What changed in this filing

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Item 1. Business

2021-03-30 compared with 2020-03-24 · 153 added, 152 removed, 188 unchanged (62% of the section changed)

We were incorporated on October 15, 2012 as a Maryland corporation that elected to be taxed as a REIT beginning with our taxable year ended December 31, 2013.

Substantially all of our business is conducted through Healthcare Trust Operating Partnership, L.P.

Our initial public offering of our 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 (the “Series A Preferred Stock”),closed, and we listed shares of our Series A Preferred Stock on The Nasdaq Global Market (“Nasdaq”) under the symbol “HTIA.”

We invest in healthcare real estate, focusing on seniors housing properties and medical office buildings (“MOB”), located in the United States.

We are an externally managed real estate investment trust for U.S.

federal income tax purposes (“REIT”) that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate focused on medical office buildings (“MOBs,”), healthcare properties leased on a triple net basis (“NNN properties”) and senior housing operating properties (“SHOPs”).

As of December 31, 2020, we owned 193 properties located in 31 states and comprised of 9.4 million rentable square feet.

On April 1, 2019, we published a new estimate of per share asset value (“Estimated Per-Share NAV”) equal to $17.50 as of December 31, 2018.

Our previous Estimated Per-Share NAV was equal to $20.25 as of December 31, 2017.

We intend to publish Estimated Per-Share NAV periodically at the discretion of board of directors (the “Board”), provided that such estimates will be made at least once annually.

We have no employees.

The Advisor has been retained by us to manage our affairs on a day-to-day basis.

We have retained the 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 for services related to managing our business and investments.

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

Preferred Stock Offering

In December 2019, we completed the issuance 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 .The gross proceeds from this offering were $40.3 million and net proceeds were $37.6 million after deducting the underwriting discount of $1.3 million and additional offering expenses of $1.4 million .

Portfolio Summary

The following table summarizes our portfolio of properties as of December 31, 2020:

Number of Properties

Rentable Square Feet

Asset Type Number of Properties Rentable Square Feet Gross

Asset Value (1)

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61 4,367,124 1,232,953 47.4 %

Total 193 9,383,484 $ 2,599,703 100.0 %

(1) Gross asset value represents total real estate investments, at cost ($2.6 billion total at December 31, 2020) and assets held for sale at carrying value ($0.1 million total at December 31, 2020), net of gross market lease intangible liabilities ($22.1 million total at December 31, 2020).

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(2) Includes two land parcels.

In constructing our portfolio, we are committed to a strategy dedicated to diversification of geography.

In constructing our portfolio, we are committed to diversifying our assets by geographic region.

The following table details the geographic distribution, by region, of our portfolio as of December 31, 2020:

Geographic Region

Number of Properties

Annualized Rental Income (1)

Geographic Region Number of Properties Annualized Rental Income (1)

(In thousands)

_______________

Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2019 , which includes tenant concessions such as free rent, as applicable, as well as gross revenue from our SHOPs (as defined below).

Business Strategy

We seek to protect and enhance long-term stockholder value by creating stable, reliable and growing income streams generated through the ownership of a balanced and diversified portfolio of healthcare real estate.

Northeast 19 $ 34,425 1,465,977

South 70 138,177 3,703,006

Midwest 74 107,586 2,735,934

West 30 43,796 1,478,567

Total 193 $ 323,984 9,383,484

(1) Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2020, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs (as defined below) for the fourth quarter of 2020.

Investment Strategy

Our investment strategy is guided by three core principles:

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and (3) maintaining a strong and flexible capital structure.

We have invested, and expect to continue investing, primarily in MOBs and seniors housing properties.

In addition, we may invest in facilities leased to hospitals, rehabilitation hospitals, long-term acute care centers, surgery centers, inpatient rehabilitation facilities, special medical and diagnostic service providers, laboratories, research firms, pharmaceutical and medical supply manufacturers and health insurance firms.

While we may invest in facilities across the healthcare continuum, our primary investment focus going forward is MOBs and Seniors Housing — Operating Properties (“SHOP”).

Our SHOP investments are held through a structure permitted under the REIT rules.

We have invested, and expect to continue investing, primarily in MOBs and seniors housing properties, primarily structured as SHOPs.

In addition, we may invest in facilities leased to hospitals, including rehabilitation hospitals including long-term acute care centers, surgery centers, inpatient rehabilitation facilities, special medical and diagnostic service providers, laboratories, research firms, pharmaceutical and medical supply manufacturers and health insurance firms.

While we may invest in facilities across the healthcare continuum, our primary investment focus going forward is MOBs and SHOPs.

Our SHOP investments are held through a structure permitted under the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA").

We generally acquire a fee interest in any property we acquire (a “fee interest” is the absolute, legal possession and ownership of land, property, or rights), although we may also acquire a leasehold interest (a “leasehold interest” is a right to enjoy the exclusive possession and use of an asset or property for a stated definite period as created by a written lease).

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We also may make preferred equity investments in an entity.

We have, and may in the future, enter into management agreements with healthcare operators to manage communities that are placed in a structure permitted by the REIT rules pursuant to which, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” We view this as a structure primarily to be used on properties that present attractive valuation entry points with long term growth prospects or drive growth by:

(i) transitioning the asset to a new third-party operator that can bring scale, operating efficiencies, or ancillary services;

or (ii) investing capital to reposition the asset.

A smaller part of our business may involve originating or acquiring loans secured by or related to the same types of properties in which we may invest directly.

Likewise, we may invest in commercial mortgage-backed securities (“CMBS”), securities of publicly-traded and private companies primarily engaged in real estate businesses, including REITs and other real estate operating companies, and securities issued by pass-through entities of which substantially all of the assets consist of qualifying assets or real estate-related assets.

For example, we may purchase the common stock, preferred stock, debt, or other securities of these entities or options to acquire these securities.

Examples of loans we may invest in include, but are not limited to, investments in first, second and third mortgage loans, securitized loans, wraparound mortgage loans, construction mortgage loans on real property and loans on leasehold interest mortgages.

We also may invest in participations in mortgage, bridge or mezzanine loans unsecured loans.

We do not currently intend to underwrite the securities of other issuers or offer equity or debt securities in exchange for property.

Our board of directors may change any of the foregoing policies without prior notice to our stockholders or a vote of our stockholders

Maintaining a Balanced, Well Diversified Portfolio of High-Quality Assets

We seek balance and diversity within our portfolio.

This extends to the mix of tenancy, geography, operator/managers and payors within our facilities.

Healthcare is the single largest industry in the United States based on contribution to Gross Domestic Product (“GDP”).

According to the National Health Expenditures Projections, 2018 - 2028 report by the Centers for Medicare and Medicaid Services (“CMS”):

(i) national health expenditures are projected to grow 5.2% in 2020 and at an average annual growth rate of 5.4% per year for 2019 through 2028 and (ii) the healthcare industry is projected to increase from 17.7% of U.S.

GDP in 2018 to 19.7% by 2028.

This growth in expenditures is projected to lead to significant growth in healthcare employment.

According to the U.S.

Department of Labor’s Bureau of Labor Statistics, the healthcare industry was one of the largest industries in the United States, providing approximately 19.9 million seasonally adjusted jobs as of December 31, 2020.

According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare practitioners and technical occupations and healthcare support) is projected to grow 15% from 2019 to 2029, adding approximately 2.4 million new jobs.

This growth is expected due to an aging population and the projected increase in the number of individuals who have access to health insurance.

We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for MOBs and other facilities that serve the healthcare industry.

In addition to the growth in national health expenditures and corresponding increases in employment in the healthcare sector, the nature of healthcare delivery continues to evolve due to the COVID-19 pandemic, impact of government programs, regulatory changes and consumer preferences.

We believe these changes have increased the need for capital among healthcare providers and increased incentives for these providers to develop more efficient real estate solutions in order to enhance the delivery of quality healthcare.

The aging of the U.S.

population has a direct effect on the demand for healthcare as older persons generally utilize healthcare services at a rate well in excess of younger people.

According to the Centers for Disease Control and Prevention (the “CDC”), 7.0% of all adults aged 65 years and over during 2018 needed help with personal care from another person.

For both sexes combined, adults aged 85 years and over (21.1%) were nearly three times as likely as adults aged 75 to 84 (8.0%) to need help with personal care from other persons;

adults aged 85 and over were nearly six times as likely as adults aged 65 to 74 (3.9%) to need help with personal care from other persons.

We believe that the aging population, improved chronic disease management, technological advances and healthcare reform will positively affect the demand for MOBs, seniors housing properties and other healthcare-related facilities and generate attractive investment opportunities.

The first wave of Baby Boomers, the largest segment of the U.S.

population, began turning 65 in 2011.

According to the U.S.

Census Bureau, the U.S.

population over 65 will grow to 85 million in 2060, up from 49 million in 2016.

This group will grow more rapidly than the overall population.

Thus, its share of the population will increase to 22% in 2050, from 15.2% in 2016.

Patients with diseases that were once life threatening are now being treated with specialized medical care and an arsenal of new pharmaceuticals.

Advances in research, diagnostics, surgical procedures, pharmaceuticals and a focus on healthier lifestyles have led to people living longer.

Finally, we believe that healthcare reform in the United States will continue to drive an increase in demand for medical services, and in particular, in the post-acute and long-term services which our tenants and operators provide.

We may invest in healthcare assets through development and joint venture partnerships.

As of December 31, 2020, 2019 and 2018, none of our tenants (together with their affiliates) had annualized rental income on a straight-line basis representing 10% or greater of total annualized rental income on a straight-line basis for the portfolio.

The following table lists the states where we 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 December 31, 2020, 2019 and 2018:

State 2020 2019 2018

20.6% 25.2% 16.6%

Georgia * * 10.1%

* 10.9% 13.1%

Pennsylvania 10.4% * 10.2%

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

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

As of December 31, 2019, we had 14 SHOP assets located in Michigan (the “Michigan SHOPs”) that are under contract to be sold pursuant to a definitive purchase and sale agreement (“PSA”).

Investing in Healthcare-related Facilities

Healthcare-related facilities include MOBs and outpatient facilities, seniors housing properties, such as assisted and independent living and memory care facilities, as well as hospitals, inpatient rehabilitation hospitals, long-term acute care centers, surgery centers, skilled nursing facilities, specialty medical and diagnostic facilities, research laboratories and pharmaceutical buildings.

While we may invest in facilities across the healthcare continuum, our primary investment focus going forward is MOBs and SHOPs.

(1) We expect to sell the recently completed development project in Jupiter, Florida, in late March or second quarter 2021 pursuant to the definitive purchase and sale agreement (“PSA”) we entered into in August 2020.

In addition, in August 2020 we entered into a PSA to sell a skilled nursing facility in Wellington, Florida, which is expected to close later in 2021.

The PSAs are subject to conditions and there can be no assurance we will complete these transactions, or any future acquisitions or other investments, on a timely basis or on acceptable terms and conditions, if at all.

If these sales had been completed prior to December 31, 2020, Florida would have represented 10.0% of our consolidated annualized rental income on a straight-line basis.

(2) During the year ended December 31, 2020, we sold 11 SHOPs located in Michigan, seven of which were transferred to the buyer during the fourth quarter of 2020, and four of which remained classified as held for sale on our consolidated balance sheet as of December 31, 2020.

The remaining four properties were transferred to the buyer during the first quarter of 2021.

As of December 31 2019 we owned 14 SHOPs located in Michigan that were classified as assets held for sale on our consolidated balance sheet.

Three of the 14 properties that are still owned by us after the aforementioned sale, were reclassified

from held for sale to held for use in 2020.

For a complete description of the Michigan SHOP transaction, see N o te 3 — Real Estate Investments, Net - “Assets Held for Sale and Related Impairments” below.

Medical Office Building and Outpatient Facilities

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The following table reflects the on campus, off campus, affiliated and non-affiliated MOB composition of our portfolio as of December 31, 2020:

MOB Classification

Number of Buildings

Rentable Square Feet

MOB Classification Number of Properties Rentable Square Feet

On Campus 20 1,212,405

Off Campus 97 2,699,532

117 3,911,937

Affiliated 78 2,874,174

Non-affiliated 39 1,037,763

117 3,911,937

Seniors Housing Properties

As of December 31, 2019 , we owned 59 seniors housing properties under a structure permitted the REIT rules, our SHOP segment, and four seniors housing properties under long term leases, which are included within our triple net leased healthcare facilities segment.

Under the REIT rules, a REIT may lease qualified healthcare properties on an arm’s length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an eligible independent contractor.

As of December 31, 2020, we owned 59 seniors housing properties under the RIDEA structure in our SHOP segment.

Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by a person who qualifies as an eligible independent contractor.

Seniors housing properties primarily consist of independent living facilities, assisted living facilities and memory care facilities.

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Services provided by our operators or tenants in these facilities are primarily paid for by the residents directly and are less reliant on government reimbursement programs such as Medicaid and Medicare.

To date there have been no known cases of coronavirus infection among the residents and staff of our seniors housing properties.

In early March 2020, we implemented preventative actions at all our seniors housing properties in our SHOP segment, including restriction of visitation except in very limited and controlled circumstances, the practice of social distancing measures, and the immediate screening of 100% of all persons entering these facilities.

Some of the additional steps we have taken to address the coronavirus pandemic include, among other things, enhanced training for staff members, the implementation of Telehealth to help residents be safe while keeping appointments with important, but non-emergency, health providers, virtual tours for potential new residents, and agreements between some of our facilities and local lab partners to provide testing services.

In the absence of visitors, outside vendors and the observance of other precautionary measures, our on-site team members and caregivers have stepped in to provide care for our residents in addition to required medical care.

We believe that these actions will help prevent the introduction of the coronavirus at our properties, but there can be no assurance in this regard.

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 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.

Assisted Living and Memory Care Facilities

Assisted living facilities are licensed care facilities that provide personal care services, support and housing for those who need help with activities of daily living, such as bathing, eating and dressing, yet require limited medical care.

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As of December 31, 2020, our seniors housing properties included approximately 2,437 assisted living units and 1,307 memory care units.

Independent Living Facilities

Independent living facilities are designed to meet the needs of seniors who choose to live in an environment surrounded by their peers with services such as housekeeping, meals and activities.

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However, independent living facilities on their own are not treated as qualified health care properties eligible to be leased to a TRS.

Hospitals, Post-Acute Care and Other Facilities

Our hospitals, post-acute care and other facilities are leased to tenants that provide healthcare services.

As of December 31, 2019 , we owned 61 other healthcare-related assets, including hospitals and post-acute care facilities.

Hospitals, Post-Acute Care, Skilled Nursing and Other Facilities

Our hospitals, post-acute care, skilled nursing and other facilities are leased to tenants that provide healthcare services.

As of December 31, 2020, we owned 15 other healthcare-related assets, including hospitals, post-acute care, skilled nursing, and other facilities.

Hospitals can include general acute care hospitals, inpatient rehabilitation hospitals, long-term acute care hospitals and surgical and specialty hospitals.

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Certain facilities provide some of the foregoing services on an outpatient basis.

Our post-acute care services may be provided by SNFs.

SNFs offer licensed therapy services, nutrition services, social services, activities, housekeeping and laundry services, medical services prescribed by physicians and rehabilitative services to residents in need of nursing care, but who do not require hospitalization.

Inpatient rehabilitation services provided by our operators and tenants in these facilities are primarily paid for by private sources or through the Medicare and Medicaid programs.

Healthcare Industry

Healthcare is the single largest industry in the United States based on Gross Domestic Product (“GDP”).

According to the National Health Expenditures Projections, 2018 - 2027 report by the Centers for Medicare and Medicaid Services (“CMS”):

(i) national health expenditures are projected to grow 4.8% in 2019 and at an average annual growth rate of 5.5% per year for 2018 through 2027 and (ii) the healthcare industry is projected to increase from 17.9% of U.S.

GDP in 2017 to 19.4% by 2027.

This growth in expenditures is projected to lead to significant growth in healthcare employment.

According to the U.S.

Department of Labor’s Bureau of Labor Statistics, the healthcare industry was one of the largest industries in the United States, providing approximately 20.6 million seasonally adjusted jobs as of December 31, 2019.

According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare practitioners and technical occupations and healthcare support) is projected to grow 14% from 2018 to 2028, adding approximately 1.9 million new jobs.

This growth is expected due to an aging population and the projected increase in the number of individuals who have access to health insurance.

We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for MOBs and other facilities that serve the healthcare industry.

In addition to the growth in national health expenditures and corresponding increases in employment in the healthcare sector, the nature of healthcare delivery continues to evolve due to the impact of government programs, regulatory changes and consumer preferences.

In particular, we believe the following demographic factors and trends are creating an attractive environment in which to invest in healthcare properties.

The aging of the U.S.

population has a direct effect on the demand for healthcare as older persons generally utilize healthcare services at a rate well in excess of younger people.

According to the Centers for Disease Control and Prevention (the “CDC”), 6.9% of all adults aged 65 years and over during the first half of 2018 needed help with personal care from another person.

For both sexes combined, adults aged 85 years and over (19.6%) were nearly three times as likely as adults aged 75 to 84 (8.7%) to need help with personal care from other persons;

adults aged 85 and over were nearly six times as likely as adults aged 65 to 74 (3.7%) to need help with personal care from other persons.

Also, according to the CDC, symptoms of Alzheimer’s disease generally do not appear until after the age of 60.

Starting at age 65, the risk of developing the disease doubles every five years, and is the sixth leading cause of death among all adults and the fifth leading cause for those aged 65 or older.

Up to 5 million Americans currently have Alzheimer’s disease and by 2060 the number is expected to more than triple to 14 million due to the aging of the population.

The first wave of Baby Boomers, the largest segment of the U.S.

population, began turning 65 in 2011.

According to the U.S.

Census Bureau, the U.S.

population over 65 will grow to 85 million in 2060, up from 49 million in 2016.

This group will grow more rapidly than the overall population.

Thus, its share of the population will increase to 22.7% in 2050, from 15.2% in 2016.

Patients with diseases that were once life threatening are now being treated with specialized medical care and an arsenal of new pharmaceuticals.

Advances in research, diagnostics, surgical procedures, pharmaceuticals and a focus on healthier lifestyles have led to people living longer.

Pursuing Accretive and Opportunistic Investment Opportunities

Depending upon market conditions, we believe that new investments will be available in the future which will be accretive to our earnings and will generate attractive returns to our stockholders.

We invest in MOBs, seniors housing and certain other healthcare real estate primarily through acquisitions, although we have also done so, and may continue to do so, through development and joint venture partnerships.

In determining whether to invest in a property, we focus on the following:

(1) the experience of the obligor’s/partner’s management team;

(2) the historical and projected financial and operational performance of the property;

(3) the credit of the obligor/partner;

(4) the security for any lease or loan;

(5) the real estate attributes of the building, its age and location;

(6) the capital committed to the property by the obligor/partner;

and (7) the operating fundamentals of the applicable industry.

We conduct market research and analysis for all potential investments.

In addition, we review the value of all properties, the interest rates and covenant requirements of any facility-level debt to be assumed at the time of the acquisition and the anticipated sources of repayment of any existing debt that is not to be assumed at the time of the acquisition.

We monitor our investments through a variety of methods determined by the type of property.

Our proactive and comprehensive asset management process generally includes review of monthly financial statements and other operating data for each property, review of obligor/partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral.

Our Advisor’s internal asset managers actively manage and monitor the MOBs portfolio with a comprehensive process including tenant relations, lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs, and market conditions among other things.

In monitoring our portfolio, our Advisor’s personnel use a proprietary database to collect and analyze property-specific data.

Additionally, we conduct extensive research to ascertain industry trends.

Maintaining a Strong and Flexible Capital Structure

Impact of COVID-19 Pandemic

Starting in early March 2020, we began to implement required and voluntary preventative actions at all our seniors housing properties in our SHOP segment, including restriction of visitation except in very limited and controlled circumstances, the practice of social distancing measures, increased infection control procedures and the immediate screening of individuals entering these facilities.

Some of the additional steps we have taken to address the COVID-19 pandemic include, among other things, enhanced training for staff members, the implementation of telehealth to help residents remain safe while keeping appointments with important, but non-emergency, health providers, virtual tours for potential new residents, and agreements between some of our facilities and local lab partners to provide testing services.

In the absence of visitors and outside vendors and in the observance of other precautionary measures, our on-site team members and caregivers have stepped in to provide care for our residents in addition to required medical care.

As with almost all senior housing providers, there have been cases of coronavirus infection among the residents and staff of our seniors housing properties but we believe the actions our SHOP segment has taken has limited those infections.

In addition, pursuant to guidelines from the Centers for Disease Control (“CDC”), health care personnel and residents of long-term care facilities, including SNFs and assisted living facilities are the highest priority group to receive COVID-19 vaccines.

Since its initial classification of the highest priority group, the CDC has expanded the recommended pool of eligible vaccine recipients to include frontline essential workers and people aged 75 years and older.

While the CDC guidelines are only recommendations, most states have adopted similar guidelines or otherwise identified elderly individuals as a group that should receive the vaccines first.

The COVID-19 stimulus bill (the “COVID-19 Stimulus”), which has been passed by Congress and signed into law by President Biden, provides, among other things, increased funding to improve vaccine distribution.

Improvements in vaccine distribution could directly affect our operations by increasing the vaccination rate amongst personnel and residents of long-term care facilities, as members of the highest priority group.

The extent to which the ongoing global COVID-19 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 depend on future developments, including the scope, severity and duration of the pandemic, the willingness of residents to remain in and enter our facilities and remain able to pay for their stays, and the actions taken to contain COVID-19 or treat its impact, the effectiveness of the vaccines and the willingness of our healthcare personnel and residents to receive the vaccines and delays in distribution of the vaccines, among others, which are highly uncertain and cannot be predicted with confidence, but could be material.

The financial impact of the COVID-19 pandemic has been partially offset by funds received under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The Company received $3.6 million in these funds during the year ended December 31, 2020, related to four of our SHOPs 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 year ended December 31, 2020 to offset the incurred COVID-19 expenses.

Subsequent to December 31, 2020, we received an additional $5.1 million in funds through the CARES Act.

In addition, the Company has applied for additional funds for other SHOP, assisted living or similar facilities.

However, those applications have not yet been approved.

There can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.

A smaller part of our business may involve originating or acquiring loans secured by or related to the same types of properties in which we may invest directly.

As of December 31, 2020, we do not own any assets of this type.

Organizational Structure

Substantially all of our business is conducted through Healthcare Trust Operating Partnership, L.P.

(the “OP”), a Delaware limited partnership, and its wholly owned subsidiaries.

Our Advisor manages our day-to-day business with the assistance of our property manager, Healthcare Trust Properties, LLC (the “Property Manager”) (the “Property Manager”).

Our Advisor and Property Manager are under common control with AR Global Investments LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us.

We also reimburse these entities for certain expenses they incur in providing these services to us.

We own our SHOPs through the RIDEA structure, pursuant to which, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” We view this as a structure primarily to be used on properties that present attractive valuation entry points with long term growth prospects or drive growth by:

(i) transitioning the asset to a new third-party operator that can bring scale, operating efficiencies, or ancillary services;

or (ii) investing capital to reposition the asset.

Financing Strategies and Policies

We utilize a combination of debt and equity to fund our investment activity.

Our debt and equity levels are determined by management in consultation with the Board.

For short-term purposes, we may borrow from our Revolving Credit Facility and our Fannie Mae Master Credit Facilities, which include a secured credit facility (the “KeyBank Facility”) with KeyBank together with a secured credit facility (the “Capital One Facility”) with Capital One Multifamily Finance, LLC, an affiliate of Capital One, National Association (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 March 13, 2019, we amended and restated our existing senior secured revolving credit facility (the “Prior Credit Facility”), which was scheduled to mature on March 21, 2019, by entering into our Credit Facility with primarily the same lenders that were lenders under the Prior Credit Facility, with Keybank National Association remaining as agent for the lenders.

Our Credit Facility consists of two components, the Revolving Credit Facility and our Term Loan.

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

For short-term purposes, we may borrow from our revolving credit facility (our

“Revolving Credit Facility”) and our Fannie Mae Master Credit Facilities, which include a secured credit facility (the “KeyBank Facility”) with KeyBank together with a secured credit facility (the “Capital One Facility”) with Capital One Multifamily Finance, LLC, an affiliate of Capital One, National Association (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”).

Our senior secured credit facility (our “Credit Facility”) consists of two components, our Revolving Credit Facility and our term loan (our “Term Loan”).

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

As of December 31, 2020, the Fannie Mae Master Credit Facilities are secured by mortgages on 21 properties, in aggregate.

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federal income and excise taxes on our undistributed income.

Certain limitations are imposed on REITs with respect to the ownership and operation of seniors housing properties.

Generally, to qualify as a REIT, we cannot directly or indirectly operate seniors housing properties.

Instead, such facilities may be either leased to a third-party operator or leased to a TRS and operated by a third party on behalf of the TRS.

Accordingly, we have formed a TRS that is wholly owned by the OP to lease its SHOPs and the TRS has entered into management contracts with unaffiliated third-party operators to operate the facilities on its behalf.

As of December 31, 2020, we owned 59 seniors housing properties, excluding two land parcels, which we lease to our TRS.

The TRS is a wholly-owned subsidiary of the OP.

The market for MOBs, seniors housing and other healthcare-related real estate is highly competitive.

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The healthcare industry is one of the most regulated industries in the United States and is currently experiencing rapid regulatory change and uncertainty.

The legal challenges and legislative initiatives to roll back the Patient Protection and Affordable Care Act (the “Affordable Care Act” or “ACA”) continue and the outcomes are uncertain.

The regulatory uncertainty and the potential impact on our tenants and operators could have an adverse material effect on their ability to satisfy their contractual obligations.

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The business and operations of our tenants and therefore our business could be materially impacted by, among other things, a significant expansion of applicable federal, state or local laws and regulations, continued judicial and legislative changes to the ACA, future attempts to reform healthcare, new interpretations of existing laws and regulations, and changes or increased emphasis on certain enforcement priorities.

Additionally, the ongoing political and legal challenges to the ACA leave its future uncertain.

In December 2018, a Texas federal district court judge ruled that the ACA’s individual mandate violates the Constitution.

This decision did not enjoin the enforcement of the ACA.

The district court decision was appealed to the U.S.

Court of Appeals for the Fifth Circuit, which, in December 2019 also found that the indiv idual mandate was unconstitutional.

The Fifth Circuit court, however, sent the case back to the Texas federal district court for additional analysis of what the ruling means for the constitutionality of the entire ACA.

On March 2, 2020, the Supreme Court granted a petition of certiorari and has agreed to hear the case.

The confusion around the state of the ACA, the shift towards less comprehensive health insurance coverage, higher deductibles, and increased consumer cost-sharing on health expenditures could have a material adverse effect on our tenants’ financial conditions and results of operations and, in turn, their ability to satisfy their contractual obligations.

In the lead up to the 2020 U.S.

presidential elections, there have b een ongoing debates in the political sphere regarding possible government healthcare reforms in order to enact “Medicare for All” legislation.

If enacted, “Medicare for All” could potentially have a negative effect on provider reimbursement rates and thus our tenants’ ability to satisfy their financial obligations.

Additionally, the ongoing political and legal challenges to the Patient Protection and Affordable Care Act (the “Affordable Care Act” or “ACA”) leave its future uncertain.

Our tenants and operators are subject to extensive federal, state, and local laws, regulations and industry standards which govern business operations, physical plant and structure, patient and employee health and safety, access to facilities, patient rights - including privacy, price transparency, fewer restrictions on access to care - and security of health information.

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or (ii) purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in party under a federal health care program;

The Federal Physician Self-Referral Prohibition (42 USC Section 1395nn which is commonly referred as the “Stark Law”), which prohibits referrals by physicians of Medicare patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or certain other financial arrangements, unless an exception applies, and prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral;

• The Stark Law (42 USC Section 1395nn), which prohibits referrals by physicians of Medicare patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or certain other financial arrangements, unless an exception applies, and prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral;

• The FCA (13 USC Sections 3729-3733) creates liability for any person who submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government.

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Reimbursement

We and our tenants derive a large portion of our revenues from insurance payments with the remainder coming from Medicare and Medicaid reimbursement and private pay.

The reimbursement methodologies for healthcare facilities are constantly changing and federal and state authorities may implement new or modified reimbursement methodologies that may negatively impact healthcare operations.

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Federal and state budget pressures also continue to escalate and, in an effort to address actual or potential budget shortfalls, Congress and many state legislatures may continue to enact reductions to Medicare and Medicaid expenditures through cuts in rates paid to providers or restrictions in eligibility and benefits.

The expansion in health insurance coverage under the ACA is likely going to continue to erode in 2020 as cuts in advertising and outreach during the marketplace open-enrollment periods, shorter open enrollment periods, and other changes have left many Americans uncertain about their ability to access and be eligible for coverage.

Additionally, the repeal of the individual mandate penalty included in the Tax Cuts and Jobs Act of 2017 (“TCJA”), recent actions to increase the availability of insurance policies that do not include ACA minimum benefit standards, and support for Medicaid work requirements will likely impact the market.

Accordingly, current and future payments under federal and state healthcare programs may not be sufficient to sustain a facility’s operations, which could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of, the facility’s leases and other agreements with us.

In addition to legislative and executive actions relating to the scope of the ACA, increased enforcement will likely continue to impact the financial framework for healthcare operators and facilities.

For example, CMS is focused on reducing what it considers to be payment errors by identifying, reporting, and implementing actions to reduce payment error vulnerabilities.

In November 2019, CMS announced its successes in reducing the 2019 Medicare improper payment rate and specifically called out the successes of its actions to address improper payments in home health claims.

In addition, CMS is currently in the midst of transitioning Medicare from a traditional fee for service reimbursement model to a capitated system, which means medical providers are given a set fee per patient regardless of treatment required, and value-based and bundled payment approaches, where the government pays a set amount for each beneficiary for a defined period of

time, based on that person’s underlying medical needs, rather than based on the actual services provided.

Providers and facilities are increasing responsible to care for and be financially responsible for certain populations of patients under the population health models and this shift in patient management paradigm is creating and will continue to create unprecedented challenges for providers.

Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), permanently repealed the Sustainable Growth Rate formula (“SGR”), and provided for an annual rate increase of 0.5% for physicians through 2019, but imposed a six-year freeze on fee updates from 2020 through 2025.

In November 2020, CMS announced its successes in reducing the 2020 Medicare improper payment rate and specifically called out the successes of its actions to address improper payments in home health and SNF claims.

Providers and facilities are increasingly responsible to care for and be financially responsible for certain populations of patients under the population health models and this shift in patient management paradigm is creating and will continue to create unprecedented challenges for providers.

Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), permanently repealed the Sustainable Growth Rate formula, and provided for an annual rate increase of 0.5% for physicians through 2019, but imposed a six-year freeze on fee updates from 2020 through 2025.

MACRA established a new payment framework, called the Quality Payment Program, which modified certain Medicare payments to “eligible clinicians,” including physicians, dentists, and other practitioners.

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This could adversely impact the medical properties that house these physicians and medical technology providers.

In addition, on August 7, 2019, CMS announced a final rule that projects increased aggregate Medicare payments to skilled nursing facilities by 2.4 percent for fiscal year 2019.

If this rate increases and payments under Medicare to our tenants do not continue or increase, our tenants may have difficulty making rent payments to us.

Under a program facilitated by the CMS known as the SNF Value-Based Purchasing Program, CMS began withholding 2% of SNF Medicare payments beginning October 1, 2018, to fund an incentive payment pool.

CMS will then redistribute 50-70% of the withheld payments back to high performing SNFs.

The lowest ranked 40% of facilities will receive payments that are less than what they otherwise would have received without the program.

In addition, on July 31, 2020, CMS announced a final rule that projects increased aggregate Medicare payments to SNF by 2.2 percent for fiscal year 2021.

If payments under Medicare to our tenants do not continue or increase, our tenants may have difficulty making rent payments to us.

Under a program facilitated by the CMS known as the Skilled Nursing Facility Value-Based Purchasing Program, CMS began withholding 2% of SNF Medicare payments beginning October 1, 2018, to fund an incentive payment pool.

CMS then redistributes 50-70% of the withheld payments back to high performing SNFs.

The lowest ranked 40% of facilities receive payments that are less than what they otherwise would have received without the program.

As a result, certain of our tenants could receive less in Medicare reimbursement payments, which could adversely affect their ability to make rent payments to us.

Effective October 1, 2019, CMS finalized a new case-mix classification system, the Patient-Driven Payment Model (“PDPM”).

PDPM classifies SNF patients in Medicare Part A-covered stays into payment groups based on clinically relevant factors using diagnosis codes, rather than by the volume of services.

This shifts the focus from the amount of care provided to

instead use the patient’s condition and resulting care needs to determine Medicare reimbursement.

Future changes to payment rates or methodology under the PDPM system could reduce the reimbursement our tenants receive.

For example, CMS has indicated that it is working toward a unified payment system for post-acute care services, including those provided by SNFs, home health agencies, and other long-term care providers.

Certain of our facilities are also subject to periodic pre- and post-payment reviews and other audits by governmental authorities, which could result in recoupments, denials, or delay of payments.

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All of the factors discussed-recoupment of past payments or denial or delay of future payments-could adversely affect an operator’s ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of its leases and other agreements with us.

Assisted and independent living services generally are not reimbursable under government reimbursement programs, such as Medicare and Medicaid.

Most of the resident fee revenues generated by our SHOPs, therefore, are derived from private pay sources consisting of the income or assets of residents or their family members.

The rates for these residents are set by the facilities based on local market conditions and operating costs.

We regularly assess the financial implications of reimbursement rule changes on our tenants, but we cannot assure you that current rules or future updates will not materially adversely affect our operators and tenants, which, in turn, could have a material adverse effect on their ability to pay rent and other obligations to us.

See “Item 1A.

“Risk Factors — Risks Related to the Healthcare Industry — Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements could adversely affect the profitability of our tenants and hinder their ability to make rent payments to us” and “— A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by certain of our tenants.”

Other Regulations

Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity.

Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, the Americans with Disabilities Act of 1990, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity.

We believe that we have all permits and approvals necessary under current law to operate our investments.

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We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations in 2020 and do not expect that we will be required to make any such material capital expenditures during 2021.

We have no employees.

Instead, the employees of our Advisor and other affiliates of AR Global perform a full range of services for us, including acquisitions, property management, accounting, legal, asset management and investor relations services.

We are dependent on these affiliates for services that are essential to us, including asset acquisition decisions, property management and other general and administrative responsibilities.

In the event that any of these companies were unable to provide these services to us, we would be required to provide such services ourselves by hiring our own workforce or obtaining such services from an unrelated party at potentially higher costs.

Human Capital Resources

We are an externally managed company and thus have no employees.

We have retained the Advisor pursuant to a long-term advisory contract to manage our affairs on a day-to-day basis.

We have also entered into agreements with our Property Manager to manage and lease our properties.

The employees of the Advisor, Property Manager, and their respective affiliates perform a full range of services for us, including acquisitions, property management, accounting, legal, asset management, investor relations and all general administrative services.

We depend on the Advisor and the Property Manager for services that are essential to us.

If the Advisor and the Property Manager were unable to provide these services to us, we would be required to provide these services ourselves or obtain them from other sources.

Estimate of Net Asset Value

On April 3, 2020, we published a new estimate of per share asset value (“Estimated Per-Share NAV”) equal to $15.75 as of December 31, 2019.

Our previous Estimated Per-Share NAV was equal to $17.50 as of December 31, 2018.

Unlike the per

share amounts in this Annual Report on Form 10-K, the Estimated Per-Share NAV has not been retroactively adjusted to reflect the payment of dividends in the form of common stock and will not be adjusted for stock dividends paid or that may be paid in the future until the Board determines a new Estimated Per-Share NAV which is expected in early April 2021.

Dividends paid in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when dividends paid in stock are issued;

however, each stockholder will receive the same number of new shares, the total value of our common stockholder’s investment, all things equal, will not change assuming no sales or other transfers.

We intend to publish Estimated Per-Share NAV periodically at the discretion of board of directors (the “Board”), provided that such estimates will be made at least once annually.

Available Information

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The website contains reports, proxy statements and information statements, and other information, which you may obtain free of charge.

In addition, copies of our filings with the SEC may be obtained from the website maintained for us and our affiliates at www.healthcaretrustinc.com or www.ar-global.com .

In addition, copies of our filings with the SEC may be obtained from our website www.healthcaretrustinc.com .

Access to these filings is free of charge.

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

What changed 10-K

Item 1. Business