What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-14 compared with 2023-11-13 · 180 added, 262 removed, 234 unchanged (65% of the section changed)

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Such discussion is provided as a supplement to, and should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our 2023 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or SEC, on March 22, 2024.

Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of September 30, 2023 and December 31, 2022, together with our results of operations and cash flows for the three and nine months ended September 30, 2023 and 2022.

Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of March 31, 2024 and December 31, 2023, together with our results of operations and cash flows for the three months ended March 31, 2024 and 2023.

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

During the quarter ended December 31, 2023, we modified how we evaluate our business and make resource allocations, and therefore determined that we operate through four reportable business segments:

integrated senior health campuses, outpatient medical, or OM, (which was formerly known as medical office buildings, or MOBs), triple-net leased properties and SHOP.

All segment information included in this Quarterly Report on Form 10-Q has been recast for all periods presented to reflect four reportable business segments and the change in segment name from MOBs to OM.

The segment name change from MOBs to OM did not result in any changes to the composition of such segment or information reviewed by management, and therefore, had no impact on the historical results of operations.

Forward-Looking Statements

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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 and planned or future acquisitions or dispositions of properties and other assets, including our option to purchase the minority membership interest in Trilogy REIT Holdings;

(ii) 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 as well as the termination of the federally declared public health emergency;

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

(i) statements about our plans, strategies, initiatives and prospects, including any future capital-raising initiatives and planned or future acquisitions or dispositions of properties and other assets, including our option to purchase the minority membership interest in Trilogy REIT Holdings;

and (ii) 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 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;

legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs, and regulations or proposed regulations governing the operations and sales of health care properties;

the availability of capital;

our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due, including our ability to refinance the 2019 Trilogy Credit Facility on acceptable terms, or at all;

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.

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competition in the real estate industry;

changes in GAAP policies and guidelines applicable to REITs;

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

the success of our investment strategy;

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our ability to retain our executive officers and key employees;

and unexpected labor costs and inflationary pressures.

unexpected labor costs and inflationary pressures;

and those risks identified in Item 1A.

Risk Factors in our 2023 Annual Report on Form 10-K, as filed with the SEC on March 22, 2024, this Quarterly Report on Form 10-Q, and any future filings we make with the SEC.

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

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Overview and Background

American Healthcare REIT, Inc., a Maryland corporation, is a self-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.

American Healthcare REIT, Inc., a Maryland corporation, is a self-managed REIT that acquires, owns and operates a diversified portfolio of clinical healthcare real estate properties, focusing primarily on outpatient medical buildings, senior housing, skilled nursing facilities, or SNFs, and other healthcare-related facilities.

We have built a fully-integrated management platform, with approximately 112 employees, that operates clinical healthcare properties throughout the United States, the United Kingdom and the Isle of Man.

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

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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.

On October 1, 2021, Griffin-American Healthcare REIT III, Inc., or GAHR III, merged with and into a wholly owned subsidiary, or Merger Sub, of Griffin-American Healthcare REIT IV, Inc., or GAHR IV, with Merger Sub being the surviving company, which we refer to as the REIT Merger, and our operating partnership, Griffin-American Healthcare REIT IV Holdings, LP, merged with and into Griffin-American Healthcare REIT III Holdings, LP, or the Surviving Partnership, with the Surviving Partnership being the surviving entity, which we refer to as the Partnership Merger and, together with the REIT Merger, the Merger.

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

and the Surviving Partnership was renamed American Healthcare REIT Holdings, LP, or our operating partnership.

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

Following the Merger and the AHI Acquisition, our company became self-managed.

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 both September 30, 2023 and December 31, 2022 , we owned 95.0% of the partnership units, or OP units, in our operating partnership, and the remaining 5.0% limited OP units, were owned by AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T.

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

As of March 31, 2024 and December 31, 2023 , we owned approximately 97.4% and 95.0%, respectively, of the operating partnership units, or OP units, in our operating partnership, and the remaining 2.6% and 5.0%, respectively, limited OP units were owned by AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T.

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

Streiff, one of our directors;

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Flaherty Trust;

and a wholly owned subsidiary of Griffin Capital Company, LLC, or collectively, the NewCo Sellers.

and a wholly-owned subsidiary of Griffin Capital Company, LLC.

See Note 11, Redeemable Noncontrolling Interests, and Note 12, Equity — Noncontrolling Interests in Total Equity, to our accompanying condensed consolidated financial statements for a further discussion of the ownership in our operating partnership.

Public Offerings

As of September 30, 2023, after taking into consideration the Merger and the impact of the reverse stock split as discussed below, we had issued 65,445,557 shares for a total of $2,737,716,000 of common stock since February 26, 2014 in our initial public offerings and our distribution reinvestment plan, or DRIP, offerings (includes historical offering amounts sold by GAHR III and GAHR IV prior to the Merger).

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

333-267464), which was last amended on November 7, 2023 upon filing with the SEC Amendment No.

2 to the Registration Statement on Form S-11, 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 Proposed Listing.

Such registration statement and contemplated listing are not yet effective.

On November 15, 2022 we effected 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 our accompanying condensed consolidated financial statements and related notes have been retroactively adjusted for all periods presented to give effect to the Reverse Splits.

Public Offerings and Listing

We issued an aggregate 65,445,557 shares of Class T common stock and Class I common stock, for a total of $2,737,716,000 in gross offering proceeds, since February 26, 2014 in our initial public offerings and our distribution reinvestment plan, or DRIP, offerings.

Our initial public offerings were terminated as of April 2019.

On February 9, 2024, pursuant to a Registration Statement filed with the SEC on Form S-11 (File No.

333-267464), as amended, we closed our underwritten public offering through which we issued 64,400,000 shares of Common Stock, for a total of $772,800,000 in gross offering proceeds.

Such amounts include the exercise in full of the underwriters’ overallotment option to purchase up to an additional 8,400,000 shares of Common Stock.

These shares are listed on the New York Stock Exchange, or NYSE, under the trading symbol “AHR” and began trading on February 7, 2024.

See Note 12, Equity, to our accompanying condensed consolidated financial statements, 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 Rule 2231 with respect to customer account statements.

The updated estimated per share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of December 31, 2022.

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

See our Current Report on Form 8-K filed with the SEC on March 17, 2023 for more information on the methodologies and assumptions used to determine, and the limitations and risks of, our updated estimated per share NAV.

Following the closing of the 2024 Offering, we are presenting Common Stock, Class T common stock and Class I common stock, or collectively, common stock, as separate classes within our condensed consolidated balance sheets and condensed consolidated statements of equity.

Any references to “Common Stock” in this Quarterly Report on Form 10-Q refer to our NYSE-listed shares sold through the 2024 Offering, whereas Class T common stock and Class I common stock refer to classes of common stock that are not listed.

This applies to all historical periods presented herein.

Our Real Estate Investments Portfolio

We currently operate through six reportable business segments:

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

As of September 30, 2023, we owned and/or operated 298 buildings and integrated senior health campuses, including completed development and expansion projects, representing approximately 18,875,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,485,940,000.

In addition, as of September 30, 2023, we also owned a real estate-related debt investment purchased for $60,429,000.

We currently operate through four reportable business segments:

integrated senior health campuses, outpatient medical, or OM, SHOP and triple-net leased properties.

As of March 31, 2024, we owned and/or operated 318 buildings and integrated senior health campuses, representing approximately 19,451,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,566,829,000.

In addition, as of March 31, 2024, we also owned a real estate-related debt investment purchased for $60,429,000.

Critical Accounting Estimates

Our accompanying condensed consolidated financial statements are prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying footnotes.

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

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

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

Actual results could differ from those estimates,

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

The complete listing of our Critical Accounting Estimates was previously disclosed in our 2023 Annual Report on Form 10-K, as filed with the SEC on March 22, 2024, and there have been no material changes to our Critical Accounting Estimates as disclosed therein, except as included within Note 2, Summary of Significant Accounting Policies, to our accompanying condensed consolidated financial statements.

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Acquisitions and Dispositions in 2024

For a discussion of our acquisitions and dispositions of investments in 2023, see Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements.

For a discussion of our acquisitions and dispositions of investments in 2024, see Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, and Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements.

Factors Which May Influence Results of Operations

Other than the effects of inflation and the lasting effects of the COVID-19 pandemic discussed below, as well as other national economic conditions affecting real estate generally, and 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.

Other than the effects of inflation discussed below, as well as other national economic conditions affecting real estate generally, and 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 “Forward-Looking Statements” above and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and those Risk Factors previously disclosed in our 2023 Annual Report on Form 10-K, as filed with the SEC on March 22, 2024.

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

economy have been adversely affected by the impacts of the COVID-19 pandemic, including its economic impact.

While the immediate effects of the COVID-19 pandemic have subsided, the timing and extent of the economic recovery towards pre-pandemic norms is dependent upon many factors, including the emergence and severity of future COVID-19 variants, the effectiveness and frequency of booster vaccinations, the duration and implications of ongoing or future restrictions and safety measures, the availability of ongoing government financial support to our tenants, operating partners and managers and the overall pace of economic recovery, among others.

As an owner and operator of healthcare facilities, we expect to continue to be adversely affected by the long-term effects of the COVID-19 pandemic for some period of time;

however, it is not possible to predict the full extent of its future impact on us, our residents, tenants, operating partners and managers, the operations of our properties or the markets in which they are located, or the overall healthcare industry.

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 such economic impacts of the COVID-19 pandemic on our business thus far and have incorporated information concerning such impacts into our assessments of liquidity, impairment and collectability from tenants and residents as of September 30, 2023.

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

The COVID-19 pandemic resulted in a significant decline in resident occupancy at our senior housing — leased facilities, SNFs, SHOP and integrated senior health campuses and an increase in COVID-19-related operating expenses.

Among other things, due to the shortage of healthcare personnel, the pandemic caused higher labor costs that continue to adversely affect us, including those related to greater reliance on agency staffing and more costly short-term hires.

Expenses also increased due to pandemic-related costs (e.g., heightened cleaning and sanitation protocols) and the ongoing inflationary environment.

This has, in general, resulted in decreased net operating income, or NOI, and margin at these properties relative to pre-pandemic levels.

Therefore, our focus continues to be on improving occupancy and managing operating expenses.

Resident occupancy for our properties has been improving, but labor costs continue to remain elevated, and we have had difficulty filling open positions and retaining existing staff.

The timing and extent of any further improvement in occupancy or relief from these labor pressures remains unclear.

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

These declarations expired on May 11, 2023 and April 10, 2023, respectively, and certain relief measures have been wound down and others are being phased out.

It is unclear what pandemic related relief measures, including funding, waiver and reimbursement programs, that we and certain of our tenants and operators benefited from will continue to be available or the extent they will be available.

The impact on individual skilled nursing facilities’ operators will vary, and therefore it is not possible to predict or quantify the financial impact it will have on resident occupancies.

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

During the nine months ended September 30, 2023 and 2022, inflation has affected our operations.

The annual rate of inflation in the United States was 3.7% in September 2023, as measured by the Consumer Price Index.

During the three months ended March 31, 2024 and 2023, inflation has affected our operations.

The annual rate of inflation in the United States was 3.5% in March 2024, 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.

However, an inflationary environment has also impacted our operations at such properties in that we have the ability to seek increases in rent when relatively short-term resident leases expire (typically one year or less), which will improve our operating performance at such properties, as well as increase rent coverage and the stability of our real estate revenue in our senior housing — leased and SNF segments over time.

To offset the impact of inflation on the cost of labor and services, we had our RIDEA managers bill higher than average annual rent and care fee increases for existing residents in 2023 and 2024, as compared to prior years, while adjusting market rates as frequently as needed based on competitor pricing and market conditions.

We believe this practice will improve operating performance in our integrated senior health campuses and SHOP, as well as increase rent coverage and the stability of our real estate revenue in our triple-net leased properties over time.

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.

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In addition, inflation also caused, and may continue to cause, an increase in the cost of our variable-rate debt due to rising interest rates.

Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk of this Quarterly Report on Form 10Q for further discussion.

See Item 3, Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk, of this Quarterly Report on Form 10-Q for further discussion.

Scheduled Lease Expirations

Excluding our SHOP and integrated senior health campuses, as of September 30, 2023, our properties were 92.6% leased, and during the remainder of 2023, 3.5% of the leased GLA is scheduled to expire.

Excluding our SHOP and integrated senior health campuses, as of March 31, 2024, our properties were 91.0% leased, and, during the remainder of 2024, 6.5% of the leased GLA is scheduled to expire.

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

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

As of September 30, 2023, our remaining weighted average lease term was 6.2 years, excluding our SHOP and integrated senior health campuses.

Our combined SHOP and integrated senior health campuses were 84.4% leased as of September 30, 2023.

As of March 31, 2024, our remaining weighted average lease term was 6.7 years, excluding our SHOP and integrated senior health campuses.

Our combined SHOP and integrated senior health campuses were 85.5% leased as of March 31, 2024.

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

Results of Operations

Comparison of Three and Nine Months Ended September 30, 2023 and 2022

Comparison of Three Months Ended March 31, 2024 and 2023

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

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

Our primary expenses include property operating expenses and rental expenses.

In general, we expect such revenues and expenses related to our portfolio of RIDEA properties to increase in the future due to an overall increase in occupancies, resident fees and pricing of care services provided.

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 September 30, 2023, we operated through six reportable business segments:

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

The most significant drivers behind changes in our consolidated results of operations for the three and nine months ended September 30, 2023 compared to the corresponding periods in 2022 were the adverse effect of inflation, which resulted in increases in the cost of labor, services, energy and supplies;

our acquisitions and dispositions of investments subsequent to September 30, 2022;

and the transitions of the operations of certain leased skilled nursing and senior housing facilities to a RIDEA structure.

As of March 31, 2024, we operated through four reportable business segments:

integrated senior health campuses, OM, SHOP and triple-net leased properties.

The most significant drivers behind changes in our consolidated results of operations for the three months ended March 31, 2024 compared to the corresponding period in 2023 were primarily due to the increase in resident occupancies and billing rates, partially offset by the adverse effect of inflation, which resulted in increases in the cost of labor, services, energy and supplies;

our acquisitions and dispositions of investments subsequent to March 31, 2023;

and the transition of the operations of certain leased senior housing and skilled nursing facilities from triple-net leased properties to a RIDEA structure.

Additional drivers behind the changes in our consolidated results of operations are discussed in more detail below.

See Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions during 2023.

As of September 30, 2023 and 2022, we owned and/or operated the following types of properties (dollars in thousands):

September 30,

See Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, and Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions during 2024.

As of March 31, 2024 and 2023, we owned and/or operated the following types of properties (dollars in thousands):

Campuses Aggregate

Purchase Price Leased

% (1) Number of

Campuses Aggregate

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Integrated senior health campuses 126 $ 1,967,091 86.1 % 122 $ 1,909,591 84.6 %

MOBs 90 1,270,474 89.7 % 105 1,378,995 89.6 %

OM 86 1,239,845 88.1 % 104 1,369,596 88.7 %

SHOP 78 889,928 83.9 % 51 804,367 76.4 %

Senior housing — leased 20 179,285 100 % 20 179,285 100 %

SNFs 15 223,500 100 % 17 249,200 100 %

Hospitals 2 139,780 100 % 2 139,780 100 %

Triple-net leased properties 28 469,965 100 % 37 542,565 100 %

Total/weighted average(2) 318 $ 4,566,829 91.0 % 314 $ 4,626,119 91.7 %

(1) The leased percentage for the resident units of our integrated senior health campuses was 85.5% and 84.0% as of September 30, 2023 and 2022, respectively.

(2) The leased percentage for the resident units of our SHOP was 80.7% and 75.3% as of September 30, 2023 and 2022, respectively.

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

Revenues and Grant Income

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

(2) Weighted average leased percentage excludes our SHOP and integrated senior health campuses.

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

For the three and nine months ended September 30, 2023 and 2022, resident fees and services revenue primarily consisted of rental fees related to resident leases, extended health care fees and other ancillary services, and real estate revenue primarily consisted of base rent and expense recoveries.

For the three months ended March 31, 2024 and 2023, 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 RIDEA properties depends principally on our ability to maintain resident occupancy rates.

The amount of revenues generated by our non-RIDEA properties is dependent on our ability to maintain tenant occupancy rates of currently leased space and to lease available space at the then existing rental rates.

We also receive grant income.

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

Three Months Ended September 30,

Nine Months Ended September 30,

2023 2022 2023 2022

Revenues by reportable segment consisted of the following for the periods then ended (in thousands):

Three Months Ended March 31,

Resident Fees and Services Revenue

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Real Estate Revenue

MOBs 35,688 37,128 109,811 111,798

SNFs 6,175 6,633 10,633 19,625

Senior housing — leased 2,684 5,143 13,352 15,703

Hospitals 2,423 2,419 7,338 7,245

OM 34,067 37,483

Triple-net leased properties 13,348 6,113

Total real estate revenue 47,415 43,596

Integrated senior health campuses 1,064 5,796 7,445 21,861

SHOP — 737 — 855

Total grant income 1,064 6,533 7,445 22,716

Total revenues and grant income

$ 464,240 $ 426,162 $ 1,384,037 $ 1,190,592

Total revenues $ 499,533 $ 452,226

Resident Fees and Services Revenue

For our integrated senior health campuses segment, we experienced an increase in resident fees and services revenue of $43,540,000 and $199,572,000, respectively, for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, due to:

(i) an increase of $14,053,000 and $97,806,000, respectively, related to our acquisition of the remaining 50.0% interest in a privately held company, RHS Partners, LLC, or RHS, on August 1, 2022, which owns and/or operates 16 integrated senior health campuses located in Indiana;

(ii) improved resident occupancy and higher resident fees as a result of an increase in billing rates;

and (iii) an increase of $5,897,000 and $33,371,000, respectively, due to the expansion of our customer base, expansion of services offered and an increase in billing rates for such services at an ancillary business unit within Trilogy Investors, LLC, or Trilogy.

Such amounts were partially offset by a decrease in total resident fees and services revenue of $3,590,000 and $12,054,000, respectively, due to dispositions within our integrated senior health campuses segment during the third and fourth quarter of 2022.

For our SHOP segment, we experienced an increase in resident fees and services revenue of $4,360,000 and $22,381,000, respectively, for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, primarily due to:

(i) our acquisition of a portfolio of seven senior housing facilities in Texas within our SHOP segment on December 5, 2022, which increased revenue by $6,907,000 and $20,464,000 respectively;

and (ii) an increase of $3,656,000 and $8,378,000, respectively, due to transitioning the SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023.

The remaining increase in resident fees and services revenue for our SHOP segment was primarily attributable to improved resident occupancy and higher resident fees as a result of an increase in billing rates.

Such increases were partially offset by a decrease of $7,169,000 and $11,398,000, respectively, for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, due to real estate dispositions within our SHOP segment during the three months ended December 31, 2022 and the nine months ended September 30, 2023.

For our integrated senior health campuses segment, we increased resident fees and services revenue by $31,352,000 for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to:

(i) increased resident occupancy and higher resident fees as a result of an increase in billing rates and service levels;

and (ii) an increase of $5,864,000 due to the expansion of our customer base, expansion of services offered and increases in billing rates for such services at ancillary business units within Trilogy Investors, LLC, or Trilogy.

For our SHOP segment, resident fees and services revenue increased $12,136,000 for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to:

(i) an increase of $7,767,000 due to the acquisition of 14 senior housing properties in February 2024;

(ii) an increase of $4,161,000 due to the transitioning of senior housing facilities within the Michigan ALF Portfolio to a RIDEA structure in November 2023;

and (iii) an increase of $2,613,000 due to transitioning the SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023.

The remaining increase in resident fees and services revenue for our SHOP segment was primarily attributable to increased resident occupancy and higher resident fees as a result of an increase in billing rates and service levels.

Such increases were partially offset by a decrease of $5,859,000 for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, due to real estate dispositions within our SHOP segment since March 31, 2023.

Real Estate Revenue

For the three and nine months ended September 30, 2023, we experienced a decrease in real estate revenue for our SNFs of $458,000 and $8,992,000, respectively, as compared to the three and nine months ended September 30, 2022, due to transitioning the SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023, which amount included the full amortization of $8,073,000 of above-market leases.

In addition, for the three and nine months ended September 30, 2023, we experienced a decrease in real estate revenue for our senior housing — leased segment of $2,459,000 and $2,351,000, respectively, as compared to the three and nine months ended September 30, 2022, primarily due to transitioning the senior housing — leased facilities within Michigan ALF Portfolio to RIDEA, which amount included the full amortization of $2,756,000 of above-market leases.

We also experienced a net decrease in real estate revenue for our MOBs segment for both the three and nine months ended September 30, 2023 of $1,440,000 and $1,987,000, respectively, as compared to the three and nine months ended September 30, 2022, primarily due to real estate dispositions of MOBs during the fourth quarter of 2022 and the nine months ended September 30, 2023, which was partially offset by fixed rent escalations and lease-up activity.

For the three months ended September 30, 2023 and 2022, we recognized $1,064,000 and $6,533,000, respectively, of grant income at our integrated senior health campuses and SHOP primarily related to government grants received through the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, economic stimulus programs.

For the nine months ended September 30, 2023 and 2022, we recognized $7,445,000 and $22,716,000, 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.

As of April 2023, the federal government’s COVID-19 public health emergency declaration expired and certain relief measures have been wound down and others are being phased out.

For the three months ended March 31, 2024, real estate revenue within our triple-net leased properties segment increased $7,235,000, as compared to the three months ended March 31, 2023, primarily due to the transitioning of SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023 that resulted in the full amortization of $8,073,000 of above-market leases recorded against real estate revenue.

Such increase was partially offset by $1,489,000 due to the transitioning of senior housing facilities within Michigan ALF Portfolio to a RIDEA structure in November 2023.

Real estate revenue for our OM segment decreased $3,416,000 for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to a decrease of $3,402,000 related to dispositions of OM buildings since March 31, 2023.

Property Operating Expenses and Rental Expenses

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

Three Months Ended September 30,

Nine Months Ended September 30,

2023 2022 2023 2022

Integrated senior health campuses and SHOP typically have a higher percentage of direct operating expenses to revenue than OM buildings and triple-net leased properties due to the nature of RIDEA-type facilities where we conduct day-to-day operations.

Property operating expenses and property operating expenses as a percentage of resident fees and services revenue, as well as rental expenses and rental expenses as a percentage of real estate revenue, by reportable segment consisted of the following for the periods then ended (dollars in thousands):

Three Months Ended March 31,

Property Operating Expenses

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Rental Expenses

MOBs $ 13,690 38.4 % $ 14,155 38.1 % $ 42,025 38.3 % $ 42,259 37.8 %

SNFs 352 5.7 % 437 6.6 % 1,199 11.3 % 1,644 8.4 %

Senior housing — leased 446 16.6 % 160 3.1 % 874 6.5 % 551 3.5 %

Hospitals 86 3.5 % 98 4.1 % 324 4.4 % 346 4.8 %

OM $ 13,089 38.4 % $ 14,408 38.4 %

Triple-net leased properties 638 4.8 % 787 12.9 %

Total rental expenses $ 13,727 29.0 % $ 15,195 34.9 %

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

For the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, the increase in total property operating expenses for our integrated senior health campuses segment was predominately due to (i) an increase of $14,481,000 and $95,737,000, respectively, attributable to our acquisition of the 50.0% interest in RHS on August 1, 2022;

(ii) increased occupancy at the facilities within such segment;

and (iii) an increase of $7,438,000 and $34,636,000, respectively, within Trilogy’s ancillary business unit due to higher labor costs associated with the expansion of services offered and inflation impacting the cost of goods sold.

Such amounts were partially offset by a decrease in total property operating expenses of $2,851,000 and $9,311,000, respectively, due to real estate dispositions within our integrated senior health campuses segment during the third and fourth quarters of 2022.

For the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, total property operating expenses for our SHOP segment primarily increased due to:

(i) an increase of $5,756,000 and $16,645,000, respectively, due to the acquisition of a portfolio of seven senior housing facilities within our SHOP segment in Texas on December 5, 2022;

(ii) an increase of $3,962,000 and $9,223,000, respectively, due to transitioning the SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023;

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

and (iv) higher labor costs due to an increase in employee wages.

Such amounts were partially offset by a decrease in total property operating expenses for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, of $8,717,000 and $13,445,000, respectively, due to real estate dispositions within our SHOP segment during the three months ended December 31, 2022 and during the nine months ended September 30, 2023.

For the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, the increase in total property operating expenses for our integrated senior health campuses segment was predominately due to:

(i) increased occupancy at the facilities within such segment;

and (ii) an increase of $8,354,000 within Trilogy’s ancillary business unit due to higher labor costs associated with the expansion of services offered and inflation impacting such costs.

For the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, total property operating expenses for our SHOP segment increased primarily due to:

(i) an increase of $6,401,000 due to acquisition of 14 senior housing properties in February 2024;

(ii) an increase of $5,797,000 due to the transitioning of senior housing facilities within the Michigan ALF Portfolio from triple-net leased properties to a RIDEA structure in November 2023;

(iii) an increase of $3,568,000 due to the transitioning of SNFs within the Central Wisconsin Senior Care Portfolio from triple-net leased properties to a RIDEA structure in March 2023;

(iv) higher labor costs due to an increase in employee wages;

and (v) higher operating expenses as a result of increased occupancy.

Such amounts were partially offset by a decrease of $6,631,000 in total property operating expenses for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, due to real estate dispositions within our SHOP segment since March 31, 2023.

Rental expenses for our OM segment decreased for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to the dispositions of OM buildings since March 31, 2023.

General and Administrative

For the three months ended September 30, 2023, general and administrative expenses were $11,342,000 compared to $9,626,000 for the three months ended September 30, 2022.

The increase in general and administrative expenses of $1,716,000 was primarily the result of an increase of $1,712,000 in bad debt expense.

For the nine months ended September 30, 2023, general and administrative expenses were $36,169,000 compared to $31,673,000 for the nine months ended September 30, 2022.

The increase in general and administrative expenses of $4,496,000 was primarily the result of an increase of:

(i) $1,910,000 in bad debt expense;

(ii) $1,586,000 in stock compensation expense;

and (iii) $890,000 in professional fees and legal fees.

For the three months ended March 31, 2024, general and administrative expenses were $11,828,000, as compared to $13,053,000 for the three months ended March 31, 2023.

The decrease in general and administrative expenses of $1,225,000 was primarily the result of a decrease in professional and legal fees of $1,315,000.

Business Acquisition Expenses

For the three and nine months ended September 30, 2023, we recorded business acquisition expenses of $1,024,000 and $2,244,000, respectively, primarily incurred in pursuit of real estate-related investment opportunities.

For the three and nine months ended September 30, 2022, we recorded business acquisition expenses of $231,000 and $2,161,000, respectively, primarily incurred in connection with $938,000 in transaction costs related to the acquisition of a pharmaceutical business in April 2022 and $61,000 and $780,000, respectively, of costs incurred in the pursuit of real estate investments that did not close.

See Note 3, Real Estate Investments, Net and Business Combinations — Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisition of a pharmaceutical business in April 2022.

For the three months ended March 31, 2024 and 2023, we recorded business acquisition expenses of $2,782,000 and $332,000, respectively.

The increase in such expenses was primarily due to acquisition costs incurred in pursuit of our investment in properties operated under a RIDEA structure and included in our SHOP segment.

See Note 3, Real Estate Investments, Net and Business Combinations — Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our senior housing facilities acquired in February 2024.

Depreciation and Amortization

For the three months ended September 30, 2023 and 2022, depreciation and amortization was $49,273,000 and $40,422,000, respectively, which primarily consisted of depreciation on our operating properties of $36,929,000 and $35,327,000, respectively, and amortization of our identified intangible assets of $11,778,000 and $4,421,000, respectively.

For the nine months ended September 30, 2023 and 2022, depreciation and amortization was $138,644,000 and $122,704,000, respectively, which primarily consisted of depreciation on our operating properties of $109,967,000 and $104,077,000, respectively, and amortization of our identified intangible assets of $26,618,000 and $16,554,000, respectively.

For the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, the increase in depreciation and amortization of $8,851,000 and $15,940,000, respectively, was primarily due to:

(i) an increase in depreciation and amortization within our SHOP segment and our integrated senior health campuses segment as a result of acquisitions that occurred subsequent to September 30, 2022, as well as development and capital expenditures since September 30, 2022;

(ii) the full amortization of an aggregate $6,635,000 of in-place leases related to the transition of SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023 and the transition of senior housing — leased facilities within the Michigan ALF Portfolio to a RIDEA structure;

and (iii) the full amortization of $1,157,000 of depreciable assets as a result of storm damage affecting our properties in Louisiana, Nebraska, North Carolina and Texas.

Such amounts were partially offset by a decrease in depreciation and amortization as a result of real estate dispositions within our SHOP segment and our MOBs segment subsequent to September 30, 2022.

For the three months ended March 31, 2024 and 2023, depreciation and amortization was $42,767,000 and $44,670,000, respectively, which primarily consisted of depreciation on our operating properties of $37,135,000 and $35,899,000, respectively, and amortization of our identified intangible assets of $4,997,000 and $7,988,000, respectively.

For the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, the decrease in depreciation and amortization of $1,903,000 was primarily due to the full amortization of $885,000 of in-place leases related to the transition of SNFs within the Central Wisconsin Senior Care Portfolio from triple-net leased properties to a RIDEA structure in March 2023 and a decrease in depreciation and amortization as a result of real estate dispositions within our SHOP

and OM segments subsequent to March 31, 2023.

Such amounts were partially offset by an increase in depreciation and amortization in our SHOP and integrated senior health campuses segments as a result of real estate acquisitions and capital expenditures in those segments that occurred subsequent to March 31, 2023.

Interest Expense

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

Three Months Ended September 30,

Nine Months Ended September 30,

2023 2022 2023 2022

Interest expense, including gain or loss in fair value of derivative financial instruments, consisted of the following for the periods then ended (in thousands):

Three Months Ended March 31,

Interest expense:

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Mortgage loans payable

554 530 1,690 1,463

Amortization of debt discount/premium, net

887 134 2,662 464

Gain in fair value of derivative financial instruments (3,402) — (8,200) (500)

(Gain) loss in fair value of derivative financial instruments (6,417) 195

Loss on extinguishments of debt 1,280 —

1 unchanged sentence

Interest expense on financing obligations and other liabilities

270 176 614 772

Total $ 30,021 $ 39,206

The increase in total interest expense for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022, was primarily due to an increase in debt balances since September 30, 2022 and a higher weighted average effective interest rate on our variable debt, which was 7.52% and 5.13% as of September 30, 2023 and 2022, respectively.

Such increases in total interest expense for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, were primarily offset by:

(i) a $7,700,000 increase in gain in fair value of our derivative financial instruments;

(ii) $2,039,000 of net proceeds from our interest rate swaps;

and (iii) a $4,693,000 decrease in loss on extinguishments of debt.

See Note 7, Mortgage Loans Payable, Net, and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for a further discussion of debt extinguishments.

The decrease in total interest expense for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily due to:

(i) a decrease in debt balances predominately related to the payoff of $176,145,000 of variable-rate mortgage loans payable and $545,010,000 on our variable-rate lines of credit in February 2024 from the net proceeds received from the 2024 Offering;

and (ii) a change from loss to gain in fair value of derivative financial instruments.

Such decreases in total interest expense were partially offset by a $1,280,000 loss on extinguishments of debt in 2024 due to the above-mentioned debt payoffs.

See Note 6, Other Assets, Net, and Note 7, Mortgage Loans Payable, Net, to our accompanying condensed consolidated financial statements for a further discussion of debt extinguishments.

Gain or Loss on Dispositions of Real Estate Investments

For the three months ended September 30, 2023, we recognized an aggregate net gain on dispositions of our real estate investments of $31,981,000 primarily related to the sale of one SHOP within our Central Florida Senior Housing Portfolio and three MOBs.

For the nine months ended September 30, 2023, we recognized an aggregate net gain on dispositions of our real estate investments of $29,777,000 primarily related to the sale of six SHOP within our Central Florida Senior Housing Portfolio and 14 MOBs.

See Note 3, Real Estate Investments, Net and Business Combinations — Dispositions of Real Estate Investments, to our accompanying condensed consolidated financial statements for further discussion.

For the three and nine months ended September 30, 2022, we recognized an aggregate net gain on dispositions of our real estate investments of $2,113,000 and $2,796,000, respectively, primarily related to the disposition of one integrated senior health campus in Indiana.

Impairment of Real Estate Investments

For both the three and nine months ended September 30, 2023, we recognized an aggregate impairment charge of $12,510,000 for two of our SHOP within the Northern CA Senior Housing Portfolio.

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

See Note 3, Real Estate Investments, Net and Business Combinations — Impairment of Real Estate Investments, to our accompanying condensed consolidated financial statements for further discussion.

Gain on Re-measurement of Previously Held Equity Interests

For the nine months ended September 30, 2023, we recognized a $726,000 gain on re-measurement of the fair value of our previously held equity interest in Memory Care Partners, LLC, or MCP.

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

See Note 3, Real Estate Investments, Net and Business Combinations — Business Combinations, to our accompanying condensed consolidated financial statements for further discussion.

For the three months ended March 31, 2024, we recognized an aggregate net gain on dispositions of our real estate investments of $2,263,000 related to the sale of two OM buildings and one SHOP in 2024.

See Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, and Note 3, Real Estate Investments, Net and Business Combinations — Dispositions of Real Estate Investments, to our accompanying condensed consolidated financial statements for further discussion.

For the three months ended March 31, 2023, we recognized an aggregate net loss on dispositions of our real estate investments of $132,000 primarily related to the disposition of one SHOP in Florida.

Liquidity and Capital Resources

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and (iv) make distributions to our stockholders, as required for us to continue to qualify as a REIT.

We believe that the sources of liquidity described above, along with the probable refinancing of the 2019 Trilogy Credit Facility, will be sufficient to satisfy our cash requirements for the next 12 months and the longer term thereafter.

We believe that the sources of liquidity described above will be sufficient to satisfy our cash requirements for the next 12 months and thereafter.

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

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

As of September 30, 2023, we had $17,866,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures.

Based on the budget for the properties we owned as of September 30, 2023, we estimated that unspent discretionary expenditures for capital and tenant improvements as of such date are equal to $52,883,000 for the remaining three months of 2023, although actual expenditures are dependent on many factors which are not presently known.

As of March 31, 2024, we had $17,077,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures.

Based on the budget for the properties we owned as of March 31, 2024, we estimated that unspent discretionary expenditures for capital and tenant improvements as of such date are equal to $62,446,000 for the remaining nine months of 2024, although actual expenditures are dependent on many factors which are not presently known.

Contractual Obligations

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(iii) ground and other lease obligations;

and (iv) financing obligations as of September 30, 2023 (in thousands):

and (iv) financing and other obligations as of March 31, 2024 (in thousands):

Payments Due by Period

6 unchanged sentences

134,554 240,000 550,000 7,700 932,254

Interest payments — variable-rate debt (based on rates in effect as of September 30, 2023)

Interest payments — variable-rate debt (based on rates in effect as of March 31, 2024)

46,088 84,087 3,014 664 133,853

1 unchanged sentence

26,936 70,227 71,324 166,314 334,801

Financing obligations 1,342 9,910 8,646 35,106 55,004

Financing obligations and other obligations 4,795 11,212 10,052 31,595 57,654

$ 285,110 $ 765,692 $ 842,324 $ 1,101,056 $ 2,994,182

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We are party to a credit agreement, as amended, with an aggregate maximum principal amount up to $1,150,000,000, or the 2024 Credit Facility.

In addition, we are party to an agreement, as amended, regarding a senior secured revolving credit facility with an aggregate maximum principal amount of $400,000,000, or the 2019 Trilogy Credit Facility, and an outstanding balance of $367,000,000 as of September 30, 2023, which is scheduled to mature in less than 12 months on September 5, 2024.

See Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for further discussion.

We are currently evaluating our options for refinancing the 2019 Trilogy Credit Facility based on current loan-to-value ratios and lending market conditions and believe it is probable that we could extend the maturity date of this facility or obtain a replacement facility that would extend the maturity date beyond 12 months from the filing date of this Quarterly Report on Form 10-Q.

As of September 30, 2023, our aggregate borrowing capacity under the 2022 Credit Facility and the 2019 Trilogy Credit Facility was $1,450,000,000.

As of September 30, 2023, our aggregate borrowings outstanding under our credit facilities was $1,277,900,000 and we had an aggregate of $172,100,000 available on such facilities.

In addition, we are party to an agreement, as amended, regarding a senior secured revolving credit facility with an aggregate maximum principal amount of $400,000,000, or the Trilogy Credit Facility.

See Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for a further discussion.

As of March 31, 2024, our aggregate borrowing capacity under the 2024 Credit Facility and the Trilogy Credit Facility was $1,550,000,000.

As of March 31, 2024, our aggregate borrowings outstanding under our credit facilities was $760,000,000, and we had an aggregate of $790,000,000 available on such facilities.

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

The following table sets forth changes in cash flows (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Cash, cash equivalents and restricted cash — beginning of period $ 90,782 $ 111,906

Net cash provided by operating activities 72,766 113,441

Net cash provided by (used in) investing activities 20,701 (122,539)

Net cash (used in) provided by financing activities (123,177) 7,969

Net cash (used in) provided by operating activities (5,954) 23,862

Net cash used in investing activities (5,223) (33,319)

Net cash provided by (used in) financing activities 44,962 (14,300)

Effect of foreign currency translation on cash, cash equivalents and restricted cash (36) 80

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Operating Activities

For the nine months ended September 30, 2023 and 2022, cash flows provided by operating activities were primarily related to the cash flows provided by our property operations, offset by payments of general and administrative expenses and interest payments on our outstanding indebtedness.

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

For the three months ended March 31, 2024 and 2023, cash flows from operating activities were primarily related to property operations, offset by payments of general and administrative expenses and interest payments on our outstanding indebtedness.

The change from net cash provided by operating activities for the three months ended March 31, 2023, to net cash used in operating activities for the three months ended March 31, 2024, was primarily due to the timing of cash receipts and payments.

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

Investing Activities

For the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, the change from net cash used in investing activities to net cash provided by investing activities was primarily due to a $142,239,000 increase in proceeds from dispositions of real estate investments and a $29,743,000 decrease in cash paid to acquire real estate investments.

Such amounts were partially offset by a $23,028,000 increase in development and capital expenditures and an $7,563,000 increase in investments in unconsolidated entities.

See Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions.

For the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, the decrease in net cash used in investing activities was primarily due to an $11,328,000 decrease in cash paid to acquire real estate investments, a $7,621,000 increase in proceeds from dispositions of real estate investments and a $6,000,000 decrease in investments in unconsolidated entities.

Financing Activities

For the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, the change from net cash provided by financing activities to net cash used in financing activities was primarily due to the change from net borrowings under our lines of credit and mortgage loans payable of $94,296,000 to net payments on our lines of credit and mortgage loans payable of $15,853,000.

For the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, the change from net cash used in financing activities to net cash provided by financing activities was primarily due to the closing of the 2024 Offering that resulted in $772,800,000 in gross offering proceeds from the issuance of Common Stock.

Such amount was partially offset by the increase in payment of offering costs of $47,534,000 in connection with the 2024 Offering, as well as a change from $34,078,000 of net borrowings under our lines of credit and mortgage loans payable to $630,378,000 of net payments on our lines of credit and mortgage loans payable, primarily using the net proceeds from the 2024 Offering for such paydowns.

Distributions

Our board authorized record date distributions to holders of our Class T common stock and Class I common stock of record as of each monthly record date from January 2022 through June 2022, equal to $0.133333332 per share of our common stock, which was equal to an annualized distribution rate of $1.60 per share.

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

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

Our board authorized a quarterly distribution to holders of our Class T common stock and Class I common stock of record as of the close of business on September 29, 2022.

Such quarterly distribution was equal to $0.40 per share of our common stock, which was equal to an annualized distribution rate of $1.60 per share and paid in cash or shares of our common stock pursuant to the DRIP offering, only from legally available funds.

On November 14, 2022, our board suspended the DRIP offering beginning with distributions declared for the quarter ended December 31, 2022.

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

Our board authorized a quarterly distribution to holders of our Class T common stock and Class I common stock of record as of the close of business on December 29, 2022.

Such quarterly distribution was equal to $0.40 per share of our common stock, which was equal to an annualized distribution rate of $1.60 per share and paid in cash, only from legally available funds.

In response to interest rates that have increased drastically since the beginning of 2022, and greater uncertainty surrounding further interest rate movements, our board elected to reduce our quarterly distribution to $0.25 per share in order to preserve our liquidity, better align distributions with available cash flows and position our company for its long-term strategic goals.

Therefore, our board authorized a quarterly distribution equal to $0.25 per share to holders of our Class T common stock and Class I common stock commencing with the first quarter of 2023.

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

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

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

Since the first quarter of 2023, our board has authorized a quarterly distribution equal to $0.25 per share to holders of our common stock, which we expect will continue to be paid in the future, though we cannot guarantee that our distributions will continue at the current value.

Such quarterly distributions were equal to an annualized distribution rate of $1.00 per share and paid in cash, only from legally available funds.

See our Current Reports on Form 8-K filed with the SEC on March 17, 2023, June 16, 2023 and September 20, 2023 for more information.

The following tables reflect distributions we paid for the nine months ended September 30, 2023 and 2022, along with the amount of distributions reinvested pursuant to the DRIP 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 (dollars in thousands):

Nine Months Ended September 30,

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

The following tables reflect distributions we paid for the three months ended March 31, 2024 and 2023, 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 (dollars in thousands):

Three Months Ended March 31,

Distributions paid in cash $ 16,596 $ 26,492

Distributions reinvested — 26,118

$ 59,685 $ 61,509

Sources of distributions:

2 unchanged sentences

$ 16,596 100 % $ 26,492 100 %

Nine Months Ended September 30,

Three Months Ended March 31,

Distributions paid in cash $ 16,596 $ 26,492

Distributions reinvested — 26,118

$ 59,685 $ 61,509

Sources of distributions:

2 unchanged sentences

$ 16,596 100 % $ 26,492 100 %

As of September 30, 2023, any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and some portion of a distribution to our stockholders may have been paid from borrowings.

As of March 31, 2024, 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 Normalized Funds from Operations” below.

We anticipate that our overall leverage will approximate 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.

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

As of September 30, 2023, our aggregate borrowings were 53.2% of the combined market value of all of our real estate and real estate-related investments.

Mortgage Loans Payable, Net

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

As of September 30, 2023, we had $1,243,358,000 of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties.

As of September 30, 2023, we had $1,277,900,000 outstanding and $172,100,000 remained available under our lines of credit.

The weighted average effective interest rate on our outstanding debt, factoring in our interest rate swaps, was 5.77% per annum as of September 30, 2023.

As of March 31, 2024, we had $1,255,120,000 of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties.

As of March 31, 2024, we had $760,000,000 outstanding, and $790,000,000 remained available under our lines of credit.

The weighted average effective interest rate on our outstanding debt, factoring in our interest rate swaps, was 4.90% per annum as

of March 31, 2024.

See Note 7, Mortgage Loans Payable, Net, and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements.

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

As of September 30, 2023, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loan.

As of March 31, 2024, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loan.

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.

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Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP.

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 operating performance to investors, industry analysts 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).

We define normalized FFO attributable to controlling interest, or NFFO, as FFO further adjusted for the following items included in the determination of GAAP net income (loss):

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 operating performance to investors, industry analysts and 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).

We define normalized FFO attributable to controlling interest, or Normalized FFO, as FFO further adjusted for the following items included in the determination of GAAP net income (loss):

expensed acquisition fees and costs, which we refer to as business acquisition expenses;

amounts relating to changes in deferred rent and amortization of above- and below-market leases (which are adjusted in order to reflect such payments from a GAAP accrual basis);

amounts relating to changes in deferred rent and amortization of above- and below-market leases;

the non-cash impact of changes to our equity instruments;

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capitalized interest;

impairment of goodwill;

amortization of closing costs on debt investments;

impairment of intangible assets and goodwill;

amortization of closing costs on debt security investments;

mark-to-market adjustments included in net income (loss);

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;

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

However, FFO and NFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) as an indicator of our operating performance, GAAP cash flows from operations as an indicator of our liquidity or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders.

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 NFFO measures and the adjustments to GAAP in calculating FFO and NFFO.

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

FFO and NFFO should be reviewed in conjunction with other measurements as an indication of our performance.

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 NFFO.

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 or NFFO.

The following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to FFO and NFFO for the periods presented below (in thousands except for share and per share amounts):

Three Months Ended September 30,

Nine Months Ended September 30,

2023 2022 2023 2022

and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect Normalized FFO on the same basis.

However, FFO and Normalized FFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) as an indicator of our operating performance, GAAP cash flows from operations as an indicator of our liquidity or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders.

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 Normalized FFO measures and the adjustments to GAAP in calculating FFO and Normalized FFO.

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

FFO and Normalized FFO should be reviewed in conjunction with other measurements as an indication of our performance.

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 Normalized FFO.

The following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to FFO and Normalized FFO for the periods presented below (in thousands except for share and per share amounts):

Three Months Ended March 31,

$ (3,004) $ (27,615)

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Depreciation and amortization related to real estate — unconsolidated entities 186 63

Impairment of real estate investments — consolidated properties 12,510 21,851 12,510 39,191

Gain on dispositions of real estate investments, net — consolidated properties (31,981) (2,113) (29,777) (2,796)

Net loss (income) attributable to noncontrolling interests 457 (5,861) 1,884 (9,688)

Gain on re-measurement of previously held equity interests — (19,567) (726) (19,567)

Depreciation, amortization, impairments, net gain on dispositions and gain on re-measurements — noncontrolling interests (6,061) (757) (19,672) (14,910)

FFO attributable to controlling interest $ 17,810 $ 26,496 $ 57,075 $ 91,830

(Gain) loss on dispositions of real estate investments, net — consolidated properties (2,263) 132

Net (income) loss attributable to noncontrolling interests (888) 1,743

Gain on re-measurement of previously held equity interest — (726)

Depreciation, amortization, impairments, net gain/loss on dispositions and gain on re-measurement — noncontrolling interests (5,462) (6,538)

NAREIT FFO attributable to controlling interest $ 31,298 $ 11,691

Business acquisition expenses $ 2,782 $ 332

Amortization of above- and below-market leases 426 8,675

Amortization of closing costs 71 60 204 174

Amortization of closing costs — debt security investments 76 65

Change in deferred rent (589) (60)

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Loss on debt extinguishments 1,280 —

Gain in fair value of derivative financial instruments (3,402) — (8,200) (500)

(Gain) loss in fair value of derivative financial instruments (6,417) 195

Foreign currency loss (gain) 426 (1,008)

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Adjustments for noncontrolling interests 125 (633)

NFFO attributable to controlling interest $ 23,173 $ 31,036 $ 67,549 $ 106,584

Weighted average Class T and Class I common shares outstanding — basic and diluted 66,048,991 65,819,808 66,036,253 65,735,176

Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted $ (0.09) $ (0.21) $ (0.67) $ (0.51)

FFO per Class T and Class I common share attributable to controlling interest — basic and diluted $ 0.27 $ 0.40 $ 0.86 $ 1.40

NFFO per Class T and Class I common share attributable to controlling interest — basic and diluted $ 0.35 $ 0.47 $ 1.02 $ 1.62

Normalized FFO attributable to controlling interest

$ 31,098 $ 20,229

Weighted average common shares outstanding — basic and diluted 104,295,142 66,026,173

Net loss per common share attributable to controlling interest — basic and diluted $ (0.04) $ (0.39)

NAREIT FFO per common share attributable to controlling interest — basic and diluted $ 0.30 $ 0.18

Normalized FFO per common share attributable to controlling interest — basic and diluted $ 0.30 $ 0.31

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, income or loss from unconsolidated entities, gain on re-measurement of previously held equity interests, 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 intangible assets and goodwill, income or loss from unconsolidated entities, gain on re-measurement of previously held equity interests, 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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To facilitate understanding of this financial measure, the following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to NOI for the periods presented below (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

$ (3,004) $ (27,615)

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Interest expense 30,021 39,206

Gain on dispositions of real estate investments, net (31,981) (2,113) (29,777) (2,796)

Impairment of real estate investments 12,510 21,851 12,510 39,191

Loss (income) from unconsolidated entities 505 344 924 (1,680)

Gain on re-measurement of previously held equity interests — (19,567) (726) (19,567)

(Gain) loss on dispositions of real estate investments, net (2,263) 132

Loss from unconsolidated entities 1,205 306

Gain on re-measurement of previously held equity interest — (726)

Foreign currency loss (gain) 426 (1,008)

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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-Q

Item 2. Management’s Discussion and Analysis