decrease in net cash used in investing activities of $26,801,000 was primarily due to a $12,602,000 increase in proceeds from dispositions of real estate, a $10,669,000 decrease in developments and capital expenditures and a $3,421,000 decrease in property acquisitions during the six months ended June 30, 2022 as compared to the prior year period.

The decrease in net cash used in investing activities of $15,041,000 was primarily due to a $21,123,000 increase in proceeds from dispositions of real estate and a $9,960,000 decrease in developments and capital expenditures.

Such amounts were partially offset by a $13,713,000 payment to acquire the 50.0% controlling interest in RHS in August 2022 and the issuance of a $3,000,000 note receivable in September 2022.

See Note 4, Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisition of RHS.

Financing Activities

The decrease in net cash provided by financing activities of $66,547,000 was primarily due to a decrease in net borrowings under our mortgage loans payable of $55,177,000 and a $6,697,000 increase in distributions to noncontrolling interests during the six months ended June 30, 2022 as compared to the prior year period, as well as the $30,247,000 payment of distributions to our common stockholders and a $10,583,000 payment to repurchase our common stock for the six months ended June 30, 2022.

Such amounts were partially offset by an increase in net borrowings under our lines of credit and term loans of $47,400,000 during the six months ended June 30, 2022 as compared to the prior year period.

The decrease in net cash provided by financing activities of $130,302,000 was primarily due to a decrease in net borrowings under our mortgage loans payable of $233,399,000 and a $22,430,000 increase in distributions paid to our common stockholders during the nine months ended September 30, 2022 as compared to the prior year period, as well as a $16,233,000 payment to repurchase our common stock for the nine months ended September 30, 2022.

During the nine months ended September 30, 2022, we also paid $657,000 in offering costs in connection with the filing of our Registration Statement on Form S-11 for a proposed primary public offering of our shares of common stock in conjunction with a contemplated listing of our common stock on the New York Stock Exchange, as discussed in the “Overview and Background — Public Offerings” section above.

No such costs were paid during the nine months ended September 30, 2021.

Such amounts were partially offset by an increase in net borrowings under our lines of credit and term loans of $153,200,000 during the nine months ended September 30, 2022 as compared to the prior year period.

The change 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, which the board of directors of GAHR III subsequently reinstated in June 2021.

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Distributions

The following information represents distributions of GAHR IV for the period before the consummation of the Merger between GAHR III and GAHR IV on October 1, 2021.

The following information represents distributions of GAHR IV and GAHR III, as applicable, for the period before the consummation of the Merger between GAHR III and GAHR IV on October 1, 2021.

Since October 1, 2021, the information included below represents the distributions of the Combined Company.

GAHR IV and Combined Company Distributions

Prior to March 31, 2020, the GAHR IV board authorized a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on May 1, 2016 and ending on March 31, 2020.

The daily distributions were calculated based on 365 days in the calendar year and were equal to $0.001643836 per share of our Class T and Class I common stock, which was equal to an annualized distribution rate of $0.60 per share.

The daily distributions were calculated based on 365 days in the calendar year and were equal to $0.001643836 per share of our Class T common stock and Class I common stock, which was equal to an annualized distribution rate of $0.60 per share.

These distributions were aggregated and paid in cash or shares of our common stock pursuant to the DRIP on a monthly basis, in arrears, only from legally available funds.

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Consequently, the GAHR IV board authorized a daily distribution to our stockholders of record as of the close of business on each day of the period commencing on April 1, 2020 and ending on August 31, 2021, which was calculated based on 365 days in the calendar year and was equal to $0.001095890 per share of our Class T and Class I common stock.

Such daily distribution was equal to an annualized

distribution rate of $0.40 per share.

Such daily distribution was equal to an annualized distribution rate of $0.40 per share.

The distributions were aggregated and paid in cash or shares of our common stock pursuant to the DRIP on a monthly basis, in arrears, only from legally available funds.

The GAHR IV board of directors also authorized distributions to our Class T and Class I stockholders of record as of the close of business on September 17, 2021, equal to $0.0328767 per share of our common stock, which was equal to an annualized distribution of $0.40 per share.

Further, our board authorized record date distributions to our Class T and Class I stockholders of record as of each monthly record date from October 2021 through June 2022, equal to $0.033333333 per share of our common stock, which was equal to an annualized distribution rate of $0.40 per share.

The distributions were paid in cash or shares of our common stock pursuant to the DRIP.

Beginning with the third quarter of 2022, distributions, if any, shall be authorized by our board on a quarterly basis, in such amounts as our board shall determine, and each quarterly record date for purposes of such distributions shall be determined and declared by our board in the last month of each calendar quarter until such time as our board changes such policy.

Stockholders who have elected to participate in our DRIP will continue to have their distributions reinvested to purchase additional shares of our common stock, but on a quarterly basis beginning with any third quarter 2022 distribution declared.

Further, our board authorized record date distributions to our Class T common stockholders and Class I common stockholders of record as of each monthly record date from October 2021 through June 2022, equal to $0.033333333 per share of our common stock, which was equal to an annualized distribution rate of $0.40 per share.

The distributions were paid in cash or shares of our common stock pursuant to the AHR DRIP.

Effective beginning with the third quarter of 2022, distributions, if any, were or shall be authorized by our board on a quarterly basis, in such amounts as our board determined or shall determine, and each quarterly record date for the purposes of such distributions was or shall be determined and authorized by our board in the last month of each calendar quarter until such time as our board changes our distribution policy.

On September 28, 2022, our board authorized a distribution to our Class T and Class I common stockholders of record as of the close of business on September 29, 2022, for the quarter commencing on July 1, 2022 and ending on September 30, 2022.

The quarterly distribution was equal to $0.10 per share of our common stock, which is equal to an annualized distribution rate of $0.40 per share.

The third quarter distribution was paid in October 2022 in cash or shares of our common stock pursuant to the AHR DRIP, only from legally available funds.

On March 18, 2021, in connection with the GAHR IV special committee's strategic alternative review process, the GAHR IV board of directors authorized the suspension of the DRIP, effective as of April 1, 2021.

As a result, beginning with the April 2021 distributions, which were paid in May 2021, there were no further issuances of shares pursuant to the DRIP, and stockholders who were participants in the DRIP received cash distributions instead.

On October 4, 2021, our board authorized the reinstatement of the DRIP and as a result, beginning with the October 2021 distribution, which was paid in November 2021, stockholders who previously enrolled as participants in the DRIP (including former GAHR III stockholders who participated in the GAHR III distribution reinvestment plan) received distributions in shares of our common stock pursuant to the terms of the DRIP, instead of cash distributions.

On October 4, 2021, our board authorized the reinstatement of the DRIP and as a result, beginning with the October 2021 distribution, which was paid in

November 2021, stockholders who previously enrolled as participants in the DRIP (including former GAHR III stockholders who participated in the GAHR III distribution reinvestment plan) received distributions in shares of our common stock pursuant to the terms of the AHR DRIP, instead of cash distributions.

On November 14, 2022, our board suspended the AHR DRIP Offering beginning with the distributions declared, if any, for the quarter ending December 31, 2022.

Please see Note 22, Subsequent Events, to our accompanying condensed consolidated financial statements for a further discussion.

The amount of the distributions paid to our common stockholders was determined quarterly or monthly, as applicable, by our board and was dependent on a number of factors, including funds available for payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our qualification as a REIT under the Code.

We have not established any limit on the amount of borrowings that may be used to fund distributions, except that, in accordance with our organizational documents and Maryland law, we may not make distributions that would:

We have not established any limit on the amount of borrowings that may be used to fund distributions, except that, in accordance with Maryland law, we may not make distributions that would:

(i) cause us to be unable to pay our debts as they become due in the usual course of business or (ii) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences.

GAHR III did not pay any distributions for the six months ended June 30, 2021.

The following tables reflect distributions paid for the six months ended June 30, 2022, along with the amount of distributions reinvested pursuant to the AHR DRIP, and the sources of our distributions as compared to cash flows from operations or funds from operations attributable to controlling interest, or FFO, a non-GAAP financial measure:

Six Months Ended

June 30, 2022

GAHR III Distributions

On May 29, 2020 in response to the impact of the COVID-19 pandemic, the board of directors of GAHR III authorized the suspension of all stockholder distributions upon the completion of the payment of distributions payable to stockholders of record on or prior to the close of business on May 31, 2020.

The board of directors of GAHR III subsequently reinstated stockholder distributions in June 2021 through September 2021 at an annualized distribution rate of $0.20 per share.

The following tables reflect distributions we paid for the nine months ended September 30, 2022 and distributions paid by GAHR III for the nine months ended September 30, 2021, along with the amount of distributions reinvested pursuant to the AHR DRIP or GAHR III distribution reinvestment plan, as applicable, and the sources of distributions as compared to cash flows from operations or funds from operations attributable to controlling interest, or FFO, a non-GAAP financial measure:

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

Distributions paid in cash $ 35,391,000 $ 12,961,000

Distributions reinvested 26,118,000 —

$ 61,509,000 $ 12,961,000

Sources of distributions:

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$ 61,509,000 100 % $ 12,961,000 100 %

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

Distributions paid in cash $ 35,391,000 $ 12,961,000

Distributions reinvested 26,118,000 —

$ 61,509,000 $ 12,961,000

Sources of distributions:

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$ 61,509,000 100 % $ 12,961,000 100 %

As of June 30, 2022, 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 some portion of a distribution to our stockholders may have been paid from borrowings.

As of September 30, 2022, 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 some portion of a distribution to our stockholders may have been paid from borrowings.

For a further discussion of FFO, including a reconciliation of our GAAP net loss to FFO, see “Funds from Operations and Modified Funds from Operations,” below.

We anticipate that our overall leverage will not exceed 50.0% of the combined fair 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 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.

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 June 30, 2022, our aggregate borrowings were 47.4% of the combined market value of all of our real estate and real estate-related investments.

As of September 30, 2022, our aggregate borrowings were 48.0% of the combined market value of all of our real estate and real estate-related investments.

Mortgage Loans Payable, Net

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REIT Requirements

In order to maintain our qualification as a REIT for federal income tax purposes, we are required to distribute to our stockholders a minimum of 90.0% of our annual taxable income, excluding net capital gains.

In order to maintain our qualification as a REIT for U.S.

federal income tax purposes, we are required to distribute to our stockholders a minimum of 90.0% of our REIT taxable income.

Existin g Internal Revenue Service, or IRS, guidance includes a safe harbor pursuant to which publicly offered REITs ca n satisfy the distribution requirement by distributing a combination of cash and stock to stockholders.

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

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

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 make distributions by means of secured and unsecured debt financing through one or more unaffiliated third parties.

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

Commitments and Contingencies

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

As of June 30, 2022, we had $1,152,998,000 of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties.

As of June 30, 2022, we had $1,267,634,000 outstanding and $142,366,000 remained available under our lines of credit.

The weighted average effective interest rate on our outstanding debt was 3.43% per annum as of June 30, 2022.

As of September 30, 2022, we had $1,177,244,000 of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties.

As of September 30, 2022, we had $1,292,935,000 outstanding and $117,065,000 remained available under our lines of credit.

The weighted average effective interest rate on our outstanding debt was 4.47% per annum as of September 30, 2022.

See Note 8, Mortgage Loans Payable, Net and Note 9, Lines of Credit and Term Loans, to our accompanying condensed consolidated financial statements.

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.

As of June 30, 2022, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loans.

As of September 30, 2022, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loans.

While the extent and severity of the COVID-19 pandemic on our business has been subsiding, any potential future deterioration of operations in excess of management's projections as a result of COVID-19 could impact future compliance with these covenants.

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

During the six months ended June 30, 2022 and 2021, inflation has not significantly affected our operations;

however, the annual rate of inflation in the United States reached 8.5% in July 2022, 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 personal protective equipment 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.

These provisions include negotiated rental increases, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements.

However, due to the long-term nature of the anticipated leases, among other factors, the leases may not reset frequently enough to cover inflation.

Related Party Transactions

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Funds from Operations and Modified Funds from Operations

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

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 financial measure, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT.

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

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

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on funds from operations approved by the Board of Governors of NAREIT, or the White Paper.

The White Paper defines funds from operations as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets and impairment writedowns of certain real estate assets and investments, plus depreciation and amortization related to real estate, and after adjustments for unconsolidated partnerships and joint ventures.

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on funds from operations approved by the Board of Governors of NAREIT, or the White Paper.

The White Paper defines funds from operations as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets, gains or losses upon consolidation of a previously held equity interest, and impairment writedowns of certain real estate assets and investments, plus depreciation and amortization related to real estate, and after adjustments for unconsolidated partnerships and joint ventures.

While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that impairments are based on estimated future undiscounted cash flows.

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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 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 and which we believe to be another appropriate supplemental performance measure to reflect operating performance.

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.

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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

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.

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

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 Practice Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs:

We define MFFO, a non-GAAP financial measure, consistent with the 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.

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gains or losses included in net income (loss) from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan;

unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting;

and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect modified funds from operations on the same basis.

Our MFFO calculation complies with the IPA’s Practice Guideline described above.

Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other publicly registered, non-listed REITs which intend to have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter.

As noted above, MFFO may not be a useful measure of the impact of long-term operating performance if we do not continue to operate in this manner.

We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to publicly registered, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence, that the use of such measures may be useful to investors.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate funds from operations and modified funds from operations the same way, so comparisons with other REITs may not be meaningful.

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MFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete.

FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO and MFFO.

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

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

For the three and six months ended June 30, 2022 and 2021, we recognized government grants as grant income or as a reduction of property operating expenses, as applicable, and within loss from unconsolidated entities.

None of the SEC, NAREIT, or any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO.

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

For the three and nine months ended September 30, 2022 and 2021, 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.

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

For the three months ended June 30, 2022 and 2021, FFO would have been approximately $24,638,000 and $17,168,000, respectively, excluding government grants recognized.

For the six months ended June 30, 2022 and 2021, FFO would have been approximately $52,882,000 and $21,626,000, respectively, excluding government grants recognized.

For the three months ended June 30, 2022 and 2021, MFFO would have been approximately $28,752,000 and $17,974,000, respectively, excluding government grants recognized.

For the six months ended June 30, 2022 and 2021, MFFO would have been approximately $61,474,000 and $22,681,000, respectively, excluding government grants recognized.

For the three months ended September 30, 2022 and 2021, FFO would have been approximately $21,574,000 and $15,996,000, respectively, excluding government grants recognized.

For the nine months ended September 30, 2022 and 2021, FFO would have been approximately $74,456,000 and $37,622,000, respectively, excluding government grants recognized.

For the three months ended September 30, 2022 and 2021, MFFO would have been approximately $25,326,000 and $20,619,000, respectively, excluding government grants recognized.

For the nine months ended September 30, 2022 and 2021, MFFO would have been approximately $86,800,000 and $43,300,000, 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:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2022 2021 2022 2021

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Impairment of real estate investments — consolidated properties 21,851,000 — 39,191,000 3,335,000

Loss (gain) on dispositions of real estate investments — consolidated properties 73,000 42,000 (683,000) 377,000

(Gain) loss on dispositions of real estate investments — consolidated properties (2,113,000) (276,000) (2,796,000) 101,000

Gain on re-measurement of previously held equity interest(1) (19,567,000) — (19,567,000) —

Net (income) loss attributable to noncontrolling interests (5,861,000) (1,201,000) (9,688,000) 3,508,000

Depreciation, amortization, impairments and gain/loss on dispositions — noncontrolling interests (7,744,000) (4,891,000) (14,153,000) (9,656,000)

Depreciation, amortization, impairments, gain/loss on dispositions and gain on re-measurement — noncontrolling interests (757,000) (4,960,000) (14,910,000) (14,616,000)

FFO attributable to controlling interest $ 26,496,000 $ 16,629,000 $ 91,830,000 $ 44,808,000

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Change in deferred rent(5) (1,029,000) 1,493,000 (3,333,000) 1,011,000

(Gain) loss on debt extinguishments(5) (181,000) 5,000 4,410,000 2,293,000

Loss on debt extinguishments(6) 628,000 — 5,038,000 2,293,000

Gain in fair value of derivative financial instruments(7) — (1,860,000) (500,000) (5,456,000)

Foreign currency loss (gain)(7) 3,607,000 (238,000) 4,994,000 (653,000)

Foreign currency loss(8) 3,695,000 1,394,000 8,689,000 741,000

Adjustments for unconsolidated entities(9) 33,000 133,000 223,000 452,000

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MFFO attributable to controlling interest per Class T and Class I common share — basic and diluted $ 0.11 $ 0.12 $ 0.40 $ 0.28

(1) We recognized a gain upon the acquisition of the 50.0% controlling interest in RHS.

Such acquisition resulted in the consolidation of RHS, which was previously accounted for as an equity method investment.

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

(2) In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment.

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

By excluding 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.

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(3) 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.

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.

(4) 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.

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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 three and six months ended June 30, 2022 and 2021, we recognized government grants as grant income or as a reduction of property operating expenses, as applicable.

For the three and nine months ended September 30, 2022 and 2021, 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.

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

For the three months ended June 30, 2022 and 2021, NOI would have been approximately $66,608,000 and $48,449,000, respectively, excluding government grants recognized.

For the six months ended June 30, 2022 and 2021, NOI would have been approximately $135,078,000 and $78,301,000, respectively, excluding government grants recognized.

For the three months ended September 30, 2022 and 2021, NOI would have been approximately $67,292,000 and $51,541,000, respectively, excluding government grants

For the nine months ended September 30, 2022 and 2021, NOI would have been approximately $202,370,000 and $129,842,000, 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:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2022 2021 2022 2021

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Interest expense 27,524,000 17,025,000 70,694,000 52,284,000

Loss (gain) on dispositions of real estate investments 73,000 42,000 (683,000) 377,000

(Gain) loss on dispositions of real estate investments (2,113,000) (276,000) (2,796,000) 101,000

Impairment of real estate investments 21,851,000 — 39,191,000 3,335,000

(Income) loss from unconsolidated entities (638,000) 901,000 (2,024,000) 2,672,000

Foreign currency loss (gain) 3,607,000 (238,000) 4,994,000 (653,000)

Loss (income) from unconsolidated entities 344,000 (384,000) (1,680,000) 2,288,000

Gain on re-measurement of previously held equity interest (19,567,000) — (19,567,000) —

Foreign currency loss 3,695,000 1,394,000 8,689,000 741,000

Other income (670,000) (348,000) (2,399,000) (811,000)

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Net operating income $ 73,825,000 $ 52,477,000 $ 225,086,000 $ 140,106,000

Subsequent Events

For a discussion of subsequent events, see Note 22, Subsequent Events, to our accompanying condensed 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-Q

Item 2. Management’s Discussion and Analysis