What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-03-18 compared with 2021-03-30 · 278 added, 344 removed, 512 unchanged (55% of the section changed)

4 unchanged sentences

Please see “Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K for a description of these risks and uncertainties.

We are an externally managed REIT that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate focused on MOBs, NNN properties, and SHOPs.

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 and other healthcare-related buildings and senior housing operating properties.

Prior to December 31, 2021, we had three reportable segments 1) Former MOBs, 2) Former NNN and 3) SHOPs.

As a result of strategic property divestitures in our Former NNN segment, and transitions of certain properties reported in our Former NNN segment into our SHOP segment, we have combined the properties in our Former NNN segment with the properties in our Former MOB segment to form a single set of MOBs.

As a result, effective December 31, 2021 we have determined that we have two reportable segments, with activities related to investing in MOBs and SHOPs.

All prior periods presented in this Annual Report on Form 10-K have been conformed to the presentation of our new reportable segment structure.

As of December 31, 2021, we owned 202 properties located in 33 states and comprised of 9.2 million rentable square feet.

4 unchanged sentences

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.

We operate in two reportable business segments for management and internal financial reporting purposes:

MOBs and SHOPs.

In our MOB operating segment, we own, manage, and lease single and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent.

Our Property Manager or third party managers manage our MOBs.

In our SHOP segment, we invest in seniors housing properties using the RIDEA structure.

As of December 31, 2021, we had six eligible independent contractors operating 54 SHOPs (not including two land parcels).

All of our properties across both business segments are located throughout the United States.

Subsequent to December 31, 2021, we terminated one of our independent contractors who managed 20 SHOPs and those management duties were assumed by other existing eligible independent contractors effective March 1, 2022 which reduced our active independent contractors to five.

We have declared quarterly dividends entirely in shares of our common stock equal to 0.01349 shares of our common stock on each share of our outstanding common stock on October 1, 2020 and January 4, 2021.

These stock dividends were issued on October 15, 2020 and January 15, 2021 to holders of record of our common stock at the close of business on October 8, 2020 and January 11, 2021, respectively.

We have declared quarterly dividends entirely in shares of our common stock equal to 0.014655 shares of our common stock on each share of our outstanding common stock on April 2, 2021, July 1, 2021, October 1, 2021, and January 3, 2022.

These stock dividends were issued on April 15, 2021, July 15, 2021, October 15, 2021, and January 15, 2022 to holders of record of our common stock at the close of business on April 8, 2021, July 8, 2021, October 8, 2021, and January 8, 2022, respectively.

Dividends payable entirely in shares of our common stock are treated in a fashion similar to a stock split for accounting purposes specifically related to per-share calculations for the current and prior periods.

The aggregate impact of these stock dividends was an increase of 0.08871 shares, cumulatively, for every one share of common stock.

No additional shares, except for the dividends paid in the form of additional shares of common stock, were issued during the three months ended December 31, 2020.

No additional shares, except for the dividends paid in the form of additional shares of common stock, were issued during the year ended December 31, 2021.

Additionally, other references to weighted-average shares outstanding and per-share amounts have been retroactively adjusted for the stock dividends and are noted as such throughout the accompanying financial statements and footnotes.

On April 3, 2020, we published a new Estimated Per-Share NAV equal to $15.75 as of December 31, 2019.

On March 31, 2021, we published a new Estimated Per-Share NAV equal to $14.50 as of December 31, 2020.

Our previous Estimated Per-Share NAV was equal to $15.75 as of December 31, 2019.

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.

The Estimated Per-Share NAV has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in early April 2022.

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;

2 unchanged sentences

Management Update on the Impacts of the COVID-19 Pandemic

The economic uncertainty created by the COVID-19 global pandemic has created several risks and uncertainties that may impact our business, including our future results of operations and our liquidity.

A pandemic, epidemic or outbreak of a contagious disease, such as the ongoing global pandemic of COVID-19 affecting states or regions in which we or our tenants operate could have material and adverse effects on our business, financial condition, results of operations and cash flows.

The ultimate impact on our results of operations, our liquidity and the ability of our tenants to continue to pay us rent will depend on numerous factors including the overall length and severity of the COVID-19 pandemic.

Management is unable to predict the nature and scope of any of these factors.

These factors include the following, among others:

• The negative impacts of the COVID-19 pandemic has caused and may continue to cause certain of our tenants to be unable to make rent payments to us timely, or at all.

However, we have taken proactive steps with regard to rent collections to mitigate the impact on our business (see “—Management Actions” below).

The COVID-19 global pandemic has created several risks and uncertainties that have had and may continue to have an impact on our business, including our financial condition, future results of operations and our liquidity.

Negative impacts of the COVID-19 pandemic have caused some of our tenants to be unable to make rent payments to us timely, or at all.

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 December 31, 2020, our MOB segment had an occupancy of 91.6% with a weighted-average remaining lease term of 4.9 years, (based on annualized straight-line rent as of December 31, 2020) and our triple-net leased healthcare facilities segment had an occupancy of 94.5% with a weighted average remaining lease term of 6.5 years (based on annualized straight-line rent as of December 31, 2020) and our SHOP segment had an occupancy of 75.1%.

During the year ended December 31, 2020, we experienced a decline in occupancy and an increase in costs at our SHOP portfolio, however, we received grants under the CARES Act of $3.6 million that helped offset the COVID-19 related operating

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

For additional information on our SHOP portfolio, see the “Management Actions - Seniors Housing Properties” section below.

• Capital market volatility and a tightening of credit standards could negatively impact our ability to obtain debt financing.

We do not have any significant debt principal repayments due until 2024.

• The volatility in the 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 senior “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.

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 continue to depend on future developments, including the scope, severity and duration of the pandemic, and the actions taken to contain the COVID-19 or treat its impact, among others, which are highly uncertain and cannot be predicted with confidence, but could be material.

As of December 31, 2021, our MOB segment had an occupancy of 91.5% with a weighted-average remaining lease term of 4.9 years, (based on annualized straight-line rent as of December 31, 2021), and our SHOP segment had an occupancy of 74.1% weighted by unit count.

During the second, third and fourth quarters of 2021, we experienced relative stability in occupancy and operating costs in our SHOP portfolio, although future developments in the course of the pandemic may cause further adverse impacts on our occupancy and cost levels.

Occupancy and operating costs in our MOB segment was relatively stable during these quarters.

The negative impact of the pandemic on our results of operations and cash flows has impacted and could continue to impact our ability to comply with covenants in our Credit Facility, and the amount available for future borrowings thereunder.

We would have been in default of a covenant contained in the Credit Facility requiring us to maintain a certain minimum fixed charge coverage ratio for the four fiscal quarter period ended September 30, 2021.

We entered into an amendment to our Credit Facility on November 12, 2021, in which the lenders waived any defaults or event of defaults under the covenant requiring us to maintain a fixed charge coverage ratio of 1.60 to 1.00 for the quarter ended September 30, 2021 and reduced this covenant to 1.50 to 1.00 until the earlier of December 31, 2022 and the date on which we elect to terminate this relief, among other changes (see Liquidity and Capital Resources section below and see Note 5 — Credit Facilities, Net to our consolidated financial statements included in this Annual Report on Form 10-K for additional Information).

For additional information on the risks and uncertainties associated with the COVID-19 pandemic, please see Item 1A .

“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” included in this Annual Report on Form 10-K for the year ended December 31, 2021.

The Advisor has responded to the challenges resulting from the COVID-19 pandemic.

Beginning in early March, the Advisor took proactive steps to prepare for and actively mitigate the inevitable disruption COVID-19 would cause, such as enacting safety measures, both required or recommended by local and federal authorities, including remote working policies, cooperation with localized closure or curfew directives, and social distancing measures at all of our properties.

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 year ended December 31, 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

Rent Collections

We experienced delays in rent collection in the second, third and fourth quarters of 2020 and the first quarter of 2021.

We have taken several steps to mitigate the impact of the pandemic on our business.

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.

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.

We have achieved mutually agreeable solutions with our tenants and in some cases, during the year ended December 31, 2020, we executed lease amendments wherein we agreed to defer payment.

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 100% of the original cash rent due for the fourth quarter of 2020 in our MOB segment and 100% in our triple-net leased healthcare facilities segment.

Cash rental payments for our 59 SHOPs 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, third or fourth quarter 2020 cash rent collected for our SHOP segment.

Rent collections in January and February 2021 were materially consistent with the fourth quarter 2020, and we expect this trend to continue.

During the year ended December 31, 2021, we did not enter into any rent deferral agreements with any of our tenants and all amounts previously deferred under prior rent deferral agreements have been collected.

We collected approximately 100% of the original cash rent due for the fourth quarter of 2020 and throughout 2021 in our MOB segment.

Cash rental payments for our 54 SHOPs is primarily paid by the residents through private payer insurance or directly, and to a lesser extent, by government reimbursement programs such as Medicaid and Medicare, therefore we have not provided the amount of quarterly cash rent collected for our SHOP segment.

“Original cash rent” refers to contractual rents on a cash basis due from tenants as stipulated in their original executed lease agreement at inception or as amended, prior to any rent deferral agreement.

We calculate “original cash rent collections” by comparing the total amount of rent collected during the period to the original cash rent due.

Total rent collected during the period includes both original cash rent due and payments made by tenants pursuant to rent deferral agreements.

Eliminating the impact of deferred rent paid, we collected nearly 100% of original cash rent due for each quarter of 2021.

A deferral agreement is an executed or approved amendment to an existing lease to defer a certain portion of cash rent due to a future period.

During the year ended December 31, 2020, we granted rent deferrals for an aggregate of $0.4 million or less than 1% of original cash rent due for the year.

No additional rent was deferred during the year ended December 31, 2021.

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.

We offered $0.1 million and $0.4 million of rent concessions during the years ended December 31, 2021 and 2020, respectively.

Seniors Housing Properties

2 unchanged sentences

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, occupancy has trended lower since the second half of March 2020 as government policies and implementation of infection control best practices and prospective residents’ concerns about communal-setting COVID-19 spread and prospective residents’ concerns about communal-setting COVID-19 spread limited resident move-ins.

Occupancy in our SHOP portfolio has trended lower since the second half of March 2020 to a low of 72.0% as of March 31, 2021 and has subsequently begun to recover, reaching 74.1% as of December 31, 2021, as government policies and implementation of infection control best practices and prospective residents’ concerns about communal-setting COVID-19 spread limited resident move-ins.

We have also continued to experience lower inquiry volumes and reduced in-person tours.

These and other impacts of the COVID-19 pandemic have 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, to 77.9%, as of September 30, 2020 and 75.1% as of December 31, 2020.

The declines in revenue we experienced during the fourth quarter were primarily attributable

to this decline in occupancy which also represented a decline from December 31, 2019, when SHOP occupancy was 85.7%.

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, third and fourth quarters of 2020 and into the beginning of the first quarter of 2021 as the surge of new COVID-19 cases that started in late 2020 crested, and may continue to impact us in the and have a material adverse effect on our revenues and income in the other quarters thereafter.

We believe that, as infections decline and more vaccinations are administered during 2021, our occupancy will stop declining, and may start to increase, but there can be no assurance as to when or if we will be able to approach pre-pandemic levels of occupancy.

The below table presents SHOP occupancy since the onset of the COVID-19 pandemic in March 2020:

As of Number of Properties [1]

Rentable Units Percentage Leased

December 31, 2019 59 4,926 85.1%

March 31, 2020 63 5,198 84.4%

June 30, 2020 63 5,198 79.2%

September 30, 2020 67 5,350 77.4%

December 31, 2020 59 4,878 74.5%

March 31, 2021 55 4,682 72.0%

June 30, 2021 54 4,530 73.2%

September 30, 2021 54 4,494 74.3%

December 31, 2021 54 4,494 74.1%

[1] Exclusive of two land parcels.

The declines in revenue we experienced during the year ended December 31, 2021 and 2020, as compared to the year ended December 31, 2019, were primarily attributable to the decline in occupancy in or SHOP segment, noted in the table above, and our SHOP disposals which reduced the average number of rentable units over the periods.

In addition, starting in mid-March of 2020, 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 the SHOP facilities, we generally bear these cost increases, which were partially offset by funds received under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and to a lesser extent, cost recoveries for personal protective equipment from residents.

See below for additional information on the CARES Act.

There can be no assurance, however, that future developments in the course of the pandemic will not cause further adverse impacts to our occupancy and cost levels, and these trends may continue to impact us and have a material adverse effect on our revenues and income in the other quarters.

We believe that our vaccination participation achieved in 2021 for both residents and staff populations have mitigated certain adverse impacts of COVID-19.

Furthermore, as infections decline and more vaccinations and boosters are administered during 2022, our occupancy may further increase.

However, there can be no assurance as to when or if we will be able to approach pre-pandemic levels of occupancy due to, among other factors, the ongoing vaccine hesitancy and resistance in certain segments of the population and the recent spread of more transmissible COVID-19 variants such as the Delta and Omicron variants.

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.

5 unchanged sentences

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.

As of December 31, 2020 w e received $3.6 million in these funds related to four of our SHOPs and we considered the funds to be a grant contribution from the government.

The full amount was 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 CARES Act funding which will reduce property operating expenses incurred due to COVID-19 during the first quarter of 2021.

During the year ended December 31, 2021 we received $5.1 million from CARES Act grants.

Previously, we received $3.6 million in grants during the year ended December 31, 2020.

We have applied for additional funds under the CARES Act, however, there can be no assurance that any funds requested will actually be received.

We consider the funds to be a grant contribution from the government and the full amount was recognized as a reduction of property operating expenses in our consolidated statement of operations during the years ended December 31, 2021 and 2020.

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

14 unchanged sentences

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

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 lease.

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 lease.

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

Revenue Recognition

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

As of December 31, 2020 and 2019, these leases had a weighted average remaining lease term of 4.9 years and 6.5 years, respectively.

Rent from tenants in our MOB and triple-net leased healthcare facilities operating segments (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease.

Our revenues, which are derived primarily from lease contracts, include rent received from tenants in our triple-net MOBs.

As of December 31, 2021 these leases had a weighted average remaining lease term of 4.9 years.

Rent from tenants in our MOB segment (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease.

Because many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record a receivable for, and include in revenue from tenants on a straight-line basis, unbilled rent receivables that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease.

23 unchanged sentences

Under ASC 840, we recorded such amounts as bad debt expense as part of property operating expenses.

During the years ended December 31, 2020, 2019 and 2018 such amounts were $2.7 million, $6.5 million and $14.8 million, respectively, which include bad debt expense related to the NuVista and LaSalle Tenants (see Note 3 — Real Estate Investment, Net to the consolidated financial statements included in this Annual Report on Form 10-K for additional information).

During the years ended December 31, 2021, 2020 and 2019 such amounts were $1.1 million, $2.7 million, and $6.5 million, respectively, which include bad debt expense related to the NuVista and LaSalle Tenants (see Note 3 — Real Estate Investments, Net to the consolidated financial statements included in this Annual Report on Form 10-K for additional information).

Investments in Real Estate

11 unchanged sentences

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

There were $0.1 million and $70.8 million in real estate investments held for sale as of December 31, 2020 and 2019, respectively (see Note 3 — Real Estate Investments, Net to the consolidated financial statements included in this Annual Report on Form 10-K for additional information).

There were $0.1 million in real estate investments held for sale as of December 31, 2020 and none as of December 31, 2021 (see Note 3 — Real Estate Investments, Net to the consolidated financial statements included in this Annual Report on Form 10-K for additional information).

All of our leases as lessor prior to the adoption of new lease accounting rules on January 1, 2019, were accounted for as operating leases and they continue to be accounted for as operating leases under the transition guidance.

We evaluate new leases originated after the adoption date (by us 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 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.

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.

32 unchanged sentences

These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.

If an impairment exists, due to the inability to recover the carrying value of a property, we would recognize an impairment loss in the consolidated statement of operations and comprehensive (loss) to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used.

If an impairment

exists, due to the inability to recover the carrying value of a property, we would recognize an impairment loss in the consolidated statement of operations and comprehensive (loss) to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used.

For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset.

19 unchanged sentences

We received $3.6 million in these funds during the year ended December 31, 2020, related to four of our SHOPs and we 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 funding through the CARES Act which will reduce property operating expenses incurred due to COVID-19 during the first quarter of 2021.

We received $5.1 million and $3.6 million in these funds during the years ended December 31, 2021 and 2020, respectively, 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 the Company’s consolidated statement of operations for the years ended December 31, 2021 and 2020, respectively, to offset the incurred COVID-19 expenses.

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

2 unchanged sentences

Results of Operations

We operate in three reportable business segments for management and internal financial reporting purposes:

MOBs, triple-net leased healthcare facilities, and SHOPs.

In our MOB operating segment, we own, manage and lease single and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent.

In our triple-net leased healthcare facilities operating segment, we own, manage and lease seniors housing properties, hospitals, post-acute care and skilled nursing facilities throughout the United States under long-term triple-net leases, and tenants are generally directly responsible for all operating costs of the respective properties.Our Property Manager or third party managers manage our MOBs and our triple-net leased healthcare facilities.

In our SHOP segment, we invest in seniors housing properties using the RIDEA structure.

As of December 31, 2020, we had seven eligible independent contractors operating 59 SHOPs (not including two land parcels).

All of our properties across all three business segments are located throughout the United States.

Same Store Properties

1 unchanged sentence

As of December 31, 2021, we owned 202 properties.

There were 175 properties (our “Same Store” properties) owned for the entire years ended December 31, 2020 and 2019, including two vacant land parcels and one development property that was substantially completed in the fourth quarter of 2019.

There were 176 properties (our “Same Store” properties) owned for the entire years ended December 31, 2021 and 2020, including two vacant land parcels.

Since January 1, 2020 and through December 31, 2021, we acquired 26 properties (our “Acquisitions”) and disposed of 17 properties (our “Dispositions”).

As described in more detail under “Results of Operations — Comparison of the Years Ended December 31, 2020 and 2019 — 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 entirety of 2019 and 2020 and merely moved between segments.

We retroactively adjusted our Same Store reporting for those segments to include the Transition Properties as part of the Same Store reporting in our SHOP segment and excluded them from the Same Store reporting 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 to our consolidated financial statements included in this Annual Report on Form 10-K for further information about the Transition Properties and the transition.

The following table presents a roll-forward of our properties owned from January 1, 2020 to December 31, 2021:

Number of Properties

MOB SHOP Total

Number of properties, December 31, 2019

1 unchanged sentence

Disposition activity during the year ended December 31, 2020

Transition activity during the year ended December 31, 2020

Number of properties, December 31, 2020

24 unchanged sentences

370,438 406,714 (36,276)

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

(25,102) (40,578) 15,476 38.1 %

Gain on sale of real estate investments 5,230 8,790 (3,560) NM

Operating loss before gain on sale of real estate investments (41,083) (25,102) (15,981)

Gain on sale of real estate investments 3,648 5,230 (1,582)

Operating loss

3 unchanged sentences

Interest and other income

44 7 37 528.6 %

Loss on non-designated derivatives

(102) (68) (34) (50.0) %

Total other expenses

1 unchanged sentence

Loss before income taxes (85,237) (71,449) (13,788)

Income tax expense (4,061) (399) (3,662) NM

Income tax expense (203) (4,061) 3,858

Net loss (85,440) (75,510) (9,930)

Net income attributable to non-controlling interests (303) 393 (696) (177.1) %

Allocation for preferred stock (2,968) (173) (2,795) NM

Net (income) loss attributable to non-controlling interests 260 (303) 563

Allocation for preferred stock (7,762) (2,968) (4,794)

Net loss attributable to common stockholders $ (92,942) $ (78,781) $ (14,161)

NM — Not Meaningful

Transition Properties

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 our TRS 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” and Note 15 — Segment Reporting to our consolidated financial statements included in this Annual Report on Form 10-K 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 purposes.

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 Properties – 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.”

During the year ended December 31, 2020, as shown in more detail in the table below, the Transition Properties contributed approximately $(0.1) 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.

The previously reported Same Store results had already been retroactively adjusted to reflect the impact of Transition Properties during the applicable periods and require no further adjustments thereto.

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.

Year Ended December 31, 2020 Year Ended December 31, 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

Revenue from tenants $ 35,452 $ (19,841) $ 15,611 $ 32,509 $ (17,945) $ 14,564 $ 2,943 $ (1,896) $ 1,047

Property operating and maintenance 21,853 (19,892) 1,961 18,180 (15,870) 2,310 3,673 (4,022) (349)

NOI $ 13,599 $ 51 $ 13,650 $ 14,329 $ (2,075) $ 12,254 $ (730) $ 2,126 $ 1,396

Revenue from tenants $ 198,864 $ 19,841 $ 218,705 $ 209,579 $ 17,945 $ 227,524 $ (10,715) $ 1,896 $ (8,819)

Property operating and maintenance 154,022 19,892 173,914 154,351 15,870 170,221 (329) 4,022 3,693

NOI $ 44,842 $ (51) $ 44,791 $ 55,228 $ 2,075 $ 57,303 $ (10,386) $ (2,126) $ (12,512)

Net Operating Income

3 unchanged sentences

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 Measures included in this Annual Report on Form 10-K for additional disclosure and a reconciliation to our net income (loss) attributable to common stockholders.

See “Non-GAAP Financial Measures” below for additional disclosure and a reconciliation, in the aggregate, of the NOI for the segments presented below to our net income (loss) attributable to common stockholders.

Segment Results — Medical Office Buildings

14 unchanged sentences

(2) Our MOB segment included 22 Acquisition properties.

(3) Our MOB segment included seven Disposition properties.

(3) Our MOB segment included four Disposition properties.

(4) Our MOB segment consisted of 146 properties.

1 unchanged sentence

Revenue from tenants is primarily related to contractual rent received from tenants in our MOBs.

It also includes operating expense reimbursements which generally increase in proportion with the increase in property operating and maintenance expenses in our MOB segment.

Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, in addition to base rent.

It also includes operating expense reimbursements which generally increase with the increase in property operating and maintenance expenses in our MOB segment.

In addition to base rent, dependent on the specific lease, tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’expenses for the base year of the respective leases.

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 year ended December 31, 2021, the MOB segment contributed a $1.4 million increase in NOI as compared to the year ended December 31, 2020.

Of our 18 Acquisitions, during the period from January 1, 2019 through December 31, 2020, 13 were MOBs which contributed a $2.5 million increase in NOI, and our Disposition properties contributed a $0.4 million decrease in NOI, while NOI from our Same Store properties contributed a $2.7 million increase in NOI as compared to the year ended December 31, 2019.

Segment Results — Triple Net Leased Healthcare Facilities

The following table presents the revenue and property operating and maintenance expense and the period to period change within our triple net leased healthcare facilities segment for the years ended December 31, 2020 and 2019:

Segment Same Store (1)

Acquisitions (2)

Dispositions (3)

Segment Total (4)

Year Ended December 31, Increase (Decrease) Year Ended December 31, Increase (Decrease) Year Ended December 31, Increase (Decrease) Year Ended December 31, Increase (Decrease)

(Dollar amounts in thousands) 2020 2019 $ 2020 2019 $ 2020 2019 $ 2020 2019 $

Revenue from tenants

$ 15,611 $ 14,564 $ 1,047 $ — $ — $ — $ — $ — $ — $ 15,611 $ 14,564 $ 1,047

Property operating and maintenance

1,961 2,310 (349) — — — — — — 1,961 2,310 (349)

$ 13,650 $ 12,254 $ 1,396 $ — $ — $ — $ — $ — $ — $ 13,650 $ 12,254 $ 1,396

(1) Our triple-net leased healthcare facilities segment included 15 Same Store properties.

(2) Our triple-net leased healthcare facilities segment did not have any Acquisitions properties.

(3) Our triple-net leased healthcare facilities segment did not have any Dispositions properties.

(4) Our triple-net leased healthcare facilities segment included 15 properties.

NM - Not Meaningful

Revenue from tenants for our triple-net leased healthcare facilities generally consist of fixed rental amounts (which may be subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms.

These revenues are contractual rent received from tenants that does not vary based on the underlying operating performance of the properties.

In addition, revenue from tenants also includes operating expense reimbursements in our triple-net leased healthcare facilities segment, which generally include reimbursement for property operating expenses that we pay on behalf of tenants in this segment.

However, pursuant to many of our lease agreements in this segment, tenants are generally directly responsible for all operating costs of the respective properties in addition to base rent.

Property operating and maintenance expense should typically include minimal activity in our triple-net leased healthcare facilities segment except for real estate taxes and insurance.

Real estate taxes are typically paid directly by the tenants;

however, they may be paid by us and reimbursed by the tenants.

During the year ended December 31, 2020, revenue from tenants in our triple-net leased healthcare facilities segment increased $1.0 million as compared to the year ended December 31, 2019.

Property operating and maintenance expenses decreased $0.3 million during the year ended December 31, 2020 and December 31, 2019, respectively, primarily related to lower property taxes and operating expenses.

Of our 26 Acquisitions, during the period from January 1, 2020 through December 31, 2021, 22 were MOBs which contributed a $4.8 million increase in NOI, and our Disposition properties contributed a $1.1 million decrease in NOI, while NOI from our Same Store properties contributed a $2.3 million decrease in NOI as compared to the year ended December 31, 2020.

The decrease in NOI from our Same Store properties is due to one-time expense recoveries which occurred in the year ended December 31, 2020 which did not occur in the year ended December 31, 2021.

Segment Results — Seniors Housing Operating Properties

12 unchanged sentences

(1) Our SHOP segment included 52 Same Store properties, including two land parcels.

(2) Our SHOP segment included five Acquisitions properties.

(3) Our SHOP segment included nine Dispositions properties.

(2) Our SHOP segment included four Acquisitions properties.

(3) Our SHOP segment included 13 Dispositions properties.

(4) Our SHOP segment included 56 properties, including two land parcels.

2 unchanged sentences

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 year ended December 31, 2020, revenue from tenants increased by $1.8 million in our SHOP segment as compared to the year ended December 31, 2019 which was primarily driven by an increase in revenue of $16.5 million due to our Acquisition properties, offset by decreases of $5.8 million due to our Disposition properties and $8.8 million due to our Same Store properties, which includes our Transition Properties.

Revenues declined in our Same Store SHOPs primarily due to a decrease in occupancy as a result of the impact of COVID-19 as discussed above.

SHOP occupancy has declined from 84.1% as of March 31, 2020 to 79.5% as of June 30, 2020, to 77.9% as of September 30, 2020 and 75.1% as of December 31, 2020.

This decline in occupancy trend is also represented in a decline from December 31, 2019, when SHOP occupancy was 85.7%.

Regulatory and government-imposed restrictions and infectious disease protocols have hindered, and continue to hinder, our ability to accommodate and conduct in-person tours, process and attract new move-ins at our SHOPs and these and other impacts of the COVID-19 pandemic have 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 (which include ancillary revenue from non-residents) at four of our Same Store SHOPs.

This revenue declined $2.1 million from $15.4 million during the year ended December 31, 2019 to $13.3 million during the year ended December 31, 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 $0.4 million for the year ended December 31, 2020.

These revenue decreases were partially offset by $1.3 million in COVID-19 surcharges we began billing residents for Personal Protective Equipment (“PPE”) during the quarter ended September 30, 2020, and less bad debt expense of $3.1 million relating to the LaSalle tenant, as described further below.

During the year ended December 31, 2020, property operating and maintenance expenses increased $10.7 million in our SHOP segment as compared to the year ended December 31, 2019, primarily due to an increase of $13.6 million due to our SHOP Acquisition properties and an increase of $3.7 million in our Same Store properties, which includes our Transition Properties.

These increases were partially offset by a decrease in property operating and maintenance expenses from our Dispositions of $6.6 million.

The total increase in Same Store operating costs mainly related to costs incurred from the ongoing COVID-19 pandemic which totaled $7.6 million for the year ended December 31, 2020, which was partially offset by $3.6 million of funds received through the CARES Act.

The full amount of the CARES Act funds was recognized as a reduction to our Same Store property operating expenses in the table above for the year ended December 31, 2020.

As a result we experienced an increase in Same Store operating costs of $3.7 million year over year.

Subsequent to December 31, 2020, we received an additional $5.1 million in funding through the CARES Act which will be recognized as a reduction to our Same Store property operating expenses in the quarter ending March 31, 2021.

During the year ended December 31, 2021, revenue from tenants decreased by $55.3 million in our SHOP segment as compared to the year ended December 31, 2020 primarily giving effect to a $38.6 million decrease from our Disposition properties, and a decrease of $18.6 million from our Same Store properties.

These decreases were partially offset by $1.9 million of additional revenue through our Acquisition properties.

For the year ended December 31, 2021, an additional $0.8 million was generated through COVID-19 surcharges for PPE as compared to $1.1 million in PPE billings during the year ended December 31, 2020.

We also offered $0.1 million of rent concessions related to COVID-19 in the year ended December 31, 2021 as compared to $0.4 million of rent concessions granted during the year ended December 31, 2020.

Revenues declined in our Same Store SHOPs primarily due to a decrease in occupancy as a result of COVID-19 as discussed in Management Update on the Impacts of the COVID-19 Pandemic .

Regulatory and government-imposed restrictions and infectious disease protocols have hindered our ability to accommodate and conduct in-person tours and process and attract new move-ins at our SHOPs which has affected and could continue to affect our ability to fill vacancies.

We also generated a portion of our SHOP revenue from skilled nursing facilities (which include ancillary revenue from non-residents) at two of our Same Store SHOPs and two of our Disposition SHOPs.

This revenue declined $9.8 million from $13.3 million during the year ended December 31, 2020 to $3.5 million during the year ended December 31, 2021 as a result of limiting the services we offered at our skilled nursing facilities during the COVID-19 pandemic to protect our residents and on-site staff, as well as from disposing of our two largest SNFs in Lutz and Wellington, Florida in December 2020 and May 2021, respectively.

The property in Wellington, Florida generated ancillary revenues of $1.6 million and $3.9 million in the years ended December 31, 2021 and 2020, respectively.

The property in Lutz, Florida generated ancillary revenue of $4.0 million in the year ended December 31, 2020.

These properties’ results are presented in Disposition properties in the table above.

As a result of these dispositions, we expect ancillary revenue to continue to decline in future quarters relative to prior quarters where we owned these properties.

Our remaining SNFs generated ancillary revenue of $1.9 million and $5.4 million in the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, property operating and maintenance expenses decreased $39.4 million in our SHOP segment as compared to the year ended December 31, 2020, primarily due to a decrease of $34.6 million from our Dispositions and a decrease of $6.3 million in our Same Store properties.

These increases were partially offset by an increase in property operating and maintenance expenses from our Acquisitions of $1.5 million.

Our property operating and maintenance expenses for our Same Store properties decreased due to $5.1 million in CARES Act funds received, $4.4 million of which related to our Same Store properties.

We received $3.6 million of CARES Act funds in 2020, $0.9 million of which related to our Same Store properties.

We consider the receipt of CARES Act funds as government grants which reduce property operating and maintenance expenses for the period in which they are received.

In addition, we had lower operating costs as a result of lower occupancy levels as well as some lessening of COVID-related costs in the year ended December 31, 2021 as compared to the year ended December 31, 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 our TRS and operated and managed on our behalf by a third-party operator.

Beginning with our reporting for the period ended December 31, 2020 these properties are part of the “Transition Properties” and the resultant change has been applied retrospectively to historical periods.

As of December 31, 2020, the prior tenants at the LaSalle Properties remain in default of a forbearance agreement as described in more detail under “ Note 3 — Real Estate Investment, Net - The LaSalle Tenant” and owe 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 December 31, 2020 and 2019.

We incurred bad debt expense, including straight-line rent write-offs of $0.4 million and $3.5 million, related to the LaSalle Properties during the years ended December 31, 2020 and 2019, respectively, which is included as a reduction in revenue from tenants on 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.

Other Results of Operations

1 unchanged sentence

We incurred $41.0 million of impairment charges for the year ended December 31, 2021.

The impairment charges for the year ended December 31, 2021 related to a $0.9 million impairment on our Wellington property, which was recorded to adjust the carrying value to its fair value as determined by its purchase and sale agreement, a $6.1 million impairment related to an MOB property located in Sun City, Arizona, and $34.0 million related to our LaSalle properties.

We incurred $36.4 million of impairment charges for the year ended December 31, 2020.

We recorded $19.6 million of impairment charges related to the 11 Michigan SHOPs, which was recognized after an amendment to the PSA for the sale of these properties in April 2020 which reduced the number of properties under consideration as well as the contract purchase price.

We recorded $16.9 million of impairment charges related to the two Florida properties in Jupiter and Wellington as a result of our marketing efforts during the COVID-19 pandemic which concluded with a PSA in August 2020, for which the contract purchase was less than the carrying values of the properties, as well as expected closing costs that were not previously anticipated, which reduced the net amount expected to be realized on the sale of properties.

We incurred $56.0 million of impairment charges for the year ended December 31, 2019.

During the fourth quarter of 2019, we began to evaluate the properties in Lutz, Florida, Wellington, Florida and our recently completed development property in Jupiter, Florida for potential sale.

As a result, we concluded these held for use assets were impaired and recognized impairment charges in the aggregate of $33.3 million.

The other impairment charges for 2019 relate to the 14 Michigan SHOPs that were under contract to be sold.

See Note 3 — Real Estate Investments to our consolidated financial statements in this Annual Report on Form 10-K for additional information on impairment charges.

3 unchanged sentences

The fixed portion of the base management fee we pay for asset management services is 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 the we raise.

Asset management fees increased $0.5 million to $20.0 million for the year ended December 31, 2020, due to the increase in the variable portion of the base management fee related to the issuance and sale of Series A Preferred Stock in December 2019.

Property management fees increased $0.3 million to $4.2 million, inclusive of $0.3 million of leasing commissions paid, during the year ended December 31, 2020 from $3.9 million during the year ended December 31, 2019.

Asset management fees increased $0.7 million to $20.7 million for the year ended December 31, 2021, due to the increase in the variable portion of the base management fee related to the issuance and sale of Series B Preferred Stock in October 2021.

Property management fees decreased $0.4 million to $3.7 million, inclusive of $0.3 million of leasing commissions paid, during the year ended December 31, 2021 from $4.2 million during the year ended December 31, 2020.

Property management fees increase or decrease in direct correlation with gross revenues of the properties managed.

See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements found in this Annual Report on Form 10-K which provides detail on our fees and expense reimbursements.

See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements found in this Annual Report on Form 10-K which provides detail on our asset and property management fees.

Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses were $2.7 million for the year ended December 31, 2021 and $0.2 million for the year ended December 31, 2020.

The increase is mainly due to $1.2 million of costs incurred from our terminated Preferred Stock Equity Line, $0.8 million from litigation costs related to our Michigan dispositions which occurred in the first quarter of 2021, $0.2 million from a legal settlement related to our Jupiter, Florida disposition which occurred in the second quarter of 2021, and $0.3 million of increased costs related to dead deal and other miscellaneous costs incurred in the year ended December 31, 2021 as compared to the year ended December 31, 2020.

The expenses in both periods primarily related to indirect costs associated with potential acquisitions.

General and Administrative Expenses

General and administrative expenses increased $1.0 million to $21.6 million for the year ended December 31, 2020 compared to $20.5 million for the year ended December 31, 2019, which includes a $0.8 million increase in expense reimbursements to related parties.

The increase in expense reimbursements to related parties was primarily due to $2.2 million of severance payments and related to legal costs incurred by the Advisor relating to the termination in 2018 of our former chief executive officer, partially offset by a $1.2 million reduction in expenses as a result of revisions to previously accrued bonuses to reflect the ultimate amount paid (see Note 9 – Related Party Transactions and Arrangements to our consolidated financial statements included in this Annual Report on Form 10-K).

General and administrative expenses decreased $4.7 million to $16.8 million for the year ended December 31, 2021 compared to $21.6 million for the year ended December 31, 2020.

For the year ended December 31, 2021 and 2020, incurred expense reimbursements and distributions on partnership units of the OP designated as Class B Units to related parties were $8.4 million and $11.1 million, respectively.

Class B Units will not receive cash distributions, and no further expense will be incurred, for so long as we pay distributions to our common stockholders in stock instead of cash.

The decrease in expense reimbursements to related parties was primarily due to $2.2 million of costs incurred in the year ended December 31, 2020 related to severance payments to our former chief executive officer and related legal costs which did not occur in the year ended December 31, 2021.

Both the years ended December 31, 2021 and 2020 include reductions of expenses related to 2020 and 2019 employee bonuses, respectively, of $1.0 million and $1.2 million of professional fee credits from the Advisor.

For additional details on the 2020 and 2019 bonus awards (see Note 9 – Related Party Transactions and Arrangements to our consolidated financial statements included in this Annual Report on Form 10-K).

In addition to lower expense reimbursements, the decrease was primarily due the decrease in distributions on Class B Units of $0.2 million, lower legal expenses of $0.9 million, lower auditing expenses of $0.4 million, lower printing expenses of $0.6 million, and lower transfer agent expenses of $0.2 million.

The aforementioned professional reimbursement fees to the Advisor are subject to a cap which is equal to the greater of a fixed or variable component.

We did not meet the cap for the years ended December 2021 and 2020.

The fixed component increases by an annual cost of living adjustment equal to the greater of (x) 3.0% and (y) the CPI, as defined in the Advisory Agreement Amendment for the prior year ended December 31st.

See Note 9 – Related Party Transactions and Arrangements to our consolidated financial statements included in this Annual Report on Form 10-K for additional information.

Depreciation and Amortization Expenses

Depreciation and amortization expense increased marginally to $81.1 million for the year ended December 31, 2020 from $81.0 million for the year ended December 31, 2019.

Depreciation and amortization expense decreased marginally to $79.9 million for the year ended December 31, 2021 from $81.1 million for the year ended December 31, 2020 as decreases from property dispositions were largely offset by increases from acquisitions.

Gain on Sale of Real Estate Investments

During the year ended December 31, 2020, we disposed of nine properties.

During the year ended December 31, 2021, we disposed of eight properties.

The properties were sold for an aggregate contract price of $133.6 million, which resulted in an aggregate gain on sale of $3.6 million.

2 unchanged sentences

Interest expense decreased by $3.6 million to $47.9 million for the year ended December 31, 2021 from $51.5 million for the year ended December 31, 2020.

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 well as $3.0 million of interest expense recorded in the year ended December 31, 2019 resulting from the write off of unamortized deferred financing costs from the refinancing of a $250.0 million mortgage loan originally entered into in 2017.

The decrease in interest expense resulted from lower interest rates as well as lower average outstanding debt in 2021 compared to 2020.

As of December 31, 2021 our outstanding debt obligations were $1.1 billion at a weighted average interest rate of 3.44% per year.

7 unchanged sentences

Loss on non-designated derivative instruments for the years ended December 31, 2021 and 2020 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.

Loss on derivative instruments for the years ended December 31, 2020, 2019 and 2018 were $0.1 million, $0.1 million and $0.2 million, respectively.

Loss on derivative instruments for the years ended December 31, 2021 and 2020 were $37,000 and $0.1 million, respectively.

Income Tax Benefit (Expense)

We recorded income tax expense of $0.2 million and $4.1 million for the years ended December 31, 2021 and 2020, respectively, related to deferred tax assets generated by temporary differences and current period net operating income associated with our TRS.

During the year ended December 31, 2020, we recorded a $4.6 million valuation allowance against our deferred tax asset.

During the year ended December 31, 2020, we recorded an initial $4.6 million valuation allowance against our net deferred tax assets.

During the year ended December 31, 2021, we continue to maintain a full valuation allowance against our net deferred tax assets.

Income taxes generally relate to our SHOPs, which are leased by our TRS.

Because of our TRS recent operating history of losses and the on-going impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, we are not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets;

thus we have recorded a 100% valuation allowance as of December 31, 2020 of $4.6 million.

thus we have recorded a 100% valuation allowance in the year ended December 31, 2020 and we have continued to maintain this valuation allowance through December 31, 2021.

If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive income (loss).

3 unchanged sentences

Net Income/Loss Attributable to Non-Controlling Interests

Net income attributable to non-controlling interests was approximately $0.3 million and net loss to non-controlling interests was $0.4 million for the years ended December 31, 2020 and 2019, respectively.

Net loss attributable to non-controlling interests was approximately $0.3 million and net income attributable non-controlling interests was $0.3 million for the years ended December 31, 2021 and 2020, respectively.

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.

1 unchanged sentence

During the year ended December 31, 2021, net cash provided by operating activities was $38.9 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.

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.

Cash inflows include non-cash items of $38.8 million (net loss of $85.4 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).

In addition, cash provided by operating activities was impacted by an increase in accounts payable and accrued expenses of $4.6 million related to higher accrued real estate taxes, property operating expenses and professional and legal fees.

These cash inflows were partially offset by a net increase in prepaid expenses and other assets of $0.1 million and a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $2.4 million.

In addition, cash provided by operating activities was impacted by an increase in accounts payable and accrued expenses of $1.3 million related to higher accrued real estate taxes, property operating expenses and professional and legal fees, a net decrease in prepaid expenses and other assets of $2.1 million, and by an increase in deferred rent of $1.7 million.

These cash inflows were partially offset by a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $0.8 million.

During the year ended December 31, 2020, net cash provided by operating activities was $41.8 million.

Cash inflows include non-cash items of $56.8 million (net loss of $88.3 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) and an increase in accounts payable and accrued expenses of $2.6 million related to higher accrued real estate taxes, property operating expenses and professional and legal fees.

These cash inflows were partially offset by a net increase in prepaid expenses and other assets of $9.7 million and a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $3.8 million.

Cash inflows include non-cash items of $50.4 million (net loss of $75.5 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).

These inflows were partially offset by a decrease in accounts payable and accrued expenses of $4.6 million related to higher accrued real estate taxes, property operating expenses and professional and legal fees, a net increase in prepaid expenses and other assets of $0.1 million, a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $2.4 million and by a decrease in deferred rent of $1.6 million.

Cash Flows from Investing Activities

Net cash used in investing activities during the year ended December 31, 2021 was $47.9 million.

The cash used in investing activities included $95.0 million for the acquisition of nine properties and $21.9 million in capital expenditures.

The cash used in investing activities included $159.3 million for the acquisition of 17 properties and $19.1 million in capital expenditures.

These cash outflows were partially offset by proceeds from the sale of real estate of $130.4 million.

Net cash used in investing activities during the year ended December 31, 2020 was $82.5 million.

The cash used in investing activities included $92.0 million for the acquisition of nine properties and to fund the cost of our ongoing development property in Jupiter, Florida during the period and $16.7 million in capital expenditures.

The cash used in investing activities included $95.0 million for the acquisition of nine properties and $21.9 million in capital expenditures.

These cash outflows were partially offset by proceeds from the sale of real estate of $34.4 million.

Cash Flows from Financing Activities

Net cash provided by financing activities of $4.1 million during the year ended December 31, 2021 related to net proceeds from the issuance of Series A preferred stock of $56.3 million, net proceeds from the issuance of Series B preferred stock of $86.9 million and proceeds from a mortgage note payable of $42.8 million.

These cash inflows were partially offset by net repayments under our Revolving Credit Facility of $173.8 million, payment for deferred financing costs of $1.5 million and payments of preferred stock dividends of $5.1 million.

Net cash provided by financing activities of $19.4 million during the year ended December 31, 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 for deferred financing costs of $2.2 million, the buyout of a non-controlling interest of $0.6 million and dividends paid to preferred stockholders $2.4 million.

Net cash provided by financing activities of $19.1 million during the year ended December 31, 2019 related to proceeds of $225.6 million from our Revolving Credit Facility, $150.0 million from our Term Loan, $136.5 million from the Multi-Property CMBS Loan and $37.6 million of net proceeds from the issuance of Series A Preferred Stock.

These cash inflows were partially offset by payments on our Revolving Credit Facility of $368.3 million, mortgage principal repayments of $67.8 million, distributions to stockholders of $51.4 million, common stock repurchases of $21.1 million, payments for deferred financing costs of $19.5 million, and distributions to non-controlling interest holders of $0.3 million.

Liquidity and Capital Resources

The negative impacts of the COVID-19 pandemic has caused and may continue to cause certain of our tenants to be unable to make rent payments to us timely, or at all, which has, and could continue to have, an adverse effect on the amount of cash we receive from our operations.

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 December 31, 2020, we had $72.4 million of cash and cash equivalents.

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 and holders of Series B Preferred Stock.

We closely monitor our current and anticipated liquidity position relative to our current and anticipated demands for cash and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next 12 months.

Our future liquidity requirements, and available liquidity, however, depend on many factors, such as the on-going impact of COVID-19 on our tenants and operators.

We expect to fund our future short-term operating liquidity requirements, including dividends to holders of Series A Preferred Stock and holders of Series B Preferred Stock, through a combination of current cash on hand, net cash provided by our property operations and draws on the Revolving Credit Facility, which may include amounts reborrowed following the repayments we were or are required to make thereunder.

As of December 31, 2021 and 2020, we had $59.7 million and $72.4 million of cash and cash equivalents, respectively.

Our ability to use this cash on hand is restricted.

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 December 31, 2020, $48.3 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 the “Commencement Quarter” which is 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%.

As of December 31, 2020, our ratio of consolidated total indebtedness to consolidated total asset value for these purposes was 61.7%.

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.

We, for example, may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of our common stock) on our common stock until 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 do 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.

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.

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.

December 31, 2021, $236.6 million was available for future borrowings under our Revolving Credit Facility.

Certain other restrictions and conditions described below, including those on paying cash dividends, will no longer apply starting in the “Commencement Quarter” which is 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%, and the Covenant Relief Period has terminated.

The fiscal quarter ended June 30, 2021 was the first quarter that could have been the Commencement Quarter.

We satisfied the conditions during the quarter ended December 31, 2021 in order to elect the quarter ending March 31, 2022 as the Commencement Quarter, but chose not to do so.

There can be no assurance as to if, or when, we will elect to do so, including to the extent we may be unable to satisfy these conditions in future periods.

We may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of our common stock) on our common stock until 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 and Series B Preferred Stock) for any period of four fiscal quarters do 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.

Our Credit Facility also restricts our uses 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 repay 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.

1 unchanged sentence

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.

See “Item 1A.

Risk Factors.

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.”

We expect to fund our future short-term operating liquidity requirements, including dividends to holders of Series A Preferred Stock, through a combination of current cash on hand, net cash provided by our property operations and proceeds from the Revolving Credit Facility.

Our future liquidity requirements, and available liquidity, however, depend on many factors, such as the on-going impact of COVID-19 on our tenants and operators and our ability to complete our pending dispositions on their contemplated terms, or at all.

During the year ended December 31, 2021, we generated liquidity through the sale of equity securities and from various financings as described below.

Preferred Stock Equity Line with B.

2 unchanged sentences

Riley Principal Capital, LLC (“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.

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.

We did not sell any shares under the Preferred Stock Equity Line during the year ended December 31, 2020.

Riley”), pursuant to which we had 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 (“Preferred Stock Equity Line”).

We sold 15,000 shares of Series A Preferred Stock under the Preferred Stock Equity Line during the year ended December 31, 2021, resulting in gross proceeds of $0.4 million and net proceeds of $0.3 million after fees and commissions.

In total, we incurred $1.2 million in costs related to establishing the Preferred Stock Equity Line which were all initially recorded in prepaid expenses and other assets on our consolidated balance sheet.

Upon receiving proceeds under the Preferred Stock Equity Line in the third quarter of 2021, the Company reclassified $30,000 of these prepaid costs to additional paid in capital in our consolidated statement of changes in equity as a reduction of the gross proceeds received under the Preferred Stock Equity Line.

In the fourth quarter of 2021, we determined that it was not probable that additional proceeds would be received from the Preferred Stock Equity Line and later terminated the Preferred Stock Equity Line.

As a result, we expensed the remaining balance of prepaid costs within acquisition and transaction related costs on the consolidated statement of operations and comprehensive income during the year ended December 31, 2021.

We did not sell any Series A Preferred Stock under the Preferred Stock Equity Line during the year ended December 31, 2020.

Series A Preferred Stock Add-On Offering

On May 11, 2021, we completed an underwritten public offering of 2,352,144 shares (which included 152,144 shares issued and sold pursuant to the underwriters’ exercise of their option to purchase additional shares) of our Series A Preferred Stock for net proceeds of $56.0 million after deducting the underwriters’ discount, structuring fees and other offering costs aggregating to $2.9 million.

Pursuant to the terms of the Credit Facility, all proceeds were used to repay amounts outstanding under the Credit Facility.

Subject to the terms and conditions set forth in the Credit Facility, we may then draw on the Credit Facility to borrow any amounts so repaid.

Series B Preferred Stock Offering

On October 6, 2021, we completed the initial issuance and sale of 3,630,000 shares (which includes 430,000 shares issued and sold pursuant to the underwriters’ exercise of their option to purchase additional shares) of our 7.125% Series B Preferred Stock in an underwritten public offering at a public offering price equal to the liquidation preference of $25.00 per share.

The offering generated gross proceeds of $90.8 million and net proceeds of $86.8 million, after deducting underwriting discounts, structuring fees and other offering costs.

Pursuant to the terms of the Credit Facility, all proceeds were used to repay amounts outstanding under the

Credit Facility.

Subject to the terms and conditions set forth in the Credit Facility, we may then draw on the Credit Facility to borrow any amounts so repaid.

As of December 31, 2021, our total debt leverage ratio (net debt divided by gross asset value) was approximately 40.1%.

Net debt totaled $1.0 billion, which represents gross debt ($1.1 billion) less cash and cash equivalents ($59.7 million).

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

Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion), net of gross market lease intangible liabilities ($23.5 million).

Impairment charges are already reflected within gross asset value.

5 unchanged sentences

These actions may require us to add some or all of our unencumbered properties as security for that debt or add them to the borrowing base under our Credit Facility.

Unencumbered real estate investments, at cost as of December 31, 2020 was $0.2 billion.

Unencumbered real estate investments, at cost as of December 31, 2021 was $110.4 million.

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.

2 unchanged sentences

As of December 31, 2021, we had $591.8 million in gross mortgage notes payable outstanding.

During the first quarter of 2020, we assumed one mortgage for $13.9 million in connection with one of our SHOP acquisitions.

Future scheduled principal payments on our mortgage notes payable for 2022 are $1.3 million.

Credit Facility

4 unchanged sentences

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 a portion of which was used for general corporate purposes.

Subsequently, we have not borrowed additional amount under the Revolving Credit Facility.

In the fourth quarter of 2020, we repaid $4.4 million of the Revolving Credit Facility from the proceeds of the Michigan SHOP disposition and $17.6 million from the disposition of the skilled nursing facility in Lutz, Florida.

These amounts represented all the cash proceeds from these dispositions.

We drew $125.0 million under our Credit Facility during the year ended December 31, 2021, primarily to fund acquisitions during the year.

We repaid $298.8 million of amounts outstanding under our Revolving Credit Facility during the year ended December 31, 2021 derived from $88.0 million of net proceeds of our dispositions of the Wellington, Florida and Jupiter, Florida properties, all $56.7 million of net cash proceeds from our May 2021 Series A Preferred Stock offering, $87.6 million of net cash proceeds from our October Series B Preferred Stock Offering, $37.0 million of proceeds from our BMO CMBS Loan and $29.4 million from cash on hand.

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.

As of December 31, 2020, $323.7 million was outstanding under the Credit Facility and the unused borrowing availability under the Credit Facility was $48.3 million.

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.

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.

As of December 31, 2020, $150.0 million was outstanding under our Term Loan, and $173.7 million was outstanding under the Revolving Credit Facility.

As of December 31, 2021, $150.0 million was outstanding under the Term Loan, and no amounts were outstanding under the Revolving Credit Facility.

The unused borrowing availability under the Credit Facility was $236.6 million.

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

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 Revolving 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.

See also the discussion above regarding the need to maintain certain levels of liquidity until the Commencement Quarter.

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.

1 unchanged sentence

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 December 31, 2020, the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to 3.21% and 4.95%, respectively.

The Credit Facility prohibits us from exceeding a maximum ratio of consolidated total indebtedness to consolidated total asset value, and requires us to maintain a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges on a quarterly basis and a minimum consolidated tangible net worth.

As of December 31, 2021, the Term Loan had an effective interest rate per annum equal to 4.11%.

Coverage Ratio”) on a quarterly basis and a minimum consolidated tangible net worth.

We entered into an amendment to our Credit Facility on November 12, 2021.

We would have been in default of the Fixed Charge Coverage Ratio for the four fiscal quarter period ended September 30, 2021.

Pursuant to the terms of a third amendment entered into on November 12, 2021 by us, the agent and the requisite lenders under the Credit Facility, the lenders waived any defaults or event of defaults under the covenant requiring us to maintain a Fixed Charge Coverage Ratio of 1.60 to 1.00 for the quarter ended September 30, 2021 and any further defaults or Events of Default (as defined in the Credit Facility) resulting from the breach of the Fixed Charge Coverage Ratio covenant.

In addition, as described above, the Fixed Charge Coverage Ratio we are required to maintain was reduced from 1.60 to 1.00 to 1.50 to 1.00 until the earlier of December 31, 2022, and such earlier date as we elect to terminate this relief.

There can be no assurance our lenders will consent to any amendments or waivers that may become necessary to comply with the terms of the Credit Facility in the future.

As of December 31, 2021, we were in compliance with the financial covenants under the Credit Facility.

Based upon our current expectations, we believe our operating results during the next 12 months will allow us to comply with these covenants.

Based upon our current expectations, we believe we will be able to comply with these covenants during the next 12 months.

Please see “Item 1A.

3 unchanged sentences

As of December 31, 2021, $355.0 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 once annually for each of 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 subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests.

We do not expect to draw any further amounts on 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.

1 unchanged sentence

The Fannie Mae Master Credit Facilities mature on November 1, 2026.

Future scheduled principal payments on our Fannie Mae Master Credit Facilities for 2022 are $2.8 million.

Capital Expenditures

During the year ended December 31, 2020, our capital expenditures were $21.9 million, of which approximately $4.6 million related our MOB segment, $4.0 million related to our NNN segment and $12.8 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 will be similar for the MOB, NNN and SHOP segments throughout 2021, however, 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.

During the year ended December 31, 2021, our capital expenditures were $19.1 million, of which approximately $6.2 million related our MOB segment and $12.9 million related to our SHOP segment.

We anticipate this rate of capital expenditures will be similar for the MOB and SHOP segments throughout 2022, however, 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.

Our capital expenditures in 2021 were funded using cash on hand, and we also expect to fund future capital expenditures using cash on hand.

Acquisitions — Year Ended December 31, 2021

During the year ended December 31, 2020, we completed the acquisitions of two multi-tenant MOBs, three single tenant MOBs and four SHOP for an aggregate contract purchase price of $109.6 million.

The acquisition of one multi-tenant MOB for a contract purchase price of $5.7 million, was completed during the three months ended December 31, 2020.

The properties acquired during the year ended December 31, 2020 are located in Illinois, Pennsylvania, Ohio and Florida and comprise approximately 340,783 square feet and were funded with proceeds from financings (including amounts borrowed under our Credit Facility), the assumption of the $13.9 million mortgage in an acquisition, and cash on hand.

Acquisitions — Subsequent to December 31, 2020 and Pending Transactions

We acquired one property subsequent to December 31, 2020 for $6.6 million.

We have signed two PSAs to acquire two MOBs located in Ohio and Oklahoma for an aggregate contract purchase price of approximately $10.1 million.

We anticipate using cash on hand to fund the consideration required to complete these acquisitions.

The PSAs are subject to conditions and 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.

During the year ended December 31, 2021, we completed the acquisitions of five multi-tenant MOBs and 12 single tenant MOBs for an aggregate contract purchase price of $160.2 million.

The acquisition of one multi-tenant MOB and two single-tenant MOBs for a contract purchase price of $12.8 million, was completed during the three months ended December 31, 2021.

The properties acquired during the year were funded with proceeds cash on hand and borrowings from our Revolving Credit Facility, and in one case, in part by the issuance of our Series A Preferred OP Units (see Note 8 — Stockholders’ Equity and Note 13 — Non-Controlling Interests to our consolidated financial statements included in this Annual Report on Form 10-K).

Acquisitions — Subsequent to December 31, 2021

We did not acquire any properties subsequent to December 31, 2021.

We have entered into one non-binding letter of intent to purchase one MOB property for a contract purchase price of $8.2 million.

There can be no assurance we will complete this acquisition on its contemplated terms, or at all.

Dispositions — Year Ended December 31, 2021

During the year ended December 31, 2020, we sold nine properties (one MOB, seven SHOPs and one skilled nursing facility in Lutz Florida) for an aggregate contract price of $40.4 million, which resulted in an aggregate gain on sale of $5.2 million.

Eight of these properties (seven SHOPs in Michigan and one skilled nursing facility in Lutz Florida) were sold in the fourth quarter of 2020 and had an aggregate purchase price of $31.8 million, which resulted in an aggregate gain on sale of $2.9 million There were no mortgages on these properties, however the property in Lutz, Florida was part of the borrowing base under the Credit Facility, as well as four Michigan properties, and one of the Michigan properties was part of the Capital One Fannie Mae Credit Facility.

Which respect to the sale of the Michigan SHOPs, 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 were transferred to the buyer at a second closing in January 2021 when the $0.8 million held in escrow was 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 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.

Following the sale of the SHOP in Lutz, Florida, all $17.6 million of the net proceeds were used to repay amounts outstanding under the Credit Facility.

During the year ended December 31, 2021, we sold eight properties (three MOBs and five SHOPs) for an aggregate contract price of $133.6 million, which resulted in an aggregate gain on sale of $3.6 million.

Two of these properties were sold in the fourth quarter of 2021 and had an aggregate contract sales price of $37.8 million, which resulted in an aggregate gain on sale of $1.3 million.

Of the properties disposed in the year ended December 31, 2021, one was encumbered under the Capital One MOB loan, one was unencumbered, and six were part of the borrowing base of our Credit Facility.

Pursuant to the terms of our amended Credit Facility, all proceeds from these dispositions were used to repay amounts outstanding under the Credit Facility.

Dispositions — Subsequent to December 31, 2021

Subsequent to December 31, 2021, we did not dispose of any properties.

We have entered into two definitive PSAs to sell the property in Jupiter Florida for $65.0 million and a skilled nursing facility in Wellington, Florida for $33.0 million.

The sales of these 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.

With respect to the skilled nursing facility in Wellington, Florida, closing may not occur unless, among other conditions, certain occupancy and revenue levels have been maintained at the property for a period of time.

The property in Jupiter, Florida is not currently encumbered by any mortgage debt or part of the borrowing base under our Credit Facility.

The skilled nursing facility in Wellington Florida is part of the borrowing base under our Credit Facility.

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.

We have entered into a PSA to dispose of the four LaSalle properties located in Texas for an aggregate contract sales price of $12.4 million.

The PSA is subject to conditions, and there can be no assurance this, or any, disposition will be completed on the contemplated terms, or at all.

Pursuant to the terms of our Credit Facility, 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.

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

1 unchanged sentence

Share Repurchase Program

Our Board has adopted the SRP, which enables our common stockholders to sell their shares of common stock to us under limited circumstances.

At the time a common stockholder requests a repurchase, we may, subject to certain conditions, repurchase the shares presented for repurchase for cash.

There are limits on the number of shares we may repurchase under this program during any calendar year.

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.

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.

The amendment to the Credit Facility on August 10, 2020 provides that we may not repurchase shares of our common stock until the Commencement Quarter.

In light of this amendment, the Board suspended repurchases under the SRP effective August 14, 2020.

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.

Under the Credit Facility, we are restricted from repurchasing shares until the end of the Commencement Quarter.

Thus, the Board suspended repurchases under the SRP effective August 14, 2020.

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 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%.

There can be no assurance, however, as to whether our SRP will be reactivated or on what terms.

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.

22 unchanged sentences

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

Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010.

Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in

November 2010.

The Practice Guideline defines MFFO as FFO further adjusted for acquisition fees and expenses and other items.

consideration, accretion of discounts and amortization of premiums on debt investments, mark-to-market adjustments included in net income, gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and adjustments for unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.

In calculating MFFO, we follow the Practice Guideline and exclude acquisition fees and expenses, amortization of above and below market and other intangible lease assets and liabilities, amounts relating to straight-line rent adjustments (in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the lease and rental payments), contingent purchase price consideration, accretion of discounts and amortization of premiums on debt investments, mark-to-market adjustments included in net income, gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and adjustments for unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.

We also exclude other non-operating items in calculating MFFO, such as transaction-related fees and expenses and capitalized interest.

In addition, because we currently believe that concessions granted to our tenants as a result of the COVID-19 pandemic are collectable (see Accounting Treatment of Rent Deferrals below), we have excluded from the increase in straight-line rent for MFFO purposes the amounts recognized under GAAP relating to these deferrals, which is not considered by the Practice Guideline.

We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance once our portfolio is stabilized.

Our Modified FFO (as defined in our Credit Facility) is similar but not identical to MFFO as discussed in this Quarterly Report on Form 10-Q.

Our Modified FFO (as defined in our Credit Facility) is similar but not identical to MFFO as discussed in this Annual Report on Form 10-K.

We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.

9 unchanged sentences

As a result of relief granted by the FASB and SEC related to lease modification accounting, rental revenue used to calculate Net Income and NAREIT FFO has not been, and we do not expect it to be, significantly impacted by these types of deferrals.

In addition, since we currently believe that these deferral amounts are collectable, we have excluded from the increase in straight-line rent for MFFO purposes the amounts recognized under GAAP relating to these types of rent deferrals.

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 Annual Report on Form 10-K.

The table below reflects the items deducted from or added to net loss attributable to stockholders in our calculation of FFO and MFFO for the periods indicated.

In addition, because we currently believe that these deferred amounts are collectable, we have excluded from the increase in straight-line rent for MFFO purposes the amounts recognized under GAAP relating to these deferrals.

The table below reflects 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.

7 unchanged sentences

40,951 36,446

(Gain) loss on sale of real estate investment

(5,230) (8,790) 70

Gain on sale of real estate investments (3,648) (5,230)

Adjustments for non-controlling interests (2)

(526) (595) (484)

FFO (as defined by NAREIT) attributable to common stockholders

6 unchanged sentences

Amortization of mortgage premiums and discounts, net

60 (162) (263)

Loss on non-designated derivatives

Capitalized construction interest costs

— (2,756) (3,198)

(Gain) loss on non-designated derivatives (37) 102

Deferred tax asset valuation allowance (4)

9 unchanged sentences

NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio.

NOI is equal to revenue from tenants less property operating and maintenance.

NOI is equal to revenue from tenants less property operating and maintenance expenses.

NOI excludes all other items of expense and income included in the financial statements in calculating net income (loss).

10 unchanged sentences

(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total

Net income (loss) attributable to common stockholders (in accordance with GAAP)

$ 36,862 $ 2,492 $ (15,690) $ (102,445) $ (78,781)

Net (loss) income attributable to common stockholders (in accordance with GAAP) $ (133) $ 2,527 $ 2,074 $ (97,410) $ (92,942)

Impairment charges 40,073 — 878 — 40,951

11 unchanged sentences

NOI $ 112,757 $ 9,232 $ 1,553 $ — $ 123,542

The following table reflects the items deducted from or added to net loss attributable to stockholders in our calculation of NOI for the year ended December 31, 2019:

The following table reflects the items deducted from or added to net loss attributable to common stockholders in our calculation of NOI for the year ended December 31, 2020:

(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total

19 unchanged sentences

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 our board of directors and declared by us.

Dividends on our Series B Preferred Stock accrue in an amount equal to $1.78125 per share each year ($0.445313 per share per quarter) to Series B Preferred Stock holders, which is equivalent to 7.125% of per annum in the $25.00 liquidation preference per share of Series B Preferred Stock.

Dividends on the Series B 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 our board of directors and declared by us.

The first dividend on the Series B Preferred Stock was paid in January 2022.

From March 1, 2018 until June 20, 2020, we paid distributions to our common 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.

On June 29, 2020, the Board approved a change in our common stock distribution policy whereby we would no longer declare distributions based on daily record dates.

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.

As noted herein under our Credit Facility 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.

On June 29, 2020, the Board approved a change in our common stock distribution policy changing from daily record dates to a single record date during the applicable month.

Under our Credit Facility 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 and the Series B 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 and Series B Preferred Stock) if a default or event of default exists or would result therefrom.

The restrictions on paying cash distributions will no longer apply starting in the 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, our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%, and the Covenant Relief Period has ended.

There can be no assurance as to if, or when, we will be able to satisfy these conditions.

We may only pay cash distributions beginning in the Commencement Quarter and the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock) for any period of four fiscal quarters do 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.

We may only pay cash distributions on our common stock beginning in the Commencement Quarter and the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock and Series B Preferred Stock) for any period of four fiscal quarters do 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, our ability to pay cash distributions may be limited by financial covenants in the Credit Facility, including our requirement to maintain a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges.

Until four full fiscal quarters have elapsed after the commencement of Commencement Quarter, the aggregate amount of permitted distributions and Modified FFO will be determined by using only the fiscal quarters that have elapsed from and after the Commencement Quarter and annualizing those amounts.

On August 13, 2020, the Board changed 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 to comply with an amendment to the Credit Facility described above.

Under the new policy, 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 and January 4, 2021, we declared dividends payable in 0.01349 shares of our common stock on each share of our outstanding common stock.

This amount was based on our prior cash distribution rate of $0.85 per share per annum.

The stock dividends were paid on October 15, 2020 and January 15, 2021 to holders of record of our common stock at the close of business on October 8, 2020 and January 11, 2021.

In each of October 2020 and January 2021, we declared and issued stock dividends equal to 0.01349 shares of common stock on each share of outstanding common stock, and in April 2021, July 2021, October 2021 and January 2022, we declared and issued a stock dividend equal to 0.014655 shares of common stock on each share of outstanding common stock.

The amounts of these stock dividends were based on our prior cash distribution rate of $0.85 per share per annum and the then applicable Estimated Per-Share NAV.

We did not pay any cash dividends on our common stock during the year ended December 31, 2021.

See “— Overview” for additional information on the impact of the stock dividends.

2 unchanged sentences

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

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

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:

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

The following table shows the sources for the payment of distributions to common stockholders and preferred stockholders, including distributions on restricted shares and OP Units, but excluding distributions related to Class B Units because these distributions are recorded as an expense in our consolidated statement of operations and comprehensive loss, for the periods indicated:

Three Months Ended Year Ended

2 unchanged sentences

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 173 742 742 742 2,399

Distributions on OP Units 86 87 28 — 201

Total distributions (1)

Dividends paid to holders of Series A Preferred Stock $ 742 $ 742 $ 1,827 $ 1,833 $ 5,144

Distributions paid to holders of Series A OP Units — — — 46 46

Total cash distributions [1] [3]

$ 742 $ 742 $ 1,827 $ 1,879 $ 5,190

2 unchanged sentences

$ 742 100.0 % $ 742 100.0 % $ 1,827 100.0 % $ 1,879 100.0 % $ 5,190 100.0 %

Proceeds received from common stock issued under the DRIP (2)

854 4.3 % 6,267 30.1 % — — % 718 96.8 % 6,751 (3) 13.9 %

Available cash on hand

— — % 2,264 10.9 % — — % — — % — (3) — %

Total source of distribution coverage

2 unchanged sentences

$ 13,959 $ 3,644 $ 8,401 $ 12,875 $ 38,879

Net loss attributable to stockholders (in accordance with GAAP)

$ (24,744) $ (22.811) $ (10,500) $ (43,514) $ (78,781)

(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 and the change to declaring distributions in common stock (as opposed to cash) beginning in October 2020 (see disclosure above).

Net loss (in accordance with GAAP) $ (11,442) $ (14,103) $ (40,465) $ (19,430) $ (85,440)

[1] Assumes the use of available cash flows from operations before any other sources.

(3) Year-to-date total does not equal the sum of the quarters.

Each quarter and year-to-date period is evaluated separately for purposes of this table.

[2] During 2021 all dividends on common stock and common stock OP Units were issued in the form of additional shares and therefore, are not included in the table above.

[3] Our Series B Preferred Stock was first issued in October 2021, and we are required to begin paying dividends on the Series B Preferred Stock in January 2022.

For the year ended December 31, 2021, cash flows provided by operations were $38.9 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.

As shown in the table above, we funded distributions with cash flows provided by operations.

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.

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 our ability to improve operations at our existing properties.

Our ability to pay dividends on our Series A Preferred Stock and Series B 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 our ability to 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.

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.

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 under the Credit

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.

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.

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.

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 and Series B Preferred Stock) if a default or event of default exists or would result therefrom under the Credit Facility.

Loan Obligations

1 unchanged sentence

The payment terms of our Credit Facility require interest only amounts payable monthly with all unpaid principal and interest due at maturity.

The payment terms of our Fannie Mae Master Credit Facilities require interest only payments through November 2021 and principal and interest payments thereafter.

The payment terms of our Fannie Mae Master Credit Facilities required interest only payments through November 2021 and principal and interest payments thereafter.

Our loan agreements require us to comply with specific reporting covenants.

As of December 31, 2021, 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

The following table reflects contractual debt obligations under our mortgage notes payable, Revolving Credit Facility and Fannie Mae Master Credit Facilities and minimum base rental cash payments due for leasehold interests over the next five years and thereafter as of December 31, 2020.

The minimum base rental cash payments due for leasehold interests amounts exclude contingent rent payments, as applicable, that may be payable based on provisions related to increases in annual rent based on exceeding certain economic indexes, among other items.

As of December 31, 2020, the outstanding mortgage notes payable and loans under the Revolving Credit Facility and Fannie Mae Master Credit Facilities had weighted-average effective interest rates of 3.9%, 3.2% and 2.6%, respectively.

Years Ended December 31,

(In thousands) Total 2021 2022 - 2023 2024 -2025 Thereafter

Principal on mortgage notes payable

$ 550,361 $ 1,191 $ 7,625 $ 2,237 $ 539,308

Interest on mortgage notes payable

108,961 15,971 45,387 47,603 —

Principal on Revolving Credit Facility 173,674 — — 173,674 —

Interest on Revolving Credit Facility 27,875 5,575 11,150 11,150 —

Principal on Term Loan 150,000 — — 150,000 —

Interest on Term Loan 37,125 7,425 14,850 14,850 —

Fannie Mae Master Credit Facilities 355,175 130 7,316 8,993 338,736

Interest on Fannie Mae Master Credit Facilities 53,913 9,314 18,464 18,031 8,104

Lease rental payments due (1)

39,944 747 1,540 1,560 36,097

Total $ 1,497,028 $ 40,353 $ 106,332 $ 428,098 $ 922,245

(1) Includes all payments due on both operating leases and direct financing leases.

See Note 16 — Commitments and Contingencies to our consolidated financial statements included in this Form 10-K for additional information.

Election as a REIT

7 unchanged sentences

federal income and excise taxes on our undistributed income.

We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions.

In addition, we may be required to pay costs for maintenance and operation of properties, which may adversely impact our results of operations due to potential increases in costs and operating expenses resulting from inflation.

We may be adversely impacted by inflation on the leases with tenants in our MOB segment that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates.

For the year ended December 31, 2021, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 7.0%.

To help mitigate the adverse impact of inflation, approximately 87% of our leases with our tenants in our MOB segment contain rent escalation provisions which average 1.8% per year.

These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures).

Approximately 84% are fixed-rate, 3% are based on the Consumer Price Index and 13% do not contain any escalation provisions.

In addition to base rent, depending on the specific lease, MOB tenants are generally reuired to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases.

Property operating and maintenance expenses include common area maintenance costs, real estate taxes and insurance.

Increased operating costs paid by our tenants under these net leases could have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’ ability to pay rent owed to us or property expenses to be paid, or reimbursed to us, by our tenants.

Renewals of leases or future leases for our net lease properties may not be negotiated on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs.

If we are unable to lease properties on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs.

Leases with residents at our SHOPs typically do not have rent escalations, however, we are able to renew leases at market rates as they mature due to their short-term nature.

As inflation rates increase or persist at high levels, the cost of providing medical care at our SHOPs, particularly labor costs, will increase.

If we are unable to admit new residents or renew resident leases at market rates, while bearing these increased costs from providing services to our residents, our results of operations may be affected.

Related-Party Transactions and Agreements

3 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis