What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-09 compared with 2024-05-10 · 714 added, 413 removed, 1347 unchanged (46% of the section changed)

18 unchanged sentences

Operating lease right-of-use assets 7,587 7,713

Prepaid expenses and other assets (including $ 0 due to related parties as of March 31, 2024)

Prepaid expenses and other assets (including $ 46 due from related parties as of June 30, 2024)

35,804 35,781

5 unchanged sentences

Market lease intangible liabilities, net 7,211 8,165

Accounts payable and accrued expenses (including $ 872 and $ 47 due to related parties as of March 31, 2024 and December 31, 2023, respectively)

Accounts payable and accrued expenses (including $ 98,334 and $ 295 due to related parties as of June 30, 2024 and December 31, 2023, respectively)

143,620 48,356

5 unchanged sentences

7.375 % Series A cumulative redeemable perpetual preferred stock, $ 0.01 par value, 4,740,000 authorized;

3,977,144 issued and outstanding as of March 31, 2024 and December 31, 2023

3,977,144 issued and outstanding as of June 30, 2024 and December 31, 2023

7.125 % Series B cumulative redeemable perpetual preferred stock, $ 0.01 par value, 3,680,000 authorized;

3,630,000 issued and outstanding as of March 31, 2024 and December 31, 2023

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 113,238,180 shares and 111,545,018 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

3,630,000 issued and outstanding as of June 30, 2024 and December 31, 2023

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 113,238,180 shares and 111,545,018 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 2,533,484 2,509,303

10 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Revenue from tenants $ 88,817 $ 86,104 $ 177,116 $ 173,459

3 unchanged sentences

Operating fees to related parties 6,424 6,369 12,790 12,756

Termination fees to related parties 98,241 — 98,241 —

Acquisition and transaction related 357 148 499 211

2 unchanged sentences

Total expenses 189,032 84,985 278,451 170,515

Operating income before gain on sale of real estate investments ( 1,120 ) 1,825

Gain on sale of real estate investments — 115

Operating income ( 1,120 ) 1,940

Operating (loss) income before loss on sale of real estate investments ( 100,215 ) 1,119 ( 101,335 ) 2,944

Loss on sale of real estate investments ( 225 ) ( 306 ) ( 225 ) ( 191 )

Operating (loss) income ( 100,440 ) 813 ( 101,560 ) 2,753

Other income (expense):

1 unchanged sentence

Interest and other income 457 313 529 318

Gain (loss) on non-designated derivatives 1,951 ( 182 )

Gains on non-designated derivatives 882 286 2,833 104

Total other expenses ( 16,413 ) ( 18,104 ) ( 30,773 ) ( 34,066 )

6 unchanged sentences

Other comprehensive income (loss):

Unrealized gain (loss) on designated derivatives 2,280 ( 7,431 )

Unrealized (loss) gain on designated derivatives ( 1,276 ) 5,466 1,004 ( 1,965 )

Comprehensive loss attributable to common stockholders $ ( 121,192 ) $ ( 15,293 ) $ ( 137,912 ) $ ( 40,233 )

9 unchanged sentences

(In thousands, except share data)

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

Series A Preferred Stock Series B Preferred Stock Common Stock Accumulated Other Comprehensive Income

15 unchanged sentences

Rebalancing of ownership percentage — — — — — — 43 — — 43 ( 43 ) —

Balance, March 31, 2024 3,977,144 $ 40 3,630,000 $ 36 113,238,180 $ 1,132 $ 2,533,232 $ 25,744 $ ( 1,682,499 ) $ 877,685 $ 6,362 $ 884,047

Three Months Ended March 31, 2023

Balance, June 30, 2024 3,977,144 $ 40 3,630,000 $ 36 113,238,180 $ 1,132 $ 2,533,484 $ 24,468 $ ( 1,802,415 ) $ 756,745 $ 5,842 $ 762,587

Three Months Ended June 30, 2024

Series A Preferred Stock Series B Preferred Stock Common Stock Accumulated Other Comprehensive Income

3 unchanged sentences

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

Balance, March 31, 2023 3,977,144 $ 40 3,630,000 $ 36 113,238,180 $ 1,132 $ 2,533,232 $ 25,744 $ ( 1,682,499 ) $ 877,685 $ 6,362 $ 884,047

Issuance of Preferred Stock, net — — — — — — — — — — — —

Share-based compensation, net — — — — — — 230 — — 230 — 230

Distributions declared on Series A Preferred Stock, $ 0.46 per share

— — — — — — — — ( 1,834 ) ( 1,834 ) — ( 1,834 )

Distributions declared on Series B Preferred Stock, $ 0.45 per share

— — — — — — — — ( 1,616 ) ( 1,616 ) — ( 1,616 )

Distributions to non-controlling interest holders — — — — — — — — — — ( 46 ) ( 46 )

Net loss — — — — — — — — ( 116,466 ) ( 116,466 ) ( 452 ) ( 116,918 )

Unrealized gain on designated derivatives — — — — — — — ( 1,276 ) — ( 1,276 ) — ( 1,276 )

Rebalancing of ownership percentage — — — — — — 22 — — 22 ( 22 ) —

Balance, June 30, 2024 3,977,144 $ 40 3,630,000 $ 36 113,238,180 $ 1,132 $ 2,533,484 $ 24,468 $ ( 1,802,415 ) $ 756,745 $ 5,842 $ 762,587

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

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

Six Months Ended June 30, 2023

Series A Preferred Stock Series B Preferred Stock Common Stock Accumulated Other Comprehensive (Loss) Income

Shares Par Value Number of

Shares Par Value Additional

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

Balance, December 31, 2022 3,977,144 $ 40 3,630,000 $ 36 105,080,531 $ 1,051 $ 2,417,059 $ 36,910 $ ( 1,462,457 ) $ 992,639 $ 6,551 $ 999,190

9 unchanged sentences

Unrealized gain on designated derivatives — — — — — — — ( 1,965 ) — ( 1,965 ) — ( 1,965 )

Contributions from minority interests — — — — — — — — — — 284 284

Rebalancing of ownership percentage — — — — — — 52 — — 52 ( 52 ) —

Balance, June 30, 2023 3,977,144 $ 40 3,630,000 $ 36 108,284,434 $ 1,082 $ 2,462,523 $ 34,945 $ ( 1,545,708 ) $ 952,918 $ 6,660 $ 959,578

Three Months Ended June 30, 2023

Series A Preferred Stock Series B Preferred Stock Common Stock Accumulated Other Comprehensive Income

Shares Par Value Number of

Shares Par Value Additional

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

Balance, March 31, 2023 3,977,144 $ 40 3,630,000 $ 36 106,668,245 $ 1,066 $ 2,439,662 $ 29,479 $ ( 1,502,299 ) $ 967,984 $ 6,441 $ 974,425

Issuance of Preferred Stock, net — — — — — — 2 — — 2 — 2

Share-based compensation, net — — — — — — 230 — — 230 — 230

Distributions declared in common stock, $ 0.21 per share

— — — — 1,616,189 16 22,632 — ( 22,648 ) — — —

Distributions declared on Series A Preferred Stock, $ 0.46 per share

— — — — — — — — ( 1,834 ) ( 1,834 ) — ( 1,834 )

Distributions declared on Series B Preferred Stock, $ 0.45 per share

— — — — — — — — ( 1,617 ) ( 1,617 ) — ( 1,617 )

Distributions to non-controlling interest holders — — — — — — — — — — ( 46 ) ( 46 )

Net loss — — — — — — — — ( 17,310 ) ( 17,310 ) ( 22 ) ( 17,332 )

Unrealized gain on designated derivatives — — — — — — — 5,466 — 5,466 — 5,466

Contributions from minority interests — — — — — — — — — — 284 284

Rebalancing of ownership percentage — — — — — — ( 3 ) — — ( 3 ) 3 —

Balance, June 30, 2023 3,977,144 $ 40 3,630,000 $ 36 108,284,434 $ 1,082 $ 2,462,523 $ 34,945 $ ( 1,545,708 ) $ 952,918 $ 6,660 $ 959,578

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

3 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

15 unchanged sentences

Prepaid expenses and other assets ( 1,824 ) 909

Termination fees payable to related parties 98,241 —

Accounts payable, accrued expenses and other liabilities ( 2,854 ) ( 5,728 )

5 unchanged sentences

Investments in non-designated interest rate caps ( 1,709 ) ( 4,580 )

Proceeds from sales of real estate investments 2,896 4,803

Net cash used in investing activities ( 15,578 ) ( 34,360 )

2 unchanged sentences

Proceeds from credit facilities 6,960 20,000

Proceeds from mortgage notes payable — 240,000

Payments on mortgage notes payable ( 584 ) ( 565 )

1 unchanged sentence

Payments of deferred financing costs ( 199 ) ( 7,774 )

Payments for derivative instruments — ( 7,783 )

Preferred stock issuance costs — ( 2 )

Contributions from non-controlling interests — 284

Dividends paid on Series A Preferred stock ( 3,668 ) ( 3,666 )

9 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash and cash equivalents, end of period $ 29,461 $ 71,705

7 unchanged sentences

Mortgages issued with acquisition of real estate investments $ 7,500 $ —

Net change in accrued capital expenditures for the period $ ( 632 ) $ —

Proceeds from real estate sales used to repay mortgage notes payable $ — $ 2,663

Mortgage notes payable repaid with proceeds from real estate sales $ — $ ( 2,663 )

Proceeds from real estate sales used to repay amounts outstanding under the Prior Credit Facility $ — $ 5,167

Amounts outstanding under the Prior Credit Facility repaid with proceeds from real estate sales $ — $ ( 5,167 )

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

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Note 1 — Organization

4 unchanged sentences

The Company acquires, owns and manages a diversified portfolio of healthcare-related real estate, focused on medical office and other healthcare-related buildings (“MOBs”) and senior housing operating properties (“SHOPs”).

As of March 31, 2024, the Company owned 208 properties located in 33 states and comprised of 9.1 million rentable square feet.

As of June 30, 2024, the Company owned 207 properties located in 32 states and comprised of 9.0 million rentable square feet.

Substantially all of the Company’s business is conducted through the OP and its wholly-owned subsidiaries including taxable REIT subsidiaries.

The Company’s advisor, Healthcare Trust Advisors, LLC (the “Advisor”) manages its day-to-day business with the assistance of its property manager, Healthcare Trust Properties, LLC (the “Property Manager”).

The Company’s Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”), and these related parties receive compensation and fees for providing services to the Company.

The Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global” or the “Advisor Parent”), and these related parties receive compensation and fees for providing services to the Company.

The Company also reimburses these entities for certain expenses they incur in providing these services to the Company.

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

As of March 31, 2024, the Company owned 46 SHOPs using the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure in its SHOP segment.

As of June 30, 2024, the Company owned 45 SHOPs using the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure in its SHOP segment.

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

5 unchanged sentences

In its SHOP segment, the Company invests in seniors housing properties through the RIDEA structure.

As of March 31, 2024, the Company had four eligible independent contractors operating 46 SHOPs.

As of June 30, 2024, the Company had four eligible independent contractors operating 45 SHOPs.

The Company declared quarterly dividends entirely in shares of its common stock from October 2020 through January 2024.

12 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Intent to Internalize Management

On July 1, 2024, the Company announced that, in anticipation of a potential future listing of the Company’s common stock on a national securities exchange, it provided notice to the Advisor in June 2024 of its intent to transition to self-management and internalize management functions.

On August 6, 2024, the Company entered into a merger agreement (the “Internalization Agreement”) with HTI Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), the Advisor and the Advisor Parent.

The transactions contemplated by the Internalization Agreement are referred to as the “Internalization.”

Consummation of the transactions contemplated by the Internalization Agreement will result in the internalization of the Company’s management immediately following consummation of the merger (the “Internalization Merger”) of the Advisor with and into Merger Sub, with the Advisor being the surviving entity (under the name “Healthcare Trust Advisors, LLC”), including by terminating (i) the Company’s existing arrangement for advisory management services provided by the Advisor pursuant to the Second A&R Advisory Agreement (as defined in Note 9 — Related Party Transactions and Arrangements ), by and among the Company, the OP, and the Advisor and (ii) the Company’s existing arrangement for property management services provided by the Property Manager, pursuant to the A&R Property Management Agreement (as defined in Note 9 — Related Party Transactions and Arrangements ).

All assets, contracts (including leases) and employees necessary for the Company to conduct its business will be contributed by Advisor Parent (and/or its affiliates) to the Advisor, including all of the equity interests in the Property Manager, prior to the effective time of the Internalization Merger.

Pursuant to the Internalization Agreement, at closing of the Internalization (the “Closing”), the outstanding membership interest of the Advisor will be converted into the right to receive from the Company (i) a $ 98.2 million self-management termination fee pursuant to the formula set forth in the Second A&R Advisory Agreement, which was recommended and approved by a special committee of the Company’s board of directors, consisting entirely of independent directors, in February 2017, (ii) an asset management fee of $ 10.9 million, representing the aggregate Base Management Fee (as defined in the Second A&R Advisory Agreement) that the Company would have been required to pay to the Advisor during the six month notice period required to terminate the Second A&R Advisory Agreement (assuming the Closing occurs on or prior to December 25, 2024) which began on June 25, 2024 when the Company delivered notice to the Advisor of its intention to effect the Internalization, and (iii) a property management fee of $ 3.9 million, representing the aggregate Management Fees (as defined in the A&R Property Management Agreement) that the Company would have been required to pay to the Property Manager through the current term of the Property Management Agreement, subject to certain closing adjustments to the extent the amount of such asset management and property management fees exceed or are less than the amount required to be paid by Advisor Parent to employees placed with the Company pursuant to the Internalization prior to the Closing and the amounts due under the contracts acquired by the Company in the Internalization relating to the pre-Closing period (collectively, the “Closing Payments”).

Advisor Parent will also deliver cash to the Company at Closing in order for the Company to pay any unpaid employee bonuses for calendar year 2023 and any accrued bonuses for calendar year 2024 to the extent that the Company has previously reimbursed Advisor Parent for, but Advisor Parent has not paid, such bonuses.

To the extent the Closing Payments exceed the Company’s Available Cash (as defined in the Internalization Agreement), the Company has agreed to pay Advisor Parent aggregate cash consideration equal to at least $ 60.0 million (such cash amount, the “Closing Date Cash Consideration”), and the Company shall issue to Advisor Parent a promissory note in a principal amount equal to the difference between the Closing Date Cash Consideration and the Closing Payments, as may be adjusted for any post-Closing true-ups on the Closing Payments.

The Company intends to fund the Closing Date Cash Consideration through a combination of cash on hand and the net proceeds from certain anticipated strategic dispositions.

The Company expects the Internalization to close no later than the fourth quarter of 2024, subject to the satisfaction or waiver of certain conditions in the Internalization Agreement.

The Internalization Agreement may be terminated, subject to certain limitations set forth in the Internalization Agreement, (i) by mutual written agreement by the parties thereto, (ii) by any party if a final and non-appealable order is entered that permanently restrains or otherwise prohibits the Internalization, or (iii) by any party should the Effective Time (as defined in the Internalization Agreement) not have occurred on or before June 28, 2025.

There can be no assurance that the Internalization will close within the anticipated time frame, or at all, or that the Company will be able to list its shares of common stock on a national securities exchange.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Note 2 — Summary of Significant Accounting Policies

2 unchanged sentences

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

The results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the results for the entire year or any subsequent interim periods.

The results of operations for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of the results for the entire year or any subsequent interim periods.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023, which are included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on March 15, 2024.

Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company’s significant accounting policies during the three months ended March 31, 2024.

Principles of Consolidation and Basis of Presentation

14 unchanged sentences

Moreover, these increases in the rate of inflation, the ongoing wars in Ukraine, Israel and related sanctions and increases in interest rates may also impact the ability of the Company’s tenants to pay rent and hence the Company’s results of operations and liquidity.

In the Company’s SHOP segment, occupancy trended downward from March 2020 until March 2021 and has since recovered modestly and stabilized.

In the Company’s SHOP segment, occupancy trended downward from March 2020 until March 2021 and has since stabilized and has begun recovering.

The Company also experienced lower inquiry volumes and reduced in-person tours in post-pandemic periods as compared to pre-pandemic periods.

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

The persistence of high inflation and labor shortages have caused adverse impacts to the Company’s occupancy and cost levels, and these trends may continue to impact the Company and have a material adverse effect on its operations in future periods.

1 unchanged sentence

The Company’s revenues, which are derived primarily from lease contracts, include rent received from tenants in its MOB segment.

As of March 31, 2024, these leases had a weighted average remaining lease term of 4.7 years.

As of June 30, 2024, these leases had a weighted average remaining lease term of 4.5 years.

Rent from tenants in the Company’s MOB operating 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.

13 unchanged sentences

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

The following table presents future base rent payments on a cash basis due to the Company over the next five years and thereafter as of March 31, 2024.

The following table presents future base rent payments on a cash basis due to the Company over the next five years and thereafter as of June 30, 2024.

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

8 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

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

4 unchanged sentences

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

The Company recorded reductions in revenue of $ 0.2 million and $ 0.3 million for uncollectable amounts during the three months ended March 31, 2024 and 2023, respectively.

The Company recorded reductions in revenue of $ 0.6 million and $ 0.8 million for uncollectable amounts during the three and six months ended June 30, 2024, respectively, and $ 0.4 million and $ 0.7 million for uncollectable amounts during the three and six months ended 2023, respectively.

Investments in Real Estate

7 unchanged sentences

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

No properties were presented as discontinued operations during the three months ended March 31, 2024 and 2023.

No properties were presented as discontinued operations during the six months ended June 30, 2024 and 2023.

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

1 unchanged sentence

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

There were no real estate investments held for sale as of March 31, 2024 or December 31, 2023.

There were no real estate investments held for sale as of June 30, 2024 or December 31, 2023.

Purchase Price Allocation

7 unchanged sentences

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

All acquisitions during the three months ended March 31, 2024 were asset acquisitions.

The Company acquired four properties during the three months ended March 31, 2024.

All acquisitions during the six months ended June 30, 2024 were asset acquisitions.

The Company acquired four properties during the six months ended June 30, 2024.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

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

12 unchanged sentences

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

The Company did not record any intangible asset amounts related to customer relationships during the three months ended March 31, 2024 or 2023.

The Company did not record any intangible asset amounts related to customer relationships during the six months ended June 30, 2024 or 2023.

Accounting for Leases

4 unchanged sentences

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.

As of March 31, 2024 and December 31, 2023, the Company had no leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.

As of June 30, 2024 and December 31, 2023, the Company had no leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.

As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating and maintenance expenses) as a single lease component as an operating lease because (i) the non-lease components have the same timing and pattern of transfer as the associated lease component;

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Lessee Accounting

The Company is also the lessee under certain land leases which will continue to be classified as operating leases under transition elections unless subsequently modified.

These leases are reflected on the balance sheets as of March 31, 2024 and December 31, 2023, and the rent expense is reflected on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023.

These leases are reflected on the balance sheets as of June 30, 2024 and December 31, 2023, and the rent expense is reflected on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss for the six months ended June 30, 2024 and 2023.

For lessees, the accounting standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

25 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ended December 31, 2013.

13 unchanged sentences

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

As of March 31, 2024, the Company owned 46 seniors housing properties which are leased and operated through its TRS.

As of June 30, 2024, the Company owned 45 seniors housing properties which are leased and operated through its TRS.

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

5 unchanged sentences

Deferred income taxes result from temporary differences between the carrying amounts of the TRS’s assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes as well as net operating loss carryforwards.

Significant components of the deferred tax assets and liabilities as of March 31, 2024 and December 31, 2023 consisted of deferred rent and net operating loss carryforwards.

Significant components of the deferred tax assets and liabilities as of June 30, 2024 and December 31, 2023 consisted of deferred rent and net operating loss carryforwards.

During the year ended December 31, 2023, the Company modified 26 intercompany leases with the TRS which reduced intercompany rent.

Because of the TRS’s historical operating losses and the continuing adverse economic impacts since the COVID-19 pandemic on the results of operations of the Company’s SHOP assets, the Company is not able to conclude that it is more likely than not it will realize the future benefit of its deferred tax assets;

thus the Company has provided a 100 % valuation allowance of $ 8.6 million as of March 31, 2024.

thus the Company has provided a 100 % valuation allowance of $ 9.0 million as of June 30, 2024.

If and when the Company believes it is more likely than not that it will recover its deferred tax assets, the Company will reverse the valuation allowance as an income tax benefit in its consolidated statements of comprehensive loss.

11 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Not yet Fully Adopted as of March 31, 2024:

June 30, 2024

Not yet Fully Adopted as of June 30, 2024:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting — Improvements to Reportable Segment Disclosures (Topic 280).

5 unchanged sentences

The ASU should be adopted retrospectively unless it is impracticable to do so.

The Company has not adopted this ASU as of March 31, 2024, but is currently evaluating the impact on its segment disclosures and intends to adopt ASU 2023-07 during the year ending December 31, 2024.

The Company has not adopted this ASU as of June 30, 2024, but is currently evaluating the impact on its segment disclosures and intends to adopt ASU 2023-07 during the year ending December 31, 2024.

Note 3 — Real Estate Investments, Net

1 unchanged sentence

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

The Company owned 208 properties as of March 31, 2024.

During the three months ended March 31, 2024 and 2023, the Company acquired four and five properties, respectively.

All acquisitions in the three months ended March 31, 2024 and 2023 were considered asset acquisitions for accounting purposes.

The following table presents the allocation of real estate assets acquired and liabilities assumed during the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The Company owned 207 properties as of June 30, 2024.

During the six months ended June 30, 2024 and 2023, the Company acquired four and five properties, respectively.

All acquisitions in the six months ended June 30, 2024 and 2023 were considered asset acquisitions for accounting purposes.

The following table presents the allocation of real estate assets acquired and liabilities assumed during the six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

(In thousands) 2024 2023

12 unchanged sentences

Significant Concentrations

As of March 31, 2024 and 2023, the Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or greater of total annualized rental income for the portfolio on a straight-line basis.

The following table lists the states where the Company had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of March 31, 2024 and 2023:

As of June 30, 2024 and 2023, the Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or greater of total annualized rental income for the portfolio on a straight-line basis.

State 2024 2023

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Intangible Assets and Liabilities

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 2024 2023

4 unchanged sentences

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

$ 57 $ 40 $ 96 $ 80

(1) Reflected within depreciation and amortization expense.

10 unchanged sentences

$ 406 $ 796 $ 676 $ 442 $ 413

The Company did not dispose of any properties during the three months ended March 31, 2024 and 2023.

Three and Six Months Ended June 30, 2024

The Company disposed of one held-for-use SHOP during the three and six months ended June 30, 2024 for a contract sales price of $ 3.3 million.

This property was impaired during the six months ended June 30, 2024 by $ 0.3 million, and had been previously impaired by a cumulative total of $ 2.3 million in the years ended December 31, 2023 and 2022.

The Company recorded a $ 0.2 million loss on the sale of this SHOP, which is presented in the Company’s consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2024.

Subsequent to June 30, 2024, the Company disposed of seven MOBs in Illinois for a contract sales price of $ 50.5 million.

For additional information, please see Note 1 7 — Subsequent Events.

Three and Six Months Ended June 30, 2023

During the three and six months ended June 30, 2023, the Company disposed of four SHOPs and one MOB for an aggregate contract sales price of $ 13.8 million.

Two of the four disposed SHOPs were previously impaired by $ 6.2 million in the year ended December 31, 2022.

As a result, the Company recorded an aggregate loss on sale of $ 0.2 million, which is presented in the Company’s consolidated statement of operations and comprehensive loss for the six months ended June 30, 2023.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Assets Held for Sale

2 unchanged sentences

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

There were no assets held for sale as of March 31, 2024 and December 31, 2023.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

There were no assets held for sale as of June 30, 2024 and December 31, 2023.

Assets Held for Use

7 unchanged sentences

Property Damage and Insurance Recoveries

During the three months ended March 31, 2024, one MOB property sustained fire damages estimated at $ 2.9 million, which the Company anticipates will be completely recoverable through its property insurance policy during the remainder of 2024.

Accordingly, the Company reduced the carrying value of the damaged property by $ 2.9 million and recorded a receivable of that amount due from the insurance carrier as of March 31, 2024.

During the six months ended June 30, 2024, one MOB property sustained fire damages estimated at $ 2.9 million, which the Company anticipates will be completely recoverable through its property insurance policy during the remainder of 2024.

Accordingly, the Company reduced the carrying value of the damaged property by $ 2.9 million and recorded a receivable of that amount due from the insurance carrier as of June 30, 2024.

Impairment Charges

There were no impairment charges recorded in the three months ended March 31, 2023.

The following table presents impairment charges by segment recorded during the three months ended March 31, 2024:

Three Months Ended March 31,

There were no impairment charges recorded in the three or six months ended June 30, 2023.

The following table presents impairment charges by segment recorded during the three and six months ended June 30, 2024:

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 2024 2023

$ 2,409 $ — $ 2,409 $ —

Total MOB impairment charges 2,409 — 2,409 —

SHOP Segment:

2 unchanged sentences

Total impairment charges $ 2,409 $ — $ 2,669 $ —

(1) This property was impaired to its contractual sales price of $ 3.3 million as determined by a purchase and sale agreement executed in the three months ended March 31, 2024.

This property was impaired previously by a cumulative total of $ 2.3 million in the years ended December 31, 2023 and 2022.

The Company expects to accept the final bid price and dispose of the property in the three months ended June 30, 2024.

(1) This property was impaired to reduce its carrying value to its estimated fair value as determined by the Assets Held for Use approach described above.

This property has been actively marketed for sale since September 2021.

This property has been previously impaired by a cumulative total of $ 8.6 million in the years ended December 31, 2023 and 2021.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

(2) This property was impaired to its contractual sales price of $ 3.3 million as determined by a purchase and sale agreement executed in the six months ended June 30, 2024.

This property was previously impaired by a cumulative total of $ 2.3 million in the years ended December 31, 2023 and 2022.

The property was sold during the three months ended June 30, 2024.

Note 4 — Mortgage Notes Payable, Net

The following table reflects the Company’s mortgage notes payable as of March 31, 2024 and December 31, 2023:

The following table reflects the Company’s mortgage notes payable as of June 30, 2024 and December 31, 2023:

Outstanding Loan Amount as of Effective Interest Rate (1) as of

Portfolio Encumbered Properties March 31,

2024 December 31, 2023 March 31,

Portfolio Encumbered Properties June 30,

2024 December 31, 2023 June 30,

2024 December 31, 2023 Interest Rate Maturity

17 unchanged sentences

_____________

(1) Calculated on a weighted average basis for all mortgages outstanding as of March 31, 2024 and December 31, 2023.

(2) Variable rate loan, based on daily SOFR (as defined below) as of March 31, 2024 and December 31, 2023, which is fixed as a result of entering into “pay-fixed” interest rate swap agreements.

The Company allocated $ 378.5 million of its “pay-fixed” interest rate swaps to this mortgage consistently as of March 31, 2024 and December 31, 2023.

(1) Calculated on a weighted average basis for all mortgages outstanding as of June 30, 2024 and December 31, 2023.

(2) Variable rate loan, based on daily SOFR (as defined below) as of June 30, 2024 and December 31, 2023, which is fixed as a result of entering into “pay-fixed” interest rate swap agreements.

The Company allocated $ 378.5 million of its “pay-fixed” interest rate swaps to this mortgage consistently as of June 30, 2024 and December 31, 2023.

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

2 unchanged sentences

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

As of March 31, 2024, the Company had pledged $ 1.4 billion in total real estate investments, at cost, as collateral for its $ 828.6 million of gross mortgage notes payable.

As of June 30, 2024, the Company had pledged $ 1.4 billion in total real estate investments, at cost, as collateral for its $ 828.3 million of gross mortgage notes payable.

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

2 unchanged sentences

Notably, the Barclays MOB Loan Agreement requires the OP to comply with certain covenants, including, maintaining combined cash and cash equivalents totaling at least $ 12.5 million at all times.

As of March 31, 2024, the Company was in compliance with these financial covenants.

As of June 30, 2024, the Company was in compliance with these financial covenants.

See Note 5 — Credit Facilities - Future Principal Payments for a schedule of principal payment requirements of the Company’s mortgage notes and credit facilities.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Note 5 — Credit Facilities

The Company had the following credit facilities outstanding as of March 31, 2024 and December 31, 2023:

The Company had the following credit facilities outstanding as of June 30, 2024 and December 31, 2023:

Outstanding Facility

1 unchanged sentence

Credit Facilities Encumbered Properties (1)

2024 December 31, 2023 March 31,

2024 December 31, 2023 June 30,

2024 December 31, 2023 Interest Rate Maturity

4 unchanged sentences

Total Fannie Mae Master Credit Facilities 21 $ 343,393 $ 346,278

MOB Warehouse Facility (6)

4 14,748 14,748 8.33 % 8.36 % Variable Dec.

MOB Warehouse Facility 7 21,708 14,748 8.33 % 8.36 % Variable Dec.

Total Credit Facilities 28 $ 365,101 $ 361,026 7.90 % 7.90 %

(1) Encumbered properties are as of March 31, 2024.

(2) Secured by first-priority mortgages on 11 of the Company’s seniors housing properties as of March 31, 2024 with an aggregate carrying value, at cost of $ 351.7 million.

(3) Secured by first-priority mortgages on ten of the Company’s seniors housing properties as of March 31, 2024 with an aggregate carrying value, at cost of $ 263.3 million.

(4) Calculated on a weighted average basis for all credit facilities outstanding as of March 31, 2024 and December 31, 2023, respectively.

(5) The Company has seven active non-designated interest rate cap agreements with an aggregate notional amount of $ 364.2 million which limited one-month SOFR to 3.50 %.

(1) Encumbered properties are as of June 30, 2024.

(2) Secured by first-priority mortgages on 11 of the Company’s seniors housing properties as of June 30, 2024 with an aggregate carrying value, at cost of $ 352.8 million.

(3) Secured by first-priority mortgages on ten of the Company’s seniors housing properties as of June 30, 2024 with an aggregate carrying value, at cost of $ 263.9 million.

(4) Calculated on a weighted average basis for all credit facilities outstanding as of June 30, 2024 and December 31, 2023, respectively.

(5) The Company has eight active non-designated interest rate cap agreements with an aggregate notional amount of $ 369.2 million which limited one-month SOFR to 3.50 %.

The Company did not designate these derivatives as hedges and accordingly, the changes in value and any cash received from these derivatives are presented within gain (loss) on derivative instruments on the consolidated statements of operations and comprehensive income ( see Note 7 — Derivatives and Hedging Activities for additional details).

Inclusive of the impact of these non-designated derivatives, the economic interest rates on the Capital One Fannie Mae Facility, KeyBank Fannie Mae Facility and MOB Warehouse Facility were 5.89 %, 5.95 % and 6.50 %, respectively, as of March 31, 2024 and December 31, 2023.

(6) Subsequent to March 31, 2024, the Company drew an additional $ 7.0 million under the MOB Warehouse Facility.

As of March 31, 2024, the carrying value of the Company’s real estate investments, at cost was $ 2.6 billion, with $ 1.4 billion secured as collateral for mortgage notes payable and $ 637.9 million secured under the credit facilities.

As of June 30, 2024, the carrying value of the Company’s real estate investments, at cost was $ 2.6 billion, with $ 1.4 billion secured as collateral for mortgage notes payable and $ 649.6 million secured under the credit facilities.

All of the real estate assets pledged to secure mortgages or to secure borrowings under our credit facilities are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, unless, as applicable, the existing indebtedness associated with the property is satisfied or the property is removed from the pledged collateral.

Unencumbered real estate investments, at cost as of March 31, 2024 were $ 634.9 million, although there can be no assurance as to the amount of liquidity the Company would be able to generate from using these unencumbered assets as collateral for future mortgage loans, future advances under the credit facilities, or other future financings.

Unencumbered real estate investments, at cost as of June 30, 2024 were $ 621.0 million, although there can be no assurance as to the amount of liquidity the Company would be able to generate from using these unencumbered assets as collateral for future mortgage loans, future advances under the credit facilities, or other future financings.

Prior Credit Facility

8 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

The Prior Credit Facility contained various restrictions which no longer apply, that limited the Company’s ability to incur additional debt, maintain certain cash balances or pay dividends, among other things.

3 unchanged sentences

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

As of March 31, 2024, $ 344.8 million was outstanding under the Fannie Mae Master Credit Facilities.

As of June 30, 2024, $ 343.4 million was outstanding under the Fannie Mae Master Credit Facilities.

The Company 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.

9 unchanged sentences

On December 22, 2023, the Company, through wholly-owned subsidiaries of the OP, entered into a loan agreement with Capital One (the “MOB Warehouse Facility”) to provide up to $ 50.0 million of variable-rate financing.

As of March 31, 2024, $ 14.7 million was outstanding under the MOB Warehouse Facility.

As of June 30, 2024, $ 21.7 million was outstanding under the MOB Warehouse Facility.

The Company may request future advances under the MOB Warehouse Facility by adding eligible MOBs to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests.

1 unchanged sentence

Interest payments are due monthly, with no principal payments due until maturity in December 2026.

Subsequent to March 31, 2024, the Company drew $ 7.0 million under the MOB Warehouse Facility.

Please see Note 17 — Subsequent Events for additional information.

Non-Designated Interest Rate Caps

As of March 31, 2024 the Company had seven non-designated interest rate cap agreements with an aggregate current effective notional amount of $ 364.2 million which caps SOFR at 3.50 % with terms through January 2027.

As of June 30, 2024 the Company had eight non-designated interest rate cap agreements with an aggregate current effective notional amount of $ 369.2 million which caps SOFR at 3.50 % with terms through January 2027.

The Company does not apply hedge accounting to these non-designated interest cap agreements, and changes in value as well as any cash received are presented within (loss) gain on non-designated derivatives in the Company’s consolidated statements of comprehensive loss.

1 unchanged sentence

In connection with the Fannie Mae Master Credit Facilities, the Company was required to enter into interest rate cap agreements which the Company periodically renews upon their expiration.

During the three months ended March 31, 2024, the Company prepaid premiums of $ 1.5 million to renew one cap which matured in April 2024.

During the six months ended June 30, 2024, the Company paid total premiums of $ 1.7 million to renew one cap and to execute a new cap.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Future Principal Payments

The following table summarizes the scheduled aggregate principal payments for the five years subsequent to March 31, 2024 and thereafter, on all of the Company’s outstanding mortgage notes payable and credit facilities:

The following table summarizes the scheduled aggregate principal payments for the five years subsequent to June 30, 2024 and thereafter, on all of the Company’s outstanding mortgage notes payable and credit facilities:

Future Principal

21 unchanged sentences

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

However, as of March 31, 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives.

However, as of June 30, 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives.

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

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

The following table presents information about the Company’s assets and liabilities measured at fair value as of March 31, 2024 and December 31, 2023, aggregated by the level in the fair value hierarchy within which those instruments fall.

June 30, 2024

The following table presents information about the Company’s assets and liabilities measured at fair value as of June 30, 2024 and December 31, 2023, aggregated by the level in the fair value hierarchy within which those instruments fall.

(In thousands) Quoted Prices in Active Markets

3 unchanged sentences

Level 3 Total

March 31, 2024

June 30, 2024

Derivative assets, at fair value (non-designated) $ — $ 7,087 $ — $ 7,087

7 unchanged sentences

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

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2024.

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2024.

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

Real Estate Investments - Held for Use

The Company has impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheets as of March 31, 2024 and December 31, 2023.

As of March 31, 2024, the Company owned 12 held for use properties ( eight MOBs, three SHOPs and one land parcel) for which the Company had reconsidered their expected holding periods, of which four properties ( one MOB and two SHOPs and one land parcel) are being marketed for sale.

As a result, the Company evaluated the impact on its ability to recover the carrying values of the respective properties, and has previously recorded impairment charges on 10 properties ( eight MOBs and two SHOPs) to reduce the carrying values to their estimated fair values.

One held for use property was impaired during the three months ended March 31, 2024.

The Company has impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheets as of June 30, 2024 and December 31, 2023.

As of June 30, 2024, the Company owned 11 held for use properties ( eight MOBs, two SHOPs and one land parcel) for which the Company had reconsidered their expected holding periods, of which four properties ( one MOB and two SHOPs and one land parcel) are being marketed for sale.

As a result, the Company evaluated the impact on its ability to recover the carrying values of the respective properties, and has previously recorded impairment charges on nine properties ( eight MOBs and one SHOP) to reduce the carrying values to their estimated fair values.

One held for use property was impaired during the six months ended June 30, 2024.

See Note 3 — Real Estate Investments, Net - “Assets Held for Use and Related Impairments” for additional details.

1 unchanged sentence

Real estate investments held for sale are carried at net realizable value on a non-recurring basis and are generally classified in Level 3 of the fair value hierarchy.

The Company did not have any real estate investments classified as held for sale as of March 31, 2024 and December 31, 2023.

The Company did not have any real estate investments classified as held for sale as of June 30, 2024 and December 31, 2023.

Financial Instruments Not Measured at Fair Value

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

13 unchanged sentences

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

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2024 and December 31, 2023:

(In thousands) Balance Sheet Location March 31,

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of June 30, 2024 and December 31, 2023:

(In thousands) Balance Sheet Location June 30,

2024 December 31, 2023

4 unchanged sentences

Cash Flow Hedges of Interest Rate Risk

As of March 31, 2024 and December 31, 2023, the Company had one derivative with a notional value of $ 378.5 million designated as a cash flow hedges of interest rate risk.

As of June 30, 2024 and December 31, 2023, the Company had one derivative with a notional value of $ 378.5 million designated as a cash flow hedges of interest rate risk.

The Company uses its interest rate swap as part of its interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for fixed-rate payments by the Company over the life of the agreement without exchange of the underlying notional amount.

During the three months ended March 31, 2024 and the year ended December 31, 2023, such derivatives were used to hedge the variable cash flows associated with variable-rate debt.

During the six months ended June 30, 2024 and the year ended December 31, 2023, such derivatives were used to hedge the variable cash flows associated with variable-rate debt.

The remaining interest rate “pay-fixed” swap has a base interest rate of 1.61 % and matures December 2026.

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 2024 2023

6 unchanged sentences

These amounts were included in AOCI and will be amortized into earnings as a reduction to interest expense from the termination dates of the swaps through March 2024 (the original term of the swap and the Prior Credit Facility).

For the three months ended March 31, 2024 and 2023, the Company reclassified $ 1.2 million and $ 0.3 million from AOCI as decreases to interest expense, and no amounts remained in AOCI as of March 31, 2024.

For the six months ended June 30, 2024 and 2023, the Company reclassified $ 1.2 million and $ 1.1 million, respectively, from AOCI as decreases to interest expense, and no amounts remained in AOCI as of June 30, 2024.

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

During the next 12 months, from April 1, 2024 through March 31, 2025, the Company estimates that $ 12.4 million will be reclassified from AOCI as a decrease to interest expense or other comprehensive income relating to the “pay-fixed” swaps designated as derivatives.

During the next 12 months, from July 1, 2024 through June 30, 2025, the Company estimates that $ 12.4 million will be reclassified from AOCI as a decrease to interest expense or other comprehensive income relating to the “pay-fixed” swaps designated as derivatives.

Non-Designated Derivatives

The Company had the following outstanding interest rate derivatives with current effective notional amounts that were not designated as hedges in qualified hedging relationships as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Interest Rate Derivatives Number of Instruments Notional Amount (1)

6 unchanged sentences

(2) All of the Company’s interest rate cap agreements limited one-month SOFR to 3.50 % with terms through January 2027.

The actual one-month SOFR rates during the three months ended March 31, 2024, exceeded the strike price rate of 3.50 % and the Company received payments under these agreements.

The actual one-month SOFR rates during the six months ended June 30, 2024, exceeded the strike price rate of 3.50 % and the Company received payments under these agreements.

Changes in the fair market value of these non-designated derivatives, as well as any cash received, are presented within gain (loss) on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

These derivatives are used to limit the Company’s exposure to interest rate movements for economic purposes, however, the Company has not elected to apply hedge accounting.

As of March 31, 2024 and December 31, 2023, the Company had entered into seven SOFR-based interest rate caps, with notional amounts of $ 364.2 million, which limited one-month SOFR borrowings to 3.50 % and have varying maturities through January 2027.

The Company prepaid premiums of $ 1.5 million to renew one cap with an aggregate notional amount of $ 60.0 million which matured in April 2024.

As of June 30, 2024 and December 31, 2023, the Company had entered into eight and seven SOFR-based interest rate caps, respectively, with notional amounts of $ 369.2 million and $ 364.2 million, respectively, which limited one-month SOFR borrowings to 3.50 % and have varying maturities through January 2027.

In the six months ended June 30, 2024, the Company paid total premiums of $ 1.7 million to renew one cap with an aggregate notional amount of $ 58.1 million and to execute a new cap of $ 7.0 million which matures in January 2027.

Five interest rate caps with an aggregate notional amount of $ 289.4 million matures in 2025, which represents the next interest rate cap maturity.

2 unchanged sentences

Changes in the fair value of, and any cash received from, derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net loss and are presented within gain (loss) on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.

The gains on non-designated derivatives were $ 2.0 million for the three months ended March 31, 2024, and were $ 0.2 million for the three months ended March 31, 2023.

During the three months ended March 31, 2024 and 2023, the Company received aggregate payments of $ 1.8 million and $ 0.9 million, respectively, related to its effective interest rate caps as LIBOR/SOFR exceeded the effective rates of the capped debt.

The gains on non-designated derivatives were $ 0.9 million and $ 2.8 million for the three and six months ended June 30, 2024, and were $ 0.3 million and $ 0.1 million for the three and six months ended June 30, 2023.

During the six months ended June 30, 2024 and 2023, the Company received aggregate payments of $ 3.6 million and $ 2.3 million, respectively, related to its effective interest rate caps as LIBOR/SOFR exceeded the effective rates of the capped debt.

Offsetting Derivatives

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives (both designated and non-designated) as of March 31, 2024 and December 31, 2023.

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives (both designated and non-designated) as of June 30, 2024 and December 31, 2023.

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

2 unchanged sentences

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

March 31, 2024 $ 33,496 $ — $ — $ 33,496 $ — $ — $ 33,496

June 30, 2024 $ 31,568 $ — $ — $ 31,568 $ — $ — $ 31,568

December 31, 2023 $ 28,370 $ — $ — $ 28,370 $ — $ — $ 28,370

1 unchanged sentence

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

As of March 31, 2024, there were no derivatives in a net liability position.

As of June 30, 2024, there were no derivatives in a net liability position.

The Company is not required to post any collateral related to these agreements and was not in breach of any agreement provisions.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Note 8 — Stockholders’ Equity

As of March 31, 2024 and December 31, 2023, the Company had 113,238,180 and 111,545,018 shares of common stock outstanding, respectively, including unvested restricted shares, shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases, and shares issued as stock dividends since October 2020.

As of June 30, 2024 and December 31, 2023, the Company had 113,238,180 and 111,545,018 shares of common stock outstanding, respectively, including unvested restricted shares, shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases, and shares issued as stock dividends since October 2020.

Since October 2020, the Company has issued an aggregate of approximately 20.7 million shares in respect to the stock dividends.

Except for shares issued as dividends, no additional shares of common stock were issued during the three months ended March 31, 2024 or the year ended December 31, 2023.

Except for shares issued as dividends, no additional shares of common stock were issued during the three months ended June 30, 2024 or the year ended December 31, 2023.

References made to weighted-average shares and per-share amounts in the consolidated statements of operations and comprehensive loss have been retroactively adjusted to reflect the cumulative increase in shares outstanding due to the stock dividends and are noted as such throughout the accompanying financial statements and notes.

Please see Note 1 — Organization for additional information.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

On March 27, 2024, the Company published a new Estimated Per-Share NAV as of December 31, 2023, which was approved by the Board on March 27, 2024.

19 unchanged sentences

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

During the three months ended March 31, 2024 and the year ended December 31, 2023, the Company did no t issue any shares of common stock pursuant to the DRIP.

During the six months ended June 30, 2024 and the year ended December 31, 2023, the Company did no t issue any shares of common stock pursuant to the DRIP.

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 the Company pays distributions in stock instead of cash.

3 unchanged sentences

During the year ended December 31, 2023, The Company extended the expiration date of the stockholders rights plan from May 18, 2023 to May 18, 2026.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Preferred Stock and Preferred Units

4 unchanged sentences

Also, in connection with an underwritten offering in October 2021, the Company classified and designated 3,680,000 shares of its authorized preferred stock on October 4, 2021 as authorized shares of its Series B Preferred Stock.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

The Company had 3,977,144 shares of Series A Preferred Stock issued and outstanding as of March 31, 2024 and December 31, 2023.

The Company had 3,630,000 shares of Series B Preferred Stock issued and outstanding as of March 31, 2024 and December 31, 2023.

The Company also had 100,000 Series A Preferred Units outstanding as of March 31, 2024 and December 31, 2023, which were accounted for as a component of non-controlling interests.

The Company had 3,977,144 shares of Series A Preferred Stock issued and outstanding as of June 30, 2024 and December 31, 2023.

The Company had 3,630,000 shares of Series B Preferred Stock issued and outstanding as of June 30, 2024 and December 31, 2023.

The Company also had 100,000 Series A Preferred Units outstanding as of June 30, 2024 and December 31, 2023, which were accounted for as a component of non-controlling interests.

See Note 13 — Non-controlling Interests for additional information.

19 unchanged sentences

The Company did not declare a quarterly stock dividend in April 2024, and does not intend to declare any further stock dividends in the future.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Note 9 — Related Party Transactions and Arrangements

As of March 31, 2024 and December 31, 2023, the Special Limited Partner owned 10,873 and 10,710 shares (assuming conversion of its partnership interests), respectively, of the Company’s outstanding common stock.

As of June 30, 2024 and December 31, 2023, the Special Limited Partner owned 10,873 and 10,710 shares (assuming conversion of its partnership interests), respectively, of the Company’s outstanding common stock.

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

As of March 31, 2024 and December 31, 2023, the Advisor held 90 partnership units in the OP designated as “Common OP Units”.

As of June 30, 2024 and December 31, 2023, the Advisor held 90 partnership units in the OP designated as “Common OP Units”.

The limited partnership agreement of the OP (as amended from time to time, the “LPA”) allows for the special allocation, solely for tax purposes, of excess depreciation deductions of up to $ 10.0 million to the Advisor, a limited partner of the OP.

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

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Fees Incurred in Connection with the Operations of the Company

4 unchanged sentences

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

On July 1, 2024, the Company announced that, in anticipation of a potential future listing of the Company’s common stock on a national securities exchange, it provided notice in June 2024 to the Advisor of its intent to transition to self-management.

The Advisory Agreement will be terminated upon the effective date of the Internalization, which is expected to be no later than the fourth quarter of 2024.

Certain expenses have been incurred as a result of the Company’s decision to terminate the Advisory Agreement, which are discussed below in the section “Intent to Internalize Management — Termination Fees”.

Acquisition Expense Reimbursements

3 unchanged sentences

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

This threshold has not been exceeded through March 31, 2024.

This threshold has not been exceeded through June 30, 2024.

Asset Management Fees

9 unchanged sentences

or (b) the advisory agreement is terminated by an affirmative vote of a majority of the Company’s independent directors without cause before the Economic Hurdle has been met.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Subject to approval by the Board, the Class B Units were issued to the Advisor quarterly in arrears pursuant to the terms of the LPA.

3 unchanged sentences

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

As of March 31, 2024, the Company determined that achieving the Performance Condition was not yet considered probable for accounting purposes.

As of June 30, 2024, the Company determined that achieving the Performance Condition was not yet considered probable for accounting purposes.

The Advisor receives cash distributions on each issued Class B Unit equivalent to the cash distribution paid, if any, on the Company’s common stock.

4 unchanged sentences

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

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

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

6 unchanged sentences

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

No incentive fee was incurred for the three months ended March 31, 2024 or 2023.

No incentive fee was incurred for the six months ended June 30, 2024 or 2023.

Pursuant to the terms of the Internalization Agreement, the Company has agreed to pay an asset management fee of $ 10.9 million, representing the aggregate base management fees that the Company would have been required to pay to the Advisor during the six month notice period required to terminate the Second A&R Advisory Agreement (assuming the Closing occurs on or prior to December 25, 2024), beginning June 25, 2024 when the Company delivered notice to the Advisor of its intent to effect the Internalization, subject to certain closing adjustments.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Professional Fees and Other Reimbursements

1 unchanged sentence

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

During the three months ended March 31, 2024 and 2023, the Company incurred $ 2.5 million and $ 1.9 million, respectively, of reimbursement expenses from the Advisor for providing administrative services.

During the three months ended June 30, 2024 and 2023, the Company incurred $ 3.0 million and $ 2.4 million, respectively of reimbursement expenses from the Advisor for providing administrative services.

During the six months ended June 30, 2024 and 2023, the Company incurred $ 7.0 million and $ 4.8 million, respectively, of reimbursement expenses from the Advisor for providing administrative services.

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

2 unchanged sentences

The Advisory Agreement Amendment clarifies that, with respect to executive officers of the Advisor, the Company is required to reimburse the Advisor or its affiliates for the reasonable salaries and wages, benefits and overhead of the Company’s executive officers, other than for any executive officer that is also a partner, member or equity owner of AR Global, an affiliate of the Advisor.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Further, under the Advisory Agreement Amendment, the aggregate amount of expenses relating to salaries, wages, severance and benefits, including for executive officers and all other employees of the Advisor or its affiliates (the “Capped Reimbursement Amount”), is limited to the greater of:

4 unchanged sentences

For the fiscal year ended December 31, 2024, the Fixed Component is $ 8.2 million and the Company expects the Variable Component to be approximately $ 9.3 million.

During the three months ended March 31, 2024, the Company incurred $ 3.0 million of expenses subject to the Capped Reimbursement Amount.

During the three and six months ended June 30, 2024, the Company incurred $ 2.0 million and $ 4.9 million, respectively, of expenses subject to the Capped Reimbursement Amount.

If the Company sells real estate investments aggregating an amount equal to or more than 25.0 % of Real Estate Cost, in one or a series of related dispositions in which the proceeds of the disposition(s) are not reinvested in Investments (as defined in the Advisory Agreement Amendment), then within 12 months following the disposition(s), the Advisory Agreement Amendment requires the Advisor and the Company to negotiate in good faith to reset the Fixed Component;

3 unchanged sentences

Reimbursements for the cash portion of 2023 bonuses paid by the Advisor to its employees, or employees of its affiliates, were expensed and reimbursed on a monthly basis during the year ended December 31, 2023 in accordance with estimates provided by the Advisor.

These bonus awards were awarded in June 2023, and were paid to employees over a six-month period from October 2023 to March 2024.

These amounts have not yet been awarded or paid by the Advisor to its employees, or employees of its affiliates as of the date of this Quarterly Report on Form 10-Q.

These amounts were awarded in May 2024 and are scheduled to be paid by the Advisor to its employees from September 2024 to March 2025.

To the extent that any amounts remain unpaid at the time of the Closing of the Internalization, the Company will receive such amounts from the Advisor as a credit to its Closing Payments.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Reimbursements for the cash portion of 2024 bonuses paid by the Advisor to its employees, or employees of its affiliates, are being expensed and reimbursed on a monthly basis during the year ended December 31, 2024 in accordance with estimates provided by the Advisor.

To the extent that any amounts remain unpaid at the time of the Closing of the Internalization, the Company will receive such amounts from the Advisor as a credit to its Closing Payments.

Property Management Fees

5 unchanged sentences

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

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

The A&R Property Management Agreement automatically renews for successive one-year terms unless any party provides written notice of its intention to terminate the A&R Property Management Agreement.

The Company provided the Property Manager with notice of its intent to self-manage during the three months ended June 30, 2024 and, as a result, the current term of the A&R Property Management Agreement will expire the earlier of the effective date of the Internalization or February 17, 2025.

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

Pursuant to the terms of the Internalization Agreement, the Company has agreed to pay a property management fee of $ 3.9 million, representing the aggregate property management fees that the Company would have been required to pay to the Property Manager through the current term of the Property Management Agreement, subject to certain closing adjustments.

HEALTHCARE TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

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

The A&R Property Management Agreement automatically renews for successive one-year terms unless any party provides written notice of its intention to terminate the A&R Property Management Agreement at least 90 days prior to the end of the term.

Neither party has provided notice of intent to terminate.

The current term of the A&R Property Management Agreement expires February 17, 2025.

June 30, 2024

Summary of Related Party Expenses and Payables

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

Three Months Ended March 31, Payable (Prepayments) as of

(In thousands) Incurred Incurred March 31,

Three Months Ended June 30, Six Months Ended June 30, Payable (Prepayments) as of

2024 2023 2024 2023

(In thousands) Incurred Incurred Incurred

Incurred June 30,

2024 December 31, 2023

7 unchanged sentences

1,022 911 2,492 1,840 73 97

Termination fees (3)

98,241 — 98,241 — 98,241 —

Total related party operation fees and reimbursements $ 107,742 $ 8,742 $ 118,649 $ 17,536 $ 98,288 $ 295

(1) Included in general and administrative expenses in the consolidated statements of operations.

Includes $ 3.0 million and $ 1.5 million for the three months ended March 31, 2024 and 2023, respectively, subject to the Capped Reimbursement Amount.

(2) The three months ended March 31, 2024 and 2023 includ es $ 0.6 million and $ 49,000 of leasing commissions, respectively, which are capitalized and included in prepaid expenses and other assets.

Includes $ 2.0 million and $ 1.7 million for the three months ended June 30, 2024 and 2023, respectively, and $ 4.9 million and $ 3.2 million for the six months ended June 30, 2024 and 2023, respectively, subject to the Capped Reimbursement Amount.

(2) The three months ended June 30, 2024 and 2023 includ es $ 0.1 million and $ 49,000 respectively, and the six months ended June 30, 2024 and 2023 includes $ 0.6 million and $ 0.1 million , respectively, of leasing commissions which are capitalized and included in deferred costs, net on the Company’s consolidated balance sheets .

(3) The three and six months ended June 30, 2024 includes an estimate for termination fees of $ 98.2 million, resulting from the Company’s intent to internalize its management functions, which is payable within 30 days of the effective date of the termination of the Advisory Agreement.

Please see the below section “Intent to Internalize Management — Termination Fees” for additional information.

Intent to Internalize Management

On August 6, 2024, the Company entered into the Internalization Agreement with Merger Sub, the Advisor and the Advisor Parent.

The Company expects the Internalization to close no later than the fourth quarter of 2024.

Closing Payments

Pursuant to the terms of the Internalization Agreement, the Company is required to pay the Advisor Payment certain fees in connection with the Internalization.

All fees will be due within 30 days after the Closing.

To the extent the Closing Payments exceed the Company’s Available Cash, the Company has agreed to pay the Advisor Parent the Closing Date Cash Consideration, and the Company shall issue to Advisor Parent a promissory note in a principal amount equal to the difference between the Closing Date Cash Consideration and the Closing Payments, as may be adjusted for any post-Closing true-ups on the Closing Payments.

The Company intends to fund the Closing Date Cash Consideration through a combination of cash on hand and the net proceeds from certain anticipated strategic dispositions.

The Company expects to pay the Advisor such fees in connection with the Closing, but there can be no assurance that the Internalization closes on its anticipated time frame, or subject to the terms described herein, or at all.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Self-Management Termination Fee

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

Such fee is a component of the Closing Payments contemplated by the Internalization Agreement.

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

The Company has recorded the transition fee agreed upon in the Internalization Agreement of $ 98.2 million, in the three and six months ended June 30, 2024.

Asset Management Fees, Property Management Fees and Other Closing Payments

Pursuant to the terms of the Internalization Agreement, the Company is required to pay to the Advisor Parent (i) an asset management fee of $ 10.9 million, representing the aggregate base management fees that the Company would have been required to pay to the Advisor during the six month notice period required to terminate the Second A&R Advisory Agreement (assuming the Closing occurs on or prior to December 25, 2024), and (ii) a property management fee of $ 3.9 million, representing the aggregate property management fees that the Company would have been required to pay to the Property Manager through the current term of the Property Management Agreement, in each case subject to certain closing adjustments.

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

1 unchanged sentence

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

No such distribution was incurred during the three months ended March 31, 2024 or 2023.

No such distribution was incurred during the three or six months ended June 30, 2024 or 2023.

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

1 unchanged sentence

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

No such participation in net sales proceeds became due and payable during the three months ended March 31, 2024 or 2023.

No such participation in net sales proceeds became due and payable during the three or six months ended June 30, 2024 or 2023.

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

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Termination Fees

2 unchanged sentences

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

Under the Advisory Agreement Amendment, upon the termination or non-renewal of the agreement, the Advisor will be entitled to receive from the Company all amounts due to the Advisor, including any change of control fee and transition fee (both described below), as well as the then-present fair market value of the Advisor’s interest in the Company.

All fees will be due within 30 days after the effective date of the termination or non-renewal of the Advisory Agreement Amendment.

Upon a termination by either party in connection with a change of control (as defined in the Advisory Agreement Amendment), the Company would be required to pay the Advisor a change of control fee equal to the product of four and the “Subject Fees” described below.

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

Note 10 — Economic Dependency

Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common control with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company and asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and investor relations.

Under various agreements, subject to the pending Internalization, the Company has engaged the Advisor, its affiliates and entities under common control with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company and asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and investor relations.

As a result of these relationships, the Company is dependent upon the Advisor and its affiliates.

In the event that the Advisor and its affiliates are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.

In the event that the Advisor and its affiliates are unable to provide the Company with the respective services prior to the Internalization, the Company will be required to find alternative providers of these services.

Note 11 — Equity-Based Compensation

2 unchanged sentences

The total number of shares of common stock that may be subject to awards granted under the RSP may not exceed 5.0 % of the Company’s outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 4.2 million shares (as such number may be further adjusted for stock splits, stock dividends, combinations and similar events).

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Restricted shares vest on a straight-line basis over periods of three to five years and may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested.

1 unchanged sentence

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

The following table reflects the amount of restricted shares outstanding as of March 31, 2024 and activity for the period presented:

The following table reflects the amount of restricted shares outstanding as of June 30, 2024 and activity for the period presented:

Number of Shares of Common Stock Weighted Average Issue Price

1 unchanged sentence

Stock dividend 785 14.00

Unvested, March 31, 2024 52,428 $ 16.90

As of March 31, 2024, the Company had $ 0.4 million of unrecognized compensation cost related to unvested restricted share awards granted under the RSP.

Unvested, June 30, 2024 52,428 $ 16.90

As of June 30, 2024, the Company had $ 0.2 million of unrecognized compensation cost related to unvested restricted share awards granted under the RSP.

This cost will be recognized over a weighted-average period of 0.1 years.

Compensation expense related to restricted shares was $ 0.2 million for the three months ended March 31, 2024 and 2023.

Compensation expense related to restricted shares was $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2024 and 2023.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Other Share-Based Compensation

1 unchanged sentence

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

No such shares were issued during the three months ended March 31, 2024 or 2023.

No such shares were issued during the six months ended June 30, 2024 or 2023.

Note 12 — Accumulated Other Comprehensive Income

4 unchanged sentences

Amount of gain reclassified from accumulated other comprehensive income ( 8,315 )

Balance, March 31, 2024

Balance, June 30, 2024

Accumulated other comprehensive income predominately relates to the unrealized gains (losses) on designated derivatives, however, as previously discussed in Note 7 — Derivatives and Hedging Activities , previously designated hedges were terminated and the termination costs are being amortized over the term of the hedged item.

2 unchanged sentences

Balance as of

(In thousands) March 31, 2024 December 31, 2023

(In thousands) June 30, 2024 December 31, 2023

Series A Preferred Units held by third parties $ 2,578 $ 2,578

4 unchanged sentences

Net loss attributable to non-controlling interests on the Company’s consolidated statements of operations and comprehensive loss are comprised of the following:

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

7 unchanged sentences

The securities held by the Company are eliminated in consolidation.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Series A Preferred Units

5 unchanged sentences

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

During both the three months ended March 31, 2024 and 2023, Series A Preferred Unit holders were paid $ 46,000 .

During both the three and six months ended June 30, 2024 and 2023, Series A Preferred Unit holders were paid $ 46,000 and $ 0.1 million, respectively.

Common OP Units

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

As of March 31, 2024 and December 31, 2023, the Advisor held 90 Common OP Units, which represents a nominal percentage of the aggregate ownership in the OP.

As of June 30, 2024 and December 31, 2023, the Advisor held 90 Common OP Units, which represents a nominal percentage of the aggregate ownership in the OP.

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

2 unchanged sentences

Dur ing the three months ended March 31, 2024 and 2023 , Common OP Unit non-controlling interest holders were no t paid any cash distribu tions.

Dur ing the six months ended June 30, 2024 and 2023 , Common OP Unit non-controlling interest holders were no t paid any cash distribu tions.

Stock dividends do not cause the OP to issue additional Common OP Units, rather, the redemption ratio to common stock is adjusted.

The 405,998 Common OP Units outstanding as of March 31, 2024 would be redeemable for 496,644 shares of common stock, giving effect to adjustments for the impact of the stock dividends through January 2024.

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

The 405,998 Common OP Units outstanding as of June 30, 2024 would be redeemable for 496,644 shares of common stock, giving effect to adjustments for the impact of the stock dividends through January 2024.

Non-Controlling Interests in Property Owning Subsidiaries

4 unchanged sentences

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

HEALTHCARE TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

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

Distributions

Third Party Net Investment Amount Non-Controlling Ownership Percentage Net Real Estate Assets Subject to Investment Arrangement Three Months Ended March 31,

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

Property Name

(Dollar amounts in thousands)

Investment Date March 31, 2024 March 31, 2024 March 31, 2024 December 31, 2023 2024 2023

Investment Date June 30, 2024 June 30, 2024 June 30, 2024 December 31, 2023 2024 2023

Plaza Del Rio Medical Office Campus Portfolio (1)

4 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net loss attributable to common stockholders (in thousands)

11 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

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

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Unvested restricted shares (1)

7 unchanged sentences

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

Th ere were 52,428 and 98,736 unvested restricted shares outstanding, respectively, as of March 31, 2024 and 2023.

Th ere were 52,428 and 100,221 unvested restricted shares outstanding, respectively, as of June 30, 2024 and 2023.

(2) Weighted average number of antidilutive Common OP Units presented as shares outstanding for the periods presented, at the current redemption rate reflecting adjustments for the effect of the stock dividends (see Note 1 — Organization for additional details).

There were 405,998 Common OP Units outstanding as of March 31, 2024 and 2023.

There were 405,998 Common OP Units outstanding as of June 30, 2024 and 2023.

The securities held by the Company are eliminated in consolidation.

(3) Weighted average number of antidilutive Class B Units presented as shares outstanding for the periods presented, at the current redemption rate reflecting adjustments for the effect of the stock dividends (see Note 1 — Organization for additional details).

There were 359,250 Class B Units outstanding as of March 31, 2024 and 2023.

These Class B Units were unvested as of March 31, 2024 and 2023 (see Note 9 — Related Party Transactions for additional information).

There were 359,250 Class B Units outstanding as of June 30, 2024 and 2023.

These Class B Units were unvested as of June 30, 2024 and 2023 (see Note 9 — Related Party Transactions for additional information).

Note 15 — Segment Reporting

The disclosures below for the three months ended March 31, 2024 and 2023 are presented for the Company’s two reportable business segments for management and internal financial reporting purposes:

The disclosures below for the six months ended June 30, 2024 and 2023 are presented for the Company’s two reportable business segments for management and internal financial reporting purposes:

MOBs and SHOPs.

14 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

The following table presents the operating financial information for the Company’s two business segments for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

June 30, 2024

The following table presents the operating financial information for the Company’s two business segments for the six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

7 unchanged sentences

A reconciliation of the total reportable segments’ revenue from tenants to consolidated revenue from tenants and the total reportable segments’ income to consolidated net loss attributable to common stockholders is presented below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

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Operating fees to related parties ( 6,424 ) ( 6,369 ) ( 12,790 ) ( 12,756 )

Termination fees to related parties ( 98,241 ) — ( 98,241 ) —

Acquisition and transaction related ( 357 ) ( 148 ) ( 499 ) ( 211 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

The following table reconciles the segment activity to consolidated total assets as of the periods presented:

(In thousands) March 31, 2024 December 31, 2023

(In thousands) June 30, 2024 December 31, 2023

Investments in real estate, net:

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The following table reconciles capital expenditures by reportable business segment, excluding corporate non-real estate expenditures, for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 2024 2023

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Note 16 — Commitments and Contingencies

As of March 31, 2024, the Company had seven operating and six direct financing lease agreements.

As of June 30, 2024, the Company had seven operating and six direct financing lease agreements.

The seven operating leases have durations, including assumed renewals, ranging from 18.4 years to 83.2 years, excluding an adjacent parking lot lease with a term of 2.3 years.

The Company did not enter into any additional ground leases during the three months ended March 31, 2024.

As of March 31, 2024, the Company had ROU assets and liabilities of $ 7.7 million and $ 8.0 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively on the Company’s consolidated balance sheets.

The Company did not enter into any additional ground leases during the six months ended June 30, 2024.

As of June 30, 2024, the Company had ROU assets and liabilities of $ 7.6 million and $ 8.1 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively on the Company’s consolidated balance sheets.

In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the lease guidance issued in 2019, as well as for new operating leases in the current period, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases.

Because the terms of the Company’s ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the Company’s estimate of this rate required significant judgment.

The Company’s ground operating leases have a weighted-average remaining lease term, including assumed renewals, of 33.3 years and a weighted-average discount rate of 7.38 % as of March 31, 2024.

For each of the three months ended March 31, 2024 and 2023, the Company paid cash of $ 0.2 million for amounts included in the measurement of lease liabilities and recorded expense of $ 0.2 million on a straight-line basis in accordance with the current accounting guidance.

The Company’s ground operating leases have a weighted-average remaining lease term, including assumed renewals, of 33.2 years and a weighted-average discount rate of 7.38 % as of June 30, 2024.

For each of the three months ended June 30, 2024 and 2023, the Company paid cash of $ 0.2 million for amounts included in the measurement of lease liabilities and recorded expense of $ 0.2 million on a straight-line basis in accordance with the current accounting guidance.

For each of the six months ended June 30, 2024 and 2023, the Company paid cash of $ 0.4 million and recorded expense of $ 0.4 million.

The ground operating lease expense is recorded in property operating expenses in the Company’s consolidated statements of operations and comprehensive loss.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

The following table reflects the base cash rental payments due from the Company for the next five years as of March 31, 2024:

June 30, 2024

The following table reflects the base cash rental payments due from the Company for the next five years as of June 30, 2024:

Future Base Rent Payments

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Total present value of minimum lease payments $ 8,133 $ 4,831

(1) The direct finance lease liability is included in accounts payable and accrued expenses on the balance sheet as of March 31, 2024.

(1) The direct finance lease liability is included in accounts payable and accrued expenses on the balance sheet as of June 30, 2024.

The direct financing lease asset is included as part of building and improvements as the land component was not required to be bifurcated under ASU 840.

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In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters.

As of March 31, 2024, the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.

As of June 30, 2024, the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.

Note 17 — Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements except for the following:

Borrowings Under the MOB Warehouse Facility

Subsequent to March 31, 2024, the Company borrowed $ 7.0 million under the MOB Warehouse Facility, which are available for general corporate purposes.

Purchase of Non-Designated Interest Rate Cap

Subsequent to March 31, 2024, the Company purchased a non-designated interest rate cap with a notional amount of $ 7.0 million and a strike price of 3.50 %, which matures in January 2027.

The Company paid premiums of $ 0.3 million for this interest rate cap.

Property Dispositions

Subsequent to June 30, 2024, the Company disposed of seven MOBs in Illinois for a contract sales price of $ 50.5 million.

These proceeds are available for general and corporate uses, including for the potential partial payment of the Closing Payments when they become payable.

Internalization Agreement

On August 6, 2024, the Company entered into the Internalization Agreement with the Merger Sub, the Advisor and the Advisor Parent.

A summary of the terms of the agreement can be found in Not e 1 — Organization and Note 9 — Related Party Transactions and Agreements .

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

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These risks and uncertainties include the risks associated with the geopolitical instability due to the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, including related sanctions and other penalties imposed by the U.S.

and European Union, and the related impact on us, our tenants and the global economy and financial markets;

that any potential future acquisition by the Company is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all.

and European Union, and the related impact on us, our tenants, operators and the global economy and financial markets;

that any potential future acquisitions by the Company is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all.

Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2023 (as amended) as well as Part II — Other Information, Item IA — Risk Factors below.

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We acquire, own and manage a diversified portfolio of healthcare-related real estate focused on medical office and other healthcare-related buildings and senior housing operating properties.

As of March 31, 2024, we owned 208 properties located in 33 states and comprised of 9.1 million rentable square feet.

As of June 30, 2024, we owned 207 properties located in 32 states and comprised of 9.0 million rentable square feet.

Substantially all of our business is conducted through the OP, a Delaware limited partnership, and its wholly-owned subsidiaries.

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In our SHOP segment, we invest in seniors housing properties through the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure.

As of March 31, 2024, we had four eligible independent contractors operating 46 SHOPs.

As of June 30, 2024, we had four eligible independent contractors operating 45 SHOPs.

We declared and issued quarterly dividends entirely in shares of our common stock from October 2020 through January 2024.

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We intend to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless and until we list our common stock.

Intent to Internalize Management

On July 1, 2024, we announced that, in anticipation of a potential future listing of our common stock on a national securities exchange, we provided notice to the Advisor in June 2024 of our intent to transition to self-management and internalize management functions (the “Internalization”).

On August 6, 2024, we entered into the Internalization Agreement with the Merger Sub, the Advisor and the Advisor Parent (each of such terms as defined in Note 1 — Organization ).

We expect the Internalization to take effect no later than the fourth quarter of 2024.

There can be no assurance that the Internalization will close within the anticipated time frame, or at all, or that we will be able to list our shares of common stock on a national securities exchange.

For additional information about the Internalization, including fees we expect to incur in connection therewith, please see Note 9 — Related Party Transactions and Arrangements.

Management Update on the Continuing Adverse economic Impacts Since the COVID-19 Pandemic

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Specifically, our SHOP segment has suffered challenges with its occupancy levels, cost incurred from labor and conceded rental revenue.

Further, recent and continuing increases in inflation brought about by labor shortages, supply chain disruptions and increases in interest rates have had, and may continue to have, adverse impacts on our results of operations.

Further, the significant increase in the rate of inflation in recent years brought about by labor shortages, supply chain disruptions and increases in interest rates have had, and may continue to have, adverse impacts on our results of operations.

Moreover, these increases in the rate of inflation, the ongoing wars in Ukraine, Israel and related sanctions, supply chain disruptions and increases in interest rates may also impact our tenants’ ability to pay rent and hence our results of operations and liquidity.

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

Occupancy in our SHOP portfolio trended downward from 85.1% as of December 31, 2019 to a low of 72.0% as of March 31, 2021, and has since recovered to 75.3% as of March 31, 2024.

The below table presents SHOP occupancy since the onset of our downward occupancy trends, which was exacerbated by the COVID-19 pandemic in March 2020:

Occupancy in our SHOP portfolio trended downward from 85.1% as of December 31, 2019 to a low of 72.0% as of March 31, 2021, and has since recovered to 76.4% as of June 30, 2024.

The below table presents SHOP occupancy since the onset of our previous downward occupancy trends, which was exacerbated by the COVID-19 pandemic in March 2020:

As of Number of Properties (1)

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46 4,164 75.3%

June 30, 2024 (2)

45 4,069 76.4%

(1) Exclusive of two land parcels.

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These contract and agency costs have declined since then.

In particular, costs incurred from contract labor and agencies for care providers decreased in our SHOP segment by $0.4 million, from $0.7 million in the three months ended March 31, 2023, to $0.3 million as compared to the three months ended March 31, 2024.

However, these costs were offset by increased wage costs for direct employees of our third party operators of $0.7 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

In particular, costs incurred from contract labor and agencies for care providers decreased in our SHOP segment by $0.3 million, from $0.6 million in the three months ended June 30, 2023, to $0.3 million as compared to the three months ended June 30, 2024.

However, these costs were offset by increased wage costs for direct employees of our third party operators of $1.0 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Likewise, occupancy levels have not recovered to their pre-pandemic rates (as noted in the table above), thus the results of operations in our SHOP segment have been significantly adversely affected by the increase in labor costs even though resident fees have increased.

Significant Accounting Estimates and Critical Accounting Policies

For a discussion about our significant accounting estimates and critical accounting policies, see the “Significant Accounting Estimates and Critical Accounting Policies” section of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 17, 2023.

Except for those required by new accounting pronouncements discussed below, there have been no material changes from these significant accounting estimates and critical accounting policies.

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Please see Note 2 — Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements to our consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.

The following table presents certain additional information about the properties we owned as of March 31, 2024:

The following table presents certain additional information about the properties we owned as of June 30, 2024:

Portfolio Number

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Total Portfolio 207 8,995,802 $ 2,614,057

(1) Inclusive of leases signed but not yet commenced as of March 31, 2024.

(2) Weighted-average remaining lease term in years is calculated based on square feet as of March 31, 2024.

(3) Gross asset value represents total real estate investments, at cost ($2.6 billion total as of March 31, 2024) net of gross market lease intangible liabilities ($23.5 million total as of March 31, 2024).

(1) Inclusive of leases signed but not yet commenced as of June 30, 2024.

(2) Weighted-average remaining lease term in years is calculated based on square feet as of June 30, 2024.

(3) Gross asset value represents total real estate investments, at cost ($2.6 billion total as of June 30, 2024) net of gross market lease intangible liabilities ($21.0 million total as of June 30, 2024).

Cumulative impairment charges are reflected within gross asset value.

(4) Includes two parcels of land

(5) Weighted by unit count as of March 31, 2024.

As of March 31, 2024, we had 4,164 rentable units in our SHOP segment.

(5) Weighted by unit count as of June 30, 2024.

As of June 30, 2024, we had 4,069 rentable units in our SHOP segment.

The SHOP segment includes one closed SHOP with 30 rentable units, and excludes land parcels.

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Information based on Same Store Properties, Acquired Properties and Disposed Properties (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered.

As of March 31, 2024, we owned 208 properties.

There were 197 properties owned for the entire year ended December 31, 2022 and the three months ended March 31, 2024 (our “Same Store Properties), including two vacant land parcels.

Since January 1, 2023, we acquired 11 properties (our “Acquired Properties”) and disposed of five properties (our “Disposed Properties”).

The following table presents a roll-forward of our properties owned from January 1, 2023 to March 31, 2024:

As of June 30, 2024, we owned 207 properties.

There were 196 properties owned for the entire year ended December 31, 2023 and the six months ended June 30, 2024 (our “Same Store Properties”), including two vacant land parcels.

Since January 1, 2023, we acquired 11 properties (our “Acquired Properties”) and disposed of six properties (our “Disposed Properties”).

The following table presents a roll-forward of our properties owned from January 1, 2023 to June 30, 2024:

MOB SHOP Total

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Number of properties, December 31, 2023

Acquisition activity during the three months ended March 31, 2024

Disposition activity during the three months ended March 31, 2024

Number of properties, March 31, 2024

Acquisition activity during the six months ended June 30, 2024

Disposition activity during the six months ended June 30, 2024

Number of properties, June 30, 2024

Number of Same Store Properties 149 47 196

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Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

Net loss attributable to common stockholders was $19.0 million and $17.5 million, respectively, for the three months ended March 31, 2024, and 2023.

The following table shows our results of operations for the three months ended March 31, 2024 and 2023 and the period to period change by line item of the consolidated statements of operations:

Three Months Ended March 31, Increase (Decrease)

Comparison of the Three Months Ended June 30, 2024 and 2023

Net loss attributable to common stockholders was $119.9 million and $20.8 million, respectively, for the three months ended June 30, 2024, and 2023.

The following table shows our results of operations for the three months ended June 30, 2024 and 2023 and the period to period change by line item of the consolidated statements of operations:

Three Months Ended June 30, Increase (Decrease)

(Dollars in thousands) 2024 2023 $

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Operating fees to related parties 6,424 6,369 55

Termination fees to related parties 98,241 — 98,241

Acquisition and transaction related 357 148 209

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Total expenses 189,032 84,985 104,047

Operating loss before gain on sale of real estate investments (1,120) 1,825 (2,945)

Gain on sale of real estate investments — 115 (115)

Operating loss (1,120) 1,940 (3,060)

Operating (loss) income before loss on sale of real estate investments (100,215) 1,119 (101,334)

Loss on sale of real estate investments (225) (306) 81

Operating (loss) income (100,440) 813 (101,253)

Other income (expense):

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Segment Results — Medical Office Buildings

The following table presents the revenue and property operating and maintenance expense and the period to period change within our MOB segment for the three months ended March 31, 2024 and 2023:

The following table presents the revenue and property operating and maintenance expense and the period to period change within our MOB segment for the three months ended June 30, 2024 and 2023:

Same Store (1)

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Segment Total (4)

Three Months Ended March 31, Increase (Decrease) Three Months Ended March 31, Increase (Decrease) Three Months Ended March 31, Increase (Decrease) Three Months Ended March 31, Increase (Decrease)

Three Months Ended June 30, Increase (Decrease) Three Months Ended June 30, Increase (Decrease) Three Months Ended June 30, Increase (Decrease) Three Months Ended June 30, Increase (Decrease)

(Dollars in thousands) 2024 2023 2024 2023 2024 2023 2024 2023

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Revenue from Tenants

During the three months ended March 31, 2024, revenue from tenants increased by $1.0 million in our MOB segment as compared to the three months ended March 31, 2023, which was primarily driven by an increase in revenue from tenants of $0.7 million due to our Acquired Properties and by an increase in revenue from tenants of $0.3 million due to our Same Store Properties.

The increase in our Same Store properties revenue from tenants was primarily due to increased expense reimbursements from higher expenses in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

During the three months ended June 30, 2024, revenue from tenants increased by $0.8 million in our MOB segment as compared to the three months ended June 30, 2023, which was primarily driven by an increase in revenue from tenants of $0.5 million due to our Acquired Properties and by an increase in revenue from tenants of $0.3 million due to our Same Store Properties.

The increase in our Same Store properties revenue from tenants was primarily due to increased expense reimbursements from higher expenses in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Property Operating and Maintenance

Property operating and maintenance expenses reflect the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third-party property management fees.

During the three months ended March 31, 2024, property operating and maintenance expenses increased by $0.7 million in our MOB segment as compared to the three months ended March 31, 2023.

During the three months ended June 30, 2024, property operating and maintenance expenses increased by $0.3 million in our MOB segment as compared to the three months ended June 30, 2023.

This increase was primarily driven by our Same Store Properties.

Segment Results — Seniors Housing Operating Properties

The following table presents the revenue and property operating and maintenance expenses and the period to period change within our SHOP segment for the three months ended March 31, 2024 and 2023:

The following table presents the revenue and property operating and maintenance expenses and the period to period change within our SHOP segment for the three months ended June 30, 2024 and 2023:

Same Store (1)

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Segment Total (4)

Three Months Ended March 31, Increase (Decrease) Three Months Ended March 31, Increase (Decrease) Three Months Ended March 31, Increase (Decrease) Three Months Ended March 31, Increase (Decrease)

Three Months Ended June 30, Increase (Decrease) Three Months Ended June 30, Increase (Decrease) Three Months Ended June 30, Increase (Decrease) Three Months Ended June 30, Increase (Decrease)

(Dollars in thousands) 2024 2023 2024 2023 2024 2023 2024 2023

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(2) Our SHOP segment did not include any Acquired Properties.

(3) Our SHOP segment included four Disposed Properties.

(3) Our SHOP segment included five Disposed Properties.

(4) Our SHOP segment included 47 total properties (including two land parcels).

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Revenue from Tenants

During the three months ended March 31, 2024 and 2023, revenue from tenants was consistent in our SHOP segment, with an increase in revenue from tenants of $1.8 million from our Same Store Properties, partially offset by a decrease in revenue from tenants of $1.9 million from our Disposed Properties.

The increase to our Same Store properties revenue from tenants was primarily driven by higher leasing rates during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, as well as by marginally higher occupancy in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Additionally, we offered more rent concessions to drive occupancy during the three months ended March 31, 2024, which amounted to $1.9 million as compared to $0.6 million during the three months ended March 31, 2023.

During the three months ended June 30, 2024, revenue increased $2.0 million in our SHOP segment as compared to the three months ended June 30, 2023, primarily from an increase in revenue from tenants of $3.0 million from our Same Store Properties, partially offset by a decrease in revenue from tenants of $1.0 million from our Disposed Properties.

The increase to our Same Store properties revenue from tenants was primarily driven by higher leasing rates during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, as well as by marginally higher occupancy in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Additionally, we offered more rent concessions to drive occupancy during the three months ended June 30, 2024, which amounted to $1.6 million as compared to $0.8 million during the three months ended June 30, 2023.

Property Operating and Maintenance

During the three months ended March 31, 2024, property operating and maintenance expenses increased $0.5 million in our SHOP segment as compared to the three months ended March 31, 2023, primarily due to an increase in property operating and maintenance expenses of $2.4 million in our Same Store Properties, partially offset by a decrease of $1.9 million from our Disposed Properties.

Our Same Store Properties property operating and maintenance expenses increased in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily from $1.5 million of increased costs for wages, including overtime, training and bonus wages paid to employees of our third party operators, $0.7 million of higher insurance expense and the effects of inflation which raised the general costs of food, supplies, and utilities generally.

During the three months ended June 30, 2024, property operating and maintenance expenses increased $1.1 million in our SHOP segment as compared to the three months ended June 30, 2023, primarily due to an increase in property operating and maintenance expenses of $2.1 million in our Same Store Properties, partially offset by a decrease of $1.0 million from our Disposed Properties.

Our Same Store Properties property operating and maintenance expenses increased in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily from $1.4 million of increased costs for wages, including overtime, training and bonus wages paid to employees of our third party operators, $0.5 million of higher insurance expense and the effects of inflation which raised the general costs of food, supplies, and utilities generally.

These increases to property operating and maintenance expenses were partially offset by decreased costs for contract labor of $0.3 million.

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Impairment Charges

We recorded $0.3 million of impairment charges during the three months ended March 31, 2024.

This impairment was recorded to reduce the carrying value of a held-for-use SHOP to its contract sales price of $3.3 million.

We have previously recorded impairment charges of $2.3 million on this SHOP in the years ended December 31, 2023 and 2022.

We did not record any impairment charges in the three months ended March 31, 2023.

We recorded $2.4 million of impairment charges during the three months ended June 30, 2024.

This impairment was recorded to reduce the carrying value of a held-for-use MOB to its estimated fair value .

This MOB has been marketed for sale since September 2021 and had been previously impaired by $8.6 million in the years ended December 31, 2023 and 2021.

We did not record any impairment charges in the three months ended June 30, 2023.

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

Operating Fees to Related Parties

Operating fees to related parties were consistent at $6.4 million for the three months ended March 31, 2024 and 2023.

Operating fees to related parties were consistent at $6.4 million for the three months ended June 30, 2024 and 2023.

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis.

We pay a fixed base management fee equal to $1.6 million per month, while the variable portion of the base management fee is equal, per month, to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised subsequent to February 17, 2017.

Asset management fees were $5.5 million for both the three months ended March 31, 2024 and 2023.

Asset management fees were $5.5 million for both the three months ended June 30, 2024 and 2023.

Variable asset management fees will increase if we issue additional equity securities in the future.

There were no incentive fees incurred in either of the three months ended March 31, 2024 or 2023.

Property management fees were consistent at $0.9 million for the three months ended March 31, 2024 and 2023.

There were no incentive fees incurred in either of the three months ended June 30, 2024 or 2023.

Property management fees were consistent at $1.0 million for the three months ended June 30, 2024 and 2023.

Property management fees increase or decrease in direct correlation with gross revenues of the properties managed and depending on the mix of properties managed, as the fee payable for different types of properties varies.

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

Termination Fees to Related Parties

We recorded $98.2 million of termination fees to related parties in the three months ended June 30, 2024 as a result of our intent to terminate the Second A&R Advisory Agreement with the Advisor and transition to self-management through the Internalization.

Pursuant to the terms of the Second A&R Advisory Agreement, the termination fee will be payable to the Advisor within 30 days after the effective date of the termination, and such fee is a component of the Closing Payments contemplated by the Internalization Agreement.

We expect the Closing to occur no later than the fourth quarter of 2024.

Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses were consistent at $0.1 million for the three months ended March 31, 2024 and 2023.

Acquisition and transaction related expenses increased by $0.3 million to $0.4 million for the three months ended June 30, 2024 as compared to $0.1 million for the three months ended June 30, 2023.

This increase was due to $0.2 million of increased dead deal costs, as well as $0.1 million of legal costs specifically related to our Internalization.

General and Administrative Expenses

General and administrative expenses increased by $1.7 million to $6.8 million for the three months ended March 31, 2024 compared to $5.0 million for the three months ended March 31, 2023, which includes $4.0 million and $2.4 million, respectively, for the three months ended March 31, 2024 and March 31, 2023, incurred in expense reimbursements.

The increase in expense reimbursements during the three months ended March 31, 2024 is partly attributable to $0.7 million of severance costs not present in the three months ended March 31, 2023.

General and administrative expenses increased by $0.3 million to $4.7 million for the three months ended June 30, 2024 compared to $4.3 million for the three months ended June 30, 2023, which includes $3.0 million and $2.4 million, respectively, for the three months ended June 30, 2024 and June 30, 2023, incurred in expense reimbursements.

Depreciation and Amortization Expenses

Depreciation and amortization expense increased $0.5 million to $20.7 million for the three months ended March 31, 2024 from $20.2 million for the three months ended March 31, 2023.

Depreciation and amortization expense increased $1.3 million to $21.9 million for the three months ended June 30, 2024 from $20.6 million for the three months ended June 30, 2023.

Gain on Sale of Real Estate Investments

During the three months ended March 31, 2024 and 2023, we did not dispose of any properties.

However, we did record a gain on sale of $0.1 million in the three months ended March 31, 2023, related to various settlements of liens and accruals on formerly disposed properties.

During the three months ended June 30, 2024 we disposed of one SHOP for a contract sales price of $3.3 million and recorded a loss on sale of $0.2 million.

This SHOP had been previously impaired by $2.3 million.

During the three months ended June 30, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million.

Two of these SHOPs were previously impaired by $6.2 million.

As a result, we recorded an aggregate loss on sale of $0.3 million in the three months ended June 30, 2023.

Interest Expense

Interest expense increased by $0.6 million to $16.4 million for the three months ended March 31, 2024 from $15.8 million for the three months ended March 31, 2023.

The increase in interest expense mainly resulted from higher average rates and higher average balances of our indebtedness during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

This increase was partially offset by the amortization of our terminated swaps, which reduced interest expense in the three months ended March 31, 2024 by $1.0 million compared to March 31, 2023, as well as by a decrease in deferred financing cost amortization of $0.6 million in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

As of March 31, 2024, there are no unamortized amounts remaining related to terminated swaps.

As of March 31, 2024, our outstanding debt obligations were $1.2 billion at a weighted average interest rate of 5.60% per year.

As of March 31, 2023, we had total borrowings of $1.1 billion, at a weighted average interest rate of 5.18% per year.

Interest expense decreased by $1.0 million to $17.8 million for the three months ended June 30, 2024 from $18.7 million for the three months ended June 30, 2023.

The decrease in interest expense mainly resulted from $2.9 million of increased deferred financing cost amortization recognized during the three months ended June 30, 2023 as a result of the termination of our Prior Credit Facility, partially offset by higher average rates and higher average balances of our indebtedness during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 and by $0.9 million of terminated swap amortization recognized during the three months ended June 30, 2023.

As of June 30, 2024, our outstanding debt obligations were $1.2 billion at a weighted average interest rate of 5.61% per year.

As of June 30, 2023, we had total borrowings of $1.2 billion, at a weighted average interest rate of 5.49% per year.

The weighted-average interest rates include the impact of our “pay-fixed” interest rate swaps which are designated as hedges on a portion of our variable-rate borrowings.

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Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period.

Interest and other income was approximately $0.1 million and $5,000, respectively, for the three months ended March 31, 2024 and 2023.

Interest income increased in the three months ended March 31, 2024 due to a higher balance of cash (including restricted cash) as well as higher interest rates on our cash accounts.

Gains (Losses) on Non-Designated Derivatives

The gain in the three months ended March 31, 2024 and the loss in the three months ended March 31, 2023 on non-designated derivative instruments related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our credit facilities, which have floating interest rates.

Interest and other income was approximately $0.5 million and $0.3 million, respectively, for the three months ended June 30, 2024 and 2023.

Interest and other income increased in the three months ended June 30, 2024 due to $0.4 million of excess insurance reimbursement, as well as higher interest rates on, and balances of, our cash accounts.

Gains on Non-Designated Derivatives

The gains in the three months ended June 30, 2024 and 2023 on non-designated derivative instruments related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our credit facilities, which have floating interest rates.

The relevant amounts in each period represent the change in value and any cash received on the non-designated derivatives.

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

We recorded negligible income tax expense for the three months ended March 31, 2024 and 2023.

We recorded negligible income tax expense for the three months ended June 30, 2024 and 2023.

Because of our TRS’s historical operating losses and the continuing adverse economic impacts since the COVID-19 pandemic on the results of operations of our SHOP assets, we have not been able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets, and accordingly we have retained a full valuation allowance on our deferred tax assets.

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Net Loss Attributable to Non-Controlling Interests

Net loss attributable to non-controlling interests was approximately $0 for the three months ended March 31, 2024 and net loss attributable to non-controlling interests was approximately $9,000 for the three months ended March 31, 2023.

Net loss attributable to non-controlling interests was approximately $0.5 million for the three months ended June 30, 2024 and net loss attributable to non-controlling interests was approximately $22,000 for the three months ended June 30, 2023.

These amounts represent the portion of our net loss that is related to the Series A Preferred Units held by third parties, Common OP Units held by third parties, and non-controlling interest holders in our subsidiaries that own certain properties.

The increase in net loss attributable to non-controlling interests in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 was due to the increase of our net loss, which primarily resulted from the termination fee to related parties of $98.2 million we recorded in the three months ended June 30, 2024 in connection with our intent to effect the Internalization as described above.

Allocation for Preferred Stock Dividends

Allocation for preferred stock was $3.5 million for the three months ended March 31, 2024 and 2023.

Allocation for preferred stock was $3.5 million for the three months ended June 30, 2024 and 2023.

These amounts represent the allocation of our net loss that is attributable to holders of Series A Preferred Stock and holders of Series B Preferred Stock.

Comparison of the Six Months Ended June 30, 2024 and 2023

Information based on Same Store, Acquisitions and Dispositions allows us to evaluate the performance of our portfolio based on a consistent population of properties.

Net loss attributable to common stockholders was $138.9 million and $38.3 million, respectively, for the six months ended June 30, 2024 and 2023.

The following table shows our results of operations for the six months ended June 30, 2024 and 2023 and the period to period change by line item of the consolidated statements of operations:

Six Months Ended June 30, Increase (Decrease)

(Dollars in thousands) 2024 2023 $

Revenue from tenants $ 177,116 $ 173,459 $ 3,657

Operating expenses:

Property operating and maintenance 110,150 107,452 2,698

Impairment charges 2,669 — 2,669

Operating fees to related parties 12,790 12,756 34

Termination fees to related parties 98,241 — 98,241

Acquisition and transaction related 499 211 288

General and administrative 11,436 9,352 2,084

Depreciation and amortization 42,666 40,744 1,922

Total expenses

278,451 170,515 107,936

Operating (loss) income before loss on sale of real estate investments (101,335) 2,944 (104,279)

Loss on sale of real estate investments (225) (191) (34)

Operating (loss) income (101,560) 2,753 (104,313)

Other income (expense):

Interest expense (34,135) (34,488) 353

Interest and other income

Gain on non-designated derivatives 2,833 104 2,729

Total other expenses

(30,773) (34,066) 3,293

Loss before income taxes (132,333) (31,313) (101,020)

Income tax expense (135) (87) (48)

Net loss (132,468) (31,400) (101,068)

Net loss attributable to non-controlling interests 452 31 421

Allocation for preferred stock (6,900) (6,899) (1)

Net loss attributable to common stockholders $ (138,916) $ (38,268) $ (100,648)

Segment Results — Medical Office Buildings

The following table presents the revenue and property operating and maintenance expense and the period to period change within our MOB segment for the six months ended June 30, 2024 and 2023:

Same Store (1)

Acquisitions (2)

Dispositions (3)

Segment Total

Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease)

(Dollars in thousands) 2024 2023 $ 2024 2023 $ 2024 2023 $ 2024 2023 $

Revenue from tenants

$ 67,373 $ 66,815 $ 558 $ 1,897 $ 654 $ 1,243 $ — $ 61 $ (61) $ 69,270 $ 67,530 $ 1,740

Property operating and maintenance 19,405 18,248 1,157 172 59 113 (150) 86 (236) 19,427 18,393 1,034

Segment income $ 47,968 $ 48,567 $ (599) $ 1,725 $ 595 $ 1,130 $ 150 $ (25) $ 175 $ 49,843 $ 49,137 $ 706

_______________

(1) Our MOB segment included 149 Same Store properties.

(2) Our MOB segment included 11 Acquisition properties.

(3) Our MOB segment included one Disposition property.

(4) Our MOB segment included 160 properties.

Revenue from tenants primarily reflects contractual rent received from tenants in our MOBs and operating expense reimbursements.

These reimbursements 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.

Revenue from Tenants

During the six months ended June 30, 2024, revenue from tenants increased by $1.7 million in our MOB segment as compared to the six months ended June 30, 2023, primarily as a result of increased revenue from tenants of $1.2 million due to our Acquired Properties and an increase in revenue from tenants of $0.6 million from our Same Store Properties, partially offset by a decrease in revenue from tenants of $0.1 million due to our Disposed Properties.

The increase in our Same Store Properties revenue from tenants was primarily driven by an increase of operating expense reimbursement revenue from increased property, operating and maintenance expenses, as well as from marginally higher occupancy in the six months ended June 30, 2024, as compared to June 30, 2023.

Property Operating and Maintenance

During the six months ended June 30, 2024, property operating and maintenance costs in our MOB segment increased by $1.0 million as compared to the same period last year, primarily as a result of increased costs from our Same Store Properties of $1.2 million and our Acquired Properties of $0.1 million, partially offset by a decrease from our Disposed Properties of $0.2 million.

The increase in property operating and maintenance expenses from our Same Store properties is primarily the result of the impacts of inflation on utility and maintenance costs, which are largely reimbursed by tenants.

Segment Results — Seniors Housing - Operating Properties

The following table presents the revenue and property operating and maintenance expense and the period to period change within our SHOP segment for the six months ended June 30, 2024 and 2023:

Same Store (1)

Acquisitions (2)

Dispositions (3)

Segment Total

Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase (Decrease)

(Dollars in thousands) 2024 2023 $ 2024 2023 $ 2024 2023 $ 2024 2023 $

Revenue from tenants

$ 106,209 $ 101,391 $ 4,818 $ — $ — $ — $ 1,637 $ 4,538 $ (2,901) $ 107,846 $ 105,929 $ 1,917

Property operating and maintenance 88,367 84,202 4,165 — — — 2,356 4,857 (2,501) 90,723 89,059 1,664

Segment income $ 17,842 $ 17,189 $ 653 $ — $ — $ — $ (719) $ (319) $ (400) $ 17,123 $ 16,870 $ 253

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(1) Our SHOP segment included 47 Same Store properties (including two land parcels).

(2) Our SHOP segment did not include any Acquired Properties.

(3) Our SHOP segment included five Disposed Properties.

(4) Our SHOP segment included 47 total properties (including two land parcels).

Revenues from tenants within our SHOP segment are generated in connection with rent and services offered to residents in our SHOPs depending on the level of care required, as well as fees associated with other ancillary services.

Property operating and maintenance expenses relate 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.

Revenue from Tenants

During the six months ended June 30, 2024, revenue from tenants increased by $1.9 million in our SHOP segment as compared to the six months ended June 30, 2023, which was primarily driven by an increase in revenue from tenants of $4.8 million due to our Same Store Properties, partially offset by a decrease in revenue from tenants of $2.9 million due to our Disposed Properties.

The increase to our Same Store properties revenue from tenants was primarily driven by higher leasing rates during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, as well as by marginally higher occupancy in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

These increases were partially offset by $2.1 million of increased rent concessions offered during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023

Property Operating and Maintenance

During the six months ended June 30, 2024, property operating and maintenance expenses increased $1.7 million in our SHOP segment as compared to the six months ended June 30, 2023, primarily due to an increase in property operating and maintenance expenses of $4.2 million from our Same Store Properties, partially offset by a decrease of $2.5 million from our Disposed Properties.

Our Same Store properties operating and maintenance expenses increased in the six months ended June 30, 2024 compared to the same period last year, primarily from (i) $2.6 million of increased costs for overtime, training and bonus wages paid to employees of our third party operators, (ii) $1.3 million of increased management fees paid to our third party operators, (iii) $1.2 million of higher insurance expense, (iv) the effects of inflation which raised the general costs of food, supplies, and utilities generally.

These increases to property operating and maintenance expenses were partially offset by decreased costs for contract labor of $0.5 million.

Other Results of Operations

Impairment Charges

We recorded $2.7 million of impairment charges during the six months ended June 30, 2024 on one held-for-use MOB and one SHOP which was disposed in the six months ended June 30, 2024.

The held-for-use MOB was impaired by $2.4 million and the disposed SHOP was impaired by $0.3 million.

We did not record any impairment charges during the six months ended June 30, 2023.

See Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges for the six months ended June 30, 2024 and 2023.

Operating Fees to Related Parties

Operating fees to related parties were consistent at $12.8 million for each of the six months ended June 30, 2024 and 2023.

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis (see — Results of Operations — Comparison of the Three Months Ended June 30, 2024 and 2023 for additional information).

Asset management fees were $10.9 million for both the six months ended June 30, 2024 and 2023.

Variable asset management fees will further increase if we issue additional equity securities in the future.

There were no incentive fees incurred in either of the six months ended June 30, 2024 or 2023.

Property management fees were consistent at $1.9 million and $1.8 million, respectively, for the six months ended June 30, 2024 and 2023.

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

Termination Fees to Related Parties

We recorded $98.2 million of termination fees to related parties in the six months ended June 30, 2024 as a result of our intent to terminate the Second A&R Advisory Agreement with the Advisor and transition to self-management through the Internalization.

Pursuant to the terms of the Second A&R Advisory Agreement, the termination fee is payable to the Advisor within 30 days after the effective date of the termination, and such a fee is a component of the Closing Payments contemplated by the Internalization Agreement.

We expect the Closing to occur no later than the fourth quarter of 2024.

We anticipate funding the Closing Payments primarily with net proceeds from strategic dispositions of MOBs, SHOPs and land parcels.

Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses increased by $0.3 million, to $0.5 million for the six months ended June 30, 2024 from $0.2 million for the six months ended June 30, 2023.

This increase was due to $0.2 million of increased dead deal costs and $0.1 million of legal costs specifically related to our Internalization.

General and Administrative Expenses

General and administrative expenses increased $2.1 million to $11.4 million for the six months ended June 30, 2024 compared to $9.4 million for the six months ended June 30, 2023, which includes $7.0 million and $4.8 million, respectively, for the six months ended June 30, 2024 and 2023, incurred in expense reimbursements.

The increase in general and administrative expenses was primarily attributable to $0.7 million of severance payments incurred in the six months ended June 30, 2024 made to former employees of the Advisor.

Depreciation and Amortization Expenses

Depreciation and amortization expense increased by $2.0 million to $42.7 million for the six months ended June 30, 2024 as compared with $40.7 million for the six months ended June 30, 2023.

Gain (Loss) on Sale of Real Estate Investments

During the six months ended June 30, 2024, we disposed of one SHOP for a contract sales price of $3.3 million.

This SHOP had been previously impaired by $2.3 million.

As a result, the Company recorded an aggregate loss on sale of $0.2 million in the six months ended June 30, 2024.

During the six months ended June 30, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million.

Two of the SHOPs were previously impaired by $6.2 million.

As a result, we recorded an aggregate loss of $0.2 million in the six months ended June 30, 2023.

Interest Expense

Interest expense decreased $0.4 million to $34.1 million for the six months ended June 30, 2024 from $34.5 million for the six months ended June 30, 2023.

The increase in interest expense mainly resulted from the acceleration of deferred financing costs of $2.6 million from the termination of our Prior Credit Facility, as well as from higher average rates and higher average balances of amounts outstanding under our indebtedness during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

As of June 30, 2024, our outstanding debt obligations were $1.2 billion, at a weighted average interest rate of 5.61% per year.

As of June 30, 2023, we had total borrowings of $1.2 billion, at a weighted average interest rate of 5.49% per year.

The weighted-average interest rates include the impact of our “pay-fixed” interest rate swaps which are designated as hedges on a portion of our variable-rate borrowings.

Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings, among other factors (including the impact of variable rates to the extent such borrowings are not hedged).

Recent and continuing increases in interest rates may adversely impact the terms on which we may borrow in the future and thus our results of operations.

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period.

Interest and other income was approximately $0.5 million for the six months ended June 30, 2024 and approximately $0.3 million for the six months ended June 30, 2023.

Interest and other income increased in the six months ended June 30, 2024 from $0.4 million of excess insurance reimbursement as well as higher interest rates on, and balances of, our cash accounts.

Gain (Loss) on Non-Designated Derivatives

Gain (loss) on non-designated derivative instruments for the six months ended June 30, 2024 and 2023 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with the Fannie Mae Master Credit Facilities, which have floating interest rates.

Income Tax Benefit (Expense)

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

We recorded an income tax expense of approximately $0.1 million for the six months ended June 30, 2024 and 2023.

Because of our TRS’s recent operating history of losses and the impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, in the third quarter of 2020, we were not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance.

Since that time, our TRS’s operating performance has not significantly improved and thus we have recorded a 100% valuation allowance on our net deferred tax assets through June 30, 2024.

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).

Net Loss (Income) Attributable to Non-Controlling Interests

Net loss attributable to non-controlling interests was approximately $0.5 million for the six months ended June 30, 2024 and net loss attributable to non-controlling interests was approximately $31,000 for the six months ended June 30, 2023, which represents the portion of our net income that is related to the Series A Preferred Units held by third parties (issued in connection with a property acquisition in September, 2021), Common OP Units held by third parties, and other non-controlling interest holders in our subsidiaries that own certain properties.

The increase in net loss attributable to non-controlling interests in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 was due to the increase of our net loss, which primarily resulted from the termination fee to related parties of $98.2 million which we recorded in the six months ended June 30, 2024 in connection with our intent to effect the Internalization as described above.

Allocation for Preferred Stock

Allocation for preferred stock was $6.9 million for the six months ended June 30, 2024 and 2023.

These amounts represent the allocation of our net loss that is attributable to holders of Series A Preferred Stock and holders of Series B Preferred Stock.

Cash Flows from Operating Activities

The following table presents a reconciliation of our net cash provided by operations from our net loss for the three months ended March 31, 2024 and 2023:

(in thousands) Three Months Ended March 31,

The following table presents a reconciliation of our net cash provided by operations from our net loss for the six months ended June 30, 2024 and 2023:

(in thousands) Six Months Ended June 30,

Cash flows from operating activities:

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Prepaid expenses and other assets (1,824) 909

Termination fees payable to related parties 98,241 —

Accounts payable, accrued expenses and other liabilities (2,854) (5,728)

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Cash Flows from Investing Activities

The following table presents our net cash used in investing activities for the three months ended March 31, 2024 and 2023:

(in thousands) Three Months Ended March 31,

The following table presents our net cash used in investing activities for the six months ended June 30, 2024 and 2023:

(in thousands) Six Months Ended June 30,

Cash flows from investing activities:

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Investments in non-designated interest rate caps (1,709) (4,580)

Proceeds from sales of real estate investments 2,896 4,803

Cash used in investing activities $ (15,578) $ (34,360)

Cash Flows from Financing Activities

The following table presents our net cash provided by financing activities for the three months ended March 31, 2024 and 2023:

(in thousands) Three Months Ended March 31,

The following table presents our net cash provided by financing activities for the six months ended June 30, 2024 and 2023:

(in thousands) Six Months Ended June 30,

Cash flows from financing activities:

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Proceeds from credit facilities 6,960 20,000

Proceeds from mortgage notes payable — 240,000

Payments on mortgage notes payable (584) (565)

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Payments of deferred financing costs (199) (7,774)

Payments for derivative instruments — (7,783)

Preferred stock issuance costs — (2)

Contributions from non-controlling interests — 284

Dividends paid on Series A Preferred stock (3,668) (3,666)

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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 operating activities, potential future advances under our Fannie Mae Master Credit Facilities and MOB Warehouse Facility, net cash provided by our property dispositions and potential new financings utilizing certain of our currently unencumbered properties.

As of March 31, 2024, we had $28.7 million of cash and cash equivalents.

As of June 30, 2024, we had $29.5 million of cash and cash equivalents.

The Barclays MOB Loan Agreement requires us to maintain a minimum balance of cash and cash equivalents of $12.5 million at all times.

As of March 31, 2024, our total debt leverage ratio (total debt divided by total gross asset value) was approximately 44.4%.

Intent to Internalize Management

On July 1, 2024, we announced that, in anticipation of a potential future listing of our common stock on a national securities exchange, we provided notice in June 2024 to the Advisor of our intent to Internalize.

On August 6, 2024, we entered into the Internalization Agreement with the Merger Sub, the Advisor and the Advisor Parent.

We expect the Internalization to take effect no later than the fourth quarter of 2024.

For additional information about the Internalization, please see Note 9 — Related Party Transactions and Arrangements.

Following our transition to self-management, we would no longer be required to pay asset management and property management fees to the Advisor Parent.

We paid total asset management fees of $5.5 million and $10.9 million, respectively, during the three and six months ended June 30, 2024 (which includes a monthly base asset management fee of $1.625 million per month and a monthly variable asset management fee of one-twelfth of 1.25% of the cumulative net proceeds of our equity offerings subsequent to February 17, 2017).

We paid total property management fees, including capitalized leasing commissions, of $1.0 million and $2.5 million, respectively, during the three and six months ended June 30, 2024 which is equal to 1.5% of gross revenues from the our stand-alone single-tenant net leased properties managed and 2.5% of gross revenues from all other types of properties managed.

Certain costs are incurred as a result of our decision to transition to self-management;

including, upon a termination of the Second A&R Advisory Agreement by us in connection with a transition to self-management, we would be required to pay the Advisor a transition fee of $98.2 million.

We would also be required to pay six-months of base asset management fees, which began on June 25, 2024 when we delivered notice to the Advisor of our intention to effect the Internalization, of $10.9 million, and property management fees of $3.9 million, representing the costs we would incur through the current term of the Property Management Agreement.

A portion each of the asset management fees and property management fees have been paid as we continue to pay our monthly operating expense to the Advisor and Property Manager.

Collectively, these payments to the Advisor Parent described above are referred to herein as “Closing Payments”.

To the extent the Closing Payments exceed our Available Cash (as defined in the Internalization Agreement), we have agreed to pay the Advisor Parent aggregate cash consideration equal to at least $60.0 million (such cash amount, the “Closing Date Cash Consideration”), and we will issue to the Advisor Parent a promissory note in a principal amount equal to the difference between the Closing Date Cash Consideration and the Closing Payments, as may be adjusted for any post-Closing true-ups on the Closing Payments.

We intend to fund the Closing Date Cash Consideration through a combination of cash on hand and the net proceeds from certain anticipated strategic dispositions.

The Company expects the Internalization to close no later than the fourth quarter of 2024, subject to the satisfaction or waiver of certain conditions in the Internalization Agreement.

There can be no assurance, however, that we will generate enough net proceeds through these expected strategic dispositions to fully fund the Closing Payments before they are payable, or that these strategic dispositions will occur at all.

As of June 30, 2024, our total debt leverage ratio (total debt divided by total gross asset value) was approximately 44.5%.

Net debt totaled $1.2 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($29.5 million).

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Cumulative impairment charges are reflected within gross asset value.

As of March 31, 2024, we had total gross borrowings of $1.2 billion, at a weighted-average interest rate of 5.60% and a weighted-average remaining term of 4.9 years.

As of June 30, 2024, we had total gross borrowings of $1.2 billion, at a weighted-average interest rate of 5.61% and a weighted-average remaining term of 4.6 years.

The weighted-average interest rate includes the impact of “pay-fixed” swaps that are designated as hedging instruments on a portion of our variable-rate debt, but does not include the impact of our non-designated interest rate caps (discussed below).

Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on our total gross borrowings was 5.00% as of March 31, 2024.

As of March 31, 2024, the carrying value of our real estate investments, at cost was $2.6 billion, with $1.4 billion of this asset value pledged as collateral for mortgage notes payable and $637.9 million of this asset value pledged to secure advances under our credit facilities.

Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on our total gross borrowings was 5.01% as of June 30, 2024.

As of June 30, 2024, the carrying value of our real estate investments, at cost was $2.6 billion, with $1.4 billion of this asset value pledged as collateral for mortgage notes payable and $649.6 million of this asset value pledged to secure advances under our credit facilities.

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

Unencumbered real estate investments, at cost as of March 31, 2024 was $634.9 million.

Unencumbered real estate investments, at cost as of June 30, 2024 was $621.0 million.

There can be no assurance as to the amount of liquidity we would be able to generate from leveraging these unencumbered real estate investments, if we are able to leverage them at all.

Mortgage Notes Payable

As of March 31, 2024, we had $828.6 million in mortgage notes payable outstanding, all of which is either fixed-rate or effectively fixed through our interest rate swap at a weighted-average annual interest rate of 4.60% and a weighted-average remaining term of 5.9 years.

As of June 30, 2024, we had $828.3 million in mortgage notes payable outstanding, all of which is either fixed-rate or effectively fixed through our interest rate swap at a weighted-average annual interest rate of 4.60% and a weighted-average remaining term of 5.6 years.

Future scheduled principal payments on our mortgage notes payable for the remainder of 2024 and 2025 are $0.6 million and $13.3 million, respectively.

During the three months ended March 31, 2024, we entered into the CPC Mortgage Loan in connection with a four-property acquisition also completed in the three months ended March 31, 2024.

During the three months ended June 30, 2024, we entered into the CPC Mortgage Loan in connection with a four-property acquisition also completed in the three months ended June 30, 2024.

The mortgage has a principal balance of $7.5 million, bears interest at an annual fixed rate of 6.84% and matures in February 2034 with no principal amounts due until that time.

Credit Facilities

As of March 31, 2024, $359.6 million was outstanding under our credit facilities, which bore interest at a weighted-average annual rate of 7.89% and had a weighted-average remaining term of 2.6 years.

Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on our credit facilities was 5.93% as of March 31, 2024.

As of June 30, 2024, $365.1 million was outstanding under our credit facilities, which bore interest at a weighted-average annual rate of 7.90% and had a weighted-average remaining term of 2.3 years.

Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on our credit facilities was 5.95% as of June 30, 2024.

Fannie Mae Master Credit Facilities

As of March 31, 2024, $344.8 million was outstanding under our Fannie Mae Master Credit Facilities which bore interest at a weighted-average annual rate of 7.87%.

Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on the Fannie Mae Master Credit Facilities was 5.91% as of March 31, 2024.

As of June 30, 2024, $343.4 million was outstanding under our Fannie Mae Master Credit Facilities which bore interest at a weighted-average annual rate of 7.87%.

Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on the Fannie Mae Master Credit Facilities was 5.91% as of June 30, 2024.

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.

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On December 22, 2023, we entered into a loan agreement with Capital One to provide up to $50.0 million of variable-rate financing.

As of March 31, 2024, $14.7 million was outstanding under the MOB Warehouse Facility which bore interest at an annual rate of 8.33%.

Inclusive of our non-designated interest rate caps, the economic interest rate on our MOB Warehouse Facility was 6.50% as of March 31, 2024.

As of June 30, 2024, $21.7 million was outstanding under the MOB Warehouse Facility which bore interest at an annual rate of 8.33%.

Inclusive of our non-designated interest rate caps, the economic interest rate on our MOB Warehouse Facility was 6.50% as of June 30, 2024.

We may request future advances under the MOB Warehouse Facility by adding eligible MOBs to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests.

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Interest payments are due monthly, with no principal payments due until maturity in December 2026.

Subsequent to March 31, 2024, we drew $7.0 million under the MOB Warehouse Facility.

Please see Note 17 — Subsequent Events for additional information.

Non-Designated Interest Rate Caps

Our interest rate caps are used to limit our exposure to interest rate movements on our Fannie Mae Master Credit Facilities for economic purposes, however, we do not elect to apply hedge accounting to these instruments.

As of March 31, 2024, we had seven SOFR-based interest rate caps with an aggregate notional amount of $364.2 million, which limits one-month SOFR to 3.50% and have varying maturities through January 2027.

As of June 30, 2024, we had eight SOFR-based interest rate caps with an aggregate notional amount of $369.2 million, which limits one-month SOFR to 3.50% and have varying maturities through January 2027.

Although these interest rate caps are not designated hedging instruments, we consider them economically related to our variable-rate credit facility borrowings.

As SOFR has increased beyond 3.50%, we received cash payments of $1.8 million in the three months ended March 31, 2024.

We received $0.9 million of cash payments in the three months ended March 31, 2023.

We prepaid premiums of $1.5 million to renew one caps with an aggregate notional amount of $60.0 million which matures in April 2024.

As SOFR has increased beyond 3.50%, we received cash payments of $3.6 million in the three months ended June 30, 2024.

We received $2.3 million of cash payments in the three months ended June 30, 2023.

We paid total premiums of $1.7 million to renew one cap with an aggregate notional amount of $58.1 million which matures in April 2024, and to execute a new cap of $7.0 million, which matures in January 2027.

We have five interest rate caps with a notional amount of $289.4 million which mature in 2025, which represents the next maturing interest rate caps.

During the year ended December 31, 2023, we paid premiums of $10.0 million to renew expiring interest rate cap contracts.

Subsequent to March 31, 2024, we purchased a new non-designated interest rate cap with a notional amount of $7.0 million and a strike price of 3.50%, which matures in January 2027.

We paid premiums of $0.3 million for this interest rate cap.

Capital Expenditures

During the three months ended March 31, 2024, our capital expenditures were $5.2 million, of which $1.1 million related to our MOB segment and $4.1 million related to our SHOP segment.

During the six months ended June 30, 2024, our capital expenditures were $11.2 million, of which $3.4 million related to our MOB segment and $7.8 million related to our SHOP segment.

We anticipate this rate of capital expenditures for the MOB and SHOP segments throughout the remainder of 2024.

Acquisitions — Three Months Ended March 31, 2024

During the three months ended March 31, 2024, we acquired four single-tenant MOBs for an aggregate contract purchase price of $12.6 million.

Acquisitions — Six Months Ended June 30, 2024

During the six months ended June 30, 2024, we acquired four single-tenant MOBs for an aggregate contract purchase price of $12.6 million.

These acquisitions were funded with $7.5 million of new mortgage debt from our CPC Mortgage Loan and the remainder with cash on hand.

Acquisitions — Subsequent to March 31, 2024

We have not acquired any properties subsequent to March 31, 2024.

Dispositions — Three Months Ended March 31, 2024

We did not dispose of any properties during the three months ended March 31, 2024.

Dispositions — Subsequent to March 31, 2024

We have not disposed of any properties subsequent to March 31, 2024.

We have entered into a purchase and sale agreement to dispose of one SHOP for a contract sales price of $3.3 million.

There can be no assurance that this sale will be completed on its contemplated terms, or at all.

Acquisitions — Subsequent to June 30, 2024

We have not acquired any properties subsequent to June 30, 2024.

Dispositions — Six Months Ended June 30, 2024

We disposed of one SHOP during the six months ended June 30, 2024 for a contract sales price of $3.3 million.

These proceeds are available for general corporate purposes.

Dispositions — Subsequent to June 30, 2024

We disposed of seven MOBs in Illinois subsequent to June 30, 2024 for a contract sales price of $50.5 million.

These proceeds are available for general and corporate uses, including for the potential partial payment of the Closing Payments at the Closing.

We have also signed a letter of intent to dispose of one SHOP in California for a contract sales price of $21.0 million.

There can be no assurance that this signed letter of intent will close on its contemplated terms, or at all.

To fund the amounts necessary to pay the Closing Payments, we anticipate primarily using net proceeds from strategic dispositions to occur before the end of the fourth quarter of 2024.

There can be no assurance that we will generate enough net proceeds through these strategic dispositions to fully fund the Closing Payments before the fee is payable, or that these strategic dispositions will occur at all.

Share Repurchase Program

We did not repurchase any shares during the three months ended March 31, 2024 and 2023.

We did not repurchase any shares during the six months ended June 30, 2024 and 2023.

Non-GAAP Financial Measures

This section discusses the non-GAAP financial measures we use to evaluate our performance including Funds from Operations (“FFO”) and Modified Funds from Operations (“MFFO”).

MFFO is based on our total performance as a company and therefore reflects the impact of interest expense, general and administrative expenses and operating fees to related parties.

A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net loss, are provided below:

Funds from Operations and Modified Funds from Operations

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings, improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time.

We believe that, because real estate values historically rise and fall with market conditions, including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be less informative.

Because of these factors, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has published a standardized measure of performance known as FFO, which is used in the REIT industry as a supplemental performance measure.

We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance.

FFO is not equivalent to our net income or loss as determined under GAAP.

We calculate FFO, a non-GAAP measure, consistent with the standards established over time by the Board of Governors of NAREIT, as restated in a White Paper approved by the Board of Governors of NAREIT effective in December 2018 (the “White Paper”).

The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sales of certain real estate assets, gains and losses from changes in control and impairment charges of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect our proportionate share of FFO attributable to our stockholders.

Our FFO calculation complies with NAREIT’s definition.

We believe that the use of FFO provides a more complete understanding of our operating performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT’s definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries.

These changes had a particularly significant impact on publicly registered, non-listed REITs, which typically have a significant amount of acquisition activity in the early part of their existence, particularly during the period when they are raising capital through ongoing initial public offerings.

Because of these factors, the Institute of Portfolio Alternatives (“IPA”), an industry trade group, has published a standardized measure of performance known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs.

MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP.

We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

MFFO is not equivalent to our net income or loss as determined under GAAP.

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, except that we adjust for deferred tax asset allowances based on management’s determination.

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

In calculating MFFO, we follow the Practice Guideline (with the added adjustment for deferred tax asset allowances based on management’s determination as noted above) and exclude acquisition fees and expenses, amortization of above- and below-market leases 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, mark-to-market adjustments included in net loss, gains or losses included in net loss from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and 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.

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.

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.

Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way.

Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful.

Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to pay dividends and other distributions to our stockholders.

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

The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.

Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO.

In the future, updates to the White Paper or the Practice Guideline may be published or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.

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 calculating our FFO and MFFO, we exclude the impact of amounts attributable to our non-controlling interests.

Three Months Ended March 31,

This section discusses the non-GAAP financial measures we use to evaluate our performance including Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”).

A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net loss attributable to common stockholders, are provided below.

We consider FFO and AFFO to be useful supplemental measures for reviewing comparative operating and financial performance because, by excluding the applicable items listed above, FFO and AFFO can help investors compare our operating performance between periods or as compared to other companies.

While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent, nor are they meant to replace, cash flows from operations and net income or loss as defined by GAAP, and should not be considered alternatives to those measures in evaluating our liquidity or operating performance.

Rather, FFO and AFFO should be reviewed in conjunction with these and other GAAP measurements.

FFO and AFFO also do not consider the costs associated with capital expenditures and leasing commissions, nor do they purport to be indicative of cash available to fund our future cash requirements, including our ability to pay dividends and other distributions to our stockholders.

Additionally, our computation of FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition, or that interpret the current NAREIT definition or define AFFO differently than we do.

Prior to the quarter ended June 30, 2024, we presented another non-GAAP metric in place of AFFO, Modified Funds From Operations (“MFFO”).

Historically, we calculated MFFO as FFO as defined by NAREIT adjusted for (i) acquisition and transaction related costs, (ii) amortization of market-lease intangible assets and liabilities, (iii) adjustments for straight-line rent, (iv) mark-to-market gains and losses from our non-designated derivatives, (v) net amortization of our mortgage discounts and premiums, (vi) valuation reserves against our deferred tax assets and (vii) similar adjustments for non-controlling interests and unconsolidated entities.

We believe that AFFO is a more meaningful non-GAAP metric to assess our operating performance than MFFO, and as such we intend to present AFFO for each reporting period beginning with the quarter ended June 30, 2024 and each comparable period thereafter.

Funds from Operations

Our consolidated financial statements are presented in accordance with GAAP, utilizing historical cost accounting which, among other things, requires depreciation of real estate investments.

As a result, our operating results imply that the value of our real estate investments will decrease predictably over a set time period.

However, we believe that the value of our real estate investments will fluctuate over time based on various market conditions and as such, depreciation under historical cost accounting may be less informative.

FFO is a standard REIT industry metric defined by the National Association of Real Estate Investment Trusts (“NAREIT”), which was most recently restated in a White Paper effective in December 2018 (the “White Paper”).

NAREIT defines FFO as net income or loss (computed in accordance with GAAP), adjusted for (i) real estate-related depreciation and amortization, (ii) impairment charges on depreciable real property, (iii) gains or losses from sales of depreciable real property and (iv) similar adjustments for non-controlling interests and unconsolidated entities.

We believe that the use of FFO provides a more complete understanding of our operating performance to investors and to management, and when compared year-over-year reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, which may not be immediately apparent from net loss.

Adjusted Funds from Operations

We also believe that AFFO is a meaningful supplemental non-GAAP measure of our operating results.

We calculate AFFO by further adjusting FFO to reflect the performance of our portfolio for items we believe are not directly attributable to our operations.

We believe that AFFO is a beneficial indicator of our ongoing portfolio performance and isolates the financial results of our operations.

Our adjustments to FFO to arrive at AFFO include removing the impacts of (i) acquisition and transaction related costs, (ii) amortization of market-lease intangible assets and liabilities, (iii) adjustments for straight-line rent, (iv) termination fees to related parties (v) equity-based compensation expense, (vi) depreciation and amortization related to non-real estate related assets, (vii) mark-to-market gains and losses from our non-designated derivatives, (viii) non-cash components of interest expense and (ix) similar adjustments for non-controlling interests and unconsolidated entities.

We believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry and is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies.

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

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 2024 2023

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$ (119,916) $ (20,759) $ (138,916) $ (38,268)

Depreciation and amortization (1)

19,748 19,608

Depreciation and amortization related to real estate assets 20,903 19,915 40,651 39,523

Impairment charges 2,409 — 2,669 —

Gain on sale of real estate investments — (115)

(Gain)/loss on sale of real estate investments 225 306 225 191

Adjustments for non-controlling interests (1)

(120) (108) (221) (201)

FFO (as defined by NAREIT) attributable to stockholders

Acquisition and transaction related 142 63

(96,499) (646) (95,592) 1,245

Accretion of market lease and other intangibles, net (228) (260) (687) (471)

Straight-line rent adjustments

Amortization of mortgage premiums and discounts, net 23 23

(Gain) loss on non-designated derivatives (1,951) 182

Cash received from non-designated derivative instruments 1,773 926

Deferred tax asset valuation allowance (2)

(90) (388) 98 (605)

Acquisition and transaction related 357 148 499 211

Termination fees to related parties (2)

98,241 — 98,241 —

Equity-based compensation 230 230 460 460

Depreciation and amortization on non-real estate assets 1,025 655 2,015 1,223

Mark-to-market (gains)/losses from derivatives (3)

910 1,089 732 2,197

Non-cash components of interest expense (4)

862 2,983 488 4,131

Adjustments for non-controlling interests (1)

MFFO attributable to stockholders

(451) 19 (449) 14

(1) Excludes non-real estate depreciation and amortization.

(2) Represents additional non-cash reserves against our deferred tax asset, which we do not consider relevant to our operations.

AFFO attributable to stockholders $ 4,357 $ 3,830 $ 5,805 $ 8,405

(1) Represents the portion of the adjustments allocable to non-controlling interests.

(2) We provided notice to the Advisor in June 2024 of our intent to transition to self-management, and executed the Internalization Agreement in August 2024.

Upon the Closing of the Internalization, we have agreed to pay the Closing Payments, a component of which is a self-management termination fee, which is payable within 30 days thereof.

We do not consider such termination fees to be indicative of our performance given its unique and non-recurring nature, and accordingly, we have included it as an adjustment to FFO.

(3) Presented as total gains or losses from our non-designated derivatives net of cash received.

(4) Non-cash components of interest expense include (i) deferred financing cost amortization, (ii) mortgage discount and premium amortization and (iii) amortized gains or losses from terminated hedging instruments.

Dividends and Other Distributions

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

No cash distributions were made to common stockholders, restricted shareholders, holders of Common OP Units or holders of Class B Units in the three months ended March 31, 2024.

Three Months Ended

March 31, 2024

(In thousands) Amounts Percentage of Distributions

No cash distributions were made to common stockholders, restricted shareholders, holders of Common OP Units or holders of Class B Units in the three months ended June 30, 2024.

Three Months Ended Year-To-Date

March 31, 2024 June 30, 2024 June 30, 2024

(In thousands) Amounts Percentage of Distributions Amounts Percentage of Distributions Amounts Percentage of Distributions

Distributions:

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(1) Assumes the use of available cash flows from operations before any other sources.

For the three months ended March 31, 2024, cash flows provided by operations were $2.5 million.

(2) 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.

For the six months ended June 30, 2024, cash flows provided by operations were $8.9 million.

We had not historically generated sufficient cash flows 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.

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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.

As of March 31, 2024, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 3.5%.

As of June 30, 2024, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 3.0%.

To help mitigate the adverse impact of inflation, most of our leases with our tenants in our MOB segment contain rent escalation provisions which increase the cash that is due under these leases over time.

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

What changed 10-Q

Item 1. Financial Statements