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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number: 001-39153
HCT-20210930_G1.JPG
Healthcare Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland 38-3888962
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
650 Fifth Ave., 30th Floor, New York, NY                 10019
___________________________________________________ __________________________________________________
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 415-6500
Securities registered pursuant to section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share HTIA The Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
  Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of November 9, 2021, the registrant had 99,281,753 shares of common stock outstanding.
1
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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2


Table of Contents

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements.

HEALTHCARE TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30,
2021 		December 31, 2020
ASSETS (Unaudited) (Unaudited)
Real estate investments, at cost:
Land $ 206,463  $ 212,651 
Buildings, fixtures and improvements 2,145,217  2,133,057 
Construction in progress 1,417  — 
Acquired intangible assets 291,471  276,015 
Total real estate investments, at cost 2,644,568  2,621,723 
Less: accumulated depreciation and amortization (555,107) (512,775)
Total real estate investments, net 2,089,461  2,108,948 
Assets held for sale —  90 
Cash and cash equivalents 29,784  72,357 
Restricted cash 26,081  17,989 
Derivative assets, at fair value 65  13 
Straight-line rent receivable, net 23,994  23,322 
Operating lease right-of-use assets 13,790  13,912 
Prepaid expenses and other assets (including $1,152 and $1,278 due from related parties as of September 30, 2021 and December 31, 2020, respectively)
30,411  34,932 
Deferred costs, net 14,987  15,332 
Total assets $ 2,228,573  $ 2,286,895 
LIABILITIES AND EQUITY    
Mortgage notes payable, net $ 542,575  $ 542,698 
Credit facilities, net 626,423  674,551 
Market lease intangible liabilities, net 10,729  10,803 
Derivative liabilities, at fair value 21,829  38,389 
Accounts payable and accrued expenses (including $317 and $299 due to related parties as of September 30, 2021 and December 31, 2020)
41,702  42,271 
Operating lease liabilities 9,054  9,155 
Deferred rent 6,415  6,914 
Distributions payable 1,879  742 
Total liabilities 1,260,606  1,325,523 
Stockholders’ Equity
7.375% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, 4,740,000 and 2,210,000 authorized as of September 30, 2021 and December 31, 2020, respectively; 3,977,144 issued and outstanding as of September 30, 2021 and 1,610,000 issued and outstanding as of December 31, 2020
40  16 
Common stock, $0.01 par value, 300,000,000 shares authorized, 99,281,753 shares (including 1,434,440 shares paid as a stock dividend on October 15, 2021) and 95,040,783 shares (including 1,265,037 shares paid as a stock dividend on January 15, 2021) issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
978  938 
Additional paid-in capital 2,222,023  2,104,261 
Accumulated other comprehensive loss (22,478) (39,673)
Distributions in excess of accumulated earnings (1,239,361) (1,108,557)
Total stockholders’ equity 961,202  956,985 
Non-controlling interests 6,765  4,387 
Total equity 967,967  961,372 
Total liabilities and equity $ 2,228,573  $ 2,286,895 

The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share data)
(Unaudited)


  Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Revenue from tenants $ 82,006  $ 95,835  $ 246,602  $ 290,734 
Operating expenses:      
Property operating and maintenance 51,218  61,678  152,133  183,189 
Impairment charges 26,642  1,011  33,601  32,842 
Operating fees to related parties 6,045  5,984  17,851  17,969 
Acquisition and transaction related 2,198  175  2,453  680 
General and administrative 4,723  3,162  13,318  14,622 
Depreciation and amortization 19,786  20,211  59,390  60,589 
Total expenses
110,612  92,221  278,746  309,891 
Operating income (loss) before gain on sale of real estate investments (28,606) 3,614  (32,144) (19,157)
Gains on sale of real estate investments —  —  2,284  2,306 
Operating income (loss) (28,606) 3,614  (29,860) (16,851)
Other income (expense):
Interest expense (11,775) (12,840) (36,016) (38,677)
Interest and other income
4  2  60  43 
Loss on non-designated derivatives (33) (69) (32) (45)
Total other expenses
(11,804) (12,907) (35,988) (38,679)
Loss before income taxes (40,410) (9,293) (65,848) (55,530)
Income tax expense (55) (78) (162) (78)
Net loss (40,465) (9,371) (66,010) (55,608)
Net loss (income) attributable to non-controlling interests 331  (397) 229  (223)
Allocation for preferred stock (1,834) (732) (4,402) (2,224)
Net loss attributable to common stockholders (41,968) (10,500) (70,183) (58,055)
Other comprehensive income (loss):
   Unrealized gain (loss) on designated derivatives 3,139  2,845  17,190  (36,775)
Comprehensive loss attributable to common stockholders $ (38,829) $ (7,655) $ (52,993) $ (94,830)
Weighted-average shares outstanding — Basic and Diluted (1)
99,097,121  99,026,440  99,068,356  98,799,334 
Net loss per common share attributable to common stockholders — Basic and Diluted (1)
$ (0.42) $ (0.11) $ (0.71) $ (0.59)
_____
(1) Retroactively adjusted for the effects of the Stock Dividends (see Note 1).

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

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)


Nine Months Ended September 30, 2021
Preferred Stock Common Stock Accumulated Other Comprehensive Loss
Number of
Shares
Par Value Number of
Shares 		Par Value Additional
Paid-in
Capital 		Distributions in excess of accumulated earnings Total Stockholders Equity Non-controlling Interests Total Equity
Balance, December 31, 2020 1,610,000  16  93,775,746  $ 938  $ 2,104,261  $ (39,673) $ (1,108,557) $ 956,985  $ 4,387  $ 961,372 
Issuance of Preferred Stock, net
2,367,144  24  —  —  56,265  —  —  56,289  —  56,289 
Share-based compensation, net
—  —  —  —  996  —  —  996  —  996 
Distributions declared in common stock, $0.63 per share
—  —  4,071,567  40  60,581  —  (60,621) —  —  — 
Distributions declared on preferred stock, $1.38 per share
—  —  —  —  —  —  (4,402) (4,402) —  (4,402)
Distributions to non-controlling interest holders
—  —  —  —  —  —  —  —  (46) (46)
Issuance of Preferred OP Units —  —  —  —  —  —  —  —  2,578  2,578 
Net loss
—  —  —  —  —  —  (65,781) (65,781) (229) (66,010)
Unrealized gain on designated derivatives —  —  —  —  —  17,190  —  17,190  —  17,190 
Rebalancing of ownership percentage
—  —  —  —  (80) 5  —  (75) 75  — 
Balance, September 30, 2021 3,977,144  $ 40  97,847,313  $ 978  $ 2,222,023  $ (22,478) $ (1,239,361) $ 961,202  $ 6,765  $ 967,967 

Three Months Ended September 30, 2021
Preferred Stock Common Stock Accumulated Other Comprehensive Loss
Number of
Shares
Par Value Number of
Shares 		Par Value Additional
Paid-in
Capital 		Distributions in excess of accumulated earnings Total Stockholders Equity Non-controlling Interests Total Equity
Balance, June 30, 2021 3,962,144  40  96,434,080  $ 964  $ 2,201,383  $ (25,621) $ (1,176,900) $ 999,866  $ 4,351  $ 1,004,217 
Issuance of Preferred Stock, net
15,000  —  —  —  45  —  —  45  —  45 
Share-based compensation, net
—  —  —  —  334  —  —  334  —  334 
Distributions declared in common stock, $0.21 per share
—  —  1,413,233  14  20,479  —  (20,493) —  —  — 
Distributions declared on preferred stock, $0.46 per share
—  —  —  —  —  —  (1,834) (1,834) —  (1,834)
Distributions to non-controlling interest holders
—  —  —  —  —  —  —  —  (46) (46)
Issuance of Preferred OP Units —  —  —  —  —  —  —  —  2,578  2,578 
Net loss
—  —  —  —  —  —  (40,134) (40,134) (331) (40,465)
Unrealized gain on designated derivatives —  —  —  —  —  3,138  —  3,138  —  3,138 
Rebalancing of ownership percentage
—  —  —  —  (218) 5  —  (213) 213  — 
Balance, September 30, 2021 3,977,144  $ 40  97,847,313  $ 978  $ 2,222,023  $ (22,478) $ (1,239,361) $ 961,202  $ 6,765  $ 967,967 
______

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share data)
(Unaudited)


Nine Months Ended September 30, 2020
Preferred Stock Common Stock Accumulated Other Comprehensive Loss
Number of
Shares 		Par Value Number of
Shares 		Par Value Additional
Paid-in
Capital 		Distributions in Excess of Accumulated Earnings Total Stockholders Equity Non-controlling Interests Total Equity
Balance, December 31, 2019 1,610,000  $ 16  92,356,664  $ 923  $ 2,078,628  $ (7,043) $ (971,190) $ 1,101,334  $ 5,410  $ 1,106,744 
Issuance of Preferred Stock, net —  —  —  —  (191) —  —  (191) —  (191)
Common stock issued through distribution reinvestment plan —  —  875,896  9  14,595  —  —  14,604  —  14,604 
Common stock repurchases —  —  (705,101) (7) (10,539) —  —  (10,546) —  (10,546)
Share-based compensation, net —  —  —  —  1,011  —  —  1,011  —  1,011 
Distributions declared in cash on common stock, $0.42 per share
—  —  —  —  —  —  (39,269) (39,269) —  (39,269)
Distributions declared on preferred stock, $1.38 per share
—  —  —  —  —  —  (2,224) (2,224) —  (2,224)
Distributions to non-controlling interest holders —  —  —  —  —  —  —  —  (201) (201)
Net loss —  —  —  —  —  —  (55,831) (55,831) 223  (55,608)
Unrealized loss on designated derivatives —  —  —  —  —  (37,336) —  (37,336) —  (37,336)
Rebalancing of ownership percentage —  —  —  —  321  561  —  882  (882) — 
Balance, September 30, 2020 1,610,000  $ 16  92,527,459  $ 925  $ 2,083,825  $ (43,818) $ (1,068,514) $ 972,434  $ 4,550  $ 976,984 
Three Months Ended September 30, 2020
Preferred Stock Common Stock Accumulated Other Comprehensive Loss
Number of
Shares 		Par Value Number of
Shares 		Par Value Additional
Paid-in
Capital 		Distributions in Excess of Accumulated Earnings Total Stockholders Equity Non-controlling Interests Total Equity
Balance, June 30, 2020 1,610,000  $ 16  92,398,190  $ 924  $ 2,081,074  $ (46,489) $ (1,058,014) $ 977,511  $ 4,795  $ 982,306 
Issuance of Preferred Stock, net —  —  —  —  175  —  —  175  —  175 
Common stock issued through distribution reinvestment plan
—  —  129,269  1  2,014  —  —  2,015  —  2,015 
Share-based compensation, net
—  —  —  —  335  —  —  335  —  335 
Distributions declared on preferred stock, $0.46 per share
—  —  —  —  —  —  (732) (732) —  (732)
Distributions to non-controlling interest holders
—  —  —  —  —  —  —  —  (28) (28)
Net loss —  —  —  —  —  —  (9,768) (9,768) 397  (9,371)
Unrealized loss on designated derivatives —  —  —  —  —  2,284  —  2,284  —  2,284 
Rebalancing of ownership percentage —  —  —  —  227  387  —  614  (614) — 
Balance, September 30, 2020 1,610,000  $ 16  92,527,459  $ 925  $ 2,083,825  $ (43,818) $ (1,068,514) $ 972,434  $ 4,550  $ 976,984 
______

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2021 2020
Cash flows from operating activities:  
Net loss $ (66,010) $ (55,608)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 59,390  60,589 
Amortization of deferred financing costs 3,221  3,255 
Amortization of terminated swap 634  633 
Amortization of mortgage premiums and discounts, net 42  45 
Accretion of market lease and other intangibles, net (100) (111)
Bad debt expense 655  2,365 
Equity-based compensation 996  1,011 
Gain on sale of real estate investments, net (2,284) (2,306)
Loss on non-designated derivative instruments 32  45 
Impairment charges 33,601  32,842 
Changes in assets and liabilities:
Straight-line rent receivable (669) (2,289)
Prepaid expenses and other assets (165) (3,117)
Accounts payable, accrued expenses and other liabilities (2,840) 6,343 
Deferred rent (499) (1,914)
Net cash provided by operating activities 26,004  41,783 
Cash flows from investing activities:
Property acquisitions and development costs (146,146) (90,985)
Capital expenditures and other assets acquired (11,501) (17,629)
Deposits for real estate investments —  (1,480)
Proceeds from sales of real estate investments 94,461  8,294 
Net cash used in investing activities (63,186) (101,800)
Cash flows from financing activities:
Payments on credit facilities (174,074) — 
Proceeds from credit facilities 125,000  95,000 
Payments on mortgage notes payable (942) (672)
Payments for derivative instruments (85) (34)
Payments of deferred financing costs (173) (2,461)
Proceeds from sale of preferred stock, net 56,901  — 
Preferred stock issuance costs (615) (366)
Common stock repurchases —  (10,539)
Distributions paid on common stock —  (31,354)
Dividends paid on preferred stock (3,311) (1,657)
Distributions to non-controlling interest holders —  (201)
Net cash provided by financing activities 2,701  47,716 
Net change in cash, cash equivalents and restricted cash (34,481) (12,301)
Cash, cash equivalents and restricted cash, beginning of period 90,346  111,599 
Cash, cash equivalents and restricted cash, end of period $ 55,865  $ 99,298 
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2021 2020
Cash, cash equivalents, end of period $ 29,784  $ 82,233 
Restricted cash, end of period 26,081  17,065 
Cash, cash equivalents and restricted cash, end of period $ 55,865  $ 99,298 
Supplemental disclosures of cash flow information:
Cash paid for interest $ 32,490  $ 34,173 
Cash paid for income taxes 311  315 
Non-cash investing and financing activities:
Common stock issued through stock dividends $ 60,621  $ — 
Common stock issued through distribution reinvestment plan
$ —  $ 14,604 
Mortgage assumed in acquisition (See Note 3)
$ —  $ 13,883 
Preferred Series A Unit issuance in connection with a property acquisition (See Note 3)
$ 2,578  $ — 

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)

Note 1 — Organization
Healthcare Trust, Inc. (including, as required by context, Healthcare Trust Operating Partnership, L.P. (the “OP”) and its subsidiaries, the “Company”), is an externally managed real estate investment trust for U.S. federal income tax purposes (“REIT”) that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate, focused on medical office buildings (“MOBs”), healthcare properties leased on a triple-net basis (“NNN properties”) and senior housing operating properties (“SHOPs”). As of September 30, 2021, the Company owned 201 properties located in 33 states and comprised of 9.3 million rentable square feet.
Substantially all of the Company’s business is conducted through the OP and its wholly owned subsidiaries. The Company’s advisor, Healthcare Trust Advisors, LLC (the “Advisor”) manages our day-to-day business with the assistance of our 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 us. 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 September 30, 2021, the Company owned 54 seniors housing properties under the REIT Investment Diversification and Empowerment Act (“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.
Since October 2020, the Company has declared and paid quarterly dividends solely in shares of its common stock during the periods described in more detail below (the “Stock Dividends”). Stock Dividends paid in October 2020 and January 2021 were equal to 0.01349 shares of common stock on each share of outstanding common stock. The Stock Dividends paid in April 2021, July 2021 and October 2021 were equal to 0.014655 shares of common stock on each share of outstanding common stock. Dividends payable entirely in shares of common stock are treated in a fashion similar to a stock split for accounting purposes specifically related to per-share calculations for the current and prior periods. The Company has issued an aggregate of 6,754,203 shares in respect to the Stock Dividends. No other additional shares of common stock were issued during the three and nine months ended September 30, 2021. References made to weighted-average shares and per-share amounts in the accompanying consolidated statements of operations and comprehensive income have been retroactively adjusted to reflect the increase of 0.07299 shares for every share outstanding resulting from the Stock Dividends, and are noted as such throughout the accompanying financial statements and notes.
On April 1, 2021, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2020. The Company’s previous Estimated Per-Share NAV was as of December 31, 2019. The Estimated Per-Share NAV published on April 1, 2021 reflects the October 2020 Stock Dividend the Company issued and took into consideration the January 2021 Stock Dividend the Company issued but has not been adjusted to reflect the April 2021, July 2021 and October 2021 Stock Dividends the Company issued and will not be adjusted for any Stock Dividends the Company issues in the future until the board of directors (the “Board”) determines a new Estimated Per-Share NAV. Issuing dividends in additional shares of common stock will, all things equal, cause the value of each share to decline because the number of shares outstanding increases when shares of common stock are issued in respect of a stock dividend; however, because each stockholder will receive the same number of new shares, the total value of a common stockholder’s investment, all things equal, will not change assuming no sales or other transfers. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually.
Note 2 — Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to this Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results for the interim periods. The results of operations for the three and nine months ended September 30, 2021 and 2020 are not necessarily indicative of the results for the entire year or any subsequent interim periods.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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, 2020, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2021. 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 nine months ended September 30, 2021.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity (“VIE”) for which the Company is the primary beneficiary. The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company’s assets and liabilities are held by the OP.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, impairments, fair value measurements and income taxes, as applicable.
Impacts of the COVID-19 Pandemic
During the first quarter of 2020, the global COVID-19 pandemic that has spread around the world and to every state in the United States commenced. The pandemic has had and could continue to have an adverse impact on economic and market conditions, including a global economic slowdown and recession that may continue for some time. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of September 30, 2021, however uncertainty over the ultimate impact COVID-19 will continue to have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of September 30, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.
Starting in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect the Company in a number of ways. In the Company’s SHOP portfolio, occupancy had trended lower since March 2020 and the declines only recently began to level off in June 2021. Government policies and implementation of infection control best practices materially limited or closed communities to new resident move-ins which has affected the Company’s ability to fill vacancies. The Company has also experienced lower inquiry volumes and reduced in-person tours during the pandemic. In addition, starting in mid-March 2020, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as the Company’s operators took appropriate actions to protect residents and caregivers. At the SHOP facilities, the Company bears these cost increases. These trends accelerated beginning in the second quarter of 2020, and continued into 2021. There can be no assurance, however, that future developments in the course of the pandemic will not cause further 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 the Company’s revenues and income in the other quarters.
The financial stability and overall health of the Company’s tenants is critical to its business. The negative effects that the global pandemic has had on the economy includes the closure or reduction in occupancy activity at some of the Company’s MOBs and other healthcare-related facilities as well as restrictions on activity and access for many of the Company’s seniors housing properties. The economic impact of the pandemic has impacted the ability of some of the Company’s tenants to pay their monthly rent either temporarily or in the long term. The Company experienced delays in rent collections in the second, third and fourth quarters of 2020, although collections have been approximately 100% of original cash rent for the MOB and NNN segments throughout the nine months ended September 30, 2021. The Company has taken a proactive approach to achieve mutually agreeable solutions with its tenants and in some cases, during the year ended December 31, 2020, the Company executed lease amendments providing for deferral of rent. During the nine months ended September 30, 2021, the Company did not enter into any rent deferral agreements with any of its tenants, and all amounts previously deferred under prior rent deferral agreements have been collected.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
For accounting purposes, in accordance with ASC 842: Leases, normally a company would be required to assess a lease modification to determine if the lease modification should be treated as a separate lease and if not, modification accounting would be applied which would require a company to reassess the classification of the lease (including leases for which the prior classification under ASC 840 was retained as part of the election to apply the package of practical expedients allowed upon the adoption of ASC 842, which doesn’t apply to leases subsequently modified). However, in light of the COVID-19 pandemic in which many leases are being modified, the FASB and SEC have provided relief that allows companies to make a policy election as to whether they treat COVID-19 related lease amendments as a provision included in the pre-concession arrangement, and therefore, not a lease modification, or to treat the lease amendment as a modification. In order to be considered COVID-19 related, cash flows must be substantially the same or less than those prior to the concession. For COVID-19 relief qualified changes, there are two methods to potentially account for such rent deferrals or abatements under the relief, (1) as if the changes were originally contemplated in the lease contract or (2) as if the deferred payments are variable lease payments contained in the lease contract.
For all other lease changes that did not qualify for FASB relief, the Company is required to apply modification accounting including assessing classification under ASC 842. Some, but not all of the Company’s lease modifications qualify for the FASB relief. In accordance with the relief provisions, instead of treating these qualifying leases as modifications, the Company has elected to treat the modifications as if previously contained in the lease and recast rents receivable prospectively (if necessary). Under that accounting, for modifications that were deferrals only, there would be no impact on overall rental revenue and for any abatement amounts that reduced total rent to be received, the impact would be recognized ratably over the remaining life of the lease. For leases not qualifying for this relief, the Company has applied modification accounting and determined that there were no changes in the current classification of its leases impacted by negotiations with its tenants.
Revenue Recognition
The Company’s revenues, which are derived primarily from lease contracts, include rent received from tenants in MOBs and triple-net leased healthcare facilities. As of September 30, 2021, these leases had a weighted average remaining lease term of 5.0 years. Rent from tenants in the Company’s MOB and triple-net leased healthcare facilities operating segments is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease. Because many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable for, and include in revenue from tenants on a straight-line basis, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation. For new leases after acquisition, the commencement date is considered to be the date the tenant takes control of the space. For lease modifications, the commencement date is considered to be the date the lease modification is executed. The Company defers the revenue related to lease payments received from tenants in advance of their due dates. Pursuant to certain of the Company’s lease agreements, tenants are required to reimburse the Company for certain property operating expenses, in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties. Under ASC 842, the Company has elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For expenses paid directly by the tenant, under the Company reflects them on a net basis.
The Company’s revenues also include resident services and fee income primarily related to rent derived from lease contracts with residents in the Company’s SHOPs held using a structure permitted under the REIT Investment and Diversification and Empowerment Act of 2007 and to fees for ancillary services performed for SHOP residents, which are generally variable in nature. Rental income from residents in the Company’s SHOP segment is recognized as earned when services are provided. Residents pay monthly rent that covers occupancy of their unit and basic services, including utilities, meals and some housekeeping services. The terms of the leases are short term in nature, primarily month-to-month. Also included in revenue from tenants is fees for ancillary revenue from non-residents of $2.7 million and $10.0 million, for the nine months ended September 30, 2021 and 2020, respectively. Included in these amounts during the nine months ended September 30, 2021 and 2020 are $1.6 million and $7.8 million, respectively, which represent fees for ancillary services generated at the Company’s properties in Lutz, Florida, and Wellington, Florida. These properties were sold in December 2020 and May 2021, respectively. Fees for ancillary services are recorded in the period in which the services are performed.
The Company defers the revenue related to lease payments received from tenants and residents in advance of their due dates. Pursuant to certain of the Company’s lease agreements, tenants are required to reimburse the Company for certain property operating expenses related to non-SHOP assets (recorded in revenue from tenants), in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The following table presents future base rent payments on a cash basis due to the Company over the periods indicated over the next five years and thereafter. These amounts exclude tenant reimbursements and contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes, among other items. These amounts also exclude SHOP leases which are short term in nature.
As of September 30, 2021:
(In thousands) Future 
Base Rent Payments
2021 (remainder) $ 26,811 
2022 104,418 
2023 92,746 
2024 84,584 
2025 74,035 
Thereafter 280,006 
Total $ 662,600 
The Company continually reviews receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Under the leasing standards, the Company is required to assess, based on credit risk only, if it is probable that the Company will collect virtually all of the lease payments at lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant. Partial reserves, or the ability to assume partial recovery are no longer permitted. If the Company determines that it is probable it will collect virtually all of the lease payments (rent and common area maintenance), the lease will continue to be accounted for on an accrual basis (i.e., straight-line). However, if the Company determines it is not probable that it will collect virtually all of the lease payments, the lease will be accounted for on a cash basis and a full reserve would be recorded on previously accrued amounts in cases where it was subsequently concluded that collection was not probable. Cost recoveries from tenants are included in operating revenue from tenants in accordance with new accounting rules, on the accompanying consolidated statements of operations and comprehensive income (loss) in the period the related costs are incurred, as applicable.
The Company recorded a reduction of revenue of $0.4 million for uncollectable amounts for the three months ended September 30, 2021. During the nine months ended September 30, 2021 the Company recorded a reduction of revenue of $0.7 million for uncollectable amounts. During the three and nine months ended September 30, 2020, the Company recorded a reduction of revenue of $1.0 million and $2.4 million for uncollectable amounts, respectively.
Investments in Real Estate
Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life or improve the productive capacity of the asset. Costs of repairs and maintenance are expensed as incurred.
At the time an asset is acquired, the Company evaluates the inputs, processes and outputs of the asset acquired to determine if the transaction is a business combination or asset acquisition. If an acquisition qualifies as a business combination, the related transaction costs are recorded as an expense in the consolidated statements of operations and comprehensive loss. If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets. See the “Purchase Price Allocation” section in this Note for a discussion of the initial accounting for investments in real estate.
Disposal of real estate investments that represent a strategic shift in operations that will have a major effect on the Company's operations and financial results are required to be presented as discontinued operations in the consolidated statements of operations. No properties were presented as discontinued operations during the quarters ended September 30, 2021 and 2020. 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. The Company evaluates probability of sale based on specific facts including whether a sales agreement is in place and the buyer has made significant non-refundable deposits. Properties are no longer depreciated when they are classified as held for sale. There were no real estate investments held for
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
sale as of September 30, 2021. There were $0.1 million real estate investments held for sale as of December 31, 2020. (see Note 3 — Real Estate Investments, Net for additional information).
In accordance with the lease accounting standard, all of the Company’s leases as lessor prior to adoption were accounted for as operating leases. The Company evaluates new leases originated after the adoption date (by the Company or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than major part of remaining economic useful life of the asset (e.g., equal to or greater than 75%), if the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or if the asset so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor. For the nine months ended September 30, 2021 and the three-year period ended December 31, 2020, the Company has no leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.
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 sheet as of September 30, 2021 and December 31, 2020, 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 and nine months ended September 30, 2021 and 2020.
The Company generally determines the value of construction in progress based upon the replacement cost. During the construction period, the Company capitalizes interest, insurance and real estate taxes until the development has reached substantial completion.
Purchase Price Allocation
In both a business combination and an asset acquisition, the Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets or liabilities based on their respective fair values. Tangible assets may include land, land improvements, buildings, fixtures and tenant improvements on an as if vacant basis. Intangible assets may include the value of in-place leases and above- and below-market leases and other identifiable assets or liabilities based on lease or property specific characteristics. In addition, any assumed mortgages receivable or payable and any assumed or issued non-controlling interests (in a business combination) are recorded at their estimated fair values. In allocating the fair value to assumed mortgages, amounts are recorded to debt premiums or discounts based on the present value of the estimated cash flows, which is calculated to account for either above or below-market interest rates. In allocating the fair value to any assumed or issued non-controlling interests, amounts are recorded at their fair value at the close of business on the acquisition date. In a business combination, the difference between the purchase price and the fair value of identifiable net assets acquired is either recorded as goodwill or as a bargain purchase gain. 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 nine months ended September 30, 2021 and 2020 were asset acquisitions.
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. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of the Company’s pre-acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. The Company estimates the fair value using data from appraisals, comparable sales, discounted cash flow analysis and other methods. Fair value estimates are also made using significant assumptions such as capitalization rates, fair market lease rates, discount rates and land values per square foot.
Identifiable intangible assets include amounts allocated to acquired leases for above- and below-market lease rates and the value of in-place leases. Factors considered in the analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at contract rates during the expected lease-up period, which typically ranges from six to 24 months. The Company also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases.
The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on the Company’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth 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 nine months ended September 30, 2021 or 2020.
Impairment of Long-Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the property for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If an impairment exists, due to the inability to recover the carrying value of a property, the Company would recognize an impairment loss in the consolidated statement of operations and comprehensive income to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net earnings.
Depreciation and Amortization
Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, 7 to 10 years for fixtures and improvements, and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.
Construction in progress, including capitalized interest, insurance and real estate taxes, is not depreciated until the development has reached substantial completion. The value of certain other intangibles such as certificates of need in certain jurisdictions are amortized over the expected period of benefit (generally the life of the related building).
The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to expense over the remaining periods of the respective leases.
The value of customer relationship intangibles, if any, is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.
Assumed mortgage premiums or discounts are amortized as an increase or reduction to interest expense over the remaining terms of the respective mortgages.
Income Taxes
The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986 (the “Code”), as amended, commencing with the taxable year ended December 31, 2013. If the Company continues to qualify for taxation as a REIT, it generally will not be subject to U.S. federal corporate income tax to the extent it distributes all of its REIT taxable income (which does not equal net income as calculated in accordance with GAAP) to its stockholders. REITs are subject to a number of organizational and operational requirements, including a requirement that the Company distribute annually at least 90% of the Company’s REIT taxable income to the Company’s stockholders.
If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal, state and local income taxes at regular corporate rates beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. The Company distributed to its stockholders 100% of its REIT taxable income for each of the years ended December 31, 2020, 2019 and 2018. Accordingly, no provision for U.S. federal or state income taxes related to such REIT taxable income was recorded in the Company’s financial statements. Even if the Company continues to qualify as a REIT, it may be subject to certain state and local taxes on its income and property, and U.S. federal income and excise taxes on its undistributed income.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Certain limitations are imposed on REITs with respect to the ownership and operation of seniors housing properties. Generally, to qualify as a REIT, the Company cannot directly or indirectly operate seniors housing properties. Instead, such facilities may be either leased to a third-party operator or leased to a TRS and operated by a third party on behalf of the TRS. Accordingly, 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 September 30, 2021, the Company owned 54 seniors housing properties which are leased and operated through its TRS. The TRS is a wholly-owned subsidiary of the OP. A TRS is subject to U.S. federal, state and local income taxes. The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies (including modifying intercompany leases with the TRS) and recent financial operations. In the event the Company determines that it would not be able to realize the deferred income tax assets in the future in excess of the net recorded amount, the Company establishes a valuation allowance which offsets the previously recognized income tax asset. 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.
Because of the TRS's recent operating history of losses and the on-going impacts of 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 $3.6 million as of September 30, 2021. 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 income (loss). As of December 31, 2020, the Company had a deferred tax asset of $4.6 million with a full valuation allowance.
Accounting for Leases
Lessor Accounting
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 expenses) as a single lease component as an operating lease because (a) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (b) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under the accounting guidance. Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed.
Lessee Accounting
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. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction. For additional information and disclosures related to the Company’s operating leases, see Note 16 — Commitments and Contingencies.
CARES Act Grants
On March 27, 2020, Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law and provides funding to Medicare providers in order to provide financial relief during the COVID-19 pandemic. Funds provided under the program were to be used for the preparation, prevention, and medical response to COVID-19, and were designated to reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19. The Company did not receive any funding from the CARES Act during the three months ended September 30, 2021. During the nine months ended September 30, 2021, the Company received $5.1 million in funding from CARES Act grants. Previously, the Company received $3.6 million in grants during the year ended December 31, 2020, $0.5 million and $3.6 million of which was received in the three and nine months ended September 30, 2020, respectively. Subsequent to September 30, 2021, the Company applied for additional relief funds under the CARES Act, however, there can be no assurance that any funds requested will actually be received.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The CARES Act grants are considered to be a grant contribution from the government. The full amounts received were recognized as a reduction of property operating expenses in the Company’s consolidated statement of operations to offset the negative impacts of COVID-19. There can be no assurance that the program will be extended or if any additional amounts will be received.
Recently Issued Accounting Pronouncements
Adopted as of January 1, 2020:
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to the financial statements by removing, modifying, and adding certain fair value disclosure requirements to facilitate clear communication of the information required by generally accepted accounting principles. The amended guidance is effective for the Company beginning on January 1, 2020. The Company adopted the new guidance on January 1, 2020 and determined it did not have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how entities measure credit losses for financial assets carried at amortized cost. The update eliminates the requirement that a credit loss must be probable before it can be recognized and instead requires an entity to recognize the current estimate of all expected credit losses. Additionally, the amended standard requires credit losses on available-for-sale debt securities to be carried as an allowance rather than as a direct write-down of the asset. On July 25, 2018, the FASB proposed an amendment to ASU 2016-13 to clarify that operating lease receivables recorded by lessors (including unbilled straight-line rent) are explicitly excluded from the scope of ASU 2016-13. The new guidance is effective for the Company beginning on January 1, 2020. The Company adopted the new guidance on January 1, 2020 and determined it did not have a material impact on its consolidated financial statements.
Not yet Adopted as of September 30, 2021
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Topic 815). The new standard reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and amends the guidance for the derivatives scope exception for contracts in an entity's own equity. The standard also amends and makes targeted improvements to the related earnings per share guidance. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The standard allows for either modified or full retrospective transition methods. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period March 12, 2020 through December 31, 2022 as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to (i) the assertion that our hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of our derivatives, which will be consistent with our past presentation. The Company will continue to evaluate the impact of the guidance and may apply other elections, as applicable, as additional changes in the market occur.
Note 3 — Real Estate Investments, Net
Property Acquisitions
The Company invests in MOBs, seniors housing properties and other healthcare-related facilities primarily to expand and diversify its portfolio and revenue base. The Company owned 201 properties as of September 30, 2021. During the nine months ended September 30, 2021, the Company, through wholly owned subsidiaries of the OP, completed the acquisition of eight multi-tenant MOBs and six single-tenant MOBs for an aggregate contract purchase price of $147.4 million. All acquisitions in the nine months ended September 30, 2021 and 2020 were considered asset acquisitions for accounting purposes.
The following table presents the allocation of real estate assets acquired and liabilities assumed during the nine months ended September 30, 2021 and 2020:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Nine Months Ended September 30,
(In thousands) 2021 2020
Real estate investments, at cost:
Land $ 9,131  $ 6,900 
Buildings, fixtures and improvements 113,244  86,687 
Total tangible assets 122,375  93,587 
Acquired intangibles:
In-place leases and other intangible assets (1)
26,811  9,385 
Market lease and other intangible assets (1)
554  472 
Market lease liabilities (1)
(1,016) (362)
Total intangible assets and liabilities 26,349  9,495 
Mortgage notes payable, net
—  (13,883)
Other assets acquired and liabilities assumed in the Asset Acquisition, net —  1,786 
Issuance of Preferred OP Units (2)
(2,578) — 
Cash paid for real estate investments, including acquisitions $ 146,146  $ 90,985 
Number of properties purchased 14  8 
______
(1)Weighted-average remaining amortization periods for in-place leases, above-market leases and below-market leases acquired during the nine months ended September 30, 2021 were 11.5 years, 7.5 years and 3.7 years, respectively, as of each property’s acquisition date.
(2)See Note 8—Stockholder’s Equity for additional information.
Significant Tenants
As of September 30, 2021 and 2020, 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 September 30, 2021 and 2020:
September 30,
State 2021 2020
Florida (1)
12.0% 22.3%
Michigan (2)
* 10.4%
Pennsylvania 11.8% *
_________
* State’s annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income for all portfolio properties as of the date specified.
(1) In May 2021, the Company’s skilled nursing facility in Wellington, Florida, and the Company’s development property in Jupiter, Florida were sold. In December 2020, the Company’s skilled nursing facility in Lutz, Florida was sold.
(2) During the year ended December 31, 2020, the Company sold 11 SHOPs located in Michigan, seven of which were transferred to the buyer during the fourth quarter of 2020 and the remaining four of which were transferred to the buyer during the first quarter of 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Intangible Assets and Liabilities
The following table discloses amounts recognized within the consolidated statements of operations and comprehensive loss related to amortization of in-place leases and other intangible assets, amortization and accretion of above-and below-market lease assets and liabilities, net and the amortization and accretion of above-and below-market ground leases, for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2021 2020 2021 2020
Amortization of in-place leases and other intangible assets (1)
$ 3,804  $ 3,637  $ 11,114  $ 11,176 
Accretion of above-and below-market leases, net (2)
$ (117) $ (33) $ (269) $ (250)
Amortization of above-and below-market ground leases, net (3)
$ 53  $ 40  $ 161  $ 119 
________
(1)     Reflected within depreciation and amortization expense.
(2)     Reflected within rental income.
(3)     Reflected within property operating and maintenance expense.
The following table provides the projected amortization expense and adjustments to revenues for the next five years:
(In thousands) 2021 (remainder) 2022 2023 2024 2025
In-place lease assets $ 3,966  $ 14,794  $ 12,676  $ 10,755  $ 9,167 
Other intangible assets 3  10  10  10  10 
Total to be added to amortization expense $ 3,969  $ 14,804  $ 12,686  $ 10,765  $ 9,177 
Above-market lease assets $ (251) $ (807) $ (453) $ (375) $ (321)
Below-market lease liabilities 397  1,600  1,487  1,269  1,077 
Total to be added to revenue from tenants
$ 146  $ 793  $ 1,034  $ 894  $ 756 
Dispositions
During the second quarter of 2021, the Company sold its skilled nursing facility in Wellington, Florida and its development property in Jupiter, Florida, which resulted in gains on sale of $0.1 million and $2.4 million, respectively. These gains are included in the consolidated statement of operations for the nine months ended September 30, 2021.
During the first quarter of 2021, the Company transferred four SHOP properties located in Michigan to the buyer at a second closing, and $0.8 million held in escrow was released to the buyer. This amount had been placed in escrow at the first closing of the transaction during the year ended December 31, 2020 when the purchase price for all 11 properties sold in the transaction was received from the buyer. The Company recorded a loss on sale of $0.2 million related to this transaction in the nine months ended September 30, 2021.
During the first quarter of 2020 the Company sold one MOB property which resulted in a gain on sale of $2.3 million. This property sold for a contract price of $8.6 million. This gain is included on the consolidated statement of operations for the nine months ended September 30, 2020.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Impairments
The following table presents impairments recorded during the three months ended September 30, 2021 and 2020.
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2021 2020 2021 2020
Assets held for sale $ —  $ 1,011  $ —  $ 19,049 
Assets held for use 26,642  —  33,601  13,793 
Total $ 26,642  $ 1,011  $ 33,601  $ 32,842 
For additional information on impairments related to assets held for sale and assets held for use, see the “Assets Held for Sale and Related Impairments” and “Assets Held for Use and Related Impairments” sections below.
Assets Held for Sale and Related Impairments
When assets are identified by management as held for sale, the Company reflects them separately on its balance sheet and stops recognizing depreciation and amortization expense on the identified assets and estimates the sales price, net of costs to sell, of those assets. If the carrying amount of the assets classified as held for sale exceeds the estimated net sales price, the Company records an impairment charge equal to the amount by which the carrying amount of the assets exceeds the Company’s estimate of the net sales price of the assets. For held-for-sale properties, the Company predominately uses the contract sale price as fair market value.
Balance Sheet Details - Assets Held for Sale
The following table details the major classes of assets associated with the properties that are classified as held for sale as of December 31, 2020:
(In thousands) December 31, 2020
   Land $ 145 
   Buildings, fixtures and improvements (55)
Assets held for sale $ 90 

There were no assets held for sale as of September 30, 2021.
During the year ended December 31, 2020, the Company sold 11 SHOPs located in Michigan, seven of which were transferred to the buyer during the fourth quarter of 2020 and the remaining four of which were transferred to the buyer in the first quarter of 2021. These four properties were included in assets held for sale as of December 31, 2020.
Held for Sale Impairments - 2020
The impairments related to assets held for sale in the three and nine months ended September 30, 2020 related to an amendment to the purchase and sale agreement for the Company’s properties in Michigan which changed the properties being sold and the sales price.
Assets Held for Use and Related Impairments
When circumstances indicate the carrying value of a property classified as held for use may not be recoverable, the Company reviews the property for impairment. For the Company, the most common triggering events are (i) concerns regarding the tenant (i.e., credit or expirations) in the Company’s single tenant properties or significant vacancy in the Company’s multi-tenant properties and (ii) changes to the Company’s expected holding period as a result of business decisions or non-recourse debt maturities. If a triggering event is identified, the Company considers the projected cash flows due to various performance indicators, and where appropriate, the Company evaluates the impact on its ability to recover the carrying value of the properties based on the expected cash flows on an undiscounted basis over its intended holding period. The Company makes certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessments of terminal values. Where more than one possible scenario exists, the Company uses a probability weighted approach in estimating cash flows. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses for impairment may be realized in the future. If the undiscounted
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September 30, 2021
(Unaudited)
cash flows over the expected hold period are less than the carrying value, the Company reflects an impairment charge to write the asset down to its fair value.
The Company owns held for use properties for which the Company may from time to time reconsider the projected cash flows due to various performance indicators, and where appropriate, the Company evaluates the impact on its ability to recover the carrying value of such properties based on the expected cash flows over its intended holding period. The Company makes certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessments of terminal values. Where more than one possible scenario exists, the Company uses a probability weighted approach. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses for impairment may be realized in the future.
As of December 31, 2019, the Company was actively considering plans to sell three assets in Florida including the then recently completed development project in Jupiter, Florida and the Company’s two skilled nursing facilities in Lutz, Florida and Wellington, Florida. The Company began marketing the properties in 2020, and in August 2020, the Company entered into definitive purchase and sale agreements (“PSAs”) to sell the completed development project in Jupiter, Florida for $65.0 million and the Company’s two skilled nursing facilities in Lutz, Florida and Wellington, Florida for $20.0 million and $33.0 million, respectively.
The property in Lutz, Florida was sold in December 2020.
On May 14, 2021, the Company completed the sale of the completed development project in Jupiter, Florida and the skilled nursing facility in Wellington, Florida. In connection with these sales, the Company recognized a gain on these sales of $2.4 million and $0.1 million, respectively, in the second quarter of 2021, which is included in in the consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2021. The Company previously recorded an impairment charge in the first quarter of 2021 on the skilled nursing facility in Wellington, Florida (see below).
Held For Use Impairments - 2021
On April 30, 2021, the Company amended the PSA which reduced the sales price of the skilled nursing facility in Wellington, Florida to $30.7 million. In connection with this amendment to the PSA, the Company determined that the fair value had declined as of March 31, 2021 and the Company recognized an impairment charge of $0.9 million during the first quarter of 2021, which is included in the consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2021.
During the second quarter of 2021, the Company began to actively consider plans to sell a NNN property located in Sun City, Arizona. As a result of changes to the Company’s expected holding period, the Company determined that projected cash flows, on an undiscounted basis over its intended holding period, did not recover the carrying value of the property. During July 2021, the Company entered into a non-binding letter of intent to sell the property and as a result, the Company determined that the fair market value of the property had declined and recorded an impairment charge of $6.1 million during the second quarter of 2021, which is included in the consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2021.
The LaSalle Properties
On July 1, 2020, the Company transitioned four triple-net leased properties in Texas (collectively, the “LaSalle Properties”) from the triple-net leased healthcare facilities segment to the SHOP segment. The LaSalle Properties are now leased to the Company’s TRS and operated and managed on the Company’s behalf by a third-party operator.
During 2019, The LaSalle Group Inc., a guarantor of certain of the lease obligations of prior tenants (collectively, the “LaSalle Tenant”), filed for voluntarily relief under chapter 11 of the United States Bankruptcy Code. The Company has filed proofs of claims related to amounts previously awarded to it from the bankruptcy proceeding, however, the Company has no amounts due from the LaSalle Tenant in its consolidated balance sheets as of September 30, 2021 and December 2020 as the Company does not believe recovery is likely against the LaSalle Tenant.
During the third quarter of 2021, the Company began to actively market the LaSalle Properties for sale. As a result of changes to the Company’s expected holding period, the Company determined that projected cash flows, on an undiscounted basis over its intended holding period, did not recover the carrying value of the properties and concluded that the fair market value of the properties had declined. The fair value measurement was determined by estimated discounted cash flows using three significant unobservable inputs, including the cash flow discount rate, terminal capitalization rate, and the estimated stabilized occupancy range. The Company recorded an impairment charge of $26.6 million during the three months ended September 30, 2021 which is included in the consolidated statement of operations and comprehensive income.
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September 30, 2021
(Unaudited)
While the Company has begun marketing the properties for a potential sale, there can be no assurance these properties will be sold on favorable terms, or at all.
Held For Use Impairments - 2020
During the nine months ended September 30, 2020, the Company recorded an additional impairment charge on the completed development project in Jupiter, Florida of $13.8 million, representing the amount by which the carrying amount of the property exceeded the Company’s estimate of the net sales price as set forth in the PSA.
Note 4 — Mortgage Notes Payable, Net
The following table reflects the Company’s mortgage notes payable as of September 30, 2021 and December 31, 2020:
Outstanding Loan Amount as of
Effective Interest Rate as of
Portfolio
Encumbered Properties (1)
September 30,
2021 		December 31, 2020 September 30,
2021 		December 31, 2020 Interest Rate Maturity
(In thousands) (In thousands)
Palm Valley Medical Plaza - Goodyear, AZ 1 $ 2,908  $ 2,998  4.15  % 4.15  % Fixed Jun. 2023
Medical Center V - Peoria, AZ 1 2,710  2,786  4.75  % 4.75  % Fixed Sep. 2023
Fox Ridge Bryant - Bryant, AR 1 7,017  7,133  3.98  % 3.98  % Fixed May 2047
Fox Ridge Chenal - Little Rock, AR 1 16,120  16,390  2.95  % 3.98  % Fixed May 2049
Fox Ridge North Little Rock - North Little Rock, AR 1 10,002  10,170  2.95  % 3.98  % Fixed May 2049
Capital One MOB Loan 41 378,500  378,500  3.71  % 3.71  % Fixed (3) Dec. 2026
Multi-Property CMBS Loan 21 118,700  118,700  4.60  % 4.60  % Fixed May 2028
Shiloh - Illinois
1 13,461  13,684  4.34  % 4.34  % Fixed March 2026
Gross mortgage notes payable 68 549,418  550,361  3.89  % 3.94  % (2)
Deferred financing costs, net of accumulated amortization (4)
(5,414) (6,191)
Mortgage premiums and discounts, net (1,429) (1,472)
Mortgage notes payable, net $ 542,575  $ 542,698 
_____________
(1) Does not include real estate assets mortgaged to secure advances under the Fannie Mae Master Credit Facilities or eligible unencumbered real estate assets comprising the borrowing base of the Credit Facility (as defined below). The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the real estate assets comprising the borrowing base have been pledged for the benefit of the lenders thereunder (see Note 5 — Credit Facilities for additional details).
(2) Calculated on a weighted average basis for all mortgages outstanding as of September 30, 2021 and December 31, 2020. For the LIBOR based loans, LIBOR in effect at the balance sheet date was utilized. For the Capital One MOB Loan, the effective rate does not include the effect of amortizing the amount paid to terminate the previous pay-fixed swap. See Note 7 — Derivatives and Hedging Activities for additional details.
(3) Variable rate loan, based on 30-day LIBOR, which is economically fixed as a result of entering into “pay-fixed” interest rate swap agreements (the Company designates its “pay-fixed” interest rate swaps against all 30-day LIBOR debt, see Note 7 — Derivatives and Hedging Activities for additional details). In connection with the amendment to this loan in December 2019 (see additional details below), the Company terminated the previous interest rate swap agreements and entered into new interest rate swap agreements (see Note 7 — Derivatives and Hedging Activities for additional details).
(4) Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.
As of September 30, 2021, the Company had pledged $0.9 billion in total real estate investments, at cost, as collateral for its $0.5 billion of gross mortgage notes payable. This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable secured by these properties. The Company makes payments of principal and interest, or interest only, depending upon the specific requirements of each mortgage note, on a monthly basis.
Some of the Company’s mortgage note agreements require compliance with certain property-level financial covenants, including debt service coverage ratios. As of September 30, 2021, the Company was in compliance with these financial covenants.
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September 30, 2021
(Unaudited)
See Note 5 — Credit Facilities - Future Principal Payment and LIBOR Transition for schedule of principal payment requirements of the Company’s Mortgage Notes and Credit Facilities and discussion of the expected cessation of LIBOR publication.
Fox Ridge Refinancing
On January 29, 2021, the Company entered into interest rate reduction modifications (the “Fox Ridge Modifications”) for two of its mortgages secured by the Fox Ridge Chenal and Fox Ridge North Little Rock properties which reduced the interest rate on both mortgages. Prior to the Fox Ridge Modifications, the mortgages bore interest at an effective rate of 3.98% per annum which was reduced to an effective rate of 2.95% per annum.
Note 5 — Credit Facilities
    The Company had the following credit facilities outstanding as of September 30, 2021 and December 31, 2020:
Outstanding Facility
Amount as of
Effective Interest Rate (10)
Credit Facility
Encumbered Properties (1)
September 30,
2021 		December 31, 2020 September 30,
2021 		December 31, 2020 Interest Rate Maturity
(In thousands) (In thousands)
Credit Facility:
   Revolving Credit Facility $ 124,600  $ 173,674  3.37  % 3.21  % Variable (8) Mar. 2023 (9)
   Term Loan
150,000  150,000  5.02  % 4.95  % Fixed (6) Mar. 2024
   Deferred financing costs (3,352) (4,298)
   Term Loan, net
146,648  145,702 
Total Credit Facility
100 (2) $ 271,248  $ 319,376 
Fannie Mae Master Credit Facilities:
Capital One Facility
11 (3) $ 212,467  $ 212,467  2.50  % 2.60  % Variable (7) Nov. 2026
KeyBank Facility
10 (4) 142,708  142,708  2.55  % 2.65  % Variable (7) Nov. 2026
Total Fannie Mae Master Credit Facilities
21 $ 355,175  $ 355,175 
Total Credit Facilities 121 $ 626,423  $ 674,551  3.28  % 3.29  % (5)
_______________
(1)Encumbered properties are as of September 30, 2021.
(2)The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Credit Facility (as defined below) have been pledged for the benefit of the lenders thereunder.
(3)Secured by first-priority mortgages on 11 of the Company’s seniors housing properties located in Florida, Georgia, Iowa and Michigan as of September 30, 2021 with a carrying value of $345 million.
(4)Secured by first-priority mortgages on ten of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa as of September 30, 2021 with a carrying value of $254 million.
(5)Calculated on a weighted average basis for all credit facilities outstanding as of September 30, 2021 and December 31, 2020.
(6)Variable rate loan, based on LIBOR, all of which was economically fixed as a result of entering into “pay-fixed” interest rate swap agreements (the Company designates its “pay-fixed” interest rate swaps against all 30-day LIBOR debt, see Note 7 — Derivatives and Hedging Activities for additional details).
(7)Variable rate loan which is capped as a result of entering into interest rate cap agreements (see Note 7 — Derivatives and Hedging Activities for additional details).
(8)Variable rate loan, based on LIBOR, with $50 million of principal amount economically fixed as of September 30, 2021 and December 31, 2020, respectively, as a result of entering into “pay-fixed” interest rate swap agreements (see Note 7 — Derivatives and Hedging Activities for additional details).
(9)The company has the option to extend maturity one year to March 2024 subject to certain conditions.
(10)Effective interest rate below for variable rate debt gives effect to any “Pay-fixed” swap entered into by the Company. If not hedged, the effective interest rate below represents the variable rate (or contractual floor if appropriate) and the applicable margin in effect as of the March 31, 2020. Interest rate caps are not considered unless the cap is currently in effect.
As of September 30, 2021, the carrying value of our real estate investments at cost was $2.6 billion, with $0.9 billion of this asset value pledged as collateral for mortgage notes payable, $0.6 billion of this asset value pledged to secure advances
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September 30, 2021
(Unaudited)
under the Fannie Mae Master Credit Facilities and $1.0 billion of this asset value comprising the borrowing base of the Credit Facility. These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, unless, as applicable, the existing indebtedness associated with the property is satisfied or the property is removed from the borrowing base of the Credit Facility, which would impact availability thereunder
Unencumbered real estate investments, at cost as of September 30, 2021 was $0.1 billion, 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 mortgage loans or adding them to the borrowing base of the Company’s Credit Facility.
Credit Facility
On March 13, 2019, the Company entered into an amended and restated senior secured credit facility (the “Credit Facility”), which consists of two components, a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”). In both March and August 2020, the Credit Facility was further amended, and the terms of the Credit Facility giving effect to those amendments are generally described below.
The Revolving Credit Facility is interest-only and matures on March 13, 2023, subject to a one-year extension at the Company’s option. The Term Loan is interest-only and matures on March 13, 2024. The total commitments under the Credit Facility are $630.0 million, including $480.0 million under the Revolving Credit Facility. The Credit Facility includes an uncommitted “accordion feature” that may be used to increase the commitments under either component of the Credit Facility by up to an additional $370.0 million to a total of $1.0 billion.
The amount available for future borrowings under the Credit Facility is based on either the value of the pool of eligible unencumbered real estate assets comprising the borrowing base, or a minimum debt service coverage ratio with respect to the borrowing base. The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility have been pledged for the benefit of the lenders thereunder.
As of September 30, 2021, $150.0 million was outstanding under the Term Loan, and $124.6 million was outstanding under the Revolving Credit Facility. The unused borrowing availability under the Revolving Credit Facility was $166.5 million.
The Company is required to maintain a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $50.0 million. Pursuant to the terms of the Company’s amended Credit Facility certain other restrictions and conditions described below will no longer apply starting in a quarter in which the Company makes an election and, as of the day prior to the commencement of the applicable quarter, the Company has a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by the Company during the applicable quarter, and the Company’s ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5% and, as added by the third amendment, the Covenant Relief Period (as defined below) has terminated (the “Commencement Quarter”). The fiscal quarter ended June 30, 2021 was the first quarter that could have been the Commencement Quarter. The Company satisfied the conditions during the quarter ended September 30, 2021 in order to elect the quarter ending December 31, 2021 as the Commencement Quarter, but did not, however make the election to do so.
During the period from August 10, 2020 until the first day of the Commencement Quarter, the Company must use all the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to repay amounts outstanding under the Revolving Credit Facility. The Company may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings. There can be no assurance these conditions will be met.
In addition, commencing on August 10, 2020 and until the Commencement Quarter, the Company has the option to have amounts outstanding under the Revolving Credit Facility bear interest at an annual rate equal to either: (i) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.85% to 2.60%; or (ii) the Base Rate (as defined in the Credit Facility), plus an applicable margin that ranges, depending on the Company’s leverage, from 0.60% to 1.35%. Commencing on the first day of the Commencement Quarter, the Company will have the option to have amounts outstanding under the Revolving Credit Facility bear interest at an annual rate equal to either: (a) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.60% to 2.35%; or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.35% to 1.10%. As of September 30, 2021 the Company had elected to use the LIBOR option for all of our borrowings under the Credit Facility.
Further, commencing on August 10, 2020 and until the Commencement Quarter, the Company has the option to have amounts outstanding under the Term Loan bear interest at an annual rate equal to either: (i) LIBOR, plus an applicable margin
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September 30, 2021
(Unaudited)
that ranges, depending on the Company’s leverage, from 1.80% to 2.55%; or (ii) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.55% to 1.30%. Commencing on the first day of the Commencement Quarter, the Company will have the option to have amounts outstanding under the Term Loan bear interest at an annual rate equal to either: (a) LIBOR, plus an applicable margin that ranges, depending on the Company’s leverage, from 1.55% to 2.30%; or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company’s leverage, from 0.30% to 1.05%. Pursuant to the terms of the Company’s Credit Facility, the “floor” on LIBOR was increased from 0.00% to 0.25%.     
As of September 30, 2021, the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to 3.37% and 5.02%, respectively.
Until the Commencement Quarter, the Company may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of the Company’s common stock), subject to certain exceptions. These exceptions include paying dividends on the 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”) and the 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series B Preferred Stock”) or any other preferred stock the Company may issue and paying any cash distributions necessary to maintain its status as a REIT. The Company may not pay any cash distributions (including dividends on Series A Preferred Stock and Series B Preferred Stock) if a default or event of default exists or would result therefrom. Beginning in the Commencement Quarter, the Company will be able to pay cash distributions to holders of common stock, subject to the restrictions described below. The Company may pay cash distributions beginning in the Commencement Quarter and the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock and Series B Preferred Stock) for any period of four fiscal quarters may not exceed 95% of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after the Commencement Quarter. In addition, beginning in the Commencement Quarter, the Company will be permitted to repurchase up to $50.0 million of shares of its common stock (including amounts previously repurchased during the term of the Revolving Credit Facility) if, after giving effect to the repurchases, the Company maintains cash and cash equivalents of at least $30.0 million and the Company’s ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 55.0%.
The Credit Facility prohibits the Company from exceeding a maximum ratio of consolidated total indebtedness to consolidated total asset value, and requires the Company to maintain a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges and a minimum consolidated tangible net worth. The maximum ratio of consolidated total indebtedness to consolidated total asset value was 67.5% for the period from July 1, 2020 through June 30, 2021 and is 65% thereafter unless and until the Commencement Quarter, following which that ratio will be 62.5%. The minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges (the “Fixed Charge Coverage Ratio”) was 1.50 to 1.00 for the period from July 1, 2020 through March 31, 2021, 1.55 to 1.00 for the period from April 1, 2021 through June 30, 2021, and 1.60 to 1.00 thereafter, provided that from November 12, 2021 until the earlier of December 31, 2022 and such earlier date as the Company elects to terminate this relief (such period, the “Covenant Relief Period”), the Fixed Charge Coverage Ratio that the Company must satisfy based on the four most recently ended fiscal quarters will be reduced to 1.50:1.00. The minimum consolidated tangible net worth is the sum of (i) $1.2 million, plus (ii) 75% of any net offering proceeds (as defined in the Credit Facility) since the Credit Facility closed in March 2019.
The Company would have been in default of the covenant contained in the Credit Facility requiring the Company to maintain a certain minimum Fixed Charge Coverage Ratio for the four fiscal quarter period ended September 30, 2021. Pursuant to the terms of the third amendment entered into on November 12, 2021 by the Company, the agent and the requisite lenders under the Credit Facility, the lenders waived any defaults or event of defaults under the covenant requiring the Company to maintain a Fixed Charge Coverage Ratio of 1.60 to 1.00 for the quarter ended September 30, 2021 and any further defaults of Events of Default (as described in the Credit Facility) resulting from the breach of the Fixed Charge Coverage Ratio covenant. In addition, as described above, the Fixed Charge Coverage Ratio the Company is required to maintain was amended for the Covenant Relief Period. There can be no assurance the Company’s lenders will consent to any amendments or waivers that may become necessary to comply with the terms of the Credit Facility in the future. Based upon the Company’s current expectations, the Company believes its operating results during the next 12 months will allow it to comply with the amended covenants under the Credit Facility.





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September 30, 2021
(Unaudited)
Fannie Mae Master Credit Facilities
On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement relating to a secured credit facility with KeyBank (the “KeyBank Facility”) and a master credit facility agreement with Capital One for a secured credit facility with Capital One Multifamily Finance LLC, an affiliate of Capital One (the “Capital One Credit Facility”; the Capital One Facility and the KeyBank Facility are referred to herein individually as a “Fannie Mae Master Credit Facility” and together as the “Fannie Mae Master Credit Facilities”). Advances made under these agreements are assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.
Effective October 31, 2016, in conjunction with the execution of the Fannie Mae Master Credit Facilities, the OP entered into two interest rate cap agreements with an unrelated third party, which caps LIBOR interest paid (not giving effect to the applicable margin) on amounts outstanding under the Fannie Mae Master Credit Facilities at a maximum of 3.5%. On October 2019, the Company replaced two maturing interest rate cap agreements, effective November 1, 2019 for a total notional amount of $88.7 million. The two interest rate caps agreements extend three existing interest rate caps set to mature on the same date and are not designated as hedges (see Note 7 — Derivatives and Hedging Activities for additional disclosure regarding the Company’s derivatives).
In November 2020, in conjunction with the sale and transfer of four SHOPs in Michigan, one of which was encumbered under the Fannie Mae Master Credit Facility with Capital One, $4.2 million was repaid to Capital One upon the release of the property.
The Company may request future advances under the Fannie Mae Master Credit Facilities by borrowing against the value of the initial mortgaged properties, or by adding eligible properties to the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests.
Future Principal Payments
The following table summarizes the scheduled aggregate principal payments for the five years subsequent to September 30, 2021 and thereafter, on all of the Company’s outstanding debt (mortgage notes payable and credit facilities):
Future Principal
Payments
(In thousands) Mortgage Notes Payable Credit Facilities Total
2021 (remainder) $ 326  $ 130  $ 456 
2022 1,331  2,820  4,151 
2023 6,469  4,497  10,966 
2024 1,178  129,097  130,275 
2025 1,221  154,497  155,718 
Thereafter 538,893  338,734  877,627 
Total $ 549,418  $ 629,775  $ 1,179,193 
LIBOR Transition
In July 2017, the Financial Conduct Authority (which regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts. On March 5, 2021, the Financial Conduct Authority confirmed a partial extension of this deadline announcing that it will cease the publication of the one-week and two-month USD LIBOR settings immediately following December 31, 2021. The remaining USD LIBOR settings will continue to be published through June 30, 2023. The Company is not able to predict when there will be sufficient liquidity in the SOFR market. The Company is monitoring and evaluating the risks related to changes in LIBOR availability, which include potential changes in interest paid on debt and amounts received and paid on interest rate swaps. In addition, the value of debt or derivative instruments tied to LIBOR will also be impacted as LIBOR is limited and discontinued and contracts must be transitioned to a new alternative rate. While the Company’s expects LIBOR to be available in substantially its current form until at least the end of 2021, it is possible that LIBOR will become unavailable prior to that time. This could occur, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. To transition from LIBOR under the
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September 30, 2021
(Unaudited)
Credit Facility, the Company will either utilize the Base Rate (as defined in the Credit Facility), a SOFR-based rate as a benchmark rate as determined by the Agent in accordance with the terms of the Credit Facility, or an alternative benchmark otherwise established by the agent in accordance with the terms of the Credit Facility, which will be determined with due consideration to any evolving or then prevailing market practices for determining and implementing a rate of interest for U.S. dollar-denominated syndicated credit facilities. The Company has mortgages, credit facilities and derivative agreements that have terms that are based on LIBOR. Certain of those agreements have alternative rates already contained in the agreements while others do not. The Company anticipates that it will either utilize the alternative rates contained in the agreements or negotiate a replacement reference rates for LIBOR with the lenders and derivative counterparties.
Note 6 — Fair Value of Financial Instruments
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring assets and liabilities at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:
Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 — Unobservable inputs that reflect the entity’s own assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.
Financial Instruments Measured at Fair Value on a Recurring Basis
Derivative Instruments
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 September 30, 2021, 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.
The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments, are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.
The following table presents information about the Company’s assets and liabilities measured at fair value as of September 30, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those instruments fall.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
(In thousands) Quoted Prices in Active Markets
Level 1 		Significant
Other Observable Inputs
Level 2 		Significant Unobservable Inputs
Level 3 		Total
September 30, 2021
Derivative assets, at fair value $ —  $ 65  $ —  $ 65 
Derivative liabilities, at fair value —  (21,829) —  (21,829)
Total $ —  $ (21,764) $ —  $ (21,764)
December 31, 2020
Derivative assets, at fair value $ —  $ 13  $ —  $ 13 
Derivative liabilities, at fair value —  (38,389) —  (38,389)
Total $ —  $ (38,376) $ —  $ (38,376)
A review of the fair value hierarchy classification is conducted on a quarterly basis. 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 nine months ended September 30, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Real Estate Investments Measured at Fair Value on a Non-Recurring Basis
Real Estate Investments - Held for Use
The Company also had impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheet as of September 30, 2021. As of September 30, 2021, the Company owned four held for use properties in Texas and one held for use property in Sun City, Arizona, for which the Company had reconsidered its expected holding period and which are marketed for sale. As a result, the Company evaluated the impact on its ability to recover the carrying value of the properties and recorded impairment charges to write these properties down to their estimated fair values. The Company had also previously written down other held for use properties which have subsequently been sold.
The Company used the income approach for the four held for use properties in Texas to estimate the future cash flows on an undiscounted basis expected to be generated over a ten-year holding period and concluded that the carrying value was not recoverable. The fair value measurement was determined by estimated discounted cash flows using three significant unobservable inputs, including the cash flow discount rate, terminal capitalization rate, and the estimated stabilized occupancy range. The Company used a sales approach for the one held for use property in Sun City Arizona to estimate the future cash flows on an undiscounted basis expected to be generated from the sale and concluded that the fair market value of the properties had declined. Impaired real estate investments held for use are generally classified in Level 3 of the fair value hierarchy. See Note 3 — Real Estate investments, Net - “Assets Held for Use and Related Impairments” for additional details.
Real Estate Investments - Held for Sale
The Company has impaired real estate investments held for sale, which are carried at net realizable value on a non-recurring basis on the consolidated balance sheets as of December 31, 2020. Impaired real estate investments held for sale are generally classified in Level 3 of the fair value hierarchy.
Financial Instruments not Measured at Fair Value
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of short-term financial instruments such as cash and cash equivalents, restricted cash, straight-line rent receivable, net, prepaid expenses and other assets, deferred costs, net, accounts payable and accrued expenses, deferred rent and distributions payable approximate their carrying value on the consolidated balance sheets due to their short-term nature.
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:
September 30, 2021 December 31, 2020
(In thousands) Level Carrying Amount Fair Value  Carrying Amount Fair Value 
Gross mortgage notes payable and mortgage premium and discounts, net
3 $ 547,989  $ 552,941  $ 548,889  $ 549,553 
Credit Facility
3 $ 274,600  $ 271,782  $ 323,674  $ 319,558 
Fannie Mae Master Credit Facilities
3 $ 355,175  $ 353,102  $ 355,175  $ 354,073 

The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Advisor’s experience with similar types of borrowing arrangements, excluding the value of derivatives. At September 30, 2021 and December 31, 2020, the carrying values of the Credit Facility and Fannie Mae Master Credit Facilities did not approximate their fair values due to the widening of credit spreads during the periods.
Note 7 — Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, collars, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings.
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September 30, 2021
(Unaudited)
The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. Additionally, in using interest rate derivatives, the Company aims to add stability to interest expense and to manage its exposure to interest rate movements. The Company does not intend to utilize derivatives for speculative purposes or purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company, and its affiliates, may also have other financial relationships. 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 September 30, 2021 and December 31, 2020:
(In thousands) Balance Sheet Location September 30,
2021 		December 31, 2020
Derivatives designated as hedging instruments:
    Interest rate “pay-fixed” swaps Derivative liabilities, at fair value $ 21,829  $ 38,389 
Derivatives not designated as hedging instruments:
    Interest rate caps Derivative assets, at fair value $ 65  $ 13 
Cash Flow Hedges of Interest Rate Risk
The Company currently has nine interest rate swaps that are designated as cash flow hedges. The interest rate swaps are used as part of the Company’s 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 the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During the first quarter of 2021 and the year ended December 31, 2020, such derivatives were used to hedge the variable cash flows associated with variable-rate debt.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
In connection with the refinancing of the $250.0 million loan made by Capital One, National Association and certain other lenders to certain subsidiaries of the OP on June 30, 2017 (the “MOB Loan”) during the fourth quarter of 2019, the Company terminated two interest rate swaps with an aggregate notional amount of $250.0 million for a payment of approximately $2.2 million. Following these terminations, $2.2 million was recorded in AOCI and is being recorded as an adjustment to interest expense over the term of the two terminated swaps and the MOB Loan prior to its refinancing. Of the amount recorded in AOCI following these terminations, $0.2 million and $0.6 million was recorded as an increase to interest expense for the three and nine months ended September 30, 2021 and approximately $0.6 million remained in AOCI as of September 30, 2021.
Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, from October 1, 2021 through September 30, 2022, the Company estimates that $10.6 million will be reclassified from other comprehensive loss as an increase to interest expense.
As of September 30, 2021 and December 31, 2020, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk:
September 30, 2021 December 31, 2020
Interest Rate Derivatives Number of Instruments Notional Amount Number of Instruments Notional Amount
(In thousands) (In thousands)
Interest rate “pay-fixed” swaps 9  $ 578,500  9  $ 578,500 
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September 30, 2021
(Unaudited)
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 September 30, Nine Months Ended September 30,
(In thousands) 2021 2020 2021 2020
Amount of gain (loss) recognized in accumulated other comprehensive loss on interest rate derivatives $ 353  $ (405) $ 8,980  $ (42,631)
Amount of (loss) gain reclassified from accumulated other comprehensive income into income as interest expense $ (2,786) $ (2,689) $ (8,210) $ (5,295)
Total amount of interest expense presented in the
consolidated statements of operations and comprehensive gain (loss)
$ (11,775) $ (12,840) $ (36,016) $ (38,677)
Non-Designated Derivatives
These derivatives are used to manage the Company’s exposure to interest rate movements, but do not meet the strict hedge accounting requirements to be classified as hedging instruments. Changes in the fair value of derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net loss and were a loss of $33,000 and $32,000 for the three and nine months ended September 30, 2021, respectively, and a loss of $69,000 and $45,000 for the three and nine months ended September 30, 2020, respectively.
The Company paid $85,000 to enter into an interest rate cap contract during the nine months ended September 30, 2021 with an effective date of April 1, 2021 and notional value of $60.0 million to replace an expiring interest rate cap contract with a similar notional value. 
    The Company had the following outstanding interest rate derivatives that were not designated as hedges in qualified hedging relationships as of September 30, 2021 and December 31, 2020:
September 30, 2021 December 31, 2020
Interest Rate Derivatives Number of Instruments Notional Amount Number of Instruments Notional Amount
(In thousands) (In thousands)
Interest rate caps 6  $ 355,175  6  $ 359,322 

Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of September 30, 2021 and December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheet.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Gross Amounts Not Offset in the Consolidated Balance Sheet
(In thousands) Gross Amounts of Recognized Assets Gross Amounts of Recognized (Liabilities) Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Assets presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Received Net Amount
September 30, 2021 $ 65  $ —  $ —  $ 65  $ —  $ —  $ 65 
September 30, 2021 $ —  $ (21,829) $ —  $ (21,829) $ —  $ —  $ (21,829)
December 31, 2020 $ 13  $ —  $ —  $ 13  $ —  $ —  $ 13 
December 31, 2020 $ —  $ (38,389) $ —  $ (38,389) $ —  $ —  $ (38,389)
Credit-risk-related Contingent Features
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 September 30, 2021, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $22.6 million. As of September 30, 2021, the Company is not required to post any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $21.8 million at September 30, 2021.
Note 8 — Stockholders’ Equity
Common Stock
As of September 30, 2021 and December 31, 2020, the Company had 97,847,313 and 93,775,746 shares of common stock outstanding, respectively, including unvested restricted shares and shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases. These include shares issued as Stock Dividends during 2020 and 2021. References made to weighted-average shares and per-share amounts in the consolidated statements of operations and comprehensive income have been retroactively adjusted to reflect the increase of 0.07299 shares for every outstanding share outstanding due to the Stock Dividends (including the October 2021 Stock Dividend), and are noted as such throughout the accompanying financial statements and notes. See Note 1 — Organization for additional information.
On April 1, 2021, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2020, which was approved by the Board on March 31, 2021. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually.
Tender Offer
On January 9, 2020, the Company announced a tender offer (the “2020 Tender Offer”) to purchase up to 200,000 shares of its common stock for cash at a purchase price equal to $8.50 per share with the proration period and withdrawal rights that expired on February 7, 2020. The Company made the 2020 Tender Offer in response to an unsolicited offer to stockholders commenced on December 31, 2019. The 2020 Tender Offer expired in accordance with the terms on February 7, 2020. In accordance with the 2020 Tender Offer, the Company accepted for purchase 200,000 shares for a total cost of approximately $1.7 million, which was funded with available cash.
Share Repurchase Program
Under the Company’s share repurchase program (as amended from time to time, the “SRP”), qualifying stockholders are able to sell their shares to the Company in limited circumstances. The SRP permits investors to sell their shares back to the Company after they have held them for at least one year, subject to significant conditions and limitations. Repurchases of shares of the Company’s common stock, when requested, are at the sole discretion of the Board.
Under the SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of the Company’s common stock or received their shares from the Company (directly or indirectly) through one or more non-cash transactions are considered for repurchase. Additionally, pursuant to the SRP, the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
repurchase price per share equals 100% of the Estimated Per-Share NAV in effect on the last day of the fiscal semester, or the six-month period ending June 30 or December 31.
On February 26, 2020, the Company repurchased 505,101 shares of common stock for approximately $8.8 million, at an average price per share of $17.50 pursuant to the SRP. The repurchases reflect all repurchase requests made in good order following the death or qualifying disability of stockholders during the period commencing July 1, 2019 up to and including December 31, 2019.
Pursuant to the SRP, repurchases were to be made in respect of requests made during the periods when the SRP was active during the active periods under the SRP during the six months ending June 30, 2020 - the period from January 1, 2020 to January 8, 2020 and the period from February 26, 2020 up to and including June 30, 2020 - no later than July 31, 2020.
On August 13, 2020, in order to strategically maintain the Company’s liquidity in light of the continued impact of COVID-19 pandemic and to comply with an amendment to the Credit Facility described in Note 5 — Credit Facilities, which restricts the Company from repurchasing shares until no earlier than the Commencement Quarter (which has not occurred), on August 6, 2020, the Board determined that, effective on August 12, 2020, repurchases under the SRP would be suspended. The Board has also rejected all repurchase requests made during the period from January 1, 2020 until the effectiveness of the suspension of the SRP. No further repurchase requests under the SRP may be made unless and until the SRP is reactivated. No assurances can be made as to when or if the SRP will be reactivated.
When a stockholder requests redemption and redemption is approved by the Board, the Company will reclassify such obligation from equity to a liability based on the settlement value of the obligation. Shares repurchased under the SRP have the status of authorized but unissued shares.
The table below reflects the number of shares repurchased and the average price per share, under the SRP and does not include any repurchases under tender offers (see above), cumulatively through September 30, 2021.
Number of Shares Repurchased Average Price per Share
Cumulative repurchases as of December 31, 2020 4,896,620  $ 20.60 
 Nine months ended September 30, 2021 —  — 
Cumulative repurchases as of September 30, 2021 4,896,620  20.60 
Distribution Reinvestment Plan
Pursuant to the DRIP, stockholders may elect to reinvest distributions paid in cash by the Company into shares of common stock. No dealer manager fees or selling commissions are paid with respect to shares purchased under the DRIP. The shares purchased pursuant to the DRIP have the same rights and are treated in the same manner as all of the other shares of outstanding common stock. The Board may designate that certain cash or other distributions be excluded from reinvestment pursuant to the DRIP. The Company has the right to amend the DRIP or terminate the DRIP with ten days’ notice to participants. Shares issued under the DRIP are recorded as equity in the accompanying consolidated balance sheet in the period distributions are declared. During the nine months ended September 30, 2021, the Company did not issue any shares of common stock pursuant to the DRIP and during the nine months ended September 30, 2020, the Company issued 0.9 million shares of common stock pursuant to the DRIP, generating aggregate proceeds of $14.6 million. 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.
Stockholder Rights Plan
In May 2020, the Company announced that the Board had approved a stockholder rights plan. In December 2020, the Company issued a dividend of one common share purchase right for each share of its common stock outstanding as authorized by its board of directors in its discretion.
Preferred Stock
The Company is authorized to issue up to 50,000,000 shares of preferred stock. In connection with an underwritten offering in December 2019 (see details below), the Company classified and designated 1,610,000 shares of its authorized preferred stock as authorized shares of its Series A Preferred Stock. In September 2020, the Board authorized the classification of 600,000 additional shares of the Company’s preferred stock as Series A Preferred Stock in connection with the Preferred Stock Equity
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September 30, 2021
(Unaudited)
Line (as defined below) and in May 2021, the Board authorized the classification of 2,530,000 additional shares of the Company’s preferred stock as Series A Preferred Stock in connection with the offering in May 2021 (described below). The Company had 3,977,144 and 1,610,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.
In connection with an underwritten offering in October 2021 (see Note 17 — Subsequent Events), the Company classified and designated 3,680,000 shares of its authorized preferred stock on October 4, 2021 as authorized shares of its 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series B Preferred Stock”).
Series A Preferred Stock
Preferred Stock Equity Line with B. Riley Principal Capital, LLC
On September 15, 2020, the Company entered into a preferred stock purchase agreement and registration rights agreement with B. Riley Principal Capital, LLC (“B. Riley”), pursuant to which the Company has the right from time to time to sell up to an aggregate of $15.0 million of shares of its Series A Preferred Stock to B. Riley until December 31, 2023, on the terms and subject to the conditions set forth in the purchase agreement. This arrangement is also referred to as the “Preferred Stock Equity Line.” The Company controls the timing and amount of any sales to B. Riley under the Preferred Stock Equity Line, and B. Riley is obligated to make purchases of up to 3,500 shares of Series A Preferred Stock each time (as may be increased by mutual agreement by the parties) in accordance with the purchase agreement, upon certain terms and conditions being met. The Company sold 15,000 shares of Series A Preferred Stock under the Preferred Stock Equity Line during the three and nine months ended September 30, 2021, resulting in gross proceeds of $0.4 million and net proceeds of $0.3 million after fees and commissions.
In total, the Company incurred $1.2 million in costs related to establishing the Preferred Stock Equity Line which were all initially recorded in prepaid expenses and other assets on our consolidated balance sheet. Upon receiving proceeds under the Preferred Stock Equity Line in the third quarter of 2021, the Company reclassified $30,000 of these prepaid costs to additional paid in capital in the Company’s consolidated statement of changes in equity as a reduction of the gross proceeds received under the Preferred Stock Equity Line.
Subsequent to September 30, 2021, the Company determined that it was not probable that additional proceeds would be received from the Preferred Stock Equity Line and later terminated the Preferred Stock Equity Line. As a result, the Company expensed the remaining balance of prepaid costs within acquisition and transaction related costs on the consolidated statement of operations and comprehensive income during the three months ended September 30, 2021.
The Company did not sell any Series A Preferred Stock under the Preferred Stock Equity Line during the year ended December 31, 2020.
Series A Preferred Stock Add-On Offering
On May 11, 2021, the Company completed an underwritten public offering of 2,352,144 shares (which includes 152,144 shares issued and sold pursuant to the underwriters’ exercise of their option to purchase additional shares) of its Series A Preferred Stock for net proceeds of $56.2 million after deducting the underwriters’ discount, structuring fee and other offering costs aggregating to $2.5 million. Pursuant to the terms of the Credit Facility, all proceeds were used to repay amounts outstanding under the Credit Facility.
Series A Preferred Units
In September 2021, the Company partially funded the purchase of an MOB from an unaffiliated third party by causing the OP to issue 100,000 partnership units in the OP designated as “Series A Preferred Units”. These were recorded at fair value on the date of the acquisition at $2.6 million and were included as part of the consideration paid for the acquisition. Additionally, these are considered a non-controlling interest for the Company and were recorded as an increase in non-controlling interests on the consolidated balance sheet (see Note 13 — Non-controlling Interests for additional information).
Series B Preferred Stock
Underwritten Offering — Series B Preferred Stock
On October 6, 2021, the Company completed the initial issuance and sale of its Series B Preferred Stock and on October 12, 2021 the underwriters in the offering exercised their option to purchase additional shares of Series B Preferred Stock. For additional information, see Note 17 — Subsequent Events.
Distributions and Dividends
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September 30, 2021
(Unaudited)
Common Stock
In April 2013, the Board authorized, and the Company began paying distributions on a monthly basis at a rate equivalent to $1.70 per annum, per share of common stock, which began in May 2013. In March 2017, the Board authorized a decrease in the rate at which the Company pays monthly distributions to stockholders, effective as of April 1, 2017, to a rate equivalent to $1.45 per annum per share of common stock. On February 20, 2018, the Board authorized a further decrease in the rate at which the Company pays monthly distributions to stockholders, effective as of March 1, 2018, to a rate equivalent to $0.85 per annum per share of common stock
From March 1, 2018 until June 30, 2020, the Company paid monthly distributions to stockholders at a rate equivalent to $0.85 per annum per share of common stock. Distributions were payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month.
On August 13, 2020, the Board changed the Company’s common stock distribution policy in order to preserve the Company’s liquidity and maintain additional financial flexibility in light of the continued COVID-19 pandemic and to comply with an amendment to the Credit Facility described in Note 5 which restricts the Company from paying distributions on common stock until no earlier than the Commencement Quarter. Under the new policy, distributions authorized by the Board on the Company’s shares of common stock, if and when declared, are now issued on a quarterly basis in arrears in shares of the Company’s common stock valued at the Company’s estimated per share net asset value of common stock in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter. The Company declared and issued Stock Dividends of 0.01349 shares of the Company’s common stock on each share of the Company’s outstanding common stock in each of October 2020 and January 2021 and 0.014655 shares of the Company’s common stock on each share of the Company’s outstanding common stock in April, July and October 2021. These amounts were based on the Company’s prior cash distribution rate of $0.85 per share per annum and the then-current Estimated Per-Share NAV. The Board may further change the Company’s common stock distribution policy at any time, further reduce the amount of distributions paid or suspend distribution payments at any time, and therefore distribution payments are not assured.
Note 9 — Related Party Transactions and Arrangements
As of September 30, 2021 and December 31, 2020, the Special Limited Partner owned 9,400 and 9,008 shares, 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 September 30, 2021 and December 31, 2020, 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.
Fees Incurred in Connection with the Operations of the Company
On February 17, 2017, the members of a special committee of the Board unanimously approved certain amendments to and a restatement of the then-effective advisory agreement, by and among the Company, the OP and the Advisor (the “Second A&R Advisory Agreement”). The Second A&R Advisory Agreement, which superseded, amended and restated the previously effective advisory agreement (the “Original A&R Advisory Agreement”), took effect on February 17, 2017. The initial term of the Second A&R Advisory Agreement expires February 17, 2027, and is automatically renewable for another ten-year term upon each ten-year anniversary unless the Second A&R Advisory Agreement is terminated (i) with notice of an election not to renew at least 365 days prior to the applicable tenth anniversary, (ii) in accordance with a change of control (as defined in the Second A&R Advisory Agreement) or a transition to self-management, (iii) by 67% of the independent directors of the Board for cause, without penalty, with 45 days’ notice or (iv) with 60 days prior written notice by the Advisor for (a) a failure to obtain a satisfactory agreement for any successor to the Company to assume and agree to perform obligations under the Second A&R Advisory Agreement or (b) any material breach of the Second A&R Advisory Agreement of any nature whatsoever by the Company.
On July 25, 2019, the Company entered into Amendment No. 1 to the Second Amended and Restated Advisory Agreement (the “Advisory Agreement Amendment”) among the Company, the OP, and the Advisor. The Advisory Agreement Amendment was unanimously approved by the Company’s independent directors. Additional information on the Advisory Agreement Amendment is included later in this footnote under “—Professional Fees and Other Reimbursements.”
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September 30, 2021
(Unaudited)
Acquisition Expense Reimbursements
The Advisor may be reimbursed for services provided for which it incurs investment-related expenses, or insourced expenses. The amount reimbursed for insourced expenses may not exceed 0.5% of the contract purchase price of each acquired property or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimburses the Advisor for third party acquisition expenses. 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 September 30, 2021.
Asset Management Fees and Variable Management/Incentive Fees
Under the LPA and the advisory agreement that was superseded by the Original A&R Advisory Agreement and until March 31, 2015, for its asset management services, the Company issued the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the Board) to the Advisor partnership units of the OP designated as “Class B Units” (“Class B Units”). The Class B Units were intended to be profit interests and vest, and no longer are subject to forfeiture, at such time as: (x) the value of the OP’s assets plus all distributions made equals or exceeds the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “Economic Hurdle”); (y) any one of the following occurs: (1) a listing; (2) another liquidity event or (3) the termination of the advisory agreement by an affirmative vote of a majority of the Company’s independent directors without cause; and (z) the Advisor is still providing advisory services to the Company (the “Performance Condition”).
Unvested Class B Units will be forfeited immediately if: (a) the advisory agreement is terminated for any reason other than a termination without cause; 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.
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. The number of Class B Units issued in any quarter was equal to: (i) the excess of (A) the product of (y) the cost of assets multiplied by (z) 0.1875% over (B) any amounts payable as an oversight fee (as described below) for such calendar quarter; divided by (ii) the value of one share of common stock as of the last day of such calendar quarter, which was initially equal to $22.50 (the price in the Company’s initial public offering of common stock minus the selling commissions and dealer manager fees). 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 September 30, 2021, 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 in an amount retroactively adjusted to reflect the Stock Dividends, other stock dividends and other similar events. These distributions on Class B Units are included in general and administrative expenses in the consolidated statement of operations and comprehensive loss until the Performance Condition is considered probable to occur. The Board has previously approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement. The Board determined in February 2018 that Economic Hurdle had been satisfied, however none of the events have occurred, including a listing of the Company’s common stock on a national securities exchange, which would have satisfied the other vesting requirement of the Class B Units. Therefore, no expense has ever been recognized in connection with the Class B Units.
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.
Effective February 17, 2017, the Second A&R Advisory Agreement requires the Company to pay the Advisor a base management fee, which is payable on the first business day of each month. The fixed portion of the base management fee is equal to $1.625 million per month, while the variable portion of the base management fee is equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity (including convertible equity and certain convertible debt but excluding proceeds from the DRIP) issued by the Company and its subsidiaries subsequent to February 17, 2017 per month. The base management fee is payable to the Advisor or its assignees in cash, OP Units or shares, or a combination thereof, the form of payment to be determined at the discretion of the Advisor and the value of any OP Unit or 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.
In addition, the Second A&R Advisory Agreement requires the Company to pay the Advisor a variable management/incentive fee quarterly in arrears equal to (1) the product of fully diluted shares of common stock outstanding multiplied by (2) (x) 15.0% of the applicable prior quarter’s Core Earnings (as defined below) per share in excess of $0.375 per share plus (y) 10.0% of the applicable prior quarter’s Core Earnings per share in excess of $0.47 per share. Core Earnings is defined as, for
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
the applicable period, net income or loss, computed in accordance with GAAP, excluding non-cash equity compensation expense, the variable management/incentive fee, acquisition and transaction related fees and expenses, financing related fees and expenses, depreciation and amortization, realized gains and losses on the sale of assets, any unrealized gains or losses or other non-cash items recorded in net income or loss for the applicable period, regardless of whether such items are included in other comprehensive income or loss, or in net income, one-time events pursuant to changes in GAAP and certain non-cash charges, impairment losses on real estate related investments and other than temporary impairments of securities, amortization of deferred financing costs, amortization of tenant inducements, amortization of straight-line rent and any associated bad debt reserves, amortization of market lease intangibles, provision for loss loans, and other non-recurring revenue and expenses (in each case after discussions between the Advisor and the independent directors and approved by a majority of the independent directors). The variable management/incentive fee is payable to the Advisor or its assignees in cash or shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor and the value of any share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. No variable management incentive fee was incurred for the three or nine months ended September 30, 2021 or 2020.
Property Management Fees
Unless the Company contracts with a third party, the Company pays the Property Manager a property management fee on a monthly basis, equal to 1.5% of gross revenues from the Company’s stand-alone single-tenant net leased properties managed and 2.5% of gross revenues from all other types of properties managed, plus market-based leasing commissions applicable to the geographic location of the property. The Company also reimburses the Property Manager for property level expenses incurred by the Property Manager. The Property Manager may charge a separate fee for the one-time initial rent-up or leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties, and the Property Manager is allowed to receive a higher property management fee in certain cases if approved by our Board of Directors (including a majority of the independent directors).
If the Company contracts directly with third parties for such services, the Company will pay the third party customary market fees and will pay the Property Manager an oversight fee of 1.0% of the gross revenues of the property managed by the third party. In no event will the Company pay the Property Manager or any affiliate of the Property Manager both a property management fee and an oversight fee with respect to any particular property. If the Property Manager provides services other than those specified in the Property Management Agreement, the Company will pay the Property Manager a monthly fee equal to no more than that which the Company would pay to a third party that is not an affiliate of the Company or the Property Manager to provide the services.
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 provided notice of intent to terminate. The current term of the A&R Property Management Agreement expires February 17, 2021. 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.
On April 10, 2018, in connection with the Multi-Property CMBS Loan, the Company and the OP entered into a further amendment to the A&R Property Management Agreement confirming, consistent with the intent of the parties, that the borrowers under the Multi-Property CMBS Loan and other subsidiaries of the OP that own or lease the Company’s properties are the direct obligors under the arrangements pursuant to which the Company’s properties are managed by either the Property Manager or a third party overseen by the Property Manager pursuant to the A&R Property Management Agreement.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Professional Fees and Other Reimbursements
The Company reimburses the Advisor’s costs of providing administrative services including personnel costs, except for costs to the extent that the employees perform services for which the Advisor receives a separate fee. This reimbursement includes reasonable overhead expenses for employees of the Advisor or its affiliates directly involved in the performance of services on behalf of the Company, including the reimbursement of rent expense at certain properties that are both occupied by employees of the Advisor or its affiliates and owned by affiliates of the Advisor. During the three and nine months ended September 30, 2021 the Company incurred $2.1 million and $6.1 million of reimbursement expenses from the Advisor for providing administrative services, respectively. During the three and nine months ended September 30, 2020, the Company incurred $0.7 million and $5.4 million of reimbursement expenses from the Advisor for providing administrative services, respectively. These reimbursement expenses are included in general and administrative expense on the consolidated statements of operations and comprehensive income (loss).
On July 25, 2019, the Company entered into the Advisory Agreement Amendment. Under the Second A&R Advisory Agreement, including prior to the Advisory Agreement Amendment, the Company has been required to reimburse the Advisor for, among other things, reasonable salaries and wages, benefits and overhead of all employees of the Advisor or its affiliates, except for costs of employees to the extent that the employees perform services for which the Advisor receives a separate fee.
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.
Further, under the Advisory Agreement Amendment, the aggregate amount of expenses relating to salaries, wages 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: (a) a fixed component (the “Fixed Component”) and (b) a variable component (the “Variable Component”).
Both the Fixed Component and the Variable Component increase by an annual cost of living adjustment equal to the greater of (x) 3.0% and (y) the CPI, as defined in the amendment for the prior year ended December 31st. Initially, for the year ended December 31, 2019; (a) the Fixed Component was equal to $6.8 million and (b) the Variable Component was equal to (i) the sum of the total real estate investments, at cost as recorded on the balance sheet dated as of the last day of each fiscal quarter (the “Real Estate Cost”) in the year divided by four, which amount is then (ii) multiplied by 0.29%.
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 requires the Advisor and the Company to negotiate in good faith to reset the Fixed Component; provided that if the proceeds of the disposition(s) are paid to shareholders of the Company as a special distribution or used to repay loans with no intent of subsequently re-financing and re-investing the proceeds thereof in Investments, the advisory agreement requires these negotiations within 90 days thereof, in each case taking into account reasonable projections of reimbursable costs in light of the Company’s reduced assets.
The Company paid approximately $2.5 million in 2019 to the Advisor or its affiliates as reimbursement for bonuses of employees of the Advisor or its affiliates who provided administrative services during the calendar year 2019, prorated for the time spent working on matters relating to the Company. The Company does not reimburse the Advisor or its affiliates for any bonus amounts relating to time dedicated to the Company by Edward M. Weil, Jr., the Company’s Chief Executive Officer. The Advisor formally awarded 2019 bonuses to employees of the Advisor or its affiliates in September 2020 (the “2019 Bonus Awards”). The original $2.5 million estimate for bonuses recorded and paid to the Advisor in 2019 exceeded the cash portion of the 2019 Bonus Awards to be paid to employees of the Advisor or its affiliates and to be reimbursed by the Company by $1.2 million. As a result, during the three months ended September 30, 2020, the Company recorded a receivable from the Advisor of $1.2 million in prepaid expenses and other assets on the consolidated balance sheet and a corresponding reduction in general and administrative expenses. Pursuant to authorization by the independent members of the Company’s board of directors, the $1.2 million receivable is being paid back to the Company over a 10-month period from January 2021 through October 2021. As of September 30, 2021, $1.0 million of this amount has been received from the Advisor.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
During the second quarter of 2021, the Advisor finalized the amounts and form of the 2020 bonuses previously estimated (the “2020 Bonus Awards”) to be paid to the employees of the Advisor or its affiliates who provided administrative services during such calendar year, prorated for the time spent working on matters relating to the Company. The 2020 Bonus Awards are paid over a ten-month period from June 2021 to April 2022. The final amounts exceeded the amounts previously paid by the Company to the Advisor for estimated 2020 bonuses by approximately $1.0 million for the following reasons (i) forfeitures of bonuses related to employees of the Advisor or its affiliates who were terminated or resigned prior to payment (including the Company’s former chief financial officer) and (ii) a general reduction in final bonuses for remaining personnel due to on-going negative impacts of the COVID-19 pandemic. As a result, during the second quarter of 2021, the Company recorded a receivable from the Advisor of $1.0 million, which is recorded in prepaid expenses and other assets on the consolidated balance sheet and a corresponding reduction in general administrative expenses. Pursuant to authorization by the independent members of the Company’s board of directors, the $1.0 million receivable is required to be repaid to the Company on a pro rata basis over a six-month period from November 2021 through April 2022.
Reimbursements for the cash portion of 2020 bonuses paid by the Advisor to employees of the Advisor or its affiliates were expensed and reimbursed on a monthly basis during 2020, and 2021 bonuses continue to be expensed and reimbursed on a monthly basis during 2021 in accordance with estimates provided by the Advisor. Generally, prior to the 2019 Bonus Awards, employee bonuses have been formally awarded to employees of the Advisor or its affiliates in March as an all - cash award and paid out by the Advisor in the year subsequent to the year in which services were rendered to the Company.
Summary of fees, expenses and related payables
The following table details amounts incurred, forgiven and payable in connection with the Company’s operations-related services described above as of and for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30, Payable (Receivable) as of
  2021 2020 2021 2020
(In thousands) Incurred Incurred
Incurred
Incurred September 30,
2021 		December 31, 2020
Non-recurring fees and reimbursements:
Acquisition cost reimbursements
$ 12  $ —  $ 67  $ 70  $ 27  $ 11 
Ongoing fees and reimbursements:
Asset management fees
5,175  4,997  15,268  14,991  —  — 
Property management and fees (including leasing commissions) 994  987  2,814  2,978  91  288 
Professional fees and other reimbursements (1)
2,050  2,243  7,318  6,172 

199  (61)
Professional fees credit due from Advisor —  (1,217) (1,030) (1,217) (1,152) (3) (1,217) (3)
Distributions on Class B Units (2)
—  26  —  178  —  — 
Total related party operation fees and reimbursements
$ 8,231  $ 7,036  $ 24,437  $ 23,172  $ (835) $ (979)
___________
(1)     Included in general and administrative expenses in the consolidated statements of operations. Includes $1.6 million and $4.8 million for the three and nine months ended September 30, 2021, respectively, and $1.4 million and $5.1 million for the three and nine months ended September 30, 2020, respectively, subject to the Capped Reimbursement Amount.
(2)    Prior to April 1, 2015, the Company caused the OP to issue to the Advisor restricted performance based Class B Units for asset management services. As of September 30, 2021, the Board had approved the issuance of, and the OP had issued 359,250 Class B Units to the Advisor in connection with this arrangement. Effective April 1, 2015, the Company began paying an asset management fee to the Advisor or its assignees in cash, in shares, or a combination of both and no longer issues any Class B Units.
(3) Balance includes a receivable of $0.1 million and $1.2 million as of September 30, 2021 and December 31, 2020, respectively, from the Advisor related to the overpayment of 2019 Bonus Awards, which, pursuant to authorization by the independent members of the Company’s board of directors, is being paid back to the Company over a ten month period from January 2021 through October 2021. Also includes a receivable of $1.0 million, as of September 30, 2021, from the Advisor related to the overpayment of 2020 Bonus Awards, which, pursuant to authorization by the independent members of the Company’s board of directors, is required to be repaid to the Company on a pro rata basis over a six-month period from November 2021 through April 2022.
Fees and Participations Incurred in Connection with a Listing or the Liquidation of the Company’s Real Estate Assets
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Fees Incurred in Connection with a Listing
If the common stock of the Company is listed on a national exchange, the Special Limited Partner will be entitled to receive a promissory note as evidence of its right to receive a subordinated incentive listing distribution from the OP equal to 15.0% of the amount by which the market value of all issued and outstanding shares of common stock plus distributions exceeds the aggregate capital contributed plus an amount equal to a 6.0% cumulative, pre-tax non-compounded annual return to investors in the Company’s initial public offering of common stock. No such distribution was incurred during the nine months ended September 30, 2021 or 2020. 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.
Subordinated Participation in Net Sales Proceeds
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 nine months ended September 30, 2021 or 2020. 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.
Termination Fees
Under the operating partnership agreement of the OP, upon termination or non-renewal of the advisory agreement with the Advisor, with or without cause, the Special Limited Partner will be entitled to receive a promissory note as evidence of its right to receive subordinated termination distributions from the OP equal to 15.0% of the amount by which the sum of the Company’s market value plus distributions exceeds the sum of the aggregate capital contributed plus an amount equal to an annual 6.0% cumulative, pre-tax, non-compounded annual return to investors in the Company’s initial public offering of common stock. The Special Limited Partner is able to elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs. 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 Second A&R Advisory Agreement, 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 of the Second A&R Advisory Agreement.
Upon a termination by either party in connection with a change of control (as defined in the Second A&R Advisory Agreement), the Company would pay the Advisor a change of control fee equal to the product of four (4) and the “Subject Fees.”
Upon a termination by the Company in connection with a transition to self-management, the Company would pay the Advisor a transition fee equal to (i) $15.0 million plus (ii) the product of four multiplied by the Subject Fees, provided that the transition fee shall not exceed an amount equal to 4.5 multiplied by the Subject Fees.
The Subject Fees are equal to (i) the product of four multiplied by the actual base management fee plus (ii) the product of four multiplied by the actual variable management/incentive fee, in each of clauses (i) and (ii), payable for the fiscal quarter immediately prior to the fiscal quarter in which the change of control occurs or the transition to self-management, 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
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.
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.
Note 11 — Equity-Based Compensation
Restricted Share Plan
The Company has adopted an employee and director incentive restricted share plan (as amended from time to time, the “RSP”), which provides the Company with the ability to grant awards of restricted shares of common stock (“restricted shares”) to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company. The total number of shares of common stock that may be subject to awards granted under the RSP may not exceed 5.0% of the Company’s outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 3.5 million shares (as such number may be further adjusted for stock splits, stock dividends, combinations and similar events).
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. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. 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 September 30, 2021 and activity for the period presented:
Number of Shares of Common Stock Weighted Average Issue Price
Unvested, December 31, 2020 215,384  $ 21.11 
Stock dividend 9,352  14.89 
Vested (67,327) 20.00 
Unvested, September 30, 2021 157,409  $ 21.22 
As of September 30, 2021, the Company had $3.0 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 2.6 years. Compensation expense related to restricted shares was approximately $0.3 million and $1.0 million for the three and nine months ended September 30, 2021, respectively, and $0.4 million and $1.0 million for the three and nine months ended September 30, 2020 respectively.
Other Share-Based Compensation
The Company may issue common stock in lieu of cash to pay fees earned by the Company’s directors at the respective director’s election. 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 nine months ended September 30, 2021 or 2020.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Note 12 — Accumulated Other Comprehensive Loss
    The following table illustrates the changes in accumulated other comprehensive loss as of and for the period presented:
(In thousands) Unrealized Gain(loss) on Designated Derivative
Balance, December 31, 2020 $ (39,673)
Other comprehensive gain (loss), before reclassifications 8,980 
Amount of gain (loss) reclassified from accumulated other comprehensive gain (loss) 8,210 
Rebalancing of ownership percentage 5 
Balance, September 30, 2021 $ (22,478)
Accumulated other comprehensive (loss) income predominately relates to the unrealized gains (losses) on designated derivatives, however, as previously discussed in Note 7 — Derivatives and Hedging Activities, a previously designated hedge was terminated and the termination costs are being amortized over the term of the hedged item. The unamortized portion of the terminated swap still remaining in accumulated other comprehensive (loss) income is $0.6 million as of September 30, 2021.
Note 13 — Non-controlling Interests
Non-controlling interests on the Company’s consolidated balance sheet is comprised of the following:
Balance as of
(In thousands) September 30, 2021 December 31, 2020
Series A Preferred Units held by third parties $2,578 $—
Common OP Units held by third parties 3,823 4,016
 Total Non-controlling Interests in the Operating Partnership 6,401 4,016
Non-controlling Interests in property owning subsidiaries 364 371
Total Non-controlling interests $6,765 $4,387
Non-Controlling Interests in the Operating Partnership
For preferred and common shares issued by the Company, the Company typically issued mirror securities with substantially equivalent economic rights between the Company and the Operating Partnership. The securities held by the Company are eliminated in consolidation.
Common OP Units
The Company is the sole general partner and holds substantially all of the Common OP Units. As of September 30, 2021 and December 31, 2020, 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 a 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.
A holder of Common OP Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s common stock in an amount retroactively adjusted to reflect the Stock Dividends, other stock dividends and other similar events. After holding the Common OP Units for a period of one year, a holder of Common OP Units has the right to redeem Common OP Units for, at the option of the OP, the corresponding number of shares of the Company’s common stock, as retroactively adjusted for the Stock Dividends, other stock dividends and other similar events, or the cash equivalent. The remaining rights of the limited partners in the Common OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. During the nine months ended September 30, 2020, OP Unit non-controlling interest holders were paid distributions of $0.2 million. No distributions were paid to non-controlling interest holders during the nine months ended September 30, 2021.
The 405,998 Common OP Units outstanding as of September 30, 2021 would be redeemable for 435,630 shares of common stock, giving effect to adjustments for the impact of the Stock Dividends through October 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Series A Preferred Units
The Company is the sole general partner and holds substantially all of the Series A Preferred Units.
In September 2021, the Company partially funded the purchase of a MOB from an unaffiliated third party by causing the OP to issue 100,000 Series A Preferred Units, with a face value of $25.00 per unit, which were recorded at a fair value of $2.6 million, or $25.78 per unit, to the unaffiliated third party.
A holder of Series A Preferred Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s Series A Preferred Stock. After holding the Series A Preferred Units for a period of one year, a holder of Series A Preferred Units has the right to redeem Series A Preferred Units for, at the option of the OP, the corresponding number of shares of the Company’s Series A Preferred Stock, or the cash equivalent. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. No distributions were paid to non-controlling interest holders during the nine months ended September 30, 2021.
Non-Controlling Interests in Property Owning Subsidiaries
The Company also has investment arrangements with other unaffiliated third parties whereby such investors receive an ownership interest in certain of the Company’s property-owning subsidiaries and are entitled to receive a proportionate share of the net operating cash flow derived from the subsidiaries’ property. Upon disposition of a property subject to non-controlling interest, the investor will receive a proportionate share of the net proceeds from the sale of the property. The investor has no recourse to any other assets of the Company. Due to the nature of the Company’s involvement with these arrangements and the significance of its investment in relation to the investment of the third party, the Company has determined that it controls each entity in these arrangements and therefore the entities related to these arrangements are consolidated within the Company’s financial statements. A non-controlling interest is recorded for the investor’s ownership interest in the properties.
On November 4, 2020, the Company purchased all of the outstanding the membership interests in the joint venture that owns the UnityPoint Clinics in Muscatine, Iowa and Moline, Illinois for approximately $0.6 million, funded with cash on hand. Following this transaction, the properties were wholly owned by the Company and added to the borrowing base under the Credit Facility.
The following table summarizes the activity related to investment arrangements with the unaffiliated third parties:
Distributions Distributions
Third Party Net Investment Amount Non-Controlling Ownership Percentage Net Real Estate Assets Subject to Investment Arrangement Three Months Ended September 30, Nine Months Ended September 30,
Property Name
(Dollar amounts in thousands)
Investment Date September 30, 2021 September 30, 2021 September 30, 2021 As of December 31, 2020 2021 2020 2021 2020
Plaza Del Rio Medical Office Campus Portfolio (1)
May 2015
$ 364  2.3  % $ 13,008  $ 12,790  —  —  —  — 
_______
(1) One property within the Plaza Del Rio Medical Office Campus Portfolio was pledged to secure the Multi-Property CMBS Loan. See Note 4 - Mortgage Notes Payable for additional information.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Note 14 — Net Loss Per Share
The following is a summary of the basic and diluted net loss per share computation for the periods presented and has been retroactively adjusted to reflect the Stock Dividends (see Note 1 — Organization for additional details):
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net loss attributable to common stockholders (in thousands)
$ (41,968) $ (10,500) $ (70,183) $ (58,055)
Basic and diluted weighted-average shares outstanding (1)
99,097,121  99,026,440  99,068,356  98,799,334 
Basic and diluted net loss per share (1)
$ (0.42) $ (0.11) $ (0.71) $ (0.59)
(1) Retroactively adjusted for the effects of the Stock Dividends (see Note 1 — Organization for additional details).

Diluted net loss per share assumes the conversion of all common stock equivalents into an equivalent number of shares of common stock, unless the effect is antidilutive. The Company considers unvested restricted shares, Common OP Units and Class B Units to be common share equivalents. Series A Preferred Units are non-participating. 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 September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Unvested restricted shares (1)
187,108  253,806  228,019  282,801 
Common OP Units (2)
435,636  435,636  435,636  435,636 
Class B Units (3)
385,475  385,475  385,475  385,475 
Total weighted average antidilutive common stock equivalents
1,008,219  1,074,917  1,049,130  1,103,912 
________
(1) Weighted average number of antidilutive unvested restricted shares outstanding for the periods presented. There were 157,409 and 216,187 unvested restricted shares outstanding as of September 30, 2021 and 2020, respectively.
(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. There were 405,998 Common OP Units outstanding as of September 30, 2021 and 2020. 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. There were 359,250 Class B Units outstanding as of September 30, 2021 and 2020. These Class B Units are unvested as of September 30, 2021 and 2020 (see Note 9 — Related Party Transactions for additional information).
Note 15 — Segment Reporting
During the nine months ended September 30, 2021 and 2020, the Company operated in three reportable business segments for management and internal financial reporting purposes: MOBs, triple-net leased healthcare facilities, and SHOPs.
The Company evaluates performance and makes resource allocations based on its three business segments. The medical office building segment primarily consists of MOBs leased to healthcare-related tenants under long-term leases, which may require such tenants to pay a pro rata share of property-related expenses. The triple-net leased healthcare facilities segment primarily consists of investments in seniors housing properties, hospitals, inpatient rehabilitation facilities and skilled nursing facilities under long-term leases, under which tenants are generally responsible to directly pay property-related expenses. The SHOP segment consists of direct investments in seniors housing properties, primarily providing assisted living, independent living and memory care services, which are operated through engaging independent third-party operators.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Some of the Company’s properties move between its operating segments, for example if they are converted from being triple-net leased to third parties in the triple-net leased healthcare facilities segment to being leased to the TRS and operated and managed on the Company’s behalf by a third-party operator in the SHOP segment. When transfers between segments occur, the Company reclassifies the operating results of the transferred properties to their current segment for both the current and all historical periods in order to present a consistent group of property results. See Note 3 — Real Estate Investments, Net - “Impairments” and “Held for Use Assets” to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.
Over the last three years, the Company has had properties transfer between operating segments. Upon such transfers the Company retroactively restates the historical operating results for each segment for all periods presented in that filing and, thereafter, the Company will restate other later prior periods when they are subsequently reported in later filings for comparative purposes. As a result, the Company provides transition disclosure adjustments only for properties that have transitioned since the prior numbers were previously reported.
The Company transitioned its four LaSalle Properties on July 1, 2020, from its triple-net leased healthcare facilities segment to its SHOP segment (collectively, the “Transition Properties”). See Note 3 — Real Estate Investments for further information about these properties and the transition. The results of operations from the Transition Properties are presented within the SHOP segment for the nine months ended September 30, 2021 and 2020. The LaSalle Properties are now leased to the Company’s TRS and operated and managed on the Company’s behalf by a third-party operator. As previously reported, this segment transition has been applied retrospectively to historical periods beginning with the quarter ended September 30, 2020.
Net Operating Income
The Company evaluates the performance of the combined properties in each segment based on net operating income (“NOI”). NOI is defined as total revenues from tenants less property operating and maintenance expense. NOI excludes all other items of expense and income included in the financial statements in calculating net income (loss). The Company uses NOI to assess and compare property level performance and to make decisions concerning the operation of the properties. The Company believes that NOI is useful as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).
NOI excludes certain components from net income (loss) in order to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs that define NOI differently. The Company believes that in order to facilitate a clear understanding of the Company’s operating results, NOI should be examined in conjunction with net income (loss) as presented in the Company’s consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of the Company’s performance or to cash flows as a measure of the Company’s liquidity or ability to pay distributions.
The following tables reconcile the segment activity, retroactively adjusted for the Transition Properties to consolidated net loss for the periods presented:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2021 2021
(In thousands) Medical Office Buildings Triple-Net Leased Healthcare Facilities Seniors Housing — Operating Properties Consolidated Medical Office Buildings
Triple-Net Leased Healthcare Facilities (1)
Seniors Housing — Operating Properties (1)
Consolidated
Revenue from tenants
$ 27,036  $ 3,777  $ 51,193  $ 82,006  $ 79,839  $ 10,913  $ 155,850  $ 246,602 
Property operating and maintenance
8,359  444  42,415  51,218  23,980  1,993  126,160  152,133 
NOI
$ 18,677  $ 3,333  $ 8,778  30,788  $ 55,859  $ 8,920  $ 29,690  94,469 
Impairment charges
(26,642) (33,601)
Operating fees to related parties
(6,045) (17,851)
Acquisition and transaction related
(2,198) (2,453)
General and administrative
(4,723) (13,318)
Depreciation and amortization
(19,786) (59,390)
Interest expense
(11,775) (36,016)
Interest and other income
4  60 
Gain on sale of real estate investments
—  2,284 
Loss on non-designated derivatives (33) (32)
Income tax expense (55) (162)
Net income attributable to non-controlling interests 331  229 
Allocation for preferred stock (1,834) (4,402)
Net loss attributable to stockholders
$ (41,968) $ (70,183)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2020 2020
(In thousands) Medical Office Buildings
Triple-Net Leased Healthcare Facilities (1)
Seniors Housing — Operating Properties (1)
Consolidated Medical Office Buildings
Triple-Net Leased Healthcare Facilities (1)
Seniors Housing — Operating Properties (1)
Consolidated
Revenue from tenants
$ 25,810  $ 4,304  $ 65,721  $ 95,835  $ 77,970  $ 11,934  $ 200,830  $ 290,734 
Property operating and maintenance
8,066  828  52,784  61,678  23,106  1,850  158,233  183,189 
NOI
$ 17,744  $ 3,476  $ 12,937  34,157  $ 54,864  $ 10,084  $ 42,597  107,545 
Impairment charges
(1,011) (32,842)
Operating fees to related parties
(5,984) (17,969)
Acquisition and transaction related
(175) (680)
General and administrative
(3,162) (14,622)
Depreciation and amortization
(20,211) (60,589)
Interest expense
(12,840) (38,677)
Interest and other income
2  43 
Gain on sale of real estate investments —  2,306 
Loss on non-designated derivatives (69) (45)
Income tax benefit (expense)
(78) (78)
Net loss attributable to non-controlling interests (397) (223)
Allocation for preferred stock (732) (2,224)
Net loss attributable to stockholders
$ (10,500) $ (58,055)
_______________
(1) The results of operations from the Transition Properties are presented within the SHOP segment for the three and nine months ended September 30, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The following table reconciles the segment activity to consolidated total assets as of the periods presented:
(In thousands) September 30, 2021 December 31, 2020
ASSETS
Investments in real estate, net:
Medical office buildings
$ 1,006,298  $ 883,471 
Triple-net leased healthcare facilities 169,850  238,427 
Construction in progress 1,417  — 
Seniors housing — operating properties (1)
911,896  987,050 
Total investments in real estate, net
2,089,461  2,108,948 
Assets held for sale —  90 
Cash and cash equivalents 29,784  72,357 
Restricted cash 26,081  17,989 
Derivative assets, at fair value 65  13 
Straight-line rent receivable, net 23,994  23,322 
Operating lease right-of-use assets 13,790  13,912 
Prepaid expenses and other assets 30,411  34,932 
Deferred costs, net 14,987  15,332 
Total assets $ 2,228,573  $ 2,286,895 
_____________
(1) The Transition Properties are presented within the SHOP segment as of September 30, 2021 and December 31, 2020.
The following table reconciles capital expenditures by reportable business segment, excluding corporate non-real estate expenditures, for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2021 2020 2021 2020
Medical office buildings $ 2,100  $ 1,026  $ 3,710  $ 3,898 
Triple-net leased healthcare facilities —  9  73  67 
Seniors housing — operating properties (1)
2,246  2,937  7,718  13,664 
Total capital expenditures $ 4,346  $ 3,972  $ 11,501  $ 17,629 
______________________
(1) The results of operations from the Transition Properties are presented within the SHOP segment for the three and nine months ended September 30, 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Note 16 — Commitments and Contingencies
As of September 30, 2021, the Company had eight operating and six direct financing lease agreements. The eight operating leases have durations, including assumed renewals, ranging from 21.1 years to 86.0 years, excluding an adjacent parking lot lease with a term of 3.0 years. The Company did not enter into any additional ground leases during the three and nine months ended September 30, 2021.
As of September 30, 2021, the Company’s balance sheet included ROU assets and liabilities of $13.8 million and $9.1 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively. In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the new lease guidance as well as for new operating leases in the current period, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. 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 40.8 years and a weighted-average discount rate of 7.37% as of September 30, 2021. For the three and nine months ended September 30, 2021, the Company paid cash of $0.2 million and $0.7 million, respectively, and for amounts included in the measurement of lease liabilities and recorded expense of $0.2 million and $0.7 million, respectively, on a straight-line basis in accordance with the current accounting guidance. The Company paid cash of $0.2 million and $0.5 million, respectively, for amounts included in the measurement of lease liabilities and recorded expense of $0.2 million and $0.7 million, respectively, for the three and nine months ended September 30, 2020. The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss. The following table reflects the base cash rental payments due from the Company as of September 30, 2021:
Future Base Rent Payments
(In thousands) Operating Leases
Direct Financing Leases (1)
2021 (remainder) $ 176  $ 21 
2022 712  86 
2023 715  88 
2024 702  90 
2025 658  92 
Thereafter 28,442  7,344 
Total minimum lease payments 31,405  7,721 
Less: amounts representing interest (22,351) (2,962)
Total present value of minimum lease payments $ 9,054  $ 4,759 
_______
(1) The Direct Finance Lease liability is included in Accounts Payable and accrued expenses on the balance sheet as of September 30, 2021. 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.
Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or known to be contemplated against the Company or its properties.
Environmental Matters
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 September 30, 2021, 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:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Dividend Declaration
On October 1, 2021, the Company announced the declaration of the Stock Dividend of 0.014655 shares of the Company’s common stock, on each share of the Company’s outstanding common stock. The Stock Dividend was issued on October 15, 2021 to holders of record of the Company’s common stock at the close of business on October 12, 2021.
Underwritten Offering — Series B Preferred Stock
On October 6, 2021, the Company completed the initial issuance and sale of 3,200,000 shares of its 7.125% Series B Preferred Stock in an underwritten public offering at a public offering price equal to the liquidation preference of $25.00 per share. The offering generated gross proceeds of $80.0 million and net proceeds of $77.2 million, after deducting underwriting discounts.
On October 12, 2021 the underwriters in the offering exercised their option to purchase additional shares of Series B Preferred Stock and the Company sold 430,000 shares Series B Preferred Stock, which generated gross proceeds of $10.8 million and resulted in net proceeds of $10.4 million after deducting underwriting discounts.
Pursuant to the terms of the Credit Facility, all proceeds were used to repay amounts outstanding under the Credit Facility. Subject to the terms and conditions set forth in the Credit Facility, we may then draw on the Credit Facility to borrow any amounts so repaid.
Preferred Stock Equity Line Termination
In November 2021, the Company terminated its $15.0 million Preferred Stock Equity Line.
Credit Facility Amendment
On November 12, 2021 the Company entered into the third amendment to the agreement governing or Credit Facility. See Note 5 — Credit Facilities.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Healthcare Trust, Inc. and the notes thereto. As used herein, the terms the “Company,” “we,” “our” and “us” refer to Healthcare Trust, Inc., a Maryland corporation, including, as required by context, Healthcare Trust Operating Partnership, LP (our “OP”), a Delaware limited partnership, and its subsidiaries. The Company is externally managed by Healthcare Trust Advisors, LLC (our “Advisor”), a Delaware limited liability company. Capitalized terms used herein, but not otherwise defined, have the meaning ascribed to those terms in “Part I — Financial Information” included in the notes to the consolidated financial statements and contained herein.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Healthcare Trust, Inc. (“we,” “our” or “us”) and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2020.
Overview
We are an externally managed REIT that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate focused on medical office buildings (“MOBs”), healthcare properties leased on a triple net basis (“NNN properties”), and senior housing operating properties (“SHOPs”). As of September 30, 2021, we owned 201 properties located in 33 states and comprised of 9.3 million rentable square feet.
Substantially all of our business is conducted through the OP, a Delaware limited partnership, and its wholly owned subsidiaries. Our Advisor manages our day-to-day business with the assistance of Healthcare Trust Properties, LLC (our “Property Manager”). Our Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us. We also reimburse these entities for certain expenses they incur in providing these services to us. Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, also has an interest in us through ownership of interests in our OP. As of September 30, 2021, we owned 54 seniors housing properties using the REIT Investment Diversification and Empowerment Act (“RIDEA”) structure in our SHOP segment. Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by a person who qualifies as an eligible independent contractor.
Since October 2020, we have declared and issued quarterly dividends solely in shares of our common stock. Stock dividends issued in October 2020 and January 2021 were equal to 0.01349 shares of common stock on each share of our outstanding common stock. The stock dividends issued in April 2021, July 2021 and October 2021 were equal to 0.014655 shares of our common stock on each share of our outstanding common stock. Dividends payable entirely in shares of common stock are treated in a fashion similar to a stock split for accounting purposes specifically related to per-share calculations for the current and prior periods. The aggregate impact of all five stock dividends was an increase of 6,754,203 shares. No additional shares of common stock were issued during the three and nine months ended September 30, 2021. References made to weighted-average shares and per-share amounts in the accompanying consolidated statements of operations and comprehensive income have been retroactively adjusted to reflect the increase of 0.07299 shares for every share outstanding due to the stock dividends. Additionally, other references to weighted-average shares outstanding and per-share amounts have been retroactively adjusted for the stock dividends and are noted as such throughout the accompanying financial statements and footnotes.
On April 1, 2021, we published a new Estimated Per-Share NAV equal to $14.50 as of December 31, 2020. Our previous Estimated Per-Share NAV was equal to $15.75 as of December 31, 2019. The Estimated Per-Share NAV reflects the October 2020 stock dividend we issued and took into consideration the January 2021 stock dividend we issued but has not been adjusted to reflect the April 2021, July 2021 or October 2021 stock dividends we issued and will not be adjusted for stock dividends we pay in the future until the board of directors (the “Board”) determines a new Estimated Per-Share NAV. Paying dividends in
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additional shares of common stock will, all things equal, cause the value of each share to decline because the number of shares outstanding will increase when Stock Dividends are issued; however, because each stockholder will receive the same number of new shares, the total value of our common stockholders’ investment, all things equal, will not change assuming no sales or other transfers. Unless we list our common stock on a national security exchange, we intend to publish Estimated Per-Share NAV at least once annually.
Management Update on the Impacts of the COVID-19 Pandemic
The COVID-19 global pandemic has created several risks and uncertainties that have had and may continue to have an impact on our business, including our financial condition, future results of operations and our liquidity. Negative impacts of the COVID-19 pandemic have caused some of our tenants to be unable to make rent payments to us timely, or at all. There may be a decline in the demand for tenants to lease real estate, as well as a negative impact on rental rates. The extent to which the ongoing global COVID-19 pandemic, including the outbreaks that have occurred and may occur in markets where we own properties, impacts our operations and those of our tenants and third-party operators, will continue to depend on future developments, including the scope, severity and duration of the pandemic, and the actions taken to contain the COVID-19 or treat its impact, among others, which are highly uncertain and cannot be predicted with confidence, but could be material.
As of September 30, 2021, our MOB segment had an occupancy of 90.9% with a weighted-average remaining lease term of 4.9 years, (based on annualized straight-line rent as of September 30, 2021), our triple-net leased healthcare facilities segment had an occupancy of 94.5% with a weighted average remaining lease term of 5.8 years (based on annualized straight-line rent as of September 30, 2021) and our SHOP segment had an occupancy of 74.8%. During the second and third quarters of 2021, we have experienced relative stability with respect to occupancy and operating costs in our SHOP portfolio, although there can be no assurance that future developments in the course of the pandemic will not cause further adverse impacts on our occupancy and cost levels. Our NNN and MOB segments have also been relatively stable during these quarters. The negative impact of the pandemic on our results of operations and cash flows has impacted and could continue to impact our ability to comply with covenants in our senior secured credit facility (the “Credit Facility”), which is comprised of our revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”), and the amount available for future borrowings thereunder. We would have been in default of a covenant contained in the Credit Facility requiring the Company to maintain a certain minimum Fixed Charge Coverage Ratio for the four fiscal quarter period ended September 30, 2021. We entered into an amendment to our Credit Facility on November 12, 2021, 2021 as part of our efforts to continue addressing the continuing adverse impacts of the COVID-19 pandemic on our SHOP segment. For additional information, see Note 5 — Credit Facilities and Note 17 — Subsequent Events.
For a further discussion of the risks and uncertainties associated with the impact of the COVID-19 pandemic on us, please see Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Rent Collections
We experienced delays in rent collection in the second, third and fourth quarters of 2020 and the first quarter of 2021. We have taken several steps to mitigate the impact of the pandemic on our business. We have been in direct contact with our tenants and operators since the crisis began, cultivating open dialogue and deepening the fundamental relationships that we have carefully developed through prior transactions and historic operations. We have achieved mutually agreeable solutions with our tenants and in some cases, during the year ended December 31, 2020, we executed lease amendments providing for deferral of rent. Based on this approach and the overall financial strength and creditworthiness of our tenants, we believe that we have had positive results in our cash rent collections during this pandemic. During the nine months ended September 30, 2021, we did not enter into any rent deferral agreements with any of our tenants and all amounts previously deferred under prior rent deferral agreements have been collected.
We have collected nearly 100% of the original cash rent due for the first nine months of 2021 in our MOB segment and 100% in our triple-net leased healthcare facilities segment. Cash rental payments for our 54 SHOPs is primarily paid for by the residents through private payer insurance or directly, and to a lesser extent, by government reimbursement programs such as Medicaid and Medicare. These cash rental payments are subject to timing differences, therefore we have not provided the amount of quarterly cash rent collected for our SHOP segment.
“Original cash rent” refers to contractual rents on a cash basis due from tenants as stipulated in their original executed lease agreement at inception or as amended, prior to any rent deferral agreement. We calculate “original cash rent collections” by comparing the total amount of rent collected during the period to the original cash rent due. Total rent collected during the period includes both original cash rent due and payments made by tenants pursuant to rent deferral agreements. Eliminating the impact of deferred rent paid, we collected nearly 100% of original cash rent due for the third quarter of 2021.
A deferral agreement is an executed or approved amendment to an existing lease to defer a certain portion of cash rent due to a future period. During the year ended December 31, 2020, we granted rent deferrals for an aggregate of $0.4 million or less
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than 1% of original cash rent due for the year. No additional rent was deferred during the three and nine months ended September 30, 2021.
We have also granted rent concessions which serve to reduce revenue in our SHOP segment.
Seniors Housing Properties
In early March 2020, we implemented preventative actions at all our seniors housing properties in our SHOP segment, including restrictions on visitation except in very limited and controlled circumstances, social distancing measures, and the screening of all persons entering these facilities. Some of the additional steps we have taken to address the COVID-19 pandemic include, enhanced training for staff members, the implementation of Telehealth to help residents be safe while keeping appointments with important, but non-emergency, health providers, virtual tours for potential new residents, and agreements between some of our facilities and local lab partners to provide COVID-19 testing services.
Starting 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 has trended lower since the second half of March 2020 as government policies and implementation of infection control best practices and prospective residents’ concerns about communal-setting COVID-19 spread limited resident move-ins. We have also continued to experience lower inquiry volumes and reduced in-person tours during the pandemic. These and other impacts of the COVID-19 pandemic have affected and could continue to affect our ability to fill vacancies. We have also continued to experience lower inquiry volumes and reduced in-person tours during the pandemic. The below table presents SHOP occupancy since the onset of the COVID-19 pandemic in March 2020:
(as of)
Number of Properties(1)
Rentable Square Feet Percentage Leased
December 31, 2019 59 4,314,517 85.7%
March 31, 2020 63 4,559,412 84.1%
June 30, 2020 63 4,559,412 79.5%
September 30, 2020 67 4,662,165 77.9%
December 31, 2020 59 4,367,124 75.1%
March 31, 2021 55 4,265,466 72.7%
June 30, 2021 54 4,133,166 73.2%
September 30, 2021 54 4,133,166 74.8%
(1) Exclusive of two land parcels.
The declines in revenue we experienced during the first nine months of 2021, as compared to the first nine months of 2020, were primarily attributable to this decline in occupancy and our SHOP disposals. In addition, starting in mid-March of 2020, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as our operators took appropriate actions to protect residents and caregivers. At our SHOP facilities, we bear these cost increases. These trends accelerated beginning in the second quarter of 2020, and continued into 2021. There can be no assurance, however, that future developments in the course of the pandemic will not cause further adverse impacts to our occupancy and cost levels, and these trends may continue to impact us and have a material adverse effect on our revenues and income in the other quarters. We believe that, as infections decline and more vaccinations are administered during 2021, our occupancy may further increase. However, there can be no assurance as to when or if we will be able to approach pre-pandemic levels of occupancy due to, among other factors, the ongoing vaccine hesitancy and resistance in certain segments of the population and the recent spread of more transmissible COVID-19 variants.
The pandemic raises the risk of an elevated level of resident exposure to illness and restrictions on move-ins at our SHOPs, which has and could also continue to adversely impact occupancy and thus revenues as well as increase costs. We believe that the actions we have taken help reduce the incidences of COVID-19 at our properties, but there can be no assurance in this regard. There have been some incidences of COVID-19 among the residents and staff at certain of our seniors housing properties. Further incidences, or the perception that outbreaks may occur, could materially and adversely affect our revenues and income, as well as cause reputational harm to us and our tenants, managers and operators.
The extent to which the ongoing global COVID-19 pandemic, including the outbreaks that have occurred and may occur in markets where we own properties, impacts our operations and those of our tenants and third-party operators, will continue to depend on future developments, including the scope, severity and duration of the pandemic, and the actions taken to contain the COVID-19 or treat its impact, among others, which are highly uncertain and cannot be predicted with confidence, but could be material.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing funding to Medicare providers during the COVID-19 pandemic. Funds provided under the program are required to be
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used for the preparation, prevention, and medical response to COVID-19, and are designated to reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19. During the nine months ended September 30, 2021, we received $5.1 million in funding from CARES Act grants. Previously, we received $3.6 million in grants during the year ended December 31, 2020, $0.5 million and $3.6 million of which was received in the three and nine months ended September 30, 2020, respectively. Subsequent to September 30, 2021, we applied for additional funds under the CARES Act, however, there can be no assurance that any funds requested will actually be received. We consider the funds to be a grant contribution from the government and the full amount was recognized as a reduction of property operating expenses in our consolidated statement of operations during the nine months ended September 30, 2021. There can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.
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 2020 Annual Report on Form 10-K. 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.
Recently Issued Accounting Pronouncements
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.
CARES Act Grants
As discussed in Note 2 — Summary of Significant Accounting Policies - CARES Act Grants, we adopted a new policy with respect to accounting for such grants received.
Properties
The following table presents certain additional information about the properties we owned as of September 30, 2021:
Portfolio Number
of Properties 		Rentable
Square Feet
Percentage Leased(1)
Weighted Average Remaining
Lease Term in Years (2)
Gross Asset Value (3)
(In thousands)
Medical Office Buildings 131 4,285,174  90.9% 4.9 $ 1,239,699 
Triple-Net Leased Healthcare Facilities:
Hospitals 6 514,962  90.7% 5.5 124,677 
Post-Acute / Skilled Nursing 8 354,016  100.0% 6.1 86,574 
Total Triple-Net Leased Healthcare Facilities 14 868,978  94.5% 5.8 211,251 
Seniors Housing — Operating Properties 54 4,133,166  74.8% (4) N/A 1,166,826 
Land 2 N/A N/A N/A 3,665 
Total Portfolio 201 9,287,318  $ 2,621,441 
_______________
(1)Inclusive of leases signed but not yet commenced as of September 30, 2021.
(2)Weighted-average remaining lease term in years is calculated based on square feet as of September 30, 2021.
(3)Gross asset value represents total real estate investments, at cost ($2.6 billion total as of September 30, 2021) net of gross market lease intangible liabilities ($23.1 million total as of September 30, 2021). Impairment charges are already reflected within gross asset value.
(4)Weighted by unit count as of September 30, 2021. SHOP units were 74.3% occupied.
N/A    Not applicable.
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Results of Operations
We operate in three reportable business segments for management and internal financial reporting purposes: MOBs, triple-net leased healthcare facilities, and SHOPs. In our MOB operating segment, we own, manage and lease single and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. In our triple-net leased healthcare facilities operating segment, we own, manage and lease seniors housing properties, hospitals, post-acute care and skilled nursing facilities throughout the United States under long-term triple-net leases, and tenants are generally directly responsible for all operating costs of the respective properties. Our Property Manager or third party managers manage our MOBs and our triple-net leased healthcare facilities. In our SHOP segment, we invest in seniors housing properties using the RIDEA structure. As of September 30, 2021, we had six eligible independent contractors operating 54 SHOPs (not including two land parcels). All of our properties across all three business segments are located throughout the United States.
Same Store Properties
Information based on Same Store, Acquisitions and Dispositions (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered. As of September 30, 2021, we owned 201 properties. There were 178 properties owned for the entire year ended December 31, 2020 and the nine months ended September 30, 2021 (our “Same Store” properties). Our Same Store properties include two vacant land parcels. Since January 1, 2020, we acquired 23 properties (our “Acquisitions”) and disposed of 15 properties (our “Dispositions”). As described in more detail under “Results of Operations — Comparison of the Three Months Ended September 30, 2021 — Transition Properties” below, our Same Store properties include four Transition Properties that were transitioned from Senior Housing - Triple Net Leased to our SHOP segment effective July 1, 2020. These four Transition Properties were owned for the entire same store period and merely moved between segments. We retroactively adjusted our Same Store for those segments to include the Transition Properties as part of our Same Store in our SHOP segment and excluded them from the Same Store in our triple-net leased healthcare facilities segment (each segment as so retroactively adjusted, the “Segment Same Store”). See Note 3 — Real Estate Investments, Net for further information about the Transition Properties and the transition.
The following table presents a roll-forward of our properties owned from January 1, 2020 to September 30, 2021:
Number of Properties
Number of properties, January 1, 2020 193 
Acquisition activity during the year ended December 31, 2020 9 
Disposition activity during the year ended December 31, 2020 (9)
Number of properties, December 31, 2020 193 
Acquisition activity during the nine months ended September 30, 2021 14 
Disposition activity during the nine months ended September 30, 2021 (6)
Number of properties, September 30, 2021 201 
Number of Same Store Properties (1)
178 
___________
(1) Includes the acquisition of a land parcel adjacent to an existing property which is not considered an Acquisition.

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In addition to the comparative period-over-period discussions below, please see the “Overview — Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s responses.
Comparison of the Three Months Ended September 30, 2021 and 2020
Net loss attributable to common stockholders was $42.0 million and $10.5 million for the three months ended September 30, 2021 and 2020, respectively. The following table shows our results of operations for the three months ended September 30, 2021 and 2020 and the period to period change by line item of the consolidated statements of operations:
  Three Months Ended September 30, Increase (Decrease)
(Dollars in thousands) 2021 2020 $
Revenue from tenants $ 82,006  $ 95,835  $ (13,829)
Operating expenses:  
Property operating and maintenance 51,218  61,678  (10,460)
Impairment charges 26,642  1,011  25,631 
Operating fees to related parties 6,045  5,984  61 
Acquisition and transaction related 2,198  175  2,023 
General and administrative 4,723  3,162  1,561 
Depreciation and amortization 19,786  20,211  (425)
Total expenses
110,612  92,221  18,391 
Operating income (loss) before gain on sale of real estate investments (28,606) 3,614  (32,220)
Gain on sale of real estate investments —  —  — 
Operating loss (28,606) 3,614  (32,220)
Other income (expense):
Interest expense (11,775) (12,840) 1,065 
Interest and other income 4  2  2 
(Loss) gain on non-designated derivatives (33) (69) 36 
Total other expenses
(11,804) (12,907) 1,103 
Loss before income taxes (40,410) (9,293) (31,117)
Income tax expense (55) (78) 23 
Net loss (40,465) (9,371) (31,094)
Net (income) loss attributable to non-controlling interests 331  (397) 728 
Allocation for preferred stock (1,834) (732) (1,102)
Net loss attributable to common stockholders $ (41,968) $ (10,500) $ (31,468)
_________
NM — Not Meaningful
Transition Properties
Some of our properties move between our operating segments, for example if they are converted from being triple-net leased to third parties in our triple-net leased healthcare facilities segment to being leased to one of our TRSs and operated and managed on our behalf by a third-party operator in our SHOP segment. When transfers between segments occur, we reclassify the operating results of the transferred properties to their current segment for both the current and all historical periods in order to present a consistent group of property results. See Note 3 — Real Estate Investments, Net - “Impairments” and “Held for Use Assets” and Note 15 — Segment Reporting to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.
Over the last three years, we have had properties transfer between operating segments. Upon such transfers we retroactively restate the historical operating results for the segment for all periods presented in that filing and, thereafter, we will restate other later prior periods when they are subsequently reported in later filings for comparative purposes. As a result, we provide transition disclosure adjustments only for properties that have transitioned since the prior numbers were previously
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reported. We transitioned the four triple-net leased properties in Texas (the “LaSalle Properties”) effective July 1, 2020 (the “Transition Properties”).
As described in more detail below, our Same Store includes the four Transition Properties, which transitioned from our triple-net leased healthcare facilities segment to our SHOP segment during the third quarter of 2020 and were reflected on this basis beginning with the Company’s quarterly filing for September 30, 2020.
During the three months ended September 30, 2021, as shown in more detail in the table below, the Transition Properties contributed approximately $(0.4) million of net operating income (loss) (“NOI”). The results of operations of the Transition Properties are included in Segment Same Store with respect to the SHOP segment. The bad debt expense relating to the Transition Properties is included as a reduction to revenue from tenants on the consolidated statement of operations.
For purposes of the discussion and analysis of the segment results of operations during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020, the results of operations for the Transition Properties are included as part of our SHOP segment and excluded from our triple-net leased healthcare facilities segment.
The following table presents by segment Same Store properties’ NOI before and after adjusting for the Transition Properties as described above, to arrive at “Segment Same Store” results. Our MOB segment was not affected by the Transition Properties.
Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Increase (Decrease)
(Dollar amounts in thousands) Same Store Properties Transition Properties Segment Same Store Same Store Properties Transition Properties Segment Same Store Same Store Properties Transition Properties Segment Same Store
NNN Segment
Revenue from tenants $ 5,125  $ (1,348) $ 3,777  $ 5,559  $ (1,509) $ 4,050  $ (434) $ 161  $ (273)
Less: Property operating and maintenance 2,210  (1,773) 437  2,553  (1,896) 657  (343) 123  (220)
NOI $ 2,915  $ 425  $ 3,340  $ 3,006  $ 387  $ 3,393  $ (91) $ 38  $ (53)
SHOP Segment
Revenue from tenants $ 45,149  $ 1,348  $ 46,497  $ 49,485  $ 1,509  $ 50,994  $ (4,336) $ (161) $ (4,497)
Less: Property operating and maintenance 37,614  1,773  39,387  37,423  1,896  39,319  191  (123) 68 
NOI $ 7,535  $ (425) $ 7,110  $ 12,062  $ (387) $ 11,675  $ (4,527) $ (38) $ (4,565)

Net Operating Income
NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio. NOI is equal to revenue from tenants less property operating and maintenance expenses. NOI excludes all other financial statement amounts included in net income (loss) attributable to common stockholders. We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis. See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures included elsewhere in this Quarterly Report for additional disclosure and a reconciliation to our net income (loss) attributable to common stockholders.
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Segment Results — Medical Office Buildings
The following table presents the components of NOI and the period to period change within our MOB segment for the three months ended September 30, 2021 and 2020:
Same Store (1)
Acquisitions (2)
Dispositions (3)
Segment Total (4)
  Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease)
(Dollars in thousands) 2021 2020 $ 2021 2020 $ 2021 2020 $ 2021 2020 $
Revenue from tenants $ 24,840  $ 25,160  $ (320) $ 2,196  $ 650  $ 1,546  $ —  $ —  $ —  $ 27,036  $ 25,810  $ 1,226 
Less: Property operating and maintenance
7,804  7,937  (133) 555  129  426  —  —  —  8,359  8,066  293 
      NOI $ 17,036  $ 17,223  $ (187) $ 1,641  $ 521  $ 1,120  $ —  $ —  $ —  $ 18,677  $ 17,744  $ 933 
_______________
(1)Our MOB segment included 112 Same Store properties.
(2)Our MOB segment included 19 Acquisition properties.
(3)Our MOB segment included one Disposition property.
(4)Our MOB segment included 131 properties.
NM — Not Meaningful
Revenues from tenants is primarily related to contractual rent received from tenants in our MOBs. It also includes operating expense reimbursements which generally increase in proportion with the increase in property operating and maintenance expenses in our MOB segment. Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, in addition to base rent.
Property operating and maintenance relates to the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third-party property management fees.
During the three months ended September 30, 2021, the MOB segment contributed a $0.9 million increase in NOI as compared to the three months ended September 30, 2020 primarily as a result of our 19 MOB acquisitions during the period from January 1, 2020 through September 30, 2021, partially offset by a $0.2 million decrease in NOI from our Same Store properties.
Segment Results — Triple-Net Leased Healthcare Facilities
The following table presents the components of NOI and the period to period change within our triple-net leased healthcare facilities segment for the three months ended September 30, 2021 and 2020:
Same Store (1)
Acquisitions (2)
Dispositions (3)
Segment Total (4)
  Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease)
(Dollars in thousands) 2021 2020 $ 2021 2020 $ 2021 2020 $ 2021 2020 $
Revenue from tenants
$ 3,777  $ 4,050  $ (273) $ —  $ —  $ —  $ —  $ 254  $ (254) $ 3,777  $ 4,304  $ (527)
Less: Property operating and maintenance
437  657  (220) —  —  —  7  171  (164) 444  828  (384)
NOI
$ 3,340  $ 3,393  $ (53) $ —  $ —  $ —  $ (7) $ 83  $ (90) $ 3,333  $ 3,476  $ (143)
_________
(1)    Our triple-net leased healthcare facilities segment included 14 Same Store properties.
(2)Our triple-net leased healthcare facilities segment included zero Acquisition properties.
(3)Our triple-net leased healthcare facilities segment included one Disposition properties.
(4)Our triple-net leased healthcare facilities segment included 14 properties.
Revenue from tenants for our triple-net leased healthcare facilities generally consist of fixed rental amounts (which may be subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms. These revenues are contractual rent received from tenants that does not vary based on the underlying operating performance of the properties. In addition, revenue from tenants also includes operating expense reimbursements in our triple-net leased healthcare facilities segment, which generally include reimbursement for property operating expenses that we pay on behalf of tenants in this segment. However, pursuant to many of our lease agreements in this segment, tenants are generally directly responsible for all operating costs of the respective properties in addition to base rent. Property operating and maintenance expense should typically include minimal activity in our triple-net leased healthcare facilities segment except for real estate taxes and insurance. Real estate taxes are typically paid directly by the tenants; however, they may be paid by us and reimbursed by the tenants.
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During the three months ended September 30, 2021, revenue from tenants in our triple-net leased healthcare facilities segment decreased $0.5 million compared to the three months ended September 30, 2020, and was primarily driven by our Disposition Properties of $0.2 million as well as by a $0.3 million decrease from our Same Store properties.
Property operating and maintenance expenses which primarily relates to property taxes and operating expenses, were $0.4 million and $0.8 million during the three months ended September 30, 2021 and 2020, respectively. The decrease of $0.4 million was primarily driven by our Disposition properties of $0.2 million and by a $0.2 million decrease in our Same Store properties.
Segment Results — Seniors Housing - Operating Properties
The following table presents the components of NOI and the period to period change within our SHOP segment for the three months ended September 30, 2021 and 2020:
Same Store (1)
Acquisitions (2)
Dispositions (3)
Segment Total (4)
  Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease) Three Months Ended September 30, Increase (Decrease)
(Dollars in thousands) 2021 2020 $ 2021 2020 $ 2021 2020 $ 2021 2020 $
Revenue from tenants $ 46,497  $ 50,994  $ (4,497) $ 3,815  $ 3,695  $ 120  $ 881  $ 11,032  $ (10,151) $ 51,193  $ 65,721  $ (14,528)
Less: Property operating and maintenance
39,387  39,319  68  2,952  3,071  (119) 76  10,394  (10,318) 42,415  52,784  (10,369)
NOI
$ 7,110  $ 11,675  $ (4,565) $ 863  $ 624  $ 239  $ 805  $ 638  $ 167  $ 8,778  $ 12,937  $ (4,159)
________
(1)Our SHOP segment included 52 Same Store properties, including two land parcels.
(2)Our SHOP segment included four Acquisition properties.
(3)Our SHOP segment included 13 Disposition properties.
(4)Our SHOP segment included 56 properties, including two land parcels.
Revenue 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 relates to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third party operators, and costs associated with maintaining the physical site.
During the three months ended September 30, 2021, revenues from tenants decreased by $14.5 million in our SHOP segment as compared to the three months ended September 30, 2020 which was primarily driven by a decrease in revenue of $4.5 million due to our Same Store properties, which includes our Transition Properties, as well as a decrease in revenue of $10.2 million due to our Disposition properties. These revenue decreases were partially offset by an increase of $0.1 million due to our Acquisition properties.
Revenues declined in our Same Store SHOPs primarily due to a decrease in occupancy as a result of the impact of COVID-19 as discussed in Management Update on the Impacts of the COVID-19 Pandemic. Regulatory and government-imposed restrictions and infectious disease protocols have hindered, and continue to hinder, our ability to accommodate and conduct in-person tours, process and attract new move-ins at our SHOPs and these and other impacts of the COVID-19 pandemic have affected, and could continue to affect, our ability to fill vacancies.
In addition, we generated a portion of our SHOP revenue from skilled nursing facilities (which include ancillary revenue from non-residents) at one of our Same Store SHOPs. This ancillary revenue decreased $0.6 million from $0.7 million during the three months ended September 30, 2020 to $0.1 million during the quarter ended September 30, 2021 as a result of limited services offered at our skilled nursing facilities during the COVID-19 pandemic to protect our residents and on-site staff. Our two largest skilled nursing facilities in Lutz, Florida and Wellington, Florida were sold in December 2020 and May 2021, respectively. These properties generated ancillary revenue during the three months ended September 30, 2020 of $2.1 million which is included in our Disposition Properties. As a result of these dispositions, we expect ancillary revenue to continue to decline in future quarters relative to prior quarters where we owned these properties.
During the three months ended September 30, 2021, property operating and maintenance expenses decreased $10.4 million in our SHOP segment as compared to the three months ended September 30, 2020, primarily due to a decrease of $10.3 million from our Disposition properties and a decrease of $0.1 million from our Acquisition properties. These decreases were partially offset by an increase of $0.1 million from our Same Store properties, which include our Transition Properties.
We received funds from the CARES Act in the three months ended September 30, 2020 totaling $0.5 million, which did not recur in the three months ended September 30, 2021. The funds received in 2020 were primarily due to our Lutz, Florida and Wellington, Florida properties which were sold in December 2020 and May 2021, respectively, and the impact of the
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receipt of these funds is reflected as part of our Disposition Properties in the table above. There can be no assurance that the CARES Act program will be extended or any further amounts received. See the “Overview - Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken in response.
Other Results of Operations
Impairment Charges
We incurred $26.6 million of impairment charges for the three months ended September 30, 2021 related to our LaSalle Properties. As a result of changes to our expected holding period for these properties, we determined that projected cash flows, on an undiscounted basis, did not equal or exceed the carrying value of the properties over its intended holding period, and concluded that the fair market value of the properties had declined. The fair value measurement was determined by estimated discounted cash flows using three significant unobservable inputs, including the cash flow discount rate, terminal capitalization rate, and the estimated stabilized occupancy range. Accordingly, we wrote the properties down to their estimated fair values.
We incurred $1.0 million of impairment charges for the three months ended September 30, 2020 on the 11 Michigan SHOP properties as a result of expected additional closing costs that were not previously anticipated, which reduced the net amount expected to be realized on the sale of properties. See Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges for the three months ended September 30, 2020.
Operating Fees to Related Parties
Operating fees to related parties were $6.0 million for the three months ended September 30, 2021 and September 30, 2020.
Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis. We pay a base management fee equal to $1.6 million per month, while the variable portion of the base management fee is equal, per month, to one twelfth per month of 1.25% of the cumulative net proceeds of any equity raised subsequent to February 17, 2017. Asset management fees were $5.2 million and $5.0 million in the three months ended September 30, 2021 and 2020, respectively. 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. Variable asset management fees will further increase with additional equity offerings, if any, including the Series B Preferred Stock issued in October 2021 (see Note 17 — Subsequent Events for additional information).
Property management fees were $1.0 million for the three months ended September 30, 2021 and $1.0 million for the three months ended September 30, 2020. 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.
Acquisition and Transaction Related Expenses
Acquisition and transaction related expenses were $2.2 million for the three months ended September 30, 2021, compared to approximately $0.2 million for the three months ended September 30, 2020. This increase is primarily due to the write-off of offering costs relating to the Preferred Equity Line of $1.2 million, a $0.2 million settlement related to our Jupiter, Florida disposition which occurred in the second quarter of 2021 and $0.6 million of non-recurring litigation costs related to our Michigan dispositions which occurred in the first quarter of 2021.
General and Administrative Expenses
General and administrative expenses increased by $1.5 million to $4.7 million for the three months ended September 30, 2021 compared to $3.2 million for the three months ended September 30, 2020, which includes $2.1 million and $2.3 million (before professional fees described below) for the three months ended September 30, 2021 and September 30, 2020, respectively, incurred in expense reimbursements and distributions on partnership units of the OP designated as “Class B Units” (“Class B Units”) to related parties. Class B Units will not receive distributions, and no expense will be incurred, for so long as we pay distributions to our common stockholders in stock instead of cash.
The majority of the increase is due to a $1.2 million reduction of expense from the professional fee credits recorded in the third quarter of 2020 related to 2019 bonus awards made by the Advisor to employees of the Advisor. There was no similar reduction in the three months ended September 30, 2021, however, a similar professional fee credit of $1.0 million was reflected in the three months ended June 30, 2021 (i.e. the previous quarter) relating to the 2020 bonuses. This increase was also
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due to higher auditing expenses of $0.2 million in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.
Depreciation and Amortization Expenses
Depreciation and amortization expense decreased $0.4 million to $19.8 million for the three months ended September 30, 2021 from $20.2 million for the three months ended September 30, 2020. The decrease was primarily due to reduced depreciation and amortization as a result of our dispositions partially offset by additional depreciation from our recent acquisitions.
Gain on Sale of Real Estate Investments
During the three months ended September 30, 2021 and 2020 we did not dispose of any properties.
Interest Expense
Interest expense decreased by $1.1 million to $11.8 million for the three months ended September 30, 2021 from $12.8 million for the three months ended September 30, 2020. The decrease in interest expense resulted from lower average balances of amounts outstanding under our Revolving Credit Facility during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. As of September 30, 2021 our outstanding debt obligations were $1.2 billion at a weighted average interest rate of 3.56% per year. As of September 30, 2020, we had total borrowings of $1.3 billion, at a weighted average interest rate of 3.57% per year.
Our interest expense in future periods will vary based on our level of future borrowings, the cost of borrowings among other factors.
Interest and Other Income
Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $4,000 and a $2,000 income for the three months ended September 30, 2021 and 2020, respectively.
(Loss) Gain on Non-Designated Derivatives
The (loss) in the three months ended September 30, 2021 and the loss in the three months ended September 30, 2020 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 Fannie Mae Master Credit Facilities, which have floating interest rates.
Income Tax Expense
Income taxes generally relate to our SHOPs, which are leased by our TRS. We recorded an income tax expense of $0.1 million for the three months ended September 30, 2021 and 2020.
Because of our TRS’s recent operating history of losses and the on-going 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 as of September 30, 2021. If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive income (loss).
Net Loss (Income) Attributable to Non-Controlling Interests
Net loss attributable to non-controlling interests was approximately $0.3 million for the three months ended September 30, 2021 and net income attributable to non-controlling interests was $0.4 million for the three months ended September 30, 2020. These amounts represent the portion of our net loss that is related to the 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 non-controlling interest holders in our subsidiaries that own certain properties.
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Comparison of the Nine Months Ended September 30, 2021 and 2020
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 $70.2 million and $58.1 million for the nine months ended September 30, 2021 and 2020, respectively. The following table shows our results of operations for the nine months ended September 30, 2021 and 2020 and the period to period change by line item of the consolidated statements of operations:
  Nine Months Ended September 30, Increase (Decrease)
(Dollars in thousands) 2021 2020 $
Revenue from tenants $ 246,602  $ 290,734  $ (44,132)
Operating expenses:    
Property operating and maintenance 152,133  183,189  (31,056)
Impairment charges 33,601  32,842  759 
Operating fees to related parties 17,851  17,969  (118)
Acquisition and transaction related 2,453  680  1,773 
General and administrative 13,318  14,622  (1,304)
Depreciation and amortization 59,390  60,589  (1,199)
Total expenses
278,746  309,891  (31,145)
Operating loss before gain on sale of real estate investments (32,144) (19,157) (12,987)
Gain on sale of real estate investments 2,284  2,306  (22)
Operating (loss) income
(29,860) (16,851) (13,009)
Other income (expense):
Interest expense (36,016) (38,677) 2,661 
Interest and other income
60  43  17 
Loss on non-designated derivatives (32) (45) 13 
Total other expenses
(35,988) (38,679) 2,691 
Loss before income taxes (65,848) (55,530) (10,318)
Income tax expense (162) (78) (84)
Net loss (66,010) (55,608) (10,402)
Net (income) loss attributable to non-controlling interests 229  (223) 452 
Preferred stock dividends (4,402) (2,224) (2,178)
Net loss attributable to common stockholders $ (70,183) $ (58,055) $ (12,128)

Transition Properties
Some of our properties move between our operating segments, for example if they are converted from being triple-net leased to third parties in our triple-net leased healthcare facilities segment to being leased to one of our TRSs and operated and managed on our behalf by a third-party operator in our SHOP segment. When transfers between segments occur, we reclassify the operating results of the transferred properties to their current segment for both the current and all historical periods in order to present a consistent group of property results. See Note 3 — Real Estate Investments, Net - “Impairments” and “Held for Use Assets” and Note 15 — Segment Reporting to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.
Over the last three years, we have had properties transfer between operating segments. Upon such transfers we retroactively restate the historical operating results for the segment for all periods presented in that filing and, thereafter, we will restate other later prior periods when they are subsequently reported in later filings for comparative purposes. As a result, we provide transition disclosure adjustments only for properties that have transitioned since the prior numbers were previously reported. We transitioned the LaSalle Properties effective July 1, 2020.
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As discussed in more detail below, our Same Store includes the four Transition Properties, which transitioned from our triple-net leased healthcare facilities segment to our SHOP segment during the third quarter of 2020 and were reflected on this basis beginning with the Company’s quarterly filing for September 20, 2020.
During the nine months ended September 30, 2021, as shown in more detail in the table below, the Transition Properties contributed approximately $0.9 million of NOI. The results of operations of the Transition Properties are included in Segment Same Store with respect to the SHOP segment. The bad debt expense relating to the Transition Properties is included as a reduction to revenue from tenants on the consolidated statement of operations.
For purposes of the discussion and analysis of the segment results of operations during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020, the results of operations for the Transition Properties are included as part of our SHOP segment and excluded from our triple-net leased healthcare facilities segment.
The following table presents by segment Same Store properties NOI before and after adjusting for the Transition Properties as described above, to arrive at ‘Segment Same Store’ results. Our MOB segment was not affected by the Transition Properties.
Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Increase (Decrease)
(Dollar amounts in thousands) Same Store Properties Transition Properties Segment Same Store Same Store Properties Transition Properties Segment Same Store Same Store Properties Transition Properties Segment Same Store
NNN Segment
Revenue from tenants $ 15,128  $ (4,018) $ 11,110  $ 15,366  $ (3,808) $ 11,558  $ (238) $ (210) $ (448)
Less: Property operating and maintenance 6,091  (4,901) 1,190  6,247  (4,935) 1,312  (156) 34  (122)
NOI $ 9,037  $ 883  $ 9,920  $ 9,119  $ 1,127  $ 10,246  $ (82) $ (244) $ (326)
SHOP Segment
Revenue from tenants $ 135,364  $ 4,018  $ 139,382  $ 152,036  $ 3,808  $ 155,844  $ (16,672) $ 210  $ (16,462)
Less: Property operating and maintenance 107,482  4,901  112,383  114,575  4,935  119,510  (7,093) (34) (7,127)
NOI $ 27,882  $ (883) $ 26,999  $ 37,461  $ (1,127) $ 36,334  $ (9,579) $ 244  $ (9,335)
Net Operating Income
NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio. NOI is equal to revenue from tenants less property operating and maintenance expenses. NOI excludes all other financial statement amounts included in net income (loss) attributable to common stockholders. We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis. See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures included elsewhere in this Quarterly Report for additional disclosure and a reconciliation to our net income (loss) attributable to common stockholders.
Segment Results — Medical Office Buildings
The following table presents the components of NOI and the period to period change within our MOB segment for the nine months ended September 30, 2021 and 2020:
Same Store(1)
Acquisitions(2)
Dispositions(3)
Segment Total
  Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease)
(Dollars in thousands) 2021 2020 $ 2021 2020 $ 2021 2020 $ 2021 2020 $
Revenue from tenants
$ 75,507  $ 76,218  $ (711) $ 4,082  $ 1,525  $ 2,557  $ 250  $ 227  $ 23  $ 79,839  $ 77,970  $ 1,869 
Less: Property operating and maintenance 22,980  22,795  185  1,000  275  725  —  36  (36) 23,980  23,106  874 
NOI $ 52,527  $ 53,423  $ (896) $ 3,082  $ 1,250  $ 1,832  $ 250  $ 191  $ 59  $ 55,859  $ 54,864  $ 995 
_______________
(1)Our MOB segment included 112 Same Store properties.
(2)Our MOB segment included 19 Acquisition properties.
(3)Our MOB segment included one Disposition properties.
(4)Our MOB segment included 131 properties.
Revenue from tenants is primarily derived from contractual rent received from tenants in our MOBs. It also includes operating expense reimbursements which increase in proportion with the increase in property operating and maintenance expenses in our MOB segment. 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.
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Property operating and maintenance relates to the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third party property management fees.
During the nine months ended September 30, 2021, the MOB segment contributed a $1.0 million increase in NOI as compared to the nine months ended September 30, 2020. Of our 23 Acquisitions during the period from January 1, 2020 through September 30, 2021, 19 were MOBs which contributed a $1.8 million increase in NOI and our one MOB Disposition property contributed a $0.1 million increase in NOI. These increases were partially offset by our Same Store properties which contributed a $0.9 million decrease in NOI, which was primarily due to lower average occupancy in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.
Segment Results — Triple-Net Leased Healthcare Facilities
The following table presents the components of NOI and the period to period change within our triple-net leased healthcare facilities segment for the nine months ended September 30, 2021 and 2020:
Same Store (1)
Acquisitions(2)
Dispositions (3)
Segment Total
  Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease)
(Dollars in thousands) 2021 2020 $ 2021 2020 $ 2021 2020 $ 2021 2020 $
Revenue from tenants
$ 11,110  $ 11,558  $ (448) $ —  $ —  $ —  $ (197) $ 376  $ (573) $ 10,913  $ 11,934  $ (1,021)
Less: Property operating and maintenance 1,190  1,312  (122) —  —  —  803  538  265  1,993  1,850  143 
NOI
$ 9,920  $ 10,246  $ (326) $ —  $ —  $ —  $ (1,000) $ (162) $ (838) $ 8,920  $ 10,084  $ (1,164)
_______________
(1)    Our triple-net leased healthcare facilities segment included 14 Same Store properties.
(2)    Our triple-net leased healthcare facilities segment included zero Acquisition properties.
(3) Our triple-net leased healthcare facilities segment included one Disposition properties.
(4) Our triple-net leased healthcare facilities segment included 14 properties.
Revenue from tenants for our triple-net leased healthcare facilities generally consist of fixed rental amounts (which may be subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms. These revenues are contractual rent received from tenants that does not vary based on the underlying operating performance of the properties. In addition, revenue from tenants also includes operating expense reimbursements in our triple-net leased healthcare facilities segment, which generally include reimbursement for property operating expenses that we pay on behalf of tenants in this segment. However, pursuant to many of our lease agreements in this segment, tenants are generally directly responsible for all operating costs of the respective properties in addition to base rent. Property operating and maintenance expenses should typically include minimal activity in our triple-net leased healthcare facilities segment except for real estate taxes and insurance. Real estate taxes are typically paid directly by the tenants; however, they may be paid by us and reimbursed by the tenants.
During the nine months ended September 30, 2021, revenue from tenants in our triple-net leased healthcare facilities segment decreased $1.0 million compared to the nine months ended September 30, 2020 due to our Disposition property as well as a $0.4 million decrease from our Same Store properties.
Property operating and maintenance, which primarily relates to property taxes and operating expenses, increased to $2.0 million during the nine months ended September 30, 2021 from $1.9 million in the nine months ended September 30, 2020.
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Segment Results — Seniors Housing - Operating Properties
The following table presents the components of NOI and the period to period change within our SHOP segment for the nine months ended September 30, 2021 and 2020:
Same Store (1)
Acquisitions (2)
Dispositions (3)
Segment Total
  Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease)
(Dollars in thousands) 2021 2020 $ 2021 2020 $ 2021 2020 $ 2021 2020 $
Revenue from tenants
$ 139,382  $ 155,844  $ (16,462) $ 11,005  $ 8,952  $ 2,053  $ 5,463  $ 36,034  $ (30,571) $ 155,850  $ 200,830  $ (44,980)
Less: Property operating and maintenance 112,383  119,510  (7,127) 8,616  7,301  1,315  5,161  31,422  (26,261) 126,160  158,233  (32,073)
NOI
$ 26,999  $ 36,334  $ (9,335) $ 2,389  $ 1,651  $ 738  $ 302  $ 4,612  $ (4,310) $ 29,690  $ 42,597  $ (12,907)
_______________
(1)    Our SHOP segment included 52 Same Store properties, including two land parcels.
(2) Our SHOP segment included four Acquisition properties.
(3) Our SHOP segment included 13 Disposition property.
(4) Our SHOP segment included 56 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 relates to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third party operators, and costs associated with maintaining the physical site.
During the nine months ended September 30, 2021, revenues from tenants decreased by $45.0 million in our SHOP segment as compared to the nine months ended September 30, 2020, primarily giving effect to a $30.6 million decrease from our Disposition properties, and a decrease of $16.5 million from our Same Store properties, which includes our Transition Properties. These decreases were partially offset by $2.1 million of additional revenue through our Acquisition properties. For the nine months ended September 30, 2021, an additional $0.8 million was generated through COVID-19 surcharges for PPE as compared to $1.1 million in PPE billings during the nine months ended September 30, 2020. We also offered $0.1 million of rent concessions related to COVID-19 in the nine months ended September 30, 2021 as compared to $0.8 million of rent concessions granted during the nine months ended September 30, 2020.
Revenues declined in our Same Store SHOPs primarily due to a decrease in occupancy as a result of COVID-19 as discussed in Management Update on the Impacts of the COVID-19 Pandemic. Regulatory and government-imposed restrictions and infectious disease protocols have hindered and continue to hinder our ability to accommodate and conduct in-person tours and process and attract new move-ins at our SHOPs which has affected and could continue to affect our ability to fill vacancies.
In addition, we also generate a portion of our SHOP revenue from skilled nursing facilities (including ancillary revenue from non-residents) at one of our same store SHOPs. This revenue decreased $0.2 million from $1.3 million during the nine months ended September 30, 2020 to $1.1 million during the nine months ended September 30, 2021 as a result of limited services we offered at our facilities during the COVID-19 pandemic to protect our residents and on-site staff. Our two largest skilled nursing facilities in Lutz, Florida and Wellington, Florida were sold in December 2020 and May 2021, respectively. These properties generated ancillary revenue during the nine months ended September 30, 2021 and 2020 of $1.6 million and $7.8 million, respectively, which is included in our Disposition Properties. As a result of these dispositions, we expect ancillary revenue to continue to decline in future quarters relative to prior quarters where we owned these properties.
During the nine months ended September 30, 2021, property operating and maintenance expenses decreased $32.1 million in our SHOP segment as compared to the nine months ended September 30, 2020, primarily due to a decrease of $26.3 million from our Disposition properties and a decrease of $7.1 million from our Same Store properties, which includes our Transition Properties. These decreases were partially offset by an increase of $1.3 million due to our Acquisition properties.
Our property operating and maintenance expenses for our Same Store properties decreased due to $5.6 million in CARES Act funds received which predominately related to our Same Store properties in 2021. In addition, we had lower operating costs as a result of lower occupancy levels as well as some lessening of COVID-related costs as compared to 2020. We received $3.1 million of CARES Act funds in 2020 and were primarily received by our Lutz, Florida and Wellington, Florida properties to reduce operating expenses, which were sold in December 2020 and May 2021, respectively. The impact of the receipt of these funds is reflected as a reduction of operating expenses of our Disposition Properties in the table above. There can be no assurance that the program will be extended or any further amounts received. See the “Overview - Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken in response.
Other Results of Operations
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Impairment Charges
We recorded $33.6 million and $32.8 million of impairment charges for the nine months ended September 30, 2021 and 2020, respectively. The impairment charges for the nine months ended September 30, 2021 relate to a $0.9 million impairment on our Wellington property, which was recorded to adjust the carrying value to its fair value as determined by its PSA, a $6.1 million impairment related to a NNN property located in Sun City, Arizona, and $26.6 million related to our LaSalle properties.
During the second quarter of 2021, we identified the Sun City, Arizona property for potential disposal. As a result of changes to our expected holding period, we determined that projected cash flows, on an undiscounted basis over their intended holding periods, did not recover the carrying value of the properties. During July 2021, we entered into a non-binding letter of intent to sell the property and as a result, we determined that the fair market value of the property had declined and recorded an impairment charge of $6.1 million during the nine months ended September 30, 2021.
We also incurred $26.6 million of impairment charges for the nine months ended September 30, 2021 related to our active marketing of the LaSalle Properties. As a result of changes to our expected holding period, we determined that projected cash flows did not recover the carrying value of the properties on an undiscounted basis over its intended holding period, and concluded that the fair market value of the properties had declined. Accordingly, we wrote the properties down to their estimated fair values.
The impairment charges for the nine months ended September 30, 2020 primarily related to assets held for sale during that period which had carrying values in excess of their fair values of $19.0 million, as well as impairments related to assets held for use of $13.8 million.
See Note 3 — Real Estate Investments to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the impairment charges for the nine months ended September 30, 2021 and 2020.
Operating Fees to Related Parties
Operating fees to related parties decreased $0.1 million to $17.9 million for the nine months ended September 30, 2021 from $18.0 million for the nine months ended September 30, 2020.
Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis (see — Results of Operations — Comparison of the Three Months Ended September 30, 2021 and 2020 for additional information). Asset management fees were $15.3 million and $15.0 million for the nine months ended September 30, 2021 and 2020, respectively. While we had not previously raised any equity since the fourth quarter of 2019, in May 2021, we raised net proceeds pursuant to an underwritten offering of our Series A Preferred Stock and, in August 2021, we raised net proceeds from Series A Preferred Stock issued under our preferred equity line, resulting in higher variable base management fees with respect to these equity issuances in the nine months ended September 30, 2021 than in the comparable period in 2020. 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. Variable asset management fees will further increase with additional equity offerings, if any, including the Series B Preferred Stock issuance completed in October 2021 (see Note 17 — Subsequent Events for additional information).
Property management fees decreased $0.2 million to $2.8 million during the nine months ended September 30, 2021 from $3.0 million for the nine months ended September 30, 2020. 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.
Acquisition and Transaction Related Expenses
Acquisition and transaction related expenses were $2.5 million for the nine months ended September 30, 2021 and $0.7 million for the nine months ended September 30, 2020. This increase is primarily due to the write-off of offering costs relating to the Preferred Equity Line of $1.2 million, a $0.2 million settlement related to our Jupiter, Florida disposition which occurred in the second quarter of 2021 and $0.7 million of litigation costs related to our Michigan dispositions which occurred in the first quarter of 2021.
General and Administrative Expenses
General and administrative expenses decreased $1.3 million to $13.3 million for the nine months ended September 30, 2021 compared to $14.6 million for the nine months ended September 30, 2020. Both periods include $6.3 million for the nine months ended September 30, 2021 and 2020, incurred in expense reimbursements and distributions on partnership units of the OP designated as Class B Units to related parties. Class B Units will not receive cash distributions, and no further expense will be incurred, for so long as we pay distributions to our common stockholders in stock instead of cash.
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The decrease was primarily due the decrease in distributions on Class B Units of $0.2 million, lower auditing expenses of $0.3 million, lower printing expenses of $0.5 million, and lower transfer agent expenses of $0.4 million. These decreases were partially offset by higher miscellaneous costs of $0.1 million in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.
Both the nine months ended September 30, 2021 and 2020 include reductions of expenses related to 2020 and 2019 employee bonuses, respectively, of $1.0 million and $1.2 million of professional fee credits from the Advisor. For additional details on the 2020 and 2019 bonus awards, see Note 9 — Related Party Transactions and Agreements to our consolidated financial statements included in this Quarterly Report on Form 10-Q.
Depreciation and Amortization Expenses
Depreciation and amortization expense decreased $1.2 million to $59.4 million for the nine months ended September 30, 2021 from $60.6 million for the nine months ended September 30, 2020. The decrease was due to a decrease in Same Store depreciation and amortization of $1.0 million primarily due to several intangible assets becoming fully amortized and a decrease due to dispositions of $2.1 million, partially offset by an increase due to our acquisitions of approximately $1.9 million.
Gain on Sale of Real Estate Investments
During the nine months ended September 30, 2021, we transferred the remaining four SHOPs in Michigan to the buyer at a second closing in the first quarter of 2021 and as a result, we recorded a loss on sale of $0.2 million. The first closing of the transaction occurred during the year ended December 31, 2020 when the purchase price for all 11 properties subject to the transaction was actually received from the buyer. We also sold our skilled nursing facility in Wellington, Florida and our development property in Jupiter, Florida, which resulted in gains on sale of $0.1 million and $2.4 million, respectively. These gains are included in the consolidated statement of operations for the nine months ended September 30, 2021.
During the nine months ended September 30, 2020, we sold one MOB property which resulted in a gain on sale of $2.3 million. The property sold for a contract price of $8.6 million.
Interest Expense
Interest expense decreased $2.7 million to $36.0 million for the nine months ended September 30, 2021 from $38.7 million for the nine months ended September 30, 2020. The decrease in interest expense resulted from lower average balances of amounts outstanding under our Revolving Credit Facility during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. As of September 30, 2021, we had total borrowings of $1.2 billion, at a weighted average interest rate of 3.56% per year. As of September 30, 2020 we had total borrowings of $1.3 billion, at a weighted average interest rate of 3.57% per year.
Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings, among other factors.
Interest and Other Income
Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $0.1 million for the nine months ended September 30, 2021 and $43,000 for the nine months ended September 30, 2020.
Gain (Loss) on Non-Designated Derivatives
Gain (loss) on non-designated derivative instruments for the nine months ended September 30, 2021 and 2020 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 by our TRS. We recorded an income tax expense of $0.2 million for the nine months ended September 30, 2021. We did not have a material income tax expense or benefit during the nine months ended September 30, 2020.
Because of our TRS’s recent operating history of losses and the on-going 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 asset through September 30, 2021. If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive income (loss).
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Net Loss (Income) Attributable to Non-Controlling Interests
Net loss attributable to non-controlling interests was approximately $0.2 million for the nine months ended September 30, 2021 and net income attributable to non-controlling interests was approximately $0.2 million for the nine months ended September 30, 2020, 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.
Cash Flows from Operating Activities
During the nine months ended September 30, 2021, net cash provided by operating activities was $26.0 million. The level of cash flows used in or provided by operating activities is affected by, among other things, the number of properties owned, the performance of those properties, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses. Cash inflows include non-cash items of $30.2 million (net loss of $66.0 million adjusted for non-cash items including depreciation and amortization of tangible and identifiable intangible real estate assets, deferred financing costs and mortgage premiums and discounts, bad debt expense, equity-based compensation, gain on non-designated derivatives and impairment charges), a decrease in prepaid expenses and other assets of $0.2 million and an increase in deferred rent and other liabilities of $0.5 million. These cash inflows were partially offset by a decrease in accounts payable and accrued expenses of $2.8 million related to timing of payments for real estate taxes, property operating expenses and professional and legal fees and by a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $0.7 million.
During the nine months ended September 30, 2020, net cash provided by operating activities was $41.8 million. The level of cash flows used in or provided by operating activities is affected by, among other things, the number of properties owned, the performance of those properties, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses. Cash inflows include non-cash items of $42.8 million (net loss of $55.6 million adjusted for non-cash items including depreciation and amortization of tangible and identifiable intangible real estate assets, deferred financing costs and mortgage premiums and discounts, bad debt expense, equity-based compensation, gain on non-designated derivatives and impairment charges), an increase in accounts payable and accrued expenses of $6.3 million related to higher accrued real estate taxes, property operating expenses and professional and legal fees. These cash inflows were partially offset by an increase in prepaid expenses and other assets of $3.1 million and a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $2.3 million.
Cash Flows from Investing Activities
Net cash used in investing activities during the nine months ended September 30, 2021 was $63.2 million. The cash used in investing activities included $146.1 million for the acquisition of one property and $11.5 million in capital expenditures.
Net cash used in investing activities during the nine months ended September 30, 2020 was $101.8 million. The cash used in investing activities included $91.0 million for the acquisition of eight properties and $17.6 million in capital expenditures. These cash outflows were partially offset by proceeds from sale of real estate of $8.3 million.
Cash Flows from Financing Activities
Net cash used in financing activities of $2.7 million during the nine months ended September 30, 2021 related to cash outflows of payments of deferred financing costs of $0.2 million and dividends paid to preferred stockholders of $3.3 million, payments for derivative instruments of $0.1 million and principal payments on mortgages of $0.9 million.
Net cash used in financing activities of $47.7 million during the nine months ended September 30, 2020 included proceeds of $95.0 million from our Revolving Credit Facility. These cash inflows were partially offset by distributions to stockholders of $31.4 million, common stock repurchases of $10.5 million, payments of deferred financing costs of $2.5 million and dividends paid to preferred stockholders of $1.7 million.
Liquidity and Capital Resources
The negative impacts of the COVID-19 pandemic has caused and may continue to cause certain of our tenants to be unable to make rent payments to us timely, or at all, which has had, and could continue to have, an adverse effect on the amount of cash we receive from our operations. In addition to the discussion below, please see the “Overview — Management Update on the Impacts of the COVID-19 Pandemic” section above for additional information on the risks and uncertainties associated with the COVID-19 pandemic and management’s actions taken in response.
As of September 30, 2021, we had $29.8 million of cash and cash equivalents. Our ability to use this cash on hand is restricted. Under our Credit Facility, we are required to maintain a combination of cash, cash equivalents and availability for future borrowings under our Revolving Credit Facility totaling at least $50.0 million. As of September 30, 2021, $166.5 million was available for future borrowings under our Revolving Credit Facility. Certain other restrictions and conditions described
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below will apply until the “Commencement Quarter” which is a quarter in which we make an election and, as of the day prior to the commencement of the applicable quarter we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by us during the applicable quarter, and our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%, and, as added by the third amendment, the Covenant Relief Period (as defined below) has terminated. The fiscal quarter ended June 30, 2021 was the first quarter that could have been the Commencement Quarter. We did not satisfy the conditions during the quarter ended September 30, 2021 in order to elect the quarter ending December 31, 2021 as the Commencement Quarter. There can be no assurance as to if, or when, we will elect to do so, including to the extent we may be unable to satisfy these conditions in future periods. We may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of our common stock) on our common stock until the Commencement Quarter. Moreover, beginning in the Commencement Quarter, we may only pay cash distributions provided that the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock and Series B Preferred Stock) for any period of four fiscal quarters do not exceed 95% of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after the Commencement Quarter.
Our Credit Facility also restricts our sources of liquidity. Until the first day of the Commencement Quarter, we must use all of the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to repay amounts outstanding under the Revolving Credit Facility. We may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings. There can be no assurance these conditions will be met. The availability for future borrowings under the Credit Facility is calculated using the adjusted net operating income of the real estate assets comprising the borrowing base, and availability has been, and may continue to be, adversely affected by the decreases in cash rent collected from our tenants and income from our operators that have resulted from the effects of the COVID-19 pandemic and may persist for some time.
We expect to fund our future short-term operating liquidity requirements, including dividends to holders of Series A Preferred Stock and holders of Series B Preferred Stock, through a combination of current cash on hand, net cash provided by our property operations and proceeds from the Revolving Credit Facility, which may include amounts reborrowed following the repayments we were or are required to make thereunder.
Our principal demands for cash are for acquisitions, capital expenditures, the payment of our operating and administrative expenses, debt service obligations (including principal repayment), and dividends to holders of our Series A Preferred Stock and Series B Preferred Stock. We closely monitor our current and anticipated liquidity position relative to our current and anticipated demands for cash and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next 12 months. Our future liquidity requirements, and available liquidity, however, depend on many factors, such as the on-going impact of COVID-19 on our tenants and operators and our ability to complete our pending dispositions on their contemplated terms, or at all.
Preferred Stock Equity Line with B. Riley Principal Capital, LLC
On September 15, 2020, we entered into a preferred stock purchase agreement and registration rights agreement with B. Riley Principal Capital, LLC (“B. Riley”), pursuant to which we had the right from time to time to sell up to an aggregate of $15.0 million of shares of our Series A Preferred Stock to B. Riley until December 31, 2023, on the terms and subject to the conditions set forth in the purchase agreement. This arrangement is also referred to as the “Preferred Stock Equity Line.” We controlled the timing and amount of any sales to B. Riley under the Preferred Stock Equity Line, and B. Riley was obligated to make purchases from time to time of up to 3,500 shares of Series A Preferred Stock each time (as may be increased by mutual agreement by the parties) in accordance with the purchase agreement, upon certain terms and conditions being met. We sold 15,000 shares of Series A Preferred Stock under the Preferred Stock Equity Line during the three and nine months ended September 30, 2021, resulting in gross proceeds of $0.4 million and net proceeds of $0.3 million after fees and commissions. We did not sell any Series A Preferred Stock under the Preferred Stock Equity Line during the year ended December 31, 2020. In November 2021, we terminated the $15.0 million Preferred Stock Equity Line, see Note 17 — Subsequent Events for additional information.
Series A Preferred Stock Add-On Offering
On May 11, 2021, we completed an underwritten public offering of 2,352,144 shares (which includes 152,144 shares issued and sold pursuant to the underwriters’ exercise of their option to purchase additional shares) of our Series A Preferred Stock for net proceeds of $56.2 million after deducting the underwriters’ discount and a structuring fee aggregating to $2.5 million. Pursuant to the terms of the Credit Facility, all proceeds were used to repay amounts outstanding under the Credit Facility. Subject to the terms and conditions set forth in the Credit Facility, we may then draw on the Credit Facility to borrow any amounts so repaid.
Series B Preferred Stock Offering
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On October 6, 2021, we completed the initial issuance and sale of 3,200,000 shares of our 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series B Preferred Stock”) in an underwritten public offering at a public offering price equal to the liquidation preference of $25.00 per share. The offering generated gross proceeds of $80.0 million and net proceeds of $77.2 million, after deducting underwriting discounts. On October 8, 2021 the underwriters in the offering exercised their option to purchase additional shares of Series B Preferred Stock and we sold 430,000 shares Series B Preferred Stock, which generated gross proceeds of $10.8 million and resulted in net proceeds of $10.4 million after deducting underwriting discounts. Pursuant to the terms of the Credit Facility, all proceeds were used to repay amounts outstanding under the Credit Facility. Subject to the terms and conditions set forth in the Credit Facility, we may then draw on the Credit Facility to borrow any amounts so repaid. See Note 17 — Subsequent Events for additional information.
Financings
As of September 30, 2021, our total debt leverage ratio (total debt divided by total gross asset value) was approximately 43.8%. Net debt totaled $1.1 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($29.8 million). Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion) net of gross market lease intangible liabilities $23.1 million. Impairment charges are already reflected within gross asset value.
As of September 30, 2021, we had total gross borrowings of $1.2 billion, at a weighted average interest rate of 3.6%. As of December 31, 2020, we had total gross borrowings of $1.2 billion at a weighted average interest rate of 3.6%. As of September 30, 2021, the carrying value of our real estate investments, at cost was $2.6 billion, with $0.9 billion of this asset value pledged as collateral for mortgage notes payable, $0.6 billion of this asset value pledged to secure advances under the Fannie Mae Master Credit Facilities and $1.0 billion of this asset value comprising the borrowing base of the Credit Facility. These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, as applicable unless the existing indebtedness associated with the property is satisfied or the property is removed from the borrowing base of the Credit Facility, which would impact availability thereunder.
We expect to utilize proceeds from our Credit Facility to fund future property acquisitions, as well as, subject to the terms of our Credit Facility, other sources of funds that may be available to us. These actions may require us to add some or all of our unencumbered properties to the borrowing base under our Credit Facility. Unencumbered real estate investments, at cost as of September 30, 2021 was $118.0 million. There can be no assurance as to the amount of liquidity we would be able to generate from adding any of the unencumbered assets we own to the borrowing base of our Credit Facility.
Mortgage Notes Payable
As of September 30, 2021, we had $549.4 million in mortgage notes payable outstanding. Future scheduled principal payments on our mortgage notes payable for the remainder of 2021 are $0.3 million.
Credit Facility
Our Credit Facility consists of two components, the Revolving Credit Facility and our Term Loan. The Revolving Credit Facility is interest-only and matures on March 13, 2023, subject to a one-year extension at our option. Our Term Loan is interest-only and matures on March 13, 2024. Loans under our Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty, subject to customary breakage costs. Any amounts repaid under our Term Loan may not be re-borrowed.
In March 2020, we borrowed an additional $95.0 million under the Revolving Credit Facility a portion of which was used for general corporate purposes. We repaid $174.1 million of amounts outstanding under our revolving credit facility during the nine months ended September 30, 2021, derived from all $88.0 million of net proceeds of our dispositions of the Wellington, Florida and Jupiter, Florida properties, all $56.7 million of proceeds from our May 2021 Series A Preferred Stock offering. The remainder of the repayment was funded with cash on hand. After these repayments, we borrowed $125.0 million, all of which was used to fund subsequent acquisitions.
The total commitments under the Credit Facility are $630.0 million including $480.0 million under the Revolving Credit Facility. The Credit Facility includes an uncommitted “accordion feature” that may, subject to conditions, be used to increase the commitments under either component of the Credit Facility by up to an additional $370.0 million to a total of $1.0 billion. As of September 30, 2021, $274.6 million was outstanding under the Credit Facility and the unused borrowing availability under the Credit Facility was $166.5 million. The amount available for future borrowings under the Credit Facility is based on either the value of the pool of eligible unencumbered real estate assets comprising the borrowing base, or a minimum debt service coverage ratio with respect to the borrowing base. Both of these amounts are calculated using the adjusted net operating income of the real estate assets comprising the borrowing base, and, therefore, availability under our Credit Facility has been adversely affected by the decreases in cash rent collected from our tenants and income from our operators due to the effects of the COVID-19 pandemic, and may continue to be adversely affected. See also the discussion above regarding the need to maintain certain levels of liquidity until the Commencement Quarter.
As of September 30, 2021, $150.0 million was outstanding under our Term Loan, and $124.6 million was outstanding under the Revolving Credit Facility. The equity interests and related rights in our wholly owned subsidiaries that directly own
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or lease the eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility are pledged for the benefit of the lenders thereunder. The Credit Facility also contains a subfacility for letters of credit of up to $25.0 million. The applicable margin used to determine the interest rate under both the Term Loan and Revolving Credit Facility components of the Credit Facility varies based on our leverage. As of September 30, 2021, the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to 3.37% and 5.02%, respectively. The Credit Facility prohibits us from exceeding a maximum ratio of consolidated total indebtedness to consolidated total asset value, and requires us to maintain a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges (the “Fixed Charge Coverage Ratio”) on a quarterly basis and a minimum consolidated tangible net worth. We entered into an amendment to our Credit Facility on November 12, 2021 as part of our efforts to continue addressing the continuing adverse impacts of the COVID-19 pandemic on our SHOP segment.
We would have been in default of a covenant contained in the Credit Facility requiring the Company to maintain a certain minimum Fixed Charge Coverage Ratio for the four fiscal quarter period ended September 30, 2021. Pursuant to the terms of a third amendment entered into on November 12, 2021 by us, the agent and the requisite lenders under the Credit Facility, the lenders waived any defaults or event of defaults under the covenant requiring us to maintain a Fixed Charge Coverage Ratio of 1.60 to 1.00 for the quarter ended September 30, 2021 and any further defaults or Events of Default (as defined in the Credit Facility) resulting from the breach of the Fixed Charge Coverage Ratio covenant. In addition, as described above, the Fixed Charge Coverage Ratio we are required to maintain was reduced until the earlier of December 31, 2022, and such earlier date as we elect to terminate this relief. There can be no assurance our lenders will consent to any amendments or waivers that may become necessary to comply with the terms of the Credit Facility in the future. Based upon our current expectations, we believe our operating results during the next 12 months will allow us to comply with the amended covenants under the Credit Facility.
Pursuant to the terms of the Credit Facility, in October 2021, the net proceeds from our Series B Preferred Stock offering of $87.6 million were used to repay amounts outstanding under the Credit Facility. Subject to the terms and conditions set forth in the Credit Facility, we may then draw on the Credit Facility to borrow any amounts so repaid.
Fannie Mae Master Credit Facilities
As of September 30, 2021, $355.2 million was outstanding under the Fannie Mae Master Credit Facilities. We may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool or by borrowing-up against the increased value of the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Future advances based on the increased value of the collateral pool may only occur until November 2021 and not more than once annually for each of the Fannie Mae Master Credit Facilities. Borrowings under the Fannie Mae Master Credit facilities bear annual interest at a rate that varies on a monthly basis and is equal to the sum of the current LIBOR for one month U.S. dollar-denominated deposits and 2.62%, with a floor of 2.62%. The Fannie Mae Master Credit Facilities mature on November 1, 2026.
Capital Expenditures
During the nine months ended September 30, 2021, our capital expenditures were $11.5 million, of which $3.7 million related our MOB segment, $0.1 million related to our NNN segment, and $7.7 million related to our SHOP segment. We anticipate this rate of capital expenditures for the MOB and SHOP segments throughout 2021, however, given the recent economic uncertainty created by the COVID-19 global pandemic will continue to impact our decisions on the amount and timing of future capital expenditures.
Acquisitions — Nine Months Ended September 30, 2021
During the nine months ended September 30, 2021, we completed the acquisition of eight multi-tenant MOBs and six single-tenant MOBs for an aggregate contract purchase price of $147.4 million. These acquisitions were funded with cash on hand and borrowings from our Revolving Credit Facility, and, in one case, in part by the issuance of our Series A Preferred OP Units.
Acquisitions — Subsequent to September 30, 2021
We have not acquired any properties subsequent to September 30, 2021. We have signed two definitive purchase and sale agreements (“PSAs”) to acquire two MOB properties for an aggregate contract purchase price of $5.9 million, and we have signed one non-binding LOIs to acquire one MOB property for an aggregate purchase price of $7.1 million. We anticipate using cash on hand and borrowings from our Revolving Credit Facility to fund the consideration required to complete these acquisitions. The PSAs are subject to conditions and the LOI is non-binding. There can be no assurance we will complete any of these acquisitions, or any future acquisitions or other investments, on a timely basis or on acceptable terms and conditions, if at all.
Dispositions — Nine Months Ended September 30, 2021
During the three months ended March 31, 2021, four SHOPs in Michigan were transferred to their buyer, which resulted in a loss on sale of $0.2 million. Additionally, we sold our skilled nursing facility in Wellington, Florida and our development property in Jupiter, Florida in the three months ended June 30, 2021, which resulted in gains on sale of $0.1 million and
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$2.4 million, respectively. The $88.0 million of net proceeds from these dispositions were used to repay amounts outstanding under the Revolving Credit Facility. At the closing of the sale of the Jupiter, Florida property, $0.9 million of the sale price was placed into escrow pending resolution of a lien related to the property.
With respect to the sale of the Michigan SHOPs, in November 2020, we received payment of the full $11.8 million sales price for all 11 of the Michigan SHOPs, less $0.8 million held in escrow, and transferred seven of the properties to the buyer. The remaining four properties were transferred to the buyer at a second closing in January 2021 when the $0.8 million held in escrow was released to the buyer. Of the properties transferred at the initial closing, four were part of the borrowing base under the Credit Facility, one was part of the collateral pool under the Fannie Mae Master Credit Facility with Capital One and two were unencumbered. Of the properties transferred at the second closing, three were part of the borrowing base under the Credit Facility until the initial closing and one was unencumbered. At the initial closing, $4.2 million of the net proceeds was used to repay amounts outstanding under the Fannie Mae Master Credit Facility with Capital One, $4.4 million of the net proceeds were used to repay amounts outstanding under the Revolving Credit Facility, with the remainder used for closing costs. Following the sale of the SHOP in Lutz, Florida, all $17.6 million of the net proceeds were used to repay amounts outstanding under the Credit Facility.
Dispositions — Subsequent to September 30, 2021
Subsequent to September 30, 2021 we did not dispose of any properties. We have entered into two PSAs to dispose of one NNN property in Sun City, Arizona for $9.5 million which is not part of the borrowing base under the Credit Facility or encumbered by a mortgage, and two MOB properties in Virginia for $37.8 million. Of these two MOB properties, one property is part of the borrowing base under the Credit Facility and one property is encumbered under our Capital One MOB mortgage. These dispositions do not qualify for held for sale treatment pursuant to our policies. The PSAs are subject to conditions, and there can be no assurance this, or any, disposition will be completed on the contemplated terms, or at all. Pursuant to the terms of our amended Credit Facility, the net cash proceeds from any completed dispositions must be used to prepay amounts outstanding under the Revolving Credit Facility and will therefore not be available to us for any other purpose. We may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings. There can be no assurance these conditions will be met.
Share Repurchase Program
The Credit Facility we entered into in the third quarter of 2020 restricts us from repurchasing shares until the end of the Commencement Quarter. In light of this provision, the Board suspended repurchases to us under the SRP effective August 14, 2020 which, when active, enables our common stockholders to sell their shares under limited circumstances. The Board also rejected all repurchase requests made during the period from January 1, 2020 until the effectiveness of the suspension of the SRP. No further repurchase requests under the SRP may be made unless and until the SRP is reactivated. There can be no assurance, however, as to whether our SRP will be reactivated or on what terms. Beginning in the Commencement Quarter, we will be permitted to repurchase up to $50.0 million of shares of our common stock (including amounts previously repurchased during the term of the Revolving Credit Facility) if, after giving effect to the repurchases, we maintain cash and cash equivalents of at least $30.0 million and our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 55.0%.
No assurances can be made as to when or if our SRP will be reactivated.
Non-GAAP Financial Measures
This section discusses the non-GAAP financial measures we use to evaluate our performance including Funds from Operations (“FFO”), Modified Funds from Operations (“MFFO”) and NOI. While NOI is a property-level measure, MFFO is based on our total performance as a company and therefore reflects the impact of other items not specifically associated with NOI such as, interest expense, general and administrative expenses and operating fees to related parties. Additionally, in calculating NOI, adjustments for straight-line rent are not eliminated as they are in MFFO. A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net income, 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.
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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 sale of certain real estate assets, gains and losses from change in control and impairment write-downs 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 FFO. 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, both before and after we have deployed all of our offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, 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. 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 and exclude acquisition fees and expenses, amortization of above and below market and other intangible lease assets and liabilities, amounts relating to straight-line rent adjustments (in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the lease and rental payments), contingent purchase price consideration, accretion of discounts and amortization of premiums on debt investments, mark-to-market adjustments included in net income, gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and adjustments for unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. We also exclude other non-operating items in calculating MFFO, such as transaction-related fees and expenses, certain non-recurring litigation costs 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. Our Modified FFO (as defined in our Credit Facility) is similar but not identical to MFFO as discussed in this Quarterly Report on Form 10-Q. 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.
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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.
Accounting Treatment of Rent Deferrals
All of the concessions granted to our tenants as a result of the COVID-19 pandemic are rent deferrals with the original lease term unchanged and collection of deferred rent deemed probable (see the “Overview - Management Update on the Impacts of the COVID-19 Pandemic” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information). As a result of relief granted by the FASB and SEC related to lease modification accounting, rental revenue used to calculate Net Income and NAREIT FFO has not been, and we do not expect it to be, significantly impacted by these types of deferrals. In addition, since we currently believe that these deferral amounts are collectable, we have excluded from the increase in straight-line rent for MFFO purposes the amounts recognized under GAAP relating to these types of rent deferrals. For a detailed discussion of our revenue recognition policy, including details related to the relief granted by the FASB and SEC, see Note 2 — Significant Accounting Polices to our consolidated financial statements included in this Quarterly Report on Form 10-Q.
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 September 30, Nine Months Ended September 30,
(In thousands) 2021 2020 2021 2020
Net loss attributable to common stockholders (in accordance with GAAP)
$ (41,968) $ (10,500) $ (70,183) $ (58,055)
Depreciation and amortization (1)
19,376  19,853  58,102  59,530 
Impairment charges 26,642  1,011  33,601  32,842 
Gain on sale of real estate investment
—  —  (2,284) (2,306)
Adjustments for non-controlling interests (3)
(208) (101) (409) (424)
FFO (as defined by NAREIT) attributable to stockholders
3,842  10,263  18,827  31,587 
Acquisition and transaction related 2,198  175  2,453  680 
(Accretion) amortization of market lease and other intangibles, net
(61) 9  (100) (111)
Straight-line rent adjustments
(148) (547) (693) (2,289)
Straight-line rent (rent deferral agreements) (2)
(46) 23  (280) 391 
Amortization of mortgage premiums and discounts, net
14  16  42  45 
(Gain) loss on non-designated derivatives 33  69  32  45 
Deferred tax asset allowance (4)
17  —  (1,009) — 
Adjustments for non-controlling interests (3)
(8) 1  2  7 
MFFO attributable to stockholders
$ 5,841  $ 10,009  $ 19,274  $ 30,355 
_______
(1)    Net of non-real estate depreciation and amortization.
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(2)    Represents amounts related to deferred rent pursuant to lease negotiations which qualify for FASB relief for which rent was deferred but not reduced. These amounts are included in the straight-line rent receivable on our balance sheet but are considered to be earned revenue attributed to the current period for rent that was deferred, for purposes of MFFO, as they are expected to be collected. Accordingly, when the deferred amounts are collected, the amounts reduce MFFO.
(3)    Represents the portion of the adjustments allocable to non-controlling interest.
(4)    Represents the reversal of a previously recorded non-cash add-back.
Net Operating Income
NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio. NOI is equal to revenue from tenants less property operating and maintenance expenses. NOI excludes all other items of expense and income included in the financial statements in calculating net income (loss).
We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis. We use NOI to assess and compare property level performance and to make decisions concerning the operation of the properties. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).
NOI excludes certain components from net income (loss) in order to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or ability to pay distributions.
The following table reflects the items deducted from or added to net loss attributable to stockholders in our calculation of NOI for the three months ended September 30, 2021:
(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total
Net income (loss) attributable to common stockholders (in accordance with GAAP)
$ (17,548) $ 662  $ 798  $ (26,430) $ (42,518)
Impairment charges
26,642  —  —  —  26,642 
Operating fees to related parties
—  —  —  6,045  6,045 
Acquisition and transaction related
—  —  —  2,198  2,198 
General and administrative
26  —  —  4,697  4,723 
Depreciation and amortization
17,944  1,842  —  —  19,786 
Interest expense
424  —  —  11,351  11,775 
Interest and other income
(2) —  —  (2) (4)
Gains on sale of real estate investments —  —  —  —  — 
Gain on non-designated derivative instruments
—  —  —  33  33 
Income tax (benefit) expense
—  —  55  55 
Allocation for preferred stock —  —  —  1,834  1,834 
Net income attributable to non-controlling interests —  —  —  219  219 
NOI $ 27,486  $ 2,504  $ 798  $ —  $ 30,788 
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The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store, Acquisitions and Dispositions NOI for the three months ended September 30, 2020:
(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total
Net income (loss) attributable to common stockholders (in accordance with GAAP)
$ 13,376  $ 282  $ (1,424) $ (22,734) $ (10,500)
Impairment charges
—  —  1,011  —  1,011 
Operating fees to related parties
—  —  —  5,984  5,984 
Acquisition and transaction related
—  —  —  175  175 
General and administrative
18  —  —  3,144  3,162 
Depreciation and amortization
18,214  863  1,134  —  20,211 
Interest expense
684  —  —  12,156  12,840 
Interest and other income
(1) —  —  (1) (2)
Loss on non-designated derivative instruments
—  —  —  69  69 
Income tax (benefit) expense
—  — — 78  78 
Allocation for preferred stock —  —  —  732  732 
Net loss attributable to non-controlling interests —  —  —  397  397 
NOI $ 32,291  $ 1,145  $ 721  $ —  $ 34,157 
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The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store and Dispositions NOI for the nine months ended September 30, 2021:
(In thousands) Same Store Acquisitions Dispositions Non-Property Specific Total
Net income (loss) attributable to common stockholders (in accordance with GAAP)
$ 1,235  $ 1,446  $ (288) $ (73,126) $ (70,733)
Impairment charges
32,723  —  878  —  33,601 
Operating fees to related parties
—  —  —  17,851  17,851 
Acquisition and transaction related
3  —  —  2,450  2,453 
General and administrative
81  —  —  13,237  13,318 
Depreciation and amortization
54,119  4,025  1,246  59,390 
Interest expense
1,304  —  —  34,712  36,016 
Interest and other income
(19) —  —  (41) (60)
Gains on sale of real estate investments —  —  (2,284) —  (2,284)
Loss on non-designated derivative instruments
—  —  —  32  32 
Income tax (benefit) expense
—  162  162 
Net income (loss) attributable to non-controlling interests
—  —  —  321  321 
Preferred Stock dividends
—  —  —  4,402  4,402 
NOI $ 89,446  $ 5,471  $ (448) $ —  $ 94,469 
The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store and Dispositions NOI for the nine months ended September 30, 2020:
(In thousands) Same Store Acquisition Dispositions Non-Property Specific Total
Net income (loss) attributable to common stockholders (in accordance with GAAP)
$ 53,105  $ 788  $ (39,419) $ (72,529) $ (58,055)
Impairment charges
(10,137) —  42,979  —  32,842 
Operating fees to related parties
—  —  —  17,969  17,969 
Acquisition and transaction related
—  —  —  680  680 
General and administrative
85  —  —  14,537  14,622 
Depreciation and amortization
55,089  2,113  3,387  —  60,589 
Interest expense 1,867  —  —  36,810  38,677 
Interest and other income (6) —  —  (37) (43)
Gain on sale of real estate investment —  —  (2,306) —  (2,306)
Loss on non-designated derivative instruments
—  —  —  45  45 
Income tax (benefit) expense
—  —  —  78  78 
Net income (loss) attributable to non-controlling interests
—  —  —  223  223 
Preferred Stock dividends
—  —  —  2,224  2,224 
NOI $ 100,003  $ 2,901  $ 4,641  $ —  $ 107,545 


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Distributions and Dividends
Dividends on our Series A Preferred Stock accrue in an amount equal to $1.84375 per share each year ($0.460938 per share per quarter) to Series A Preferred Stock holders, which is equivalent to 7.375% of per annum in the $25.00 liquidation preference per share of Series A Preferred Stock. Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.
Dividends on our Series B Preferred Stock (issued in October 2021 - See Note 17 — Subsequent Events) accrue in an amount equal to $1.78125 per share each year ($0.445313 per share per quarter) to Series B Preferred Stock holders, which is equivalent to 7.125% of per annum in the $25.00 liquidation preference per share of Series B Preferred Stock. Dividends on the Series B Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us. The first dividend on the Series B Preferred Stock will be paid in January 2022.
From March 1, 2018 until June 30, 2020, we paid distributions to our common stockholders at a rate equivalent to $0.85 per annum per share of common stock. Distributions were payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month.
On June 29, 2020, the Board approved a change in our common stock distribution policy changing from daily record dates to a single record date during the applicable month.
Under our Credit Facility we may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of the Company’s common stock), subject to certain exceptions. These exceptions include paying cash dividends on the Series A Preferred Stock and the Series B Preferred Stock or any other preferred stock we may issue and paying any cash distributions necessary to maintain our status as a REIT. We may not pay any cash distributions (including dividends on Series A Preferred Stock and Series B Preferred Stock) if a default or event of default exists or would result therefrom. The restrictions on paying cash distributions will no longer apply starting in the quarter in which we make an election and, as of the day prior to the commencement of the applicable quarter, we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by us during the applicable quarter, our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%, and the Covenant Relief Period has ended. There can be no assurance as to if, or when, we will be able to satisfy these conditions. We may only pay cash distributions on our common stock beginning in the Commencement Quarter and the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock and Series B Preferred Stock) for any period of four fiscal quarters do not exceed 95% of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after the Commencement Quarter. In addition, our ability to pay cash distributions may be limited by financial covenants in the Credit Facility, including our requirement to maintain a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges. Until four full fiscal quarters have elapsed after the commencement of Commencement Quarter, the aggregate amount of permitted distributions and Modified FFO will be determined by using only the fiscal quarters that have elapsed from and after the Commencement Quarter and annualizing those amounts.
On August 13, 2020, the Board changed our common stock distribution policy in order to preserve our liquidity and maintain additional financial flexibility in light of the continued COVID-19 pandemic and to comply with the Credit Facility described above. Under the new policy, distributions authorized by the Board on shares of our common stock, if and when declared, are now paid on a quarterly basis in arrears in shares of our common stock valued at the Estimated Per-Share NAV in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter. In each of October 2020 and January 2021, we declared and issued stock dividends equal to 0.01349 shares of common stock on each share of outstanding common stock, and in April 2021, July 2021 and October 2021, we declared and issued a stock dividend equal to 0.01466 shares of common stock on each share of outstanding common stock. The amounts of these stock dividends were based on our prior cash distribution rate of $0.85 per share per annum and the then applicable Estimated Per-Share NAV. We did not pay any cash dividends on our common stock during the nine months ended September 30, 2021. See “— Overview” for additional information on the impact of the stock dividends.
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Subject to the restrictions in our Credit Facility, the amount of dividends and other distributions payable to our stockholders is determined by the Board and is dependent on a number of factors, including funds available for distribution, our financial condition, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986 (the “Code”). Distribution payments are dependent on the availability of funds. The Board may reduce the amount of dividends or distributions paid or suspend dividend or distribution payments at any time and therefore dividend and distribution payments are not assured. Any accrued and unpaid dividends payable with respect to the Series A Preferred Stock or Series B Preferred Stock become part of the liquidation preference thereof.
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 statement of operations and comprehensive loss, for the periods indicated:
Three Months Ended Year-To-Date
March 31, 2021 June 30, 2021 September 30, 2021 September 30, 2021
(In thousands) Percentage of Distributions Percentage of Distributions Percentage of Distributions Percentage of Distributions
Distributions:
Distributions to common stockholders not reinvested in common stock issued under the DRIP
$ —  $ —  $ —  $ — 
Distributions reinvested in common stock issued under the DRIP
—  —  —  — 
Dividends to preferred stockholders
742  742  1,827  3,311 
Distributions on Common OP Units —  —  —  — 
Total distributions $ 742  $ 742  $ 1,827  $ 3,311 
Source of distribution coverage:
Cash flows provided by operations (1)
$ 742  100.0  % $ 742  100  % $ 1,827  100.0  % $ 3,311  100.0  %
Total source of distribution coverage $ 742  100  % $ 742  100  % $ 1,827  100.0  % $ 3,311  100  %
Cash flows provided by operations (in accordance with GAAP)
$ 13,959  $ 3,644  $ 8,401  $ 26,004 
Net loss attributable to stockholders (in accordance with GAAP)
$ (12,230) $ (15,985) $ (41,968) $ (70,183)
______
(1) Assumes the use of available cash flow from operations before any other sources.
For the nine months ended September 30, 2021, cash flows provided by operations were $26.0 million. We had not historically generated sufficient cash flow from operations to fund the payment of dividends and other distributions at the current rate prior to switching from paying cash dividends to stock dividends on our common stock. As shown in the table above, we funded dividends to holders of Series A Preferred Stock and Series B Preferred Stock with cash flows provided by operations. Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as we pay distributions in stock instead of cash.
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Our ability to pay dividends on our Series A Preferred Stock and Series B Preferred Stock and starting with the Commencement Quarter, other distributions and maintain compliance with the restrictions on the payment of distributions in our Credit Facility depends on our ability to increase the amount of cash we generate from property operations which in turn depends on a variety of factors, including the duration and scope of the COVID-19 pandemic and its impact on our tenants and properties, our ability to complete acquisitions of new properties and our ability to improve operations at our existing properties. There can be no assurance that we will complete acquisitions on a timely basis or on acceptable terms and conditions, if at all. Our ability to improve operations at our existing properties is also subject to a variety of risks and uncertainties, many of which are beyond our control, and there can be no assurance we will be successful in achieving this objective.
We may still pay any cash distributions necessary to maintain our status as a REIT and may not pay any cash distributions (including dividends on Series A Preferred Stock and Series B Preferred Stock) if a default or event of default exists or would result therefrom under the Credit Facility.
Loan Obligations
The payment terms of our mortgage notes payable generally require principal and interest amounts payable monthly with all unpaid principal and interest due at maturity. The payment terms of our Credit Facility require interest only amounts payable monthly with all unpaid principal and interest due at maturity. The payment terms of our Fannie Mae Master Credit Facilities require interest only payments through November 2021 and principal and interest payments thereafter. Our loan agreements require us to comply with specific reporting covenants. As of September 30, 2021, we were in compliance with the financial and reporting covenants under our loan agreements.
Under our Credit Facility, until the first day of the Commencement Quarter, we must use all the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to repay amounts outstanding under the Revolving Credit Facility. We may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings. There can be no assurance these conditions will be met.
Contractual Obligations
There were no material changes in our contractual obligations as of September 30, 2021, as compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
Election as a REIT 
We elected to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2013. Commencing with that taxable year, we have been organized and operated in a manner so that we qualify as a REIT under the Code. We intend to continue to operate in such a manner but we can provide no assurances that we will operate in a manner so as to remain qualified for taxation as a REIT. To continue to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP) determined without regard to the deduction for dividends paid and excluding net capital gains, and comply with a number of other organizational and operational requirements. If we continue to qualify as a REIT, we generally will not be subject to U.S. federal corporate income tax on the portion of our REIT taxable income that we distribute to our stockholders. Even if we continue to qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties as well as U.S. federal income and excise taxes on our undistributed income.
Inflation
We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions. In addition, we may be required to pay costs for maintenance and operation of properties, which may adversely impact our results of operations due to potential increases in costs and operating expenses resulting from inflation.
Related-Party Transactions and Agreements
Please see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related party transactions, agreements and fees.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There has been no material change in our exposure to market risk during the nine months ended September 30, 2021. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 1A. Risk Factors.
    There have been no material changes to the risk factors disclosed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, and we direct your attention to those risk factors other than those disclosed below:
Our Credit Facility contains various covenants that may restrict our ability to take certain actions and may restrict our ability to use our cash and make investments.
Our Credit Facility contains various covenants that may restrict our ability to take certain actions for example, may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of our common stock) on our common stock until the Company meets certain requirements and the Covenant Relief Period (as defined below) has ended. We may, however, pay dividends on the Series A Preferred Stock and Series B Preferred Stock, or any other preferred stock we may issue and any cash distributions necessary to maintain our status as a REIT. The restrictions on paying cash distributions will no longer apply starting in the quarter in which we make an election and, as of the day prior to the commencement of the applicable quarter, we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by us during the applicable quarter, our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%, and the Covenant Relief Period has ended. There can be no assurance as to if, or when, we will be able to satisfy these conditions. Moreover, we will only be permitted to pay cash distributions if the aggregate distributions (as defined in the Credit Facility and including dividends on Series A Preferred Stock or Series B Preferred Stock) for any period of four fiscal quarters do not exceed 95% of Modified FFO (as defined in the Credit Facility) for the same period based only on fiscal quarters after we make the election and begin paying distributions.
The lenders waived any defaults or events of defaults under the covenant requiring a minimum ratio of adjusted consolidated EBITDA to consolidated fixed charges that may have occurred during the fiscal quarter ended September 31, 2021 as well as any additional default or events of default resulting therefrom prior to November 12, 2021. The lenders have also adjusted this covenant for a period starting November 12, 2021 and lasting until the earlier of December 31, 2022 and such earlier date as the Company elects to terminate this relief (such period, the “Covenant Relief Period”). There can be no assurance our lenders will consent to any amendments, or waivers or adjustments that may become necessary to comply with our Credit Facility in the future, and a breach of compliance of our Credit Facility could, among other things, impact our ability to use our Credit Facility in the future, and could require us to repay amounts borrowed under our Credit Facility earlier than we otherwise would have been required to pay.
Covenants in our Credit Facility also require us to maintain a combination of cash, cash equivalents and availability for future borrowings under our Revolving Credit Facility totaling at least $50.0 million. As of September 30, 2021, we had $29.8 million of cash and cash equivalents, and $166.5 million was available for future borrowings under our Revolving Credit Facility. Following the amendment in August 2020, our Credit Facility also restricts our sources of liquidity. Pursuant to an amendment to our Credit Facility in August 2020, certain restrictions and conditions will no longer apply starting in a quarter in which we make an election and, as of the day prior to the commencement of the applicable quarter we have a combination of cash, cash equivalents and availability for future borrowings under the Revolving Credit Facility totaling at least $100.0 million, giving effect to the aggregate amount of distributions projected to be paid by us during the applicable quarter, our ratio of consolidated total indebtedness to consolidated total asset value (expressed as a percentage) is less than 62.5%, and, as added by the third amendment to the credit agreement governing the Credit Facility, the Covenant Relief Period has terminated (the “Commencement Quarter”). Until the first day of the Commencement Quarter, we must use all of the net cash proceeds from any capital event (such as an asset sale, financing or equity issuance) to prepay amounts outstanding under the Revolving Credit Facility. We may reborrow any amounts so repaid if all relevant conditions are met, including sufficient availability for future borrowings. There can be no assurance these conditions will be met.
Even if we are ultimately able to reborrow amounts generated by capital events that are required to be used to prepay the Revolving Credit Facility, there still can be no assurance as to the additional amount we will be able to generate from capital events and therefore availability under our Credit Facility giving effect to any required prepayment. Unencumbered real estate investments, at cost as of September 30, 2021 was $0.1 billion. There can be no assurance as to the amount of liquidity we would be able to generate from adding any of the unencumbered assets we own to the borrowing base of our Credit Facility or pledging them as security for a new mortgage loan. In addition, any capital-raising transaction, to the extent we are able to access the debt or equity capital markets (which is not assured) could be on terms that would not be favorable to us or our
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stockholders, including high interest rates, in the case of debt, and substantial dilution, in the case of issuing equity or convertible debt securities.
The availability for future borrowings under the Credit Facility is calculated using the adjusted net operating income of the real estate assets comprising the borrowing base, and availability has been, and may continue to be, adversely affected by the decreases income from our operators that have resulted from the effects of the COVID-19 pandemic and may persist for some time. Our ability to increase the amount of cash we generate from property operations depends on a variety of factors, including the duration and scope of the COVID-19 pandemic and its impact on our tenants and properties, our ability to complete acquisitions of new properties on favorable terms and our ability to improve operations at our existing properties. There can be no assurance that we will complete acquisitions on a timely basis or on favorable terms and conditions, if at all, particularly if we do not have a source of capital available that will allow us to do so. Our ability to improve operations at our existing properties is also subject to a variety of risks and uncertainties, many of which are beyond our control, and there can be no assurance we will be successful in achieving this objective. Because shares of common stock are only offered and sold pursuant to the our distribution reinvestment plan (“DRIP”) in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as we pay distributions in stock instead of cash, so this source of capital will not be available unless and until we are able to resume paying cash distributions on our common stock. There is also no assurance that participation in the DRIP will be maintained at current or higher levels if the DRIP becomes a source of capital in the future.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
In order to provide common stockholders with interim liquidity, the Board has adopted the SRP, which enables our common stockholders to sell their shares back to us after they have been held for at least one year, subject to significant conditions and limitations. In August 2020, repurchases under the SRP were suspended. For additional information on the SRP, see Note 8 — Stockholders’ Equity to our consolidated financial statements included in this Quarterly Report on Form 10-Q.
The following table summarizes our SRP activity for the period presented. Repurchases are currently consummated using the most recently published Estimated Per-Share NAV at the time of the repurchase.
Number of Shares Repurchased Average Price per Share
Cumulative repurchases as of December 31, 2020 4,896,620  $ 20.60 
Nine months ended September 30, 2021 —  — 
Cumulative repurchases as of September 30, 2021 4,896,620  20.60 

Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Third Amendment to First Amended and Restated Senior Secured Credit Agreement
On November 12, 2021, the Company, the OP, KeyBank National Association individually and as agent for the lenders and each of the lenders from time to time a party under the credit agreement, among others, agreed to amend the credit agreement. As part of the amendment, the lenders agreed to waive a covenant default occurring because the Company did not satisfy the Fixed Charge Coverage Ratio (as defined in the credit agreement) during the quarter ended September 30, 2021 as well as any Default or Event of Default resulting from breach of the Fixed Charge Coverage Ratio covenant. Further, under the amendment: (i) the Fixed Charge Coverage Ratio that the Company must satisfy based on the four most recently ended fiscal quarters was reduced from 1.60:1.00 to 1.50:1.00 commencing on the effective date of the amendment through the earlier of (x) December 31, 2022 and (y) such earlier date as the Company elects to terminate the covenant relief period, pursuant to a notice electing such termination and certifying that no default is continuing and that the Company is in pro forma compliance with the financial covenants in the Credit Agreement (such earlier date, the “Covenant Relief Termination Date”); (ii) the Applicable Capitalization Rate (as defined in the credit agreement) used to determine the value ascribed to MOBs for purposes of the borrowing base was reduced from 7.25% to 7.0%; (iii) updated provisions were added to facilitate the transition from LIBOR to SOFR, and (iv) erroneous payments provisions governing receipt of a payment by a lender mistakenly distributed by the agent were also added. The Fixed Charge Coverage Ratio will revert to 1.60 to 1.00 after the Covenant Relief Termination Date. Prior
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Table of Contents
to the Covenant Relief Termination Date, the Company may not pay distributions to holders of common stock in cash or any other cash distributions (including repurchases of shares of the Company’s common stock), subject to certain exceptions.
The foregoing summary of the Amendment is qualified in its entirety by reference to the Amendment, which is attached hereto as Exhibit 10.2 in incorporated by reference herein..
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Item 6. Exhibits.
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (and are numbered in accordance with Item 601 of Regulation S-K):
Exhibit No.    Description
3.1 (1)
Articles of Amendment and Restatement for Healthcare Trust, Inc.
3.2 (2)
Amended and Restated Bylaws of Healthcare Trust, Inc.
3.3 (3)
Amendment to Amended and Restated Bylaws of Healthcare Trust, Inc.
3.4 (4)
Articles Supplementary of Healthcare Trust, Inc. relating to election to be subject to Section 3-803 of the Maryland General Corporation Law, dated November 9, 2017.
3.5 (5)
Articles Supplementary relating to the designation of shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, dated December 6, 2019.
3.6 (6)
Articles Supplementary designating additional shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock
3.7 (7)
Articles Supplementary designating additional shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock $0.01 par value per share.
4.1 (7)
Fifth Amendment, dated May 7, 2021, to the Agreement of Limited Partnership of Healthcare Trust Operating Partnership, L.P., dated February 14, 2013.
10.1 (8)
Underwriting Agreement, dated October 1, 2021, by and among Healthcare Trust, Inc., Healthcare Trust Operating Partnership, L.P. and B. Riley Securities, Inc., as representative of the underwriters listed on Schedule I thereto.
10.2*
Third Amendment to First Amended and Restated Senior Secured Credit Agreement, entered into as of November 12, 2021, among Healthcare Trust Operating Partnership, L.P., Healthcare Trust, Inc., the subsidiary guarantor parties thereto, Keybank National Association and the other lenders party thereto.
10.3*
Second Amendment to Amended and Restated Property Management and Leasing Agreement, dated as of November 11, 2021, by and among Healthcare Trust, Inc., Healthcare Trust Operating Partnership, L.P. and Healthcare Properties, LLC
10.4*
Property Management and Leasing Agreement, dated as of November 11, 2021, by and among ARHC OPFWNIN01, LLC and Healthcare Properties, LLC
10.5*
Property Management and Leasing Agreement, dated as of November 11, 2021, by and among ARHC OPFWNIN02, LLC and Healthcare Properties, LLC
31.1 *
Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *
Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *
Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH * Inline XBRL Taxonomy Extension Schema Document.
101.CAL * Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF * Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB * Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 *
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
______
*    Filed herewith.
(1)    Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 11, 2016, and incorporated by reference herein.
(2) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the
SEC on March 20, 2018, and incorporated by reference herein.
(3)    Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on May 19, 2020, and incorporated by reference herein.
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(4)    Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 filed with the Securities and Exchange Commission on November 14, 2017, and incorporated by reference herein.
(5)    Filed as an exhibit to the Company’s Registration Statement on Form 8-A filed with the SEC on December 6, 2019, and incorporated by reference herein.
(6) Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on September 15, 2020, and incorporated by reference herein.
(7)    Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2021, and incorporated by reference herein.
(8) Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on October 4, 2021.
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  HEALTHCARE TRUST, INC.
  By: /s/ Edward M. Weil, Jr.
    Edward M. Weil, Jr.
    Chief Executive Officer and President
(Principal Executive Officer)
By: /s/ Jason F. Doyle
  Jason F. Doyle
  Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal Accounting Officer)

Dated: November 12, 2021
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EXHIBIT 10.2
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO FIRST AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT (this “Amendment”) is made as of the 12th day of November, 2021, by and among HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“Borrower”), HEALTHCARE TRUST, INC., a Maryland corporation (“REIT”), THE PARTIES EXECUTING BELOW AS “SUBSIDIARY GUARANTORS” (the “Subsidiary Guarantors”; REIT and the Subsidiary Guarantors, collectively the “Guarantors”), KEYBANK NATIONAL ASSOCIATION (“KeyBank”), individually and as Agent for itself and the other Lenders from time to time a party to the Credit Agreement (as hereinafter defined) (KeyBank, in its capacity as Agent, is hereinafter referred to as “Agent”), and THE OTHER “LENDERS” WHICH ARE SIGNATORIES HERETO (KeyBank and such Lenders hereinafter referred to collectively as the “Lenders”).
W I T N E S S E T H:
WHEREAS, Borrower, Agent and certain of the Lenders entered into that certain First Amended and Restated Senior Secured Credit Agreement dated as of March 13, 2019, as amended by that certain First Amendment to First Amended and Restated Senior Secured Credit Agreement dated as of March 24, 2020, and by that certain Second Amendment to First Amended and Restated Senior Secured Credit Agreement dated as of August 10, 2020 (as the same may be further varied, extended, supplemented, consolidated, amended, replaced, increased, renewed or modified or restated from time to time, the “Credit Agreement”); and
WHEREAS, Borrower has requested that the Agent and the Lenders make certain modifications to the terms of the Credit Agreement; and
WHEREAS, the Agent and the Lenders have agreed to make such modifications subject to the execution and delivery by Borrower and Guarantors of this Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby covenant and agree as follows:
1.Definitions. All the terms used herein which are not otherwise defined herein shall have the meanings set forth in the Credit Agreement (as modified and amended by this Amendment).
2.Modification of the Credit Agreement. Borrower, the Lenders and Agent do hereby modify and amend the Credit Agreement as follows:
(a)By deleting the words and figures “MOBs – seven and one-quarter percent (7.25%)” from the definition of “Applicable Capitalization Rate” appearing in §1.1 of the Credit Agreement, and inserting in lieu thereof the following: “MOBs – seven percent (7.0%)”;
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(b)By inserting the following proviso at the end of the definition of “Business Day” appearing in §1.1 of the Credit Agreement:
“; provided that, when used in connection with SOFR (including, without limitation, any component of the Base Rate that is based upon SOFR or any other calculation or determination involving SOFR), the term "Business Day" means any such day that is also a U.S. Government Securities Business Day.”;
(c)By deleting the word “and” appearing immediately prior to clause (v) of the definition of “Distribution Trigger Conditions” appearing in §1.1 of the Credit Agreement, and inserting the following new clause (vi) following the words “Compliance Certificate” in the last line of said definition:
“and (vi) the Covenant Relief Period shall have terminated.”;
(d)By deleting the words and figures “two (2),” from the definition of “Interest Period” appearing in §1.1 of the Credit Agreement;
(e)By inserting the following new sentence at the end of the definition of “Obligations” appearing in §1.1 of the Credit Agreement:
“Without limiting any of the foregoing, the Obligations shall include the Borrower’s and Guarantors’ obligations to pay, discharge and satisfy any Erroneous Payment Subrogation Rights.”;
(f)By inserting the following new definitions in §1.1 of the Credit Agreement in the appropriate alphabetical order:
“Covenant Relief Period. The period commencing on November 12, 2021, and terminating on (and including) the Covenant Relief Period Termination Date.”;
“Covenant Relief Period Termination Date. The earlier of (a) December 31, 2022 and (b) the date on which the Borrower irrevocably elects to terminate the Covenant Relief Period as specified in the Covenant Relief Period Termination Notice; provided that, with respect to this clause (b), no Default or Event of Default shall have occurred and be continuing as of such date.”;
“Covenant Relief Period Termination Notice. A notice executed by the chief executive officer, president or chief financial officer of the Borrower (a) stating that the Borrower irrevocably elects to terminate the Covenant Relief Period effective as of the last day of the fiscal quarter specified in such notice (provided, that such notice shall have been delivered to the Agent not later than the date of delivery of the Compliance Certificate for such specified fiscal quarter pursuant to
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Section 7.4(c)), (b) certifying that as of the date of such notice and at the time of and immediately after the Covenant Relief Period Termination Date, no Default or Event of Default shall have occurred and be continuing, and (c) enclosing a Compliance Certificate for such specified fiscal quarter demonstrating compliance with the covenants contained in §9 of the Credit Agreement and the other covenants described in such Compliance Certificate, in each case, after giving pro forma effect to the termination of the Covenant Relief Period.”;
“Erroneous Payment. See §14.17(a).”;
“Erroneous Payment Deficiency Assignment. See §14.17(d)(i).”;
“Erroneous Payment Impacted Class. See §14.17(d)(i).”;
“Erroneous Payment Return Deficiency. See §14.17(d)(i).”;
“Erroneous Payment Subrogation Rights. See §14.17(e).”;
“Payment Recipient. See §14.17(a).”; and
“U.S. Government Securities Business Day. Any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.”;
(g)By deleting in its entirety §1.2(n) of the Credit Agreement, and inserting in lieu thereof the following new §1.2(n):
“(n)    The interest rate on LIBOR Rate Loans is determined by reference to the LIBOR, which is derived from the London interbank offered rate. The London interbank offered rate is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. In July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator, the “IBA”) for purposes of the IBA setting the London interbank offered rate. As a result, it is possible that in the future, the London interbank offered rate may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on LIBOR Rate. In light of this eventuality, public and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of the London interbank offered rate. In the event that the London interbank offered rate is no longer available or in certain other
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circumstances as set forth in §4.16 of this Agreement, such §4.16 provides a mechanism for determining an alternative rate of interest. The Agent will notify the Borrower, pursuant to §4.16, in advance of any change to the reference rate upon which the interest rate on LIBOR Loans is based. However, the Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to USD LIBOR (as defined in §4.16) or with respect to any alternative or successor benchmark thereto, or replacement rate therefor or thereof, including, without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate, as it may or may not be adjusted pursuant to §4.16, will be similar to, or produce the same value or economic equivalence of, USD LIBOR or any other benchmark or have the same volume or liquidity as did USD LIBOR or any other benchmark rate prior to its discontinuance or unavailability.”;
(h)By deleting in its entirety §4.16 of the Credit Agreement, and inserting in lieu thereof the following new §4.16:
“4.16 Successor LIBOR Rate.
(a)    Replacing USD LIBOR. On March 5, 2021, the Financial Conduct Authority (“FCA”), the regulatory supervisor of USD LIBOR’s administrator (“IBA”), announced in a public statement the future cessation or loss of representativeness of overnight/Spot Next, 1-month, 3-month, 6-month and 12-month USD LIBOR tenor settings. On the earliest of (i) July 1, 2023, (ii) the date that all Available Tenors of USD LIBOR have either permanently or indefinitely ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative and (iii) the Early Opt-in Effective Date, if the then-current Benchmark is USD LIBOR, the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action by or consent of any other party to, this Agreement or any other Loan Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis.
(b)    Replacing Future Benchmarks. If any Benchmark Transition Event occurs after the date hereof (other than as described above in clause (a)), the then-current Benchmark will be replaced with the Benchmark Replacement for all purposes hereunder and under any Loan Document in respect of any Benchmark setting on the later of (i) as of 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders and the Borrower or (ii) such other date as may be determined by the Agent, in
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each case, without any further action or consent of any other party to this Agreement or any other Loan Document, so long as the Agent has not received, by such time (or, in the case of clause (ii) above, such time as may be specified by the Agent as a deadline to receive objections, but in any case, no less than five (5) Business Days after the date such notice is provided to the Lenders and the Borrower), written notice of objection to such Benchmark Replacement from Lenders comprising the Majority Lenders. At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a borrowing of, conversion to or continuation of Loans to be made, converted or continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Agent that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Loans. During the period referenced in the foregoing sentence, the component of the Base Rate based upon the Benchmark will not be used in any determination of the Base Rate.
(c)    Benchmark Replacement Conforming Changes. In connection with the implementation and administration of a Benchmark Replacement (whether in connection with the replacement of USD LIBOR or any future Benchmark), the Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(d)    Notices; Standards for Decisions and Determinations. The Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by the Agent pursuant to this §4.16, including, without limitation, any determination with respect to a tenor, rate or adjustment, or implementation of any Benchmark Replacement Conforming Changes, the timing of implementation of any Benchmark Replacement or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding on all parties hereto absent manifest error and may be made in its sole discretion
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and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this §4.16, and shall not be a basis of any claim of liability of any kind or nature by any party hereto, all such claims being hereby waived individually by each party hereto.
(e)    Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or USD LIBOR (or any alternate rate selected in an Early Opt-in Election)), then the Agent may remove any tenor of such Benchmark that is unavailable or non-representative for such Benchmark (including any Benchmark Replacement) settings and (ii) if such tenor becomes available or representative, the Agent may reinstate any previously removed tenor for such Benchmark (including any Benchmark Replacement) settings.
(f)    Certain Defined Terms. As used in this §4.16:
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then-current Benchmark is a term rate, any tenor for such Benchmark that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.
“Benchmark” means, initially, USD LIBOR; provided that if a replacement of the Benchmark has occurred pursuant to this §4.16, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, for any Available Tenor:
(1)    for purposes of clause (a) of this §4.16, the first alternative set forth below that can be determined by the Agent:
(a)    the sum of: (i) Term SOFR and (ii) 0.11448% (11.448 basis points) for an Available Tenor of one-month’s duration, 0.26161% (26.161 basis points) for an Available Tenor of three-months’ duration, and 0.42826% (42.826 basis points) for an Available Tenor of six-months’ duration; provided, that, if the Borrower has provided a notification to the Agent in writing on or prior to the date on which the Benchmark Replacement will become effective that the Borrower has a Hedge in place with respect to any of the Loans as of the date of such notice (which such notification the Agent shall be entitled to rely upon and shall have no duty or obligation to ascertain the correctness or completeness of), then the
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Agent will not determine the Benchmark Replacement pursuant to this clause (1)(a) for such Benchmark Transition Event or Early Opt-in Election, as applicable; or
(b)    the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment for an Available Tenor of one-month’s duration (0.11448% (11.448 basis points)); provided, however, that if an Early Opt-in Election has been made, the Benchmark Replacement will be the benchmark selected in connection with such Early Opt-in Election; and
(2)    for purposes of clause (b) of this §4.16, the sum of (a) the alternate benchmark rate and (b) an adjustment (which may be a positive or negative value, or zero), in each case, that has been selected pursuant to this clause (2) by the Agent and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time;
provided that, if the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for all purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Transition Event” means, with respect to any then-current Benchmark (other than USD LIBOR), the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Board of Governors of the Federal Reserve System,
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the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Agent in accordance with the conventions for this rate recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided, that if the Agent decides that any such convention is not administratively feasible for the Agent, then the Agent may establish another convention in its reasonable discretion.
“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Majority Lenders.
“Early Opt-in Election” means the occurrence of:
(1) a notification by the Agent to (or the request by the Borrower to the Agent to notify) each of the other parties hereto that at least five (5) currently outstanding U.S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) either a SOFR-based rate (including SOFR or Term SOFR or any other rate based upon SOFR) as a benchmark rate or an alternate benchmark interest rate to replace USD LIBOR (and such syndicated credit facilities are identified in such notice and are publicly available for review), and
(2) the joint election by the Agent and the Borrower to trigger a fallback from USD LIBOR and the provision by the Agent of written notice of such election to the Lenders.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the
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modification, amendment or renewal of this Agreement or otherwise) with respect to USD LIBOR.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“SOFR” means, for any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org. (or any successor source for the secured overnight financing rate identified as such by the administrator of the secured overnight financing rate from time to time), on the immediately succeeding Business Day.
“Term SOFR” means, for the applicable corresponding tenor, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“USD LIBOR” means the London interbank offered rate for U.S. dollars.”;
(i)By deleting in its entirety §9.3 of the Credit Agreement and inserting in lieu thereof the following new §9.3:
“§9.3    Adjusted Consolidated EBITDA to Consolidated Fixed Charges. From and after the fiscal quarter commencing on October 1, 2021, the Borrower will not at any time permit the ratio of Adjusted Consolidated EBITDA to Consolidated Fixed Charges for the most recently ended four (4) fiscal quarters to be less than (a) during the Covenant Relief Period, 1.50 to 1.00, and (b) from and after the Covenant Relief Period Termination Date, 1.60:1.00. For the avoidance of doubt, the ratio of Adjusted Consolidated EBITDA to Consolidated Fixed Charges for the most recently ended four (4) fiscal quarters shall not be tested for the fiscal quarter commencing on July 1, 2021 and ending on September 30, 2021; provided, however, Borrower shall be required to report said ratio for such fiscal quarter in the Compliance Certificate delivered with respect to such fiscal quarter pursuant to §7.4(c).”; and
(j)By inserting the following new §14.17 into the Credit Agreement:
“§14.17    Erroneous Payments.
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(a)    If the Agent (x) notifies a Lender, Issuing Lender or any Person who has received funds on behalf of a Lender or Issuing Lender (any such Lender, Issuing Lender or other recipient, a “Payment Recipient”) that the Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately succeeding clause (b)) that any funds (as set forth in such notice from the Agent) received by such Payment Recipient from the Agent or any of its Affiliates were erroneously or mistakenly transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender, Issuing Lender or other Payment Recipient on its behalf) (any such funds, whether transmitted or received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and (y) demands in writing the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of the Agent pending its return or repayment as contemplated below in this §14.17(a) and held in trust for the benefit of the Agent, and such Lender or Issuing Lender shall (or, with respect to any Payment Recipient who received such funds on its behalf, shall cause such Payment Recipient to) promptly, but in no event later than two (2) Business Days thereafter (or such later date as the Agent may, in its sole discretion, specify in writing), return to the Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon (except to the extent waived in writing by the Agent) in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Agent in same day funds at the greater of the Federal Funds Effective Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect. A notice of the Agent to any Payment Recipient under this clause (a) shall be conclusive, absent manifest error.
(b)    Without limiting immediately preceding clause (a), each Lender, Issuing Lender or any Person who has received funds on behalf of a Lender or Issuing Lender, hereby further agrees that if it receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in this Agreement or in a notice of payment, prepayment or repayment sent by the Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Agent (or any of its Affiliates), or (z) that such Lender, Issuing Lender or other such recipient,
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otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), then in each such case:
(i)    it acknowledges and agrees that (A) in the case of immediately preceding clauses (x) or (y), an error and mistake shall be presumed to have been made (absent written confirmation from the Agent to the contrary) or (B) an error and mistake has been made (in the case of immediately preceding clause (z)), in each case, with respect to such payment, prepayment or repayment; and
(ii)    such Lender or Issuing Lender shall (and shall cause any other recipient that receives funds on its respective behalf to) promptly (and, in all events, within one (1) Business Day of its knowledge of the occurrence of any of the circumstances described in immediately preceding clauses (x), (y) and (z)) notify the Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying the Agent pursuant to this §14.17(b).
For the avoidance of doubt, the failure to deliver a notice to the Agent pursuant to this §14.17(b) shall not have any effect on a Payment Recipient’s obligations pursuant to §14.17(a) or on whether or not an Erroneous Payment has been made.
(c)    Each Lender or Issuing Lender hereby authorizes the Agent to set off, net and apply any and all amounts at any time owing to such Lender or Issuing Lender under any Loan Document, or otherwise payable or distributable by the Agent to such Lender or Issuing Lender under any Loan Document with respect to any payment of principal, interest, fees or other amounts, against any amount that the Agent has demanded to be returned under immediately preceding clause (a).
(d)(i)    In the event that an Erroneous Payment (or portion thereof) is not recovered by the Agent for any reason, after demand therefor in accordance with immediately preceding clause (a), from any Lender or Issuing Lender that has received such Erroneous Payment (or portion thereof) (and/or from any Payment Recipient who received such Erroneous Payment (or portion thereof) on its respective behalf) (such unrecovered amount, an “Erroneous Payment Return Deficiency”), upon the Agent’s notice to such Lender or Issuing Lender at any time, then effective immediately (with the consideration therefor being acknowledged by the parties hereto), (A) such Lender or Issuing Lender shall be deemed to have assigned its Loans (but not its Commitments) of the relevant class of Loans with respect to which such Erroneous Payment was made (the “Erroneous Payment Impacted Class”) in an amount equal to the Erroneous Payment Return Deficiency (or such lesser amount as the
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Agent may specify) (such assignment of the Loans (but not Commitments) of the Erroneous Payment Impacted Class, the “Erroneous Payment Deficiency Assignment”) (on a cashless basis and such amount calculated at par plus any accrued and unpaid interest (with the assignment fee to be waived by the Agent in such instance)), and is hereby (together with the Borrower) deemed to execute and deliver an Assignment and Acceptance Agreement (or, to the extent applicable, an agreement incorporating an Assignment and Acceptance Agreement by reference pursuant to an approved electronic platform as to which the Agent and such parties are participants) with respect to such Erroneous Payment Deficiency Assignment, and such Lender or Issuing Lender shall deliver any Notes evidencing such Loans to the Borrower or the Agent (but the failure of such Person to deliver any such Notes shall not affect the effectiveness of the foregoing assignment), (B) the Agent as the assignee Lender shall be deemed to have acquired the Erroneous Payment Deficiency Assignment, (C) upon such deemed acquisition, the Agent as the assignee Lender shall become a Lender or Issuing Lender, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment and the assigning Lender or assigning Issuing Lender shall cease to be a Lender or Issuing Lender, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment, excluding, for the avoidance of doubt, its obligations under the indemnification provisions of this Agreement and its applicable Commitments which shall survive as to such assigning Lender or assigning Issuing Lender, (D) the Agent and the Borrower shall each be deemed to have waived any consent required under this Agreement to any such Erroneous Payment Deficiency Assignment, and (E) the Agent will reflect in the Register its ownership interest in the Loans subject to the Erroneous Payment Deficiency Assignment. For the avoidance of doubt, no Erroneous Payment Deficiency Assignment will reduce the Commitments of any Lender and such Commitments shall remain available in accordance with the terms of this Agreement.
(ii)    Subject to §18.1 (but excluding, in all events, any assignment consent or approval requirements (whether from the Borrower or otherwise), the Agent may, in its discretion, sell any Loans acquired pursuant to an Erroneous Payment Deficiency Assignment and upon receipt of the proceeds of such sale, the Erroneous Payment Return Deficiency owing by the applicable Lender or Issuing Lender shall be reduced by the net proceeds of the sale of such Loan (or portion thereof), and the Agent shall retain all other rights, remedies and claims against such Lender or Issuing Lender (and/or against any recipient that receives funds on its respective behalf). In addition, an Erroneous Payment Return Deficiency owing by the applicable Lender (x) shall be reduced by the proceeds of prepayments or repayments of principal and interest, or other distribution in respect of principal and interest, received by the Agent on or with respect to any such Loans acquired from such Lender pursuant to
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an Erroneous Payment Deficiency Assignment (to the extent that any such Loans are then owned by the Agent) and (y) may, in the sole discretion of the Agent, be reduced by any amount specified by the Agent in writing to the applicable Lender from time to time.
(e)    The parties hereto agree that (x) irrespective of whether the Agent may be equitably subrogated, in the event that an Erroneous Payment (or portion thereof) is not recovered from any Payment Recipient that has received such Erroneous Payment (or portion thereof) for any reason, the Agent shall be subrogated to all the rights and interests of such Payment Recipient (and, in the case of any Payment Recipient who has received funds on behalf of a Lender or an Issuing Lender, to the rights and interests of such Lender or Issuing Lender, as the case may be) under the Loan Documents with respect to such amount (the “Erroneous Payment Subrogation Rights”) (provided that, the Borrower’s Obligations under the Loan Documents in respect of the Erroneous Payment Subrogation Rights shall not be duplicative of such Obligations in respect of Loans that have been assigned to the Agent under an Erroneous Payment Deficiency Assignment) and (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any Guarantor; provided that this §14.17(e) shall not be interpreted to increase (or accelerate the due date for) or have the effect of increasing (or accelerating the due date for), the Obligations of the Borrower relative to the amount (and/or timing for payment) of the Obligations that would have been payable had such Erroneous Payment not been made by the Agent; provided, further, that for the avoidance of doubt, immediately preceding clauses (x) and (y) shall not apply to the extent any such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Agent from the Borrower or any Guarantor for the purpose of making such Erroneous Payment.
(f)    To the extent permitted by applicable law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Agent for the return of any Erroneous Payment received, including, without limitation, any defense based on “discharge for value” or any similar doctrine.
(g)    Each party’s obligations, agreements and waivers under this §14.17 shall survive the resignation or replacement of the Agent, any transfer of rights or obligations by, or the replacement of, a Lender or Issuing Lender, the termination of the Commitments and/or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.”
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3.Limited Waiver. Subject to the execution and delivery of this Amendment by the Borrower and the Guarantors, the Agent and the Majority Lenders hereby agree that any Default or Event of Default that may have occurred during the period commencing on and including July 1, 2021 and ending on and including September 30, 2021 under §9.3 of the Credit Agreement, and any additional Default or Event of Default resulting therefrom, prior to the effectiveness of this Amendment, if any, shall be waived. The aforesaid waiver shall only be applicable to the limited circumstances described in the immediately preceding sentence, and except as expressly provided in this Amendment, Borrower and Guarantors shall be required to strictly comply with the provisions of the Credit Agreement and the other Loan Documents (as amended hereby). Borrower and Guarantors acknowledge that the Agent and the Lenders party hereto have made no agreement, and are in no way obligated, to grant any future extension, waiver, indulgence or consent.
4.References to Loan Documents. All references in the Loan Documents to the Credit Agreement shall be deemed a reference to the Credit Agreement as modified and amended herein.
5.Consent and Acknowledgment of Borrower and Guarantors. By execution of this Amendment, the Guarantors hereby expressly consent to the modifications and amendments relating to the Credit Agreement as set forth herein and any other agreements or instruments executed in connection herewith, and Borrower and Guarantors hereby acknowledge, represent and agree that (a) the Credit Agreement, as modified and amended herein, and the other Loan Documents remains in full force and effect and constitutes the valid and legally binding obligation of Borrower and Guarantors, as applicable, enforceable against such Persons in accordance with their respective terms, (b) that the Guaranty extends to and applies to the Credit Agreement as modified and amended herein, and (c) that the execution and delivery of this Amendment and any other agreements or instruments executed in connection herewith does not constitute, and shall not be deemed to constitute, a release, waiver or satisfaction of Borrower’s or any Guarantor’s obligations under the Loan Documents.
6.Representations and Warranties. Borrower and Guarantors represent and warrant to Agent and the Lenders as follows:
(a)Authorization. The execution, delivery and performance of this Amendment and any other agreements or instruments executed in connection herewith and the transactions contemplated hereby and thereby (i) are within the authority of Borrower and Guarantors, (ii) have been duly authorized by all necessary proceedings on the part of the Borrower and Guarantors, (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which Borrower or any Guarantor is subject or any judgment, order, writ, injunction, license or permit applicable to Borrower or any Guarantor, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the partnership agreement, articles of incorporation or other charter documents or bylaws of, or any agreement or other instrument binding upon, Borrower or any Guarantor or any of their respective properties, (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of Borrower or any Guarantor, other than those in favor of Agent, on behalf of itself and the other Lenders, pursuant to the Loan
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Documents, and (vi) do not require the approval or consent of any Person other than those already obtained and delivered to the Agent.
(b)Enforceability. This Amendment and any other agreements or instruments executed in connection herewith to which Borrower or any Guarantor is a party are the valid and legally binding obligations of Borrower and Guarantors enforceable in accordance with the respective terms and provisions hereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and the effect of general principles of equity.
(c)Governmental Approvals. The execution, delivery and performance of this Amendment and any other agreements or instruments executed in connection herewith and the transactions contemplated hereby and thereby do not require the approval or consent of, or any filing or registration with, or the giving of any notice to, any court, department, board, governmental agency or authority other than those already obtained, and filings after the date hereof of disclosures with the SEC, or as may be required hereafter with respect to tenant improvements, repairs or other work with respect to any Real Estate.
(d)Reaffirmation of Representations and Warranties. Each of the representations and warranties made by or on behalf of the Borrower, the Guarantors or any of their respective Subsidiaries contained in the Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement or this Amendment is true and correct in all material respects as of the date hereof, with the same effect as if made at and as of the date hereof, except to the extent of changes resulting from transactions permitted by the Loan Documents (it being understood and agreed that, with respect to any representation or warranty which by its terms is made as of a specified date, such representation or warranty is reaffirmed hereby only as of such specified date), in each case, after giving effect to this Amendment. To the extent that any of the representations and warranties contained in the Credit Agreement, any other Loan Document or in any document or instrument delivered pursuant to or in connection with the Credit Agreement or this Amendment is qualified by “Material Adverse Effect” or any other materiality qualifier, then the qualifier “in all material respects” contained in this Paragraph 6(d) shall not apply with respect to any such representations and warranties.
7.No Default. By execution hereof, the Borrower and the Guarantors certify that, immediately after giving effect to this Amendment, there exists no Default or Event of Default as of the date of this Amendment.
8.Waiver of Claims. Borrower and Guarantors acknowledge, represent and agree that none of such Persons has any defenses, setoffs, claims, counterclaims or causes of action of any kind or nature whatsoever arising on or before the date hereof with respect to the Loan Documents, the administration or funding of the Loan or the Letters of Credit or with respect to any acts or omissions of Agent or any Lender, or any past or present officers, agents or employees of Agent or any Lender pursuant to or relating to the Loan Documents, and each of such Persons does hereby expressly waive, release and relinquish any and all such defenses, setoffs, claims, counterclaims and causes of action arising on or before the date hereof, if any.
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9.Ratification. Except as hereinabove set forth, all terms, covenants and provisions of the Credit Agreement remain unaltered and in full force and effect, and the parties hereto do hereby expressly ratify and confirm the Credit Agreement as modified and amended herein. Nothing in this Amendment or any other document delivered in connection herewith shall be deemed or construed to constitute, and there has not otherwise occurred, a novation, cancellation, satisfaction, release, extinguishment or substitution of the indebtedness evidenced by the Notes or the other obligations of Borrower and Guarantors under the Loan Documents.
10.Effective Date. This Amendment shall be deemed effective and in full force and effect upon confirmation by the Agent of the satisfaction of the following conditions:
(a)the execution and delivery of this Amendment by Borrower, Guarantors, Agent and the Majority Lenders;
(b)receipt by Agent of evidence that the Borrower shall have paid all fees due and payable with respect to this Amendment;
(c)receipt by Agent of such other resolutions, certificates, documents, instruments and agreements as the Agent may reasonably request;
(d)delivery to Agent of (i) a Borrowing Base Certificate and (ii) a Compliance Certificate evidencing compliance with the covenants described in §9 of the Credit Agreement and the other covenants described in such Compliance Certificate (as such covenants have been modified pursuant to this Amendment), calculated in good faith based on the pro forma consolidated financial statements of REIT for the calendar quarter ended September 30, 2021; and
(e)the Borrower shall have paid the reasonable fees and expenses of Agent in connection with this Amendment.
11.Amendment as Loan Document. This Amendment shall constitute a Loan Document.
12.Counterparts. This Amendment may be executed in any number of counterparts which shall together constitute but one and the same agreement.
13.MISCELLANEOUS. THIS AMENDMENT SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors, successors-in-title and assigns as provided in the Credit Agreement. All interest accrued and unpaid under the Credit Agreement as of the Effective Date shall be due and payable in the amount determined pursuant to the Credit Agreement prior to the effectiveness of this Amendment for periods prior to the Effective Date on the next payment date for such interest set forth in the Credit Agreement.
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14.Electronic Signatures. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or as an attachment to an electronic mail message in .pdf, .jpeg, .TIFF or similar electronic format shall be effective as delivery of a manually executed counterpart of this Amendment for all purposes. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment and any other Loan Document to be signed in connection with this Amendment, the other Loan Documents and the transactions contemplated hereby and thereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Agent to accept electronic signatures in any form or format without its prior written consent. For the purposes hereof, “Electronic Signatures” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record. Each of the parties hereto represents and warrants to the other parties hereto that it has the corporate capacity and authority to execute the Amendment through electronic means and there are no restrictions for doing so in that party’s constitutive documents. Without limiting the generality of the foregoing, the Borrower hereby (i) agrees that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among any of the Agent or the Lenders and any of the Borrower or Guarantors, electronic images of this Agreement or any other Loan Document (in each case, including with respect to any signature pages thereto) shall have the same legal effect, validity and enforceability as any paper original, and (ii) waives any argument, defense or right to contest the validity or enforceability of any Loan Document based solely on the lack of paper original copies of such Loan Document, including with respect to any signature pages thereto.
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IN WITNESS WHEREOF, the parties hereto have hereto set their hands and affixed their seals as of the day and year first above written.
            BORROWER:
HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
By:    HEALTHCARE TRUST, INC.,
a Maryland corporation, its general partner

By: /s/ Jason F. Doyle
Name: Jason F. Doyle
Title: Chief Financial Officer, Secretary and                  and Treasurer

(SEAL)

REIT:
HEALTHCARE TRUST, INC., a Maryland corporation

By: /s/ Jason F. Doyle
Name: Jason F. Doyle
Title: Chief Financial Officer, Secretary and Treasurer

(SEAL)








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SUBSIDIARY GUARANTORS:

ARHC BMBWNIL01, LLC;
ARHC FMWEDAL01, LLC;
ARHC AHJACOH01, LLC;
ARHC LMHBGPA01, LLC;
ARHC GHGVLSC01, LLC;
ARHC TRS HOLDCO II, LLC;
ARHC DFDYRIN01, LLC;
ARHC FMMUNIN01, LLC;
ARHC DVMERID01, LLC;
ARHC ALSPGFL01, LLC;
ARHC RWROSGA01, LLC;
ARHC WHWCHPA01, LLC;
ARHC AAEKHWI01, LLC;
ARHC CMLITCO01, LLC;
ARHC WGWCHIL01, LLC;
ARHC CHSGDIL01, LLC;
ARHC CHPTNIL01, LLC;
ARHC MTMTNIL01, LLC;
ARHC MVMTNIL01, LLC;
ARHC RHMARIL01, LLC; and
ARHC HHPEOIL01, LLC,
each a Delaware limited liability company


By:_________________________________
Name:
Title: Authorized Signatory                        


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SUBSIDIARY GUARANTORS:


ARHC ECGVLSC01, LLC;
ARHC SLKLAOR01, LLC;
ARHC DVMERID01 TRS, LLC;
ARHC ALSPGFL01 TRS, LLC;
ARHC RWROSGA01 TRS, LLC;
ARHC WHWCHPA01 TRS, LLC;
ARHC LCDIXIL01, LLC;
ARHC AVBURWI01, LLC;
ARHC RWCUDWI01, LLC;
ARHC ACRICKY01, LLC;
ARHC SSTMPFL01, LLC;
ARHC HCTMPFL01, LLC;
ARHC TPTMPFL01, LLC;
ARHC WCWCHFL01, LLC;
ARHC AHMLWWI01, LLC;
ARHC VSTALFL01, LLC;
ARHC LCDIXIL01 TRS, LLC;
ARHC AVBURWI01 TRS, LLC;
ARHC RWCUDWI01 TRS, LLC; and
ARHC ACRICKY01 TRS, LLC,
each a Delaware limited liability company


By:_________________________________
Name:
Title: Authorized Signatory    




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SUBSIDIARY GUARANTORS:

ARHC AHWTMWI01, LLC;
ARHC AHKIEWI01, LLC;
ARHC AHGBYWI01, LLC;
ARHC AHGVLWI01, LLC;
ARHC AHWTFWI01, LLC;
ARHC OCWMNLA01, LLC;
ARHC DDLARFL01, LLC;
ARHC DMDCRGA01, LLC;
ARHC MHCLVOH01, LLC;
ARHC CCGBGIL01, LLC;
ARHC VAGBGIL01, LLC;
ARHC LMFMYFL01, LLC;
ARHC RACLWFL01, LLC;
ARHC DDHUDFL01, LLC;
ARHC RMRWLTX01, LLC;
ARHC GFGBTAZ01, LLC;
ARHC BMWRNMI01, LLC;
ARHC MMJLTIL01, LLC;
ARHC CHCOLIL01, LLC;
ARHC CHCOLIL01 TRS, LLC;
ARHC WMBRPMI01, LLC;
ARHC TCHOUTX01, LLC;
ARHC GDFMHMI01, LLC;
ARHC CMWTSMI001, LLC; and
ARHC CMSHTMI001, LLC,
each a Delaware limited liability company

By:_________________________________
Name:
Title: Authorized Signatory


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SUBSIDIARY GUARANTORS:

ARHC RHMESAZ01, LLC;
ARHC WHYRKPA01, LLC;
ARHC LMLANPA01, LLC;
ARHC PSSGDMA01, LLC;
ARHC PSWSGMA01, LLC;
ARHC PSNHTMA01, LLC;
ARHC CFGREOR01, LLC;
ARHC SFFLDIA01, LLC;
ARHC SPPLSIA01, LLC;
ARHC PHTIPIA01, LLC;
ARHC PSINDIA01, LLC;
ARHC PHOTTIA01, LLC;
ARHC ALELIKY01, LLC;
ARHC CFGREOR01 TRS, LLC;
ARHC SFFLDIA01 TRS, LLC;
ARHC SPPLSIA01 TRS, LLC;
ARHC PHTIPIA01 TRS, LLC;
ARHC PSINDIA01 TRS, LLC;
ARHC PHOTTIA01 TRS, LLC;
ARHC ALELIKY01 TRS, LLC;
ARHC FVECOCA01, LLC;
ARHC FVECOCA01 TRS, LLC;
ARHC CHSPTIL01, LLC;
ARHC UPHBGPA01, LLC;
ARHC UPMBGPA01, LLC;
ARHC UPHBGPA02, LLC,
each a Delaware limited liability company

By:_________________________________
Name:
Title: Authorized Signatory


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SUBSIDIARY GUARANTORS:

ARHC SARCOIL01, LLC;
ARHC CHSPTIL01 TRS, LLC;
ARHC SCTEMTX01, LLC;
ARHC SMMDSIA01, LLC;
ARHC ATROCIL01, LLC;
ARHC BWBRUGA01, LLC;
ARHC DBDUBGA01, LLC;
ARHC HRHAMVA01, LLC;
ARHC BSNPLFL01, LLC;
ARHC SMMDSIA01 TRS, LLC;
ARHC ATROCIL01 TRS, LLC;
ARHC BWBRUGA01 TRS, LLC;
ARHC DBDUBGA01 TRS, LLC;
ARHC BSNPLFL01 TRS, LLC;
ARHC UPMUSIA01, LLC;
ARHC UPMOLIL01, LLC;
ARHC CPCIROH01, LLC;
ARHC QUAD CITIES PORTFOLIO MEMBER, LLC;
ARHC KEKWDTX01, LLC;
ARHC OOHLDOH01, LLC;
ARHC SDGMDWOK01, LLC;
ARHC OPFWNIN01, LLC;
ARHC OPFWNIN02, LLC;
ARHC SPABYNY01, LLC;
ARHC SPTRYNY01, LLC;
ARHC HPOKCOK01, LLC;
ARHC SPABYNY02, LLC;
ARHC SPABYNY03, LLC;
ARHC SLESTPA01, LLC;
ARHC MESCSMI01, LLC;
ARHC NCODSTX01, LLC;
ARHC BPBLPOH01, LLC;
ARHC CHEVLIL01, LLC; and
ARHC CHEVLIL01 TRS, LLC, and
each a Delaware limited liability company


By:_________________________________
Name:
Title: Authorized Signatory


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Third Amendment to First Amended and Restated Senior Secured Credit Agreement


SUBSIDIARY GUARANTORS:

ARHC BMBWNIL01, LLC;
ARHC FMWEDAL01, LLC;
ARHC AHJACOH01, LLC;
ARHC LMHBGPA01, LLC;
ARHC GHGVLSC01, LLC;
ARHC TRS HOLDCO II, LLC;
ARHC DFDYRIN01, LLC;
ARHC FMMUNIN01, LLC;
ARHC DVMERID01, LLC;
ARHC ALSPGFL01, LLC;
ARHC RWROSGA01, LLC;
ARHC WHWCHPA01, LLC;
ARHC AAEKHWI01, LLC;
ARHC CMLITCO01, LLC;
ARHC WGWCHIL01, LLC;
ARHC CHSGDIL01, LLC;
ARHC CHPTNIL01, LLC;
ARHC MTMTNIL01, LLC;
ARHC MVMTNIL01, LLC;
ARHC RHMARIL01, LLC; and
ARHC HHPEOIL01, LLC,
each a Delaware limited liability company


By: /s/ Michael Anderson
Name: Michael Anderson
Title: Authorized Signatory


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Third Amendment to First Amended and Restated Senior Secured Credit Agreement

SUBSIDIARY GUARANTORS:


ARHC ECGVLSC01, LLC;
ARHC SLKLAOR01, LLC;
ARHC DVMERID01 TRS, LLC;
ARHC ALSPGFL01 TRS, LLC;
ARHC RWROSGA01 TRS, LLC;
ARHC WHWCHPA01 TRS, LLC;
ARHC LCDIXIL01, LLC;
ARHC AVBURWI01, LLC;
ARHC RWCUDWI01, LLC;
ARHC ACRICKY01, LLC;
ARHC SSTMPFL01, LLC;
ARHC HCTMPFL01, LLC;
ARHC TPTMPFL01, LLC;
ARHC WCWCHFL01, LLC;
ARHC AHMLWWI01, LLC;
ARHC VSTALFL01, LLC;
ARHC LCDIXIL01 TRS, LLC;
ARHC AVBURWI01 TRS, LLC;
ARHC RWCUDWI01 TRS, LLC; and
ARHC ACRICKY01 TRS, LLC,
each a Delaware limited liability company


By: /s/ Michael Anderson
Name: Michael Anderson
Title: Authorized Signatory




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Third Amendment to First Amended and Restated Senior Secured Credit Agreement


SUBSIDIARY GUARANTORS:

ARHC AHWTMWI01, LLC;
ARHC AHKIEWI01, LLC;
ARHC AHGBYWI01, LLC;
ARHC AHGVLWI01, LLC;
ARHC AHWTFWI01, LLC;
ARHC OCWMNLA01, LLC;
ARHC DDLARFL01, LLC;
ARHC DMDCRGA01, LLC;
ARHC MHCLVOH01, LLC;
ARHC CCGBGIL01, LLC;
ARHC VAGBGIL01, LLC;
ARHC LMFMYFL01, LLC;
ARHC RACLWFL01, LLC;
ARHC DDHUDFL01, LLC;
ARHC RMRWLTX01, LLC;
ARHC GFGBTAZ01, LLC;
ARHC BMWRNMI01, LLC;
ARHC MMJLTIL01, LLC;
ARHC CHCOLIL01, LLC;
ARHC CHCOLIL01 TRS, LLC;
ARHC WMBRPMI01, LLC;
ARHC TCHOUTX01, LLC;
ARHC GDFMHMI01, LLC;
ARHC CMWTSMI001, LLC; and
ARHC CMSHTMI001, LLC,
each a Delaware limited liability company

By: /s/ Michael Anderson
Name: Michael Anderson
Title: Authorized Signatory


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Third Amendment to First Amended and Restated Senior Secured Credit Agreement


SUBSIDIARY GUARANTORS:

ARHC RHMESAZ01, LLC;
ARHC WHYRKPA01, LLC;
ARHC LMLANPA01, LLC;
ARHC PSSGDMA01, LLC;
ARHC PSWSGMA01, LLC;
ARHC PSNHTMA01, LLC;
ARHC CFGREOR01, LLC;
ARHC SFFLDIA01, LLC;
ARHC SPPLSIA01, LLC;
ARHC PHTIPIA01, LLC;
ARHC PSINDIA01, LLC;
ARHC PHOTTIA01, LLC;
ARHC ALELIKY01, LLC;
ARHC CFGREOR01 TRS, LLC;
ARHC SFFLDIA01 TRS, LLC;
ARHC SPPLSIA01 TRS, LLC;
ARHC PHTIPIA01 TRS, LLC;
ARHC PSINDIA01 TRS, LLC;
ARHC PHOTTIA01 TRS, LLC;
ARHC ALELIKY01 TRS, LLC;
ARHC FVECOCA01, LLC;
ARHC FVECOCA01 TRS, LLC;
ARHC CHSPTIL01, LLC;
ARHC UPHBGPA01, LLC;
ARHC UPMBGPA01, LLC;
ARHC UPHBGPA02, LLC,
each a Delaware limited liability company

By: /s/ Michael Anderson
Name: Michael Anderson
Title: Authorized Signatory


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Third Amendment to First Amended and Restated Senior Secured Credit Agreement

SUBSIDIARY GUARANTORS:

ARHC SARCOIL01, LLC;
ARHC CHSPTIL01 TRS, LLC;
ARHC SCTEMTX01, LLC;
ARHC SMMDSIA01, LLC;
ARHC ATROCIL01, LLC;
ARHC BWBRUGA01, LLC;
ARHC DBDUBGA01, LLC;
ARHC HRHAMVA01, LLC;
ARHC BSNPLFL01, LLC;
ARHC SMMDSIA01 TRS, LLC;
ARHC ATROCIL01 TRS, LLC;
ARHC BWBRUGA01 TRS, LLC;
ARHC DBDUBGA01 TRS, LLC;
ARHC BSNPLFL01 TRS, LLC;
ARHC UPMUSIA01, LLC;
ARHC UPMOLIL01, LLC;
ARHC CPCIROH01, LLC;
ARHC QUAD CITIES PORTFOLIO MEMBER, LLC;
ARHC KEKWDTX01, LLC;
ARHC OOHLDOH01, LLC;
ARHC SDGMDWOK01, LLC;
ARHC OPFWNIN01, LLC;
ARHC OPFWNIN02, LLC;
ARHC SPABYNY01, LLC;
ARHC SPTRYNY01, LLC;
ARHC HPOKCOK01, LLC;
ARHC SPABYNY02, LLC;
ARHC SPABYNY03, LLC;
ARHC SLESTPA01, LLC;
ARHC MESCSMI01, LLC;
ARHC NCODSTX01, LLC;
ARHC BPBLPOH01, LLC;
ARHC CHEVLIL01, LLC; and
ARHC CHEVLIL01 TRS, LLC, and
each a Delaware limited liability company


By: /s/ Michael Anderson
Name: Michael Anderson
Title: Authorized Signatory
[Signatures

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Third Amendment to First Amended and Restated Senior Secured Credit Agreement


AGENT AND LENDERS:
KEYBANK NATIONAL ASSOCIATION, individually as a Lender and as the Agent
By: /s/ Peter A. Trazerra
Name: Peter A. Trazzera
Title: Vice President
BMO HARRIS BANK N.A., as a Lender
By: /s/ Lloyd Baron
Name: Lloyd Baron
Title: Managing Director
CITIZENS BANK, N.A., as a Lender
By: /s/ Donald Woods
Name: Donald Woods
Title: SVP
BBVA USA, an Alabama banking corporation, f/k/a Compass Bank, as a Lender
By:    
Name:    
Title:    
CAPITAL ONE, NATIONAL ASSOCIATION, as a Lender
By: /s/ Jason LaGrippe    
Name: Jason LaGrippe    
Title: Duly Authorized Signatory     

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Third Amendment to First Amended and Restated Senior Secured Credit Agreement

COMERICA BANK, as a Lender
By: /s/ Charles Weddell    
Name: Charles Weddell    
Title: Senior Vice President    

SYNOVUS BANK, as a Lender
By: /s/ Zachary Brown    
Name: Zachary Brown    
Title: Corporate Banker    

FIRST HORIZON BANK, SUCCESSOR BY CONVERSION TO FIRST HORIZON BANK, A DIVISION OF FIRST TENNESSEE BANK NATIONAL ASSOCIATION, as a Lender
By: /s/ Christina Blackwell    
Name: Christina Blackwell    
Title: SVP    

SOCIÉTÉ GÉNÉRALE, as a Lender
By: /s/ Richard Bernal    
Name: Richard Bernal        
Title: Managing Director    




Third Amendment to First Amended and Restated Senior Secured Credit Agreement

EXHIBIT 10.3
SECOND AMENDMENT TO
AMENDED AND RESTATED PROPERTY MANAGEMENT AND LEASING AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED PROPERTY MANAGEMENT AND LEASING AGREEMENT (this “Second Amendment”), is made and entered into as of November 11, 2021, by and among HEALTHCARE TRUST, INC., a Maryland corporation (the “Company”), HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “OP”), and HEALTHCARE TRUST PROPERTIES, LLC, a Delaware limited liability company (the “Manager”).

WHEREAS the parties hereto entered into that certain Amended and Restated Property Management and Leasing Agreement, dated of February 17, 2017, as amended by that certain First Amendment to Amended and Restated Property Management and Leasing Agreement, dated April 10, 2018 (hereinafter collectively, the “Property Management Agreement”); and

WHEREAS, the parties wish to further amend the Property Management Agreement as provided herein.

NOW, THEREFORE, in consideration of the mutual promise contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree to amend the Agreement as follows:

1.Amendments.

a.Definition of “Owner”. The defined term “Owner” set forth in Section 1.13 of the Agreement is hereby deleted in its entirety and replaced as follows:

1.13. “Owner” means, as the context may require, the Company, the OP, any Joint Venture and “any” or “each” Subsidiary, as the actual owner or lessee of one or more of the Properties.

b.Definition of “Properties”. The defined term “Properties” set forth in Section 1.17 of the Agreement is hereby deleted in its entirety and replaced as follows:

1.16. “Properties” means all real estate properties owned directly or indirectly, as applicable, by the Owner and all tracts as yet unspecified but to be acquired by the Owner containing income-producing Improvements or on which the Owner will develop or rehabilitate income-producing Improvements, provided, however, that those real estate properties owned by the Owner that are expressly subject to a separate property management agreement with Manager are expressly excluded from the definition of Properties hereunder.


2.Miscellaneous. Except as expressly modified by this Second Amendment the terms of the Property Management Agreement shall remain in full force and effect as written. Any capitalized term used in this Second Amendment and not otherwise defined herein, shall have the meaning ascribed to such term in the Property Management Agreement. This Second Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other party. Signatures on this Second Amendment which are transmitted by electronically (including, without limitation, the delivery of PDF counterparts) shall be valid for all purposes, however any party shall deliver an original signature of this Second Amendment to the other party upon request.

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2

IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of the day and year first set forth above.
HEALTHCARE TRUST, INC.

By:    /s/ Michael Anderson    
Name: Michael Anderson
Title: Authorized Signatory

HEALTHCARE TRUST OPERATING PARTNERSHIP, L.P.
By:    Healthcare Trust, Inc.
its General Partner

By:    /s/ Michael Anderson    
Name: Michael Anderson
Title: Authorized Signatory

HEALTHCARE TRUST PROPERTIES, LLC

By:    /s/ James Tanaka    
Name: James Tanaka
Title: Authorized Signatory



EXHIBIT 10.4
PROPERTY MANAGEMENT AND LEASING AGREEMENT


This property management and leasing agreement (this “Management Agreement”) is made and entered into as of the 11th day of November, 2021, by and among ARHC OPFWNIN01, LLC (the “Owner”) and HEALTHCARE TRUST PROPERTIES, LLC, a Delaware limited liability company (the “Manager”).

WHEREAS, the Owner desires to retain the Manager to manage and coordinate the leasing of the real estate properties owned by the Owner, and the Manager desires to be so retained, all under the terms and conditions set forth in this Management Agreement;

NOW, THEREFORE, in consideration of the foregoing and of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

ARTICLE I. DEFINITIONS
Except as otherwise specified or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Management Agreement:

1.1“Account” has the meaning set forth in Section 2.3(i) hereof.

1.2“Advisor” means Healthcare Trust Advisors, LLC, a Delaware limited liability company, any successor advisor to the Company and the OP, or any Person to which Healthcare Trust Advisors, LLC or any successor advisor subcontracts substantially all of its functions. Notwithstanding the foregoing, a Person hired or retained by Healthcare Trust Advisors, LLC to perform property management and related services for the Company or the OP that is not hired or retained to perform substantially all of the functions of Healthcare Trust Advisors, LLC with respect to the Company and the OP as a whole shall not be deemed to be an Advisor.
1.3“Affiliate” means with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, ten percent (10%) or more of the outstanding voting securities of such other Person;
(ii) any Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner. For purposes of this definition, the terms “controls,” “is controlled by,” or “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership or voting rights, by contract or otherwise.

1.4“Budget” has the meaning set forth in Section 2.5(c) hereof.

1.5“Company” means Healthcare Trust, Inc.
1.6“Director” means a director of the Company.
1.7“Gross Revenues” means all amounts actually collected as rents or other charges for the use and occupancy of the Property, but shall exclude interest and other investment income of the Owner and proceeds received by the Owner for a sale, exchange, condemnation, eminent domain taking, casualty or other disposition of assets of the Owner.
1.8“Improvements” means buildings, structures, equipment from time to time located on the Property and all parking and common areas located on the Property.

1.9 “Independent Director” means a Director who is not and who has not been within the last two years, directly or indirectly associated with the Sponsor or the Advisor by virtue of ownership of an interest in the Sponsor, the Advisor or any of their Affiliates.

1.10“Joint Venture” means the joint venture or partnership arrangements (other than between the Company and the OP) in which the Company or the OP or any of their subsidiaries is a co-venturer or general partner which are established to own Property.

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1.11“Management Fees” has the meaning set forth in Section 4.1(a) hereof.

1.12“OP” means Healthcare Trust Operating Partnership, LP.
1.13“Oversight Fees” has the meaning set forth in Section 4.2 hereof.

1.14“Ownership Agreements” has the meaning set forth in Section 2.3(k) hereof.
F
1.15“Person” means an individual, corporation, partnership, joint venture, association, company (whether of limited liability or otherwise), trust, bank or other entity, or government or any agency or political subdivision of a government.

1.16“Plan” has the meaning set forth in Section 2.5(c) hereof.

1.17“Property” means 7232 Engle Road, Ft. Wayne, IN
1.18“Sponsor” means American Realty Capital VII, LLC, a Delaware limited liability company.

ARTICLE II.
APPOINTMENT OF THE MANAGER; SERVICES TO BE PERFORMED

2.1Appointment of the Manager. The Owner hereby engages and retains the Manager as the sole and exclusive manager and agent of the Property, and the Manager hereby accepts such appointment, all on the terms and conditions hereinafter set forth, it being understood that this Management Agreement shall cause the Manager to be, at law, the Owner’s agent upon the terms contained herein.

2.2General Duties. The Manager shall use commercially reasonable efforts in performing its duties hereunder to manage, operate, maintain and lease the Property in a diligent, careful and vigilant manner. The services of the Manager are to be of scope and quality not less than those generally performed by professional property managers of other similar properties in the area. The Manager shall make available to the Owner the full benefit of the judgment, experience and advice of its members and staff with respect to the policies to be pursued by the Owner relating to the operation and leasing of the Property.

2.3Specific Duties. The Manager’s duties include the following:

(a)Lease Obligations. The Manager shall perform all duties of the landlord under all leases insofar as such duties relate to the operation, maintenance, and day-to-day management of the Property. The Manager shall also provide or cause to be provided, at the Owner’s expense, all services normally provided to tenants of like premises, including, where applicable and without limitation, gas, electricity or other utilities required to be furnished to tenants under leases, normal repairs and maintenance, and cleaning and janitorial service. The Manager shall arrange for and supervise the performance of all installations and improvements in space leased to any tenant which are either expressly required under the terms of the lease of such space or which are customarily provided to tenants.

(b)Maintenance. The Manager shall cause the Property to be maintained in the same manner as similar properties in the area. The Manager’s duties and supervision in this respect shall include, without limitation, cleaning of the interior and the exterior of the Improvements and the public common areas on the Property and the making and supervision of repair, alterations, and decoration of the Improvements, subject to and in strict compliance with this Management Agreement and any applicable leases. Construction and rehabilitation activities undertaken by the Manager, if any, will be limited to activities related to the management, operation, maintenance, and leasing of the Property (e.g., repairs, renovations, and leasehold improvements).

(c)Leasing Functions. The Manager shall coordinate the leasing of the Property and shall negotiate and use its best efforts to secure executed leases from qualified tenants, and to execute same on behalf of the Owner, if requested, for available space in the Property, such leases to be in form and on terms approved by the Owner and the Manager, and to bring about complete leasing of the Property. The Manager shall be responsible for the hiring of all leasing agents, as necessary for the leasing of the Property, and to otherwise oversee and manage the leasing process on behalf of the Owner.




(d)Notice of Violations. The Manager shall forward to the Owner, promptly upon receipt, all notices of violation or other notices from any governmental authority, and board of fire underwriters or any insurance company, and shall make such recommendations regarding compliance with such notice as shall be appropriate.

(e)Personnel. Any personnel hired by the Manager to maintain, operate and lease the Property shall be the employees or independent contractors of the Manager and not of the Owner. The Manager shall use due care in the selection and supervision of such employees or independent contractors. The Manager shall be responsible for the preparation of and shall timely file all payroll tax reports and timely make payments of all withholding and other payroll taxes with respect to each employee.

(f)Utilities and Supplies. The Manager shall enter into or renew contracts for electricity, gas, steam, landscaping, fuel, oil, maintenance and other services as are customarily furnished or rendered in connection with the operation of similar rental property in the area.

(g)Expenses. The Manager shall analyze all bills received for services, work and supplies in connection with maintaining and operating the Property, pay all such bills, and, if requested by the Owner, pay, when due, utility and water charges, sewer rent and assessments, any applicable taxes, including, without limitation, any real estate taxes, and any other amount payable in respect to the Property. All bills shall be paid by the Manager within the time required to obtain discounts, if any. The Owner may from time to time request that the Manager forward certain bills to the Owner promptly after receipt, and the Manager shall comply with any such request. The payment of all bills, real property taxes, assessments, insurance premiums and any other amounts payable with respect to the Property shall be paid out of the Account by the Manager. All expenses shall be billed at net cost (i.e., less all rebates, commissions, discounts and allowances, however designed).

(h)Monies Collected. The Manager shall collect all rent and other monies from tenants and any sums otherwise due to the Owner with respect to the Property in the ordinary course of business. In collecting such monies, the Manager shall inform tenants of the Property that all remittances are to be in the form of a check or money order. The Owner authorizes the Manager to request, demand, collect and provide receipts for all such rent and other monies and to institute legal proceedings in the name of the Owner for the collection thereof and for the dispossession of any tenant in default under its lease.

(i)Banking Accommodations. Subject in all cases to any requirements imposed by any financing arrangements placed on the Property at any time and from time to time by Owner, the Manager shall establish and maintain a separate checking account (the “Account”) for funds relating to the Property. All monies deposited from time to time in the Account shall be deemed to be trust funds and shall be and remain the property of the Owner and shall be withdrawn and disbursed by the Manager for the account of the Owner only as expressly permitted by this Management Agreement for the purposes of performing the obligations of the Manager hereunder. No monies collected by the Manager on the Owner’s behalf shall be commingled with funds of the Manager. The Account shall be maintained, and monies shall be deposited therein and withdrawn therefrom, in accordance with the following:
(i)All sums received from rents and other income from the Property shall be promptly deposited by the Manager in the Account. The Manager shall have the right to designate two (2) or more persons who shall be authorized to draw against the Account, but only for purposes authorized by this Management Agreement.

(ii)All sums due to the Manager hereunder, whether for compensation, reimbursement for expenditures, or otherwise, as herein provided, shall be a charge against the operating revenues of the Property and shall be paid and/or withdrawn by the Manager from the Account prior to the making of any other disbursements therefrom.

(iii)On or before the 30th day following the end of each calendar quarter during the term of this Management Agreement, the Manager shall forward to the Owner all net operating proceeds from the preceding quarter, retaining at all times, however, a reserve of $5,000, in addition to any other amounts otherwise provided in the Budget.

(j)Tenant Complaints. The Manager shall maintain business-like relations with the tenants of the Property.


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(k)Ownership Agreements. The Manager has received copies of the Limited Liability Company Operating Agreement and the other constitutive documents of the Owner (collectively, the “Ownership Agreements”) and is familiar with the terms thereof. The Manager shall use reasonable care to avoid any act or omission which, in the performance of its duties hereunder, shall in any way conflict with the terms of the Ownership Agreements.

(l)Signs. The Manager shall place and remove, or cause to be placed and removed, such signs upon the Property as the Manager deems appropriate, subject, however, to the terms and conditions of the leases and to any applicable ordinances and regulations.

2.4Approval of Leases, Contracts, Etc. In fulfilling its duties to the Owner, the Manager may and hereby is authorized to enter into any leases, contracts or agreements on behalf of the Owner in the ordinary course of the management, operation, maintenance and leasing of the Property.

2.5Accounting, Records and Reports.

(a)Records. The Manager shall maintain all office records and books of account and shall record therein, and keep copies of, each invoice received from services, work and supplies ordered in connection with the maintenance and operation of the Property. Such records shall be maintained on a double entry basis. The Owner and persons designated by the Owner shall at all reasonable times have access to and the right to audit and make independent examinations of such records, books and accounts and all vouchers, files and all other material pertaining to the Property and this Management Agreement, all of which the Manager agrees to keep safe, available and separate from any records not pertaining to the Property, at a place recommended by the Manager and approved by the Owner.

(b)Quarterly Reports. On or before the 30th day following the end of each calendar quarter during the term of this Management Agreement, the Manager shall prepare and submit to the Owner the following reports and statements:

(i)Rental collection record;

(ii)Quarterly operating statement;

(iii)Copy of cash disbursements ledger entries for such period, if requested;

(iv)Copy of cash receipts ledger entries for such period, if requested;
(v)The original copies of all contracts entered into by the Manager on behalf of the Owner during such period, if requested; and

(vi)Copy of ledger entries for such period relating to security deposits maintained by the Manager, if requested.

(c)Budgets and Leasing Plans. On or before November 15 of each calendar year during the term of this Management Agreement, the Manager shall prepare and submit to the Owner for its approval an operating budget (a “Budget”) and a marketing and leasing plan (a “Plan”) on the Property for the calendar year immediately following such submission. Each Budget and Plan shall be in the form approved by the Owner prior to the date thereof. As often as reasonably necessary during the period covered by any Budget or Plan, the Manager may submit to the Owner for its approval an updated Budget or Plan incorporating such changes as shall be necessary to reflect cost overruns and the like during such period. If the Owner does not disapprove a Budget or Plan within thirty (30) days after receipt thereof by the Owner, such Budget or Plan shall be deemed approved. If the Owner shall disapprove any Budget or Plan, it shall so notify the Manager within said thirty (30) day period and explain the reasons therefor. The Manager will not incur any costs other than those estimated in an approved Budget except for:

(i)maintenance or repair costs under $5,000 per Property;

(ii)costs incurred in emergency situations in which action is immediately necessary for the preservation or safety of the Property, or for the safety of occupants or other persons on the Property (or to avoid the suspension of any necessary service of the Property);




(iii)expenditures for real estate taxes and assessments; and

(iv)maintenance supplies calling for an aggregate purchase price of less than $25,000 for all Property.

(d)Returns Required by Law. The Manager shall execute and file when due all forms, reports, and returns required by law relating to the employment of its personnel.

(e)Notices. Promptly after receipt, the Manager shall deliver to the Owner all notices, from any tenant, or any governmental authority, that are not of a routine nature. The Manager shall also report expeditiously to the Owner notice of any extensive damage to any part of the Property.

2.6Subcontracting. Notwithstanding anything to the contrary contained in this Agreement, the Manager may subcontract any of its duties hereunder, without the consent of the Owner, for a fee that may be less than the Management Fees paid hereunder. In the event that the Manager does so subcontract any its duties hereunder, such fees payable to such third parties may, at the instruction of the Manager, be deducted from the Management Fee and paid by the Owner to such parties, or paid directly by the Manager to such parties, in its discretion.

ARTICLE III. EXPENSES

3.1Owner’s Expenses. Except as otherwise specifically provided, all costs and expenses incurred hereunder by the Manager in fulfilling its duties to the Owner shall be for the account of and on behalf of the Owner. Such costs and expenses may include, without limitation, reasonable wages and salaries and other employee-related expenses of all on-site and off-site employees of the Manager who are engaged in the operation, management, maintenance and leasing of the Property, including taxes, insurance and benefits relating to such employees, and legal, travel and other out-of-pocket expenses which are directly related to the operation, management, maintenance and leasing of specific Property. All costs and expenses for which the Owner is responsible under this Management Agreement shall be paid by the Manager out of the Account. In the event the Account does not contain sufficient funds to pay all of the costs and expenses, the Owner shall fund all sums necessary to meet such additional costs and expenses.

3.2Manager’s Expenses. The Manager shall, out of its own funds, pay all of its general overhead and administrative expenses.

ARTICLE IV. MANAGER’S COMPENSATION

4.1Management Fees.

(a)The Owner shall pay the Manager or any of its Affiliates property management and leasing fees (the “Management Fees”), on a monthly basis, equal to: (i) with respect to stand-alone, single-tenant net leased properties, one and a half percent (1.5%) of Gross Revenues from the properties managed; and
(ii) with respect to all other types of properties, two and a half percent (2.5%) of Gross Revenues from the properties managed, plus market-based leasing commissions applicable to the geographic location of the Property. Except as otherwise set forth herein, the Owner shall also reimburse the Manager for any costs and expenses incurred by the Manager in connection with managing the Property.

(b)The Manager may charge a separate fee for the one-time initial rent-up or leasing-up of newly constructed Properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties.

(c)Notwithstanding the foregoing, the Manager may be entitled to receive higher fees in the event the Manager can demonstrate to the satisfaction of the board of directors of the Company (including a majority of the Independent Directors) through empirical data that a higher competitive fee is justified for the services rendered and the type of Property managed. As described in Section 2.6 above, in the event that the Manager properly engages one or more third parties to perform the services described herein, the fees payable to such parties for such services will be deducted from the Management Fees, or paid directly by the Manager, at the Manager’s option. The Manager’s compensation under this

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Section 4.1 shall apply to all renewals, extensions or expansions of leases which the Manager originally negotiated.

4.2Oversight Fees. If the Owner contracts directly with one or more third parties for the services described in Section 2.3 above, the Owner will pay such third parties customary market fees and shall pay the Manager oversight fees (the “Oversight Fees”) equal to 1.0% of the Gross Revenues of the particular Property managed by such third parties. In no event shall the Manager (including any Affiliate of the Manager) be entitled to both Management Fees and Oversight Fees with respect to any particular Property.

4.3Additional Fees. If the Manager provides services other than those specified herein, the Owner shall pay to the Manager a monthly fee equal to no more than that which the Owner would pay to a third party that is not an Affiliate of the Owner or the Manager to provide such services.

4.4Audit Adjustment. If any audit of the records, books or accounts relating to the Property discloses an overpayment or underpayment of Management Fees, the Owner or the Manager shall promptly pay to the other party the amount of such overpayment or underpayment, as the case may be. If such audit discloses an overpayment of Management Fees for any fiscal year of more than the correct Management Fees for such fiscal year, the Manager shall bear the cost of such audit.


ARTICLE V.
INSURANCE AND INDEMNIFICATION

5.1Insurance to be Carried.

(a)The Manager shall obtain and keep in full force and effect insurance on the Property against such hazards as the Owner and the Manager shall deem appropriate, but in any event, insurance sufficient to comply with the leases and the Ownership Agreements shall be maintained. All liability policies shall provide sufficient insurance satisfactory to both the Owner and the Manager and shall contain waivers of subrogation for the benefit of the Manager.

(b)The Manager shall obtain and keep in full force and effect, in accordance with the laws of the state in which each Property is located, employer’s liability insurance applicable to and covering all employees of the Manager at the Property and all persons engaged in the performance of any work required hereunder, and the Manager shall furnish the Owner certificates of insurers naming the Owner as a co- insured and evidencing that such insurance is in effect. If any of the Manager’s duties hereunder are subcontracted as permitted under Section 2.6, the Manager shall include in each subcontract a provision that the subcontractor shall also furnish the Owner with such a certificate.

5.2Cooperation with Insurers. The Manager shall cooperate with and provide reasonable access to the Property to representatives of insurance companies and insurance brokers or agents with respect to insurance which is in effect or for which application has been made. The Manager shall use its best efforts to comply with all requirements of insurers.

5.3Accidents and Claims. The Manager shall promptly investigate and report in detail to the Owner all accidents, claims for damage relating to the ownership, operation or maintenance of the Property, and any damage or destruction to the Property and the estimated costs of repair thereof, and shall prepare for approval by the Owner all reports required by an insurance company in connection with any such accident, claim, damage, or destruction. Such reports shall be given to the Owner promptly and any report not so given within ten (10) days after the occurrence of any such accident, claim, damage or destruction shall be noted in the report delivered to the Owner pursuant to Section 2.5(b). The Manager is authorized to settle any claim against an insurance company arising out of any policy and, in connection with such claim, to execute proofs of loss and adjustments of loss and to collect and provide receipts for loss proceeds.

5.4Indemnification. The Manager shall hold the Owner harmless from and indemnify and defend the Owner against any and all claims or liability for any injury or damage to any person or property whatsoever for which the Manager is responsible occurring in, on, or about the Property, including, without limitation, the Improvements when such injury or damage is caused by the negligence or misconduct of the Manager, its agents, servants, or employees, except to the extent that the Owner recovers insurance proceeds with respect to such matter. The Owner will indemnify and hold the Manager harmless against all liability for injury to persons and damage to property caused by



the Owner’s negligence and which did not result from the negligence or misconduct of the Manager, except to the extent the Manager recovers insurance proceeds with respect to such matter.

ARTICLE VI. TERM; TERMINATION

6.1Term. This Management Agreement shall commence on the date first above written and shall continue until terminated in accordance with the earliest to occur of the following:

(a)Two years from the date of the commencement of the term hereof unless any party gives written notice to the other parties of its intention to terminate this Management Agreement at least ninety (90) days prior to the end of the initial two year term. If no party gives such written notice ninety (90) days prior to the end of the initial two year term, this Management Agreement will be automatically extended for an unlimited number of successive one year terms at the end of each year unless any party gives ninety (90) days’ prior written notice to the other parties of its intention not to renew this Management Agreement;

(b)Immediately upon the occurrence of any of the following:
(i)A decree or order is rendered by a court having jurisdiction (A) adjudging the Manager as bankrupt or insolvent, (B) approving as properly filed a petition seeking reorganization, readjustment, arrangement, composition or similar relief for the Manager under the federal bankruptcy laws or any similar applicable law or practice, or (C) appointing a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of the Manager or a substantial part of the Manager’s assets, or for the winding up or liquidation of its affairs, or
(ii)The Manager (A) voluntarily institutes proceedings to be adjudicated bankrupt or insolvent, (B) consents to the filing of a bankruptcy proceeding against it, (C) files a petition, answer or consent seeking reorganization, readjustment, arrangement, composition or relief under any similar applicable law or practice, (D) consents to the filing of any such petition, or to the appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency for it or for a substantial part of its assets, (E) makes an assignment for the benefit of creditors, (F) is unable to or admits in writing its inability to pay its debts generally as they become due, unless such inability shall be the fault of the Owner, or (G) takes corporate or other action in furtherance of any of the aforesaid purposes; and

(c)Upon written notice from the Owner in the event that the Manager commits an act of gross negligence or willful misconduct in the performance of its duties hereunder.

Upon termination, the obligations of the parties hereto shall cease; provided, however; that the Manager shall comply with the provisions hereof applicable in the event of termination and shall be entitled to receive all compensation which may be due to the Manager hereunder up to the date of such termination; provided, further, however; that if this Management Agreement terminates pursuant to clauses (b) or (c) of this Section 6.1, the Owner shall have other remedies as may be available at law or in equity.

6.2Manager’s Obligations after Termination. Upon the termination of this Management Agreement, the Manager shall have the following duties:

(a)The Manager shall deliver to the Owner, or its designee, all books and records with respect to the Property.

(b)The Manager shall transfer and assign to the Owner, or its designee, all service contracts and personal property relating to or used in the operation and maintenance of the Property, except personal property paid for and owned by the Manager. Manager shall also, for a period of sixty
(60) days immediately following the date of such termination, make itself available to consult with and advise the Owner, or its designee, regarding the operation, maintenance and leasing of the Property.

(c)The Manager shall render to the Owner an accounting of all funds of the Owner in its possession and shall deliver to the Owner a statement of Management Fees claimed to be due the Manager and

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shall cause funds of the Owner held by the Manager relating to the Property to be paid to the Owner or its designee.

(d)The Manager shall cooperate with the Owner to provide an orderly transition of the Manager’s duties hereunder.

ARTICLE VII. MISCELLANEOUS

7.1Notices. All notices, approvals, consents and other communications hereunder shall be in writing, and, except when receipt is required to start the running of a period of time, shall be deemed given when delivered in person or on the fifth (5th) day after its mailing by either party by registered or certified United States mail, postage prepaid and return receipt requested, to the other party, at the addresses set forth after their respect name below or at such different addresses as either party shall have theretofore advised the other party in writing in accordance with this Section 7.1.


To the Owner:    Healthcare Trust, Inc.
650 Fifth Avenue
30th Floor
New York, NY 10019
Attention: Chief Executive Officer and
Chief Financial Officer

with a copy to:

Healthcare Trust Operating Partnership, L.P.
650 Fifth Avenue
30th Floor
New York, NY 10019
Attention: Chief Executive Officer and
Chief Financial Officer


To the Manager:    Healthcare Trust Properties, LLC
650 Fifth Avenue
30th Floor
New York, NY 10019
        Attention: Edward M. Weil, Jr.


7.2Governing Law. This Management Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof.

7.3Assignment. This Management Agreement may be assigned by the Manager (a) to an Affiliate of the Manager, or (b) to any party with expertise in commercial real estate and which has, together with its Affiliates, over $100 million of assets under management. Any assignee of the Manager shall be bound hereunder to the same extent as the Manager. This Agreement shall not be assigned by the Owner without the written consent of the Manager, except to a Person which is a successor to such Owner. Such successor shall be bound hereunder to the same extent as such Owner. Notwithstanding anything to the contrary contained herein, the economic rights of the Manager hereunder, including the right to receive all compensation hereunder, may be sold, transferred or assigned by the Manager without the consent of the Owner.

7.4No Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Management Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrences. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.




7.5Amendments. This Management Agreement may be amended only by an instrument in writing signed by the party against whom enforcement of the amendment is sought.

7.6Headings. The headings of the various subdivisions of this Management Agreement are for reference only and shall not define or limit any of the terms or provisions hereof.

7.7Counterparts. This Management Agreement may be executed with counterpart signature pages (including, without limitation, by delivery of counterpart signature pages by electronic (including PDF) and facsimile transmission) or in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.

7.8Entire Agreement. This Management Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof.

7.9Disputes. If there shall be a dispute between the Owner and the Manager relating to this Management Agreement resulting in litigation, the prevailing party in such litigation shall be entitled to recover from the other party to such litigation such amount as the court shall fix as reasonable attorneys’ fees.

7.10Activities of the Manager. The obligations of the Manager pursuant to the terms and provisions of this Management Agreement shall not be construed to preclude the Manager from engaging in other activities or business ventures, whether or not such other activities or ventures are in competition with the Owner or the business of the Owner.
7.11Independent Contractor. The Manager and the Owner shall not be construed as joint venturers or partners of each other pursuant to this Management Agreement, and neither party shall have the power to bind or obligate the other except as set forth herein. In all respects, the status of the Manager to the Owner under this Management Agreement is that of an independent contractor.

7.12Pronouns and Plurals. Whenever the context may require, any pronoun used in this Management Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

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IN WITNESS WHEREOF, the parties have executed this Management Agreement as of the date first above written.

ARHC OPFWNIN01, LLC



                     By:
/s/ Michael Anderson IMAGE_0.JPG Name: Michael Anderson
Title: Authorized Signatory



HEALTHCARE TRUST PROPERTIES, LLC

/s/ James Tanaka IMAGE_0.JPG Name: James Tanaka
Title: Authorized Signatory



EXHIBIT 10.5
PROPERTY MANAGEMENT AND LEASING AGREEMENT


This property management and leasing agreement (this “Management Agreement”) is made and entered into as of the 11th day of November, 2021, by and among ARHC OPFWNIN02, LLC (the “Owner”) and HEALTHCARE TRUST PROPERTIES, LLC, a Delaware limited liability company (the “Manager”).

WHEREAS, the Owner desires to retain the Manager to manage and coordinate the leasing of the real estate properties owned by the Owner, and the Manager desires to be so retained, all under the terms and conditions set forth in this Management Agreement;

NOW, THEREFORE, in consideration of the foregoing and of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

ARTICLE I. DEFINITIONS
Except as otherwise specified or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Management Agreement:

1.1“Account” has the meaning set forth in Section 2.3(i) hereof.

1.2“Advisor” means Healthcare Trust Advisors, LLC, a Delaware limited liability company, any successor advisor to the Company and the OP, or any Person to which Healthcare Trust Advisors, LLC or any successor advisor subcontracts substantially all of its functions. Notwithstanding the foregoing, a Person hired or retained by Healthcare Trust Advisors, LLC to perform property management and related services for the Company or the OP that is not hired or retained to perform substantially all of the functions of Healthcare Trust Advisors, LLC with respect to the Company and the OP as a whole shall not be deemed to be an Advisor.
1.3“Affiliate” means with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, ten percent (10%) or more of the outstanding voting securities of such other Person;
(ii) any Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner. For purposes of this definition, the terms “controls,” “is controlled by,” or “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership or voting rights, by contract or otherwise.

1.4“Budget” has the meaning set forth in Section 2.5(c) hereof.

1.5“Company” means Healthcare Trust, Inc.
1.6“Director” means a director of the Company.
1.7“Gross Revenues” means all amounts actually collected as rents or other charges for the use and occupancy of the Property, but shall exclude interest and other investment income of the Owner and proceeds received by the Owner for a sale, exchange, condemnation, eminent domain taking, casualty or other disposition of assets of the Owner.
1.8“Improvements” means buildings, structures, equipment from time to time located on the Property and all parking and common areas located on the Property.

1.9 “Independent Director” means a Director who is not and who has not been within the last two years, directly or indirectly associated with the Sponsor or the Advisor by virtue of ownership of an interest in the Sponsor, the Advisor or any of their Affiliates.

1.10“Joint Venture” means the joint venture or partnership arrangements (other than between the Company and the OP) in which the Company or the OP or any of their subsidiaries is a co-venturer or general partner which are established to own Property.

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1.11“Management Fees” has the meaning set forth in Section 4.1(a) hereof.

1.12“OP” means Healthcare Trust Operating Partnership, LP.
1.13“Oversight Fees” has the meaning set forth in Section 4.2 hereof.

1.14“Ownership Agreements” has the meaning set forth in Section 2.3(k) hereof.
F
1.15“Person” means an individual, corporation, partnership, joint venture, association, company (whether of limited liability or otherwise), trust, bank or other entity, or government or any agency or political subdivision of a government.

1.16“Plan” has the meaning set forth in Section 2.5(c) hereof.

1.17“Property” means 10186 Dupont Circle, Ft. Wayne, IN
1.18“Sponsor” means American Realty Capital VII, LLC, a Delaware limited liability company.

ARTICLE II.
APPOINTMENT OF THE MANAGER; SERVICES TO BE PERFORMED

2.1Appointment of the Manager. The Owner hereby engages and retains the Manager as the sole and exclusive manager and agent of the Property, and the Manager hereby accepts such appointment, all on the terms and conditions hereinafter set forth, it being understood that this Management Agreement shall cause the Manager to be, at law, the Owner’s agent upon the terms contained herein.

2.2General Duties. The Manager shall use commercially reasonable efforts in performing its duties hereunder to manage, operate, maintain and lease the Property in a diligent, careful and vigilant manner. The services of the Manager are to be of scope and quality not less than those generally performed by professional property managers of other similar properties in the area. The Manager shall make available to the Owner the full benefit of the judgment, experience and advice of its members and staff with respect to the policies to be pursued by the Owner relating to the operation and leasing of the Property.

2.3Specific Duties. The Manager’s duties include the following:

(a)Lease Obligations. The Manager shall perform all duties of the landlord under all leases insofar as such duties relate to the operation, maintenance, and day-to-day management of the Property. The Manager shall also provide or cause to be provided, at the Owner’s expense, all services normally provided to tenants of like premises, including, where applicable and without limitation, gas, electricity or other utilities required to be furnished to tenants under leases, normal repairs and maintenance, and cleaning and janitorial service. The Manager shall arrange for and supervise the performance of all installations and improvements in space leased to any tenant which are either expressly required under the terms of the lease of such space or which are customarily provided to tenants.

(b)Maintenance. The Manager shall cause the Property to be maintained in the same manner as similar properties in the area. The Manager’s duties and supervision in this respect shall include, without limitation, cleaning of the interior and the exterior of the Improvements and the public common areas on the Property and the making and supervision of repair, alterations, and decoration of the Improvements, subject to and in strict compliance with this Management Agreement and any applicable leases. Construction and rehabilitation activities undertaken by the Manager, if any, will be limited to activities related to the management, operation, maintenance, and leasing of the Property (e.g., repairs, renovations, and leasehold improvements).

(c)Leasing Functions. The Manager shall coordinate the leasing of the Property and shall negotiate and use its best efforts to secure executed leases from qualified tenants, and to execute same on behalf of the Owner, if requested, for available space in the Property, such leases to be in form and on terms approved by the Owner and the Manager, and to bring about complete leasing of the Property. The Manager shall be responsible for the hiring of all leasing agents, as necessary for the leasing of the Property, and to otherwise oversee and manage the leasing process on behalf of the Owner.




(d)Notice of Violations. The Manager shall forward to the Owner, promptly upon receipt, all notices of violation or other notices from any governmental authority, and board of fire underwriters or any insurance company, and shall make such recommendations regarding compliance with such notice as shall be appropriate.

(e)Personnel. Any personnel hired by the Manager to maintain, operate and lease the Property shall be the employees or independent contractors of the Manager and not of the Owner. The Manager shall use due care in the selection and supervision of such employees or independent contractors. The Manager shall be responsible for the preparation of and shall timely file all payroll tax reports and timely make payments of all withholding and other payroll taxes with respect to each employee.

(f)Utilities and Supplies. The Manager shall enter into or renew contracts for electricity, gas, steam, landscaping, fuel, oil, maintenance and other services as are customarily furnished or rendered in connection with the operation of similar rental property in the area.

(g)Expenses. The Manager shall analyze all bills received for services, work and supplies in connection with maintaining and operating the Property, pay all such bills, and, if requested by the Owner, pay, when due, utility and water charges, sewer rent and assessments, any applicable taxes, including, without limitation, any real estate taxes, and any other amount payable in respect to the Property. All bills shall be paid by the Manager within the time required to obtain discounts, if any. The Owner may from time to time request that the Manager forward certain bills to the Owner promptly after receipt, and the Manager shall comply with any such request. The payment of all bills, real property taxes, assessments, insurance premiums and any other amounts payable with respect to the Property shall be paid out of the Account by the Manager. All expenses shall be billed at net cost (i.e., less all rebates, commissions, discounts and allowances, however designed).

(h)Monies Collected. The Manager shall collect all rent and other monies from tenants and any sums otherwise due to the Owner with respect to the Property in the ordinary course of business. In collecting such monies, the Manager shall inform tenants of the Property that all remittances are to be in the form of a check or money order. The Owner authorizes the Manager to request, demand, collect and provide receipts for all such rent and other monies and to institute legal proceedings in the name of the Owner for the collection thereof and for the dispossession of any tenant in default under its lease.

(i)Banking Accommodations. Subject in all cases to any requirements imposed by any financing arrangements placed on the Property at any time and from time to time by Owner, the Manager shall establish and maintain a separate checking account (the “Account”) for funds relating to the Property. All monies deposited from time to time in the Account shall be deemed to be trust funds and shall be and remain the property of the Owner and shall be withdrawn and disbursed by the Manager for the account of the Owner only as expressly permitted by this Management Agreement for the purposes of performing the obligations of the Manager hereunder. No monies collected by the Manager on the Owner’s behalf shall be commingled with funds of the Manager. The Account shall be maintained, and monies shall be deposited therein and withdrawn therefrom, in accordance with the following:
(i)All sums received from rents and other income from the Property shall be promptly deposited by the Manager in the Account. The Manager shall have the right to designate two (2) or more persons who shall be authorized to draw against the Account, but only for purposes authorized by this Management Agreement.

(ii)All sums due to the Manager hereunder, whether for compensation, reimbursement for expenditures, or otherwise, as herein provided, shall be a charge against the operating revenues of the Property and shall be paid and/or withdrawn by the Manager from the Account prior to the making of any other disbursements therefrom.

(iii)On or before the 30th day following the end of each calendar quarter during the term of this Management Agreement, the Manager shall forward to the Owner all net operating proceeds from the preceding quarter, retaining at all times, however, a reserve of $5,000, in addition to any other amounts otherwise provided in the Budget.

(j)Tenant Complaints. The Manager shall maintain business-like relations with the tenants of the Property.


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(k)Ownership Agreements. The Manager has received copies of the Limited Liability Company Operating Agreement and the other constitutive documents of the Owner (collectively, the “Ownership Agreements”) and is familiar with the terms thereof. The Manager shall use reasonable care to avoid any act or omission which, in the performance of its duties hereunder, shall in any way conflict with the terms of the Ownership Agreements.

(l)Signs. The Manager shall place and remove, or cause to be placed and removed, such signs upon the Property as the Manager deems appropriate, subject, however, to the terms and conditions of the leases and to any applicable ordinances and regulations.

2.4Approval of Leases, Contracts, Etc. In fulfilling its duties to the Owner, the Manager may and hereby is authorized to enter into any leases, contracts or agreements on behalf of the Owner in the ordinary course of the management, operation, maintenance and leasing of the Property.

2.5Accounting, Records and Reports.

(a)Records. The Manager shall maintain all office records and books of account and shall record therein, and keep copies of, each invoice received from services, work and supplies ordered in connection with the maintenance and operation of the Property. Such records shall be maintained on a double entry basis. The Owner and persons designated by the Owner shall at all reasonable times have access to and the right to audit and make independent examinations of such records, books and accounts and all vouchers, files and all other material pertaining to the Property and this Management Agreement, all of which the Manager agrees to keep safe, available and separate from any records not pertaining to the Property, at a place recommended by the Manager and approved by the Owner.

(b)Quarterly Reports. On or before the 30th day following the end of each calendar quarter during the term of this Management Agreement, the Manager shall prepare and submit to the Owner the following reports and statements:

(i)Rental collection record;

(ii)Quarterly operating statement;

(iii)Copy of cash disbursements ledger entries for such period, if requested;

(iv)Copy of cash receipts ledger entries for such period, if requested;
(v)The original copies of all contracts entered into by the Manager on behalf of the Owner during such period, if requested; and

(vi)Copy of ledger entries for such period relating to security deposits maintained by the Manager, if requested.

(c)Budgets and Leasing Plans. On or before November 15 of each calendar year during the term of this Management Agreement, the Manager shall prepare and submit to the Owner for its approval an operating budget (a “Budget”) and a marketing and leasing plan (a “Plan”) on the Property for the calendar year immediately following such submission. Each Budget and Plan shall be in the form approved by the Owner prior to the date thereof. As often as reasonably necessary during the period covered by any Budget or Plan, the Manager may submit to the Owner for its approval an updated Budget or Plan incorporating such changes as shall be necessary to reflect cost overruns and the like during such period. If the Owner does not disapprove a Budget or Plan within thirty (30) days after receipt thereof by the Owner, such Budget or Plan shall be deemed approved. If the Owner shall disapprove any Budget or Plan, it shall so notify the Manager within said thirty (30) day period and explain the reasons therefor. The Manager will not incur any costs other than those estimated in an approved Budget except for:

(i)maintenance or repair costs under $5,000 per Property;

(ii)costs incurred in emergency situations in which action is immediately necessary for the preservation or safety of the Property, or for the safety of occupants or other persons on the Property (or to avoid the suspension of any necessary service of the Property);




(iii)expenditures for real estate taxes and assessments; and

(iv)maintenance supplies calling for an aggregate purchase price of less than $25,000 for all Property.

(d)Returns Required by Law. The Manager shall execute and file when due all forms, reports, and returns required by law relating to the employment of its personnel.

(e)Notices. Promptly after receipt, the Manager shall deliver to the Owner all notices, from any tenant, or any governmental authority, that are not of a routine nature. The Manager shall also report expeditiously to the Owner notice of any extensive damage to any part of the Property.

2.6Subcontracting. Notwithstanding anything to the contrary contained in this Agreement, the Manager may subcontract any of its duties hereunder, without the consent of the Owner, for a fee that may be less than the Management Fees paid hereunder. In the event that the Manager does so subcontract any its duties hereunder, such fees payable to such third parties may, at the instruction of the Manager, be deducted from the Management Fee and paid by the Owner to such parties, or paid directly by the Manager to such parties, in its discretion.

ARTICLE III. EXPENSES

3.1Owner’s Expenses. Except as otherwise specifically provided, all costs and expenses incurred hereunder by the Manager in fulfilling its duties to the Owner shall be for the account of and on behalf of the Owner. Such costs and expenses may include, without limitation, reasonable wages and salaries and other employee-related expenses of all on-site and off-site employees of the Manager who are engaged in the operation, management, maintenance and leasing of the Property, including taxes, insurance and benefits relating to such employees, and legal, travel and other out-of-pocket expenses which are directly related to the operation, management, maintenance and leasing of specific Property. All costs and expenses for which the Owner is responsible under this Management Agreement shall be paid by the Manager out of the Account. In the event the Account does not contain sufficient funds to pay all of the costs and expenses, the Owner shall fund all sums necessary to meet such additional costs and expenses.

3.2Manager’s Expenses. The Manager shall, out of its own funds, pay all of its general overhead and administrative expenses.

ARTICLE IV. MANAGER’S COMPENSATION

4.1Management Fees.

(a)The Owner shall pay the Manager or any of its Affiliates property management and leasing fees (the “Management Fees”), on a monthly basis, equal to: (i) with respect to stand-alone, single-tenant net leased properties, one and a half percent (1.5%) of Gross Revenues from the properties managed; and
(ii) with respect to all other types of properties, two and a half percent (2.5%) of Gross Revenues from the properties managed, plus market-based leasing commissions applicable to the geographic location of the Property. Except as otherwise set forth herein, the Owner shall also reimburse the Manager for any costs and expenses incurred by the Manager in connection with managing the Property.

(b)The Manager may charge a separate fee for the one-time initial rent-up or leasing-up of newly constructed Properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties.

(c)Notwithstanding the foregoing, the Manager may be entitled to receive higher fees in the event the Manager can demonstrate to the satisfaction of the board of directors of the Company (including a majority of the Independent Directors) through empirical data that a higher competitive fee is justified for the services rendered and the type of Property managed. As described in Section 2.6 above, in the event that the Manager properly engages one or more third parties to perform the services described herein, the fees payable to such parties for such services will be deducted from the Management Fees, or paid directly by the Manager, at the Manager’s option. The Manager’s compensation under this

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Section 4.1 shall apply to all renewals, extensions or expansions of leases which the Manager originally negotiated.

4.2Oversight Fees. If the Owner contracts directly with one or more third parties for the services described in Section 2.3 above, the Owner will pay such third parties customary market fees and shall pay the Manager oversight fees (the “Oversight Fees”) equal to 1.0% of the Gross Revenues of the particular Property managed by such third parties. In no event shall the Manager (including any Affiliate of the Manager) be entitled to both Management Fees and Oversight Fees with respect to any particular Property.

4.3Additional Fees. If the Manager provides services other than those specified herein, the Owner shall pay to the Manager a monthly fee equal to no more than that which the Owner would pay to a third party that is not an Affiliate of the Owner or the Manager to provide such services.

4.4Audit Adjustment. If any audit of the records, books or accounts relating to the Property discloses an overpayment or underpayment of Management Fees, the Owner or the Manager shall promptly pay to the other party the amount of such overpayment or underpayment, as the case may be. If such audit discloses an overpayment of Management Fees for any fiscal year of more than the correct Management Fees for such fiscal year, the Manager shall bear the cost of such audit.


ARTICLE V.
INSURANCE AND INDEMNIFICATION

5.1Insurance to be Carried.

(a)The Manager shall obtain and keep in full force and effect insurance on the Property against such hazards as the Owner and the Manager shall deem appropriate, but in any event, insurance sufficient to comply with the leases and the Ownership Agreements shall be maintained. All liability policies shall provide sufficient insurance satisfactory to both the Owner and the Manager and shall contain waivers of subrogation for the benefit of the Manager.

(b)The Manager shall obtain and keep in full force and effect, in accordance with the laws of the state in which each Property is located, employer’s liability insurance applicable to and covering all employees of the Manager at the Property and all persons engaged in the performance of any work required hereunder, and the Manager shall furnish the Owner certificates of insurers naming the Owner as a co- insured and evidencing that such insurance is in effect. If any of the Manager’s duties hereunder are subcontracted as permitted under Section 2.6, the Manager shall include in each subcontract a provision that the subcontractor shall also furnish the Owner with such a certificate.

5.2Cooperation with Insurers. The Manager shall cooperate with and provide reasonable access to the Property to representatives of insurance companies and insurance brokers or agents with respect to insurance which is in effect or for which application has been made. The Manager shall use its best efforts to comply with all requirements of insurers.

5.3Accidents and Claims. The Manager shall promptly investigate and report in detail to the Owner all accidents, claims for damage relating to the ownership, operation or maintenance of the Property, and any damage or destruction to the Property and the estimated costs of repair thereof, and shall prepare for approval by the Owner all reports required by an insurance company in connection with any such accident, claim, damage, or destruction. Such reports shall be given to the Owner promptly and any report not so given within ten (10) days after the occurrence of any such accident, claim, damage or destruction shall be noted in the report delivered to the Owner pursuant to Section 2.5(b). The Manager is authorized to settle any claim against an insurance company arising out of any policy and, in connection with such claim, to execute proofs of loss and adjustments of loss and to collect and provide receipts for loss proceeds.

5.4Indemnification. The Manager shall hold the Owner harmless from and indemnify and defend the Owner against any and all claims or liability for any injury or damage to any person or property whatsoever for which the Manager is responsible occurring in, on, or about the Property, including, without limitation, the Improvements when such injury or damage is caused by the negligence or misconduct of the Manager, its agents, servants, or employees, except to the extent that the Owner recovers insurance proceeds with respect to such matter. The Owner will indemnify and hold the Manager harmless against all liability for injury to persons and damage to property caused by



the Owner’s negligence and which did not result from the negligence or misconduct of the Manager, except to the extent the Manager recovers insurance proceeds with respect to such matter.

ARTICLE VI. TERM; TERMINATION

6.1Term. This Management Agreement shall commence on the date first above written and shall continue until terminated in accordance with the earliest to occur of the following:

(a)Two years from the date of the commencement of the term hereof unless any party gives written notice to the other parties of its intention to terminate this Management Agreement at least ninety (90) days prior to the end of the initial two year term. If no party gives such written notice ninety (90) days prior to the end of the initial two year term, this Management Agreement will be automatically extended for an unlimited number of successive one year terms at the end of each year unless any party gives ninety (90) days’ prior written notice to the other parties of its intention not to renew this Management Agreement;

(b)Immediately upon the occurrence of any of the following:
(i)A decree or order is rendered by a court having jurisdiction (A) adjudging the Manager as bankrupt or insolvent, (B) approving as properly filed a petition seeking reorganization, readjustment, arrangement, composition or similar relief for the Manager under the federal bankruptcy laws or any similar applicable law or practice, or (C) appointing a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of the Manager or a substantial part of the Manager’s assets, or for the winding up or liquidation of its affairs, or
(ii)The Manager (A) voluntarily institutes proceedings to be adjudicated bankrupt or insolvent, (B) consents to the filing of a bankruptcy proceeding against it, (C) files a petition, answer or consent seeking reorganization, readjustment, arrangement, composition or relief under any similar applicable law or practice, (D) consents to the filing of any such petition, or to the appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency for it or for a substantial part of its assets, (E) makes an assignment for the benefit of creditors, (F) is unable to or admits in writing its inability to pay its debts generally as they become due, unless such inability shall be the fault of the Owner, or (G) takes corporate or other action in furtherance of any of the aforesaid purposes; and

(c)Upon written notice from the Owner in the event that the Manager commits an act of gross negligence or willful misconduct in the performance of its duties hereunder.

Upon termination, the obligations of the parties hereto shall cease; provided, however; that the Manager shall comply with the provisions hereof applicable in the event of termination and shall be entitled to receive all compensation which may be due to the Manager hereunder up to the date of such termination; provided, further, however; that if this Management Agreement terminates pursuant to clauses (b) or (c) of this Section 6.1, the Owner shall have other remedies as may be available at law or in equity.

6.2Manager’s Obligations after Termination. Upon the termination of this Management Agreement, the Manager shall have the following duties:

(a)The Manager shall deliver to the Owner, or its designee, all books and records with respect to the Property.

(b)The Manager shall transfer and assign to the Owner, or its designee, all service contracts and personal property relating to or used in the operation and maintenance of the Property, except personal property paid for and owned by the Manager. Manager shall also, for a period of sixty
(60) days immediately following the date of such termination, make itself available to consult with and advise the Owner, or its designee, regarding the operation, maintenance and leasing of the Property.

(c)The Manager shall render to the Owner an accounting of all funds of the Owner in its possession and shall deliver to the Owner a statement of Management Fees claimed to be due the Manager and

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shall cause funds of the Owner held by the Manager relating to the Property to be paid to the Owner or its designee.

(d)The Manager shall cooperate with the Owner to provide an orderly transition of the Manager’s duties hereunder.

ARTICLE VII. MISCELLANEOUS

7.1Notices. All notices, approvals, consents and other communications hereunder shall be in writing, and, except when receipt is required to start the running of a period of time, shall be deemed given when delivered in person or on the fifth (5th) day after its mailing by either party by registered or certified United States mail, postage prepaid and return receipt requested, to the other party, at the addresses set forth after their respect name below or at such different addresses as either party shall have theretofore advised the other party in writing in accordance with this Section 7.1.


To the Owner:    Healthcare Trust, Inc.
650 Fifth Avenue
30th Floor
New York, NY 10019
Attention: Chief Executive Officer and
Chief Financial Officer

with a copy to:

Healthcare Trust Operating Partnership, L.P.
650 Fifth Avenue
30th Floor
New York, NY 10019
Attention: Chief Executive Officer and
Chief Financial Officer


To the Manager:    Healthcare Trust Properties, LLC
650 Fifth Avenue
30th Floor
New York, NY 10019
        Attention: Edward M. Weil, Jr.


7.2Governing Law. This Management Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof.

7.3Assignment. This Management Agreement may be assigned by the Manager (a) to an Affiliate of the Manager, or (b) to any party with expertise in commercial real estate and which has, together with its Affiliates, over $100 million of assets under management. Any assignee of the Manager shall be bound hereunder to the same extent as the Manager. This Agreement shall not be assigned by the Owner without the written consent of the Manager, except to a Person which is a successor to such Owner. Such successor shall be bound hereunder to the same extent as such Owner. Notwithstanding anything to the contrary contained herein, the economic rights of the Manager hereunder, including the right to receive all compensation hereunder, may be sold, transferred or assigned by the Manager without the consent of the Owner.

7.4No Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Management Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrences. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.




7.5Amendments. This Management Agreement may be amended only by an instrument in writing signed by the party against whom enforcement of the amendment is sought.

7.6Headings. The headings of the various subdivisions of this Management Agreement are for reference only and shall not define or limit any of the terms or provisions hereof.

7.7Counterparts. This Management Agreement may be executed with counterpart signature pages (including, without limitation, by delivery of counterpart signature pages by electronic (including PDF) and facsimile transmission) or in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.

7.8Entire Agreement. This Management Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof.

7.9Disputes. If there shall be a dispute between the Owner and the Manager relating to this Management Agreement resulting in litigation, the prevailing party in such litigation shall be entitled to recover from the other party to such litigation such amount as the court shall fix as reasonable attorneys’ fees.

7.10Activities of the Manager. The obligations of the Manager pursuant to the terms and provisions of this Management Agreement shall not be construed to preclude the Manager from engaging in other activities or business ventures, whether or not such other activities or ventures are in competition with the Owner or the business of the Owner.
7.11Independent Contractor. The Manager and the Owner shall not be construed as joint venturers or partners of each other pursuant to this Management Agreement, and neither party shall have the power to bind or obligate the other except as set forth herein. In all respects, the status of the Manager to the Owner under this Management Agreement is that of an independent contractor.

7.12Pronouns and Plurals. Whenever the context may require, any pronoun used in this Management Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

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IN WITNESS WHEREOF, the parties have executed this Management Agreement as of the date first above written.

ARHC OPFWNIN02, LLC



                     By: /s/ Michael Anderson
IMAGE_0.JPG Name: Michael Anderson
Title: Authorized Signatory



HEALTHCARE TRUST PROPERTIES, LLC

By: /s/ James Tanaka
IMAGE_0.JPG Name: James Tanaka
Title: Authorized Signatory



Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Edward M. Weil, Jr., certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Healthcare Trust, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated this 12th day of November, 2021 /s/ Edward M. Weil, Jr.
Edward M. Weil, Jr.
Chief Executive Officer and President
(Principal Executive Officer)




Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Jason F. Doyle, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Healthcare Trust, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated this 12th day of November, 2021 /s/ Jason F. Doyle
Jason F. Doyle
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)





Exhibit 32

SECTION 1350 CERTIFICATIONS
This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
The undersigned, who are the Chief Executive Officer and Chief Financial Officer of Healthcare Trust, Inc. (the “Company”), each hereby certify as follows:
The Quarterly report on Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated this 12th day of November, 2021
/s/ Edward M. Weil, Jr.
Edward M. Weil, Jr.
Chief Executive Officer and President
(Principal Executive Officer)
/s/ Jason F. Doyle
Jason F. Doyle
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)