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Item 7. Management’s Discussion and Analysis

2023-03-17 compared with 2022-03-25 · 285 added, 271 removed, 341 unchanged (62% of the section changed)

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

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

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

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

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

is included for background purposes.

The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT III, Inc., or GAHR III, and its subsidiaries, including Griffin-American Healthcare REIT III Holdings, LP, for periods prior to the Merger, as defined below, and American Healthcare REIT, Inc.

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

Certain historical information of GAHR IV is included for background purposes.

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

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This section discusses the results of operations and cash flows for fiscal year 2022 compared to fiscal year 2021.

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

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

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

Securities and Exchange Commission, or the SEC, on March 25, 2022.

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, and Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

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

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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 27A of the Securities Act, 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 with the Securities Act and Exchange Act, or 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:

(i) statements about our plans, strategies, initiatives and prospects, including our proposed listing and future capital-raising initiatives;

(ii) statements about the impact of the Merger;

(iii) 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 (iv) 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 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, or SNFs, 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;

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

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

competition in the real estate industry;

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

Forward-looking statements in this Annual Report on Form 10-K speak only as of the date on which such statements are made, and undue reliance should not be placed on such statements.

Forward-looking statements in this Annual Report on Form 10-K speak only as of the date on which such statements are made, and

undue reliance should not be placed on such statements.

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

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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 REIT that owns a diversified portfolio of clinical healthcare real estate properties, focusing primarily on medical office buildings, or MOBs, senior housing, SNFs, 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).

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

Our healthcare facilities operated under a RIDEA structure include our senior housing operating properties, or SHOP, and our integrated senior health campuses.

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

We generally seek investments that produce current income;

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

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

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

We have elected to be taxed as a REIT for U.S.

federal income tax purposes.

We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Code.

Merger of Griffin-American Healthcare REIT III, Inc.

and Griffin-American Healthcare REIT IV, Inc.

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

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

On October 1, 2021, pursuant to an Agreement and Plan of Merger dated June 23, 2021, or the Merger Agreement, GAHR III merged with and into Continental Merger Sub, LLC, a Maryland limited liability company and newly formed wholly owned subsidiary of GAHR IV, or Merger Sub, with Merger Sub being the surviving company, or the REIT Merger.

On October 1, 2021, also pursuant to the Merger Agreement, Griffin-American Healthcare REIT IV Holdings, LP, a Delaware limited partnership and subsidiary and operating partnership of GAHR IV, or GAHR IV Operating Partnership, merged with and into Griffin-American Healthcare REIT III Holdings, LP, a Delaware limited partnership, or our operating partnership, with our operating partnership being the surviving entity, or the Partnership Merger.

We collectively refer to the REIT Merger and the Partnership Merger as the Merger.

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

and our operating partnership, also referred to as the surviving partnership, was renamed American Healthcare REIT Holdings, LP.

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

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

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

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

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

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

AHI Acquisition

Also on June 23, 2021, GAHR III;

Also on October 1, 2021, immediately prior to the consummation of the Merger, GAHR III acquired a newly formed entity, American Healthcare Opps Holdings, LLC, or NewCo, which we refer to as the AHI Acquisition, pursuant to a contribution and exchange agreement dated June 23, 2021, or the Contribution Agreement, between GAHR III;

our operating partnership;

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and Jeffrey T.

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

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

Hanson, the non-executive Chairman of our board of directors, or our board, Danny Prosky, our Chief Executive Officer and President, and Mathieu B.

Streiff, one of our directors, or collectively, the AHI Principals.

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

Pursuant to the Contribution Agreement, AHI contributed substantially all of its business and operations to the surviving partnership, including its interest in GAHR III Advisor and GAHR IV Advisor, and Griffin Capital contributed its then-current ownership interest in GAHR III Advisor and GAHR IV Advisor to the surviving partnership.

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

Subject to working capital and other customary adjustments, the total approximate value of these OP units at the time of consummation of the transactions contemplated by the Contribution Agreement, and prior to the reverse stock split, was approximately $131,674,000, with a reference value for purposes thereof of $8.71 per OP unit, such that the surviving partnership issued 15,117,529 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.

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

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

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

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

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

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

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

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

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

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

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

Such OP units were owned by AHI Group Holdings, LLC, or AHI Group Holdings, which is owned and controlled by the AHI Principals, Platform Healthcare Investor TII, LLC, Flaherty Trust and a wholly owned subsidiary of Griffin Capital, or collectively, the NewCo Sellers.

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

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

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

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

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

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

See Note 4, Business Combinations — 2021 Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of the Merger and the AHI Acquisition.

Operating Partnership and Former Advisor

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

We conduct substantially all of our operations through our operating partnership and we are the sole general partner of our operating partnership.

As of December 31, 2022 and 2021, we owned an approximately 95.0% and 94.9% general partnership interest therein, respectively, and the remaining 5.0% and 5.1%, respectively, was owned by the NewCo Sellers.

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

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

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

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

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

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

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

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

Flaherty III, a former partner of Colony Capital.

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

Our former advisor, subject to the oversight and review of 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 to a third party.

Upon consummation of the AHI Acquisition, we redeemed all 51 limited partnership units that our former advisor held in our operating partnership, as well as all 52 limited partnership units held by GAHR IV Advisor in GAHR IV Operating Partnership.

Also, on October 1, 2021 and in connection with the AHI Acquisition, our operating partnership redeemed all 5,148 shares of our common stock owned by our former advisor and all 5,208 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 DigitalBridge Group, Inc.

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

Flaherty III.

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

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

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

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

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

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

Public Offering

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

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

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

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

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

and Griffin-American Healthcare REIT IV, Inc.” and “AHI Acquisition” sections above for a further discussion.

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

Public Offerings

GAHR IV raised $754,118,000 through a best efforts initial public offering, or the initial offering, and issued 18,909,921 aggregate shares of its Class T common stock and Class I common stock.

In addition, during the initial offering, GAHR IV issued 813,384 aggregate shares of its Class T common stock 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 reinvested distributions.

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 of directors, or our board, authorized the reinstatement of the DRIP.

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

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

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

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

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

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 distributions declared, if any, for the quarter ending December 31, 2022.

As a result of the suspension of the AHR DRIP Offering, unless and until our board reinstates the AHR DRIP Offering, stockholders who are current participants in the AHR DRIP will be paid future distributions in cash.

As of December 31, 2022, a total of $91,448,000 in distributions were reinvested that resulted in 2,431,695 shares of common stock being issued pursuant to the AHR DRIP.

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 public offering by us of our shares of common stock in conjunction with a contemplated listing of our common stock on the New York Stock Exchange, or the NYSE.

Such registration statement and contemplated listing are not yet effective.

On November 10, 2022, our board approved charter amendments to effect, on November 15, 2022 a one-for-four reverse stock split of our common stock and a corresponding reverse split of the OP units, or the Reverse Splits.

All numbers of common shares and per share data, as well as the OP units in this Annual Report on Form 10-K have been retroactively adjusted for all periods presented to give effect to the Reverse Splits.

See Note 14, Equity, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of our public offerings.

On March 15, 2023, 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 $31.40.

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.

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We currently operate through six reportable business segments:

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

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

integrated senior health campuses, MOBs, SNFs, SHOP, senior housing — leased and hospitals.

As of December 31, 2022, we owned and/or operated 314 buildings and integrated senior health campuses including completed development and expansion projects, or approximately 19,897,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,624,249,000.

In addition, as of December 31, 2022, we also owned a real estate-related debt investment purchased for $60,429,000.

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

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

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

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

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There have been no significant changes to our critical accounting policies during 2022.

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

Below is a summary of the key judgments and estimates used in our critical accounting policies.

Real Estate Investments Purchase Price Allocation

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

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

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

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

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

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

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

however, for a transaction accounted for as an asset acquisition, we capitalize transaction costs and allocate the purchase price using a relative fair value method allocating all accumulated costs, whereas, for a transaction accounted for as a business combination, we immediately expense transaction costs incurred associated with the business combination and allocate the purchase price based on the estimated fair value of each separately identifiable asset and liability.

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

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

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

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

These allocation assessments directly impact our financial statements.

Impairment of Long-Lived Assets

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

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

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

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

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

These allocation assessments have a direct impact on our financial statements.

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

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

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

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

Revenue Recognition and Grant Income

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

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

We recognize amounts granted through federal and state government programs (such as through the CARES Act) that were established for eligible healthcare providers to preserve liquidity in response to the COVID-19 pandemic as grant income or as a reduction of property operating expenses, as applicable, when there is reasonable assurance that the grants will be received and all conditions to retain the funds will be met.

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

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

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

Substantially all of such allowances are recorded as direct

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

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

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

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

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

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

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

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

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

We have elected to be taxed as a REIT under the Code for U.S.

federal income tax purposes commencing with our taxable year ended December 1, 2016.

We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Code.

Our qualification as a REIT, and maintenance of such qualification, will depend on our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the concentration of ownership of our stock.

As a REIT, we generally will not be subject to U.S.

federal income tax on REIT taxable income that we currently distribute to our stockholders.

If we fail to qualify as a REIT in any calendar year and do not qualify for certain statutory relief provisions, our income would be subject to U.S.

federal income tax at the corporate rate, and we would likely be precluded from qualifying for treatment as a REIT until the fifth calendar year following the year in which we fail to qualify.

Accordingly, our failure to qualify as a REIT could have a material adverse effect on our results of operations and amounts available for distribution to our stockholders.

Even if we qualify as a REIT, we may still be subject to certain U.S.

federal, state and local taxes on our income and assets and to U.S.

federal income and excise taxes on our undistributed income.

In addition, subject to maintaining our qualification as a REIT, a portion of our business may be conducted through, and a portion of our income may be earned in, one or more TRSs that are themselves subject to regular corporate income taxation.

Recently Issued Accounting Pronouncements

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Acquisitions and Dispositions in 2022, 2021 and 2020

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

For a discussion of our acquisitions and dispositions of investments in 2022, 2021 and 2020, see Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, Note 3, Real Estate Investments, Net, and Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

Factors Which May Influence Results of Operations

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

In connection with the Merger, GAHR IV was the legal acquiror and GAHR III was the accounting acquiror for financial reporting purposes, as discussed in Note 1, Organization and Description of Business, and Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

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

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

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

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

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

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

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

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

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

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

Other than the effects of the Merger and the AHI Acquisition discussed above, and the impacts of the COVID-19 pandemic and inflation discussed below, as well as other national economic conditions affecting real estate generally, or as otherwise disclosed in our risk factors, 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, of this Annual Report on Form 10-K.

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

economy may continue to be adversely affected by the COVID-19 pandemic and related supply chain disruptions and labor shortages.

While the COVID 19 pandemic is subsiding, 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 effectiveness and frequency of booster vaccinations and the duration and implications of restrictions and safety measures.

As the lasting effect of 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 SNFs, 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 December 31, 2022.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Many states throughout the U.S.

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

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

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

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

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

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

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

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

Resident occupancies at our senior housing and SNFs have gradually improved to near pre-pandemic levels.

We believe the operational recovery of such classes 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.

As a result of the federal government's COVID-19 public health emergency declaration in January 2020, certain federal and state pandemic-related relief measures, such as funding, procedural waivers and/or reimbursement increases, became available to some of our tenants and operators.

On January 30, 2023, the Biden Administration announced that the COVID-19 public health emergency declaration will expire on May 11, 2023, creating uncertainty as to how widespread these measures will continue to be and to what extent they may be distributed to and benefit our tenants and operators.

The lasting effect of the COVID-19 pandemic over the next 12 months will largely depend on future developments, which cannot be predicted with confidence at this time.

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

For the years ended December 31, 2022 and 2021, inflation has affected our operations.

The annual rate of inflation in the United States was 6.0% in February 2023, 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, energy 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 due to rising interest rates.

See Item 7A, Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk, for a further discussion.

Scheduled Lease Expirations

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Our primary expenses include property operating expenses and rental expenses.

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

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

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 adverse effect of the COVID-19 pandemic and challenging economic conditions resulting from inflation, 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 occupancies and market rents as well as 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.

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

See Note 1, Organization and Description of Business and Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

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

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

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

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

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

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

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

As of both December 31, 2022 and 2021, we operated through six reportable business segments:

integrated senior health campuses, MOBs, SNFs, SHOP, senior housing — leased and hospitals.

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 well as the adverse effect of inflation.

As of December 31, 2022 and 2021, we owned and/or operated the following types of properties:

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120 $ 1,898,591,000 (1) 122 $ 1,787,686,000 (1)

Medical office buildings

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

MOBs 104 1,369,596,000 89.0 % 105 1,378,995,000 92.0 %

SHOP 51 787,797,000 (2) 47 706,871,000 (2)

Senior housing

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

Skilled nursing facilities

Senior housing — leased

20 179,285,000 100 % 20 179,285,000 100 %

SNFs 17 249,200,000 100 % 17 249,200,000 100 %

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

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(2) The leased percentage for the resident units of our SHOP was 77.0% and 72.5% as of December 31, 2022 and 2021, respectively.

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

(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 years ended December 31, 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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Real Estate Revenue

Medical office buildings

97,297,000 78,424,000

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

Senior housing

MOBs 148,717,000 97,297,000

SNFs 26,159,000 17,309,000

Senior housing — leased

20,802,000 16,530,000

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Total revenues and grant income $ 1,643,175,000 $ 1,282,254,000

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

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

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

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

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

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

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

Resident Fees and Services Revenue

For the year ended December 31, 2022, $43,582,000 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 for our SHOP segment for the year ended December 31, 2022, as compared to the prior year period, was primarily attributable to:

(i) increased resident occupancy;

(ii) higher move-in fees;

(iii) an increase of $5,661,000 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;

and (iv) an increase of $1,995,000 due to the acquisition of a portfolio of seven senior housing facilities in Texas that are now included within our SHOP segment.

For our integrated senior health campuses segment, we experienced an increase in resident fees and services revenue of $69,992,000 for the year ended December 31, 2022 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 year ended December 31, 2022, we also experienced an increase in resident fees and services revenue of $11,480,000 due to our acquisition of an integrated senior health campus in Kentucky on January 3, 2022.

See Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of such acquisitions.

The remaining increase in resident fees and services revenue for our integrated senior health campuses segment was primarily attributable to increased resident occupancy.

Real Estate Revenue

For the year ended December 31, 2022, $67,234,000 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 $2,200,000 for the year ended December 31, 2022, 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 year ended December 31, 2022, we experienced a decrease in rental revenue for our MOBs segment of $782,000, primarily due to a one-time lease termination fee recognized in June 2021 for one of our MOBs.

For the years ended December 31, 2022 and 2021, we recognized $25,675,000 and $16,951,000, 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

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Rental Expenses

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

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

MOBs $ 56,390,000 37.9 % $ 36,375,000 37.4 %

SNFs 2,179,000 8.3 % 1,507,000 8.7 %

Hospitals 433,000 4.5 % 477,000 4.7 %

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

Senior housing — leased

682,000 3.3 % 366,000 2.2 %

Total rental expenses $ 59,684,000 29.1 % $ 38,725,000 27.4 %

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.

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

For the year ended December 31, 2022, as compared to the year ended December 31, 2021, rental expenses increased by $19,760,000 and property operating expenses increased by $46,897,000 for our SHOP due to the increase in the size of our portfolio as a result of the Merger.

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

The remaining increase in total property operating expenses for our SHOP segment was due to:

(i) higher operating expenses as a result of increased occupancy;

(ii) an increase in labor costs, such as a significant increase in employee wages, agency fees and temporary labor expenses;

(iii) an increase of $4,743,000 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;

and (iv) an increase of $1,961,000 due to the acquisition of a portfolio of seven senior housing facilities in Texas within our SHOP segment on December 5, 2022.

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 $77,097,000 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 the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of such acquisitions.

General and Administrative

For the year ended December 31, 2022, general and administrative expenses were $43,418,000 compared to $43,199,000 for the year ended December 31, 2021.

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

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

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

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

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

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

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

The increase in general and administrative expenses of $219,000 was primarily the result of an increase of $17,638,000 in payroll and compensation costs for the personnel hired as a result of the AHI Acquisition, partially offset by a decrease in our asset management and property management oversight fees of $17,141,000 as a result of the AHI Acquisition.

Business Acquisition Expenses

For the years ended December 31, 2022 and 2021, we recorded business acquisition expenses of $4,388,000 and $13,022,000, respectively.

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

For the year ended December 31, 2022, the decrease in such expenses primarily related to a decrease of $12,599,000 in third-party legal costs and professional services incurred related to the Merger and the AHI Acquisition, partially offset by an increase of $3,158,000 in transaction costs related to our business combinations and an increase of $807,000 in dead-deal costs incurred in the pursuit of real estate investments that did not close.

See Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of our acquisitions accounted for as business combinations.

Depreciation and Amortization

For the years ended December 31, 2022 and 2021, depreciation and amortization was $167,957,000 and $133,191,000, respectively, which primarily consisted of depreciation on our operating properties of $141,257,000 and $109,036,000, respectively, and amortization of our identified intangible assets of $23,934,000 and $21,111,000, respectively.

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

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

For the year ended December 31, 2022, the increase in depreciation and amortization of $34,766,000 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 $27,280,000 as well as an increase in depreciable assets in our portfolio as a result of acquisitions at our integrated senior health campuses segment of $9,368,000.

Such amounts were partially offset by a decrease of $1,979,000 in depreciable assets in our portfolio as a result of a real estate disposition within our MOB segment during the year ended December 31, 2022.

Interest Expense

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827,000 773,000

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

Gain in fair value of derivative financial instruments (500,000) (8,200,000)

Loss on extinguishment of debt 5,166,000 2,655,000

Interest on finance lease liabilities 261,000 —

Interest expense on financing obligations and other liabilities

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Total $ 105,456,000 $ 72,737,000

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

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

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:

(i) a larger debt portfolio as a result of the Merger;

(ii) an increase in variable interest rates;

(iii) a decrease in the gain in fair value recognized on our derivative financial instruments of $7,700,000;

and (iv) an increase in loss on debt extinguishment of $2,511,000.

Such increase in total interest expense was partially offset by a decrease in amortization of deferred financing costs on our lines of credit and term loans of $1,261,000.

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

Gain or loss on dispositions of real estate investments

For the year ended December 31, 2022, we recognized an aggregate gain on dispositions of our real estate investments of $5,481,000 primarily related to the sale of one MOB, three senior housing facilities within our Central Florida Senior Housing Portfolio and two integrated senior health campuses.

For the year ended December 31, 2021, we recognized an aggregate net loss on dispositions of our real estate investments of $100,000 related to the sale of one MOB, one SNF and two integrated senior health campuses.

See Note 2, Summary of Significant Accounting Policies, and Note 3, Real Estate Investments, Net, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K.

For the year ended December 31, 2022, we recognized aggregate impairment charges on our real estate investments of $54,579,000 related to our SHOP within the Central Florida Senior Housing Portfolio, Pinnacle Warrenton ALF and Mountain Crest Senior Housing Portfolio.

For the year ended December 31, 2021, we recognized an impairment charge of $3,335,000 on a MOB, Mount Dora Medical Center.

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

As a result of our annual assessment of goodwill, we determined that goodwill pertaining to our SHOP reporting segment was fully impaired as of December 31, 2022 and recognized an impairment loss of $23,277,000 in our accompanying consolidated statements of operations and comprehensive income (loss).

See Note 19, Segment Reporting, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion of such goodwill impairment.

Gain on Re-measurement of Previously Held Equity Interest

For the year ended December 31, 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 year ended December 31, 2021, we did not recognize a gain on re-measurement of previously held equity interest.

See Note 4, Business Combinations, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, 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 and repurchases of our common stock .

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

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

We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Material Cash Requirements

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As of December 31, 2022, we had $17,776,000 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 own as of December 31, 2021, we estimate that our discretionary expenditures for capital and tenant improvements could require up to $108,803,000 within the next 12 months.

Based on the budget for the properties we own as of December 31, 2022, we estimated discretionary expenditures for capital and tenant improvements of $68,821,000 for 2023, although actual expenditures are dependent on many factors which are not presently known.

Contractual Obligations

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

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

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

(iii) ground and other lease obligations;

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Credit Facilities

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

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

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

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

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

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

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

On January 19, 2022, we terminated our credit agreement, as amended, for our line of credit and term loans with an aggregate maximum principal amount of $530,000,000, or the 2018 Credit Facility, and, through our operating partnership, entered into an agreement that superseded and replaced our amended credit facility with a maximum principal amount of $480,000,000, or the 2019 Credit Facility, with a credit facility with an aggregate maximum principal amount of up to $1,050,000,000, or the 2022 Credit Facility.

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, which was further amended on December 20, 2022 to increase the aggregate maximum principal amount to $400,000,000.

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

Our 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 December 31, 2022, our aggregate borrowing capacity under the 2022 Credit Facility and the 2019 Trilogy Credit Facility, as amended, was $1,450,000,000.

As of December 31, 2022, our aggregate borrowings outstanding under our credit facilities was $1,282,634,000 and we had an aggregate of $167,366,000 available on such facilities.

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

We believe that the resources described above will be sufficient to satisfy our cash requirements for the next 12 months and the longer term thereafter.

The following table sets forth changes in cash flows:

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Net cash used in investing activities (118,578,000) (138,652,000)

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

Net cash (used in) provided by financing activities (42,924,000) 94,109,000

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

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

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

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

Operating Activities

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

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

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

The increase in net cash provided by operating activities during the year ended December 31, 2022 as compared to the prior year period of $129,855,000 was 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.

Additionally, our net operating income increased substantially for our integrated senior health campuses segment, which experienced improved margins primarily due to improved resident occupancy and expense management.

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

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

Investing Activities

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

The decrease in net cash used in investing activities during the year ended December 31, 2022 as compared to the prior year period of $20,074,000 was primarily due to a $43,798,000 increase in proceeds from dispositions of real estate, a $17,852,000 decrease in cash, cash equivalents and restricted cash acquired in connection with the Merger on October 1, 2021 and a $8,175,000 decrease in developments and capital expenditures.

Such amounts were partially offset by a $13,714,000 payment to acquire the 50.0% controlling interest in RHS in August 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 change from net cash used in financing activities to net cash provided by financing activities of $102,920,000 was primarily due to an increase in net borrowings under our mortgage loans payable of $243,490,000, a decrease in share repurchases of $22,725,000 and a decrease in distributions paid to common stockholders of $4,209,000.

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

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

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

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

The decrease in net cash provided by financing activities during the year ended December 31, 2022 as compared to the prior year period of $137,033,000 was primarily due to a decrease in net borrowings under our mortgage loans payable of $269,296,000, a $28,334,000 increase in distributions paid to our common stockholders and a $20,317,000 payment to repurchase our common stock.

During the year ended December 31, 2022, we also paid $2,075,000 in offering costs in connection with the filing of our Registration Statement on Form S-11 for a proposed public offering by us 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 year ended December 31, 2021.

Such amounts were partially offset by an increase in net borrowings under our lines of credit and term loans of $161,900,000 and borrowings under a financing obligation of $25,900,000.

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.

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

Distributions

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

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

The following tables reflect distributions we paid for the year ended December 31, 2022 compared to distributions we paid for the year ended December 31, 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:

Years Ended December 31,

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$ 87,934,000 100 % $ 30,454,000 100 %

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

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

Years Ended December 31,

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$ 87,934,000 100 % $ 30,454,000 100 %

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

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

As of December 31, 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.

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

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

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.

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

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

As of December 31, 2022, we had $1,254,479,000 of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties.

As of December 31, 2022, we had $1,282,634,000 outstanding and $167,366,000 remained available under our lines of credit.

The weighted average effective interest rate on our outstanding debt was 5.82% per annum.

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

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

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

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

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

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

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

As of December 31, 2022, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loans.

See Note 22, Subsequent Events — 2022 Credit Agreement Amendment, to the Consolidated Financial Statements that are a part of this Annual Report on Form 10-K, for a further discussion.

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Institute for Portfolio Alternatives, or the IPA, an industry trade group, has standardized a measure known as modified funds from operations, which the IPA has recommended as a supplemental performance measure and which we believe to be another appropriate supplemental performance measure to reflect operating performance.

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

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

Investors are cautioned that modified funds from operations should only be used to assess the sustainability of our operating performance after 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.

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

Modified Funds from Operations , or the Practice Guideline, which defines modified funds from operations as funds from operations further adjusted for the following items included in the determination of GAAP net income (loss):

expensed acquisition fees and costs;

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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.

In order to arrive at our reported modified funds from operations attributable to controlling interest, or MFFO, we further adjust the IPA’s definition of modified funds from operations for the impairment of goodwill.

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

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.

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 years ended December 31, 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.

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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 impact would have had a material adverse impact to our FFO and MFFO.

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

For the years ended December 31, 2022 and 2021, FFO would have been approximately $74,994,000 and $54,516,000, respectively, excluding government grants recognized.

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Years Ended December 31,

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

Net loss $ (73,383,000) $ (53,269,000)

Depreciation and amortization related to real estate — consolidated properties

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Impairment of real estate investments — consolidated properties 54,579,000 3,335,000

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

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

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

(Gain) loss on dispositions of real estate investments — consolidated properties (5,481,000) 100,000

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

Net (income) loss attributable to noncontrolling interests (7,919,000) 5,475,000

Depreciation, amortization, impairments, gain/loss on dispositions and gain on re-measurement — noncontrolling interests (22,614,000) (22,270,000)

FFO attributable to controlling interest

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Amortization of above- and below-market leases(3) 2,596,000 953,000

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

Amortization of closing costs(4) 237,000 201,000

Change in deferred rent(5) (3,355,000) (20,000)

Loss on debt extinguishments(6) 5,166,000 2,655,000

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

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

Gain in fair value of derivative financial instruments(7) (500,000) (8,200,000)

Foreign currency loss(8) 5,206,000 564,000

Impairment of goodwill(9) 23,277,000 —

Adjustments for unconsolidated entities(10) 222,000 573,000

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$ 128,395,000 $ 77,642,000

Weighted average common shares outstanding — basic and diluted

200,324,561 179,916,841

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

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

$ 0.35 $ 0.53

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

$ 0.39 $ 0.54

Weighted average Class T and Class I common shares outstanding — basic and diluted 65,807,868 50,081,140

Net loss per Class T and Class I common share — basic and diluted $ (1.12) $ (1.06)

FFO attributable to controlling interest per Class T and Class I common share — basic and diluted $ 1.44 $ 1.39

MFFO attributable to controlling interest per Class T and Class I common share — basic and diluted $ 1.95 $ 1.55

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

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

By adjusting for the amortization of the closing costs, MFFO may provide useful supplemental information on the realized economic impact of our debt security investment, providing insight on the

expected contractual cash flows of such investment, and aligns results with management’s analysis of operating performance.

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

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

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

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

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

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

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

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

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

(9) We recognized an impairment loss of our goodwill pertaining to our SHOP reporting segment as a result of our annual assessment of goodwill.

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

(10) Includes all adjustments to eliminate the unconsolidated entities’ share or noncontrolling interests’ share, as applicable, of the adjustments described in notes (2) – (9) above to convert our FFO to MFFO.

Net Operating Income

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

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

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

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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 impact would have had a material adverse impact to our NOI.

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

For the years ended December 31, 2022 and 2021, NOI would have been approximately $276,290,000 and $196,385,000, respectively, excluding government grants recognized.

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Years Ended December 31,

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

Net loss $ (73,383,000) $ (53,269,000)

General and administrative

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Interest expense 105,456,000 72,737,000

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

(Gain) loss on dispositions of real estate investments (5,481,000) 100,000

Impairment of real estate investments 54,579,000 3,335,000

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

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

Impairment of goodwill 23,277,000 —

(Income) loss from unconsolidated entities (1,407,000) 1,355,000

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

Foreign currency loss 5,206,000 564,000

Other income (3,064,000) (1,854,000)

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

Income tax expense 586,000 956,000

Net operating income $ 301,965,000 $ 213,336,000

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

What changed 10-K

Item 7. Management’s Discussion and Analysis