What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-16 compared with 2020-08-14 · 1180 added, 1047 removed, 1438 unchanged (61% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

2020 December 31, 2019

ASSETS (Unaudited)

Real estate investments, at cost:

Land $ 212,575 $ 207,335

Buildings, fixtures and improvements 2,138,485 2,004,116

9 unchanged sentences

Operating lease right-of-use assets 14,303 14,351

Prepaid expenses and other assets (including $429 and $394 due from related parties as of June 30, 2020 and December 31, 2019, respectively)

Prepaid expenses and other assets (including $ 1,443 and $ 394 due from related parties as of September 30, 2020 and December 31, 2019, respectively)

41,797 39,707

Deferred costs, net 14,012 13,642

Total assets $ 2,339,629 $ 2,325,303

LIABILITIES AND EQUITY

8 unchanged sentences

Total liabilities 1,362,645 1,218,559

7.375% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, 1,610,000 authorized, 1,610,000 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

Common stock, $0.01 par value, 300,000,000 shares authorized as of June 30, 2020 and December 31, 2019, and 92,398,190 shares of common stock issued and outstanding as of June 30, 2020 and 92,356,664 outstanding as of December 31, 2019, respectively

7.375 % Series A cumulative redeemable perpetual preferred stock, $ 0.01 par value, 2,210,000 and 1,610,000 authorized as of September 30, 2020 and December 31, 2019, respectively;

1,610,000 issued and outstanding as of September 30, 2020 and December 31, 2019

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 93,775,745 (1) and 93,602,555 (1) shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 2,083,812 2,078,628

3 unchanged sentences

Non-controlling interests 4,550 5,410

Total equity 976,984 1,106,744

Total liabilities and equity $ 2,339,629 $ 2,325,303

(1) Retroactively adjusted for the effects of the Stock Dividend (see Note 1 ).

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Revenue from tenants $ 95,835 $ 95,440 $ 290,734 $ 280,445

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Total expenses

Operating (loss) income before gain on sale of real estate investments

92,221 114,245 309,891 289,106

Operating income (loss) before gain on sale of real estate investments 3,614 ( 18,805 ) ( 19,157 ) ( 8,661 )

Gain on sale of real estate investments — 2,715 2,306 8,793

Operating (loss) income

Operating income (loss) 3,614 ( 16,090 ) ( 16,851 ) 132

Other income (expense):

1 unchanged sentence

Interest and other income

Gain (loss) on non-designated derivatives

Loss on non-designated derivatives ( 69 ) ( 2 ) ( 45 ) ( 50 )

Total other expenses

( 12,907 ) ( 12,981 ) ( 38,679 ) ( 39,774 )

Loss before income taxes ( 9,293 ) ( 29,071 ) ( 55,530 ) ( 39,642 )

Income tax benefit (expense)

Net loss attributable to non-controlling interests

Income tax (expense) benefit ( 78 ) 271 ( 78 ) ( 364 )

Net loss ( 9,371 ) ( 28,800 ) ( 55,608 ) ( 40,006 )

Net (income) loss attributable to non-controlling interests ( 397 ) 11 ( 223 ) 52

Preferred stock dividends ( 732 ) — ( 2,224 ) —

1 unchanged sentence

Other comprehensive loss:

Unrealized loss on designated derivatives

Unrealized gain (loss) on designated derivatives 2,845 ( 2,680 ) ( 36,775 ) ( 13,515 )

Comprehensive loss attributable to common stockholders

$ ( 7,655 ) $ ( 31,469 ) $ ( 94,830 ) $ ( 53,469 )

Basic and diluted weighted-average shares outstanding (1)

93,534,591 93,233,948 93,320,080 93,124,017

Basic and diluted net loss per share (1)

$ ( 0.11 ) $ ( 0.31 ) $ ( 0.62 ) $ ( 0.43 )

(1) Retroactively adjusted for the effects of the Stock Dividend (see Note 1 ).

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3 unchanged sentences

(In thousands, except share data)

Six Months Ended June 30, 2020

Preferred Stock

Accumulated Other Comprehensive Income

Distributions in excess of accumulated earnings

Total Stockholders Equity

Non-controlling Interests

Nine Months Ended September 30, 2020

Preferred Stock Common Stock Accumulated Other Comprehensive Income

Shares Par Value Number of

Par Value (1)

Capital Distributions in excess of accumulated earnings Total Stockholders Equity Non-controlling Interests Total Equity

Balance, December 31, 2019 1,610,000 $ 16 93,602,555 $ 935 $ 2,078,616 $ ( 7,043 ) $ ( 971,190 ) $ 1,101,334 $ 5,410 $ 1,106,744

Issuance of Preferred Stock, net

— — — — ( 191 ) — — ( 191 ) — ( 191 )

Common stock issued through distribution reinvestment plan

— — 887,803 10 14,594 — — 14,604 — 14,604

Common stock repurchases — — ( 714,613 ) ( 7 ) ( 10,539 ) — — ( 10,546 ) — ( 10,546 )

Share-based compensation, net

— — — — 1,011 — — 1,011 — 1,011

Distributions declared on common stock, $ 0.42 per share (1)

Preferred stock dividends declared, $1.84 per share

— — — — — — ( 39,269 ) ( 39,269 ) — ( 39,269 )

Distributions declared on preferred stock, $ 1.38 per share

— — — — — — ( 2,224 ) ( 2,224 ) — ( 2,224 )

Distributions to non-controlling interest holders

— — — — — — — — ( 201 ) ( 201 )

Unrealized loss on designated derivative

— — — — — ( 37,336 ) — ( 37,336 ) — ( 37,336 )

— — — — — — ( 55,831 ) ( 55,831 ) 223 ( 55,608 )

Rebalancing of ownership percentage

— — — — 321 561 — 882 ( 882 ) —

Balance, September 30, 2020 1,610,000 $ 16 93,775,745 $ 938 $ 2,083,812 $ ( 43,818 ) $ ( 1,068,514 ) $ 972,434 $ 4,550 $ 976,984

Three Months Ended September 30, 2020

Preferred Stock Common Stock Accumulated Other Comprehensive Income

Par Value Number of

Par Value (1)

Capital Distributions in excess of accumulated earnings Total Stockholders Equity Non-controlling Interests Total Equity

Balance, June 30, 2020 1,610,000 16 93,644,641 $ 936 $ 2,081,062 $ ( 46,489 ) $ ( 1,058,014 ) $ 977,511 $ 4,795 $ 982,306

Three Months Ended June 30, 2020

Preferred Stock

Accumulated Other Comprehensive Income

Distributions in excess of accumulated earnings

Total Stockholders Equity

Non-controlling Interests

Balance, March 31, 2020

Issuance of Preferred Stock, net

— — — — 175 — — 175 — 175

Common stock issued through distribution reinvestment plan

— — 131,104 2 2,013 — — 2,015 — 2,015

Common stock repurchases

— — — — — — — — — —

Share-based compensation, net

Distributions declared on common stock, $0.85 per share

Preferred stock dividends declared, $1.84 per share

— — — — 335 — — 335 — 335

Distributions declared on preferred stock, $ 0.46 per share

— — — — — — ( 732 ) ( 732 ) — ( 732 )

Distributions to non-controlling interest holders

Unrealized loss on designated derivative

— — — — — — — — ( 28 ) ( 28 )

Unrealized gain on designated derivative — — — — — 2.284 — 2,284 — 2,284

— — — — — — ( 9,768 ) ( 9,768 ) 397 ( 9,371 )

Rebalancing of ownership percentage

Balance, June 30, 2020

— — — — 227 387 — 614 ( 614 ) —

Balance, September 30, 2020 1,610,000 $ 16 93,775,745 $ 938 $ 2,083,812 $ ( 43,818 ) $ ( 1,068,514 ) $ 972,434 $ 4,550 $ 976,984

(1) Retroactively adjusted for the effects of the Stock Dividend (see Note 1 ).

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3 unchanged sentences

(In thousands, except share data)

Six Months Ended June 30, 2019

Accumulated Other Comprehensive Income

Distributions in Excess of Accumulated Earnings

Total Stockholders Equity

Non-controlling Interests

Nine Months Ended September 30, 2019

Common Stock Accumulated Other Comprehensive Income

Par Value (1)

Capital Distributions in Excess of Accumulated Earnings Total Stockholders Equity Non-controlling Interests Total Equity

Balance, December 31, 2018 93,204,120 $ 932 $ 2,031,954 $ 4,582 $ ( 804,331 ) $ 1,233,137 $ 7,797 $ 1,240,934

1 unchanged sentence

Common stock repurchases

( 665,288 ) ( 7 ) ( 13,286 ) — — ( 13,293 ) — ( 13,293 )

Share-based compensation, net

15,202 — 978 — — 978 — 978

Distributions declared on common stock, $ 0.63 per share (1)

— — — — ( 58,711 ) ( 58,711 ) — ( 58,711 )

Common stock issued through distribution reinvestment plan

1,123,852 11 20,687 — — 20,698 — 20,698

Distributions to non-controlling interest holders

Other comprehensive loss

— — — — — — ( 261 ) ( 261 )

Unrealized loss on designated derivatives — — — ( 13,515 ) — ( 13,515 ) — ( 13,515 )

Net loss — — — — ( 39,954 ) ( 39,954 ) ( 52 ) ( 40,006 )

Rebalancing of ownership percentage — — 1,648 — — 1,648 ( 1,648 ) —

Balance, September 30, 2019 93,677,886 $ 936 $ 2,041,981 $ ( 8,933 ) $ ( 903,083 ) $ 1,130,901 $ 5,836 $ 1,136,737

Three Months Ended September 30, 2019

Common Stock Accumulated Other Comprehensive Income

Par Value (1)

Capital Distributions in Excess of Accumulated Earnings Total Stockholders Equity Non-controlling Interests Total Equity

Balance, June 30, 2019 93,271,833 $ 932 $ 2,034,905 $ ( 6,253 ) $ ( 854,660 ) $ 1,174,924 $ 5,935 $ 1,180,859

Three Months Ended June 30, 2019

Accumulated Other Comprehensive Income

Distributions in Excess of Accumulated Earnings

Total Stockholders Equity

Non-controlling Interests

Balance, March 31, 2019

Common stock repurchases

Share-based compensation, net

15,202 — 333 — — 333 — 333

Distributions declared on common stock, $ 0.21 per share (1)

— — — — ( 19,634 ) ( 19,634 ) — ( 19,634 )

Common stock issued through distribution reinvestment plan

390,851 4 6,743 — — 6,747 — 6,747

Distributions to non-controlling interest holders

Other comprehensive loss

— — — — — — ( 88 ) ( 88 )

Unrealized loss on designated derivatives — — — ( 2,680 ) — ( 2,680 ) — ( 2,680 )

Net loss — — — — ( 28,789 ) ( 28,789 ) ( 11 ) ( 28,800 )

Rebalancing of ownership percentage — — — — — — — —

Balance, June 30, 2019

Balance, September 30, 2019 93,677,886 $ 936 $ 2,041,981 $ ( 8,933 ) $ ( 903,083 ) $ 1,130,901 $ 5,836 $ 1,136,737

(1) Retroactively adjusted for the effects of the Stock Dividend (see Note 1 ).

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net loss $ ( 55,608 ) $ ( 40,006 )

Adjustments to reconcile net loss to net cash provided by operating activities:

4 unchanged sentences

Amortization (accretion) amortization of market lease and other intangibles, net

( 111 ) ( 25 )

Bad debt expense 2,365 4,797

1 unchanged sentence

Gain on sale of real estate investments, net ( 2,306 ) ( 8,793 )

(Gain) loss on non-designated derivatives

Loss on non-designated derivatives 45 50

Impairment charges 32,842 22,634

15 unchanged sentences

Proceeds from term loan — 150,000

Proceeds from mortgage notes payable — —

Payments on mortgage notes payable ( 672 ) ( 27,416 )

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(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash, cash equivalents, end of period $ 82,233 $ 52,425

6 unchanged sentences

Common stock issued through distribution reinvestment plan

$ 14,604 $ 20,698

Mortgage assumed in acquisition

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Note 1 — Organization

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Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, also has an interest in the Company through ownership of interests in the OP.

As of June 30, 2020 , the Company owned 200 properties (all references to number of properties and square footage are unaudited) located in 31 states and comprised of 9.7 million rentable square feet.

As of September 30, 2020, the Company owned 200 properties (all references to number of properties and square footage are unaudited) located in 31 states and comprised of 9.7 million rentable square feet.

On October 1, 2020, the Company announced the declaration of a quarterly stock dividend of 0.01349 shares of the Company’s common stock on each share of the Company’s outstanding common stock (the “Stock Dividend”).

The Stock Dividend was paid on October 15, 2020 to holders of record of the Company’s common stock at the close of business on October 8, 2020.

Since the Stock Dividend is treated similar to a stock split for accounting purposes, the result of the Stock Dividend was an increase of 0.01349 shares for every one share of common stock.

All references made to shares or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the Stock Dividend.

The Company’s initial public offering of its common stock, which is not listed on a national securities exchange, closed in November 2014, and, in December 2019, the Company’s initial public offering of its 7.375 % Series A Cumulative Redeemable Perpetual Preferred Stock, $ 0.01 par value per share (“Series A Preferred Stock”) closed, and the Company listed shares of its Series A Preferred Stock on The Nasdaq Global Market under the symbol “HTIA.”

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The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results for the interim periods.

The results of operations for the three and six months ended June 30, 2020 and 2019 respectively, are not necessarily indicative of the results for the entire year or any subsequent interim period.

The results of operations for the three and nine months ended September 30, 2020 and 2019 respectively, are not necessarily indicative of the results for the entire year or any subsequent interim period.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2020.

Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company’s significant accounting policies during the six months ended June 30, 2020 .

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Principles of Consolidation and Basis of Presentation

5 unchanged sentences

Out-of-Period Adjustments

During the year ended December 31, 2019, the Company identified certain historical errors in its tax provision and its net deferred taxes asset as well as its statements of operations and comprehensive income (loss), consolidated statements of changes in equity, and statements of cash flows since 2014, which impacted the quarterly financial statements and annual periods previously

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Specifically, the Company had overstated intercompany rent on certain leases with the TRS and reflected a portion of depreciation on REIT assets in the TRS’s tax provision, thereby overstating previously recorded tax benefits, deferred tax assets and net income by $ 0.8 million , $ 0.3 million and $ 0.2 million for the years ended December 31, 2018, 2017 and for Pre-2017 periods, respectively.

Specifically, the Company had overstated intercompany rent on certain leases with the TRS and reflected a portion of depreciation on REIT assets in the TRS’s tax provision, thereby overstating previously recorded tax benefits, deferred tax assets and net incom e by $ 0.8 million, $ 0.3 million and $ 0.2 million for the years ended December 31, 2018, 2017 and for Pre-2017 periods, respectively.

The intercompany rent and allocation of depreciation only affected the tax provision and did not affect the pre-tax consolidated financial results.

These out of period adjustments were recorded in the fourth quarter of 2019.

During the year ended December 31, 2019, the Company did no t record quarterly interest expense related to borrowings under the Revolving Credit Facility (as defined below) that were borrowed and repaid during the fourth quarter of 2019.

The amount of interest expense and related payable that should have been recorded was $ 0.3 million .

As of September 30, 2020, the Company identified that the cumulative interest payable balance was understated, and as a result a true up entry was recorded to record the payable and related expense, resulting in an out of period adjustment .

Impacts of the COVID-19 Pandemic

The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

During the first quarter of 2020, there was a global outbreak of COVID-19, which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States.

The World Health Organization has designated COVID-19 as a pandemic, and numerous countries, including the United States, have declared national emergencies with respect to COVID-19.

The global impact of the pandemic has been rapidly evolving and many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading and operations of non-essential offices and retail centers.

Such actions are creating disruption in global supply chains, and adversely impacting many industries.

The pandemic has had an adverse impact on economic and market conditions and triggered a period of global economic slowdown and recession that may continue for some time.

During the first quarter of 2020, there was a global outbreak of COVID-19, which became a global pandemic that has spread around the world and to every state in the United States.

The pandemic has had and could continue to have an adverse impact on economic and market conditions, including a global economic slowdown and recession that may continue for some time.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions.

The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2020, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of June 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19.

The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of September 30, 2020, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of September 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Actual results may ultimately differ from those estimates.

Starting in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect the Company in a number of ways.

In the Company’s Seniors Housing — Operating Property (“SHOP”) portfolio, particularly, March occupancy trended lower in the second half of the month as government policies and implementation of infection control best practices began to materially limit or close communities to new resident move-ins.

In the Company’s Seniors Housing — Operating Property (“SHOP”) portfolio, occupancy has trended lower since the second half of March as government policies and implementation of infection control best practices have materially limited or closed communities to new resident move-ins which affects the Company’s ability to fill vacancies.

The Company has also continued to experience lower inquiry volumes and reduced in-person tours during the pandemic.

In addition, starting in mid-March, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as the Company’s operators took appropriate actions to protect residents and caregivers.

At the SHOP facilities, the Company bears these cost increases.

These trends accelerated during the second quarter and have continued during the third quarter of 2020, and may continue to impact the Company in the future and have a material adverse effect on its revenues and income in the fourth quarter and other quarters thereafter.

The financial stability and overall health of the Company’s tenants is critical to its business.

1 unchanged sentence

The economic impact of the pandemic has impacted the ability of some of the Company’s tenants to pay their monthly rent either temporarily or in the long term.

The Company experienced delays in rent collections in the second quarter of 2020 that have continued in some cases into the third quarter.

The Company has taken a proactive approach to achieve mutually agreeable solutions with its tenants and in some cases, in the second quarter of 2020, the Company has executed lease amendments providing for deferral of rent.

The Company experienced delays in rent collections in the second and third quarters of 2020 that have continued in some cases into the fourth quarter.

The Company has taken a proactive approach to

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

achieve mutually agreeable solutions with its tenants and in some cases, in the second and third quarters of 2020, the Company executed lease amendments providing for deferral of rent.

For accounting purposes, in accordance with ASC 842:

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In accordance with the relief provisions, instead of treating these qualifying leases as modifications, the Company has elected to treat the modifications as if previously contained in the lease and recast rents receivable prospectively (if necessary).

Under that accounting, for modifications that were deferrals only, there would be no impact on overall rental revenue and for any abatement amounts that reduced total rent to be received, the impact would be recognized ratably over the remaining life of the

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

For leases not qualifying for this relief, the Company has applied modification accounting and determined that there were no changes in the current classification of its leases impacted by negotiations with its tenants.

The Company has taken precautionary steps to increase liquidity and preserve financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic.

These steps include borrowing an additional $ 95.0 million under the Company’s senior secured credit facility (the “Credit Facility”) in March 2020 to provide more cash on the Company’s balance sheet although the Company has not borrowed additional amounts subsequently.

These steps include borrowing an additional $ 95.0 million under the Credit Facility (as defined below) in March 2020 to provide more cash on the Company’s balance sheet.

A portion of the $ 95.0 million in borrowings was used for general corporate purposes.

The Company has not borrowed additional amounts subsequently.

In August 2020, the Company amended the Credit Facility as part of its efforts to continue addressing the adverse impacts of the COVID-19 pandemic.

For additional information on the Credit Facility amendment see Note 17 — Subsequent Events.

For additional information on the Credit Facility amendment see Note 5 — Credit Facilities.

Revenue Recognition

The Company’s revenues, which are derived primarily from lease contracts, include rent received from tenants in MOBs and triple-net leased healthcare facilities.

As of June 30, 2020 , these leases had a weighted average remaining lease term of 5.5 years .

As of September 30, 2020, these leases had a weighted average remaining lease term of 5.2 years.

Rent from tenants in the Company’s MOB and triple-net leased healthcare facilities operating segments is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease.

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The terms of the rent are short term in nature, primarily month-to-month.

Also included in revenue from tenants is fees for ancillary revenue from non-residents of $ 6.3 million , for the six months ended June 30, 2020 .

Also included in revenue from tenants is fees for ancillary revenue from non-residents of $ 10.0 million, for the nine months ended September 30, 2020.

Fees for ancillary services are recorded in the period in which the services are performed.

The Company defers the revenue related to lease payments received from tenants and residents in advance of their due dates.

Pursuant to certain of the Company’s lease agreements, tenants are required to reimburse the Company for certain property operating expenses related to non-SHOP assets (recorded in revenue from tenants), in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties.

The following table presents future base rent payments on a cash basis due to the Company over the periods indicated over the next five years and thereafter.

These amounts exclude tenant reimbursements and contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes, among other items.

These amounts also exclude SHOP leases which are short term in nature.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

As of June 30, 2020 :

(In thousands)

September 30, 2020

The following table presents future base rent payments on a cash basis due to the Company over the periods indicated over the next five years and thereafter.

These amounts also exclude SHOP leases which are short term in nature.

As of September 30, 2020:

(In thousands) Future

Base Rent Payments

2020 (remainder) $ 23,154

Thereafter 206,211

Total $ 530,063

The Company continually reviews receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.

Under the leasing standards, the Company is required to assess, based on credit risk only, if it is probable that the Company will collect virtually all of the lease payments at lease commencement date and it must continue to reassess collectibility periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant.

Under the leasing standards, the Company is required to assess, based on credit risk only, if it is probable that the Company will collect virtually all of the lease payments at lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant.

Partial reserves, or the ability to assume partial recovery are no longer permitted.

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Cost recoveries from tenants are included in operating revenue from tenants in accordance with new accounting rules, on the accompanying consolidated statements of operations and comprehensive income (loss) in the period the related costs are incurred, as applicable.

During the three and six month periods ended June 30, 2020 the Company recorded reductions of revenue of $ 0.6 million and $ 1.4 million , respectively, for uncollectible amounts.

During the three and six months ended June 30, 2019, the Company recorded reductions of revenue of $ 0.9 million and $ 3.6 million , respectively, for uncollectible amounts.

During the three and nine month periods ended September 30, 2020 the Company recorded reductions of revenue of $ 1.0 million and $ 2.4 million, respectively, for uncollectible amounts.

During the three and nine months ended September 30, 2019, the Company recorded reductions of revenue of $ 1.2 million and $ 4.8 million, respectively, for uncollectible amounts.

Investments in Real Estate

7 unchanged sentences

Disposal of real estate investments that represent a strategic shift in operations that will have a major effect on the Company's operations and financial results are required to be presented as discontinued operations in the consolidated statements of operations.

No properties were presented as discontinued operations during the quarters ended June 30, 2020 and 2019.

No properties were presented as discontinued operations during the quarters ended September 30, 2020 and 2019.

Properties that are intended to be sold are to be designated as “held for sale” on the consolidated balance sheets at the lesser of carrying amount or fair value less estimated selling costs when they meet specific criteria to be presented as held for sale, most significantly that the sale is probable within one year.

1 unchanged sentence

Properties are no longer depreciated when they are classified as held for sale.

There were $ 10.8 million and $ 70.8 million of real estate investments held for sale as of June 30, 2020 and December 31, 2019, respectively (see Note 3 — Real Estate Investments, Net for additional information).

In accordance with the lease accounting standard, all of the Company’s leases as lessor prior to adoption were accounted for as operating leases.

The Company will evaluate new leases originated after the adoption date (by the Company or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant.

This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than major part

There were $ 10.1 million and $ 70.8 million of

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

of remaining economic useful life of the asset (e.g., equal to or greater than 75% ), if the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90% ) of the leased property’s fair value at lease inception, or if the asset so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term.

September 30, 2020

real estate investments held for sale as of September 30, 2020 and December 31, 2019, respectively (see Note 3 — Real Estate Investments, Net for additional information).

In accordance with the lease accounting standard, all of the Company’s leases as lessor prior to adoption were accounted for as operating leases.

This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than major part of remaining economic useful life of the asset (e.g., equal to or greater than 75%), if the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or if the asset so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term.

Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor.

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In an asset acquisition, the difference between the acquisition price (including capitalized transaction costs) and the fair value of identifiable net assets acquired is allocated to the non-current assets.

All acquisitions during the three months ended March 31, 2020 and 2019 were asset acquisitions.

All acquisitions during the three and nine months ended September 30, 2020, and 2019 were asset acquisitions.

For acquired properties with leases classified as operating leases, the Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired (including those acquired in the Merger) and liabilities assumed, based on their respective fair values.

5 unchanged sentences

Fair value estimates are also made using significant assumptions such as capitalization rates, discount rates, fair market lease rates and land values per square foot.

Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates and the value of in-place leases as applicable.

Identifiable intangible assets include amounts allocated to acquired leases for above- and below-market lease rates and the value of in-place leases as applicable.

Factors considered in the analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases.

1 unchanged sentence

The Company also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.

Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases.

The aggregate value of intangible assets related to customer relationships, as applicable, is measured based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with the tenant.

Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors.

September 30, 2020

Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors.

The Company did not record any intangible asset amounts related to customer relationships during the year ended December 31, 2019.

22 unchanged sentences

At transition to the new accounting rules on January 1, 2019, after assessing its reserve balances at December 31, 2018 under the guidance, the Company wrote off accounts receivable of $ 0.1 million and straight-line rents receivable of $ 0.1 million as an adjustment to the opening balance of accumulated deficit, and accordingly rent for these tenants is currently recorded on a cash basis.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Lessee Accounting

2 unchanged sentences

Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction.

Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction.

For additional information and disclosures related to the Company’s operating leases, see Note 16 — Commitments and Contingencies .

CARES Act Grants

On March 27, 2020, Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law and it includes relief to fund for Medicare providers.

Such funds were to be used for the preparation, prevention, and medical response to COVID-19, and were designated to reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19.

The Company received $ 3.1 million in these funds during the second quarter of 2020, related to four of its SHOP properties and considered the funds to be a grant contribution from the government.

The full amount received was recognized as a reduction of property operating expenses in our consolidated statement of operations for the three and six months ended June 30, 2020 to offset the incurred COVID-19 expenses.

The Company does not expect to receive any more CARES Act funds and is exploring ways to offset its exposure to continuing increased COVID-19 operating costs.

On March 27, 2020, Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law and it provides funding to Medicare providers in order to provide financial relief during the COVID-19 pandemic.

Funds provided under the program were to be used for the preparation, prevention, and medical response to COVID-19, and were designated to reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19.

The Company received $ 0.5 million and $ 3.6 million in these funds during the three and nine months ended September 30, 2020, related to four of its SHOP properties and considered the funds to be a grant contribution from the government.

The full amounts received were recognized as a reduction of property operating expenses in our consolidated statement of operations for the three and nine months ended September 30, 2020 to offset the incurred COVID-19 expenses.

There can be no assurance that the program will be extended or any further amounts received.

Recently Issued Accounting Pronouncements

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We will continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Note 3 — Real Estate Investments, Net

Property Acquisitions and Development Costs

The Company invests in MOBs, seniors housing properties and other healthcare-related facilities primarily to expand and diversify its portfolio and revenue base.

The Company owned 200 properties as of June 30, 2020 .

During the six months ended June 30, 2020, the Company, through wholly owned subsidiaries of the OP, completed its acquisitions of one multi-tenant MOB, three single tenant MOBs and four SHOPs for an aggregate contract purchase price of $ 103.9 million .

The following table presents the allocation of real estate assets acquired and liabilities assumed, as well as capitalized construction in progress, during the six months ended June 30, 2020 and 2019 :

Not yet Adopted as of September 30, 2020

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Topic 815).

The new standard reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and amends the guidance for the derivatives scope

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Six Months Ended June 30,

September 30, 2020

exception for contracts in an entity's own equity.

The standard also amends and makes targeted improvements to the related earnings per share guidance.

The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The standard allows for either modified or full retrospective transition methods.

The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

Note 3 — Real Estate Investments, Net

Property Acquisitions and Development Costs

The Company invests in MOBs, seniors housing properties and other healthcare-related facilities primarily to expand and diversify its portfolio and revenue base.

The Company owned 200 properties as of September 30, 2020.

During the nine months ended September 30, 2020, the Company, through wholly owned subsidiaries of the OP, completed its acquisitions of one multi-tenant MOB, three single tenant MOBs and four SHOPs for an aggregate contract purchase price of $ 103.9 million.

The following table presents the allocation of real estate assets acquired and liabilities assumed, as well as capitalized construction in progress, during the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

(In thousands) 2020 2019

Real estate investments, at cost:

Land $ 6,900 $ 6,356

Buildings, fixtures and improvements 86,687 68,903

5 unchanged sentences

Market lease liabilities (1)

( 362 ) ( 1,483 )

Total intangible assets and liabilities 9,495 11,017

3 unchanged sentences

Number of properties purchased 8 9

Weighted-average remaining amortization periods for in-place leases, an above-market lease and a below-market lease liability acquired were 2.3 years and 7.0 years as of June 30, 2020 and 2019 , respectively.

(1) Weighted-average remaining amortization periods for in-place leases, above-market leases and below-market leases acquired were 2.3 years and 9.9 years, 8.7 years and 9.8 years, and 8.4 years as of September 30, 2020 and 2019, respectively.

There were no below market leases acquired in the nine months ended September 30, 2019

Development Project

4 unchanged sentences

In December 2019, the development reached substantial completion and the Company reclassified the entire amount in construction in progress.

During the six months ended June 30, 2019 , the Company incurred $ 9.1 million in capitalized costs, including capitalized interest, related to the development project in Jupiter, Florida.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

During the nine months ended September 30, 2019, the Company incurred $ 2.8 million in capitalized costs, including capitalized interest, related to the development project in Jupiter, Florida.

All acquisitions in 2020 and 2019 were considered asset acquisitions for accounting purposes.

3 unchanged sentences

During the fourth quarter of 2019, in connection with the substantial completion of the development property, the Company began to evaluate it for a potential sale.

As a result of this potential change in plans, the Company concluded this held for use asset was impaired and recognized an impairment charge to its respective operating real estate components.

During the second quarter of 2020, the Company identified a purchaser and began negotiating a purchase and sale agreement (“PSA”) to sell the property.

In August 2020, the Company entered into a definitive PSA to sell the property.

The disposition is subject to conditions, and there can be no guarantee that the disposition will be completed on the contemplated terms, or at all.

See Note 17 — Subsequent Events for further details.

As a result the outcomes of negotiations regarding the potential sale during the second quarter of 2020, the Company recognized an additional impairment with respect to the property (see Assets Held For Use and Related Impairments below for additional information) representing the amount by which the carrying amount of the property exceeds the Company’s estimate of the net sales price set forth in the PSA described above.

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

As a result of this potential change in plans, the Company concluded this held for use asset was impaired and recognized an impairment charge to its respective operating real estate components in 2019.

In August 2020, the Company entered into definitive purchase and sale agreements (“PSA”) to sell the Company's recently completed development property in Jupiter, Florida for $ 65.0 million and the Company’s two skilled nursing facilities in Lutz, Florida and Wellington, Florida for $ 20.0 million and $ 33.0 million, respectively.

The buyer has paid the Company $ 2.9 million in non-refundable deposits, but these dispositions remain subject to conditions, and there can be no guarantee that any or all of the dispositions will be completed on the contemplated terms, or at all.

Significant Tenants

As of June 30, 2020 and 2019 , the Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or greater of total annualized rental income for the portfolio on a straight-line basis.

The following table lists the states where the Company had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of June 30, 2020 and 2019 :

As of September 30, 2020 and 2019, the Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or greater of total annualized rental income for the portfolio on a straight-line basis.

September 30,

State 2020 2019

22.3 % 23.9 %

10.4 % 11.0 %

* State’s annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income for all portfolio properties as of the date specified.

(1) In August 2020, the Company entered into a PSA to sell three assets in Florida including the recently completed development project in Jupiter, Florida and its two skilled nursing facilities in Lutz, Florida and Wellington, Florida.

(1) In August 2020, the Company entered into a PSA to sell three assets in Florida including the Company’s recently completed development project in Jupiter, Florida and the Company’s two skilled nursing facilities in Lutz, Florida and Wellington, Florida.

These dispositions are subject to conditions, and there can be no guarantee that the dispositions will be completed on the contemplated terms, or at all.

See Note 17 — Subsequent Events for m ore information.

(2) As of June 30, 2020 , the Company had 11 SHOP assets located in Michigan that are under contract to be sold pursuant to a PSA.

(2) As of September 30, 2020, the Company had 11 SHOP assets located in Michigan that are under contract to be sold pursuant to a PSA.

See “Assets Held for Sale and Related Impairments” in this note for more information.

In November 2020, the Company received payment of the full sales price for all 11 of the Michigan SHOPs (as defined below) and transferred seven of the properties to the buyer, with the remainder of the properties scheduled to be transferred to the buyer in January 2021.

See Note 17 — Subsequent Events for m ore information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Intangible Assets and Liabilities

The following table discloses amounts recognized within the consolidated statements of operations and comprehensive loss related to amortization of in-place leases and other intangible assets, amortization and accretion of above-and below-market lease assets and liabilities, net and the amortization and accretion of above-and below-market ground leases, for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

Amortization of in-place leases and other intangible assets (1)

$ 3,637 $ 3,872 $ 11,176 $ 11,832

(Accretion) and Amortization of above-and below-market leases, net (2)

$ ( 33 ) $ 13 $ ( 250 ) $ ( 142 )

Amortization of above-and below-market ground leases, net (3)

$ 40 $ 74 $ 119 $ 117

(1) Reflected within depreciation and amortization expense.

2 unchanged sentences

The following table provides the projected amortization expense and adjustments to revenues for the next five years:

(In thousands)

2020 (remainder)

(In thousands) 2020 (remainder) 2021 2022 2023 2024

In-place lease assets $ 3,429 $ 11,680 $ 9,674 $ 7,800 $ 7,038

4 unchanged sentences

Total to be added to revenue from tenants

$ ( 58 ) $ 276 $ 563 $ 788 $ 695

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1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

During the six months ended June 30, 2020 the Company sold one MOB property which resulted in a gain on sale of $ 2.3 million .

This property sold for a contract price of $ 8.6 million .On February 6, 2019, the Company sold five MOB properties in New York for a contract sales price of $ 45.0 million , resulting in a gain on sale of real estate investments of $ 6.1 million which is included on the Consolidated Statement of Operations for the six months ended June 30, 2019.

The following table presents impairments recorded during the six months ended June 30, 2020 .

There were no impairments recorded for the six months ended June 30, 2019.

Three Months Ended June 30,

Six Months Ended June 30,

September 30, 2020

The Company did no t dispose of any properties during the three months ended September 30, 2020.

During the nine months ended September 30, 2020 the Company sold one MOB property which resulted in a gain on sale of $ 2.3 million.

This property sold for a contract price of $ 8.6 million.

This gain is included on the Consolidated Statement of Operations for the three and nine months ended September 30, 2020.

On February 6, 2019, the Company sold five MOB properties in New York for a contract sales price of $ 45.0 million, resulting in a gain on sale of real estate investments of $ 6.1 million.

On July 28, 2019 the Company sold an additional MOB for a contract purchase price of $ 13.6 million, generating a gain on sale of $ 2.9 million.

On August 1, 2019, the Company sold a SHOP property for a contract purchase price of $ 3.5 million, resulting in a loss on sale of $ 0.2 million.

These gains and losses are included on the Consolidated Statement of Operations for the three and nine months ended September 30, 2019 .

The following table presents impairments recorded during the three and nine months ended September 30, 2020 and 2019.

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

1 unchanged sentence

Assets held for use — — 13,793 19

Total $ 1,011 $ 22,615 $ 32,842 $ 22,634

For additional information on impairments related to assets held for sale and assets held for use, see the “Assets Held for Sale and Related Impairments” and “Assets Held for Use and Related Impairments” sections below.

2 unchanged sentences

If the carrying amount of the assets classified as held for sale exceeds the estimated net sales price, the Company records an impairment charge equal to the amount by which the carrying amount of the assets exceeds the Company’s estimate of the net sales price of the assets.

For held-for-sale properties, the Company predominately uses the contract sale price as fair market

For held-for-sale properties, the Company predominately uses the contract sale price as fair market value.

Michigan SHOPs

In January 2020, the Company entered into a PSA for the sale of a portfolio of 14 SHOPs located in Michigan (the “Michigan SHOPs”) as a single portfolio for $ 71.8 million.

During April, 2020, the PSA was amended so that only 11 of the Michigan SHOPs will be sold pursuant to this PSA for $ 11.8 million .In addition, the original deposit made by the buyer was reduced from $ 1.0 million to $ 0.3 million .

The buyer has paid the $ 0.3 million deposit to the Company which is non-refundable under the amended PSA.

The due diligence is completed with respect to the 11 Michigan SHOPs to be sold and there was no additional deposit made at the conclusion of the due diligence period.

The closing is expected to occur shortly after the facilities, which are currently closed due to COVID-19, have been opened to the public in compliance with all applicable governmental orders and guidelines, but there can be no assurance as to when this will occur.

There also can be no assurance that the sale of these properties will close under the proposed terms, or at all.

The Company determined that the 11 Michigan SHOPs should be classified as held for sale as of June 30, 2020 and the 14 Michigan SHOPs were previously classified as held for sale as of December 31, 2019.

An impairment charge of $ 22.6 million had previously been taken with respect to the 14 Michigan SHOPs during the three months ended September 30, 2019.

As a result of the change in the asset group and sales price, the Company recognized an incremental impairment charge of $ 18.0 million in the six months ended June 30, 2020 , bringing the cumulative impairment on the now 11 Michigan SHOPs to $ 40.7 million , representing the amount by which the carrying amount of the 11 Michigan SHOPs exceeded the Company’s estimate of the net sales price for those 11 properties.

As a result, the three remaining Michigan SHOPs no longer qualify as held for sale and were reclassified to assets held for use at their original carrying values as of March 31, 2020 and an additional $ 0.7 million in catch-up depreciation was recorded in the six months ended June 30, 2020 .

As of June 30, 2020 , for the 11 Michigan SHOPs that are classified as held for sale, seven Michigan SHOPs were part of the borrowing base of the Credit Facility, one was mortgaged under the Fannie Mae Master Credit Facilities (as defined below) and three were unencumbered.

During April, 2020, the PSA was amended so that only 11 of the Michigan SHOPs will be sold pursuant to this PSA for $ 11.8 million.

As a result of the amended PSA from April 2020, the three remaining Michigan SHOPs no longer qualify as held for sale and were reclassified to assets held for use at their original carrying values as of March 31, 2020 and an additional $ 0.7 million in catch-up depreciation was recorded in the nine months ended September 30, 2020.

In addition, the original deposit made by the buyer was reduced from $ 1.0 million to $ 0.3 million.

In October 2020, the PSA was amended to provide that the full $ 11.8 million sales price for all 11 Michigan SHOPs would be paid at an initial closing when seven of the properties would be transferred to the buyer with the remaining four properties scheduled to be transferred to the buyer at a second closing in January 2021.

This amendment to the PSA also provided that $ 0.8 million of the sales price would be held in escrow and returned to the buyer at the second closing;

provided that, if the PSA is terminated before the second closing due to a material default by the buyer, the Company will receive the escrowed amount.

The Company determined that the 11 Michigan SHOPs should be classified as held for sale as of September 30, 2020 and the 14 Michigan SHOPs were previously classified as held for sale as of December 31, 2019.

An impairment charge of $ 22.6 million had previously been taken with respect to the 14 Michigan SHOPs during the three and nine months ended September 30, 2019.

As a result of the change in the asset group and sales price, the Company recognized an incremental impairment charge of $ 19.0 million in the nine months ended September 30, 2020, inclusive of $ 1.0 million of impairment charges recorded in the three months ended September 30, 2020, bringing the cumulative impairment on the now 11 Michigan SHOPs to $ 41.7 million, representing the amount by which the carrying amount of the 11 Michigan SHOPs exceeded the Company’s estimate of the net sales price for those 11 properties.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

As of September 30, 2020, for the 11 Michigan SHOPs that are classified as held for sale, seven Michigan SHOPs were part of the borrowing base of the Credit Facility, one was mortgaged under the Fannie Mae Master Credit Facilities (as defined below) and three were unencumbered.

In November 2020, the initial closing under the PSA occurred and the Company received payment of the full $ 11.8 million sales price for all 11 of the Michigan SHOPs less $ 0.8 million held in escrow and transferred seven of the properties to the buyer.

The remaining four properties are scheduled to be transferred to the buyer at a second closing in January 2021when the $ 0.8 million held in escrow will be released to the buyer (for additional information, see N ote 17 — Subsequent Events) .

Balance Sheet Details - Assets Held for Sale

The following table details the major classes of assets associated with the properties that are classified as held for sale as of June 30, 2020 and December 31, 2019:

(In thousands)

June 30, 2020

December 31, 2019

The following table details the major classes of assets associated with the properties that are classified as held for sale as of September 30, 2020 and December 31, 2019:

(In thousands) September 30, 2020 December 31, 2019

Land $ 797 $ 4,051

Buildings, fixtures and improvements 9,352 66,788

12 unchanged sentences

As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses for impairment may be realized in the future.

As of December 31, 2019, the Company was actively considering plans to sell three assets in Florida including the recently completed development project in Jupiter, Florida and its two skilled nursing facilities in Lutz, Florida and Wellington, Florida.

As of December 31, 2019, the Company was actively considering plans to sell three assets in Florida including the recently completed development project in Jupiter, Florida and the Company’s two skilled nursing facilities in Lutz, Florida and Wellington, Florida.

The Company began marketing the properties in 2020.

During the three months ended June 30, 2020, the Company received multiple bids and accepted a non-binding letter of intent from a prospective buyer to purchase the recently completed development project in Jupiter, Florida for $ 65.0 million and its two skilled nursing facilities in Lutz, Florida and Wellington, Florida for $ 53.0 million .

During the three months ended June 30, 2020, the Company received multiple bids and accepted a non-binding letter of intent from a prospective buyer to purchase the recently completed development project in Jupiter, Florida for $ 65.0 million and the Company’s two skilled nursing facilities in Lutz, Florida and Wellington, Florida for $ 20.0 million and $ 33.0 million, respectively.

During August 2020, the Company entered into PSAs with the buyer on the terms generally set forth in the letter of intent.

These dispositions are subject to conditions, and there can be no guarantee that any or all the dispositions will be completed on the contemplated terms or at all.

See Note 17 — Subsequent Events for further

During the six months ended June 30, 2020 , the Company recorded an additional impairment charge of $ 13.8 million on its recently completed development project in Jupiter, Florida representing the amount by which the carrying amount of the property exceeds the Company’s estimate of the net sales price set forth in the PSA described above.

The Company recorded an additional impairment charges of $ 13.8 million for held for use assets during the three and six months ended June 30, 2020 , and recorded impairment charges of $ 19,000 for held for use assets during the three and six months ended June 30, 2019.

The LaSalle Properties

On July 1, 2020, the Company transitioned four triple-net leased properties in Texas (collectively, the “LaSalle Properties”) from the triple-net leased healthcare facilities segment to the SHOP segment, and the LaSalle Properties are now leased to one of the Company’s TRSs and operated and managed on the Company’s behalf by a third-party operator.

See Note 17 — Subsequent

During the nine months ended September 30, 2020, the Company recorded an additional impairment charge on its recently completed development project in Jupiter, Florida representing the amount by which the carrying amount of the property exceeds the Company’s estimate of the net sales price set forth in the PSA described above.

The Company did no t record

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Events for further details.

September 30, 2020

impairment charges for held for use assets during the three months ended September 30, 2020 and recorded impairment charges for held for use assets of $ 13.8 million during nine months ended September 30, 2020.

The Company did no t record any impairments for held for use assets during the three months ended September 30, 2019 and recorded an impairment charge of $ 19,000 during the nine months ended September 30, 2019.

The LaSalle Properties

In January 2018, the Company entered into an agreement with the prior tenants at the LaSalle Properties (collectively, the “LaSalle Tenant”) in which the Company agreed to forbear from exercising legal remedies, including staying a lawsuit against the LaSalle Tenant, as long as the LaSalle Tenant paid the amounts due for rent and property taxes on an updated payment schedule pursuant to a forbearance agreement.

As of June 30, 2020 , the LaSalle Tenant remains in default of the forbearance agreement and owes the Company $ 12.7 million of rent, property taxes, late fees, and interest receivable thereunder.

The Company has the entire receivable balance, including any monetary damages, and related income from the LaSalle Tenant fully reserved as of June 30, 2020 .

The Company incurred $ 0.3 million of bad debt expense, including straight-line rent write-offs, related to the LaSalle Tenant during the six months ended June 30, 2020 , which is included in revenue from tenants on the consolidated statement of operations and comprehensive loss.

The Company incurred $ 1.0 million of bad debt expense, including straight-line rent write-offs, related to the LaSalle Tenant during the six months ended June 30, 2019 .

As of September 30, 2020, the LaSalle Tenant remains in default of the forbearance agreement and owes the Company $ 12.7 million of rent, property taxes, late fees, and interest receivable thereunder and $ 7.7 million plus interest of unpaid monetary damages awarded to us by the court on our claims against the tenant.

The Company has the entire receivable balance, including the monetary damages, and related income from the LaSalle Tenant fully reserved as of September 30, 2020.

The Company incurred $ 0.3 million of bad debt expense, including straight-line rent write-offs, related to the LaSalle Tenant during the nine months ended September 30, 2020, which is included in reduction in revenue from tenants on the consolidated statement of operations and comprehensive loss.

The Company incurred $ 3.1 million of bad debt expense, including straight-line rent write-offs, related to the LaSalle Tenant during the nine months ended September 30, 2019.

On February 15, 2019, the Company filed an amended petition in Texas state court seeking the appointment of a receiver to manage the operations at these properties and for recovery of damages for the various breaches by the LaSalle Tenant.

2 unchanged sentences

On August 27, 2019, the court awarded the Company monetary damages on its claims against the LaSalle Tenant in an amount equal to $ 7.7 million plus interest.

There can be no assurance the Company will receive any amounts with respect to these claims against the LaSalle Tenant.

On October 30, 2019, the court entered into an order appointing a receiver.

12 unchanged sentences

The Company’s designated third-party operator received its license to operate the facility on April 1, 2019 and is in operational control of the property.

On May 20, 2019, the court entered into a final order from the court terminating the existing lease with the NuVista Tenant.

On May 20, 2019, the court entered into a final order from

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

the court terminating the existing lease with the NuVista Tenant.

Following entry into the order, the property in Wellington, Florida transitioned to the SHOP segment as of April 1, 2019.

3 unchanged sentences

In August 2020, the Company entered into a PSA to sell the properties located in Lutz and Wellington Florida.

— Subsequent Events .

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Note 4 — Mortgage Notes Payable, Net

The following table reflects the Company’s mortgage notes payable as of June 30, 2020 and December 31, 2019 :

Outstanding Loan Amount as of

Effective Interest Rate as of

Encumbered Properties (1)

December 31, 2019

Interest Rate

(In thousands)

Palm Valley Medical Plaza - Goodyear, AZ

Medical Center V - Peoria, AZ

Fox Ridge Bryant - Bryant, AR

Fox Ridge Chenal - Little Rock, AR

Fox Ridge North Little Rock - North Little Rock, AR

Capital One MOB Loan

Multi-Property CMBS Loan

The following table reflects the Company’s mortgage notes payable as of September 30, 2020 and December 31, 2019:

Outstanding Loan Amount as of Effective Interest Rate as of

Portfolio Encumbered Properties (1)

September 30,

2020 December 31, 2019 September 30,

2020 December 31, 2019 Interest Rate Maturity

(In thousands) (In thousands)

Palm Valley Medical Plaza - Goodyear, AZ 1 $ 3,027 $ 3,112 4.15 % 4.15 % Fixed Jun.

Medical Center V - Peoria, AZ 1 2,811 2,884 4.75 % 4.75 % Fixed Sep.

Fox Ridge Bryant - Bryant, AR 1 7,171 7,283 3.98 % 3.98 % Fixed May 2047

Fox Ridge Chenal - Little Rock, AR 1 16,467 16,695 3.98 % 3.98 % Fixed May 2049

Fox Ridge North Little Rock - North Little Rock, AR 1 10,218 10,359 3.98 % 3.98 % Fixed May 2049

Capital One MOB Loan 35 378,500 378,500 3.71 % 3.71 % Fixed (3) Dec.

Multi-Property CMBS Loan 21 118,700 118,700 4.60 % 4.60 % Fixed May 2028

Shiloh - Illinois (4)

1 13,757 — 4.34 % — % Fixed March 2026

Gross mortgage notes payable 62 550,651 537,533 3.94 % 3.90 % (2)

Deferred financing costs, net of accumulated amortization (5)

( 7,148 ) ( 7,718 )

Mortgage premiums and discounts, net ( 1,486 ) ( 1,531 )

3 unchanged sentences

The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the real estate assets comprising the borrowing base have been pledged for the benefit of the lenders thereunder (see Note 5 — Credit Facilities for additional details).

(2) Calculated on a weighted average basis for all mortgages outstanding as of June 30, 2020 and December 31, 2019 .

(2) Calculated on a weighted average basis for all mortgages outstanding as of September 30, 2020 and December 31, 2019.

For the LIBOR based loans, LIBOR in effect at the balance sheet date was utilized.

3 unchanged sentences

In connection with the amendment to this loan in December 2019 (see additional details below), the Company terminated the previous interest rate swap agreements and entered into new interest rate swap agreements ( see Note 7 — Derivatives and Hedging Activities for additional details).

(4) The Company assumed this fixed rate mortgage when it acquired a property during the six months ended June 30, 2020 .

(4) The Company assumed this fixed rate mortgage when it acquired a property during the nine months ended September 30, 2020.

(5) Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining financing.

2 unchanged sentences

Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

As of June 30, 2020 , the Company had pledged $ 0.9 billion in total real estate investments, at cost, as collateral for its $ 0.6 billion of gross mortgage notes payable.

As of September 30, 2020, the Company had pledged $ 0.9 billion in total real estate investments, at cost, as collateral for its $ 0.6 billion of gross mortgage notes payable.

This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable secured by these properties.

1 unchanged sentence

Some of the Company’s mortgage note agreements require compliance with certain property-level financial covenants, including debt service coverage ratios.

As of June 30, 2020 , the Company was in compliance with these financial covenants.

See Note 5 — Credit Facilities - Future Principal Payment and LIBOR Transition for schedule of principal payment requirements of the Company’s Mortgage Notes and Credit Facilities and discussion of the expected cessation of LIBOR publication.

As of September 30, 2020, the Company was in compliance with these financial covenants.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Note 5 — Credit Facilities

The Company had the following credit facilities outstanding as of June 30, 2020 and December 31, 2019 :

The Company had the following credit facilities outstanding as of September 30, 2020 and December 31, 2019:

Outstanding Facility

Effective Interest Rate

Credit Facility

Encumbered Properties (1)

December 31, 2019

Interest Rate

(In thousands)

Amount as of Effective Interest Rate (10)

Credit Facility Encumbered Properties (1)

September 30,

2020 December 31, 2019 September 30,

2020 December 31, 2019 Interest Rate Maturity

(In thousands) (In thousands)

Credit Facility:

Revolving Credit Facility

Revolving Credit Facility $ 195,618 $ 100,618 3.17 % 4.08 % Variable (8) Mar.

150,000 150,000 4.95 % 4.05 % Fixed (6) Mar.

Deferred financing costs ( 4,616 ) ( 4,671 )

Term Loan, net

145,384 145,329

Total Credit Facility

81 (2) $ 341,002 $ 245,947

Fannie Mae Master Credit Facilities:

Capital One Facility

12 (3) $ 216,614 $ 216,614 2.61 % 4.17 % Variable (7) Nov.

KeyBank Facility

10 (4) 142,708 142,708 2.66 % 4.22 % Variable (7) Nov.

Total Fannie Mae Master Credit Facilities

22 $ 359,322 $ 359,322

Total Credit Facilities 103 $ 700,324 $ 605,269 3.27 % 4.14 % (5)

_______________

Encumbered properties are as of June 30, 2020 .

(1) Encumbered properties are as of September 30, 2020.

(2) The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Credit Facility (as defined below) have been pledged for the benefit of the lenders thereunder.

Secured by first-priority mortgages on 12 of the Company’s seniors housing properties located in Florida, Georgia, Iowa and Michigan as of June 30, 2020 with a carrying value of $ 344 million .

Secured by first-priority mortgages on ten of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa as of June 30, 2020 with a carrying value of $ 253 million .

Calculated on a weighted average basis for all credit facilities outstanding as of June 30, 2020 and December 31, 2019 .

In November 2020, seven Michigan SHOPs, were sold and released from the borrowing base under the Credit Facility (see Note 17 — Subsequent Events , for additional information).

(3) Secured by first-priority mortgages on 12 of the Company’s seniors housing properties located in Florida, Georgia, Iowa and Michigan as of September 30, 2020 with a carrying value of $ 347 million.

In November 2020, one Michigan SHOP property was sold and released from the Capital One Facility (see Note 17 — Subsequent Events , for additional information).

(4) Secured by first-priority mortgages on ten of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa as of September 30, 2020 with a carrying value of $ 253 million.

(5) Calculated on a weighted average basis for all credit facilities outstanding as of September 30, 2020 and December 31, 2019.

(6) Variable rate loan, based on LIBOR, all of which was fixed as a result of entering into “pay-fixed” interest rate swap agreements ( see Note 7 — Derivatives and Hedging Activities for additional details).

(7) Variable rate loan which is capped as a result of entering into interest rate cap agreements ( see Note 7 — Derivatives and Hedging Activities for additional details).

As of June 30, 2020 , the carrying value of our real estate investments, at cost was $ 2.6 billion , with $ 0.9 billion of this asset value pledged as collateral for mortgage notes payable, $ 0.6 billion of this asset value pledged to secure advances under the Fannie Mae Master Credit Facilities and $ 1.4 billion of this asset value comprising the borrowing base of the Credit Facility.

These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, unless the existing indebtedness associated with these properties is first satisfied.

Unencumbered and not pledged real estate investments, as of June 30, 2020 was $ 287.7 million , although there can be no assurance as to the amount of liquidity we would be able to generate from using these unencumbered assets as collateral for mortgage loans or adding them to the borrowing base of our Credit Facility.

Credit Facility

On March 21, 2014, the Company, through the OP, entered into a senior secured revolving credit facility (as amended from time to time, the “Prior Credit Facility”).

On March 13, 2019, the Company entered into the Credit Facility by amending and restating the Prior Credit Facility prior to its maturity on June 30, 2020 .

The total commitments under the Credit Facility are $ 630.0 million and include an uncommitted “accordion feature” whereby, upon the Company’s request, but at the sole discretion of the participating lenders, the commitments under the Credit Facility may be increased by up to an additional $ 370.0 million up to a total of $ 1.0 billion .

On August 10, 2020, the Company and the OP entered into an amendment to the Credit Facility which is part of the Company's efforts to continue addressing the adverse impacts of the COVID-19 pandemic.

The amendment revised specific provisions in the Credit Facility governing:

(i) payment of distributions;

(ii) borrowing availability;

(iii) financial covenants;

(8) Variable rate loan with $ 50 million of principal amount fixed at a rate of 4.09 % by an interest rate swap agreement.

(9) The company has the option to extend maturity one year to March 2024.

(10) Effective interest rate below for variable rate debt gives effect to any “Pay-fixed” swap entered into by the Company.

If not hedged, the effective interest rate below represents the variable rate (or contractual floor if appropriate) and the applicable margin in effect as of the September 30, 2020.

Interest rate caps are not considered unless the cap is currently in effect.

As of September 30, 2020, the carrying value of our real estate investments, at cost was $ 2.6 billion, with $ 0.9 billion of this asset value pledged as collateral for mortgage notes payable, $ 0.6 billion of this asset value pledged to secure advances under the Fannie Mae Master Credit Facilities and $ 1.4 billion of this asset value comprising the borrowing base of the Credit Facility.

These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, unless, as applicable, the existing indebtedness associated with the property is satisfied or the property is removed from the borrowing base of the Credit Facility, which would impact availability thereunder

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

mandatory prepayments with proceeds from capital events;

and (v) interest rates.

The terms of the Credit Facility without giving effect to these revisions are generally described below.

For additional information, see Note 17 — Subsequent Events .

The Credit Facility consists of two components, a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”).

September 30, 2020

Unencumbered real estate investments, at cost as of September 30, 2020 was $ 285.6 million, although there can be no assurance as to the amount of liquidity we would be able to generate from using these unencumbered assets as collateral for mortgage loans or adding them to the borrowing base of our Credit Facility.

Credit Facility

On March 13, 2019, the Company entered into an amended and restated senior secured credit facility (the “Credit Facility”), which consists of two components, a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”).

In both March and August 2020, the Credit Facility was further amended, and the terms of the Credit Facility giving effect to those amendments are generally described below.

The Revolving Credit Facility is interest-only and matures on March 13, 2023, subject to a one-year extension at the Company’s option.

The Term Loan is interest-only and matures on March 13, 2024.

The Revolving Credit Facility has total commitments of up to $ 480.0 million , and the Term Loan has total commitments of up to $ 150.0 million (both excluding the accordion feature).

The amount available for borrowings under the Credit Facility is based on the lesser of (1) 55 % of the value (or in certain cases cost) of the pool of eligible unencumbered real estate assets comprising the borrowing base, and (2) a maximum amount permitted to maintain a minimum debt service coverage ratio with respect to the borrowing base, in each case, as of the determination date.

Like the Prior Credit Facility, the Credit Facility is secured by a pledged pool of the equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base thereunder.

After the closing of the Credit Facility, the 65 properties that had comprised the borrowing base under the Prior Credit Facility comprised the borrowing base under the Credit Facility.

The Company has the option to have amounts outstanding under the Revolving Credit Facility bear interest at a rate per annum equal to either:

The total commitments under the Credit Facility are $ 630.0 million, including $ 480.0 million under the Revolving Credit Facility.

The Credit Facility includes an uncommitted “accordion feature” that may be used to increase the commitments under either component of the Credit Facility by up to an additional $ 370.0 million to a total of $ 1.0 billion.

The amount available for future borrowings under the Credit Facility is based on either the value of the pool of eligible unencumbered real estate assets comprising the borrowing base, or a minimum debt service coverage ratio with respect to the borrowing base.

The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility have been pledged for the benefit of the lenders thereunder.

As of September 30, 2020, $ 150.0 million was outstanding under the Term Loan, and $ 195.6 million was outstanding under the Revolving Credit Facility.

The unused borrowing availability under the Revolving Credit Facility was $ 29.5 million.

The Company is required to maintain a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $ 50.0 million.

Pursuant to the amendment in August 2020, certain other restrictions and conditions described below will no longer apply starting in a quarter in which the Company makes an election and, as of the day prior to the commencement of the applicable quarter, the Company has a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $ 100.0 million, giving effect to the aggregate amount of distributions projected to be paid by the Company during the applicable quarter, and the Company’s ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5 % (the “Commencement Quarter”).

The Commencement Quarter may be no earlier than the fiscal quarter ending June 30, 2021.

During the period from August 10, 2020 until the first day of the Commencement Quarter, the Company must use all the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to prepay amounts outstanding under the Revolving Credit Facility.

The Company may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings.

There can be no assurance these conditions will be met.

In addition, commencing on August 10, 2020 and until the Commencement Quarter, the Company has the option to have amounts outstanding under the Revolving Credit Facility bear interest at an annual rate equal to either:

(i) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.85 % to 2.60 %;

or (ii) the Base Rate (as defined in the Credit Facility), plus an applicable margin that ranges, depending on the Company’s leverage, from 0.60 % to 1.35 %.

Commencing on the first day of the Commencement Quarter, the Company will have the option to have amounts outstanding under the Revolving Credit Facility bear interest at an annual rate equal to either:

(a) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.60 % to 2.35 %;

or (b) the Base Rate (as defined in the Credit Facility), plus an applicable margin that ranges, depending on the Company’s leverage, from 0.35 % to 0.95 % .

The Base Rate is defined in the Credit Facility as the greatest of (a) the fluctuating annual rate of interest announced from time to time by the agent as its “prime rate”, (b) 0.5 % above the Federal Funds Effective Rate or (c) the then applicable LIBOR for a one-month interest period plus 1.0 % per annum.

The Company has the option to have amounts outstanding under the Term Loan bear interest at a rate per annum equal to either:

or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.35 % to 1.10 %.

Further, commencing on August 10, 2020 and until the Commencement Quarter, the Company has the option to have amounts outstanding under the Term Loan bear interest at an annual rate equal to either:

(i) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.80 % to 2.55 %;

or (ii) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.55 % to 1.30 %.

Commencing on the first day of the Commencement Quarter, the Company will have the option to have amounts outstanding under the Term Loan bear interest at an annual rate equal to either:

(a) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.55 % to 2.30 %;

or (b) the Base Rate (as defined in the paragraph above), plus an applicable margin that ranges, depending on the Company’s leverage, from 0.30 % to 0.90 % .

On April 15, 2019, the Company entered into “pay-fixed” interest rate swaps on the Term Loan, resulting in a weighted average fixed rate of 2.3 % plus applicable margin under the Credit Facility.

As of June 30, 2020 , the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to 2.26 % and 4.30 % , respectively.The Credit Facility contains customary representations, warranties, as well as affirmative and negative covenants.

The amendment to the Credit Facility on August 10, 2020 provides that the covenants restricting payment of distributions to a threshold based on Modified FFO (described below) and requiring maintenance of a minimum ratio of consolidated total indebtedness to consolidated total asset value and a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges will not apply for the fiscal quarter ended June 30, 2020.

As of June 30, 2020 , the Company was in compliance with the financial covenants under the Credit Facility.

As of June 30, 2020 , $ 150.0 million was outstanding under the Term Loan, while $ 195.6 million was outstanding under the Revolving Credit Facility and the unused borrowing availability under the Revolving Credit Facility was $ 37.4 million .

Availability of borrowings is based on a pool of eligible otherwise unencumbered real estate assets comprising the borrowing base thereunder.

Prior to an amendment to the Credit Facility dated March 24, 2020, until January 1, 2020, the Company was not permitted to increase the rate at which it paid distributions to holders of its common stock (or make other amendments or modifications, including, without limitation, changing the timing or frequency of distribution payments), and, from and after January 1, 2020, the Company would have been subject to a provision in the Credit Facility restricting the Company from paying distributions (as defined in the Credit Facility) in any fiscal quarter that, when added to the aggregate amount of distribution payments in the same fiscal quarter and the preceding three fiscal quarters (calculated on an annualized basis during the first three fiscal quarters for which the provisions were in effect and otherwise in accordance with our Credit Facility), exceed 95 % of Modified FFO (as defined in the Credit Facility which is different from MFFO as disclosed in this Quarterly Report on Form 10-Q) during the applicable period.

or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.30 % to 1.05 %.

Pursuant to the amendment to the Credit Facility in August 2020, the “floor” on LIBOR was increased from 0.00 % to 0.25 %.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Following the amendment, the restriction on the Company’s ability to increase the rate at which it pays distributions that would only have applied until January 1, 2020 will continue to apply until January 1, 2022, unless the Company has elected for the limit on paying distributions in excess of 95 % of Modified FFO to apply.

This restriction does not prevent the Company from issuing additional shares of common stock, Series A Preferred Stock, or any other class or series of stock (including preferred stock with a higher dividend rate than Series A Preferred Stock).

The amendment also provides that, in each fiscal quarter until the limit on paying distributions in excess of 95 % of our Modified FFO applies, the Company will be subject to a similarly structured limit on paying distributions in excess of a percentage of our Modified FFO as set forth in the table below:

Fiscal Quarter

April 1, 2020 to June 30, 2020

July 1, 2020 to September 30, 2020

October 1, 2020 to December 31, 2020

January 1, 2021 to March 31, 2021

April 1, 2021 to June 30, 2021

July 1, 2021 to September 30, 2021

October 1, 2021 to December 31, 2021

Under the Credit Facility prior to the amendment to the Credit Facility in August 2020, the Company was not subject to any limit on paying distributions in excess of a percentage of Modified FFO during the fiscal quarter ended March 31, 2020, and the distributions paid during that quarter would not be applied to subsequent quarters.

For these purposes, the limit on distributions and Modified FFO for each fiscal quarter would be calculated based only on the fiscal quarters that have elapsed from and after the fiscal quarter commencing on April 1, 2020.

Beginning with the fiscal quarter commencing January 1, 2021, the limit on distributions and Modified FFO for each fiscal quarter would be calculated based on the four-quarter period ending with that fiscal quarter.

Prior to the amendment, until the Company became subject to the limit on paying distributions in excess of 95 % of Modified FFO, the Company was subject to a covenant requiring it to maintain a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $ 50.0 million , and the amount available for borrowings under the Credit Facility assuming the same borrowing base properties is lower.

Following the amendment, even after the Company becomes subject to the limit on paying distributions in excess of 95 % of Modified FFO, the Company will remain subject to the covenant requiring it to maintain a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $ 50.0 million , and the amount available for borrowings under the Credit Facility assuming the same borrowing base properties would remain the same.

Following the amendment to the Credit Facility in August 2020, the Company is not permitted to pay cash distributions on or repurchase shares of the Company’s common stock until no earlier than the fiscal quarter ending June 30, 2021 (although the Company is not restricted from paying dividends on its Series A Preferred Stock).

These restrictions will continue to apply unless certain conditions related to the Company’s liquidity and leverage are met, and there can be no assurance as to when, or if, the Company will meet these conditions.

See Note 17 — Subsequent Events

September 30, 2020

As of September 30, 2020, the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to 3.17 % and 4.95 %, respectively.

Until the Commencement Quarter, the Company may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of the Company’s common stock), subject to certain exceptions.

These exceptions include paying dividends on the Series A Preferred Stock or any other preferred stock the Company may issue and paying any cash distributions necessary to maintain its status as a REIT.

The Company may not pay any cash distributions (including dividends on Series A Preferred Stock) if a default or event of default exists or would result therefrom.

Beginning in the Commencement Quarter, the Company will be able to pay cash distributions to holders of common stock, subject to the restrictions described below.

Beginning in the Commencement Quarter, the Company may pay cash distributions provided that the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock) for any period of four fiscal quarters may not exceed 95 % of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after the Commencement Quarter.

In addition, beginning in the Commencement Quarter, the Company will be permitted to repurchase up to $ 50.0 million of shares of its common stock (including amounts previously repurchased during the term of the Revolving Credit Facility) if, after giving effect to the repurchases, the Company maintains cash and cash equivalents of at least $ 30.0 million and the Company’s ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 55.0 %.

The Credit Facility requires the Company to maintain a minimum ratio of consolidated total indebtedness to consolidated total asset value, a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges and a minimum consolidated tangible net worth.

The maximum ratio of consolidated total indebtedness to consolidated total asset value is 67.5 % for the period from July 1, 2020 through June 30, 2021 and 65 % thereafter unless and until the Commencement Quarter, following which it will be 62.5 %.

The minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges is 1.50 to 1.00 for the period from July 1, 2020 through March 31, 2021, 1.55 to 1.00 for the period from April 1, 2021 through June 30, 2021, and 1.60 to 1.00 thereafter.

The minimum consolidated tangible net worth is the sum of (i) $ 1,188,928.00 , plus (ii) 75 % of any net offering proceeds (as defined in the Credit Facility) since the Credit Facility closed in March 2019.

As of September 30, 2020, the Company was in compliance with the financial covenants under the Credit Facility.

Fannie Mae Master Credit Facilities

On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement relating to a secured credit facility with KeyBank (the “KeyBank Facility”) and a master credit facility agreement with Capital One for a secured credit facility with Capital One Multifamily Finance LLC, an affiliate of Capital One (the “Capital One Facility”;

the Capital One Facility and the KeyBank Facility are referred to herein individually as a “Fannie Mae Master Credit Facility” and together as the “Fannie Mae Master Credit Facilities”).

On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement relating to a secured credit facility with KeyBank and a master credit facility agreement with Capital One for a secured credit facility with Capital One Multifamily Finance LLC, an affiliate of Capital One together, the “Fannie Mae Master Credit Facilities”).

Advances made under these agreements are assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Effective October 31, 2016, in conjunction with the execution of the Fannie Mae Master Credit Facilities, the OP entered into two interest rate cap agreements with an unrelated third party, which caps LIBOR interest paid (not giving effect to the applicable margin) on amounts outstanding under the Fannie Mae Master Credit Facilities at a maximum of 3.5 %.

2 unchanged sentences

The Company may request future advances under the Fannie Mae Master Credit Facilities by borrowing against the value of the initial mortgaged properties, or by adding eligible properties to the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Future Principal Payments

The following table summarizes the scheduled aggregate principal payments for the five years subsequent to June 30, 2020 and thereafter, on all of the Company’s outstanding debt (mortgage notes payable and credit facilities):

The following table summarizes the scheduled aggregate principal payments for the five years subsequent to September 30, 2020 and thereafter, on all of the Company’s outstanding debt (mortgage notes payable and credit facilities):

Future Principal

(In thousands)

Mortgage Notes Payable

Credit Facilities

(In thousands) Mortgage Notes Payable Credit Facilities Total

2020 (remainder) $ 291 $ — $ 291

2021 1,191 130 1,321

2022 1,242 2,819 4,061

2023 6,383 200,115 206,498

2024 1,095 154,497 155,592

Thereafter 540,449 347,379 887,828

Total $ 550,651 $ 704,940 $ 1,255,591

LIBOR Transition

14 unchanged sentences

However, the Company expects that changes in classifications between levels will be rare.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Financial Instruments Measured at Fair Value on a Recurring Basis

1 unchanged sentence

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties.

However, as of June 30, 2020 , the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives.

However, as of September 30, 2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives.

As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative.

1 unchanged sentence

In addition, credit valuation adjustments, are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

The following table presents information about the Company’s assets and liabilities measured at fair value as of June 30, 2020 and December 31, 2019 , aggregated by the level in the fair value hierarchy within which those instruments fall.

(In thousands)

Quoted Prices in Active Markets

The following table presents information about the Company’s assets and liabilities measured at fair value as of September 30, 2020 and December 31, 2019, aggregated by the level in the fair value hierarchy within which those instruments fall.

(In thousands) Quoted Prices in Active Markets

Level 1 Significant

Other Observable Inputs

Significant Unobservable Inputs

June 30, 2020

Level 2 Significant Unobservable Inputs

Level 3 Total

September 30, 2020

Derivative assets, at fair value $ — $ 4 $ — $ 4

5 unchanged sentences

Changes in the type of inputs may result in a reclassification for certain assets.

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2020 .

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the nine months ended September 30, 2020.

Real Estate Investments Measured at Fair Value on a Non-Recurring Basis

Real Estate Investments - Held for Use

The Company also had impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheet as of June 30, 2020 .

As of June 30, 2020 , the Company owned held for use properties for which the Company had reconsidered the projected cash flows due to various performance indicators.

The Company also had impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheet as of September 30, 2020.

As of September 30, 2020, the Company owned held for use properties for which the Company had reconsidered the projected cash flows due to various performance indicators.

As a result, the Company evaluated the impact on its ability to recover the carrying value of such properties based on the expected cash flows over its intended holding period.

As a result of this evaluation and its consideration of impairment, the Company did not record any impairments for its held for use real estate investments during the quarter ended March 31, 2020.

As a result of this evaluation and its consideration of impairment, the Company did not record any impairments for its held for use real estate investments during the quarter ended September 30, 2020.

The Company primarily uses a market approach to estimate the future cash flows expected to be generated.

1 unchanged sentence

Real Estate Investments - Held for Sale

The Company has impaired real estate investments held for sale, which are carried at fair value on a non-recurring basis on the consolidated balance sheets as of June 30, 2020 and December 31, 2019 .

The Company has impaired real estate investments held for sale, which are carried at fair value on a non-recurring basis on the consolidated balance sheets as of September 30, 2020 and December 31, 2019.

Impaired real estate investments held for sale are generally classified in Level 3 of the fair value hierarchy.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Financial Instruments not Measured at Fair Value

2 unchanged sentences

The fair values of the Company’s remaining financial instruments that are not reported at fair value on the consolidated balance sheets are reported below:

June 30, 2020

December 31, 2019

(In thousands)

Carrying Amount

September 30, 2020 December 31, 2019

(In thousands) Level Carrying Amount Fair Value Carrying Amount Fair Value

Gross mortgage notes payable and mortgage premium and discounts, net

3 $ 550,651 $ 544,348 $ 537,533 $ 545,414

Credit Facility

3 $ 345,618 $ 341,681 $ 250,618 $ 250,618

Fannie Mae Master Credit Facilities

3 $ 359,322 $ 349,555 $ 359,322 $ 370,122

The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Advisor’s experience with similar types of borrowing arrangements, excluding the value of derivatives.

At June 30, 2020 , the carrying value under the Revolving Credit Facility and Fannie Mae Master Credit Facilities does not approximate fair value, due to the widening of the credit spread during the period.

At September 30, 2020, the carrying value under the Revolving Credit Facility and Fannie Mae Master Credit Facilities does not approximate fair value, due to the widening of the credit spread during the period.

At December 31, 2019, the carrying amount approximated the fair value.

8 unchanged sentences

The Company does not anticipate that any of its counterparties will fail to meet their obligations.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of June 30, 2020 and December 31, 2019 :

(In thousands)

Balance Sheet Location

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2020 and December 31, 2019:

(In thousands) Balance Sheet Location September 30,

2020 December 31, 2019

Derivatives designated as hedging instruments:

Interest rate “pay-fixed” swaps

Derivative assets, at fair value

Interest rate “pay-fixed” swaps

Derivative liabilities, at fair value

Interest rate “pay-fixed” swaps Derivative assets, at fair value $ — $ 377

Interest rate “pay-fixed” swaps Derivative liabilities, at fair value $ 42,899 $ 5,305

Derivatives not designated as hedging instruments:

Interest rate caps

Derivative assets, at fair value

Interest rate caps Derivative assets, at fair value $ 4 $ 15

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Cash Flow Hedges of Interest Rate Risk

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The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

In connection with the refinancing of the MOB Loan during the fourth quarter of 2019, the Company terminated two interest rate swaps with an aggregate notional amount of $ 250.0 million for a payment of approximately $ 2.2 million.

Following these terminations, $ 2.2 million was recorded in AOCI and is being recorded as an adjustment to interest expense over the term of the two terminated swaps and the MOB Loan prior to its refinancing.

Of the amount recorded in AOCI following these terminations, $ 0.2 million and $ 0.4 million was recorded as an increase to interest expense for the three and six months ended June 30, 2020 and approximately $ 1.7 million remained in AOCI as of June 30, 2020 .

Of the amount recorded in AOCI following these terminations, $ 0.2 million and $ 0.6 million was recorded as an increase to interest expense for the three and nine months ended September 30, 2020 and approximately $ 1.5 million remained in AOCI as of September 30, 2020.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

During the next 12 months, from July 1, 2020 through June 30, 2021, the Company estimates that $ 10.6 million will be reclassified from other comprehensive loss as an increase to interest expense.

As of June 30, 2020 and December 31, 2019 , the Company had the following derivatives that were designated as cash flow hedges of interest rate risk:

June 30, 2020

December 31, 2019

Interest Rate Derivatives

Number of Instruments

Notional Amount

Number of Instruments

Notional Amount

(In thousands)

As of September 30, 2020 and December 31, 2019, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk:

September 30, 2020 December 31, 2019

Interest Rate Derivatives Number of Instruments Notional Amount Number of Instruments Notional Amount

(In thousands) (In thousands)

Interest rate “pay-fixed” swaps 9 $ 578,500 9 $ 578,500

The table below details the location in the financial statements of the loss recognized on interest rate derivatives designated as cash flow hedges for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

Amount of loss recognized in accumulated other comprehensive loss on interest rate derivatives

$ ( 405 ) $ ( 2,469 ) $ ( 42,631 ) $ ( 12,496 )

Amount of (loss) gain reclassified from accumulated other comprehensive income into income as interest expense (effective portion)

$ ( 2,689 ) $ 221 $ ( 5,295 ) $ 1,019

Total amount of interest expense presented in the

consolidated statements of operations and comprehensive loss

$ ( 12,840 ) $ ( 12,990 ) $ ( 38,677 ) $ ( 39,739 )

Non-Designated Derivatives

These derivatives are used to manage the Company’s exposure to interest rate movements, but do not meet the strict hedge accounting requirements to be classified as hedging instruments.

Changes in the fair value of derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net loss and were a gain of $ 8,000 and $ 24,000 the three and six months ended June 30, 2020 and a loss of $ 5,000 and $ 48,000 for the three and six months ended June 30, 2019 , respectively.

The Company paid $ 34,000 to enter into an interest rate cap contract during the three months ended March 31, 2020 with an effective date of April 1, 2020 and notional value of $ 53.4 million to replace two expiring caps with similar amounts.

As the cap was not yet effective as of June 30, 2020, it has been excluded from the notional amount in the table below.

The Company had the following outstanding interest rate derivatives that were not designated as hedges in qualified hedging relationships as of June 30, 2020 and December 31, 2019 :

June 30, 2020

December 31, 2019

Interest Rate Derivatives

Number of Instruments

Notional Amount

Number of Instruments

Notional Amount

(In thousands)

Interest rate caps

HEALTHCARE TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Changes in the fair value of derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net loss and were $ 69,000 and $ 45,000 the three and nine months ended September 30, 2020 and a loss of $ 2,000 and $ 50,000 for the three and nine months ended September 30, 2019, respectively.

As the cap was not yet effective as of September 30, 2019, it has been excluded from the notional amount in the table below.

The Company had the following outstanding interest rate derivatives that were not designated as hedges in qualified hedging relationships as of September 30, 2020 and December 31, 2019:

September 30, 2020 December 31, 2019

Interest Rate Derivatives Number of Instruments Notional Amount Number of Instruments Notional Amount

(In thousands) (In thousands)

Interest rate caps 6 $ 359,322 6 $ 359,322

Offsetting Derivatives

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of June 30, 2020 and December 31, 2019 .

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of September 30, 2020 and December 31, 2019.

The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value.

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Gross Amounts Not Offset in the Consolidated Balance Sheet

(In thousands)

Gross Amounts of Recognized Assets

Gross Amounts of Recognized (Liabilities)

Gross Amounts Offset in the Consolidated Balance Sheet

Net Amounts of Assets presented in the Consolidated Balance Sheet

Financial Instruments

Cash Collateral Received

June 30, 2020

(In thousands) Gross Amounts of Recognized Assets Gross Amounts of Recognized (Liabilities) Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Assets presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Received Net Amount

September 30, 2020 $ 4 $ ( 42,899 ) $ — $ ( 42,895 ) $ — $ — $ ( 42,895 )

December 31, 2019 $ 392 $ ( 5,305 ) $ — $ ( 4,913 ) $ — $ — $ ( 4,913 )

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The Company has agreements in place with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of June 30, 2020 , the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $ 49.5 million .

As of June 30, 2020 , the Company is not required to post any collateral related to these agreements and was not in breach of any agreement provisions.

If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $ 49.5 million at June 30, 2020 .

As of September 30, 2020, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $ 47.3 million.

As of September 30, 2020, the Company is not required to post any collateral related to these agreements and was not in breach of any agreement provisions.

If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $ 47.3 million at September 30, 2020.

Note 8 — Stockholders’ Equity

As of June 30, 2020 and December 31, 2019 , the Company had 92,398,190 and 92,356,664 shares of common stock outstanding, respectively, including unvested restricted shares and shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases.

On February 20, 2018, the Board authorized a decrease in the rate at which the Company pays monthly distributions to stockholders, effective as of March 1, 2018, to a rate equivalent to $ 0.85 per annum per share of common stock.

Distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month.

Distribution payments are dependent on the availability of funds.

As of September 30, 2020 and December 31, 2019, the Company had 93,775,745 and 93,602,555 shares of common stock outstanding (retroactively adjusted for the Stock Dividend) , respectively, including unvested restricted shares and shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases.

From March 1, 2008 until June 30, 2020, the Company paid monthly distributions to stockholders at a rate equivalent to $ 0.85 per annum per share of common stock.

Distributions were payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month.

Distribution were payments dependent on the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

availability of funds.

The Board may further reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.

On April 3, 2020, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2019 , which was approved by the Board on June 30, 2020 .

On August 13, 2020, the Company announced that the Board had approved a change in the Company’s common stock distribution policy in order to preserve the Company’s liquidity and maintain additional financial flexibility in light of the continued COVID-19 pandemic and in light of the amendment to the Credit Facility described above.

Accordingly, distributions authorized by the Board on the Company’s shares of common stock, if and when declared, are now paid on a quarterly basis in arrears in shares of the Company’s common stock valued at the Company’s estimated per share net asset value of common stock in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter.

On October 1, 2020, the Company declared the Stock Dividend of 0.01349 shares of the Company’s common stock on each share of the Company’s outstanding common stock.

This number of shares was based on the Company’s prior cash distribution rate of $ 0.85 per share per annum.

The Stock Dividend was paid on October 15, 2020 to holders of record of the Company’s common stock at the close of business on October 8, 2020.

Distribution payments are dependent on the availability of funds.

The Board may further change the Company’s common stock distribution policy at any time, further reduce the amount of distributions paid or suspend distribution payments at any time, and therefore distribution payments are not assured.

On April 3, 2020, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2019, which was approved by the Board on September 30, 2020.

The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually.

In August 2020, the Board determined that future distributions to holders of the Company’s common stock will be payable in shares of the Company’s common stock.

For additional information on the changes to the Company’s common stock distribution policy, see Note 17 — Subsequent Events .

Preferred Stock

The Company is authorized to issue up to 50,000,000 shares of preferred stock.

In connection with an underwritten offering in December 2019 (see details below), the Company classified and designated 1,610,000 shares of its authorized preferred stock as authorized shares of its Series A Preferred Stock as of December 31, 2019.

The Company had 1,610,000 shares of Series A Preferred Stock issued and outstanding, as of December 31, 2019 and June 30, 2020 .

In September 2020, the Board authorized the classification of 600,000 additional shares of the Company’s preferred stock as Series A Preferred Stock in connection with the Preferred Stock Equity Line (as defined below).

The Company had 1,610,000 shares of Series A Preferred Stock issued and outstanding as of December 31, 2019 and September 30, 2020.

In December 2019, the Company issued and sold 1,610,000 shares of the Series A Preferred Stock in an underwritten public offering at a public offering price equal to the liquidation preference of $ 25.00 per share.

On September 15, 2020, the Company entered into a preferred stock purchase agreement and registration rights agreement with B.

Riley Principal Capital, LLC (the “B.

Riley”), pursuant to which the Company has the right from time to time to sell up to an aggregate of $ 15 million of shares of its Series A Preferred Stock to B.

Riley until December 31, 2023, on the terms and subject to the conditions set forth in the purchase agreement.

This arrangement is also referred to as the “Preferred Stock Equity Line.” The Company controls the timing and amount of any sales to B.

Riley under the Preferred Stock Equity Line, and B.

Riley is obligated to make purchases of up to 3,500 shares of Series A Preferred Stock each time (as may be increased by mutual agreement by the parties) in accordance with the purchase agreement, upon certain terms and conditions being met.

The Company did no t sell any shares under the Preferred Stock Equity Line during the nine months ended September 30, 2020.

Dividends on Series A Preferred Stock accrue in an amount equal to $ 1.84375 per share each year ($ 0.460938 per share per quarter) to Series A Preferred Stock holders, which is equivalent to 7.375 % of the $ 25.00 liquidation preference per share of Series A Preferred Stock per annum.

Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by the Company’s board of directors and declared by us.

Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by the Company’s board of directors and declared by us.

The first quarterly dividend for the Series A Preferred Stock was paid on January 15, 2020 and represented an accrual for less than a full quarter, covering the period from December 11, 2019 to December 31, 2019.

Any accrued and unpaid dividends payable with respect to the Series A Preferred Stock become part of the liquidation preference thereof.

On January 9, 2020, the Company announced a tender offer (the “2020 Tender Offer”) to purchase up to 200,000 shares of its common stock for cash at a purchase price equal to $ 8.50 per share with the proration period and withdrawal rights expiring February 7, 2020.

On January 9, 2020, the Company announced a tender offer (the “2020 Tender Offer”) to purchase up to 202,698 shares (retroactively adjusted for the Stock Dividend) of its common stock for cash at a purchase price equal to $ 8.39 per share (retroactively adjusted for the Stock Dividend) with the proration period and withdrawal rights expiring February 7, 2020.

The Company made the 2020 Tender Offer in response to an unsolicited offer to stockholders commenced on December 31, 2019.

The 2020 Tender Offer expired in accordance with the terms on February 7, 2020.

In accordance with the 2020 Tender Offer, the Company accepted for purchase 200,000 shares for a total cost of approximately $ 1.7 million , which was funded with available cash.

In accordance with the 2020 Tender Offer, the Company accepted for purchase 202,698 shares (retroactively adjusted for the Stock Dividend) for a total cost of approximately $ 1.7 million, which was funded with available cash.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Share Repurchase Program

2 unchanged sentences

Repurchases of shares of the Company’s common stock, when requested, are at the sole discretion of the Board.

Under the SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of the Company’s common stock or received their shares from the Company (directly or indirectly) through one or more non-cash transactions are considered for repurchase.

Under the SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased sha res of the Company’s common stock or received their shares from the Company (directly or indirectly) through one or more non-cash transactions are considered for repurchase.

Additionally, pursuant to the SRP, the repurchase price per share equals 100% of the Estimated Per-Share NAV in effect on the last day of the fiscal semester, or the six-month period ending June 30 or December 31.

12 unchanged sentences

On February 26, 2020, the Company repurchased 511,915 shares of common stock for approximately $ 8.8 million, at an average price per share of $ 17.27 pursuant to the SRP.

The repurchases reflect all repurchase requests made in good order following

The repurchases reflect all repurchase requests made in good order following the death or qualifying disability of stockholders during the period commencing July 1, 2019 up to and including December 31, 2019.

Pursuant to the SRP, repurchases were to be ma de in respect of requests made during the periods when the SRP was active during the active periods under the SRP during the six months ending June 30, 2020 - the period from January 1, 2020 to January 8, 2020 and the period from February 26, 2020 up to and including June 30, 2020 - no later than July 31, 2020.

On August 13, 2020, the Company announced that, in order to strategically maintain the Company’s liquidity in light of the continued impact of COVID-19 pandemic and in light of the amendment to the Credit Facility described above, on August 6, 2020, the Board determined that, effective on August 12, 2020, repurchases under the SRP would be suspended.

The Board has also rejected all repurchase requests made during the period from January 1, 2020 until the effectiveness of the suspension of the SRP.

No further repurchase requests under the SRP may be made unless and until the SRP is reactivated.

No assurances can be made as to when or if the SRP will be reactivated.

HEALTHCARE TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

the death or qualifying disability of stockholders during the period commencing July 1, 2019 up to and including December 31, 2019.

Pursuant to the SRP, repurchases were to be made in respect of requests made during the periods when the SRP was active during the active periods under the SRP during the six months ending June 30, 2020 - the period from January 1, 2020 to January 8, 2020 and the period from February 26, 2020 up to and including June 30, 2020 - no later than July 31, 2020.

In August 2020, the Board determined to indefinitely suspend share repurchases under the SRP.

For additional information on the suspension of share repurchases under the SRP, see Note 17 — Subsequent Events .

September 30, 2020

On October 1, 2020, the Company announced the declaration of the Stock Dividend of 0.01349 shares of the Company’s common stock on each share of the Company’s outstanding common stock.

The Stock Dividend was paid on October 15, 2020 to holders of record of the Company’s common stock at the close of business on October 8, 2020.

Since the Stock Dividend is treated similar to a stock split for accounting purposes, the result was an increase of 0.01349 shares for every one share of common stock.

All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the Stock Dividend.

When a stockholder requests redemption and redemption is approved by the Board, the Company will reclassify such obligation from equity to a liability based on the settlement value of the obligation.

Shares repurchased under the SRP have the status of authorized but unissued shares.

The table below reflects the number of shares repurchased, under the SRP, cumulatively through June 30, 2020 .

The table below reflects the number of shares repurchased and the average price per share (retroactively adjusted for the Stock Dividend), under the SRP and does not include any repurchases under tender offers (see above), cumulatively through September 30, 2020.

Number of Shares Repurchased (3)

1 unchanged sentence

Cumulative repurchases as of December 31, 2019 (1)

Six months ended June 30, 2020 (2)

Cumulative repurchases as of June 30, 2020

4,450,761 $ 20.67

Nine months ended September 30, 2020 (2)

511,915 17.27

Cumulative repurchases as of September 30, 2020 4,962,676 20.32

(1) Repurchases made in 2019 include:

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(2) Includes 511,915 shares of common stock repurchased on February 26, 2020 with respect to requests received during the period commencing July 1, 2019 up to and including December 31, 2019 for $ 8.8 million at an average price per share of $ 17.27 .

(3) Retroactively adjusted for the effects of the Stock Dividend (see Note 1 )

Distribution Reinvestment Plan

Pursuant to the DRIP, stockholders may elect to reinvest distributions by purchasing shares of common stock in lieu of receiving cash.

Pursuant to the DRIP, stockholders may elect to reinvest distributions paid in cash by the Company into shares of common stock.

No dealer manager fees or selling commissions are paid with respect to shares purchased under the DRIP.

3 unchanged sentences

Shares issued under the DRIP are recorded as equity in the accompanying consolidated balance sheet in the period distributions are declared.

During the six months ended June 30, 2020 , the Company issued 0.7 million shares of common stock pursuant to the DRIP, generating aggregate proceeds of $ 12.6 million .

For additional information on the changes to the Company’s common stock dividend policy and the effect on the DRIP, see Note 17 — Subsequent Events .

During the nine months ended September 30, 2020, the Company issued 1.9 million shares of common stock pursuant to the DRIP, generating aggregate proceeds of $ 0.3 million.

Stockholder Rights Plan

In May 2020, the Company announced that the Board had approved a stockholder rights plan.

The dividend of one common

share purchase right for each share of the Company’s common stock necessary for the rights plan to become effective has not

yet been authorized by the Board.

The dividend of one common share purchase right for each share of the Company’s common stock necessary for the rights plan to become effective has not yet been authorized by the Board.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Note 9 — Related Party Transactions and Arrangements

As of June 30, 2020 and December 31, 2019 , the Special Limited Partner owned 8,888 shares of the Company’s outstanding common stock.

As of September 30, 2020 and December 31, 2019, the Special Limited Partner owned 9,008 shares of the Company’s outstanding common stock.

The Advisor and its affiliates may incur and pay costs and fees on behalf of the Company.

As of June 30, 2020 and December 31, 2019 , the Advisor held 90 partnership units in the OP designated as “OP Units” (“OP Units”).

As of September 30, 2020 and December 31, 2019, the Advisor held 90 partnership units in the OP designated as “OP Units” (“OP Units”).

The limited partnership agreement of the OP allows for the special allocation, solely for tax purposes, of excess depreciation deductions of up to $ 10.0 million to the Advisor, a limited partner of the OP.

In connection with this special allocation, the Advisor has agreed to restore a deficit balance in its capital account in the event of a liquidation of the OP and has agreed to provide a guaranty or indemnity of indebtedness of the OP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Fees Incurred in Connection with the Operations of the Company

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The Advisory Agreement Amendment was unanimously approved by the Company’s independent directors.

Additional information on the Advisory Agreement Amendment is included later in this footnote.

Additional information on the Advisory Agreement Amendment is included later in this footnote under “—Professional Fees and Other Reimbursements.”

Acquisition Expense Reimbursements

3 unchanged sentences

Under the Second A&R Advisory Agreement, total acquisition expenses may not exceed 4.5 % of the contract purchase price of the Company’s portfolio or 4.5 % of the amount advanced for all loans or other investments.

This threshold has not been exceeded through June 30, 2020 .

This threshold has not been exceeded through September 30, 2020.

Asset Management Fees and Variable Management/Incentive Fees

14 unchanged sentences

The value of issued Class B Units will be determined and expensed when the Company deems the achievement of the Performance Condition to be probable.

As of June 30, 2020 , the Company cannot determine the probability of achieving the Performance Condition.

The Advisor receives cash distributions on each issued Class B Unit equal to the distribution rate received on the Company’s common stock.

As of September 30, 2020, the Company

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

cannot determine the probability of achieving the Performance Condition.

The Advisor receives cash distributions on each issued Class B Unit equivalent to the cash distribution paid if any on the Company’s common stock in an amount retroactively adjusted to reflect the Stock Dividend, other stock dividends and other similar events.

These distributions on Class B Units are included in general and administrative expenses in the consolidated statement of operations and comprehensive loss until the Performance Condition is considered probable to occur.

2 unchanged sentences

Therefore, no expense has ever been recognized in connection with the Class B Units.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

On May 12, 2015, the Company, the OP and the Advisor entered into an amendment to the then-current advisory agreement, which, among other things, provided that the Company would cease causing the OP to issue Class B Units to the Advisor with respect to any period ending after March 31, 2015.

5 unchanged sentences

The variable management/incentive fee is payable to the Advisor or its assignees in cash or shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor and the value of any share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

No variable management incentive fee was incurred for the six months ended June 30, 2020 and 2019.

No variable management incentive fee was incurred for the nine months ended September 30, 2020 and 2019.

Property Management Fees

4 unchanged sentences

In no event will the Company pay the Property Manager or any affiliate of the Property Manager both a property management fee and an oversight fee with respect to any particular property.

If the Property Manager provides services other than those specified in the Property Management Agreement, the Company will pay the Property Manager a monthly fee equal to no more than that which the Company would pay to a third party that is not an affiliate of the Company or the Property Manager to provide the services.

If the Property Manager provides services other than those specified in the Property Management Agreement, the Company will pay the Property Manager a monthly fee equal

HEALTHCARE TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

to no more than that which the Company would pay to a third party that is not an affiliate of the Company or the Property Manager to provide the services.

On February 17, 2017, the Company entered into the Amended and Restated Property Management and Leasing Agreement (the “A&R Property Management Agreement”) with the OP and the Property Manager.

3 unchanged sentences

The Property Manager may assign the A&R Property Management Agreement to any party with expertise in commercial real estate which has, together with its affiliates, over $ 100.0 million in assets under management.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

under the Multi-Property CMBS Loan and other subsidiaries of the OP that own or lease the Company’s properties are the direct obligors under the arrangements pursuant to which the Company’s properties are managed by either the Property Manager or a third party overseen by the Property Manager pursuant to the A&R Property Management Agreement.

On April 10, 2018, in connection with the Multi-Property CMBS Loan, the Company and the OP entered into a further amendment to the A&R Property Management Agreement confirming, consistent with the intent of the parties, that the borrowers under the Multi-Property CMBS Loan and other subsidiaries of the OP that own or lease the Company’s properties are the direct obligors under the arrangements pursuant to which the Company’s properties are managed by either the Property Manager or a third party overseen by the Property Manager pursuant to the A&R Property Management Agreement.

Professional Fees and Other Reimbursements

1 unchanged sentence

This reimbursement includes reasonable overhead expenses for employees of the Advisor or its affiliates directly involved in the performance of services on behalf of the Company, including the reimbursement of rent expense at certain properties that are both occupied by employees of the Advisor or its affiliates and owned by affiliates of the Advisor.

During the three and six months ended June 30, 2020 the Company incurred $ 2.3 million and $ 4.7 million , respectively.

During the three and six months ended June 30, 2019 the Company incurred $ 2.7 million and $ 5.9 million , respectively, of reimbursement expenses from the Advisor for providing administrative services.

These reimbursement expenses are included in general and administrative expense on the consolidated statements of operations and comprehensive income (loss).

During the three and nine months ended September 30, 2020 the Company incurred $ 0.7 million and $ 5.4 million, respectively.

During the three and nine months ended September 30, 2019 the Company incurred $ 2.2 million and $ 5.9 million , respectively, of reimbursement expenses from the Advisor for providing administrative services.

These r eimbursement expenses are included in general and administrative expense on the consolidated statements of operations and comprehensive income (loss).

On July 25, 2019, the Company entered into the Advisory Agreement Amendment.

8 unchanged sentences

provided that if the proceeds of the disposition(s) are paid to shareholders of the Company as a special distribution or used to repay loans with no intent of subsequently re-financing and re-investing the proceeds thereof in Investments, the Advisor and the Company will enter into good faith negotiations to reset the Fixed Component within 90 days thereof, in each case taking into account reasonable projections of reimbursable costs in light of the reduced assets of the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Both the Fixed Component and the Variable Component will also be increased by an annual cost of living adjustment equal to the portion of the Capped Reimbursement Amount (as determined above) multiplied by the greater of (x) 3.0 % and (y) the CPI for the prior year ended December 31st.

For these purposes, CPI will be calculated by reference to the United States Department of Labor’s Bureau of Labor Statistics Consumer Price Index, All Urban Consumer Price Index, New York-Newark-Jersey City with reference date (1982-1984) that equals 100.0 or the successor of this index.

As part of this reimbursement, the Company paid approximately $ 2.5 million in 2019 to the Advisor or its affiliates as reimbursement for bonuses of employees of the Advisor that provided administrative services during such calendar year, prorated for the time spent working on matters relating to the Company.

As part of this reimbursement, the Company paid approximately $ 2.5 million in 2019 to the Advisor or its affiliates as reimbursement for bonuses of employees of the Advisor or its affiliates who provided administrative services during such calendar year, prorated for the time spent working on matters relating to the Company.

The Company does not reimburse the Advisor or its affiliates for any bonus amounts relating to time dedicated to the Company by Edward M.

Weil, Jr., the Company’s Chief Executive Officer.

Generally, in prior years, these bonuses would be formally awarded to employees of the Advisor or its affiliates in March and paid out in the year subsequent to the year in which services were rendered to the Company.

However, in response to the pandemic, these bonus amounts for 2019 are expected to be formally awarded to employees of the Advisor in September 2020 and paid out to the employees of the Advisor or its affiliates from the fourth quarter of 2020 through the third quarter of 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

The Advisor formally awarded 2019 bonuses to employees of the Advisor or its affiliates in September 2020 (the “2019 Bonus Awards”).

The original $ 2.5 million estimate for bonuses recorded and paid to the Advisor in 2019 exceeded the cash portion of the 2019 Bonus Awards to be paid to employees of the Advisor or its affiliates and to be reimbursed by the Company by $ 1.2 million.

As a result, during the three months ended September 30, 2020, the Company recorded a receivable from the Advisor of $ 1.2 million in prepaid expenses and other assets on the consolidated balance sheet and a corresponding reduction in general and administrative expenses.

Pursuant to authorization by the independent members of the Company’s board of directors, the $ 1.2 million receivable is payable to the Company over a 10 -month period from November 2020 through August 2021.

Reimbursements for the cash portion of 2020 bonuses to employees of the Advisor or its affiliates continue to be expensed and reimbursed on a monthly basis during 2020 in accordance with estimates provided by the Advisor.

Generally, prior to the 2019 Bonus Awards, employee bonuses have been formally awarded to employees of the Advisor or its affiliates in March as an all - cash award and paid out by the Advisor in the year subsequent to the year in which services were rendered to the Company.

Summary of fees, expenses and related payables

The following table details amounts incurred, forgiven and payable in connection with the Company’s operations-related services described above as of and for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Payable (Receivable) as of

(In thousands)

Three Months Ended September 30, Nine Months Ended September 30, Payable (Receivable) as of

2020 2019 2020 2019

(In thousands) Incurred Incurred )

Incurred September 30,

2020 December 31, 2019

1 unchanged sentence

Acquisition cost reimbursements

$ — $ 6 $ 70 $ 39 $ — $ —

Ongoing fees and reimbursements:

Asset management fees

4,997 4,875 14,991 14,625 — 27

Property management fees 987 1,067 2,978 2,910 ( 37 ) ( 44 )

Professional fees and other reimbursements (1)

2,243 2,313 6,172 7,623 ( 57 ) 152

Professional fees credit due from Advisor ( 1,217 ) — ( 1,217 ) — ( 1,349 ) (3) ( 529 ) (3)

Distributions on Class B Units (2)

26 76 178 228 — —

Total related party operation fees and reimbursements

Includes $ 1.8 million and $ 3.7 million related to the Capped Reimbursement Amount for the three and six months ended June 30, 2020 , respectively.

Includes $ 1.7 million and $ 3.5 million related to the Capped Reimbursement Amount for the three and six months ended June 30, 2019 , respectively.

Prior to April 1, 2015, the Company caused the OP to issue (subject to periodic approval by the Board) to the Advisor restricted performance based Class B Units for asset management services.

As of June 30, 2020 , the Board had approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement.

$ 7,036 $ 8,337 $ 23,172 $ 25,425 $ ( 1,443 ) $ ( 394 )

(1) Includes $ 1.4 million and $ 5.1 million subject to the Capped Reimbursement Amount for the three and nine months ended September 30, 2020, respectively.

Includes $ 1.6 million and $ 5.1 million subject to the Capped Reimbursement Amount for the three and nine months ended September 30, 2019, respectively.

(2) Prior to April 1, 2015, the Company caused the OP to issue to the Advisor restricted performance based Class B Units for asset management services.

As of September 30, 2020, the Board had approved the issuance of, and the OP had issued 359,250 Class B Units to the Advisor in connection with this arrangement.

Effective April 1, 2015, the Company began paying an asset management fee to the Advisor or its assignees in cash, in shares, or a combination of both and no longer issues any Class B Units.

Balance includes a receivable of $ 0.3 million from the Advisor as of June 30, 2020 and $ 0.5 million at December 31, 2019, previously recorded in the fourth quarter of 2018, which, pursuant to authorization by the independent members of the Company’s board of directors, is payable over time during 2020.

For the three and six months ended June 30, 2020, the Company received $ 0.1 million and $ 0.3 million , respectfully.

(3) Balance includes a receivable of $ 1.2 million from the Advisor related to the overpayment of 2019 Bonus Awards as of September 30, 2020 which, pursuant to authorization by the independent members of the Company’s board of directors, is payable over a ten month period from November 2020 through August 2021.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Balance as of September 30, 2020 and December 31, 2019 also includes a receivable of $ 0.1 million and $ 0.5 million, respectively, from the Advisor previously recorded in the fourth quarter of 2018, which pursuant to authorization by the independent members of the Company’s board of directors, is payable over time during 2020.

For the three and nine months ended September 30, 2020, the Company received $ 0.1 million and $ 0.4 million, respectively, from the Advisor for this receivable.

Fees and Participations Incurred in Connection with a Listing or the Liquidation of the Company’s Real Estate Assets

1 unchanged sentence

If the common stock of the Company is listed on a national exchange, the Special Limited Partner will be entitled to receive a promissory note as evidence of its right to receive a subordinated incentive listing distribution from the OP equal to 15.0 % of the amount by which the market value of all issued and outstanding shares of common stock plus distributions exceeds the aggregate capital contributed plus an amount equal to a 6.0 % cumulative, pre-tax non-compounded annual return to investors in the Company’s initial public offering of common stock.

No such distribution was incurred during the six months ended June 30, 2020 or 2019 .

No such distribution was incurred during the nine months ended September 30, 2020 or 2019.

If the Special Limited Partner or any of its affiliates receives the subordinated incentive listing distribution the Special Limited Partner and its affiliates will no longer be entitled to receive the subordinated participation in net sales proceeds or the subordinated incentive termination distribution described below.

1 unchanged sentence

Upon a liquidation or sale of all or substantially all of the Company’s assets, including through a merger or sale of stock, the Special Limited Partner will be entitled to receive a subordinated participation in the net sales proceeds of the sale of real estate assets from the OP equal to 15.0 % of remaining net sale proceeds after return of capital contributions to investors in the Company’s initial public offering of common stock plus payment to investors of a 6.0 % cumulative, pre-tax non-compounded annual return on the capital contributed by investors.

No such participation in net sales proceeds became due and payable during the six months ended June 30, 2020 or 2019 .

No such participation in net sales proceeds became due and payable during the nine months ended September 30, 2020 or 2019.

Any amount of net sales proceeds paid to the Special Limited Partner or any of its affiliates prior to the Company’s listing or termination or non-renewal of the advisory agreement with the Advisor, as applicable, will reduce dollar for dollar the amount of the subordinated incentive listing distribution described above and subordinated incentive termination distribution described below.

1 unchanged sentence

Under the operating partnership agreement of the OP, upon termination or non-renewal of the advisory agreement with the Advisor, with or without cause, the Special Limited Partner will be entitled to receive a promissory note as evidence of its right to receive subordinated termination distributions from the OP equal to 15.0 % of the amount by which the sum of the Company’s market value plus distributions exceeds the sum of the aggregate capital contributed by investors in the Company’s initial public offering of common stock plus an amount equal to an annual 6.0 % cumulative, pre-tax, non-compounded annual return to investors.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

The Special Limited Partner is able to elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs.

4 unchanged sentences

Upon a termination by the Company in connection with transition to self-management, the Company would pay the Advisor a transition fee equal to (i) $ 15.0 million plus (ii) the product of four multiplied by the Subject Fees, provided that the transition fee shall not exceed an amount equal (i) 4.5 multiplied by (ii) the Subject Fees.

The Subject Fees are equal to (i) the product of four multiplied by the actual base management fee plus (ii) the product of four multiplied by the actual variable management/incentive fee, in each of clauses (i) and (ii), payable for the fiscal quarter immediately prior to the fiscal quarter in which the change of control occurs or the transition to self-management is consummated, as applicable, plus (iii) without duplication, the annual increase in the base management fee resulting from the cumulative net proceeds of any equity raised (but excluding proceeds from the DRIP) in respect to the fiscal quarter immediately prior to the fiscal quarter in which the change of control occurs or the transition to self-management is consummated, as applicable.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

immediately prior to the fiscal quarter in which the change of control occurs or the transition to self-management is consummated, as applicable.

The right to termination of the Second A&R Advisory Agreement in connection with a change of control or transition to self-management is subject to a lockout period that requires the notice of any termination in connection with a change of control or transition to self-management to be delivered after February 14, 2019.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

Note 10 — Economic Dependency

5 unchanged sentences

The Company has adopted an employee and director incentive restricted share plan (as amended from time to time, the “RSP”), which provides the Company with the ability to grant awards of restricted shares of common stock (“restricted shares”) to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company.

The total number of shares of common stock that may be subject to awards granted under the RSP may not exceed 5.0 % of the Company’s outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 3.4 million shares (as such number may be adjusted for stock splits, stock dividends, combinations and similar events).

Prior to August 2017, the RSP provided for an automatic grant of 1,333 restricted shares to each of the independent directors, without any further approval by the Board or the stockholders, on the date of his or her initial election to the Board and thereafter on the date of each annual stockholder meeting.

The total number of shares of common stock that may be subject to awards granted under the RSP may not exceed 5.0 % of the Company’s outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 3.4 million shares (as such number may further be adjusted for stock splits, stock dividends, combinations and similar events).

Prior to August 2017, the RSP provided for an automatic grant of 1,351 restricted shares (retroactively adjusted for the Stock Dividend) to each of the independent directors, without any further approval by the Board or the stockholders, on the date of his or her initial election to the Board and thereafter on the date of each annual stockholder meeting.

The restricted shares granted as annual automatic awards prior to August 2017 were subject to vesting over a five-year period following the date of grant.

In August 2017, the Board amended the RSP to provide that the number of restricted shares comprising the automatic annual award to each of the independent directors would be equal to the quotient of $ 30,000 divided by the then-current Estimated Per-Share NAV and subsequently amended and restated the RSP to eliminate the automatic annual awards and to make other revisions

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

related to the implementation of a new independent director equity compensation program.

As part of this new independent director equity compensation program, the Board approved a one-time grant of restricted share awards to the independent directors as follows:

(i) 300,000 restricted shares to the chairman, with one-seventh of the shares vesting annually in equal increments over a seven -year period with initial vesting on August 4, 2018;

and (ii) 25,000 restricted shares to each of the three other independent directors, with one-fifth of the shares vesting annually in equal increments over a five -year period with initial vesting on August 4, 2018.

(i) 304,047 restricted shares to the chairman (retroactively adjusted for the Stock Dividend) with one-seventh of the shares vesting annually in equal increments over a seven-year period with initial vesting on August 4, 2018;

and (ii) 25,337 restricted shares (retroactively adjusted for the Stock Dividend) to each of the three other independent directors, with one-fifth of the shares vesting annually in equal increments over a five-year period with initial vesting on August 4, 2018.

In connection with these one-time grants, the restricted shares granted as automatic annual awards in connection with the Company’s 2017 annual meeting of stockholders on July 21, 2017 were forfeited.

In connection with his election to the Board in July 2019, B.J.

Penn received an award of 15,000 restricted shares vesting annually in equal increments over a three-year period with initial vesting on August 4, 2020.

Penn received an award of 15,202 restricted shares (retroactively adjusted for the Stock Dividend) vesting annually in equal increments over a three-year period with initial vesting on August 4, 2020.

Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested.

1 unchanged sentence

Any distributions payable in shares of common stock are subject to the same restrictions as the underlying restricted shares.

The following table reflects the amount of restricted shares outstanding as of June 30, 2020 and activity for the period presented:

The following table reflects the amount of restricted shares outstanding as of September 30, 2020 and activity for the period presented, as retroactively adjusted for the Stock Dividend:

Number of Shares of Common Stock (1)

1 unchanged sentence

Unvested, December 31, 2019 280,981 $ 20.89

Unvested, June 30, 2020

As of June 30, 2020 , the Company had $ 4.7 million of unrecognized compensation cost related to unvested restricted share awards granted under the RSP.

Vested ( 64,794 ) 20.88

Forfeitures — —

Unvested, September 30, 2020 216,187 20.89

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(1) Retroactively adjusted for the effects of the Stock Dividend (see Note 1 )

As of September 30, 2020, the Company had $ 4.4 million of unrecognized compensation cost related to unvested restricted share awards granted under the RSP.

This cost will be recognized over a weighted-average period of 3.5 years.

Compensation expense related to restricted shares was approximately $ 0.3 million and $ 0.7 million for the three months and six months ended June 30, 2020 respectively.

Compensation expense related to restricted shares was approximately $ 0.4 million and $ 1.0 million for the three and nine months ended September 30, 2020, and September 20, 2019, respectively.

Other Share-Based Compensation

1 unchanged sentence

There are no restrictions on shares issued in lieu of cash compensation since these payments in lieu of cash relate to fees earned for services performed.

No such shares were issued during the six months ended June 30, 2020 or 2019 .

No such shares were issued during the nine months ended September 30, 2020 or 2019.

Note 12 — Accumulated Other Comprehensive Loss

The following table illustrates the changes in accumulated other comprehensive loss as of and for the period presented:

(In thousands)

Unrealized Gain on Designated Derivative

(In thousands) Unrealized Gain(loss) on Designated Derivative

Balance, December 31, 2019 $ ( 7,043 )

Other comprehensive loss, before reclassifications

Amount of gain reclassified from accumulated other comprehensive loss

Other comprehensive gain (loss), before reclassifications ( 42,631 )

Amount of gain (loss) reclassified from accumulated other comprehensive gain (loss) 5,295

Rebalancing of ownership percentage 561

Balance, June 30, 2020

Balance, September 30, 2020 $ ( 43,818 )

Note 13 — Non-controlling Interests

1 unchanged sentence

The Company is the sole general partner and holds substantially all of the OP Units.

As of June 30, 2020 and December 31, 2019 , the Advisor held 90 OP Units, which represents a nominal percentage of the aggregate ownership in the OP.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

As of September 30, 2020 and December 31, 2019, the Advisor held 90 OP Units, which represents a nominal percentage of the aggregate ownership in the OP.

In November 2014, the Company partially funded the purchase of a MOB from an unaffiliated third party by causing the OP to issue 405,908 OP Units, with a value of $ 10.1 million, or $ 25.00 per unit, to the unaffiliated third party.

A holder of OP Units has the right to distributions.

After holding the OP Units for a period of one year, a holder of OP Units has the right to redeem OP Units for, at the option of the OP, the cash value of a corresponding number of shares of the Company’s common stock or a corresponding number of shares of the Company’s common stock.

A holder of OP Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s common stock in an amount retroactively adjusted to reflect the Stock Dividend, other stock dividends and other similar events.

After holding the OP Units for a period of one year , a holder of OP Units has the right to redeem OP Units for, at the option of the OP, the corresponding number of shares of the Company’s common stock, as retroactively adjusted for the Stock Dividend, other stock dividends and other similar events, or the cash equivalent.

The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets.

During the six months ended June 30, 2020 and 2019 , OP Unit non-controlling interest holders were paid distributions of $ 0.2 million and $ 0.2 million , respectively.

Dur ing the nine months ended September 30, 2020 and 2019, OP Unit non-controlling interest holders were paid distribu tions of $ 0.2 million and $ 0.3 million, respectively.

Non-Controlling Interests in Property Owning Subsidiaries

4 unchanged sentences

A non-controlling interest is recorded for the investor’s ownership interest in the properties.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

The following table summarizes the activity related to investment arrangements with the unaffiliated third parties:

Distributions (2)

Third Party Net Investment Amount

Non-Controlling Ownership Percentage

Net Real Estate Assets Subject to Investment Arrangement (1)

Three Months Ended June 30,

Six Months Ended June 30,

Distributions Distributions

Third Party Net Investment Amount Non-Controlling Ownership Percentage Net Real Estate Assets Subject to Investment Arrangement Three Months Ended September 30, Nine Months Ended September 30,

Property Name

(Dollar amounts in thousands)

Investment Date

June 30, 2020

As of December 31, 2019

Investment Date September 30, 2020 September 30, 2020 September 30, 2020 As of December 31, 2019 2020 2019 2020 2019

Plaza Del Rio Medical Office Campus Portfolio (1)

$ 346 1.9 % $ 13,814 $ 14,220 — — — —

UnityPoint Clinic Portfolio (2)

2 unchanged sentences

See Note 4 - Mortgage Notes Payable for additional information.

(2) On November 4, 2020, the Company purchased all of the outstanding membership interests in the joint venture that owns the UnityPoint portfolio (see Note 17 — Subsequent Events , for additional information).

Note 14 — Net Loss Per Share

The following is a summary of the basic and diluted net loss per share computation for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

The following is a summary of the basic and diluted net loss per share computation for the periods presented and has been retroactively adjusted to reflect the Stock Dividend (see Note 1 — Organization for additional details):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net loss attributable to common stockholders (in thousands)

$ ( 10,500 ) $ ( 28,789 ) $ ( 58,055 ) $ ( 39,954 )

Basic and diluted weighted-average shares outstanding (1)

93,534,591 93,233,948 93,320,080 93,124,017

Basic and diluted net loss per share (1)

$ ( 0.11 ) $ ( 0.31 ) $ ( 0.62 ) $ ( 0.43 )

(1) Retroactively adjusted for the effects of the Stock Dividend (see Note 1 ).

Diluted net loss per share assumes the conversion of all common stock equivalents into an equivalent number of shares of common stock, unless the effect is antidilutive.

The Company considers unvested restricted shares, OP Units and Class B Units to be common share equivalents.

The Company had the following common stock equivalents on a weighted-average basis that were excluded from the calculation of diluted net loss per share attributable to stockholders as their effect would have been antidilutive for the periods presented:

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Three Months Ended June 30,

Six Months Ended June 30,

The amounts in the table below have been retroactively adjusted to reflect the Stock Dividend (see Note 1 — Organization for additional details):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Unvested restricted shares (1)

239,730 303,999 267,116 320,133

411,475 411,475 411,475 411,475

Class B Units (3)

364,096 364,096 364,096 364,096

Total weighted average antidilutive common stock equivalents

1,015,301 1,079,570 1,042,687 1,095,704

(1) Weighted average number of antidilutive unvested restricted shares outstanding for the periods presented.

There were 276,974 and 321,709 unvested restricted shares outstanding as of June 30, 2020 and 2019 , respectively.

(2) Weighted average number of antidilutive OP Units outstanding for the periods presented.

There were 405,998 OP Units outstanding as of June 30, 2020 and 2019 .

Weighted average number of antidilutive Class B Units outstanding for the periods presented.

There were 359,250 and 359,250 Class B Units outstanding as of June 30, 2020 and 2019 .

These Class B Units are unvested as of June 30, 2020 and 2019 (see Note 9 — Related Party Transactions for additional information).

There were 216,187 and 267,116 unvested restricted shares outstanding as of September 30, 2020 and 2019, respectively.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(2) Weighted average number of antidilutive OP Units presented as shares outstanding for the periods presented.

There were 405,998 OP Units outstanding as of September 30, 2020 and 2019.

(3) Weighted average number of antidilutive Class B Units presented as shares outstanding for the periods presented.

There were 359,250 Class B Units outstanding as of September 30, 2020 and 2019.

These Class B Units are unvested as of September 30, 2020 and 2019 (see Note 9 — Related Party Transactions for additional information).

Note 15 — Segment Reporting

During the six months ended June 30, 2020 and 2019 , the Company operated in three reportable business segments for management and internal financial reporting purposes:

During the nine months ended September 30, 2020 and 2019, the Company operated in three reportable business segments for management and internal financial reporting purposes:

MOBs, triple-net leased healthcare facilities, and SHOPs.

4 unchanged sentences

There were no intersegment sales or transfers during the periods presented.

Some of our properties move between our operating segments, for example if they are converted from being triple-net leased to third parties in our triple-net leased healthcare facilities segment to being leased to one of our TRSs and operated and managed on our behalf by a third-party operator in our SHOP segment.

When transfers between segments occur, we reclassify the operating results of the transferred properties to their current segment for both the current and all historical periods in order to present a consistent group of property results.

See Note 3 — Real Estate Investments, Net - “Impairments” and “Held for Use Assets” to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

Over the last three years, we have had properties transfer between operating segments.

Upon such transfers the Company retroactively restates the historical operating results for the segment for all periods presented in that filing and, thereafter, the Company will restate other later prior periods when they are subsequently reported in later filings for comparative purpose.

As a result, the Company provides transition disclosure adjustments only for properties that have transitioned since the prior numbers were previously reported.

In 2018, we transitioned (i.e.

this asset is now operating as a SHOP asset and is not leased to a third party) a property located in Lutz, Florida from our triple-net leased healthcare facilities segment to our SHOP segment.

The results of this property had previously been reclassified in our Same Store operating results in 2018 and, according, required no additional adjustment in 2019.

As described in more detail below, the Company transitioned one property located in Wellington, Florida and the LaSalle Properties on April 1, 2019 and July 1, 2020, respectively, from its triple-net leased healthcare facilities segment to its Seniors Housing — Operating Properties segment (collectively, the “Transition Properties”).

See Note 3 — Real Estate Investments for further information about this property and the transition.

The results of operations from the Transition Properties are presented within the Seniors Housing — Operating Properties segment for and nine months ended September 30, 2020 and 2019.

The previously reported same store results had already been retroactively adjusted to reflect the movement of the results Transition Property located in Wellington, Florida and the property located in Lutz, Florida and require no further adjustments thereto.

On July 1, 2020, the Company transitioned the LaSalle Properties from the triple-net leased healthcare facilities segment to the SHOP segment, and the LaSalle Properties are now leased to one of the Company’s TRSs and operated and managed on the Company’s behalf by a third-party operator.

This segment has been applied retrospectively to historical periods starting with the quarter ended September 30, 2020.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

As described in more detail below, on April 1, 2019 the Company transitioned one property located in Wellington, Florida (the “Transition Property”) from its triple-net leased healthcare facilities segment to its Seniors Housing — Operating Properties segment.

See Note 3 — Real Estate Investments for further information about this property and the transition.

The results of operations from the Transition Property are presented within the Seniors Housing — Operating Properties segment for and six months ended June 30, 2020 and 2019 .

In 2018, we had also transitioned (i.e.

this asset is now operating as a SHOP asset and is not leased to a third party) a property located in Lutz, Florida from our triple-net leased healthcare facilities segment to our SHOP segment.

The results of this property had previously been reclassified in our Same Store operating results in 2018 and, according, require no additional adjustment in 2019.

This segment change will be applied retrospectively to historical periods starting with the quarter ending September 30, 2020.

As of June, 30, 2020 the LaSalle Properties are reported in the triple-net segment.

September 30, 2020

Net Operating Income

10 unchanged sentences

NOI should not be considered as an alternative to net income (loss) as an indication of the Company’s performance or to cash flows as a measure of the Company’s liquidity or ability to pay distributions.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

The following tables reconcile the segment activity, adjusted for the Transition Property to consolidated net loss for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

Medical Office Buildings

Triple-Net Leased Healthcare Facilities (1)

The following tables reconcile the segment activity, retroactively adjusted for the Transition Properties to consolidated net loss for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) Medical Office Buildings Triple-Net Leased Healthcare Facilities (1)

Seniors Housing — Operating Properties (1)

Medical Office Buildings

Triple-Net Leased Healthcare Facilities (1)

Consolidated Medical Office Buildings Triple-Net Leased Healthcare Facilities (1)

Seniors Housing — Operating Properties (1)

Revenue from tenants

$ 25,810 $ 4,304 $ 65,721 $ 95,835 $ 77,970 $ 11,934 $ 200,830 $ 290,734

Property operating and maintenance

8,066 828 52,784 61,678 23,106 1,850 158,233 183,189

$ 17,744 $ 3,476 $ 12,937 34,157 $ 54,864 $ 10,084 $ 42,597 107,545

Impairment charges

( 1,011 ) ( 32,842 )

Operating fees to related parties

( 5,984 ) ( 17,969 )

Acquisition and transaction related

( 175 ) ( 680 )

General and administrative

( 3,162 ) ( 14,622 )

Depreciation and amortization

( 20,211 ) ( 60,589 )

Interest expense

( 12,840 ) ( 38,677 )

Interest and other income

Gain on sale of real estate investments

Gain on non-designated derivatives

Income tax benefit (expense)

Net loss attributable to non-controlling interests

Loss on non-designated derivatives ( 69 ) ( 45 )

Income tax expense ( 78 ) ( 78 )

Net income attributable to non-controlling interests ( 397 ) ( 223 )

Preferred stock dividends

( 732 ) ( 2,224 )

Net loss attributable to stockholders

(1) The results of operations from the Transition Property are presented within the Seniors Housing — Operating Properties segment for the six months ended June 30, 2020 .

$ ( 10,500 ) $ ( 58,055 )

(1) The results of operations from the Transition Properties are presented within the Seniors Housing — Operating Properties segment for the nine months ended September 30, 2020.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

Medical Office Buildings

Triple-Net Leased Healthcare Facilities (1)

September 30, 2020

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) Medical Office Buildings Triple-Net Leased Healthcare Facilities (1)

Seniors Housing — Operating Properties (1)

Medical Office Buildings

Triple-Net Leased Healthcare Facilities (1)

Consolidated Medical Office Buildings Triple-Net Leased Healthcare Facilities (1)

Seniors Housing — Operating Properties (1)

Revenue from tenants

$ 25,672 $ 3,783 $ 65,985 $ 95,440 $ 75,997 $ 10,780 $ 193,668 $ 280,445

Property operating and maintenance

8,733 501 51,421 60,655 23,702 1,049 147,507 172,258

$ 16,939 $ 3,282 $ 14,564 34,785 $ 52,295 $ 9,731 $ 46,161 108,187

Impairment charges

( 22,615 ) ( 22,634 )

Operating fees to related parties

( 5,941 ) ( 17,535 )

Acquisition and transaction related

( 112 ) ( 161 )

General and administrative

( 4,782 ) ( 15,394 )

Depreciation and amortization

( 20,140 ) ( 61,124 )

Interest expense

( 12,990 ) ( 39,739 )

Interest and other income

Gain on sale of real estate investment

Loss on non-designated derivative instruments

Gain on sale of real estate investments 2,715 8,793

Loss on non-designated derivatives ( 2 ) ( 50 )

Income tax benefit (expense)

Net income attributable to non-controlling interests

Net loss attributable to non-controlling interests 11 52

Net loss attributable to stockholders

$ ( 28,789 ) $ ( 39,954 )

(1) The results of operations from the Transition Property are presented within the Seniors Housing — Operating Properties segment for the six months ended June 30, 2019 .

_______________

(1) The results of operations from the Transition Properties are presented within the Seniors Housing — Operating Properties segment for the nine months ended September 30, 2019.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

The following table reconciles the segment activity to consolidated total assets as of the periods presented:

(In thousands)

June 30, 2020

December 31, 2019

(In thousands) September 30, 2020 December 31, 2019

Investments in real estate, net:

Medical office buildings

$ 886,379 $ 891,477

Triple-net leased healthcare facilities (1)

241,383 305,250

Seniors housing — operating properties (1)

1,008,891 856,864

Total investments in real estate, net

2,136,653 2,053,591

Assets held for sale 10,149 70,839

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Deferred costs, net 14,012 13,642

Total assets $ 2,339,629 $ 2,325,303

_____________

(1) The Transition Property is presented within the Seniors Housing — Operating Properties segment as of June 30, 2020 and December 31, 2019 .

(2) Included in the triple net leased healthcare facilities segment.

(1) The Transition Properties are presented within the Seniors Housing — Operating Properties segment as of September 30, 2020 and December 31, 2019.

The following table reconciles capital expenditures by reportable business segment, excluding corporate non-real estate expenditures, for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

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Seniors housing — operating properties (1)

2,937 3,244 13,664 7,754

Total capital expenditures $ 3,972 $ 4,629 $ 17,629 $ 10,910

______________________

(1) The results of operations from the Transition Property are presented within the Seniors Housing — Operating Properties segment for the three and six months ended June 30, 2020 and 2019 .

(1) The results of operations from the Transition Properties are presented within the Seniors Housing — Operating Properties segment for the three and nine months ended September 30, 2020 and 2019.

HEALTHCARE TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Note 16 — Commitments and Contingencies

As of June 30, 2020 , the Company has eight operating and six direct financing lease agreements related to certain acquisitions under leasehold interests arrangements.

As of September 30, 2020, the Company has eight operating and six direct financing lease agreements related to certain acquisitions under leasehold interests arrangements.

The eight operating leases have durations, including assumed renewals, ranging from 12.3 years to 87.2 years.

The Company did not enter into any additional ground leases during the quarter ended June 30, 2020 .

As of June 30, 2020 , the Company’s balance sheet includes ROU assets and liabilities of $ 14.3 million and $ 9.1 million , respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively.

The Company did not enter into any additional ground leases during the quarter ended September 30, 2020.

As of September 30, 2020, the Company’s balance sheet includes ROU assets and liabilities of $ 14.3 million and $ 9.2 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively.

In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the new lease guidance as well as for new operating leases in the current period, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases.

Since the terms of the Company’s ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the Company’s estimate of this rate required significant judgment.

The Company’s ground operating leases have a weighted-average remaining lease term, including assumed renewals, of 41.7 years and a weighted-average discount rate of 7.35 % as of June 30, 2020 .

For the six months ended June 30, 2020 , the Company paid cash of $ 0.2 million , for amounts included in the measurement of lease liabilities and recorded expense of $ 0.5 million , on a straight-line basis in accordance with the standard.

The Company’s ground operating leases have a weighted-average remaining lease term, including assumed renewals, of 41.7 years and a weighted-average discount rate of 7.35 % as of September 30, 2020.

For the nine months ended September 30, 2020, the Company paid cash of $ 0.2 million, for amounts included in the measurement of lease liabilities and recorded expense of $ 0.5 million, on a straight-line basis in accordance with the standard.

The Company recorded expense of $ 0.2 million for the three months ended March 31, 2019.

The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss.

The following table reflects the base cash rental payments due from the Company as of June 30, 2020 :

The following table reflects the base cash rental payments due from the Company as of September 30, 2020:

Future Base Rent Payments

(In thousands)

Operating Leases

Direct Financing Leases (1)

(In thousands) Operating Leases Direct Financing Leases (1)

2020 (remainder) $ 164 $ 21

Thereafter 29,381 7,500

Total minimum lease payments 32,260 7,869

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Total present value of minimum lease payments $ 9,151 $ 4,836

(1) The Direct Finance Lease liability is included in Accounts Payable and accrued expenses on the balance sheet as of June 30, 2020 .

(1) The Direct Finance Lease liability is included in Accounts Payable and accrued expenses on the balance sheet as of September 30, 2020.

The Direct Financing lease asset is included as part of building and improvements as the land component was not required to be bifurcated under ASU 840.

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In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters.

As of June 30, 2020 , the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.

As of September 30, 2020, the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.

HEALTHCARE TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Note 17 — Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements.

Credit Facility Amendment

On August 10, 2020, the Company, as guarantor, and the OP, as borrower, entered into an amendment to the Credit Facility.

The amendment is part of the Company’s efforts to continue addressing the adverse impacts of the COVID-19 pandemic.

The amendment revises specific provisions in the Credit Facility governing:

(i) payment of distributions;

(ii) borrowing availability;

(iii) financial covenants;

(iv) mandatory prepayments with proceeds from capital events;

and (v) interest rates.

Distributions .

Pursuant to the amendment, until certain conditions are met, the Company may not pay distributions to holders of common stock in cash and other cash distributions, subject to certain exceptions, including that the Company may pay cash dividends on the Series A Preferred Stock or any other preferred stock the Company may issue.

As with the similar restriction in effect prior to the amendment, the Company may still pay any cash distributions necessary to maintain its status as a REIT and may not pay any cash distributions (including dividends on Series A Preferred Stock) if a default or event of default exists or would result therefrom.

These restrictions will apply until at least the fiscal quarter ending June 30, 2021.

Starting with that quarter, these restrictions will no longer apply if, as of the day prior to the commencement of a quarter that the Company has elected (the “Commencement Quarter”), the Company has a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $ 100.0 million (giving effect to the aggregate amount of distributions projected to be paid by the Company during the Commencement Quarter) and the Company’s ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5 % .

Commencing in the Commencement Quarter, the Company will be restricted from paying aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock) in any fiscal quarter that exceed 95.0 % of Modified FFO (as defined in the Credit Facility) for a look-back period of up to four consecutive fiscal quarters commencing with the Commencement Quarter.

Commencing in the Commencement Quarter, additional exceptions to the covenant restricting the payment of cash distributions would allow the Company to repurchase up to $ 50.0 million of shares of its common stock (including amounts previously repurchased during the term of the Revolving Credit Facility) that would not be counted towards the aggregate amount of cash distributions tested against Modified FFO for the period if, after giving effect to the payments, the Company maintains cash and cash equivalents of at least $ 30.0 million and the Company’s ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 55.0 % .

Prior to the Commencement Quarter, the Company may not repurchase shares of its common stock.

Borrowing Availability.

The amount available for future borrowings under the Credit Facility is based on the lesser of (i) 55.0 % of the value (or in certain cases cost) of the pool of eligible unencumbered real estate assets comprising the borrowing base, and (ii) a maximum amount permitted to maintain a minimum debt service coverage ratio with respect to the borrowing base, in each case, as of the determination date.

Both of these amounts are calculated using the adjusted net operating income of the real estate assets comprising the borrowing base.

Pursuant to the amendment, the interest rate used to calculate the numerator of the minimum debt service coverage ratio will be increased from 7.0 % to 8.5 % .

The Company remains subject to a covenant in the Credit Facility requiring the Company to maintain a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $ 50.0 million .

Financial Covenants.

Pursuant to the amendment, the maximum ratio of consolidated total indebtedness to consolidated total asset value will be 67.5 % for the period from July 1, 2020 through June 30, 2021, 65 % thereafter until the Commencement Quarter, and 62.5 % for the Commencement Quarter and thereafter, and the minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges will be 1.50 to 1.00 for the period from July 1, 2020 through March 31, 2021, 1.55 to 1.00 for the period from April 1, 2021 through June 30, 2021, and 1.60 to 1.00 thereafter.

Mandatory Prepayments with Proceeds from Capital Events .

Pursuant to the amendment, during the period from August 10, 2020 until the first day of the Commencement Quarter, upon the occurrence of any and all capital events by the Company including, without limitation, all asset sales, refinancings and financings (secured, unsecured or otherwise but excluding borrowings under the Credit Facility), recapitalizations, equity issuances and other similar capital transactions consummated by the Company, the net cash proceeds from the capital event must be used to prepay amounts outstanding under the Revolving Credit Facility without a reduction in commitments.

While the operation of this provision would not prohibit the Company from immediately reborrowing any amounts so repaid if the amount available for future borrowings

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

under the Credit Facility at that time was sufficient to permit the Company to do so and all other relevant conditions are met, there can be no assurance in this respect.

Interest Rate .

Pursuant to the amendment, the applicable margin used to determine the interest rate under both the Term Loan and Revolving Credit Facility components of the Credit Facility will be increased until the Commencement Quarter, at which point the previously applicable margins will again govern.

Commencing on August 10, 2020, the Company has the option to have amounts outstanding under the Revolving Credit Facility bear interest at an annual rate equal to either:

(i) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.85 % to 2.60 % ;

or (ii) the Base Rate (as defined in the Credit Facility), plus an applicable margin that ranges, depending on the Company’s leverage, from 0.60 % to 1.35 % .

(a) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.60 % to 2.35 % ;

or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.35 % to 1.10 % .

Commencing on August 10, 2020, the Company has the option to have amounts outstanding under the Term Loan bear interest at an annual rate equal to either:

(i) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.80 % to 2.55 % ;

or (ii) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.55 % to 1.30 % .

Commencing on the first day of the Commencement Quarter, the Company will have the option to have amounts outstanding under the Term Loan bear interest at an annual rate equal to either:

(a) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.55 % to 2.30 % ;

or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.30 % to 1.05 % .

The amendment also increased the “floor” on LIBOR from 0.00 % to 0.25 % .

Based on the Company’s leverage at the time of the amendment, the highest end of the range applicable margins applied and the interest rate on the Term Loan and Revolving Credit Facility components of the Credit Facility was 2.55 % and 2.60 % , respectively.

The Company anticipates that LIBOR will only be available in substantially its current form until the end of 2021.

The amendment includes provisions related to the anticipated transition, which may occur before LIBOR becomes unavailable, from LIBOR to an alternative benchmark rate under the Credit Facility.

The amendment provides that the covenants restricting payment of distributions to a threshold based on Modified FFO and requiring maintenance of a minimum ratio of consolidated total indebtedness to consolidated total asset value and a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges will not apply for the fiscal quarter ended June 30, 2020.

In addition, the lenders waived any defaults or event of defaults under those covenants that may have occurred during the fiscal quarter ended June 30, 2020 as well as any additional default or event of default resulting therefrom prior to August 10, 2020.

Common Stock Distribution Policy

On August 13, 2020, the Company announced that the Board had approved a change in the Company’s common stock distribution policy in light of the amendment to the Credit Facility described above and to preserve the Company’s liquidity and maintain additional financial flexibility in light of the continued COVID-19 pandemic.

Accordingly, any future distributions authorized by the Board on the Company’s shares of common stock, if and when declared, will be paid on a quarterly basis in arrears in shares of the Company’s common stock valued at the Company’s estimated per share net asset value of common stock in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter.

The number of shares paid in any stock dividend will continue to be based on the Company’s prior cash distribution rate of $ 0.85 per share per annum.

The Board may further change the Company’s common stock distribution policy at any time and therefore distribution payments are not assured.

Share Repurchase Program

The Board has also rejected all repurchase requests made during the period from January 1, 2020 until the effectiveness of the suspension of the SRP.

No further repurchase requests under the SRP may be made unless and until the SRP is reactivated.

No assurances can be made as to when or if the Company’s share repurchase program will be reactivated.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

LaSalle Properties

See Note 3 - Real Estate Investments, Net for further details.

Florida Sales

In August 2020, the Company entered into definitive PSAs to sell the Company's property in Jupiter, Florida for $ 65.0 million and the two skilled nursing facilities in Lutz, Florida and Wellington, Florida for $ 53.0 million .

These dispositions are subject to conditions, and there can be no guarantee that any or all of the dispositions will be completed on the contemplated terms, or at all.

Dividend Declaration

On October 1, 2020, the Company announced the declaration of the Stock Dividend of 0.01349 shares of the Company’s common stock, on each share of the Company’s outstanding common stock.

The Stock Dividend was paid on October 15, 2020 to holders of record of the Company’s common stock at the close of business on October 8, 2020.

Since the Stock Dividend is treated similar to a stock split for accounting purposes, the result of the Stock Dividend was an increase of 0.01349 shares for every one share common stock.

On November 2, 2020, the initial closing under the PSA pursuant to which the Company has agreed to sell 11 Michigan SHOPs occurred, and the Company received payment of the full $ 11.8 million sales price for all 11 of the Michigan SHOPs, less $ 0.8 million held in escrow, and transferred seven of the properties to the buyer.

The remaining four properties are scheduled to be transferred to the buyer at a second closing in January 2021 when the $ 0.8 million held in escrow will be released to the buyer.

Of the properties transferred at the initial closing, four were part of the borrowing base under the Credit Facility, one was part of the collateral pool under the Fannie Mae Master Credit Facility with Capital One and two were unencumbered.

Of the properties to be transferred at the second closing, three were part of the borrowing base under the Credit Facility until the initial closing and one was unencumbered.

At the initial closing, $ 4.2 million of the net proceeds was used to repay amounts outstanding under the Fannie Mae Master Credit Facility with Capital One, $ 4.4 million of the net proceeds were used to repay amounts outstanding under the Revolving Credit Facility, with the remainder used for closing costs.

Acquisition of Non-Controlling Interest

On November 4, 2020, the Company purchased all of the outstanding the membership interests in the joint venture that owns the UnityPoint Clinics in Muscatine, Iowa and Moline, Illinois for approximately $ 0.6 million, funded with cash on hand.

Following this transaction, the properties were wholly owned by the Company and added to the borrowing base under the Credit Facility.

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

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Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements.

Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions.

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements including statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions.

Actual results may differ materially from those contemplated by such forward-looking statements.

Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

Certain of our executive officers and directors are also officers, managers, employees or holders of a direct or indirect controlling interest in our Advisor and other entities affiliated with AR Global Investments, LLC (the successor business to AR Capital, LLC, “AR Global”), the parent of our sponsor.

As a result, certain of our executive officers and directors, our Advisor and its affiliates face conflicts of interest, including significant conflicts created by our Advisor’s compensation arrangements with us and other investment programs advised by affiliates of AR Global and conflicts in allocating time among these investment programs and us.

These conflicts could result in unanticipated actions that adversely affect us.

The trading price of our 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”), may fluctuate significantly.

Our revolving credit facility (our “Revolving Credit Facility”) and the related term loan facility (our “Term Loan”), which together comprise our senior secured credit facility (our “Credit Facility”) restricts us from paying cash distributions on or repurchasing our common stock until at least the fiscal quarter ending June 30, 2021, and there can be no assurance we will be able to resume paying distributions on our common stock, and at what rate, or continue paying dividends on our Series A Preferred Stock at the current rate.

Our Credit Facility restricts our ability to use cash that would otherwise be available to us, and there can be no assurance our available liquidity will be sufficient to meet our capital needs.

Because investment opportunities that are suitable for us may also be suitable for other investment programs advised by affiliates of AR Global, our Advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could reduce the investment return to our stockholders.

Although we intend to seek a listing of our shares of common stock on a national stock exchange when we believe market conditions are favorable to do so, there is no assurance that our shares of common stock will be listed.

No public market currently exists, or may ever exist, for shares of our common stock and our shares are, and may continue to be, illiquid.

We focus on acquiring and owning a diversified portfolio of healthcare-related assets located in the United States and are subject to risks inherent in concentrating investments in the healthcare industry.

If our Advisor loses or is unable to obtain qualified personnel, our ability to continue to achieve our investment strategies could be delayed or hindered.

The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of tenants to make lease payments to us.

We are depending on our Advisor to select investments and conduct our operations.

Adverse changes in the financial condition of our Advisor and its affiliates or our relationship with our Advisor could adversely affect us.

We are obligated to pay fees, which may be substantial, to our Advisor and its affiliates.

Our revenue is dependent upon the success and economic viability of our tenants, as well as our ability to collect rent from defaulting tenants, which has and may continue to adversely impact our results of operations, and replace them with new tenants, which we may not be able to do on a timely basis, or at all.

We may not be able to achieve our rental rate objectives on new and renewal leases and our expenses could be greater than we anticipate, which may impact our results of operations.

Increases in interest rates could increase the amount of our debt payments and limit our ability to pay distributions.

We are subject to risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the ongoing global COVID-19 pandemic, including negative impacts on our tenants and operators and their respective businesses.

We are subject to risks associated with any dislocations or liquidity disruptions that may exist or occur in the credit markets of the United States from time to time, including disruptions and dislocations caused by the ongoing coronavirus pandemic.

We are subject to risks associated with changes in general economic, business and political conditions including the possibility of intensified international hostilities, acts of terrorism, and changes in conditions of United States or international lending, capital and financing markets.

We may fail to continue to qualify to be treated as a real estate investment trust for U.S.

federal income tax purposes (“REIT”), which would result in higher taxes, may adversely affect our operations and would reduce the value of an investment in our Series A Preferred Stock, common stock and the cash available for dividends and other distributions.

The offering price and repurchase price for shares of our common stock under our distribution reinvestment plan (“DRIP”), which is effective for so long as we pay dividends in stock, and our share repurchase program (as amended, the “SRP”), which is currently suspended, may not, among other things, accurately reflect the value of our assets and may not represent what a stockholder may receive on a sale of the shares, what they may receive upon a liquidation of our assets and distribution of the net proceeds or what a third party may pay to acquire us.

We were incorporated on October 15, 2012, and are a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) for U.S.

federal income tax purposes beginning with its taxable year ended December 31, 2013.

These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements.

Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, and Part II.

Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

We were incorporated on October 15, 2012, and are a Maryland corporation that elected to be taxed as a real estate investment trust for U.S.

federal income tax purposes (“REIT”) beginning with its taxable year ended December 31, 2013.

Substantially all of our business is conducted through the OP.

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We have retained Healthcare Trust Properties, LLC (the “Property Manager”) to serve as our property manager.

The Advisor and Property Manager are under common control with AR Global, and these related parties receive compensation, fees and expense reimbursements from us for services related to managing our business and investments.

The Advisor and Property Manager are under common control with AR Global Investments, LLC (the successor business to AR Capital, LLC, “AR Global”), and these related parties receive compensation, fees and expense reimbursements from us for services related to managing our business and investments.

As of June 30, 2020 , we owned 200 properties (all references to number of properties and square footage are unaudited) located in 31 states and comprised of 9.7 million rentable square feet.

Our initial public offering of its common stock, which is not listed on a national securities exchange, closed in November 2014, and, in December 2019, our initial public offering of Series A Preferred Stock closed, and we listed our Series A Preferred Stock on The Nasdaq Global Market under the symbol “HTIA.”

As of September 30, 2020, we owned 200 properties (all references to number of properties and square footage are unaudited) located in 31 states and comprised of 9.7 million rentable square feet.

Our initial public offering of common stock, which is not listed on a national securities exchange, closed in November 2014, and, in December 2019, our initial public offering of our 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”) closed, and we listed our Series A Preferred Stock on The Nasdaq Global Market under the symbol “HTIA.”

On October 1, 2020, we announced the declaration of a quarterly stock dividend of 0.01349 shares of our common stock on each outstanding share of our common stock (the “Stock Dividend”).

The Stock Dividend was paid on October 15, 2020 to holders of record of our common stock at the close of business on October 8, 2020.

Since the Stock Dividend is treated similar to a stock split for accounting purposes, the result of the Stock Dividend was an increase of 0.01349 shares for every one share of common stock.

All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the Stock Dividend.

On April 3, 2020, we published a new estimate of per share net asset value (“Estimated Per-Share NAV”) equal to $15.75 as of December 31, 2019 which was approved by our board of directors (the “Board”) on March 31, 2020.

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We intend to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually.

Unlike the per share amounts in this Quarterly Report on Form 10-Q, the Estimated Per-Share NAV has not been retroactively adjusted to

reflect the Stock Dividend and will not be retroactively adjusted for stock dividends we expect to pay in the future until the Board determines a new Estimated Per-Share NAV.

The Stock Dividend and any other stock dividends will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when stock dividends are paid;

however, because each stockholder will receive the same number of new shares, the total value of our common stockholders’ investment, all things equal, will not change assuming no sales or other transfers.

Management Update on the Impacts of the COVID-19 Pandemic

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• There may be a decline in the demand for tenants to lease real estate, as well as a negative impact on rental rates.

As of June 30, 2020 , our MOB segment had an occupancy of 92.3% with a weighted-average remaining lease term of 4.9 years, (based on annualized straight-line rent as of June 30, 2020 ) and our triple-net leased healthcare facilities segment had a high occupancy level of 95.1% with a weighted average remaining lease term of 7.3 years (based on annualized straight-line rent as of June 30, 2020) and our Seniors Housing — Operating Properties segment (“SHOP”) had an occupancy of 79.5% .

During the second quarter of 2020, we experienced a decline in occupancy and an increase in costs at our SHOP portfolio, however, we received grants under the CARES Act that helped offset the COVID-19 related operating costs.

As of September 30, 2020, our MOB segment had an occupancy of 91.4% with a weighted-average remaining lease term of 4.9 years, (based on annualized straight-line rent as of September 30, 2020) and our triple-net leased healthcare facilities segment had a high occupancy level of 94.5% with a weighted average remaining lease term of 6.7 years (based on annualized straight-line rent as of September 30, 2020) and our Seniors Housing — Operating Properties segment (“SHOP”) had an occupancy of 77.9%.

During the second and third quarters of 2020, we experienced a decline in occupancy and an increase in costs at our SHOP portfolio, however, we received grants under the CARES Act that helped offset the COVID-19 related operating costs.

For additional information on our SHOP portfolio, see the “Management Actions - Seniors Housing Properties” section below.

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• The volatility in the global financial market could negatively impact our ability to raise capital through equity offerings, which as a result, could impact our decisions as to when and if we will seek additional equity funding.

The negative impact of the pandemic on our results of operations and cash flows could impact our ability to comply with covenants in our Credit Facility and the amount available for future borrowings thereunder.

• The negative impact of the pandemic on our results of operations and cash flows could impact our ability to comply with covenants in our senior secured credit facility (our “Credit Facility”) and the amount available for future borrowings thereunder.

• The potential negative impact on the health of personnel of our Advisor and operators of our SHOP facilities, particularly if a significant number of the Advisor’s employees or operator’s employees are impacted, could result in a deterioration in our ability to ensure business continuity.

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“Risk Factors — We are subject to risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the ongoing global COVID-19 pandemic, which has caused severe disruptions in the U.S.

and global economy and financial markets and has already had adverse effects and may worsen” included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 .

and global economy and financial markets and has already had adverse effects and may worsen” included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

The Advisor has responded to the challenges resulting from the COVID-19 pandemic.

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Additionally, there has been no material adverse impact on our financial reporting systems or internal controls and procedures and the Advisor’s ability to perform services for us.

In light of the current COVID-19 pandemic, we are supplementing the historical discussion of our results of operations for the second quarter of 2020 with a current update on the measures we have taken to mitigate the negative impacts of the pandemic on our business and future results of operations.

In light of the current COVID-19 pandemic, we are supplementing the historical discussion of our results of operations for the third quarter of 2020 with a current update on the measures we have taken to mitigate the negative impacts of the pandemic on our business and future results of operations.

Management’s Actions

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For rent collections, we have been in direct contact with our tenants and operators since the crisis began, cultivating open dialogue and deepening the fundamental relationships that we have carefully developed through prior transactions and historic operations.

Based on this approach and the overall financial strength and creditworthiness of our tenants, we believe that we have had positive results in our cash rent collections during this pandemic.

We have collected approximately 99% of the original cash rent due for the second quarter of 2020 in our MOB segment and 92% in our triple-net leased healthcare facilities segment.

Based on this approach and

the overall financial strength and creditworthiness of our tenants, we believe that we have had positive results in our cash rent collections during this pandemic.

We reported cash collections of 99% and 92% for the MOB and triple-net leased healthcare facilities segments, respectively, for the second quarter of 2020 as of July 31, 2020.

There have been no material changes to second quarter cash rent collections as of October 31, 2020.

Amounts not collected are subject to deferral agreements between us and the applicable tenant which typically provide that payment of approximately 20% of the cash rent due each month for second quarter of 2020 is deferred until the latter part of 2020 or early part of 2021.

We have collected approximately 100% of the original cash rent due for the third quarter of 2020 in our MOB segment and 100% in our triple-net leased healthcare facilities segment.

Cash rental payments for our 67 SHOP properties is primarily paid for by the residents through private payer insurance or directly, and to a lesser extent, by government reimbursement programs such as Medicaid and Medicare.

These cash rental payments are subject to timing differences, therefore we have not provided the amount of second quarter 2020 cash rent collected for our SHOP segment.

The table below presents cash rent collections for our MOB segment and triple-net leased healthcare facilities segment for the second quarter of 2020 as of July 31, 2020 and therefore includes cash received in July for rent due in the second quarter of 2020.

Any cash received in July is not, however, included in cash and cash equivalents on our June 30, 2020 consolidated balance sheet.

Rent collections in July 2020 were materially consistent with the second quarter 2020, and we expect this trend to continue;

These cash rental payments are subject to timing differences, therefore we have not provided the amount of second or third quarter 2020 cash rent collected for our SHOP segment.

Rent collections in October 2020 were materially consistent with the third quarter 2020, and we expect this trend to continue;

however, the cash rent status below may not be indicative of any future period and remains subject to changes based ongoing collection efforts and negotiation of additional agreements.

We have also granted rent concessions which serve to reduce revenue in our SHOP segment.

The impact of the COVID-19 pandemic on our tenants and operators thus our ability to collect rents in future periods cannot be determined at present.

Second Quarter 2020 Cash Rent Status

Medical Office Buildings

Triple-Net Leased Healthcare Facilities

Cash rent paid (1)

Approved agreements (2)

(1) Includes both cash rent paid in full and in part pursuant to rent deferral agreements or otherwise.

(2) Consists of executed deferral agreements and approved deferral agreements where we and the tenant have agreed to certain rent deferral terms and conditions.

The typical rent deferral agreement provides that payment of approximately 30% of the cash rent due each month for second quarter of 2020 is deferred until the first half of 2021.

We retain all our rights and remedies upon default under the lease, including the right to accelerate the unpaid portion of deferred amounts if those amounts are not repaid in accordance with the rent deferral agreements.

The tenant is not entitled to any reduction or return of any security deposit until the deferred amounts have been repaid.

Seniors Housing Properties

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Starting in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect us in a number of ways.

In our SHOP portfolio, March occupancy trended lower in the second half of the month as government policies and implementation of infection control best practices began to materially limit or close communities to new resident move-ins which affects our ability fill vacancies.

We also started to experience lower inquiry volumes, and reduced in-person tours.As of March 31, 2020, SHOP occupancy was 84.1%, and it had declined to 79.5% as of June 30, 2020.

The declines in revenue we experienced during this period were primarily attributable to this decline in occupancy which also represented a decline from June 30, 2019, when SHOP occupancy was 85.3%.

In our SHOP portfolio, occupancy has trended lower since the second half of March as government policies and implementation of infection control best practices have materially limited or closed communities to new resident move-ins which has affected and could continue to affect our ability to fill vacancies.

We have also continued to experience lower inquiry volumes and reduced in-person tours during the pandemic.

SHOP occupancy has continued to decline from 84.1% as of March 31, 2020, to 79.5% as of June 30, 2020 and to 77.9%, as of September 30, 2020.

The decline in SHOP occupancy from second quarter is mainly attributable to the transition of four triple-net leased properties in Texas (collectively, the “LaSalle Properties”) from our triple-net leased healthcare facilities segment into our SHOP segment as described in more detail below.

Excluding the LaSalle Properties, SHOP occupancy would have been 78.4% as of September 30, 2020.

The declines in revenue we experienced during the third quarter were primarily attributable to this decline in occupancy which also represented a decline from September 30, 2019, when SHOP occupancy was 85.1%.

In addition, starting in mid-March, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as our operators took appropriate actions to protect residents and caregivers.

At our SHOP facilities, we bear these cost increases.

These trends accelerated during the second quarter of 2020, and may continue to impact us in the future and have a material adverse effect on our revenues and income in the third quarter and other quarters thereafter.

The pandemic raises the risk of an elevated level of resident exposed to illness and restrictions on move-ins at our SHOPs, which has and could also continue to adversely impact occupancy and revenues as well as increase costs.

We believe that the actions we have taken help reduce the evidences of COVID-19 at our properties, but there can be no assurance in this regard.

These trends accelerated during the second quarter and have continued during the third quarter of 2020, and may continue to impact us in the future and have a material adverse effect on our revenues and income in the fourth quarter and other quarters thereafter.

The pandemic raises the risk of an elevated level of resident exposure to illness and restrictions on move-ins at our SHOPs, which has and could also continue to adversely impact occupancy and revenues as well as increase costs.

We believe that the actions we have taken help reduce the incidences of COVID-19 at our properties, but there can be no assurance in this regard.

There have been some incidences of COVID-19 among the residents and staff at certain of our seniors housing properties.

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The extent to which the ongoing global coronavirus pandemic, including the outbreaks that have occurred and may occur in markets where we own properties, impacts our operations and those of our tenants and third-party operators, will continue to depend on future developments, including the scope, severity and duration of the pandemic, and the actions taken to contain the coronavirus or treat its impact, among others, which are highly uncertain and cannot be predicted with confidence, but could be material.

On March 27, 2020, Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law and it includes a relief fund for Medicare providers.

We received $3.1 million in these funds during the second quarter of 2020 related to four of its SHOP properties and considered the

funds to be a grant contribution from the government.

The full amount was recognized as a reduction in property operating expenses in our consolidated statement of operations for the three and six months ended June 30, 2020 to offset the incurred COVID-19 expenses.

We do not expect to receive any more CARES Act funds and are exploring ways to offset our exposure to continuing increased COVID-19 operating costs.

Funds provided under the program were to be used for the preparation, prevention, and medical response to COVID-19, and were designated to

reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19.

We received $3.1 million in these funds during the second quarter of 2020 and $0.5 million for the third quarter related to four of its SHOP properties and considered the funds to be a grant contribution from the government.

The full amount was recognized as a reduction in property operating expenses in our consolidated statement of operations for the three and nine months ended September 30, 2020 to offset the incurred COVID-19 expenses.

There can be no assurance that the program will be extended or any further amounts received.

Significant Accounting Estimates and Critical Accounting Policies

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As discussed in Note 2 — Summary of Significant Accounting Policies - CARES Act Grants, we adopted a new policy with respect to accounting for such grants received.

The following table presents certain additional information about the properties we owned as of June 30, 2020 :

of Properties

Percentage Leased (1)

The following table presents certain additional information about the properties we owned as of September 30, 2020:

Portfolio Number

of Properties Rentable

Square Feet Percentage Leased (1)

Weighted Average Remaining

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Seniors Housing — Triple-Net Leased (4)

6 514,962 90.7% 6.5 133,579

Post-Acute / Skilled Nursing (5)

8 354,016 100.0% 7.1 86,566

Total Triple-Net Leased Healthcare Facilities 14 868,978 94.5% (7) 6.7 220,145

Seniors Housing — Operating Properties (4) (5)

67 4,662,165 77.9% (6) N/A 1,253,922

Jupiter Property — Recently Developed 1 235,445 10.0% (7) 0 59,979

Land 2 N/A N/A N/A 3,665

Total Portfolio 200 9,658,637 $ 2,618,274

_______________

Inclusive of leases signed but not yet commenced as of June 30, 2020

Weighted-average remaining lease term in years is calculated based on square feet as of June 30, 2020 .

Gross asset value represents total real estate investments, at cost, ( $2.6 billion total as of June 30, 2020 ) and assets held for sale at carrying value ( $10.8 million total as of June 30, 2020 ), net of gross market lease intangible liabilities ( $22.1 million total as of June 30, 2020 ).

One property was transitioned from Post-Acute / Skilled Nursing within our triple-net leased healthcare facilities segment to our SHOP segment during the period from January 1, 2019 through June 30, 2020 (the “Transition Property”).

The Transition Property is presented within the Seniors Housing — Operating Properties segment as of June 30, 2020 .

(1) Inclusive of leases signed but not yet commenced as of September 30, 2020.

(2) Weighted-average remaining lease term in years is calculated based on square feet as of September 30, 2020.

(3) Gross asset value represents total real estate investments, at cost ($2.6 billion total as of September 30, 2020) and the 11 SHOPs located in Michigan (“Michigan SHOPs”) included in assets held for sale at carrying value ($10.1 million total as of September 30, 2020), net of gross market lease intangible liabilities ($22.1 million total as of September 30, 2020).

(4) Four properties were transitioned from Seniors Housing – Triple Net Leased within our triple-net leased healthcare facilities segment to our SHOP segment effective July 1, 2020.

These Transition Properties (as defined below) are presented within the Seniors Housing — Operating Properties segment as of September 30, 2020.

See Results of Operations for more information on these properties.

(5) One property was transitioned from Post-Acute / Skilled Nursing within our triple-net leased healthcare facilities segment to our SHOP segment during the second quarter of 2019.

This Transition Property is presented within the Seniors Housing — Operating Properties segment as of September 30, 2020.

See Results of Operations for more information on this property.

Weighted by unit count as of June 30, 2020 .

(6) Weighted by unit count as of September 30, 2020.

(7) Our development property in Jupiter, Florida was substantially completed in the fourth quarter of 2019.

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The disposition is subject to conditions, and there can be no guarantee that the disposition will be completed on the contemplated terms, or at all.

Not applicable.

N/A Not applicable.

Results of Operations

As of June 30, 2020 , we operated in three reportable business segments for management and internal financial reporting purposes:

We operate in three reportable business segments for management and internal financial reporting purposes:

MOBs, triple-net leased healthcare facilities, and SHOPs.

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Under the REIT rules, a REIT may lease “qualified health care” properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by an eligible independent contractor.

As of June 30, 2020 , we had 11 eligible independent contractors operating 63 SHOPs (not including two land parcels).

As of September 30, 2020, we had seven eligible independent contractors operating 67 SHOPs (not including two land parcels).

All of our properties across all three business segments are located throughout the United States.

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Information based on Same Store, Acquisitions and Dispositions (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered.

As of June 30, 2020 , we owned 200 properties.

There were 183 properties (our “Same Store” properties) owned for the entire year ended December 31, 2019 and the six months ended June 30, 2020 .

Our Same Store properties including two vacant land parcels and one development property that was substantially completed in the fourth quarter of 2019.

During the six months ended June 30, 2020 , we acquired eight properties (our “Acquisitions”) and disposed of one property (our “Dispositions”).

As described in more detail under “ — Comparison of the three Months Ended June 30, 2020 — Transition Properties” below, our Same Store properties includes the one Transition Property that was transitioned from our triple-net leased healthcare facilities segment to our SHOP segment during the period from January 1, 2019 through June 30, 2020 .

We adjusted our Same Store for those segments to include the Transition Property as part of our Same Store in our SHOP segment and excluded it entirely from the Same Store in our triple-net leased healthcare facilities segment (each segment as so adjusted, the “Segment Same Store”).

See Note3 — Real Estate Investments, Net for further information about the Transition Property and the transition.

The following table presents a roll-forward of our properties owned from January 1, 2019 to June 30, 2020 :

As of September 30, 2020, we owned 200 properties.

There were 183 properties (our “Same Store” properties) owned for the entire year ended December 31, 2019 and the nine months ended September 30, 2020.

Our Same Store properties include two vacant land parcels and one development property that was substantially completed in the fourth quarter of 2019.

Since January 1, 2019, we acquired 17 properties (our “Acquisitions”) and disposed of eight properties (our “Dispositions”).

As described in more detail under “ — Comparison of the Three Months Ended September 30, 2020 — Transition Properties” below, our Same Store properties include four Transition Properties that were transitioned from Senior Housing - Triple Net Leased to our SHOP segment effective July 1, 2020, and another Transition Property which transitioned from our Triple Net Leased segment effective April 1, 2019.

These five Transition Properties were owned for the entire same store period and merely moved between segments.

We retroactively adjusted our Same Store for those segments to include the Transition Properties as part of our Same Store in our SHOP segment and excluded them from the Same Store in our triple-net leased healthcare facilities segment (each segment as so retroactively adjusted, the “Segment Same Store”).

See Note 3 — Real Estate Investments, Net for further information about the Transition Properties and the transition.

The following table presents a roll-forward of our properties owned from January 1, 2019 to September 30, 2020:

Number of Properties

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Number of properties, December 31, 2019 193

Acquisition activity during the six months ended June 30, 2020

Disposition activity during the six months ended June 30, 2020

Number of properties, June 30, 2020

Acquisition activity during the nine months ended September 30, 2020 8

Disposition activity during the nine months ended September 30, 2020 (1)

Number of properties, September 30, 2020 200

Number of Same Store Properties (1)

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In addition to the comparative period-over-period discussions below, please see the “Overview — Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s responses.

Comparison of the Three Months Ended June 30, 2020 and 2019

Net loss attributable to stockholders was $22.8 million and $6.1 million for the three months ended June 30, 2020 and 2019 , respectively.

The following table shows our results of operations for the three months ended June 30, 2020 and 2019 and the period to period change by line item of the consolidated statements of operations:

Three Months Ended June 30,

Increase (Decrease)

Comparison of the Three Months Ended September 30, 2020 and 2019

Net loss attributable to common stockholders was $10.5 million and $28.8 million for the three months ended September 30, 2020 and 2019, respectively.

The following table shows our results of operations for the three months ended September 30, 2020 and 2019 and the period to period change by line item of the consolidated statements of operations:

Three Months Ended September 30, Increase (Decrease)

(Dollars in thousands) 2020 2019 $

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Total expenses

Operating (loss) income before gain on sale of real estate investments

Gain on sale of real estate investment

Operating (loss) income

92,221 114,245 (22,024)

Operating income (loss) before gain on sale of real estate investments 3,614 (18,805) 22,419

Gain on sale of real estate investments — 2,715 (2,715)

Operating income (loss) 3,614 (16,090) 19,704

Other income (expense):

Interest expense (12,840) (12,990) 150

Interest and other income (expense)

Gain (loss) on non-designated derivatives

Interest and other income 2 11 (9)

Loss on non-designated derivatives (69) (2) (67)

Total other expenses

(12,907) (12,981) 74

Loss before income taxes (9,293) (29,071) 19,778

Income tax benefit (expense)

Net loss attributable to non-controlling interests

Income tax (expense) benefit (78) 271 (349)

Net loss (9,371) (28,800) 19,429

Net (income) loss attributable to non-controlling interests (397) 11 (408)

Preferred stock dividends (732) — (732)

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NM — Not Meaningful

Transition Property

Transition Properties

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See Note 3 — R eal Estate Investments, Net - “Impairments” and “Held for Use Assets” and Note 15 — Segment Reporting to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

As described in more detail below, our Same Store includes one Transition Property, our property in Wellington, Florida, which was transitioned from our triple-net leased healthcare facilities segment to our SHOP segment during the second quarter of 2019.

During the three months ended June 30, 2020 , as shown in more detail in the table below, the Transition Property contributed approximately $0.8 million of net operating income (“NOI”).

The results of operations of the Transition Property are included in Segment Same Store with respect to the SHOP segment.

The bad debt expense relating to the Transition Property is included in property operating and maintenance expense on the consolidated statement of operations.

On July 1, 2020, we transitioned four of our triple-net leased properties in Texas (collectively, the “LaSalle Properties”) from the triple-net leased healthcare facilities segment to the SHOP segment, and the LaSalle Properties are now leased to one of our TRSs and operated and managed on our behalf by a third-party operator.

Beginning with the Company’s reporting for the period ending September 30, 2020 these properties will also become part of the “Transition Properties” and the resultant change will be applied retrospectively to historical periods.

As of June, 30, 2020 the LaSalle Properties are reported in the triple-net segment and are not yet part of the “Transition Properties.”

For purposes of the discussion and analysis of the segment results of operations during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019 , the results of operations for the Transition Property is included as part of our SHOP segment and excluded entirely from our triple-net leased healthcare facilities segment.

The following table presents by segment Same Store properties’ NOI before and after adjusting for the Transition Property as described above, to arrive at “Segment Same Store” results.

Our MOB segment was not affected by the Transition Property.

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Increase (Decrease)

(Dollar amounts in thousands)

Same Store Properties

Transition Property

Segment Same Store

Same Store Properties

Transition Properties

Segment Same Store

Same Store Properties

Transition Properties

Segment Same Store

Over the last three years, we have had properties transfer between operating segments.

As a result, the Company provides transition disclosure adjustments only for properties that have transitioned since the prior

numbers were previously reported.

The Company had the following:

(i) 2020 Transition Property – the four LaSalle Properties (Effective July 1, 2020, reporting for the quarter ended September 30, 2020) – (ii) 2019 Transition Property – the Wellington Property (Effective in April, 2019, reporting for the quarter ended June 30, 2019).

Collectively, these are referred generically as the “Transition Properties.”

As described in more detail below, our Same Store includes five Transition Properties, our property in Wellington, Florida, which was transitioned from our triple-net leased healthcare facilities segment to our SHOP segment during the second quarter of 2019, and the four LaSalle Properties which transitioned from our triple-net leased healthcare facilities segment to our SHOP segment during the third quarter of 2020.

During the three months ended September 30, 2020, as shown in more detail in the table below, the Transition Properties contributed approximately $0.5 million of net operating income (“NOI”).

The results of operations of the Transition Properties are included in Segment Same Store with respect to the SHOP segment.

The bad debt expense relating to the Transition Properties is included as a reduction to revenue from tenants on the consolidated statement of operations.

On July 1, 2020, we transitioned the LaSalle Properties from the triple-net leased healthcare facilities segment to the SHOP segment, and the LaSalle Properties are now leased to one of our TRSs and operated and managed on our behalf by a third-party operator.

Beginning with the Company’s reporting for the period ending September 30, 2020 these properties are part of the “Transition Properties” and the resultant change has been applied retrospectively to historical periods.

As of September 30, 2019 the LaSalle Properties are reported in the Transition Properties.

The previously reported same store results had already been retroactively adjusted to reflect the movement of the results 2019 Transition Property and the 2018 Transition Property and require no further adjustments thereto.

For purposes of the discussion and analysis of the segment results of operations during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019, the results of operations for the Transition Properties are included as part of our SHOP segment and excluded entirely from our triple-net leased healthcare facilities segment.

The following table presents by segment Same Store properties’ NOI before and after adjusting for the 2020 Transition Properties as described above, to arrive at “Segment Same Store” results.

Our MOB segment was not affected by the Transition Properties.

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Increase (Decrease)

(Dollar amounts in thousands) Same Store Properties Transition Properties Segment Same Store Same Store Properties Transition Properties Segment Same Store Same Store Properties Transition Properties Segment Same Store

Revenue from tenants $ 8,898 $ (4,594) $ 4,304 $ 8,954 $ (5,171) $ 3,783 $ (56) $ 577 $ 521

Property operating and maintenance 5,878 (5,050) 828 5,547 (5,046) 501 331 (4) 327

NOI $ 3,020 $ 456 $ 3,476 $ 3,407 $ (125) $ 3,282 $ (387) $ 581 $ 194

Revenue from tenants $ 56,040 $ 4,594 $ 60,634 $ 60,197 $ 5,171 $ 65,368 $ (4,157) $ (577) $ (4,734)

Property operating and maintenance 43,453 5,050 48,503 45,830 5,046 50,876 (2,377) 4 (2,373)

NOI $ 12,587 $ (456) $ 12,131 $ 14,367 $ 125 $ 14,492 $ (1,780) $ (581) $ (2,361)

Net Operating Income

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NOI is equal to revenue from tenants less property operating and maintenance.

NOI excludes all other financial statement amounts included in net income (loss) attributable to stockholders.

NOI excludes all other financial statement amounts included in net income (loss) attributable to common stockholders.

We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measure s included elsewhere in this Quarterly Report for additional disclosure and a reconciliation to our net income (loss) attributable to stockholders.

Segment Results — Medical Office Buildings

The following table presents the components of NOI and the period to period change within our MOB segment for the three months ended June 30, 2020 and 2019 :

The following table presents the components of NOI and the period to period change within our MOB segment for the three months ended September 30, 2020 and 2019:

Same Store (1)

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Segment Total (4)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease)

(Dollars in thousands) 2020 2019 $ 2020 2019 $ 2020 2019 $ 2020 2019 $

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7,438 8,140 (702) 628 544 84 — 49 (49) 8,066 8,733 (667)

NOI $ 16,076 $ 15,767 $ 309 $ 1,668 $ 903 $ 765 $ — $ 269 $ (269) $ 17,744 $ 16,939 $ 805

_______________

(1) Our MOB segment included 104 Same Store properties.

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Property operating and maintenance relates to the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third party property management fees.

During the three months ended June 30, 2020 , the MOB segment contributed a $1.3 million increase in NOI as compared to the three months ended June 30, 2019 .

Of our 17 Acquisitions during the period from January 1, 2019 through June 30, 2020, 12 were MOBs which contributed a $0.9 million increase in NOI and our Disposition properties which contributed a $0.6 million increase in NOI due to lower property operating expenses, while NOI from our Same Store properties was relatively flat year-over-year.

During the three months ended September 30, 2020, the MOB segment contributed a $0.8 million increase in NOI as compared to the three months ended September 30, 2019.

Of our 17 Acquisitions during the period from January 1, 2019 through September 30, 2020, 12 were MOBs which contributed a $0.8 million increase in NOI and our Disposition properties contributed a $0.3 million decrease in NOI due to lower property operating expenses, while NOI from our Same Store properties was relatively flat year-over-year.

Segment Results — Triple-Net Leased Healthcare Facilities

The following table presents the components of NOI and the period to period change within our triple-net leased healthcare facilities segment for the three months ended June 30, 2020 and 2019 :

The following table presents the components of NOI and the period to period change within our triple-net leased healthcare facilities segment for the three months ended September 30, 2020 and 2019:

Same Store (1)

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Segment Total (4)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

(Dollars in thousands) 2020 2019 $ 2020 2019 $ 2020 2019 $ 2020 2019 $

Revenue from tenants

$ 4,304 $ 3,783 $ 521 $ — $ — $ — $ — $ — $ — $ 4,304 $ 3,783 $ 521

Property operating and maintenance

828 501 327 — — — — — — 828 501 327

$ 3,476 $ 3,282 $ 194 $ — $ — $ — $ — $ — $ — $ 3,476 $ 3,282 $ 194

(1) Our triple-net leased healthcare facilities segment included 18 Same Store properties.

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however, they may be paid by us and reimbursed by the tenants.

During the three months ended June 30, 2020 , revenue from tenants in our triple-net leased healthcare facilities segment increased $1.8 million compared to the three months ended June 30, 2019 , driven by our Same Store Properties.

Property operating and maintenance expenses of $2.6 million and $0.4 million during the three months ended June 30, 2020 and 2019 , respectively, primarily relates to property taxes and operating expenses related to the LaSalle Properties discussed in further detail below.

The LaSalle Properties

On July 1, 2020, we transitioned the “LaSalle Properties” from our triple-net leased healthcare facilities segment to our SHOP segment, and the LaSalle Properties are now leased to one of our TRSs and operated and managed on our behalf by a third-party operator.

As of June 30, 2020 , the prior tenants remains in default of the forbearance agreement and owes us $12.7 million of rent, property taxes, late fees, and interest receivable thereunder.

We have the entire receivable balance, including any monetary damages, and related income from the LaSalle Properties fully reserved as of June 30, 2020 and 2019 .

We incurred bad debt expense of $0.3 million and $0.9 million , related to the LaSalle Properties during the three months ended June 30, 2020 and 2019 , respectively, which is included in revenue from tenants in the consolidated statement of operations.

Now that the transition is complete, we have gained more control over the operations of the LaSalle Properties, and we believe this will allow us to improve performance and the cash flows generated by the LaSalle Properties.

There can be no assurance, however, that completing this transition will result in us achieving our operational objectives

During the three months ended September 30, 2020, revenue from tenants in our triple-net leased healthcare facilities segment increased $0.5 million compared to the three months ended September 30, 2019, driven by our Same Store Properties.

Property operating and maintenance expenses of $0.8 million and $0.5 million during the three months ended September 30, 2020 and 2019, respectively, primarily relates to property taxes and operating expenses.

Segment Results — Seniors Housing - Operating Properties

The following table presents the components of NOI and the period to period change within our SHOP segment for the six months ended June 30, 2020 and 2019 :

The following table presents the components of NOI and the period to period change within our SHOP segment for the nine months ended September 30, 2020 and 2019:

Same Store (1)

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Segment Total (4)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

Three Months Ended June 30,

Increase (Decrease)

(Dollars in thousands) 2020 2019 $ 2020 2019 $ 2020 2019 $ 2020 2019 $

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Property operating and maintenance

48,503 50,876 (2,373) 4,281 376 3,905 — 169 (169) 52,784 51,421 1,363

$ 12,131 $ 14,492 $ (2,361) $ 806 $ 89 $ 717 $ — $ (17) $ 17 $ 12,937 $ 14,564 $ (1,627)

(1) Our SHOP segment included 64 Same Store properties, including two land parcels.

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Property operating and maintenance expenses relates to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third party operators, and costs associated with maintaining the physical site.

During the three months ended June 30, 2020 , revenues from tenants decreased by $4.1 million in our SHOP segment as compared to the three months ended June 30, 2019 which was primarily driven by our Same Store properties, which includes our Transition Property, partially offset by an increase of $5.1 million due to our Acquisition properties.

Revenues declined in our same store SHOP properties primarily due to a decrease in occupancy as a result of COVID-19.

The SHOP segment was 84.1% percent leased as of March 31, 2020 and was 79.5% leased as of June 30, 2020, representing a decrease of 4.6% during the COVID-19 pandemic.

Regulatory and government-imposed restrictions and infectious disease protocols hindered our ability to accommodate and conduct in-person tours and process new move-ins at our SHOP properties which affected our ability fill vacancies.

In addition, we also generate a portion of our SHOP revenue from skilled nursing facilities (including ancillary revenue from non-residents) at four of our same store SHOP properties.

This revenue declined $2.3 million from $5.1 million during the three months ended June 30, 2019 to $2.8 million during the three months ended June 30, 2020 as a result of us limiting the services we offer at our facilities, during the COVID-19 pandemic, to protect our residents and on-site staff.

During the three months ended June 30, 2020 , property operating and maintenance expenses decreased $0.6 million in our SHOP segment as compared to the three months ended June 30, 2019 , primarily due to a decrease of $4.4 million in our Same Store properties, which includes our Transition Property, partially offset by an increase of $4.2 million due to our Acquisition properties.

We had an increase in operating costs related to COVID-19, primarily related to increased labor and supply costs, in our SHOP segment of $3.4 million during the three months ended June 30, 2020.

These increased operating costs were partially offset by $3.1 million in CARES ACT funds.

The full amount of these CARES ACT funds was recognized as a reduction in our Same Store property operating expenses in the table above for the three months ended June 30, 2020 to offset the increase in operating costs related to COVID-19.

We do not expect to receive any more CARES Act funds and are exploring ways to offset our exposure to continuing increased COVID-19 operating costs.

During the three months ended September 30, 2020, revenues from tenants decreased by $0.3 million in our SHOP segment as compared to the three months ended September 30, 2019 which was primarily driven by a decrease in revenue of $4.7 million due to our Same Store properties, which includes our Transition Properties, partially offset by an increase of $4.6 million due to our Acquisition properties.

Revenues declined in our Same Store SHOP properties primarily due to a decrease in occupancy as a result of the impact of COVID-19 as discussed above.

SHOP occupancy has decline from 84.1% as of March 31, 2020 to 79.5% as of June 30, 2020, and to 77.9% as of September 30, 2020.

The decline in SHOP occupancy from second quarter included a 0.5% reduction in occupancy due to the transition of the LaSalle Properties from our triple-net leased healthcare facilities segment into our SHOP segment as described in more detail below.

Excluding the LaSalle Properties, SHOP occupancy would have been 78.4% as of September 30, 2020.

This decline in occupancy which also represented a decline from September 30, 2019, when SHOP occupancy was 85.1%.

Regulatory and government-imposed restrictions and infectious disease protocols have hindered and continue to hinder ability to accommodate and conduct in-person tours and process and attract new move-ins at our SHOP properties which has affected and could continue to affect our ability to fill vacancies.

In addition, we also generated a portion of our SHOP revenue from skilled nursing facilities (including ancillary revenue from non-residents) at four of our Same Store SHOP properties.

This revenue declined $2.0 million from $5.1 million during the three months ended September 30, 2019 to $3.1 million during the three months ended September 30, 2020 as a result of us limiting the services we offer at our skilled nursing facilities, during the COVID-19 pandemic, to protect our residents and on-site staff.

We also offered COVID-related rent concessions of $0.5 million for the three months ended September 30, 2020.

These revenue decreases were partially offset by $1.1 million in COVID-19 surcharges we began billing residents for Personal Protective Equipment (“PPE”) during the third quarter 2020, and less bad debt expense of $0.9 million relating to the LaSalle tenant, as described further below.

During the three months ended September 30, 2020, property operating and maintenance expenses increased $1.4 million in our SHOP segment as compared to the three months ended September 30, 2019, primarily due to an increase of $3.9 million due to our SHOP Acquisition properties, partially offset by a decrease of $2.4 million in our Same Store properties, which includes our Transition Properties.

We had a decrease in operating costs of $2.4 million in our Same Store properties.

This decrease was partly due to $0.5 million of funds received through the CARES ACT.

The full amount of the CARES Act funds was recognized as a reduction in our Same Store property operating expenses in the table above for the three months ended September 30, 2020 to offset the increase in operating costs related to COVID-19, which were $1.8 million for the three months ended September 30, 2020.

There can be no assurance that the program will be extended or any further amounts received.

See the “Overview - Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken in response.

The LaSalle Properties

On July 1, 2020, we transitioned the LaSalle Properties from our triple-net leased healthcare facilities segment to our SHOP segment, and the LaSalle Properties are now leased to one of our TRSs and operated and managed on our behalf by a third-party operator.

As of September 30, 2019 the LaSalle Properties are reported in the Transition Properties.

As of September 30, 2020, the prior tenants at the LaSalle Properties remain in default of the forbearance agreement and owes us $12.7 million of rent, property taxes, late fees, and interest receivable thereunder .

We have the entire receivable balance, including any monetary damages, and related income from the LaSalle Properties fully reserved as of September 30, 2020 and 2019.

We incurred bad debt expense of $0.3 million and $1.2 million, related to the LaSalle Properties during the three months ended September 30, 2020 and 2019, respectively, which is included as a reduction in revenue from tenants on the consolidated statement of operations.

There can be no assurance, however, that completing this transition will result in us achieving our operational objectives.

Other Results of Operations

Impairment Charges

We incurred an additional $13.8 million of impairment charges for the three months ended June 30, 2020 on our recently completed development project in Jupiter, Florida representing the amount by which the carrying amount of the property exceeds our estimate of the net sales price, based on the PSA entered into in August 2020 based on terms negotiated during the second quarter of 2020 to sell the property.

See Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges for the three months ended June 30, 2020 .

We incurred $1.0 million of impairment charges for the three months ended September 30, 2020 on the 11 Michigan SHOP properties as a result of expected additional closing costs that were not previously anticipated, which reduced the net amount expected to be realized on the sale of properties.

Operating Fees to Related Parties

Operating fees to related parties were $5.9 million for the three months ended June 30, 2020 and $5.8 million for June 30, 2019 respectively.

Operating fees to related parties were $6.0 million for the three months ended September 30, 2020 and $5.9 million for September 30, 2019 respectively.

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis.

We pay a base management fee equal to $1.6 million per month, while the variable portion of the base management fee is equal, per month, to one twelfth per month of 1.25% of the cumulative net proceeds of any equity raised subsequent to February 17, 2017.

Asset management fees have increased $0.1 million due to an increase in the variable portion of the base management fee due to our offering of Series A Preferred Stock in the fourth quarter of 2019 for asset management fees of $5.0 million for the three months ended June 30, 2020 and $4.9 million for 2019 .

Property management fees were $0.9 million for the three months ended June 30, 2020 and $1.0 million for the three months ended June 30, 2019 .

Asset management fees were $5.0 million and $4.9 million or the three months ended September 30, 2020 and 2019, respectively.

The increase was due to an increase in the variable portion of the base management fee due to our offering of Series A Preferred Stock in the fourth quarter of 2019.

Property management fees were $1.0 million for the three months ended September 30, 2020 and $1.1 million for the three months ended September 30, 2019.

Property management fees increase or decrease in direct correlation with gross revenues of the properties managed.

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Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses were $0.2 million for the three months ended June 30, 2020 , compared to approximately $31,000 for the three months ended June 30, 2019 .

Acquisition and transaction related expenses were $0.2 million for the three months ended September 30, 2020, compared to approximately $0.1 million for the three months ended September 30, 2019.

The expenses in both periods relate to indirect costs related to acquisitions.

General and Administrative Expenses

General and administrative expenses increased to $4.7 million for the three months ended June 30, 2020 compared to $4.3 million for the three months ended June 30, 2019 , which includes $2.7 million and $2.5 million , respectively, incurred in expense reimbursements and distributions on partnership units of the OP designated as “Class B Units” (“Class B Units”) to related parties.

The increase was due to the higher professional fees for audit, transfer and legal services.

General and administrative expenses decreased to $3.2 million for the three months ended September 30, 2020 compared to $4.8 million for the three months ended September 30, 2019, which includes $2.3 million and $2.4 million for the three months ended September 30, 2020 and September 30, 2019, respectively, incurred in expense reimbursements and distributions on

partnership units of the OP designated as “Class B Units” (“Class B Units”) to related parties.

Class B Units will not receive distributions, and no expense will be incurred, for so long as we pay distributions to our common stockholders in stock instead of cash.

For additional details on these awards, see Note 9 — Related Party Transactions and Agreements to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Depreciation and Amortization Expenses

Depreciation and amortization expense decreased $0.1 million to $20.2 million for the three months ended June 30, 2020 from $20.3 million for the three months ended June 30, 2019 .

Depreciation and amortization expense increased $0.1 million to $20.2 million for the three months ended September 30, 2020 from $20.1 million for the three months ended September 30, 2019.

The decrease was due to acquisitions, dispositions and held for sale classifications.

Gain on Sale of Real Estate Investments

During the three months ended June 30, 2020 , we did not dispose of any properties.

During the three months ended September 30, 2020, we did not dispose of any properties.

In the three months ended September 30, 2019 we disposed of one MOB property for a contract purchase price of $13.6 million and one SHOP property for a contract purchase price of $3.5 million.

These dispositions resulted in an aggregated gain on sale of $2.7 million for the three months ended September 30, 2019.

Interest Expense

Interest expense decreased by $0.2 million to $12.6 million for the three months ended June 30, 2020 from $12.8 million for the three months ended June 30, 2019 .

The decrease in interest expense resulted from lower interest rates, partially offset by the increase on average outstanding debt for the periods.

As of June 30, 2020 our outstanding debt obligations were $1.3 billion at a weighted average interest rate of 3.79% per year.

As of June 30, 2019, we had total borrowings of $1.1 billion , at a weighted average interest rate of 4.68% per year.

Our interest expense in future periods will vary based on our level of future borrowings, the cost of borrowings and the opportunity to acquire real estate assets which meet our investment objectives.

Interest expense decreased by $0.2 million to $12.8 million for the three months ended September 30, 2020 from $13.0 million for the three months ended September 30, 2019.

The decrease in interest expense resulted from lower interest rates, partially offset by the increase on average outstanding debt in 2020 compared to 2019.

As of September 30, 2020 our outstanding debt obligations were $1.3 billion at a weighted average interest rate of 3.57% per year.

As of September 30, 2019, we had total borrowings of $1.0 billion, at a weighted average interest rate of 4.45% per year.

Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings among other factors.

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period.

Interest and other income was approximately $36,000 and a $0 expense for the three months ended June 30, 2020 and 2019 , respectively.

Interest and other income was approximately $2,000 and a $11,000 income for the three months ended September 30, 2020 and 2019, respectively.

Gain (Loss) on Non-Designated Derivatives

The gain (loss) on non-designated derivative instruments for the three months ended June 30, 2020 and 2019 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our Fannie Mae Master Credit Facilities, which have floating interest rates.

The gain (loss) on non-designated derivative instruments for the three months ended September 30, 2020 and 2019 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our Fannie Mae Master Credit Facilities, which have floating interest rates.

Income Tax Expense

We recorded an income tax benefit of $0.3 million and a $0.3 million expense for the three months ended June 30, 2020 and 2019 , respectively, primarily related to deferred tax assets generated by temporary differences and current period net operating income associated with our TRS.

We recorded an income tax expense of $0.1 million and a $0.3 million benefit for the three months ended September 30, 2020 and 2019, respectively, primarily related to deferred tax assets generated by temporary differences and current period net operating income associated with our TRS.

These deferred tax assets are partially offset by other income tax benefits incurred during the same period.

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Net Loss Attributable to Non-Controlling Interests

Net loss attributable to non-controlling interests was approximately $0.1 million for the three months ended June 30, 2020 , compared to income of $0.1 million for the three months ended June 30, 2019 .

These amounts represent the portion of our net income that is related to the OP Units and non-controlling interest holders in our subsidiaries that own certain properties.

Comparison of the Six Months Ended June 30, 2020 and 2019

Net loss attributable to non-controlling interests was approximately $0.4 million for the three months ended September 30, 2020.

These amounts represent the portion of our net loss that is related to the OP Units and non-controlling interest holders in our subsidiaries that own certain properties.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Information based on Same Store, Acquisitions and Dispositions allows us to evaluate the performance of our portfolio based on a consistent population of properties.

Net loss attributable to stockholders was $47.6 million and $11.2 million for the six months ended June 30, 2020 and 2019 , respectively.

The following table shows our results of operations for the six months ended June 30, 2020 and 2019 and the period to period change by line item of the consolidated statements of operations:

Six Months Ended June 30,

Increase (Decrease)

Net loss attributable to common stockholders was $58.1 million and $40.0 million for the nine months ended September 30, 2020 and 2019, respectively.

The following table shows our results of operations for the nine months ended September 30, 2020 and 2019 and the period to period change by line item of the consolidated statements of operations:

Nine Months Ended September 30, Increase (Decrease)

(Dollars in thousands) 2020 2019 $

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Total expenses

Operating (loss) income before gain on sale of real estate investments

Gain on sale of real estate investment

309,891 289,106 20,785

Operating loss before gain on sale of real estate investments (19,157) (8,661) (10,496)

Gain on sale of real estate investments 2,306 8,793 (6,487)

Operating (loss) income

(16,851) 132 (16,983)

Other income (expense):

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Interest and other income

Gain (loss) on non-designated derivatives

Loss on non-designated derivatives (45) (50) 5

Total other expenses

(38,679) (39,774) 1,095

Loss before income taxes (55,530) (39,642) (15,888)

Income tax benefit (expense)

Net loss attributable to non-controlling interests

Income tax expense (78) (364) 286

Net loss (55,608) (40,006) (15,602)

Net (income) loss attributable to non-controlling interests (223) 52 (275)

Preferred stock dividends (2,224) — (2,224)

Net loss attributable to common stockholders $ (58,055) $ (39,954) $ (18,101)

Transition Property

During the six months ended June 30, 2020 , as shown in more detail in the table below, the Transition Property contributed $1.8 million of NOI, an increase of $0.5 million from the $1.3 million negative NOI for the six months ended June 30, 2019 .

The results of operations of this property is included in Segment Same Store with respect to the SHOP segment.

The bad debt expense relating to this property is included in property operating and maintenance expense on the consolidated statement of operations.

Transition Properties

See Note 3 — Real Estate Investments, Net - “Impairments” and “Held for Use Assets” and Note 15 — Segment Reporting to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

Over the last three years, we have had properties transfer between operating segments.

As a result, the Company provides transition disclosure adjustments only for properties that have transitioned since the prior numbers were previously reported.

The Company had the following:

Collectively, these are referred generically as the “Transition Properties.”

Beginning with the Company’s reporting for the period ending September 30, 2020, these properties will also become part of the “Transition Properties” and the resultant change will be applied retrospectively to historical periods.

As of June 30, 2020 the LaSalle Properties are reported in the triple-net segment and are not yet part of the “Transition Properties”.

For purposes of the discussion and analysis of the segment results of operations during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 , the results of operations for the Transition Property is included as part of our SHOP segment and excluded entirely from our triple-net leased healthcare facilities segment.

The following table presents segment Same Store properties NOI before and after adjusting for the Transition Property as described above, to arrive at ‘Segment Same Store’ results.

Beginning with our reporting for the period ended September 30, 2020, these properties are part of the “Transition Properties” and the resultant change has been applied retrospectively to historical periods.

As of September 30, 2020, the LaSalle Properties are reported in the Transition Properties.

For purposes of the discussion and analysis of the segment results of operations during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, the results of operations for the Transition Properties are included as part of our SHOP segment and excluded entirely from our triple-net leased healthcare facilities segment.

The following table presents by segment Same Store properties NOI before and after adjusting for the Transition Property as described above, to arrive at ‘Segment Same Store’ results.

Our MOB segment was not affected by the Transition Property.

Six Months Ended Jun 30, 2020

Six Months Ended Jun 30, 2019

Increase (Decrease)

(Dollar amounts in thousands)

Same Store Properties

Transition Property

Segment Same Store

Same Store Properties

Transition Property

Segment Same Store

Same Store Properties

Transition Property

Segment Same Store

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Increase (Decrease)

Revenue from tenants $ 27,195 $ (15,261) $ 11,934 $ 23,051 $ (12,271) $ 10,780 $ 4,144 $ (2,990) $ 1,154

Property operating and maintenance 16,512 (14,662) 1,850 12,125 (11,076) 1,049 4,387 (3,586) 801

NOI $ 10,683 $ (599) $ 10,084 $ 10,926 $ (1,195) $ 9,731 $ (243) $ 596 $ 353

Revenue from tenants $ 172,185 $ 15,261 $ 187,446 $ 179,872 $ 12,271 $ 192,143 $ (7,687) $ 2,990 $ (4,697)

Property operating and maintenance 132,598 14,662 147,260 135,049 11,076 146,125 (2,451) 3,586 1,135

NOI $ 39,587 $ 599 $ 40,186 $ 44,823 $ 1,195 $ 46,018 $ (5,236) $ (596) $ (5,832)

Net Operating Income

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NOI is equal to revenue from tenants less property operating and maintenance.

NOI excludes all other financial statement amounts included in net income (loss) attributable to stockholders.

NOI excludes all other financial statement amounts included in net income (loss) attributable to common stockholders.

We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis.

Segment Results — Medical Office Buildings

The following table presents the components of NOI and the period to period change within our MOB segment for the six months ended June 30, 2020 and 2019 :

The following table presents the components of NOI and the period to period change within our MOB segment for the nine months ended September 30, 2020 and 2019:

Same Store (1)

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Segment Total

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease)

(Dollars in thousands) 2020 2019 $ 2020 2019 $ 2020 2019 $ 2020 2019 $

Revenue from tenants

$ 71,434 $ 71,525 $ (91) $ 6,309 $ 3,322 $ 2,987 $ 227 $ 1,150 $ (923) $ 77,970 $ 75,997 $ 1,973

Property operating and maintenance 21,212 21,808 (596) 1,858 1,327 531 36 567 (531) 23,106 23,702 (596)

NOI $ 50,222 $ 49,717 $ 505 $ 4,451 $ 1,995 $ 2,456 $ 191 $ 583 $ (392) $ 54,864 $ 52,295 $ 2,569

_______________

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(4) Our MOB segment included 116 properties.

Revenue from tenants is primarily related to contractual rent received from tenants in our MOBs.

Revenue from tenants is primarily derived from contractual rent received from tenants in our MOBs.

It also includes operating expense reimbursements which increase in proportion with the increase in property operating and maintenance expenses in our MOB segment.

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During the six months ended June 30, 2020 , the MOB segment contributed a $1.8 million increase in NOI as compared to the six months ended June 30, 2019 .

Of our 17 Acquisitions during the period from January 1, 2019 through June 30, 2020, 12 were MOBs which contributed a $1.7 million increase in NOI and our Same Store properties contributed a $0.2 million decrease in NOI , which was partially offset by seven MOB Disposition properties which contributed a $0.1 million decrease in NOI.

During the nine months ended September 30, 2020, the MOB segment contributed a $2.6 million increase in NOI as compared to the nine months ended September 30, 2019.

Of our 17 Acquisitions during the period from January 1, 2019 through September 30, 2020, 12 were MOBs which contributed a $2.5 million increase in NOI and our Same Store properties contributed a $0.5 million increase in NOI mainly due to a decrease in property operating and maintenance, which was partially offset by seven MOB Disposition properties which contributed a $0.4 million decrease in NOI.

Segment Results — Triple-Net Leased Healthcare Facilities

The following table presents the components of NOI and the period to period change within our triple-net leased healthcare facilities segment for the six months ended June 30, 2020 and 2019 :

The following table presents the components of NOI and the period to period change within our triple-net leased healthcare facilities segment for the nine months ended September 30, 2020 and 2019:

Same Store (1)

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Segment Total

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

(Dollars in thousands) 2020 2019 $ 2020 2019 $ 2020 2019 $ 2020 2019 $

Revenue from tenants

$ 11,934 $ 10,780 $ 1,154 $ — $ — $ — $ — $ — $ — $ 11,934 $ 10,780 $ 1,154

Property operating and maintenance 1,850 1,049 801 — — — — — — 1,850 1,049 801

$ 10,084 $ 9,731 $ 353 $ — $ — $ — $ — $ — $ — $ 10,084 $ 9,731 $ 353

_______________

(1) Our triple-net leased healthcare facilities segment included 18 Same Store properties.

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however, they may be paid by us and reimbursed by the tenants.

During the six months ended June 30, 2020 , revenue from tenants in our triple-net leased healthcare facilities segment increased $2.9 million compared to the six months ended June 30, 2019 due to our Same Store Properties.

Property operating and maintenance expenses of $4.1 million during the six months ended June 30, 2020 primarily relates to property taxes and operating expenses related to the LaSalle Properties and the tenants at two of its Florida properties located in Lutz and Wellington Florida (collectively, the “NuVista Tenant”).

Property operating and maintenance expenses during the six months ended June 30, 2019 primarily related to real estate taxes that were not reimbursed and bad debt expense related to the LaSalle Properties and the NuVista Tenant, which is described below.

The LaSalle Properties

On July 1, 2020, we transitioned the LaSalle Properties from our triple-net leased healthcare facilities segment to our SHOP

segment, and the LaSalle Properties are now leased to one of our TRSs and operated and managed on our behalf by a third-party

As of June 30, 2020, the prior tenants remains in default of a forbearance agreement and owes us $12.7 million of rent, property taxes, late fees, and interest receivable thereunder.

We have the entire receivable balance, including any monetary damages, and related income from the prior tenant fully reserved as of June 30, 2020 .

We incurred $3.1 million of bad debt expense, including straight-line rent write-offs, related to the LaSalle Properties during the six months ended June 30, 2020 , which is included on revenue from tenants in the consolidated statement of operations.

The NuVista Tenant

The NuVista Tenant was in default under its leases beginning from July 2017, and the applicable properties transitioned to the SHOP operating segment as of January 1, 2018 and April 1, 2019, respectively.

In connection with these transitions, we replaced the NuVista Tenant as a tenant with TRSs and engaged a third party to operate the properties.

We did not incur a bad debt expense for the six months ended June 30, 2020 .

We incurred a $1.1 million of bad debt expense related to the NuVista Tenant during the six months ended June 30, 2019 , respectively which is included in revenue from tenants during the six months ended June 30, 2020 and property operating and maintenance expense during the six months ended June 30, 2019 in the consolidated statement of operations.

During the nine months ended September 30, 2020, revenue from tenants in our triple-net leased healthcare facilities segment increased $1.2 million compared to the nine months ended September 30, 2019 due to our Same Store properties.

Property operating and maintenance expenses of $1.9 million during the nine months ended September 30, 2020 primarily relates to property taxes and operating expenses.

Segment Results — Seniors Housing - Operating Properties

The following table presents the components of NOI and the period to period change within our SHOP segment for the six months ended June 30, 2020 and 2019 :

The following table presents the components of NOI and the period to period change within our SHOP segment for the nine months ended September 30, 2020 and 2019:

Same Store (1)

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Segment Total

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

Six Months Ended June 30,

Increase (Decrease)

(Dollars in thousands) 2020 2019 $ 2020 2019 $ 2020 2019 $ 2020 2019 $

Revenue from tenants

$ 187,446 $ 192,143 $ (4,697) $ 13,384 $ 465 $ 12,919 $ — $ 1,060 $ (1,060) $ 200,830 $ 193,668 $ 7,162

Property operating and maintenance 147,260 146,125 1,135 10,973 376 10,597 — 1,006 (1,006) 158,233 147,507 10,726

$ 40,186 $ 46,018 $ (5,832) $ 2,411 $ 89 $ 2,322 $ — $ 54 $ (54) $ 42,597 $ 46,161 $ (3,564)

_______________

(1) Our SHOP segment included 64 Same Store properties, including two land parcels.

(2) Our SHOP segment included five acquisition property.

(2) Our SHOP segment included five Acquisition properties.

(3) Our SHOP segment included one Disposition property.

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Revenues from tenants within our SHOP segment are generated in connection with rent and services offered to residents in our SHOPs depending on the level of care required, as well as fees associated with other ancillary services.

During the six months ended June 30, 2020 , revenues from tenants increased by $5.1 million in our SHOP segment as compared to the six months ended June 30, 2019 , which primarily was driven by our Same Store properties, which includes our Transition Property, partially offset by an increase of $8.3 million to our Acquisition properties.

Property operating

and maintenance expenses relates to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third party operators, and costs associated with maintaining the physical site.

During the nine months ended September 30, 2020, revenues from tenants increased by $7.2 million in our SHOP segment as compared to the nine months ended September 30, 2019, primarily driven by $12.9 million of additional revenue through our Acquisition properties and a decrease in bad debt expense related to tenants at two of our Florida properties located in Lutz and Wellington, Florida (collectively, the “NuVista Tenant”) of $0.8 million compared to the nine months ended September 30, 2019.

For the nine months ended September 30, 2020, an additional $1.1 million was generated through COVID-19 surcharges which we began billing residents for PPE during the third quarter 2020.

These revenue increases were partially offset by a decrease of $4.7 million to our Same Store properties, which includes our Transition Properties.

Revenues declined in our Same Store SHOP properties primarily due to a decrease in occupancy as a result of COVID-19.

The SHOP segment was 84.1% percent leased as of March 31, 2020 and was 79.5% leased as of June 30, 2020, representing a decrease of 4.6% during the COVID-19 pandemic.

SHOP occupancy has declined from 84.1% as of March 31, 2020, to 79.5% as of June 30, 2020 and 77.9% as of September 30, 2020.

Excluding the four LaSalle Properties, SHOP occupancy would have been 78.4% as of September 30, 2020.

This decline in occupancy which also represented a decline from September 30, 2019, when SHOP occupancy was 85.1%.

Regulatory and government-imposed restrictions and infectious disease protocols have hindered and continue to hinder our ability to accommodate and conduct in-person tours and process and attract new move-ins at our SHOP properties which has affected and could continue to affect our ability to fill vacancies.

In addition, we also generate a portion of our SHOP revenue from skilled nursing facilities (including ancillary revenue from non-residents) at four of our same store SHOP properties.

This revenue declined $0.8 million from $7.7 million during the six months ended June 30, 2019 to $6.9 million during the six months ended June 30, 2020 as a result of us limiting the services we offer at our facilities, during the COVID-19 pandemic, to protect our residents and on-site staff.

During the six months ended June 30, 2020 , property operating and maintenance expenses increased $6.6 million in our SHOP segment as compared to the six months ended June 30, 2019 , primarily due to an increase of $6.7 million due to our Acquisition properties.

We had an increase in operating costs related to COVID-19, primarily related to increased labor and supply costs, in our SHOP segment of $3.6 million during the six months ended June 30, 2019 .

This revenue declined $2.8 million from $12.8 million during the nine months ended September 30, 2019 to $10.0 million during the nine months ended September 30, 2020 as a result of us limiting the services we offer at our facilities, during the COVID-19 pandemic, to protect our residents and on-site staff.

These revenue decreases were partially offset by $1.1 million in COVID-19 surcharges we began billing residents for PPE during the third quarter 2020.

We also offered $0.8 million of rent concessions related to COVID-19.

During the nine months ended September 30, 2020, property operating and maintenance expenses increased $10.7 million in our SHOP segment as compared to the nine months ended September 30, 2019, primarily due to an increase of $10.6 million due to our Acquisition properties and an increase of $1.1 million from our Same Store properties, which includes our Transition Properties.

These increases were partially offset by a decrease of $1.0 million from our Disposition properties.

We had an increase in operating costs, primarily related to increased labor and supply costs related to COVID-19 in our SHOP segment of $5.0 million during the nine months ended September 30, 2020.

These increased operating costs were partially offset by $3.6 million in CARES ACT funds.

The full amount of these CARES ACT funds was recognized as a reduction in our Same Store property operating expenses in the table above for the six months ended June 30, 2020 to offset the increase in operating costs related to COVID-19.

We do not expect to receive any more CARES Act funds and are exploring ways to offset our exposure to continuing increased COVID-19 operating costs.

The full amount of these CARES ACT funds was recognized as a reduction in our Same Store property operating expenses in the table above for the nine months ended September 30, 2020 to offset the increase in operating costs related to COVID-19.

There can be no assurance that the program will be extended or any further amounts received.

See the “ Overview - Management Update on the Impacts of the COVID-19 Pandemic ” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken in response.

The LaSalle Properties

Beginning with our reporting for the period ending September 30, 2020 these properties are part of the “Transition Properties” and the resultant change has been applied retrospectively to historical periods.

As of September 30, 2020, the LaSalle Properties are reported in the Transition Properties.

As of September 30, 2020, the prior tenants at the LaSalle Properties remain in default of a forbearance agreement and owes us $12.7 million of rent, property taxes, late fees, and interest receivable thereunder.

We have the entire receivable balance, including any monetary damages, and related income from the prior tenant fully reserved as of September 30, 2020.

We incurred $0.3 million of bad debt expense, including straight-line rent write-offs, related to the LaSalle Properties during the nine months ended September 30, 2020, and we incurred $3.1 million in bad debt expense, including straight-lint rent write-offs during the nine months ended September 30, 2019, which is included as a reduction in revenue from tenants on the consolidated statement of operations.

The NuVista Properties

In connection with these transitions, we replaced the NuVista Tenant as a tenant with TRSs and engaged a third party to operate the properties.

$0.3 million in bad debt expense for the nine months ended September 30, 2020.

We incurred $1.1 million of bad debt expense related to the NuVista Tenant during the nine months ended September 30, 2019, respectively which is included as a reduction in revenue from tenants during the nine months ended September 30, 2020 and September 30, 2019.

Other Results of Operations

Impairment Charges

We recorded $31.8 million and $19,000 of impairment charges for the six months ended June 30, 2020 and 2019 , respectively.

See Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges for the six months ended June 30, 2020 .

The impairment charges for the six months ended June 30, 2019 primarily related to assets held for sale during that period in 2018 that had carrying values in excess of the net sales price of the assets.

We recorded $32.8 million and $22.6 million of impairment charges for the nine months ended September 30, 2020 and 2019, respectively.

See Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges for the nine months ended September 30, 2020.

The impairment charges for the nine months ended September 30, 2019 primarily related to assets held for sale during that period in 2018 that had carrying values in excess of the net sales price of the assets.

Operating Fees to Related Parties

Operating fees to related parties increased $0.4 million to $12.0 million for the six months ended June 30, 2020 from $11.6 million for the six months ended June 30, 2019 .

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis (see — Results of Operations — Comparison of the Three Months Ended June 30, 2020 and 2019 for additional information).

Asset management fees were $10.0 million for the six months ended June 30, 2020 and 2018.

Property management fees increased $0.1 million to $2.0 million during the six months ended June 30, 2020 from $1.8 million for the six months ended June 30, 2019 .

Operating fees to related parties increased $0.4 million to $18.0 million for the nine months ended September 30, 2020 from $17.5 million for the nine months ended September 30, 2019.

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis (see — Results of Operations — Comparison of the Three Months Ended September 30, 2020 and 2019 for additional information).

Asset management fees were $15.0 million and $14.6 million for the nine months ended September 30, 2020 and 2019, respectively.

The increase was due to an increase in the variable portion of the base management fee due to our offering of Series A Preferred Stock in the fourth quarter of 2019.

Property management fees increased $0.1 million to $3.0 million during the nine months ended September 30, 2020 from $2.9 million for the nine months ended September 30, 2019.

Property management fees increase or decrease in direct correlation with gross revenues of the properties managed.

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Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses were $0.5 million for the six months ended June 30, 2020 and $49,000 for the six months ended June 30, 2019 .

Acquisition and transaction related expenses were $0.7 million for the nine months ended September 30, 2020 and $0.2 million for the nine months ended September 30, 2019.

The expenses in both periods relate to indirect costs related to acquisitions.

General and Administrative Expenses

General and administrative expenses increased $0.8 million to $11.5 million for the six months ended June 30, 2020 from $10.6 million for the six months ended June 30, 2019 , which includes $5.3 million and $5.5 million , respectively, incurred in expense reimbursements and distributions on Class B Units to related parties.

The increase in general and administrative expenses primarily relate to professional fees for audit, transfer agent and legal services as well as certain expenses reimbursed to related parties.

General and administrative expenses decreased $0.8 million to $14.6 million for the nine months ended September 30, 2020 compared to $15.4 million for the nine months ended September 30, 2019, which includes $6.4 million and $7.9 million for the nine months ended September 30, 2020 and September 30, 2019, respectively, incurred in expense reimbursements and distributions on partnership units of the OP designated as Class B Units to related parties.

Class B Units will not receive distributions, and no expense will be incurred, for so long as we pay distributions to our common stockholders in stock instead of cash.

The decrease was primarily due to the reduction of expense related to 2019 bonus awards made by the Advisor to employees of the Advisor or its affiliates of $1.2 million as well as the decrease in distributions on Class B Units of $0.1 million, partially offset by increases of professional fees for audit, transfer agent and legal services as well as certain expenses reimbursed to related parties totaling $0.6 million.

For additional details on the 2019 bonus awards, see Note 9 — Related Party Transactions and Agreements to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Depreciation and Amortization Expenses

Depreciation and amortization expense decreased $0.6 million to $40.4 million for the six months ended June 30, 2020 from $41.0 million for the six months ended June 30, 2019 .

Depreciation and amortization expense decreased $0.5 million to $60.6 million for the nine months ended September 30, 2020 from $61.1 million for the nine months ended September 30, 2019.

The decrease was due to a decrease in Same Store depreciation and amortization of $3.8 million primarily due to several intangible assets becoming fully amortized and a decrease due to dispositions of $0.3 million, partially offset by an increase due to our acquisitions of approximately $3.5 million.

Gain on Sale of Real Estate Investments

During the six months ended June 30, 2020 , we sold one MOB property which resulted in a gain on sale of $2.3 million.

During the nine months ended September 30, 2020, we sold one MOB property which resulted in a gain on sale of $2.3 million.

The property sold for a contract price of $8.6 million.

During the six months ended June 30, 2019, we sold five of six related MOB properties located within the State of New York.

These properties sold for a contract price of $45.0 million, resulting in an aggregate gain on sale of approximately $6.1 million.

During the nine months ended September 30, 2019, we sold six MOB properties located in New York which resulted in gains on sale.

These properties sold for a contract price of $58.8 million.

Also, in August 2019, we sold one of our SHOP

properties for a contract price of $3.5 million.

As a result, of these sales, we recorded an aggregate gain on sale of real estate investments of $8.8 million for the nine months ended September 30, 2019.

Interest Expense

Interest expense decreased $0.9 million to $25.8 million for the six months ended June 30, 2020 from $26.7 million for the six months ended June 30, 2019 .

The decrease in interest expense resulted from lower interest rates, partially offset by the increase on average outstanding debt for the periods.

As of June 30, 2020 , we had total borrowings of $1.3 billion , at a weighted average interest rate of 3.82% .

As of June 30, 2019 we had total borrowings of $1.1 billion , at a weighted average interest rate of 4.66% .

Interest expense decreased $1.1 million to $38.7 million for the nine months ended September 30, 2020 from $39.7 million for the nine months ended September 30, 2019.

The decrease in interest expense resulted from lower interest rates, partially offset by the increase on average outstanding debt in 2020 compared to 2019.

As of September 30, 2020, we had total borrowings of $1.3 billion, at a weighted average interest rate of 3.57% per year.

As of September 30, 2019 we had total borrowings of $1.0 billion, at a weighted average interest rate of 4.45% per year.

Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings, among other factors.

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period.

Interest and other income was approximately $41,000 for the six months ended June 30, 2020 and $4,000 for the six months ended June 30, 2019 .

Interest and other income was approximately $43,000 for the nine months ended September 30, 2020 and $15,000 for the nine months ended September 30, 2019.

Gain (Loss) on Non-Designated Derivatives

Gain (loss) on non-designated derivative instruments for the six months ended June 30, 2020 and 2019 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with the Fannie Mae Master Credit Facilities, which have floating interest rates.

Gain (loss) on non-designated derivative instruments for the nine months ended September 30, 2020 and 2019 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with the Fannie Mae Master Credit Facilities, which have floating interest rates.

Income Tax Benefit (expense)

We recorded an income tax benefit of $0.0 million and an expense of $0.6 million for the six months ended June 30, 2020 and 2019 , respectively, related to deferred tax assets generated by current period net operating losses associated with our TRS.

We recorded an income tax benefit of $0.1 million and an expense of $0.4 million for the nine months ended September 30, 2020 and 2019, respectively, related to deferred tax assets generated by current period net operating losses associated with our TRS.

These deferred tax assets are partially offset by other income tax benefit incurred during the same period.

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Net Loss Attributable to Non-Controlling Interests

Net loss attributable to non-controlling interests was approximately $0.2 million and approximately $41,000 for the six months ended June 30, 2020 and 2019 , which represents the portion of our net income that is related to the OP Units and other non-controlling interest holders in our subsidiaries that own certain properties.

Net loss attributable to non-controlling interests was approximately $0.2 million and approximately $52,000 for the nine months ended September 30, 2020 and 2019, which represents the portion of our net income that is related to the OP Units and other non-controlling interest holders in our subsidiaries that own certain properties.

Cash Flows from Operating Activities

During the six months ended June 30, 2020 , net cash provided by operating activities was $31.2 million .

During the nine months ended September 30, 2020, net cash provided by operating activities was $41.8 million.

The level of cash flows used in or provided by operating activities is affected by, among other things, the number of properties owned, the performance of those properties, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses.

Cash inflows include non-cash items of $28.6 million (net loss of $46.2 million adjusted for non-cash items including depreciation and amortization of tangible and identifiable intangible real estate assets, deferred financing costs and mortgage premiums and discounts, bad debt expense, equity-based compensation, gain on non-designated derivatives and impairment charges), an increase in accounts payable and accrued expenses of $1.7 million related to higher accrued real estate taxes, property operating expenses and professional and legal fees and a decrease in prepaid expenses and other assets of $3.8 million .

These cash inflows were partially offset by a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $1.7 million .

During the six months ended June 30, 2019 , net cash provided by operating activities was $25.1 million.

Cash inflows include non-cash items of $42.8 million (net loss of $55.6 million adjusted for non-cash items including depreciation and amortization of tangible and identifiable intangible real estate assets, deferred financing costs and mortgage premiums and discounts, bad debt expense, equity-based compensation, gain on non-designated derivatives and impairment charges), an increase in accounts payable and accrued expenses of $6.3 million related to higher accrued real estate taxes, property operating expenses and professional and legal fees.

These cash inflows were partially offset by an increase in prepaid expenses and other assets of $3.1 million and a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $2.3 million.

During the nine months ended September 30, 2019, net cash provided by operating activities was $39.4 million.

The level of cash flows provided by operating activities is affected by, among other things, the number of properties owned, the performance of those properties, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses.

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Cash Flows from Investing Activities

Net cash used in investing activities during the six months ended June 30, 2020 was $97.5 million .

Net cash used in investing activities during the nine months ended September 30, 2020 was $101.8 million.

The cash used in investing activities included $91.0 million for the acquisition of eight properties and $17.6 million in capital expenditures.

These cash outflows were partially offset by proceeds from sale of real estate of $8.3 million.

Net cash provided by investing activities during the six months ended June 30, 2019 was $4.9 million.

The cash provided by investing activities was due to property dispositions of $45.6 million, partially offset by cash used of $44.4 million for the acquisition of three properties during the period and $6.2 million in capital expenditures.

Net cash provided by investing activities during the nine months ended September 30, 2019 was $40.1 million.

The net cash used in investing activities was due to cash used of $91.6 million for the acquisition of nine properties during the period and $10.9 million in capital expenditures, partially offset by proceeds from sale of real estate of $62.5 million.

Cash Flows from Financing Activities

Net cash used in financing activities of $54.4 million during the six months ended June 30, 2020 related proceeds of $95.0 million from our Revolving Credit Facility and $0.0 million from our Term Loan.

Net cash used in financing activities of $47.7 million during the nine months ended September 30, 2020 included proceeds of $95.0 million from our Revolving Credit Facility.

These cash inflows were partially offset by distributions to stockholders of $31.4 million, common stock repurchases of $10.5 million, payments of deferred financing costs of $2.5 million and dividends paid to preferred stockholders of $1.7 million.

Net cash used in financing activities of $46.4 million during the six months ended June 30, 2019 related to payments on our prior senior secured revolving credit facility of $243.3 million, mortgage principal repayments of $25.4 million, distributions to stockholders of $25.1 million, common stock repurchases of $13.3 million and payments of deferred financing costs of $9.7 million.

Net cash used in financing activities of $19.1 million during the nine months ended September 30, 2019 related to payments on our prior credit facility we, through the OP, entered into on March 21, 2014, of $243.3 million, mortgage principal repayments of $27.4 million, distributions to stockholders of $38.2 million, common stock repurchases of $13.3 million and payments of deferred financing costs of $10.3 million.

These cash outflows were partially offset by total proceeds received under our Credit Facility of $313.6 million.

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In addition to the discussion below, please see the “Overview — Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken in response.

As of June 30, 2020 , we had $83.5 million of cash and cash equivalents.

As of September 30, 2020, we had $82.2 million of cash and cash equivalents.

Our ability to use this cash on hand is restricted.

Under our Credit Facility, we are required to maintain a combination of cash, cash equivalents and availability for future borrowings under our Revolving Credit Facility totaling at least $50.0 million.

As of June 30, 2020, $37.4 million was available for future borrowings under our Revolving Credit Facility.

Following an amendment to our Credit Facility in August 2020 as part of our efforts to continue

addressing the adverse impacts of the COVID-19 pandemic, we are not permitted to pay cash distributions on or repurchase shares of our common stock until no earlier than the fiscal quarter ending June 30, 2021 (although we are not restricted from paying dividends on our Series A Preferred Stock).

These restrictions will continue to apply until, as of the day prior to the commencement of a quarter that we have elected (the “Commencement Quarter”), we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million (giving effect to the aggregate amount of distributions projected to be paid by us during the Commencement Quarter) and our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%.

Under our Credit Facility, as amended on August 2020, we are required to maintain a combination of cash, cash equivalents and availability for future borrowings under our revolving credit facility under our Credit Facility (our “Revolving Credit Facility”) totaling at least $50.0 million.

As of September 30, 2020, $29.5 million was available for future borrowings under our Revolving Credit Facility.

Pursuant to an amendment to our Credit Facility in August 2020, certain other restrictions and conditions described below will no longer apply starting in a quarter in which we make an election and, as of the day prior to the commencement of the applicable quarter we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by us during the applicable quarter, and our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5% (the “Commencement Quarter”).

The Commencement Quarter may be no earlier than the fiscal quarter ending June 30, 2021.

There can be no assurance as to if, or when, we will be able to satisfy these conditions.

Moreover, commencing in the Commencement Quarter, we will be restricted from paying aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock) in any fiscal quarter that exceed 95% of Modified FFO (as defined in the Credit Facility) for a look-back period of up to four consecutive fiscal quarters commencing with the Commencement Quarter.

Moreover, beginning in the Commencement Quarter, we may only pay cash distributions provided that the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock) for any period of four fiscal quarters may not exceed 95% of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after the Commencement Quarter.

See “Item 1A.

Risk Factors.

Our Credit Facility restricts us from paying cash distributions on or repurchasing our common stock until at least the fiscal quarter ending June 30, 2021, and there can be no assurance we will be able to resume paying distributions on our common stock, and at what rate, or continue paying dividends on our Series A Preferred Stock at the current rate.” Following the amendment in August 2020, our Credit Facility also restricts our sources of liquidity.

Until the Commencement Quarter, we are required to use the proceeds from all asset sales, refinancings and financings (secured, unsecured or otherwise), recapitalizations, equity issuances and other similar capital transactions to prepay amounts outstanding under the Revolving Credit Facility.

While the operation of this provision would not prohibit us from immediately reborrowing any amounts so repaid if the amount available for future borrowings under the Credit Facility at that time was sufficient to permit the Company to do so and all other relevant conditions are met, there can be no assurances in this respect.

Following the amendment in August 2020, our Credit Facility also restricts our sources of liquidity.

Until the first day of the Commencement Quarter, we must use all of the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to prepay amounts outstanding under the Revolving Credit Facility.

We may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings.

There can be no assurance these conditions will be met.

The availability for future borrowings under the Credit Facility is calculated using the adjusted net operating income of the real estate assets comprising the borrowing base, and availability has been, and may continue to be, adversely affected by the decreases in cash rent collected from our tenants and income from our operators that have resulted from the effects of the COVID-19 pandemic and may persist for some time.

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Our principal demands for cash are for acquisitions, capital expenditures, the payment of our operating and administrative expenses, debt service obligations (including principal repayment), and dividends to holders of our Series A Preferred Stock.

As of June 30, 2020 , our total debt leverage ratio (total debt divided by total gross asset value) was approximately 44.8% .

Preferred Stock Equity Line with B.

Riley Principal Capital, LLC

On September 15, 2020, we entered into a preferred stock purchase agreement and registration rights agreement with B.

Riley Principal Capital, LLC (the “B.

Riley”), pursuant to which we have the right from time to time to sell up to an aggregate of $15 million of shares of our Series A Preferred Stock to B.

Riley until December 31, 2023, on the terms and subject to the conditions set forth in the purchase agreement.

This arrangement is also referred to as the “Preferred Stock Equity Line.” We control the timing and amount of any sales to B.

Riley under the Preferred Stock Equity Line, and B.

We did not sell any shares under the Preferred Stock Equity Line during the nine months ended September 30, 2020.

As of September 30, 2020, our total debt leverage ratio (total debt divided by total gross asset value) was approximately 44.4%.

Net debt totaled $1.2 billion, which represents gross debt ($1.3 billion) less cash and cash equivalents ($82.2 million).

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Impairment charges are already reflected within gross asset value.

As of June 30, 2020 , we had total gross borrowings of $1.3 billion , at a weighted average interest rate of 3.8% .

As of September 30, 2020, we had total gross borrowings of $1.3 billion, at a weighted average interest rate of 3.6%.

As of December 31, 2019, we had total gross borrowings of $1.1 billion at a weighted average interest rate of 4.0%.

As of June 30, 2020, the carrying value of our real estate investments, at cost was $2.6 billion , with $0.9 billion of this asset value pledged as collateral for mortgage notes payable, $0.5 billion of this asset value pledged to secure advances under the Fannie Mae Master Credit Facilities and $1.3 billion of this asset value comprising the borrowing base of the Credit Facility.

As of September 30, 2020, the carrying value of our real estate investments, at cost was $2.6 billion, with $0.9 billion of this asset value pledged as collateral for mortgage notes payable, $0.5 billion of this asset value pledged to secure advances under the Fannie Mae Master Credit Facilities and $1.3 billion of this asset value comprising the borrowing base of the Credit Facility.

These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, as applicable unless the existing indebtedness associated with the property is satisfied or the property is removed from the borrowing base of the Credit Facility, which would impact availability thereunder.

We expect to utilize proceeds from our Credit Facility to fund future property acquisitions, as well as, subject to the terms of our Credit Facility, other sources of funds that may be available to us.

These actions may require us to add some or all of our unencumbered properties to the borrowing base under our Credit Facility.

Unencumbered real estate investments, at cost as of June 30, 2020 was $287.7 million , although four of these assets - three Michigan SHOPs and our recently completed development property in Jupiter, Florida - representing $64.4 million in real estate investments, at cost, are currently subject to PSA and expected to be sold, and there can be no assurance as to the amount of liquidity we would be able to generate from adding any of these unencumbered assets to the borrowing base of our Credit Facility.

Unencumbered real estate investments, at cost as of September 30, 2020 was $285.6 million, although three of these assets - all Michigan SHOPs and representing $10.1 million in real estate investments, at cost, were sold in November 2020, and our recently completed development property in Jupiter, Florida - representing $60.0 million in real estate investments, at cost, is currently subject to a PSA and expected to be sold.

There can be no assurance as to the amount of liquidity we would be able to generate from adding any of the unencumbered assets we own to the borrowing base of our Credit Facility.

Pursuant to the Credit Facility, any resulting net proceeds from these dispositions prior to the Commencement Quarter must be used to prepay amounts outstanding under the Revolving Credit Facility.

Mortgage Notes Payable

As of June 30, 2020 , we had $550.9 million in mortgage notes payable outstanding.

As of September 30, 2020, we had $550.7 million in mortgage notes payable outstanding.

Future scheduled principal payments on our mortgage notes payable for the remainder of 2020 are $0.3 million.

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Our Credit Facility consists of two components, the Revolving Credit Facility and our Term Loan.

The Revolving Credit Facility is interest-only and matures on March 13, 2023, subject to one one-year extension at our option, subject to certain conditions.

The Revolving Credit Facility is interest-only and matures on March 13, 2023, subject to a one-year extension at our option.

Our Term Loan is interest-only and matures on March 13, 2024.

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Any amounts repaid under our Term Loan may not be re-borrowed.

In March 2020, we borrowed an additional $95.0 million under the Revolving Credit Facility which was used to fund acquisitions and other corporate purposes.

In March 2020, we borrowed an additional $95.0 million under the Revolving Credit Facility a portion of which was used for general corporate purposes.

Subsequently, we have not borrowed additional amount under the Revolving Credit Facility.

The total commitments under the Credit Facility are $630.0 million and include an uncommitted “accordion feature” whereby, upon our request, but at the sole discretion of the participating lenders, the commitments under the Credit Facility may be increased by up to an additional $370.0 million up to a total of $1.0 billion.

As of June 30, 2020 , $345.6 million was outstanding under the Credit Facility and the unused borrowing availability under the Credit Facility was $37.4 million .

The amount available for borrowings under the Credit Facility is based on the lesser of (i) 55% of the value (or in certain cases cost) of the pool of eligible unencumbered real estate assets comprising the borrowing base, and (ii) a maximum amount permitted to maintain a minimum debt service coverage ratio with respect to the borrowing base, in each case, as of the determination date.

The total commitments under the Credit Facility are $630.0 million including $480.0 million under the Revolving Credit Facility.

As of September 30, 2020, $345.6 million was outstanding under the Credit Facility and the unused borrowing availability under the Credit Facility was $29.5 million.

Both of these amounts are calculated using the adjusted net operating income of the real estate assets comprising the borrowing base, and, therefore, availability under our Credit Facility has been adversely affected by the decreases in cash rent collected from our tenants and income from our operators due to the effects of the COVID-19 pandemic, and may continue to be adversely affected .

Of the total amount outstanding, $150.0 million was outstanding under our Term Loan, and $195.6 million was outstanding under the Revolving Credit Facility.

As of September 30, 2020, $150.0 million was outstanding under our Term Loan, and $195.6 million was outstanding under the Revolving Credit Facility.

The equity interests and related rights in our wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility are pledged for the benefit of the lenders thereunder.

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The applicable margin used to determine the interest rate under both the Term Loan and Revolving Credit Facility components of the Credit Facility varies based on our leverage.

As of June 30, 2020, the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to 2.26% and 4.30%, respectively.

At the closing of the amendment to the Credit Facility on August 10, 2020, the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to was 2.55% and 2.60%, respectively.

The Credit Facility requires us to meet on a quarterly basis, financial covenants requiring maintenance of a minimum ratio of consolidated total indebtedness to consolidated total asset value, a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges on a quarterly basis and a minimum consolidated tangible net worth.

The amendment to the Credit Facility on August 10, 2020 provides that the covenants restricting payment of distributions to a threshold based on Modified FFO and requiring maintenance of a minimum ratio of consolidated total indebtedness to consolidated total asset value and a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges will not apply for the fiscal quarter ended June 30, 2020.

Accordingly, as of June 30, 2020, we were in compliance with the financial covenants under the Credit Facility.

As of September 30, 2020, the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to 3.17% and 4.95%, respectively.

The Credit Facility requires us to maintain a minimum ratio of consolidated total indebtedness to consolidated total asset value, a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges on a quarterly basis and a minimum consolidated tangible net worth.

As of September 30, 2020, we were in compliance with the financial covenants under the Credit Facility.

Fannie Mae Fannie Mae Master Credit Facilities

As of June 30, 2020 , $359.3 million was outstanding under the Fannie Mae Master Credit Facilities.

As of September 30, 2020, $359.3 million was outstanding under the Fannie Mae Master Credit Facilities.

We may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool or by borrowing-up against the increased value of the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests.

Future advances based on the increased value of the collateral pool may only occur until November 2021 and not more than one annually for each of the Fannie Mae Master Credit Facilities.

Future advances based on the increased value of the collateral pool may only occur until November 2021 and not more than once annually for each of the Fannie Mae Master Credit Facilities.

Borrowings under the Fannie Mae Master Credit facilities bear annual interest at a rate that varies on a monthly basis and is equal to the sum of the current LIBOR for one month U.S.

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Capital Expenditures

During the first six months of 2020, our capital expenditures were $13.8 million , of which approximately $3.6 million was related to our development property in Jupiter, Florida, $2.8 million in our MOB segment and $7.3 million in our SHOP segment.

During the first nine months of 2020, our capital expenditures were $17.6 million, of which approximately $3.8 million was related to our development property in Jupiter, Florida, $2.8 million related our MOB segment and $7.3 million related to our SHOP segment.

All other capital expenditures were typical in nature for the other properties in our portfolio.

We anticipate this rate of capital expenditures for the MOB and SHOP segments throughout 2020, however, given the recent economic uncertainty created by the COVID-19 global pandemic will continue to impact our decisions on the amount and timing of future capital expenditures.

Acquisitions — Six Months Ended June 30, 2020

During the six months ended June 30, 2020 , we completed the acquisitions of one multi-tenant MOBs, three single tenant MOBs and four SHOP for an aggregate contract purchase price of $103.9 million.

Acquisitions — Nine Months Ended September 30, 2020

During the nine months ended September 30, 2020, we completed the acquisitions of one multi-tenant MOBs, three single tenant MOBs and four SHOP for an aggregate contract purchase price of $103.9 million.

These acquisitions were completed during the three months ended March 31, 2020.

The properties are located in Roscoe, IL, Pinnacle, PA and Naples, FL and comprise approximately 320,895 square feet.

These acquisitions were funded with proceeds from financings (including amounts borrowed

under our Credit Facility) and cash on hand.

We did not complete any acquisitions subsequent to June 30, 2020 and do not

currently have any pending acquisitions.

The properties are located in Roscoe, Illinois, Pinnacle, Pennsylvania and Naples, FL and comprise approximately 320,895 square feet.

These acquisitions were funded with proceeds from financings (including amounts borrowed under our Credit Facility) and cash on hand.

and currently we have three MOB pending acquisitions for a contract purchase price of $18.5 million.

Acquisitions and Dispositions — Subsequent to September 30, 2020

We did not complete any acquisitions subsequent to September 30, 2020.

We have signed two definitive purchase and sale agreements PSAs to acquire a total of two MOBs located in Ohio and Pennsylvania or an aggregate contract purchase price of approximately $11.8 million.

We have signed one non-binding letter of intent (“LOI”) to acquire one MOB located in Texas for a contract purchase price of approximately $6.6 million.

We anticipate using cash on hand to fund the consideration required to complete these acquisitions.

The PSAs are subject to conditions and the LOI may not lead to a definitive agreement.

There can be no assurance we will complete any of these acquisitions, or any future acquisitions or other investments, on a timely basis or on acceptable terms and conditions, if at all.

Acquisition of Non-Controlling Interest

In November 2020, we purchased all of the outstanding membership interests in the joint venture that owns the UnityPoint Clinics in Muscatine, Iowa and Moline, Illinois for approximately $0.6 million, funded with cash on hand.

Following this transaction, the properties were wholly owned by us and added to the borrowing base under our Credit Facility.

Disposition and Assets Held for Sale

During the six months ended June 30, 2020 , we sold one MOB property which resulted in a gain on sale of $2.3 million .

During the nine months ended September 30, 2020, we sold one MOB property which resulted in a gain on sale of $2.3 million.

This property sold for a contract price of $8.6 million.

There was no mortgage on this property.

We did not dispose of any properties subsequent to June 30, 2020 .

In January 2020, we entered into a PSA for the sale of a portfolio of 14 Michigan SHOPs as a single portfolio for $71.8 million .

During April 2020, the PSA was amended so that only 11 of the Michigan SHOPs will be sold pursuant to this PSA for $11.8 million .

As of June 30, 2020 , for the 11 Michigan SHOPs that are classified as held for sale, seven were part of the borrowing base of the Credit Facility, one was mortgaged under the Fannie Mae Master Credit Facilities and three were unencumbered.

Also, during the fourth quarter of 2019, we began to evaluate the two skilled nursing facilities in Lutz, Florida, Wellington, Florida and our development property in Jupiter, Florida for potential.

In August 2020, we entered into two definitive PSAs with the same buyer, one PSA to sell the property in Jupiter, Florida for $65.0 million and one PSA to sell the two skilled nursing facilities in Lutz, Florida and Wellington, Florida for $53.0 million.

The sales of these six assets are subject to conditions, and, due to the persistence of the COVID-19 pandemic and other factors beyond our control, there can be no assurance that we will be able to meet these conditions and that these dispositions will be completed on their contemplated terms, or at all.

We did not dispose of any properties subsequent to September 30, 2020.

Also, during the fourth quarter of 2019, we began to evaluate the two skilled nursing facilities in Lutz, Florida, Wellington, Florida and our development property in Jupiter, Florida for potential sale.

In August 2020, we entered into two definitive PSAs

with the same buyer, one PSA to sell the property in Jupiter, Florida for $65.0 million and one PSA to sell the two skilled nursing facilities in Lutz, Florida and Wellington, Florida for $20.0 million and $33.0 million, respectively.

The sales of t hese assets a re subject to conditions, and, due to the persistence of the COVID-19 pandemic and other factors beyond our control, there can be no assurance that we will be able to meet these conditions and that these dispositions will be completed on their contemplated terms, or at all.

With respect to the two skilled nursing facilities in Lutz, Florida and Wellington, Florida, closing may not occur unless, among other conditions, certain occupancy and revenue levels have been maintained at each property for a period of time.

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Pursuant to the terms of the amendment to our Credit Facility in August 2020, the net cash proceeds from any completed dispositions must be used to prepay amounts outstanding under the Revolving Credit Facility and will therefore not be available to us for any other purpose.

While the operation of this provision would not prohibit the Company from immediately reborrowing any amounts so repaid if the amount available for future borrowings under the Credit Facility at that time was sufficient to permit the Company to do so and all other relevant conditions are met, there can be no assurances in this respect.

We may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings.

There can be no assurance these conditions will be met.

In November 2020, we received payment of the full $11.8 million sales price for all 11 of the Michigan SHOPs, less $0.8 million held in escrow, and transferred seven of the properties to the buyer.

The remaining four properties are scheduled to be transferred to the buyer at a second closing in January 2021 when the $0.8 million held in escrow will be released to the buyer.

Of the properties to be transferred at the second closing, three were part of the borrowing base under the Credit Facility until the initial closing and one was unencumbered.

At the initial closing, $4.2 million of the net proceeds was used to repay amounts outstanding under the Fannie Mae Master Credit Facility with Capital One, $4.4 million of the net proceeds were used to repay amounts outstanding under the Revolving Credit Facility, with the remainder used for closing costs.

Share Repurchase Program

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We are only authorized to repurchase shares using the proceeds secured from our DRIP in any given period, although the Board has the power, in its sole discretion, to determine the number of shares repurchased during any period as well as the amount of funds to be used for that purpose.

Under the currently effective amended and restated SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of our common stock or received their shares from us (directly or indirectly) through one or more non-cash transactions would be considered for repurchase.

Under the currentl y effective amended and restated SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of our common stock or received their shares from us (directly or indirectly) through one or more non-cash transactions would be considered for repurchase.

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No further repurchase requests under the SRP may be made unless and until the SRP is reactivated.

Prior to the Commencement Quarter, we may not repurchase shares of its common stock.

Commencing in the Commencement Quarter, additional exceptions to the covenant restricting the payment of cash distributions would allow us to repurchase up to $50.0 million of shares of our common stock (including amounts previously repurchased during the term of the Revolving Credit Facility) that

would not be counted towards the aggregate amount of cash distributions tested against Modified FFO for the period if, after giving effect to the payments, we maintain cash and cash equivalents of at least $30.0 million and our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 55%.

No assurances can be made as to when or if our share repurchase program will be reactivated

Prior to the Commencement Quarter, we may not repurchase shares of our common stock.

Beginning in the Commencement Quarter, we will be permitted to repurchase up to $50.0 million of shares of our common stock (including amounts previously repurchased during the term of the Revolving Credit Facility) if, after giving effect to the repurchases, we maintain cash and cash equivalents of at least $30.0 million and our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 55.0%.

No assurances can be made as to when or if our SRP will be reactivated

Non-GAAP Financial Measures

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For a detailed discussion of our revenue recognition policy, including details related to the relief granted by the FASB and SEC, see Note 2 — Significant Accounting Polices to our consolidated financial statements included in the Quarterly Report on Form 10-Q.

The tables below reflect the items deducted from or added to net loss attributable to stockholders in our calculation of FFO and MFFO for the periods indicated.

The tables below reflect the items deducted from or added to net loss attributable to common stockholders in our calculation of FFO and MFFO for the periods indicated.

In calculating our FFO and MFFO, we exclude the impact of amounts attributable to our non-controlling interests.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

Net loss attributable to common stockholders (in accordance with GAAP)

$ (10,500) $ (28,789) $ (58,055) $ (39,954)

Depreciation and amortization (1)

19,853 19,873 59,530 60,395

Impairment charges 1,011 22,615 32,842 22,634

Gain on sale of real estate investment

— (2,715) (2,306) (8,793)

Adjustments for non-controlling interests (2)

(101) (187) (424) (357)

FFO (as defined by NAREIT) attributable to stockholders

10,263 10,797 31,587 33,925

Acquisition and transaction related 175 112 680 161

(Accretion) amortization of market lease and other intangibles, net

9 10 (111) (25)

Straight-line rent adjustments

(547) (798) (2,289) (2,802)

Straight-line rent (rent deferral agreements) (2)

Amortization of mortgage premiums and discounts, net

16 (32) 45 (135)

(Gain) loss on non-designated derivatives 69 2 45 50

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MFFO attributable to stockholders

$ 10,009 $ 9,078 $ 30,355 $ 28,446

(1) Net of non-real estate depreciation and amortization.

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We use NOI to assess and compare property level performance and to make decisions concerning the operation of the properties.

Further, we believe NOI is useful to investors as

a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).

Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).

NOI excludes certain components from net income (loss) in order to provide results that are more closely related to a property’s results of operations.

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NOI should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or ability to pay distributions.

The following table reflects the items deducted from or added to net loss attributable to stockholders in our calculation of NOI for the three months ended June 30, 2020 :

(In thousands)

Non-Property Specific

The following table reflects the items deducted from or added to net loss attributable to stockholders in our calculation of NOI for the three months ended September 30, 2020:

(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total

Net income (loss) attributable to common stockholders (in accordance with GAAP)

$ 11,499 $ 735 $ — $ (22,734) $ (10,500)

Impairment charges

1,011 — — — 1,011

Operating fees to related parties

— — — 5,984 5,984

Acquisition and transaction related

— — — 175 175

General and administrative

16 2 — 3,144 3,162

Depreciation and amortization

18,473 1,738 — — 20,211

Interest expense

684 — — 12,156 12,840

Interest and other income

— (1) — (1) (2)

Gain on non-designated derivative instruments

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Preferred Stock dividends

— — — 732 732

Net loss (income) attributable to non-controlling interests — — — 397 397

The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store, Acquisitions and Dispositions NOI for the three months ended June 30, 2019 :

(In thousands)

Non-Property Specific

NOI $ 31,683 $ 2,474 $ — $ — $ 34,157

(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total

Net income (loss) attributable to common stockholders (in accordance with GAAP)

$ (8,374) $ 460 $ 2,912 $ (23,787) $ (28,789)

Impairment charges

22,615 — — — 22,615

Operating fees to related parties

— — — 5,941 5,941

Acquisition and transaction related

— 4 — 108 112

General and administrative

14 — — 4,768 4,782

Depreciation and amortization

19,557 528 55 — 20,140

Interest expense

(271) — — 13,261 12,990

Interest and other income

— — — (11) (11)

Gain on sale of real estate investments

— — (2,715) — (2,715)

Loss on non-designated derivative instruments

Income tax (benefit) expense

— (271) (271)

Net loss (income) attributable to non-controlling interests

The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store and Dispositions NOI for the six months ended June 30, 2020 :

(In thousands)

Non-Property Specific

— — — (11) (11)

NOI $ 33,541 $ 992 $ 252 $ — $ 34,785

The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store and Dispositions NOI for the nine months ended September 30, 2020:

(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total

Net income (loss) attributable to common stockholders (in accordance with GAAP)

$ 9,923 $ 2,093 $ 2,458 $ (72,529) $ (58,055)

Impairment charges

32,842 — — — 32,842

Operating fees to related parties

— — — 17,969 17,969

Acquisition and transaction related

— — — 680 680

General and administrative

85 — — 14,537 14,622

Depreciation and amortization

55,781 4,769 39 — 60,589

Interest expense

1,867 — — 36,810 38,677

Interest and other income

(6) — — (37) (43)

Gain on sale of real estate investments

— — (2,306) — (2,306)

Loss on non-designated derivative instruments

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Preferred Stock dividends

The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store and Dispositions NOI for the six ended June 30, 2019 :

(In thousands)

Non-Property Specific

— — — 2,224 2,224

NOI $ 100,492 $ 6,862 $ 191 $ — $ 107,545

(In thousands) Same Store Acquisition Dispositions Non-Property Specific Total

Net income (loss) attributable to common stockholders (in accordance with GAAP)

$ 23,502 $ 836 $ 9,066 $ (73,358) $ (39,954)

Impairment charges

22,634 — — — 22,634

Operating fees to related parties

— — — 17,535 17,535

Acquisition and transaction related

(1) 23 — 139 161

General and administrative

60 1 9 15,324 15,394

Depreciation and amortization

Gain on sale of real estate investment

59,545 1,224 355 — 61,124

Interest expense (292) — — 40,031 39,739

Interest and other income (6) — — (9) (15)

Gain on sale of real estate investment — — (8,793) — (8,793)

Loss on non-designated derivative instruments

Income tax (benefit) expense

— — — 364 364

Net income (loss) attributable to non-controlling interests

Distributions and Dividends on Series A Preferred Stock

24 — — (76) (52)

NOI $ 105,466 $ 2,084 $ 637 $ — $ 108,187

Distributions and Dividends

Dividends on our Series A Preferred Stock accrue in an amount equal to $1.84375 per share each year ($0.460938 per share per quarter) to Series A Preferred Stock holders, which is equivalent to 7.375% of the $25.00 liquidation preference per share of Series A Preferred Stock per annum.

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Instead, any future distributions authorized by the Board on shares of our common stock were to be paid on a monthly basis in arrears based on a single record date during the applicable month.

On August 10, 2020, we entered into an amendment to our Credit Facility pursuant to which we may not pay distributions to holders of common stock in cash and other cash distributions, subject to certain exceptions, including that we may pay dividends on the Series A Preferred Stock or any other preferred stock we may issue.

As with the similar restriction in effect prior to the amendment, we may still pay any cash distributions necessary to maintain our status as a REIT and may not pay any cash distributions (including dividends on Series A Preferred Stock) if a default or event of default exists or would result therefrom.

These restrictions will continue to apply until the Commencement Quarter which will only occur if, as of the day prior to the commencement of the quarter that we have elected to serve as the Commencement Quarter, we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million (giving effect to the aggregate amount of distributions projected to be paid by us during the Commencement Quarter) and our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%.

On August 10, 2020, we entered into an amendment to our Credit Facility pursuant to which we may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of the Company’s common stock), subject to certain exceptions.

These exceptions include paying cash dividends on the Series A Preferred Stock or any other preferred stock we may issue and paying any cash distributions necessary to maintain our status as a REIT.

We may not pay any cash distributions (including dividends on Series A Preferred Stock) if a default or event of default exists or would result therefrom.

Beginning in the Commencement Quarter we will be able to pay cash distributions to holders of common stock, subject to the restrictions described below.

There can be no assurance as to if, or when, we will be able to satisfy these conditions.

In light of the amendment to the Credit Facility described above, the Board determined that any future distributions authorized by the Board on shares of our common stock, if and when declared, will be paid on a quarterly basis in arrears in shares of our common stock valued at the Estimated Per-Share NAV in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter.

The number of shares paid in any stock dividend will continue to be based on our prior cash distribution rate of $0.85 per share per annum.

Because the number of shares outstanding will increase when stock dividends are paid, our Estimated Per-Share NAV will decline;

however, because each stockholder will receive the same number of new shares, the total value of our stockholders’ investment will not change assuming no sales or other transfers.

Beginning in the Commencement Quarter, we may only pay cash distributions provided that the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock) for any period of four fiscal quarters may not exceed 95% of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after the Commencement Quarter.

On August 13, 2020, we announced that the Board had approved a change in our common stock distribution policy in order to preserve our liquidity and maintain additional financial flexibility in light of the continued COVID-19 pandemic and in light of the amendment to the Credit Facility described above.

Accordingly, distributions in light of the amendment to the Credit Facility described above.

Accordingly, distributions authorized by the Board on shares of our common stock, if and when declared, are now paid on a quarterly basis in arrears in shares of our common stock valued at the Estimated Per-Share NAV in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter.

On October 1, 2020, we declared the Stock Dividend of 0.01349 shares of our common stock on each share of our outstanding common stock.

This number of shares was based on our prior cash distribution rate of $0.85 per share per annum.

The Stock Dividend was paid on October 15, 2020 to holders of record of our common stock at the close of business on October 8, 2020.

Unlike the per share amounts in this Quarterly Report on Form 10-Q, the Estimated Per-Share NAV has not been retroactively adjusted to reflect the Stock Dividend and will not be retroactively adjusted for stock dividends we expect to pay in the future until the Board determines a new Estimated Per-Share NAV.

Subject to the restrictions in our Credit Facility, the amount of dividends and other distributions payable to our stockholders is determined by the Board and is dependent on a number of factors, including funds available for distribution, our financial condition, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).

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The following table shows the sources for the payment of distributions to common stockholders preferred stockholders, including distributions on unvested restricted shares and OP Units, but excluding distributions related to Class B Units as these distributions are recorded as an expense in our consolidated statement of operations and comprehensive loss, for the periods indicated:

Three Months Ended

March 31, 2020

June 30, 2020

(In thousands)

Percentage of Distributions

Three Months Ended Year-To-Date

March 31, 2020 June 30, 2020 September 30, 2020 September 30, 2020

(In thousands) Percentage of Distributions Percentage of Distributions Percentage of Distributions Percentage of Distributions

Distributions:

Distributions to common stockholders not reinvested in common stock issued under the DRIP

$ 13,225 $ 13,729 $ 4,400 $ 31,354

Distributions reinvested in common stock issued under the DRIP

6,322 6,267 2,015 14,604

Dividends to preferred stockholders

173 742 742 1,657

Distributions on OP Units

Total distributions (1)

$ 19,806 $ 20,825 $ 7,185 $ 47,816

Source of distribution coverage:

Cash flows provided by operations (2)

$ 18,952 95.7 % $ 12,294 59.0 % $ 7,185 100.0 % $ 41,783 (3) 87.4 %

Proceeds received from common stock issued under the DRIP (2)

854 4.3 % 6,267 30.1 % — — % 6,033 (3) 12.6 %

Available cash on hand

— — % 2,264 10.9 % — — % — — %

Total source of distribution coverage $ 19,806 100 % $ 20,825 100 % $ 7,185 100.0 % $ 47,816 100 %

Cash flows provided by operations (in accordance with GAAP)

$ 18,952 $ 12,294 $ 10,537 $ 41,783

Net loss attributable to stockholders (in accordance with GAAP)

$ (24,744) $ (22.811) $ (10,500) $ (58,055)

(1) Excludes distributions related to Class B Units and distributions to non-controlling interest holders other than those paid on our OP Units.

The decrease in total distributions was due to the change in the timing of our distributions to common stockholders (see disclosure above).

(2) Assumes the use of available cash flow from operations before any other sources.

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Each quarter and year-to-date period is evaluated separately for purposes of this table.

For the six months ended June 30, 2020 , cash flows provided by operations were $31.2 million .

We have not historically generated sufficient cash flow from operations to fund the payment of dividends and other distributions at the current rate.

For the nine months ended September 30, 2020, cash flows provided by operations were $41.8 million.

We had not historically generated sufficient cash flow from operations to fund the payment of dividends and other distributions at the current rate prior to switching from paying cash dividends to stock dividends on our common stock.

As shown in the table above, we funded distributions with cash flows provided by operations, proceeds received from common stock issued under our DRIP and available cash on hand, comprised of proceeds from financings and dispositions.

Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as we pay distributions in stock instead of cash, so this source will not be available again until we are able to resume paying distributions on our common stock, and there can be no assurance we will maintain participation at current levels.

Our ability to pay dividends on our Series A Preferred Stock, and starting with the Commencement Quarter, other distributions and maintain compliance with the restrictions on the payment of distributions in our Credit Facility depends on our ability to increase the amount of cash we generate from property operations which in turn depends on a variety of factors, including the duration and scope of the COVID-19 pandemic and its impact on our tenants and properties, our ability to complete acquisitions of new properties and improve operations at our existing properties.

There can be no assurance that we will complete acquisitions on a timely basis or on acceptable terms and conditions, if at all.

There can be no

assurance that we will complete acquisitions on a timely basis or on acceptable terms and conditions, if at all.

Our ability to improve operations at our existing properties is also subject to a variety of risks and uncertainties, many of which are beyond our control, and there can be no assurance we will be successful in achieving this objective.

As with the similar restriction in effect prior to the amendment to our Credit Facility in August 2020, we may still pay any cash distributions necessary to maintain its status as a REIT and may not pay any cash distributions (including dividends on Series A Preferred Stock) if a default or event of default exists or would result therefrom.

In addition, the lenders waived any defaults or event of defaults under those covenants that may have occurred during the fiscal quarter ended June 30, 2020 as well as any

additional default or event of default resulting therefrom prior to August 10, 2020.

The amendment provided that the covenants restricting payment of distributions to a threshold based on Modified FFO and requiring maintenance of a minimum ratio of consolidated total indebtedness to consolidated total asset value and a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges did not apply for the fiscal quarter ended June 30, 2020.

There can be no assurance our lenders will consent to any amendments or waivers that may become necessary to comply with our Credit Facility in the future.

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Our loan agreements require us to comply with specific reporting covenants.

As of June 30, 2020 , we were in compliance with the financial and reporting covenants under our loan agreements.

Following the amendment to our Credit Facility in August 2020, until the Commencement Quarter, we are required to use the proceeds from all asset sales, refinancings and financings (secured, unsecured or otherwise), recapitalizations, equity issuances and other similar capital transactions to prepay amounts outstanding under the Revolving Credit Facility.

While the operation of this provision would not prohibit us from immediately reborrowing any amounts so repaid if the amount available for future borrowings under the Credit Facility at that time was sufficient to permit us to do so and all other relevant conditions are met, there can be no assurances in this respect.

As of September 30, 2020, we were in compliance with the financial and reporting covenants under our loan agreements.

Following the amendment to our Credit Facility in August 2020, until the first day of the Commencement Quarter, we must use all the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to prepay amounts outstanding under the Revolving Credit Facility.

We may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings.

There can be no assurance these conditions will be met.

Contractual Obligations

There were no material changes in our contractual obligations as of June 30, 2020 , as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2019 .

There were no material changes in our contractual obligations as of September 30, 2020, as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2019.

Election as a REIT

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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 1. Financial Statements