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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
 For the fiscal year ended December 31, 2023
 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
hti2a20.jpg
Healthcare Trust, Inc.
(Exact name of registrant as specified in its charter) 
Maryland38-3888962
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
222 Bellevue Ave., Newport, RI 02840
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (212) 415-6500
650 Fifth Ave., 30th Floor, New York, NY
Former name, former address, and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share
HTIAThe Nasdaq Global Market
7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per shareHTIBThe Nasdaq Global Market
Securities registered pursuant to Section 12 (g) of the Act:
Common stock, $0.01 par value per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
There is no established public market for the registrant’s shares of common stock.
As of March 13, 2024, the registrant had 113,185,753 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with the registrant’s 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. The registrant intends to file its proxy statement within 120 days after its fiscal year end.

HEALTHCARE TRUST, INC.

FORM 10-K
Year Ended December 31, 2023


Page

2
Table of Contents
Forward-Looking Statements
Certain statements included in this Annual Report on Form 10-K are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 to do so by law.
These forward-looking statements are based on management’s current expectations, are not guarantees of future performance and 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 “Risk Factors” (Part I, Item 1A of this Annual Report on Form 10-K), “Quantitative and Qualitative Disclosures about Market Risk” (Part II, Item 7A of this Annual Report on Form 10-K), and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7 of this Annual Report on Form 10-K).
3
Table of Contents
PART I
Item 1. Business
We are an externally managed real estate investment trust for U.S. federal income tax purposes (“REIT”), that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate, focused on medical office and other healthcare-related buildings (“MOBs”), and senior housing operating properties (“SHOPs”). As described in further detail herein, we operate in two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs.
As of December 31, 2023, we owned 204 properties located in 33 states and comprised of 9.0 million rentable square feet. The following table summarizes our portfolio of properties as of December 31, 2023:
Asset TypeNumber of PropertiesRentable Square Feet
Gross
Asset Value (1)
(In thousands)
Medical Office and Other Healthcare-Related Buildings156 5,153,419 $1,468,401 
Seniors Housing — Operating Properties (2)
46 (3)3,857,652 1,129,573 
Total Portfolio202 9,011,071 $2,597,974 
__________
(1)Gross asset value represents total real estate investments, at cost ($2.6 billion total at December 31, 2023), net of gross market lease intangible liabilities ($23.5 million total at December 31, 2023). Impairment charges are already reflected within gross asset value.
(2)As of December 31, 2023, we had 4,164 rentable units in our SHOP segment.
(3)Excludes two land parcels with a gross asset value of $3.7 million.
In constructing our portfolio, we are committed to diversifying our assets by geographic region. The following table details the geographic distribution, by region, of our portfolio as of December 31, 2023:
Geographic RegionNumber of Properties
Annualized Rental Income (1)
Rentable
Square Feet		Rentable Units in SHOP Segment
(In thousands)
Northeast26 $39,433 1,648,564 289 
South62 109,901 2,784,053 1,436 
Midwest81 121,204 3,037,467 1,845 
West35 50,185 1,540,987 594 
Total Portfolio204 $320,723 9,011,071 4,164 
__________
(1)Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2023, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs for the fourth quarter of 2023.
Investment Strategy
Our investment strategy is guided by three core principles: (i) maintaining a balanced, well-diversified portfolio of high-quality assets; (ii) pursuing accretive and opportunistic investment opportunities; and (iii) maintaining a strong and flexible capital structure.
We have invested, and expect to continue investing, primarily in MOBs and seniors housing properties, primarily structured as SHOPs. In addition, we may invest in facilities leased to hospitals, including rehabilitation hospitals, long-term acute care centers, surgery centers, inpatient rehabilitation facilities, special medical and diagnostic service providers, laboratories, research firms, pharmaceutical and medical supply manufacturers and health insurance firms. Our SHOP investments are held through a structure permitted under the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA"). We generally acquire a fee interest in any property we acquire (a “fee interest” is the absolute, legal possession and ownership of land, property, or rights), although we may also acquire a leasehold interest (a “leasehold interest” is a right to enjoy the exclusive possession and use of an asset or property for a stated definite period as created by a written lease). We have and may continue to acquire properties through a joint venture or the acquisition of substantially all of the interests of an entity which in turn owns the real property. We also may make preferred equity investments in an entity.
4
Table of Contents
Healthcare is the single largest industry in the United States based on contribution to Gross Domestic Product (“GDP”). According to the National Health Expenditures Projections, 2022 - 2031 report prepared by the Centers for Medicare and Medicaid Services (“CMS”): (i) national health expenditures are projected to grow on average 5.4% per year for 2022 through 2031 which is expected to exceed average projected GDP growth during those periods of 4.6% and (ii) the healthcare industry projected share of GDP is projected to increase slightly from 18.3% of U.S. GDP in 2021 to 19.6% by 2031. The increase in expenditures is projected to lead to significant growth in healthcare employment. According to the U.S. Department of Labor’s Bureau of Labor Statistics (the “Bureau of Labor Statistics”), the healthcare industry was one of the largest industries in the United States, providing approximately 22 million seasonally adjusted jobs as of December 31, 2023. According to the Bureau of Labor Statistics, employment of healthcare occupations (healthcare and social assistance sector) is projected to grow 9.7% from 2022 to 2032, adding approximately 2.1 million new jobs, representing job growth higher than any other sector and approximately 45% of all the projected job gains from 2022 to 2031. This growth is expected due to an aging population and the projected increase in the number of individuals who will have access to health insurance. We believe that the continued growth in employment in the healthcare industry will lead to growth in demand for MOBs and other facilities that serve the healthcare industry. The senior housing industry has been experiencing ongoing staffing shortages in recent years; however, the Bureau of Labor Statistics reported employment increases for nursing and assisted living facilities in 2023.
In addition to the growth in national health expenditures and corresponding increases in employment in the healthcare sector, the nature of healthcare delivery continues to evolve due to the impact of government programs, regulatory changes and consumer preferences. We believe these changes have increased the need for capital among healthcare providers and increased incentives for these providers to develop more efficient real estate solutions in order to enhance the delivery of quality healthcare.
We believe that the aging population, improved chronic disease management, technological advances and healthcare reform will positively affect the demand for MOBs, seniors housing properties and other healthcare-related facilities and generate attractive investment opportunities. The first wave of Baby Boomers, the largest segment of the U.S. population, began turning 65 in 2011. According to the U.S. Census Bureau, the U.S. population over 65 will grow to 94.7 million in 2060, up from 49.2 million in 2016. This group will grow more rapidly than the overall population. Thus, its share of the population will increase to 23% in 2060, from 15% in 2016. Patients with diseases that were once life threatening are now being treated with specialized medical care and an arsenal of new pharmaceuticals. Advances in research, diagnostics, surgical procedures, pharmaceuticals and a focus on healthier lifestyles have led to people living longer. Finally, we believe that healthcare reform in the U.S. will continue to drive an increase in demand for medical services, and in particular, in the post-acute and long-term services which our tenants and operators provide. We may invest in healthcare assets through development and joint venture partnerships.
As of December 31, 2023, 2022 and 2021, none of our tenants (together with their affiliates) had annualized rental income on a straight-line basis representing 10% or greater of total annualized rental income on a straight-line basis for the portfolio.
The following table lists the states where we had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of December 31, 2023, 2022 and 2021:
December 31,
State202320222021
Florida19.9%19.2%17.7%
Pennsylvania10.6%**
__________
*    State’s annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income on a straight-line basis for all portfolio properties as of the period specified.
Medical Office and Other Healthcare-Related Buildings
As of December 31, 2023, we owned 156 MOBs and other health care related buildings under lease totaling 5.2 million square feet. These properties are leased to tenants that provide healthcare services that typically consist of:
•physicians’ offices and examination rooms,
•pharmacies,
•hospital ancillary service space and outpatient services such as diagnostic imaging centers, rehabilitation clinics and ambulatory surgery centers,
•hospitals,
•post-acute care facilities,
•skilled nursing facilities (“SNFs”) and
•other facilities.
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Certain of our properties can be located on or near hospital campuses and require significant plumbing, electrical and mechanical systems to accommodate diagnostic imaging equipment such as x-rays or other imaging equipment, and may also have significant plumbing to accommodate physician exam rooms. In addition, MOBs are often built to accommodate higher structural loads for certain equipment and may contain specialized construction such as cancer radiation therapy vaults for cancer treatment.
Hospitals can include general acute care hospitals, inpatient rehabilitation hospitals, long-term acute care hospitals and surgical and specialty hospitals. These facilities provide inpatient diagnosis and treatment, both medical and surgical, and provide a broad array of inpatient and outpatient services including surgery, rehabilitation therapy as well as diagnostic and treatment services. Post-acute facilities offer restorative, rehabilitative and custodial care for people not requiring the more extensive and complex treatment available at acute care hospitals. We include these types of assets in our MOB and other health care related segment when the property is leased to a tenant that operates the property.
There are a variety of types of MOBs: on campus, off campus, affiliated and non-affiliated. On campus MOBs are physically located on a hospital’s campus, often on land leased from the hospital. A hospital typically creates strong tenant demand which leads to high tenant retention. Off campus properties are located independent of a hospital’s location. Affiliated MOBs may be located on campus or off campus, but are affiliated with a hospital or health system. In some respects, affiliated MOBs are similar to on campus MOBs because the hospital relationship drives tenant demand and retention. Finally, non-affiliated MOBs are not affiliated with any hospital or health system, but may contain physician offices and other healthcare services. We favor affiliated MOBs versus non-affiliated MOBs because of the relationship and synergy with the sponsoring hospital or health system and buildings not affiliated with the hospital or health system but anchored or entirely occupied by a long-tenured physician practice.
The following table reflects the on campus, off campus, affiliated and non-affiliated MOB composition of our portfolio as of December 31, 2023:
MOB ClassificationNumber of PropertiesRentable Square Feet
On Campus19 1,109,706 
Off Campus137 4,043,713 
Total
156 5,153,419 
Affiliated71 2,890,507 
Non-affiliated85 2,262,912 
Total
156 5,153,419 
Seniors Housing Properties
As of December 31, 2023, we owned 46 seniors housing properties under the RIDEA structure in our SHOP segment. Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by an independent qualifying management company, which we also refer to as an operator who qualifies as an eligible independent contractor. Our seniors housing properties as of December 31, 2023 primarily consist of assisted living facilities (2,177 units), memory care facilities (1,074 units) and independent living facilities (882 units). These facilities cater to different segments of the elderly population based upon their personal needs and need for assistance with the activities of daily living. Services provided by our operators or tenants in these facilities are primarily paid for by the residents directly and are less reliant on government reimbursement programs such as Medicaid and Medicare.
Assisted living facilities are licensed care facilities that provide personal care services, support and housing for those who need help with activities of daily living, such as bathing, eating and dressing, yet require limited medical care. The programs and services may include transportation, social activities, exercise and fitness programs, beauty or barber shop access, hobby and craft activities, community excursions, meals in a dining room setting and other activities sought by residents. Assisted living facilities are often in apartment-like buildings with private residences ranging from single rooms to large apartments.
Certain assisted living facilities may offer a separate facility that provides a higher level of care for residents requiring memory care as a result of Alzheimer’s disease or other forms of dementia. Levels of personal assistance are based in part on local regulations.
Independent living facilities are designed to meet the needs of seniors who choose to live in an environment surrounded by their peers with services such as housekeeping, meals and activities. These residents generally do not need assistance with activities of daily living, however, in some of our facilities, residents have the option to contract for these services. However, independent living facilities on their own are not treated as qualified health care properties eligible to be leased to a TRS.
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Ancillary revenues and revenues from sub-acute care services are derived from providing services beyond room and board and include occupational, physical, speech, respiratory and intravenous therapy, wound care, oncology treatment, brain injury care and orthopedic therapy, as well as sales of pharmaceutical products and other services. Certain facilities provide some of the foregoing services on an outpatient basis. During the years ended December 31, 2021 and 2020, we took efforts to divest from SNFs through our property dispositions, and we have also converted many SNF units to memory care units in our existing properties, which have significantly reduced our SNF operations. As of December 31, 2023 our seniors housing properties included 31 SNF units.
Adverse Economic Impacts Since the COVID-19 Pandemic
During the first quarter of 2020, the global COVID-19 pandemic commenced. The pandemic and its aftermath have had, and could continue to have, adverse impacts on economic and market conditions. Our SHOP segment continues to be impacted by the post-pandemic operating environment. Our MOB segment was less impacted, and we believe our MOB segment has returned to its pre-pandemic operating conditions.
Further, recent increases in inflation brought about by labor shortages, supply chain disruptions, increases in property insurance and property tax rates and increases in interest rates have had, and may continue to have, adverse impacts on our results of operations. Moreover, these increases in the rate of inflation, the ongoing wars in Ukraine, Israel and related sanctions, supply chain disruptions and increases in interest rates may also impact the ability of our tenants and residents to pay rent and hence our results of operations and liquidity. For more information about the risks and uncertainties associated with inflation, the ongoing wars in Ukraine, Israel, and related sanctions and labor shortages, please see the sections “Inflation” and “Part II—Item 1A. Risk Factors” below.
Adverse Economic Impacts — SHOP Segment
In our SHOP segment, occupancy trended downward from March 2020 until June 2021 and has since stabilized. In addition, starting in March 2020, operating costs began to rise materially, including for services, labor, personal protective equipment and other supplies, as our operators took appropriate actions to protect residents and caregivers. We generally bear these cost increases at our SHOPs, which were partially offset by funds received under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and to a lesser extent, cost recoveries for personal protective equipment from residents.
During the year ended December 31, 2022, we relied more on the use of temporary contract labor and agencies than we had historically. We have since reduced our reliance on this labor source in the year ended December 31, 2023, however, wage expenses (including overtime, training and bonus wages) incurred from employees of our third party operators has increased due to, among other things, (i) inflation raising the cost of labor generally, (ii) a lack of qualified personnel that our third party operators are able to employ on a permanent basis and (iii) training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor.
The persistence of high inflation, labor shortages, supply chain disruptions, and higher interest rates, property insurance rates and property tax rates have caused adverse impacts to our occupancy and cost levels, and these trends may continue to impact us and have material adverse effects on the results of our operations in future periods.
The adverse financial impacts of the COVID-19 pandemic were partially offset by funds received under the CARES Act. We did not receive any funds through the CARES Act in the year ended December 31, 2023. We received $4.5 million and $5.1 million in these funds during the years ended December 31, 2022 and 2021, respectively. For accounting purposes, we consider these funds as grant contributions from the government. The full amounts received were recognized as reduction of property operating expenses in our consolidated statement of operations for the years ended December 31, 2022 and 2021, respectively, to offset incurred COVID-19 expenses. We do not anticipate that any further funds under the CARES Act will be received, and there can be no assurance that the CARES Act program will be extended or any further amounts received under currently effective or potential future government programs.
Organizational Structure
Substantially all of our business is conducted through Healthcare Trust Operating Partnership, L.P. (the “OP”), a Delaware limited partnership, and its wholly owned subsidiaries. Our Advisor manages our day-to-day business with the assistance of our property manager, Healthcare Trust Properties, LLC (the “Property Manager”). 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, has an interest in us through ownership of interests in our OP.
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We own our SHOPs through the RIDEA structure, pursuant to which, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” We view this as a structure primarily to be used on properties that present attractive valuation entry points with long term growth prospects or drive growth by: (i) transitioning the asset to a new third-party operator that can bring scale, operating efficiencies, or ancillary services; or (ii) investing capital to reposition the asset.
Financing Strategies and Policies
We utilize a combination of debt and equity to fund our investment activity. Our debt and equity levels are determined by management in consultation with the Board. For short-term purposes, we may borrow from our MOB Warehouse Facility and our Fannie Mae Master Credit Facilities, which include a secured credit facility with KeyBank National Association (the “KeyBank Facility”) and a secured credit facility with Capital One Multifamily Finance, LLC, an affiliate of Capital One, National Association (the “Capital One Facility”). The KeyBank Facility and Capital One Facility are referred to herein together as the “Fannie Mae Master Credit Facilities”.
We may seek and even replace current borrowings with longer-term capital such as senior secured or unsecured notes or other forms of long-term financing. We may invest in properties subject to existing mortgage indebtedness, which we assume as part of the acquisition. In addition, we may obtain financing secured by previously unencumbered properties in which we have invested or may refinance properties acquired on a leveraged basis. As of December 31, 2023, we had $635.9 million of unencumbered real estate investments, at cost.
In our agreements with our lenders, we are subject to restrictions with respect to secured and unsecured indebtedness, including restrictions on permitted investments, maintenance of a maximum leverage ratio, a minimum fixed charge coverage ratio, among other things. As of December 31, 2023 we were in compliance with these covenants. As of December 31, 2023, our total debt leverage ratio (net debt divided by gross asset value) was approximately 43.7%. Net debt totaled $1.1 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($46.4 million). Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion), net of gross market lease intangible liabilities ($23.5 million). Cumulative impairment charges are reflected within gross asset value.
Tax Status
We elected to be taxed as a REIT under Sections 856 through 860 of Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2013. Commencing with that taxable year, we believe 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 can provide no assurance that we will operate in a manner so as to remain qualified as a REIT. To continue to qualify as a REIT, we must, among other things, distribute at least 90% of our REIT taxable income, which does not equal net income as calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), determined without regard to the deduction for dividends paid and excluding net capital gains, and must 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.
Certain limitations are imposed on REITs with respect to the ownership and operation of seniors housing properties. Generally, to qualify as a REIT, we cannot directly or indirectly operate seniors housing properties. Instead, such facilities may be either leased to a third-party operator or leased to a TRS and operated by a third party on behalf of the TRS. Accordingly, we have formed a TRS that is wholly owned by the OP to lease our SHOPs, and the TRS has entered into management contracts with unaffiliated third-party operators to operate the facilities on its behalf. As of December 31, 2023, we owned 46 SHOPs which we lease to our TRS.
Competition
The market for MOB and SHOP real estate is highly competitive. We compete in all of our markets based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs and the manner in which the property is operated and marketed. In addition, we compete with other entities engaged in real estate investment activities to locate suitable properties to acquire, tenants to occupy our properties and purchasers to buy our properties. These competitors include other REITs, private investment funds, specialty finance companies, institutional investors, pension funds and their advisors and other entities. There are also other REITs with asset acquisition objectives similar to ours, and others may be organized in the future. Some of these competitors, including larger REITs, have substantially greater marketing and financial resources than we have and generally may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of tenants. In addition, these same entities seek financing through similar channels.
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Overview
The healthcare industry is one of the most regulated industries in the United States and is currently experiencing rapid regulatory change and uncertainty. The regulatory uncertainty and the potential impact on our tenants and operators could have an adverse material effect on their ability to satisfy their contractual obligations.
Our tenants and operators must comply with a wide range of complex federal, state, and local laws and regulations, and the healthcare industry, in general, is the subject to increased enforcement and penalties in all areas. Fraud and abuse continues to be an enforcement priority at both the federal and state levels including, but not limited to, the Federal Anti-Kickback Statute, the Federal Physician Self-Referral Statute (commonly known as the “Stark Law”), the False Claims Act (“FCA”), the Civil Monetary Penalties Law (“CMPL”), and a range of other federal and state regulations relating to waste, cost control, and healthcare management. The business and operations of our tenants and operators and therefore our business could be materially impacted by, among other things, a significant expansion of applicable federal, state or local laws and regulations, legislative changes or new judicial challenges to the Patient Protection and Affordable Care Act (the “Affordable Care Act” or “ACA”), future attempts to reform healthcare, new interpretations of existing laws and regulations, and changes or increased emphasis on certain enforcement priorities. Our SHOP segment derives minimal revenues from Medicare and Medicaid so the impact of federal enforcement relating to waste, cost control, and healthcare management is limited; however, facilities may be subject to increased enforcement and scrutiny under state laws. In our SHOP segment, only one property receives payments from Medicare and Medicaid, and a small percentage of our assisted living revenue is derived from Medicaid. For our MOB segment, our tenants and operators could be effected, which could impact our tenants’ ability to pay rent.
Our tenants and operators are subject to extensive federal, state, and local laws, regulations and industry standards which govern business operations, physical plant and structure, patient and employee health and safety, access to facilities, patient rights - including privacy, price transparency, fewer restrictions on access to care - and security of health information. Our tenants’ and operators’ failure to comply with any of these laws could result in loss of licensure, denial of reimbursement, imposition of fines or other penalties, suspension or exclusion from the government sponsored Medicare and Medicaid programs, loss of accreditation or certification, reputational damage and closure of a facility. In addition, both government and private third-party payors will likely continue their efforts to reduce reimbursement. The Medicare and Medicaid programs have adopted a variety of initiatives which have been incorporated and expanded by private insurance carriers, including health maintenance organizations and other health plans, to extract greater discounts and impose more stringent cost controls upon healthcare provider operations. Examples include, but are not limited to, changes in reimbursement rates and methodologies such as bundled payments, capitation payments, and discounted fee structures. Our tenants and operators may also face significant limits on the scope of services reimbursed and on reimbursement rates and fees. All of these changes could impact our tenants’ ability to pay rent or other obligations to us.
Licensure, Certification and Certificate of Need
Our tenants operate hospitals, assisted living facilities, a skilled nursing facility and other healthcare entities and providers that receive reimbursement for services from third-party payors, including the government sponsored Medicare and Medicaid programs and private insurance carriers. To participate in the Medicare and Medicaid programs, tenants and operators of healthcare facilities and other healthcare providers must comply with the regulations previously referenced, as well as with licensing, certification and, in some states, certificate of need (“CON”) requirements.
In granting and renewing these licenses and certifications, the state regulatory agencies consider numerous factors relating to a facility’s operations, including, but not limited to, the plant and physical structure, admission and discharge standards, staffing, training, patient and consumer rights, medication guidelines and other rules. In the SHOP segment if a tenant and/or operator fails to maintain or renew any required license, certification or other regulatory approval, or to correct serious deficiencies identified in compliance surveys, the tenant and/or operator could be prohibited from continuing operations at a facility.
A loss of licensure or certification, as well as a change in participation status, could also adversely affect a tenant or operator’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect the tenant or operator’s ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of, its leases with us. In addition, if we have to replace an operator, we may experience difficulties in finding a replacement because our ability to replace the operator may be affected by federal and state laws governing changes in control and ownership.
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Licensing and certification requirements also subject our tenants, and potentially operators, to compliance surveys and audits which are critical to the ongoing operations of the facilities. Our healthcare facilities must meet licensing and Medicare or Medicaid certification requirement, to the extent applicable relating to the type of facility and its equipment, personnel and standard of medical care, as well as comply with other federal, state and local laws and regulations. Healthcare facilities undergo periodic on-site licensure surveys, which generally are limited if the facility is accredited by The Joint Commission or other recognized accreditation organizations. A loss of licensure or certification could adversely affect a facility’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with, the terms of the tenant’s leases or the operator’s contractual obligation with us.
In some states, healthcare facilities are subject to various state CON laws requiring governmental approval prior to the development or expansion of healthcare facilities and services. The approval process in these states generally requires a facility to demonstrate the need for additional or expanded healthcare facilities or services. CONs, where applicable, can also be conditions to regulatory approval of changes in ownership or control of licensed facilities, addition of beds, investment in major capital equipment, introduction of new services, termination of services previously approved through the CON process and other control or operational changes.
CON laws and regulations may restrict a tenant and operator’s ability to expand properties and grow the tenant and operator’s business in certain circumstances, which could have an adverse effect on the tenant’s or operator’s revenues and, in turn, negatively impact their ability to make rental payments under, and otherwise comply with the terms of their leases with us.
Fraud and Abuse Enforcement
Various federal and state laws and regulations are aimed at actions that may constitute fraud and abuse by healthcare entities and providers who participate in, submit or cause to be submitted claims for payment to, or make or receive referrals in connection with government-funded healthcare programs, including Medicare and Medicaid. The federal laws include, for example, the following:
•The Federal Anti-Kickback Statute (42 USC Section 1320a-7b(b) of the Social Security Act) which prohibits the knowing and willful solicitation, offer, payment or acceptance of any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for: (i) referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program; or (ii) purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in party under a federal health care program;
•The Stark Law (42 USC Section 1395nn), which prohibits referrals by physicians of Medicare patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or certain other financial arrangements, unless an exception applies, and prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral;
•The FCA (31 USC Sections 3729-3733) creates liability for any person who submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government. In what is known as reverse false claims, the FCA imposes liability where a person acts improperly to avoid having to pay money to the government. The FCA also creates liability for people who conspire to violate the FCA; and
•The CMPL (42 USC 1320a-7a for healthcare) authorizes the U.S. Department of Health and Human Services (the “HHS”) to impose civil penalties administratively for fraudulent acts. The scope of the Office of the Inspector General’s authority to enforce the CMPL was increased in 2016.
Courts have interpreted the fraud and abuse laws broadly. Sanctions for violating these federal laws include substantial criminal and civil penalties such as punitive sanctions, damage assessments, monetary penalties, imprisonment, denial of Medicare and Medicaid payments, and exclusion from Medicare and Medicaid programs. These laws also impose an affirmative duty on tenants to ensure that they do not employ or contract with persons excluded from Medicare, Medicaid and other government programs. Many states have adopted laws similar to, or more expansive than, the federal fraud and abuse laws. States have also adopted and are enforcing laws that increase the regulatory burden and potential liability of healthcare entities including, but not limited to, patient protections, such as minimum staffing levels, criminal background checks, sanctions for employing excluded providers, restrictions on the use and disclosure of health information, and these state laws have their own penalties which may be in addition to federal penalties.
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In the ordinary course of their business, the tenants, and potentially operators at our properties are regularly subject to inquiries, audits and investigations conducted by federal and state agencies that oversee applicable laws and regulations. Increased funding for investigation and enforcement efforts, accompanied by an increased pressure to eliminate government waste, has led to a significant increase in the number of investigations and enforcement actions over the past several years, a trend which is not anticipated to decrease considerably. Significant enforcement activity has been the result of actions brought by regulators, who file complaints in the name of the U.S. (and, if applicable, particular states) under the FCA or equivalent state statutes. Also, the qui tam and whistleblower provisions of the FCA allow private individuals to bring actions on behalf of the government alleging that the government was defrauded. Individuals have tremendous potential financial gain in bringing whistleblower claims as the statute provides that the individual will receive a portion of the money recouped. Additionally, violations of the FCA can result in treble damages.
Violations of federal or state law or FCA actions against a tenant or operator of our properties could have a material adverse effect on the tenant’s and operator’s liquidity, financial condition or results of operations. Such a negative impact on a tenant’s or operator’s financial health could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of, its leases and other agreements with us. Federal and state fraud and abuse laws may also restrict the terms of agreements with tenants and operators.
Privacy and Security of Health Information
Various federal and state laws protect the privacy and security of health information. For example, the Health Insurance Portability and Accountability Act of 1996, its implementing regulations and related federal laws and regulations (commonly referred to as “HIPAA”) to protect the privacy and security of individually identifiable health information by limiting its use and disclosure. Many states have implemented similar laws to limit the use and disclosure of patient specific health information. The federal government has increased its HIPAA enforcement efforts over the past few years, which has increased the number of audits and enforcement actions, some of which have resulted in significant penalties to healthcare providers. Violations of federal and state privacy and security laws could have a material adverse effect on a tenant and operator’s financial condition or operations, which could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of, its leases and other agreements with us.
Reimbursement
We and our tenants derive a large portion of our revenues from insurance payments with the remainder coming from Medicare and Medicaid reimbursement and private pay. The reimbursement methodologies for healthcare facilities are constantly changing and federal and state authorities may implement new or modified reimbursement methodologies that may negatively impact healthcare operations. For example, the ACA enacted certain reductions in Medicare reimbursement rates for various healthcare providers, as well as certain other changes to Medicare payment methodologies.
The ACA has faced ongoing legal challenges, including litigation seeking to invalidate some or all of the law or the manner in which it has been interpreted. While there are no current challenges to the ACA, that could change based on the make-up of Congress and the presidential administration. The uncertain status of the ACA and of the state Medicaid programs, among other things, affect our ability to plan for the future.
Federal and state budget pressures also continue to escalate and, in an effort to address actual or potential budget shortfalls, Congress and many state legislatures may continue to enact reductions to Medicare and Medicaid expenditures through cuts in rates paid to providers or restrictions in eligibility and benefits.
In addition to legislative and executive actions relating to the scope of the ACA, increased enforcement will likely continue to impact the financial framework for healthcare tenants and facilities. For example, CMS is focused on reducing what it considers to be payment errors by identifying, reporting, and implementing actions to reduce payment error vulnerabilities. In November 2020, CMS announced its successes in reducing the 2020 Medicare improper payment rate and specifically called out the successes of its actions to address improper payments in home health and SNF claims. In 2021, CMS again successfully reduced the 2021 Medicare improper payment rate. The risk of improper payments in our SHOP segment is limited as only one property receives Medicare and Medicaid payments and a small percentage of our revenues come from assisted living facilities participating in Medicaid.
In addition, CMS’s continuing transition of Medicare from a traditional fee for service reimbursement model to a capitated value-based and bundled payment approach, which shifts the financial responsibility of certain patients to providers, will continue to create unprecedented challenges for providers.
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Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), permanently repealed the Sustainable Growth Rate formula, and provided for an annual rate increase of 0.5% for physicians through 2019, but imposed a six-year freeze on fee updates from 2020 through 2025. MACRA established a new payment framework, called the Quality Payment Program, which modified certain Medicare payments to “eligible clinicians,” including physicians, dentists, and other practitioners. MACRA represents a fundamental change in physician reimbursement. The implications of MACRA continue to be uncertain and will depend on future regulatory activity and physician activity in the marketplace. MACRA reporting requirements and quality metrics may encourage physicians to move from smaller practices to larger physician groups or hospital employment, leading to further consolidation of the industry. These and other shifts in payment and risk sharing within an outcome-based model are leading to, among other trends, increasing use of management tools to oversee individual providers and coordinate their services. The focus on utilization puts downward pressure on the number and expense of services provided as payors are moving away from a fee for service model. The continued trend toward capitated, value-based, and bundled payment approaches has the potential to diminish the market for certain healthcare providers, particularly specialist physicians and providers of particular diagnostic technologies. This could adversely impact the medical properties that house these physicians and medical technology providers.
Certain of our facilities are also subject to periodic pre- and post-payment reviews and other audits by governmental authorities, which could result in recoupments, denials, or delay of payments. Additionally, the introduction and explosion of new stakeholders competing with traditional providers in the health market, as well as telemedicine, telehealth and mobile health, are disrupting the heath industry and could lead to new trends in payment. All of the factors discussed-recoupment of past payments or denial or delay of future payments-could adversely affect a tenant’s or operator’s ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of its leases and other agreements with us. Assisted and independent living services generally are not reimbursable under government reimbursement programs, such as Medicare and Medicaid. Most of the resident fee revenues generated by our SHOPs, therefore, are derived from private pay sources consisting of the income or assets of residents or their family members. The rates for these residents are set by the facilities based on local market conditions and operating costs.
We regularly assess the financial implications of reimbursement rule changes on our tenants and operators, but we cannot make any assurances that current rules or future updates will not materially adversely affect our tenants and operators, which, in turn, could have a material adverse effect on their ability to pay rent and other obligations to us. See Item 1A. “Risk Factors — Risks Related to the Healthcare Industry — Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us” and “A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants.”
Other Regulations
Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, the Americans with Disabilities Act of 1990, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity. We did not make any material capital expenditures in connection with these regulations during the year ended December 31, 2023 and we do not expect that we will be required to make any such material capital expenditures during 2023. We believe that we have all permits and approvals necessary under current law to operate our investments.
Environmental Regulations
As an owner of real property, we are subject to various federal, state and local laws and regulations regarding environmental, health and safety matters. These laws and regulations address, among other things, asbestos, polychlorinated biphenyls, fuel, oil management, wastewater discharges, air emissions, radioactive materials, medical wastes, and hazardous wastes, and in certain cases, the costs of complying with these laws and regulations and the penalties for non-compliance can be substantial. Even with respect to properties that we do not operate or manage, we may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any property from which there is or has been an actual or threatened release of a regulated material and any other affected properties, regardless of whether we knew of or caused the release. Such costs typically are not limited by law or regulation and could exceed the property’s value. In addition, we may be liable for certain other costs, such as governmental fines and injuries to persons, property or natural resources, as a result of any such actual or threatened release.
Under the terms of our lease and management agreements, we generally have a right to indemnification by the tenants, operators and managers of our properties for any contamination caused by them. However, we cannot make any assurances that our tenants, operators and managers will have the financial capability or willingness to satisfy their respective indemnification obligations to us, and any such inability or unwillingness to do so may require us to satisfy the underlying environmental claims.
We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations during the year ended December 31, 2023 and do not expect that we will be required to make any such material capital expenditures during 2024.
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Human Capital Resources
We are an externally managed company and thus have no employees. We have retained the Advisor pursuant to a long-term advisory contract to manage our affairs on a day-to-day basis. We have also entered into agreements with our Property Manager to manage and lease our properties. The employees of the Advisor, Property Manager, and their respective affiliates perform a full range of services for us, including acquisitions, property management, accounting, legal, asset management, investor relations and all general administrative services. We depend on the Advisor and the Property Manager for services that are essential to us. If the Advisor and the Property Manager were unable to provide these services to us, we would be required to provide these services ourselves or obtain them from other sources.
Estimate of Net Asset Value
On March 31, 2023, we published an estimate of per share asset value (“Estimated Per-Share NAV”) equal to $14.00 as of December 31, 2022. Our previous Estimated Per-Share NAV was equal to $15.00 as of December 31, 2021. The Estimated Per-Share NAV has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in late March 2024. Dividends paid in the form of additional shares of common stock will, all things being equal, cause the value of each share of common stock to decline because the number of shares outstanding increase when dividends paid in stock are issued. We intend to publish Estimated Per-Share NAV periodically at the discretion of our board of directors (the “Board”), provided that such estimates will be made at least once annually.
Available Information
We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all amendments to those filings with the Securities and Exchange Commission (“SEC”). One may read and copy any materials we file with the SEC at the SEC’s Internet address located at https://www.sec.gov. The website contains reports, proxy statements and information statements, and other information, which one may obtain free of charge. In addition, copies of our filings with the SEC may be obtained from our website www.healthcaretrustinc.com. Access to these filings is free of charge. We are not incorporating our website or any information from these websites into this Annual Report on Form 10-K.
Item 1A. Risk Factors
Set forth below are the risk factors that we believe are material to our investors and a summary thereof. The occurrence of any of the risks discussed in this Annual Report on Form 10-K could have a material adverse effect on our business, financial condition, results of operations and ability to pay dividends and they may also impact other distributions and the value of an investment in our common and preferred stock.
Summary Risk Factors
•Our operating results are affected by economic and regulatory changes that have an adverse impact on the real estate market.
•Our property portfolio has a high concentration of properties located in Florida and Pennsylvania. Our properties may be adversely affected by economic cycles and risks inherent to those states.
•We have not paid our distributions on our common stock in cash since 2020, and there can be no assurance we will pay distributions on our common stock in cash in the future.
•Inflation will have an adverse effect on our investments and results of operations.
•Our real estate investments are concentrated in healthcare-related facilities, and we may be negatively impacted by adverse trends in the healthcare industry.
•The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us.
•If a tenant or lease guarantor declares bankruptcy or becomes insolvent, we may be unable to collect balances due under relevant leases.
•We assume additional operating risks and are subject to additional regulation and liability because we depend on eligible independent contractors to manage some of our facilities.
•Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.
•We may be unable to renew leases or re-lease space as leases expire.
•Our level of indebtedness may increase our business risks.
•Our financing arrangements have restrictive covenants, which may limit our ability to pursue strategic alternatives and react to changes in our business and industry or pay dividends.
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•We depend on our Advisor and Property Manager to provide us with executive officers, key personnel and all services required for us to conduct our operations and our operating performance may be impacted by any adverse changes in the financial health or reputation of our Advisor and Property Manager.
•All of our executive officers, some of our directors and the key real estate and other professionals assembled by our Advisor and Property Manager face conflicts of interest related to their positions or interests in entities related to AR Global, which could hinder our ability to implement our business strategy.
•We may terminate our advisory agreement in only limited circumstances, which may require payment of a termination fee.
•The Estimated Per-Share NAV of our common stock is based upon subjective judgments, assumptions and opinions about future events, and may not reflect the amount that our stockholders might receive for their shares.
•Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.
•The share ownership restrictions for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities.
•Our failure to remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax.
•Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities.
Risks Related to Our Properties and Operations
Our property portfolio has a high concentration of properties located in one state. Our properties may be adversely affected by economic cycles and risks inherent to those states.
A total of 10% or more of our consolidated annualized rental income on a straight-line basis for the fiscal year ended December 31, 2023 was generated from the state below:
State
Percentage of Straight-Line Rental Income
Florida
19.9%
Pennsylvania
10.6%
Any adverse situation that disproportionately affects operations or investments in the states listed above may have a magnified adverse effect on our portfolio. Real estate markets are subject to economic downturns, as they have been in the past, and we cannot predict how economic conditions will impact this market in both the short and long-term. Declines in the economy or a decline in the real estate markets in these states could hurt our financial performance and the value of our properties. Historically, Florida has been at greater risk of acts of nature such as hurricanes and tropical storms, which may have worsened as a result of climate change, and has been subject to more pronounced real estate downturns than other regions. Accordingly, our business, financial condition and results of operations may be particularly susceptible to downturns or changes in the local Florida economies where we operate. Other factors that may negatively affect economic conditions include:
•business layoffs or downsizing;
•industry slowdowns;
•relocations of businesses;
•climate change;
•changing demographics;
•increased telecommuting and use of alternative workplaces;
•infrastructure quality;
•any oversupply of, or reduced demand for, real estate;
•concessions or reduced rental rates under new leases for properties where tenants defaulted;
•increased insurance premiums;
•state budgets and payment to providers under Medicaid or other state healthcare programs; and
•changes in reimbursement for healthcare services from commercial insurers.
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We may be unable to enter into contracts for and complete property acquisitions on advantageous terms or our property acquisitions may not perform as we expect.
One of our goals is to increase assets through acquiring additional properties, and pursuing this investment objective exposes us to numerous risks, including:
•competition from other real estate investors with significant capital resources;
•we may acquire properties that are not accretive;
•we may not successfully integrate, manage and lease the properties we acquire in a fashion that meets our expectations or market conditions may result in future vacancies and lower-than expected rental rates;
•we may be unable to assume existing debt financing or obtain property-level debt financing or raise equity required to fund acquisitions from other sources on favorable terms, or at all;
•we may need to spend more than budgeted amounts to make necessary improvements or renovations to acquired properties;
•agreements for the acquisition of properties are typically subject to customary conditions to closing that may or may not be completed, and we may spend significant time and money on potential acquisitions that we do not consummate;
•the process of acquiring or pursuing the acquisition of a new property may divert the attention of our management team from our existing business operations; and
•we may acquire properties without recourse, or with only limited recourse, for liabilities, whether known or unknown.
We rely upon our Advisor and the real estate professionals employed by affiliates of our Advisor to identify suitable investments. There can be no assurance that our Advisor will be successful in doing so on financially attractive terms or that our objectives will be achieved. If our Advisor is unable to timely locate suitable investments, or if the terms governing our investments are unfavorable, we may be unable to meet our investment objectives, which could adversely affect our business.
We have not paid any distributions on our common stock in cash since 2020, and there can be no assurance we will pay distributions on our common stock in cash in the future.
All dividends or other distributions on our common stock are paid in the discretion of our Board. We have not paid cash distributions since 2020. We have recently been issuing dividends in the form of common stock valued at the Estimated Per-Share NAV in effect on the applicable date. There is no assurance we will continue to do so or when or if we will pay dividends or distributions in cash. We last published an Estimated Per-Share NAV on March 31, 2023. The estimate was as of December 31, 2022 and has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV which is expected in late March 2024. Dividends issued in the form of additional shares of common stock will, all things being equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when stock dividends are issued; however, because each common stockholder will receive the same number of new shares per share of common stock held, the total value of a common stockholder’s investment, all things being equal, will not change assuming no sales or other transfers. Our ability to make future cash distributions on our common stock will depend on our future cash flows and indebtedness and may further depend on our ability to obtain additional liquidity, which may not be available on favorable terms, or at all. Further, if we do not pay dividends on our Series A Preferred Stock or Series B Preferred Stock, 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, as applicable, and, whenever dividends on the Series A Preferred Stock or Series B Preferred Stock are in arrears, whether or not authorized or declared, for six or more quarterly periods, holders of Series A Preferred Stock or Series B Preferred Stock will have the right to elect two additional directors to serve on our board.
If a tenant or lease guarantor declares bankruptcy or becomes insolvent, we may be unable to collect balances due under relevant leases.
We have previously had tenants file for bankruptcy and seek the protections afforded under Title 11 of the United States Code. There is no assurance we will not experience this in the future. A bankruptcy filing by one of our tenants or any guarantor of a tenant’s lease obligations would result in a stay of all efforts by us to collect pre-bankruptcy debts from these entities or their assets, unless we receive an enabling order from the bankruptcy court. Post-bankruptcy debts would be required to be paid currently. If a lease is assumed by the tenant, all pre-bankruptcy balances owing under it must be paid in full. If a lease is rejected by a tenant in bankruptcy, we would only have a general unsecured claim for damages. If a lease is rejected, it is unlikely we would receive any payments from the tenant because our claim is capped at the rent reserved under the lease, without acceleration, for the greater of one year or 15% of the remaining term of the lease, but not greater than three years, plus rent already due but unpaid as of the date of the bankruptcy filing (post-bankruptcy rent would be payable in full). This claim could be paid only if funds were available, and then only in the same percentage as that realized on other unsecured claims.
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A tenant or lease guarantor bankruptcy could delay efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. A tenant or lease guarantor bankruptcy could cause a decrease or cessation of rental payments that would mean a reduction in our cash flow and the amount available for dividends and other distributions to our stockholders. In the event of a bankruptcy, there is no assurance that the debtor in possession or the bankruptcy trustee will assume the lease.
A sale-leaseback transaction may be recharacterized in a tenant’s bankruptcy proceeding.
We may enter into sale-leaseback transactions, where we purchase a property and then lease the same property back to the seller, who becomes our tenant as part of the transaction. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be recharacterized as either a financing or a joint venture, and either type of recharacterization could adversely affect our business. If the sale-leaseback were recharacterized as a financing, we might not be considered the owner of the property, and as a result would have the status of a creditor. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If this plan were confirmed by the bankruptcy court, we would be bound by the new terms. If the sale-leaseback were recharacterized as a joint venture, our lessee and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property. Either of these outcomes could adversely affect our cash flow.
Our results of operations have been, and may continue to be, adversely impacted by our inability to collect rent from tenants.
On occasion, tenants at certain properties in our MOB segment and residents at certain properties in our SHOP segment have been in default under their leases to us. These defaults negatively impact our results of operations. We incurred $1.2 million, $3.2 million and $1.1 million of bad debt expense, including straight-line rent write-offs, related to tenants in default under their leases to us during the years ended December 31, 2023, 2022 and 2021, respectively.
Further, even if we replace tenants in default to us in a manner that will allow us to transition the properties leased to those tenants to our SHOP segment, there can be no assurance this strategy will be successful and we may be more exposed to changes in property operating expenses. There also can be no assurance that we will be able to replace these tenants on a timely basis, or at all, and our results of operations may therefore continue to be adversely impacted by bad debt expenses related to our inability to collect rent from defaulting tenants. Transitions will also increase our exposure to risks associated with operating in this structure.
Our tenants or operators that experience deteriorating financial conditions have been, or may, in the future be, unwilling or unable to pay us in full or on a timely basis due to bankruptcy, lack of liquidity, lack of funding, operational failures, or for other reasons. There is no assurance we will continue to collect at the current rates. Our ability to collect rents in future periods may be impacted by issues or events that cannot be determined as present and the amount of cash rent collected during 2023 may not be indicative of any future period.
We obtain only limited warranties when we purchase a property and therefore have only limited recourse if our due diligence did not identify any issues that lower the value of our property.
We have acquired and may continue to acquire properties in “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements we entered into in the past, or may enter into in the future, may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of properties with limited warranties increases the risk that we may lose some or all our invested capital in the property as well as the loss of rental income from that property if a situation or loss occurs after the fact for which we have limited or no remedy.
Our properties and tenants may be unable to compete successfully.
The properties we have acquired and will acquire may face competition from nearby hospitals, senior housing properties and other medical office buildings and medical facilities that provide comparable services. Some of those competing facilities are owned by governmental agencies and supported by tax revenues, and others are owned by nonprofit corporations and may be supported to a large extent by endowments and charitable contributions. These types of support are not available to our properties. Similarly, our tenants face competition from other medical practices in nearby hospitals and other medical facilities. Additionally, the introduction and explosion of new stakeholders competing with traditional providers in the healthcare market, including companies such as telemedicine, telehealth and mhealth, are disrupting the healthcare industry. Our tenants’ failure to compete successfully with these other practices and providers could adversely affect their ability to make rental payments, which could adversely affect our rental revenues.
Further, from time to time and for reasons beyond our control, referral sources, including physicians and managed care organizations, may change their lists of hospitals or physicians to which they refer patients. This could adversely affect the ability of our tenants to make rental payments, which could have a material adverse impact on us.
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We may be unable to secure funds for future tenant improvements or capital needs.
If a tenant does not renew its lease or otherwise vacates its space, we will likely be required to expend substantial funds to improve and refurbish the vacated space. In addition, we are typically responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops, even if our leases with tenants may require tenants to pay routine property maintenance costs, and the impact of such costs on our results of operations may be exacerbated during inflationary periods, such as that experienced in recent years. If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain financing from sources beyond our cash flow from operations, such as borrowings, property sales or future equity offerings to fund these capital requirements. These sources of funding may not be available on attractive terms or at all, including, as a result of rising interest rates. Failure to procure additional funding for additional funding improvements would impact the value of the applicable property or our ability to lease the applicable property on favorable terms, if at all.
We have acquired or financed, and may continue to acquire or finance, properties with lock-out provisions which may prohibit us from selling a property, or may require us to maintain specified debt levels for a period of years on some properties.
Lock-out provisions, such as the provisions contained in certain mortgage loans we have entered into, could materially restrict our ability to sell or otherwise dispose of properties or refinance properties, including by requiring a yield maintenance premium to be paid in connection with the required prepayment of principal upon a sale or disposition. Lock-out provisions may also prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties. Lock-out provisions could also impair our ability to take other actions during the lock-out period that may otherwise be in the best interests of our stockholders. In particular, lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control. Payment of yield maintenance premiums in connection with dispositions or refinancings could adversely affect our cash flow, affecting our results of operations and the ability to pay distributions to our stockholders.
Rising expenses could reduce cash flow.
The properties that we own or may acquire are subject to operating risks, any or all of which may negatively affect us. If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds with respect to that property for operating expenses. Properties may be subject to increases in tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses. Following the COVID-19 pandemic, we have experienced shortages in qualified labor and supply chain disruptions that have increased our operating costs, particularly in our SHOP segment. We may not be able to negotiate leases on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs. If we are unable to lease properties on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs, which could adversely affect our cash flow, affecting our results of operations and ability to pay distributions to our stockholders.
Inflation may have an adverse effect on our investments and results of operations.
Recent increases and continuing increases in the rate of inflation, both real and anticipated, may impact our investments and results of operations. Inflation could erode the value of long-term leases that do not contain indexed escalation provisions, or contain fixed annual rent escalation provisions that are at rates lower than the rate of inflation, and increase expenses including those that cannot be passed through under our leases. Increased inflation could also increase our general and administrative expenses and, as a result of an increase in market interest rate in response to higher than anticipated inflation rate, increase our mortgage and debt interest costs, and these costs could increase at a rate higher than our rent increases. An increase in our expenses, or expenses paid or incurred by our Advisor or its affiliates that are reimbursed by us pursuant to the advisory agreement, or a failure of revenues to increase at least with inflation could adversely impact our results of operations.
For the year ended December 31, 2023, the increase to the 12-month Consumer Price Index for all items, as published by the Bureau of Labor Statistics, was 3.4%. To help mitigate the adverse impact of inflation, most of our leases with tenants in our MOB segment contain rent escalation provisions which increase the cash that is due under these leases over their respective terms. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). Leases with fixed or no escalation provisions may not keep pace with current rates of inflation, whereas leases with indexed escalations may provide more protection against inflation. Although most of our leases contain rent escalation provisions, these escalation rates are generally below the rate of inflation.
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In addition to base rent, our net leases require the single-tenant MOB leases to pay all the properties operating expenses and our multi-tenant MOB leases to pay their allocable share of operating expenses, which may include common area maintenance costs, real estate taxes and insurance. Increased operating costs paid by our tenants under these net leases could have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’ ability to pay rent owed to us or property expenses to be paid, or reimbursed to us, by our tenants. Renewals of leases or future leases for our net lease properties may not be negotiated on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs. If we are unable to lease properties on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs.
Leases with residents at our SHOPs typically do not have rent escalations, however, we are able to renew leases at market rates as they mature due to their short-term nature. As inflation rates increase, the cost of providing medical care at our SHOPs, particularly labor costs, will increase. If we are unable to admit new residents or renew resident leases at market rates, while bearing these increased costs from providing services to our residents, our results of operations may be affected.
Damage from catastrophic weather and other natural events and climate change could result in losses to us.
Certain of our properties are located in areas that may experience catastrophic weather and other natural events from time to time, including hurricanes or other severe weather, flooding, fires, snow or ice storms, windstorms or, earthquakes. These adverse weather and natural events could cause substantial damages or losses to our properties which could exceed our insurance coverage. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected property, as well as anticipated future revenue from that property. We could also continue to be obligated to repay any mortgage indebtedness or other obligations related to the property.
To the extent that significant changes in the climate occur, we may experience extreme weather and changes in precipitation and temperature and rising sea levels, all of which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. The impact of climate change may be material in nature, including destruction of our properties, or occur for lengthy periods of time.
Growing public concern about climate change has resulted in the increased focus of local, state, regional, national and international regulatory bodies on greenhouse gas (“GHG”) emissions and climate change issues. Legislation to regulate GHG emissions has periodically been introduced in the U.S. Congress, and there has been a wide-ranging policy debate, both in the U.S. and internationally, regarding the impact of these gases and possible means for their regulation. Federal, state or foreign legislation or regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties or to protect them from the consequence of climate change and could also result in increased compliance costs or additional operating restrictions that could adversely impact the businesses of our tenants and their ability to pay rent.
We may suffer uninsured losses relating to real property or have to pay expensive premiums for insurance coverage.
Our general liability, property and umbrella liability insurance coverage on all our properties may not be adequate to insure against liability claims and provide for the costs of defense. Similarly, we may not have adequate coverage against the risk of direct physical damage or to reimburse us on a replacement cost basis for costs incurred to repair or rebuild each property. Moreover, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with such catastrophic events could sharply increase the premiums we pay for coverage against property and casualty claims.
This risk is particularly relevant with respect to potential acts of terrorism. The Terrorism Risk Insurance Act of 2002 (the “TRIA”), under which the U.S. federal government bears a significant portion of insured losses caused by terrorism, will expire on December 31, 2027, and there can be no assurance that Congress will act to renew or replace the TRIA following its expiration. In the event that the TRIA is not renewed or replaced, terrorism insurance may become difficult or impossible to obtain at reasonable costs or at all, which may result in adverse impacts and additional costs to us.
Changes in the cost or availability of insurance due to the non-renewal of the TRIA or for other reasons could expose us to uninsured casualty losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any uninsured loss. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in less cash flow.
Additionally, mortgage lenders insist in some cases that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Accordingly, to the extent terrorism risk insurance policies are not available at reasonable costs, if at all, our ability to finance or refinance indebtedness secured by our properties could be impaired. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate, or any, coverage for the losses.
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Covenants, conditions and restrictions may impact our ability to operate a property.
Some of our properties are contiguous to other parcels of real property, comprising part of the same commercial center. In connection with such properties, there are significant covenants, conditions and restrictions restricting the operation of such properties and any improvements on such properties, and related to granting easements on such properties. Moreover, the operation and management of the contiguous properties may impact such properties. Compliance with covenants, conditions and restrictions may adversely affect our operating costs and reduce the amount of cash flow that we generate.
Our operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks.
We have acquired and developed, and may in the future acquire and develop, properties upon which we will construct improvements. In connection with our development activities, we are subject to uncertainties associated with re-zoning for development, environmental concerns of governmental entities or community groups and our builder or partner’s ability to build in conformity with plans, specifications, budgeted costs, and timetables. Performance also may be affected or delayed by conditions beyond our control. For example, we experienced substantial delays and incurred significant additional costs associated with development of a property located in Jupiter, Florida, a property we subsequently sold at a price below the amount we had invested. We would be exposed to the risks in connection with any other properties we develop. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. If a builder or development partner fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance, but there can be no assurance any legal action would be successful. These and other factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and our return on our investment could suffer.
We compete with third parties in acquiring properties and other investments and attracting credit worthy tenants.
We compete with many other entities engaged in real estate investment activities, including individuals, corporations, private investment funds, bank and insurance company investment accounts, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities, many of which have greater resources than we do. These entities may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase. Increased demand for assets will likely increase acquisition prices.
We also compete with other comparable properties for tenants, which impacts our ability to rent space and the amount of rent charged. We could be adversely affected if additional competitive properties are built in locations near our properties, causing increased competition for creditworthy tenants. This could result in decreased cash flow from our properties and may require us to make capital improvements to properties that we would not have otherwise made, further impacting property cash flows.
Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results.
We are subject to various federal, state and local laws and regulations that (a) regulate certain activities and operations that may have environmental or health and safety effects, such as the management, generation, release or disposal of regulated materials, substances or wastes, (b) impose liability for the costs of cleaning up, and damages to natural resources from, past spills, waste disposals on and off-site, or other releases of hazardous materials or regulated substances, and (c) regulate workplace safety. Compliance with these laws and regulations could increase our operational costs. Violation of these laws may subject us to significant fines, penalties or disposal costs, which could negatively impact our results of operations, financial position and cash flows. Under various federal, state and local environmental laws (including those of foreign jurisdictions), a current or previous owner or operator of currently or formerly owned, leased or operated real property may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. The costs of removing or remediating could be substantial. These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Certain environmental laws and common law principles could be used to impose liability for release of, and exposure to, hazardous substances, including asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances. In addition, when excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold at any of our properties could require us to undertake a costly remediation program to contain or remove the mold from the affected property or development project. Accordingly, we may incur significant costs to defend against claims of liability, to comply with environmental regulatory requirements, to remediate any contaminated property, or to pay personal injury claims.
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Moreover, environmental laws also may impose liens on property or other restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us or our Property Manager and its assignees from operating such properties. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations or the discovery of currently unknown conditions or non-compliances may impose material liability under environmental laws.
If we sell properties by providing financing to purchasers, defaults by the purchasers could adversely affect our cash flows.
In some instances, we may sell our properties by providing financing to purchasers. If we do so, we will bear the risk that the purchaser may default on its debt, requiring us to seek remedies, a process which may be time-consuming and costly. Further, the borrower may have defenses that could limit or eliminate our remedies. In addition, even in the absence of a purchaser default, the proceeds from the sale will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years.
We assume additional operational risks and are subject to additional regulation and liability because we depend on eligible independent contractors to manage some of our facilities.
We invest in SHOPs using the RIDEA structure which permits REITs such as us to lease certain types of healthcare facilities that we own or partially own to a TRS, provided that our TRS hires an independent qualifying management company to operate the facility. Under this structure, the independent qualifying management company, which we also refer to as an operator, receives a management fee from our TRS for operating the facility as an independent contractor. As the owner of the facility, we assume most of the operational risk because we lease our facility to our own partially- or wholly-owned subsidiary rather than a third-party operator. We are therefore responsible for any operating deficits incurred by the facility. As of December 31, 2023, we had four eligible independent contractors operating 46 SHOPs. We may in the future, transition other MOB facilities, which may or may not be experiencing declining performance, to third-party managed facilities using the RIDEA structure, in connection with which they would also transition from our MOB segment to our SHOP segment. There can be no assurance these transitions will improve performance of the properties, and they will also increase our exposure to risks associated with operating in this structure.
The income we generate from SHOPs is subject to a number of operational risks including fluctuations in occupancy levels and resident fee levels, increases in the cost of food, materials, energy, labor (as a result of unionization or otherwise) or other services, rent control regulations, national and regional economic conditions, the imposition of new or increased taxes, capital expenditure requirements, professional and general liability claims, and the availability and cost of professional and general liability insurance. As noted herein, we have experienced declines in occupancy at our SHOPs since the onset of the pandemic. There is no assurance we will be able to mitigate these declines. Further, we rely on the personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment of our operators to set appropriate resident fees, provide accurate property-level financial results for our properties in a timely manner and to otherwise operate our SHOPs in compliance with the terms of our management agreements and all applicable laws and regulations. We also depend on our operators to attract and retain skilled management personnel who are responsible for the day-to-day operations of our SHOPs. A shortage of nurses or other trained personnel or general inflationary pressures have forced the operator to enhance pay and benefit packages to compete effectively for personnel, but it may not be able to offset these added costs by increasing the rates charged to residents. The impact on staffing has resulted in increased turnover amongst staff and greater reliance on staffing agencies, which could have the effect of increased insurance premiums. Any additional increase in labor costs and other property operating expenses, any failure to attract and retain qualified personnel, or significant changes in the operator’s senior management or equity ownership could adversely affect the income we receive from our SHOPs.
The tenants of our SHOPs are generally required to be holders of the applicable healthcare licenses for the healthcare services they administer. Any delay in obtaining the license, or failure to obtain one at all, could result in a delay or an inability to collect a significant portion of our revenue from the impacted property. Furthermore, this licensing requirement subjects us (through our ownership interest in our TRS) to various regulatory laws, including those described herein. Most states regulate and inspect healthcare facility operations, patient care, construction and the safety of the physical environment. If one or more of our healthcare real estate facilities fails to comply with applicable laws, our TRS, if it holds the healthcare license and is the entity enrolled in government health care programs, would be subject to penalties including loss or suspension of license, certification or accreditation, exclusion from government healthcare programs such as Medicare or Medicaid, administrative sanctions, civil monetary penalties, and in certain instances, criminal penalties. Additionally, when we receive individually identifiable health information relating to residents of our TRS-operated healthcare facilities, we may be subject to federal and state data privacy and confidentiality laws and rules, and could be subject to liability in the event of an audit, complaint, or data breach. Furthermore, to the extent our TRS holds the healthcare license, it could have exposure to professional liability claims arising out of an alleged breach of the applicable standard of care rules.
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Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.
We have made investments in certain assets through joint ventures and may continue to enter into joint ventures, partnerships and other co-ownership arrangements (including preferred equity investments) in the future. In such event, we may not be in a position to exercise sole decision-making authority regarding the joint venture. Investments in joint ventures may, under certain circumstances, involve risks not present were a third-party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their required capital contributions. Co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. These investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the co-venturer would have full control over the joint venture. Disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers or directors from focusing their time and effort on our business. Consequently, actions by or disputes with co-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our co-venturers.
Net leases may not result in fair market lease rates over time.
Some of our rental income is generated by properties leased to tenants under net leases, which generally provide the tenant greater discretion in using the leased property than ordinary property leases, such as the right to freely sublease the property, to make alterations in the leased premises and to terminate the lease prior to its expiration under specified circumstances. Furthermore, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in future years will fail to result in fair market rental rates during those years. Moreover, inflation could erode the value of long-term leases that do not contain indexed escalation provisions.
We may be unable to renew leases or re-lease space as leases expire.
We may be unable to renew expiring leases on terms and conditions that are as, or more, favorable as the terms and conditions of the expiring leases. In addition, vacancies may occur at one or more of our properties due to a default by a tenant on its lease or expiration of a lease. Vacancies may reduce the value of a property as a result of reduced cash flow generated by the property. Healthcare facilities in general and MOBs in particular tend to be specifically suited for the particular needs of their tenants and we may not be able to locate suitable replacement tenants to lease the property for their specialized uses. Alternatively, major renovations and expenditures may be required to adapt the properties for other uses in order for us to re-lease vacant space or may be required to decrease the rent we intend to charge or provide other concessions in order to lease the property to another tenant, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to stockholders.
Our properties have been and may continue to be subject to impairment charges.
We periodically evaluate our real estate investments for impairment indicators. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, tenant performance and legal structure. For example, the early termination of, or default under, a lease by a major tenant may lead to an impairment charge. If we determine that an impairment has occurred, we are required to make a downward adjustment to the net carrying value of the property. Impairment charges also indicate a potential permanent adverse change in the fundamental operating characteristics of the impaired property. There is no assurance that these adverse changes will be reversed in the future and the decline in the impaired property’s value could be permanent. We have incurred impairment charges, which have an immediate direct impact on our net loss for GAAP purposes, including $4.7 million, during the year ended December 31, 2023. There can be no assurance that we will not take additional charges in the future. Any future impairment could have a material adverse effect on our financial position and results of operations and liquidity.
Our real estate investments are relatively illiquid, and therefore we may not be able to dispose of properties when we desire to do so or on favorable terms.
Investments in real properties are relatively illiquid. We may not be able to quickly alter our portfolio or generate capital by selling properties. The real estate market is affected by many factors, such as general economic conditions, the availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. If we need or desire to sell a property or properties, we cannot predict whether we will be able to do so at a price or on the terms and conditions acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. Further, we may be required to invest monies to correct defects or to make improvements before a property can be sold. We can make no assurance that we will have funds available to correct these defects or to make these improvements. Moreover, in acquiring a property or incurring debt securing a property, we may agree to restrictions that prohibit the sale of that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These types of provisions restrict our ability to sell a property.
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In addition, applicable provisions of the Code impose restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies. Thus, we may be unable to realize our investment objectives by selling or otherwise disposing of a property, or refinancing debt secured by the property, at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy.
The ongoing Russia-Ukraine conflict and the recent escalation of the Israel-Hamas conflict may adversely impact our business operations and financial performance.
The United States and global markets are experiencing volatility and disruption following the geopolitical instability resulting from the ongoing Russia-Ukraine conflict, as the North Atlantic Treaty Organization (“NATO”) has deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system. Certain countries, including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine and to Israel, increasing geopolitical tensions among a number of nations. The invasion of Ukraine by Russia and the escalation of the Israel-Hamas conflict and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing conflicts are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions and increased cyber-attacks against U.S. companies. Additionally, any resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. These ongoing conflicts and the resulting geopolitical instability can adversely impact our business operations and financial performance. These factors may also result in the weakening of the financial condition of a significant tenant or a number of smaller tenants, which could adversely impact their ability to timely pay rent. Our revenues are largely dependent on the success and economic viability of our tenants and, as a result, our financial condition and results of operations may be adversely impacted.
We are subject to risks associated with public health crises, such as pandemics and epidemics, which may have a material adverse effect on our business.
We are subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic. The COVID-19 pandemic has subsided with the normalization of living with COVID-19 following the increase in accessibility to COVID-19 vaccines and antiviral treatments. While the U.S. has removed or reduced the restrictions taken in response to the COVID-19 pandemic, a resurgence of the COVID-19 pandemic could once again impact our operations and the operations of our tenants as a result of quarantines, location closures, illnesses, and travel restrictions. Any future resurgence of COVID-19 or variants of the virus, and the severity and duration thereof, remain uncertain, however, a substantial and continuous deterioration in the business environment in the U.S. as a consequence thereof could have a material adverse effect on our business, financial condition and results of operations. The scope and duration of any future public health crisis, including the potential emergence of new variants of the COVID-19 virus, the pace at which government restrictions are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, the speed and extent to which global markets fully recover from the disruptions caused by such a public health crisis, and the impact of these factors on our business, financial condition and results of operations, will depend on future developments that are highly uncertain and cannot be predicted with confidence.
Risks Related to the Healthcare Industry
Our real estate investments are concentrated in healthcare-related facilities, and we may be negatively impacted by adverse trends in the healthcare industry.
We own and seek to acquire a diversified portfolio of healthcare-related assets including MOBs, SHOPs and other healthcare-related facilities. We are subject to risks inherent in concentrating investments in real estate and, in particular, healthcare-related assets. A downturn in the commercial real estate industry generally could significantly adversely affect the value of our properties. A downturn in the healthcare industry could particularly negatively affect our lessees’ ability to make lease payments to us and our ability to pay dividends and other distributions to our stockholders. These adverse effects could be more pronounced than if we diversified our investments outside of real estate or if our portfolio did not include a concentration in healthcare-related assets.
Furthermore, the healthcare industry currently is experiencing rapid regulatory changes and uncertainty; changes in the demand for and methods of delivering healthcare services; changes in third-party reimbursement policies; significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas; expansion of insurance providers into patient care; continuing pressure by private and governmental payors to reduce payments to providers of services; and increased scrutiny of billing, referral and other practices by federal and state authorities. These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our revenues and cash flows.
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The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us.
The healthcare industry is heavily regulated by federal, state and local governmental bodies. Our tenants and operators generally are subject to laws and regulations covering, among other things, licensure, certification for participation in government programs, relationships with physicians and other referral sources, and the privacy and security of patient health information. Changes in these laws and regulations could negatively affect the ability of our tenants to make lease payments to us. In some states, healthcare facilities are subject to various state CON laws requiring governmental approval prior to the development or expansion of healthcare facilities and services. The approval process in these states generally requires a facility to demonstrate the need for additional or expanded healthcare facilities or services. CONs, where applicable, can also be conditions to regulatory approval of changes in ownership or control of licensed facilities, addition of beds, investment in major capital equipment, introduction of new services, termination of services previously approved through the CON process and other control or operational changes. Many of our medical facilities and their tenants may require a license or CON to operate. Failure to obtain a license or CON, or loss of a required license or CON, would prevent a facility from operating in the manner intended by the tenant and may restrict a tenant’s or operator’s ability to expand properties and grow the tenant’s or operator’s business in certain circumstances, which could have an adverse effect on the operator’s or tenant’s revenues, and in turn, negatively impact their ability to make rental payments under, and otherwise comply with the terms of their leases with us. State CON laws are not uniform throughout the United States and are subject to change. We cannot predict the impact of state CON laws on our improvement of medical facilities or the operations of our tenants and operators. In addition, state CON laws often materially impact the ability of competitors to enter into the marketplace of our facilities. The repeal of CON laws could allow competitors to freely operate in previously closed markets. This could negatively affect the ability of our tenants’ to make rental payments to us. In limited circumstances, loss of state licensure or certification or closure of a facility could ultimately result in loss of authority to operate the facility and require new CON authorization to re-institute operations.
Furthermore, uncertainty surrounding the implementation of the Affordable Care Act may adversely affect our tenants. As the primary vehicle for comprehensive healthcare reform in the United States, the Affordable Care Act was designed to reduce the number of individuals in the United States without health insurance and change the ways in which healthcare is organized, delivered and reimbursed. The Affordable Care Act has faced ongoing legal challenges, including litigation seeking to invalidate some or all of the law or the manner in which it has been interpreted. The legal challenges and legislative initiatives to roll back the Affordable Care Act continues and the outcomes are uncertain. In June of 2021, the Supreme Court of the United States for a third time declined to invalidate the Affordable Care Act. There is no assurance that future litigation or legislative initiatives will not attempt to do so. There are no current challenges to the Affordable Care Act but that could change based on the makeup of Congress and presidential administration. The regulatory uncertainty and the potential impact on our tenants could have an adverse material effect on their ability to satisfy their contractual obligations. Further, we are unable to predict the scope of future federal, state and local regulations and legislation, including Medicare and Medicaid statutes and regulations or judicial decisions, or the intensity of enforcement efforts with respect to such regulations and legislation, and any changes in the regulatory or judicial framework may have a material adverse effect on our tenants.
Health insurance coverage under the Affordable Care Act is likely going to continue to expand in 2024. However, the repeal of the individual mandate penalty included in the Tax Cuts and Jobs Act of 2017, recent actions to increase the availability of insurance policies that do not include Affordable Care Act minimum benefit standards, and support for Medicaid work requirements will likely impact the market. Accordingly, current and future payments under federal and state healthcare programs may not be sufficient to sustain a facility’s operations, which could adversely affect its ability to satisfy its contractual obligations, including making rental payments under, and otherwise complying with the terms of, the facility’s leases and other agreements with us. These risks could be mitigated by our limited participation in governmental-sponsored payor programs.
The Affordable Care Act includes program integrity provisions that both create new authorities and expand existing authorities for federal and state governments to address fraud, waste and abuse in federal health programs. In addition, the Affordable Care Act expands reporting requirements and responsibilities related to facility ownership and management, patient safety and care quality. In the ordinary course of their businesses, our tenants and operators may be regularly subjected to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations. If they do not comply with the additional reporting requirements and responsibilities, the ability of our tenants’ to participate in federal health programs may be adversely affected. Moreover, there may be other comprehensive healthcare reform legislation, which, depending on how they are implemented, could materially and adversely affect our operators.
The Affordable Care Act also requires the reporting and return of overpayments. Healthcare providers that fail to report and return an overpayment could face potential liability under the FCA and the CMPL and exclusion from federal healthcare programs. Accordingly, if our tenants fail to comply with the Affordable Care Act’s requirements, they may be subject to significant monetary penalties and excluded from participation in Medicare and Medicaid, which could materially and adversely affect their ability to pay rent and satisfy other financial obligations to us.
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Reductions or changes in reimbursement from third-party payors, including Medicare and Medicaid, or delays in receiving these reimbursements, could adversely affect the profitability of our tenants and operators and hinder their ability to make rent payments to us.
Our tenants and operators may receive payments from the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce healthcare costs have intensified in recent years and will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants and operators. The Medicare and Medicaid programs have adopted a variety of initiatives which have been incorporated and expanded by private insurance carriers, including health maintenance organizations and other health plans, to extract greater discounts and impose more stringent cost controls upon healthcare provider operations. Examples include, but are not limited to, changes in reimbursement rates and methodologies, such as bundled payments, capitation payments and discounted fee structures. As a result, our tenants and operators may face significant limits on the reimbursed and on reimbursement rates and fees. All of these changes could impact the ability of our tenants’ to pay rent or our operator’s ability to meet their obligations to us. In addition, tenants and operators in certain states have experienced delays; some of which are, have been, and may be late in receiving reimbursements, which have adversely affected their ability to make rent payments to us. Further, failure of any of our tenants or operators to comply with various laws and regulations could jeopardize their ability to continue participating in Medicare, Medicaid and other government-sponsored payment programs.
The healthcare industry continues to face various challenges, including increased government and private payor pressure on healthcare providers to control or reduce costs. Coverage expansions under the Affordable Care Act through the Medicaid expansion and health insurance exchanges may be scaled back or eliminated in the future due to ongoing legal challenges and the future status of the Affordable Care Act is unknown. We cannot ensure that of our tenants or operators who currently depend on governmental or private payer reimbursement will be adequately reimbursed for the services they provide.
Any slowdown in the United States economy can negatively affect state budgets, thereby putting pressure on states to decrease spending on state programs including Medicaid. The need to control Medicaid expenditures may be exacerbated by the potential for increased enrollment in state Medicaid programs due to unemployment and declines in family incomes. Historically, some states have attempted to reduce Medicaid spending by limiting benefits and tightening Medicaid eligibility requirements. Potential reductions to Medicaid program spending in response to state budgetary pressures could negatively impact the ability of our tenants and operators to successfully operate their businesses.
Our tenants and operators may continue to experience a shift in payor mix away from fee-for-service payors, resulting in an increase in the percentage of revenues attributable to managed care payors, and general industry trends that include pressures to control healthcare costs. In addition, some of our tenants and operators may be subject to value-based purchasing programs, which base reimbursement on the quality and efficiency of care provided by facilities and require the public reporting of quality data and preventable adverse events to receive full reimbursement. Pressures to control healthcare costs and a shift away from traditional health insurance reimbursement to managed care plans have resulted in an increase in the number of patients whose healthcare coverage is provided under managed care plans, such as health maintenance organizations and preferred provider organizations. Medicare Access and CHIP Reauthorization Act (“MACRA”) has also established a new payment framework, which modified certain Medicare payments to eligible clinicians, representing a fundamental change to physician reimbursement. These changes could have a material adverse effect on the financial condition of some or all of our tenants in our properties. The financial impact on our tenants could restrict their ability to make rent payments to us.
Required regulatory approvals can delay or prohibit transfers of our healthcare facilities.
Transfers of healthcare facilities to successor tenants and/or operators are typically subject to regulatory approvals or ratifications, including, but not limited to, change of ownership approvals, zoning approvals, and Medicare and Medicaid provider arrangements that are either not required, or enjoy reduced requirements, in connection with transfers of other types of commercial operations and other types of real estate. The replacement of any tenant and/or operator could be delayed by the regulatory approval process of any federal, state or local government agency necessary for the transfer of the facility or the replacement of the tenant or, if applicable, operator, licensed to operate the facility. If we are unable to find a suitable replacement tenant or operator upon favorable terms, or at all, we may take possession of a facility, which could expose us to successor liability, require us to indemnify subsequent entities to whom we transfer the operating rights and licenses, or require us to spend substantial time and funds to preserve the value of the property and adapt the facility to other use. Furthermore, transitioning to a new tenant and/or operator could cause disruptions at the operations of the properties and, if there is a delay in the new tenant or operator obtaining its ability to receive reimbursement from third-party payors.
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A reduction in Medicare payment rates for skilled nursing facilities may have an adverse effect on the Medicare reimbursements received by one of our tenants.
Several government initiatives have resulted in reductions in funding of the Medicare and Medicaid programs and additional changes in reimbursement regulations by the CMS, contributing to pressure to contain healthcare costs and additional operational requirements, which may impact the ability of our tenant to make rent payments to us. The Medicare and Medicaid programs have adopted a variety of initiatives which have been incorporated and expanded by private insurance carriers, including health maintenance organizations and other health plans, to extract greater discounts and impose more stringent cost controls upon healthcare provider operations. As a result, our tenant may face reductions in reimbursement rates and fees. A delay in receiving reimbursements could adversely affect its ability to make rent payments to us. Similar delays, or reductions in reimbursements, may continue to impose financial and operational challenges for our tenants and tenant, which may affect its ability to make contractual payments to us. These risks could be mitigated by our limited participation in government-sponsored payor programs.
There have been numerous initiatives on the federal and state levels for comprehensive reforms affecting the payment for, and availability of, healthcare services. We may own and acquire skilled nursing facility assets that rely on revenue from Medicaid or Medicare. Our one SNF has, and may continue to experience, limited increases or reductions in Medicare payments and aspects of certain of these government initiatives, such as further reductions in funding of the Medicare and Medicaid programs, additional changes in reimbursement regulations by CMS, enhanced pressure to contain healthcare costs by Medicare, Medicaid and other payors, and additional operational requirements may adversely affect their ability to make rental payments. For example, CMS is focused on reducing what it considers to be payment errors by identifying, reporting, and implementing actions to reduce payment error vulnerabilities.
In addition, CMS is currently in the midst of transitioning Medicare from traditional fee for service reimbursement models to a capitated system, which means medical providers are given a set fee per patient regardless of treatment required, and value-based and bundled payment approaches, where the government pays a set amount for each beneficiary for a defined period of time, based on that person’s underlying medical needs, rather than based on the actual services provided. Providers and facilities are increasing responsible to care for and be financially responsible for certain populations of patients under the population health models and this shift in patient management paradigm is creating and will continue to create unprecedented challenges for providers and impact their ability to pay rent to us.
Certain of our facilities may be subject to pre- and post-payment reviews and audits by governmental authorities, which could result in recoupments, denials or delay of payments and could adversely affect the profitability of our tenants and operators.
Certain of our facilities may be subject to periodic pre- and post-payment reviews and audits by governmental authorities. If the review or audit shows a facility is not in compliance with federal and state requirements, previous payments to the facility may be recouped and future payments may be denied or delayed. Recoupments, denials or delay of payments could adversely affect the profitability of our tenants and hinder their ability to make rent payments to us and the ability of our operators to satisfy their ongoing contractual obligations, and our results of operations could be adversely affected.
We may incur costs associated with complying with the Americans with Disabilities Act.
Our properties must also comply with the Americans with Disabilities Act of 1990 (the “Disabilities Act”). Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services, including restaurants and retail stores, be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties, or, in some cases, an award of damages. A determination that a property does not comply with the Disabilities Act could result in liability for both governmental fines and damages. If we are required to make unanticipated major modifications to any of our properties to comply with the Disabilities Act which are determined not to be the responsibility of our tenants, we could incur unanticipated expenses that could have an adverse impact upon our cash flow.
Events that adversely affect the ability of seniors and their families to afford daily resident fees at our SHOPs could cause our occupancy rates and resident fee revenues to decline.
Assisted and independent living services generally are not reimbursable under as Medicare and our facilities have limited participation in Medicaid. Most of the resident fee revenues generated by our SHOPs, therefore, are derived from private pay sources consisting of the income or assets of residents or their family members. The rates for these residents are set by the facilities based on local market conditions and operating costs. In light of the significant expense associated with building new properties and staffing and other costs of providing services, typically only seniors with income or assets that meet or exceed the comparable region median can afford the daily resident and care fees at our SHOPs. A weak economy, depressed housing market or changes in demographics could adversely affect their continued ability to do so. If the operators of our SHOPs are unable to attract and retain seniors that have sufficient income, assets or other resources to pay the fees associated with assisted and independent living services, the occupancy rates, resident fee revenues and results of operations of our SHOPs could decline.
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Termination of SHOP leases by residents pursuant to state law mandated contractual provisions could have an adverse effect on our business, financial condition and results of operations.
State regulations generally require assisted living communities to have a written lease agreement with each resident that permits the resident to terminate his or her lease for any reason on reasonable notice, unlike typical apartment lease agreements that have initial terms of one year or longer. Due to these lease termination rights and the advanced age of the residents, the resident turnover rate in our SHOPs may be difficult to predict. A large number of resident lease agreements may terminate at or around the same time, and the affected units may remain unoccupied, which could have an adverse effect on our business, financial condition and results of operations.
Some tenants and operators of our healthcare-related assets must comply with fraud and abuse laws, the violation of which by either may jeopardize the tenant’s ability to make rent payments to us.
There are various federal and state laws prohibiting fraudulent and abusive business practices by healthcare providers who participate in, receive payments from or are in a position to make referrals in connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs.
Our lease arrangements with certain tenants and our management agreements with certain operators may also be subject to these fraud and abuse laws. These laws include the Federal Anti-Kickback Statute, which prohibits, among other things, the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, the referral of any item or service reimbursed by Medicare or Medicaid; the Federal Physician Self-Referral Prohibition (commonly referred to as the “Stark Law”), which, subject to specific exceptions, restricts physicians from making referrals for specifically designated health services for which payment may be made under Medicare or Medicaid programs to an entity with which the physician, or an immediate family member, has a financial relationship; the FCA, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government, including claims paid by the Medicare and Medicaid programs; and the CMPL, which authorizes the U.S. Department of Health and Human Services to impose monetary penalties for certain fraudulent acts. Additionally, some states may have laws similar to the Federal Anti-Kickback Statute and the Stark Law expanding their respective prohibitions to private insurance.
Each of these laws includes substantial criminal or civil penalties for violations that range from punitive sanctions, damage assessments, penalties, imprisonment, denial of Medicare and Medicaid payments or exclusion from the Medicare and Medicaid programs. Certain laws, such as the FCA, allow for individuals to bring whistleblower actions on behalf of the government for violations thereof. Additionally, certain states in which the facilities are located also have similar fraud and abuse laws. Federal and state adoption and enforcement of such laws increase the regulatory burden and costs, and potential liability, of healthcare providers. Investigation by a federal or state governmental body for violation of fraud and abuse laws or imposition of any of these penalties upon one of our tenants could jeopardize that tenant’s and operator’s business, reputation, and ability to operate or to make rent payments, which could have a material adverse effect on us.
Tenants and operators of our healthcare-related assets may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us.
Our tenants and operators of our healthcare-related assets may often become subject to claims that their services have resulted in patient injury or other adverse effects. The insurance coverage maintained by these tenants and operators may not cover all claims made against them or continue to be available at a reasonable cost, if at all. In some states, insurance coverage for the risk of punitive damages arising from professional liability and general liability claims or litigation may not, in certain cases, be available to these tenants due to state law prohibitions or limitations of availability. As a result, these types of tenants and operators operating in these states may be liable for punitive damage awards that are either not covered or are in excess of their insurance policy limits. Recently, there has been an increase in governmental investigations of certain healthcare providers, particularly in the area of Medicare and Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Insurance may not be available to cover such losses. Any adverse determination in a legal proceeding or governmental investigation, whether currently asserted or arising in the future, could have a material adverse effect on a tenant’s or operator’s financial condition. If a tenant or operator is unable to obtain or maintain insurance coverage, if judgments are obtained in excess of the insurance coverage, if a tenant or operator is required to pay uninsured punitive damages, or if a tenant or operator is subject to an uninsurable government enforcement action, the tenant could be exposed to substantial additional liabilities, which may affect the tenant’s or operator’s business, operations and the tenant’s ability to pay rent to us, which could have a material adverse effect on us.
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We may experience adverse effects as a result of potential financial and operational challenges faced by the tenants and operators of any seniors housing facilities and skilled nursing facilities we own or acquire.
Tenants and operators of any seniors housing facilities and skilled nursing facilities may face operational challenges from potentially reduced revenue streams and increased demands on their existing financial resources. The resources of our skilled nursing units are primarily derived from government-funded reimbursement programs, such as Medicare and Medicaid. Accordingly, our one SNF and limited assisted living facilities that participate in Medicaid could be subject to the potential negative effects of decreased reimbursement rates or other changes in reimbursement policy or programs offered through such reimbursement programs. Revenue may also be adversely affected as a result of falling occupancy rates or slow lease-ups for assisted and independent living facilities due to various factors. In addition, our facility operators may incur additional demands on their existing financial resources as a result of increases in seniors housing facility operator liability, insurance premiums and other operational expenses, which is worsened by the nationwide staffing shortage. The economic deterioration of a tenant or operator could cause such operator to file for bankruptcy protection. The bankruptcy or insolvency of a tenant or operator may adversely affect the income produced by the property or properties it operates.
The performance and economic condition of our tenant and operators may be negatively affected if they fail to comply with various complex federal and state laws that govern a wide array of referrals, relationships and licensure requirements in the senior healthcare industry. The violation of any of these laws or regulations by a seniors housing facility tenant or operator may result in the imposition of fines or other penalties that could jeopardize that tenant’s or operator’s ability to make payments to us or to continue operating its facility. In addition, legislative proposals are commonly being introduced or proposed in federal and state legislatures that could affect major changes in the seniors housing sector, either nationally or at the state level. Any such legislation could materially impact our tenant or operators in an adverse fashion.
We may change our targeted investments without stockholder consent.
We have acquired and expect to continue to acquire a diversified portfolio of healthcare-related assets including MOBs, SHOPs and other healthcare-related facilities. However, the Board may change our investment policies in its sole discretion. We may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, initially anticipated by increasing our exposure to, among other things, interest rate risk, default risk and real estate market fluctuations.
Risks Related to our Indebtedness
Our level of indebtedness may increase our business risks.
As of December 31, 2023, we had total outstanding indebtedness of $1.2 billion. We may incur additional indebtedness in the future for various purposes. The amount of our indebtedness could have material adverse consequences for us, including:
•hindering our ability to adjust to changing market, industry or economic conditions;
•limiting our ability to access the capital markets to raise additional equity or debt on favorable terms or at all, whether to refinance maturing debt, to fund acquisitions, to fund dividends and other distributions or for other corporate purposes;
•limiting the amount of free cash flow available for future operations, acquisitions, dividends and other distributions, stock repurchases or other uses; and
•making us more vulnerable to economic or industry downturns, including interest rate increases.
In most instances, we acquire real properties by using either existing financing or borrowing new funds. We may incur debt and pledge the underlying property as security for that debt to obtain funds to acquire additional properties or for other corporate purposes. We may also borrow if we need funds to satisfy the REIT tax qualification requirement that we generally distribute annually to our stockholders 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 any net capital gain. We also may borrow if we otherwise deem it necessary or advisable to assure that we maintain our qualification as a REIT.
If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on that property, especially if we acquire the property when it is being developed or under construction, we may use additional borrowings to fund the shortfall. Using debt increases the risk of loss because defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default. For U.S. federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds. In this event, we may be unable to pay the amount of distributions required in order to maintain our REIT status. We may also fully or partially guarantee mortgage debt incurred by the subsidiary entities that own our properties. In those cases, we will be responsible to the lender for repaying the debt if it is not paid by the entity. In the case of mortgages containing cross-collateralization or cross-default provisions, a default on a single mortgage could affect multiple properties.
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We may in the future acquire or originate real estate debt or invest in real estate-related securities issued by real estate market participants, which would expose us to additional risks.
We may in the future acquire or originate first mortgage debt loans, mezzanine loans, preferred equity or securitized loans, CMBS, preferred equity and other higher-yielding structured debt and equity investments. Doing so would expose us not only to the risks and uncertainties we are currently exposed to through our direct investments in real estate but also to additional risks and uncertainties attendant to investing in and holding these types of investments, such as:
•risk of defaults by borrowers in paying debt service on outstanding indebtedness and to other impairments of our loans and investments;
•increased competition from entities engaged in mortgage lending and, or investing in our target assets;
•deterioration in the performance of properties securing our investments may cause deterioration in the performance of our investments and, potentially, principal losses to us;
•fluctuations in interest rates and credit spreads could reduce our ability to generate income on our loans and other investments;
•difficulty in redeploying the proceeds from repayments of our existing loans and investments;
•the illiquidity of certain of these investments;
•lack of control over certain of our loans and investments;
•the potential need to foreclose on certain of the loans we originate or acquire, which could result in losses;
•additional risks, including the risks of the securitization process, posed by investments in CMBS and other similar structured finance investments, as well as those we structure, sponsor or arrange; use of leverage may create a mismatch with the duration and interest rate of the investments that we finance;
•risks related to the operating performance or trading price volatility of any publicly-traded and private companies primarily engaged in real estate businesses we invest in; and
•the need to structure, select and more closely monitor our investments such that we continue to maintain our qualification as a REIT and our exemption from registration under the Investment Company Act of 1940, as amended.
Any one or a combination of these factors may cause a borrower to default on a loan or to declare bankruptcy. If a default or bankruptcy occurs and the underlying asset value is less than the loan amount, we will suffer a loss. In the event of any default under a commercial real estate loan held directly by us, we will bear a risk of loss of principal or accrued interest to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the commercial real estate loan, which could have a material adverse effect on our cash flow from operations. In the event of a default by a borrower on a non-recourse commercial real estate loan, we will only have recourse to the underlying asset (including any escrowed funds and reserves) collateralizing the commercial real estate loan. If a borrower defaults on one of our commercial real estate investments and the underlying property collateralizing the commercial real estate debt is insufficient to satisfy the outstanding balance of the debt, we may suffer a loss of principal or interest. In addition, even if we have recourse to a borrower’s assets, we may not have full recourse to such assets in the event of a borrower bankruptcy as the loan to such borrower will be deemed to be secured only to the extent of the value of the mortgaged property at the time of bankruptcy (as determined by the bankruptcy court) and the lien securing the loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. We are also exposed to these risks through the commercial real estate loans underlying a commercial real estate security we hold, which may result in us not recovering a portion or all of our investment in such commercial real estate security.
Our financing arrangements have restrictive covenants, which may limit our ability to pursue strategic alternatives and react to changes in our business and industry or pay distributions.
The agreements governing our borrowings contain provisions that affect or restrict our policies regarding dividends and other distributions and our operations, require us to satisfy financial coverage ratios, and may restrict our ability to, among other things, incur additional indebtedness, make certain investments, enter into certain transactions with our affiliates, replace our Advisor, discontinue insurance coverage, merge with another company, and create, incur or assume liens. These or other limitations may adversely affect our flexibility and our ability to achieve our investment and operating objectives. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of debt under such agreements. Any such event of default or acceleration could have a material adverse effect on our business, financial condition and results of operations.
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Changes in the debt markets could have a material adverse impact on our earnings and financial condition.
The commercial real estate debt markets are subject to volatility, resulting in, from time to time, the tightening of underwriting standards by lenders and credit rating agencies and reductions in the availability of financing. For example, recent credit and capital market conditions have been characterized by volatility and a tightening of credit standards. This may impact our ability to access capital on favorable terms, in a timely manner, or at all, which could make obtaining funding for our capital needs more challenging or expensive. We also face a heightened level of interest rate risk as the U.S. Federal Reserve Board tapers its quantitative easing program and raises interest rates, such as in recent years. All of these actions will likely lead to increases in borrowing costs.
If our overall cost of borrowings continue to increase, either due to increases in the index rates or due to increases in lender spreads, we will need to factor such increases into pricing and projected returns for any future acquisitions. This may result in future acquisitions generating lower overall economic returns. Volatility in the debt markets, may negatively impact our ability to borrow monies to finance the purchase of, or other activities related to, our real estate assets may be negatively impacted. If we are unable to borrow monies on terms and conditions that we find acceptable, our ability to purchase properties and meet other capital requirements may be limited, and the return on the properties we do purchase may be lower. In addition, we may find it difficult, costly or impossible to refinance maturing indebtedness.
Furthermore, the state of the debt markets could have an impact on the overall amount of capital being invested in real estate, which may result in price or value decreases of real estate assets and could negatively impact the value of our assets, which could have a material adverse effect on us.
Increases in interest rates may make it difficult for us to finance or refinance indebtedness secured by our properties.
We have borrowed, and may continue to borrow monies, secured and unsecured by our properties. The U.S. Federal Reserve Board significantly increased the federal funds rate in 2022 and 2023. Further increases in interest rates may adversely impact our ability to refinance our indebtedness, including the indebtedness secured by our properties, as the loans come due or we otherwise desire to do so on favorable terms, or at all. If interest rates are higher when the indebtedness is refinanced, we may not be able to refinance indebtedness secured by the properties and we may be required to obtain equity to repay the loan or to increase the collateral for the loan, which could adversely affect our business, financial condition, results of operations and liquidity.
Increasing interest rates could increase the amount of our debt payments.
We have incurred, and may continue to incur, variable-rate debt. The significant increase in the federal funds rate in 2022 and 2023 has increased the borrowing costs on our variable-rate debt and may increase the cost of any new debt we incur or refinance.
We have mortgages, credit facilities and derivative agreements that have terms that are based on the Secured Overnight Financing Rate (“SOFR”). As of December 31, 2023, 62.5% of our total gross debt bore interest at variable rates. As of December 31, 2023, we had one designated interest rate swap with a notional amount of $378.5 million, which effectively fixes a portion of our variable-rate debt, and we had seven interest rate caps with a notional amount of $364.2 million, which, while not designated as hedges for accounting purposes, do economically limit our exposure to increasing variable rates, but such interest rate swap and caps may not be effective in reducing our exposure to interest rate changes.
SOFR has a limited history, and the future performance of SOFR cannot be predicted based on historical performance
As of December 31, 2023, approximately 62.5% of our total gross debt bore interest at variable rates, all of which are based on SOFR. The publication of SOFR began in April 2018, and, therefore, it has a limited history. In addition, the future performance of SOFR cannot be predicted based on the limited historical performance. Future levels of SOFR may bear little or no relation to the historical actual or historical indicative SOFR data. Prior observed patterns, if any, in the behavior of market variables and their relation to SOFR, such as correlations, may change in the future. Hypothetical performance data are not indicative of, and have no bearing on, the potential performance of SOFR. Although changes in term SOFR and compounded SOFR generally are not expected to be as volatile as changes in SOFR on a daily basis, the return on, value of and market for the SOFR based debt may fluctuate more than floating rate debt securities with interest rates based on less volatile rates.
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Any hedging strategies we utilize may not be successful in mitigating our risks.
We have used, and may continue to use, derivative financial instruments to hedge our exposure to changes in interest rates with respect to borrowings made or to be made to acquire or own real estate assets, which instruments expose us to credit basis and legal enforceability risks. Derivative financial instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. These derivative instruments are speculative in nature and there is no guarantee that they will be effective. If we are unable to manage these risks effectively, we could be materially and adversely affected.
Risks Related to Conflicts of Interest
Our Advisor faces conflicts of interest relating to the purchase and leasing of properties and these conflicts may not be resolved in our favor, which could adversely affect our investment opportunities.
We rely on our Advisor and its executive officers and other key real estate professionals at our Advisor and our Property Manager to identify suitable investment opportunities for us. Several of these individuals are also executive officers or key real estate professionals at AR Global and other entities advised by affiliates of AR Global. Many investment opportunities that are suitable for us may also be suitable for other entities advised by affiliates of AR Global. We do not have any agreements with any of these entities that govern the allocation of investment opportunities. Thus, the executive officers and real estate professionals at our Advisor could direct attractive investment opportunities to other entities advised by affiliates of AR Global.
We and other entities advised by affiliates of AR Global also rely on these executive officers and other key real estate professionals to supervise the property management and leasing of properties. These individuals, as well as AR Global, as an entity are not prohibited from engaging, directly or indirectly, in any business or from possessing interests in other businesses and ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate investments.
In addition, we may acquire properties in geographic areas where other entities advised by affiliates of AR Global own properties, and if we may acquire properties from, or sell properties to, other entities advised by affiliates of AR Global. If one of the other entities advised by affiliates of AR Global attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays in locating another suitable tenant, which could adversely affect our cash flows and ability to make distributions to our stockholders.
Our Advisor faces conflicts of interest relating to joint ventures, which could result in a disproportionate benefit to the other venture partners at our expense.
We may enter into joint ventures with other entities advised by affiliates of AR Global for the acquisition, development or improvement of properties. Our Advisor may have conflicts of interest in determining which entities advised by affiliates of AR Global should enter into any particular joint venture agreement. The co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. In addition, our Advisor may face a conflict in structuring the terms of the relationship between our interests and the interest of the affiliated co-venturer and in managing the joint venture. Due to the role of our Advisor and its affiliates, agreements and transactions between the co-venturers with respect to any joint venture will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers, which may result in the co‑venturer receiving benefits greater than the benefits that we receive. In addition, we may assume liabilities related to the joint venture that exceeds the percentage of our investment in the joint venture.
Our Advisor, AR Global and their officers and employees and certain of our executive officers and other key personnel face competing demands relating to their time, and this may cause our operating results to suffer.
Our Advisor, AR Global and their officers and employees and certain of our executive officers and other key personnel and their respective affiliates are key personnel, general partners, sponsors, managers, owners and advisors of other real estate investment programs, including entities advised by affiliates of AR Global, some of which have investment objectives and legal and financial obligations similar to ours and may have other business interests as well. Because these entities and individuals have competing demands on their time and resources, they may have conflicts of interest in allocating their time between our business and these other activities, which may have a material adverse effect on our operating results.
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All of our executive officers, some of our directors and the key real estate and other professionals assembled by our Advisor and our Property Manager face conflicts of interest related to their positions or interests in entities related to AR Global, which could hinder our ability to implement our business strategy.
All of our executive officers, and the key real estate and other professionals assembled by our Advisor and Property Manager are also executive officers, directors, managers, key professionals or holders of a direct or indirect interests in our Advisor, our Property Manager or other AR Global-affiliated entities. Through AR Global’s affiliates, some of these persons work on behalf of entities advised by affiliates of AR Global. In addition, all of our executive officers and some of our directors serve in similar capacities for other entities advised by affiliates of our Advisor. As a result, they have duties to each of these entities, which duties could conflict with the duties they owe to us and could result in action or inaction detrimental to our business. Conflicts with our business and interests are most likely to arise from (a) allocation of investments and management time and services between us and the other entities; (b) compensation to our Advisor or Property Manager; (c) our purchase of properties from, or sale of properties to, entities advised by affiliates of our Advisor; and (d) investments with entities advised by affiliates of our Advisor. Conflicts of interest may hinder our ability to implement our business strategy, and, if we do not successfully implement our business strategy.
Our Advisor faces conflicts of interest relating to the structure of the compensation it may receive.
Under our advisory agreement, the Advisor is entitled to substantial minimum compensation regardless of performance as well as incentive compensation. The variable base management fee payable to the Advisor under the advisory agreement increases proportionately with the cumulative net proceeds of any equity (including convertible equity and certain convertible debt but excluding proceeds from the DRIP) raised by us. In addition, the limited partnership agreement of our OP requires it to pay a subordinated incentive listing distribution to the “Special Limited Partner,” an affiliate of our Advisor, in connection with a listing or other liquidity event, such as the sale of all or substantially all of our assets, or if we terminate the advisory agreement, even for “cause.” The Special Limited Partner is also entitled to participate in the distribution of net sales proceeds. These arrangements may result in the Advisor taking actions or recommending investments that are riskier or more speculative absent these compensation arrangements. In addition, these fees and other compensation payable to the Advisor reduce the cash available for investment or other corporate purposes.
Risks Related to our Corporate Structure
Our common stock is not traded on a national securities exchange, and our SRP, which provides for repurchases only in the event of death or disability of a stockholder, is suspended. Stockholders may have to hold their shares for an indefinite period of time.
Our common stock is not listed on a national securities exchange and there is otherwise no active trading market for the shares and our SRP is suspended. Even if not suspended, our SRP includes numerous restrictions that limit a stockholder’s ability to sell shares of common stock to us, including limiting repurchases only to stockholders that have died or become disabled, limiting the total value of repurchases pursuant to our SRP to the amount of proceeds received from issuances of common stock pursuant to the DRIP and limiting repurchases in any fiscal semester to 2.5% of the average number of shares outstanding during the previous fiscal year. These limits are subject to the authority of the Board to identify another source of funds for repurchases under the SRP. The Board may also reject any request for repurchase of shares at its discretion or amend, suspend or terminate our SRP upon notice in its discretion. Shares that are repurchased will be repurchased at a price equal to the applicable Estimated Per-Share NAV and may be at a substantial discount to the price the stockholder paid for the shares.
The Estimated Per-Share NAV of our common stock is based upon subjective judgments, assumptions and opinions about future events, and may not reflect the amount that our stockholders might receive for their shares.
We intend to publish an updated Estimated Per-Share NAV as of December 31, 2023 in late March 2024. Our Advisor has engaged an independent valuer to perform appraisals of our real estate assets in accordance with valuation guidelines established by the Board. As with any methodology used to estimate value, the valuation methodologies that will be used by any independent valuer to value our properties involve subjective judgments concerning factors such as comparable sales, rental and operating expense data, capitalization or discount rate, and projections of future rent and expenses.
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Under our valuation guidelines, our independent valuer estimates the market value of our principal real estate and real estate-related assets, and our Advisor makes a recommendation as to the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimate provided by the independent valuer. Our Advisor reviews the valuation provided by the independent valuer for consistency with our valuation guidelines and the reasonableness of the independent valuer’s conclusions. The independent directors of the Board oversee and review the appraisals and valuations and make a final determination of the Estimated Per-Share NAV. The independent directors of the Board rely on our Advisor’s input, including its view of the estimate and the appraisals performed by the independent valuer, but the independent directors of the Board may, in their discretion, consider other factors. Although the valuations of our real estate assets by the independent valuer are reviewed by our Advisor and approved by the independent directors of the Board, neither our Advisor nor the independent directors of the Board will independently verify the appraised value of our properties and valuations do not necessarily represent the price at which we would be able to sell any asset. As a result, the appraised value of a particular property may be greater or less than its potential realizable value, which would cause our Estimated per-share NAV to be greater or less than the potential realizable value of our assets.
The price at which shares of our common stock may be sold under the DRIP, if reinstated, would be the price at which shares of our common stock may be repurchased by us pursuant to the SRP, if reinstated, would be based on Estimated Per-Share NAV and may not reflect the price that our stockholders would receive for their shares in a market transaction, the proceeds that would be received upon our liquidation or the price that a third-party would pay to acquire us.
Because Estimated Per-Share NAV is only determined annually, it may differ significantly from our actual per‑share net asset value at any given time.
Our Board estimates the per-share net asset value of our common stock only on an annual basis. In connection with any valuation, the Board estimate of the value of our real estate and real estate-related assets will be partly based on appraisals of our properties. Because the process of making this estimate is conducted annually, this process may not account for material events that occur after the estimate has been completed for that year. Material events could include the appraised value of our properties substantially changing actual property operating results differing from what we originally budgeted or dividends and other distributions to stockholders exceeding cash flow generated by us. Any such material event could cause a change in the Estimated Per-Share NAV that would not be reflected until the next valuation. Also, cash dividends and other distributions in excess of our cash flows provided by operations could decrease our Estimated Per-Share NAV. The Estimated Per-Share NAV reflected stock dividends actually issued as of December 31, 2022, but has not been adjusted to reflect or consider any of the other stock dividends that were issued and will not be adjusted for stock dividends paid or that may be issued in the future until the Board determines a new Estimated Per-Share NAV which is expected in late March 2024. Dividends paid in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding increases when dividends paid in stock are issued reducing the Estimated Per-Share NAV. The Estimated Per-Share NAV may not reflect the value of shares of our common stock at any given time, and our estimated per-share NAV may differ significantly from our actual per-share net asset value at any given time.
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The trading price of our Series A Preferred Stock and Series B Preferred Stock may fluctuate significantly.
The trading price of our Series A Preferred Stock and Series B Preferred Stock may be volatile and subject to significant price and volume fluctuations in response to market and other factors, and is impacted by a number of factors, many of which are outside our control. Among the factors that could affect the trading price are:
•our financial condition, including the level of our indebtedness, and performance;
•our ability to grow through property acquisitions, the terms and pace of any acquisitions we may make and the availability and terms of financing for those acquisitions;
•the financial condition of our tenants, including tenant bankruptcies or defaults;
•actual or anticipated quarterly fluctuations in our operating results and financial condition;
•the amount and frequency of our payment of dividends and other distributions;
•additional sales of equity securities, including Series A Preferred Stock, Series B Preferred Stock, common stock or any other equity interests, or the perception that additional sales may occur;
•the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, and fixed income debt securities;
•our reputation and the reputation of AR Global and its affiliates or other entities advised by AR Global and its affiliates;
•uncertainty and volatility in the equity and credit markets;
•increases in interest rates;
•inflation and continuing increases in the real or perceived inflation rate;
•changes in revenue or earnings estimates, if any, or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs;
•failure to meet analyst revenue or earnings estimates;
•strategic actions by us or our competitors, such as acquisitions or restructurings;
•the extent of investment in our Series A Preferred Stock and Series B Preferred Stock by institutional investors;
•the extent of short-selling of our Series A Preferred Stock and Series B Preferred Stock;
•general financial and economic market conditions and, in particular, developments related to market conditions for REITs and other real estate related companies;
•failure to maintain our REIT status;
•changes in tax laws;
•domestic and international economic factors unrelated to our performance; and
•all other risk factors addressed elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2023.
Moreover, although shares of Series A Preferred Stock and Series B Preferred Stock are listed on The Nasdaq Global Market, there can be no assurance that the trading volume for shares will provide sufficient liquidity for holders to sell their shares at the time of their choosing or that the trading price for shares will equal or exceed the price paid for the shares. Because the shares of Series A Preferred Stock and Series B Preferred Stock carry a fixed dividend rate, the trading price in the secondary market will be influenced by changes in interest rates and will tend to move inversely to changes in interest rates. In particular, an increase in market interest rates may result in higher yields on other financial instruments and may lead purchasers of shares of Series A Preferred Stock and Series B Preferred Stock to demand a higher yield on their purchase price, which could adversely affect the market price of those shares. An increase in interest rates available to investors could also reduce the value of our common stock.
We currently do not pay cash distributions on our common stock and we may be unable to pay or maintain cash distributions in the future or increase distributions over time.
There are many factors that can affect the availability and timing of cash distributions to stockholders, and we currently do not pay cash distributions on our common stock. Distributions will be based principally on cash available from our operations. The amount of cash available for distributions is affected by many factors, such as income from our properties and our operating expense levels, as well as many other variables. Actual cash available for distributions may vary substantially from estimates. We cannot assure a stockholder that we will be able to pay distributions or that distributions will increase over time with respect to our capital stock. Our actual results may differ significantly from the assumptions used by our Board in establishing the distribution rate to stockholders. We may not have sufficient cash from operations to make a distribution required to qualify or maintain our qualification as a REIT, which may materially adversely affect a stockholder’s investment.
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The limit on the number of shares a person may own may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted (prospectively or retroactively) by the Board, no person may own more than 9.8% in value of the aggregate of our outstanding shares of our capital stock or more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of shares of our capital stock. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of our common stock.
The terms of our Series A Preferred Stock, Series B Preferred Stock, and the terms of other preferred stock we may issue, may discourage a third- party from acquiring us in a manner that might result in a premium price to stockholders.
The change of control conversion and redemption features of the Series A Preferred Stock and Series B Preferred Stock may make it more difficult for a party to acquire us or discourage a party from seeking to acquire us. Upon the occurrence of a change of control, holders of Series A Preferred Stock and Series B Preferred Stock will, under certain circumstances, have the right to convert some of or all their shares of Series A Preferred Stock and Series B Preferred Stock into shares of our common stock (or equivalent value of alternative consideration) and under these circumstances we will also have a change of control redemption right to redeem shares of Series A Preferred Stock and Series B Preferred Stock. Upon exercise of this conversion right, the holders will be limited to a maximum number of shares of our common stock pursuant to a predetermined ratio. These features of the Series A Preferred Stock and Series B Preferred Stock may have the effect of discouraging a third-party from seeking to acquire us or of delaying, deferring or preventing a change of control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests. We may also issue other classes or series of preferred stock that could also have the same effect.
We have a classified board, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.
The Board is divided into three classes of directors. At each annual meeting, directors of one class are elected to serve until the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualify. The classification of our directors may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might result in a premium price for our stockholders.
Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.
Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include, but are not limited to, a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:
•any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or
•an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of, directly or indirectly, 10% or more of the voting power of the then outstanding stock of the corporation.
A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he or she otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors.
After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:
•80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and
•two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.
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These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The business combination statute permits various exemptions from its provisions, including business combinations that are exempted by the Board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, the board has exempted any business combination involving our Advisor or any affiliate of our Advisor. Consequently, the five-year prohibition and the super-majority vote requirements will not apply to business combinations between us and our Advisor or any affiliate of our Advisor. As a result, our Advisor and any affiliate of our Advisor may be able to enter into business combinations with us that may not be in the best interests of our stockholders, without compliance with the super-majority vote requirements and the other provisions of the statute. The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division, is the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, other than actions arising under federal securities laws; (b) any Internal Corporate Claim, as such term is defined in the Maryland General Corporation Law (the “MGCL”), or any successor provision thereof, including, without limitation, (i) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders or (ii) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL, our charter or our bylaws; or (c) any other action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. Our bylaws also provide that unless we consent in writing, none of the foregoing actions, claims or proceedings may be brought in any court sitting outside the State of Maryland and the federal district courts are, to the fullest extent permitted by law, the sole and exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable. Alternatively, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving these matters in other jurisdictions.
Certain provisions in our bylaws and agreements may deter, delay or prevent a change in our control.
Provisions contained in our bylaws may deter, delay or prevent a change in control of our Board, including, for example, provisions requiring qualifications for an individual to serve as a director and a requirement that certain of our directors be “Managing Directors” and other directors be “Independent Directors”, as defined in our governing documents. Such provisions may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might otherwise result in a premium for our stockholders.
Maryland law limits the ability of a third-party to buy a large stake in us and exercise voting power in electing directors, which may discourage a third-party from acquiring us in a manner that might result in a premium price to our stockholders.
The Maryland Control Share Acquisition Act provides that holders of “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by the stockholders by the affirmative vote of two-thirds of all the votes entitled to be cast on the matter, excluding all shares of stock owned by the acquirer, by officers or by employees who are directors of the corporation. “Control shares” are voting shares of stock which, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer can exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within specified ranges of voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. A “control share acquisition” means the acquisition of issued and outstanding control shares. The Maryland Control Share Acquisition Act does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction, or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation.
Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions of our stock by any person. There can be no assurance that this provision will not be amended or eliminated at any time in the future.
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If we internalize our management functions, we would be required to pay a transition fee and would not have the right to retain our management or personnel.
We may engage in an internalization transaction and become self-managed in the future. If we internalize our management functions, under the terms of our advisory agreement we would be required to pay a transition fee to our Advisor upon termination of the advisory agreement in connection with an internalization that could be up to 4.5 times the compensation paid to our Advisor in the previous year, plus expenses. We also would not have any right to retain our executive officers or other personnel of our Advisor who currently manage our day-to-day operations. An inability to manage an internalization transaction effectively could thus result in our incurring excess costs and suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting. These deficiencies could cause us to incur additional costs, and our management’s attention could be diverted from most effectively managing our investments, which could result in litigation and resulting associated costs in connection with the internalization transaction.
We may terminate our advisory agreement in only limited circumstances, which may require payment of a termination fee.
We have limited rights to terminate our Advisor. The initial term of our advisory agreement expires on February 16, 2027, but is automatically renewed upon expiration for consecutive ten-year terms unless notice of termination is provided by either party 365 days in advance of the expiration of the term. Further, we may terminate the agreement only under limited circumstances. In the event of a termination in connection with a change in control of us, we would be required to pay a termination fee that could be up to four times the compensation paid to our Advisor in the previous year, plus expenses. The limited termination rights will make it difficult for us to renegotiate the terms of the advisory agreement or replace our Advisor even if the terms of the advisory agreement are no longer consistent with the terms generally available to externally-managed REITs for similar services, could have a material adverse effect on us.
Our business and operations could suffer if our Advisor or any other party that provides us with services essential to our operations experiences system failures or cyber incidents or a deficiency in cybersecurity.
The internal information technology networks and related systems of our Advisor and other parties that provide us with services essential to our operations (including our tenants, operators, and other third-party operators of our healthcare facilities) are vulnerable to damage from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by these disruptions.
As reliance on technology has increased, so have the risks posed to those systems. Our Advisor and other parties that provide us with services essential to our operations must continuously monitor and develop their networks and information technology to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses, and social engineering, such as phishing. Our Advisor is continuously working, including with the aid of third-party service providers, to install new, and to upgrade existing, network and information technology systems, to create processes for risk assessment, testing, prioritization, remediation, risk acceptance, and reporting, and to provide awareness training around phishing, malware and other cyber risks to ensure that our Advisor and other parties that provide us with services essential to our operations are protected against cyber risks and security breaches and that we are also therefore so protected. However, these upgrades, processes, new technology and training may not be sufficient to protect us from all risks. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques and technologies used in attempted attacks and intrusions evolve and generally are not recognized until launched against a target. In some cases, attempted attacks and intrusions are designed not to be detected and, in fact, may not be detected.
The remediation costs and lost revenues experienced by a subject of an intentional cyberattack or other event which results in unauthorized third-party access to systems to disrupt operations, corrupt data or steal confidential information may be significant and significant resources may be required to repair system damage, protect against the threat of future security breaches or to alleviate problems, including reputational harm, loss of revenues and litigation, caused by any breaches. Additionally, any failure to adequately protect against unauthorized or unlawful processing of personal data, or to take appropriate action in cases of infringement may result in significant penalties under privacy law.
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Furthermore, a security breach or other significant disruption involving the information technology networks and related systems of our Advisor or any other party that provides us with services essential to our operations could:
•result in misstated financial reports, violations of loan covenants, missed reporting deadlines or missed permitting deadlines;
•affect our ability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;
•result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information (including information about our tenant operators and other third-party operators of our healthcare facilities, as well as the patients or residents at those facilities), which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;
•result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;
•require significant management attention and resources to remedy any damages that result;
•subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or
•adversely impact our reputation among our tenants, operators and investors generally.
Although our Advisor and other parties that provide us with services essential to our operations intend to continue to implement industry-standard security measures, there can be no assurance that those measures will be sufficient, and any material adverse effect experienced by our Advisor and other parties that provide us with services essential to our operations could, in turn, have an adverse impact on us.
We depend on our Advisor and Property Manager to provide us with executive officers, key personnel and all services required for us to conduct our operations and our operating performance may be impacted by any adverse changes in the financial health or reputation of our Advisor.
We have no employees. Personnel and services that we require are provided to us under contracts with our Advisor and its affiliates including our Property Manager. We depend on our Advisor and our Property Manager to manage our operations and acquire and manage certain of our real estate assets. Our Advisor makes all decisions with respect to the management of our company, subject to the supervision of, and any guidelines established by, the Board.
Our success depends to a significant degree upon the contributions of our executive officers and other key personnel of our Advisor and its affiliates, including Michael Anderson, our chief executive officer, and Scott Lappetito, our chief financial officer, treasurer and secretary. Neither our Advisor nor any of its affiliates has an employment agreement with these key personnel and we cannot guarantee that all, or any particular one, of these individuals will remain employed by our Advisor or one of its affiliates and otherwise available to continue to perform services for us. Further, we do not maintain key person life insurance on any person. We believe that our success depends, in large part, upon the ability of our Advisor to hire, retain or contract for services of highly skilled managerial, operational and marketing personnel. Competition for skilled personnel is intense, and there can be no assurance that our Advisor will be successful in attracting and retaining skilled personnel. If our Advisor loses or is unable to obtain the services of skilled personnel due to, among other things, an overall labor shortage, lack of skilled labor, increased turnover or labor inflation, our Advisor’s ability to manage our business and implement our investment strategies could be delayed or hindered, which could have a material adverse effect on us.
Any adverse changes in the financial condition or financial health of, or our relationship with, our Advisor or Property Manager, including any change resulting from an adverse outcome in any litigation could hinder their ability to successfully manage our operations and our investments. Additionally, changes in ownership or management practices, the occurrence of adverse events affecting our Advisor or its affiliates or other companies advised by our Advisor or its affiliates could create adverse publicity and adversely affect us and our relationship with lenders, tenants, operators or counterparties.
We depend on our OP and its subsidiaries for cash flow and are structurally subordinated in right of payment to the obligations of our OP and its subsidiaries.
We conduct, and intend to continue conducting, all of our business operations through our OP, and, accordingly, we rely on distributions from our OP and its subsidiaries to provide cash to pay our obligations. There is no assurance that our OP or its subsidiaries will be able to, or be permitted to, pay distributions to us that will enable us to pay dividends and other distributions to our stockholders and meet our other obligations. Each of our OP’s subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from these entities. In addition, any claims we may have will be structurally subordinated to all existing and future liabilities and obligations of our OP and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our OP and its subsidiaries will be available to satisfy the claims of our creditors or to pay dividends and other distributions to our stockholders only after all the liabilities and obligations of our OP and its subsidiaries have been paid in full.
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U.S. Federal Income Tax Risks
Our failure to remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax.
We elected to be taxed as a REIT, commencing with our taxable year ended December 31, 2013, and intend to operate in a manner that will allow us to continue to qualify as a REIT for U.S. federal income tax purposes. However, we may terminate our REIT qualification inadvertently or if the Board determines that doing so is in our best interests. Our qualification as a REIT depends upon our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. We have structured, and intend to continue structuring, our activities in a manner designed to satisfy all the requirements to qualify as a REIT. However, the REIT qualification requirements are extremely complex and interpretation of the U.S. federal income tax laws governing qualification as a REIT is limited. Furthermore, any opinion of our counsel, including tax counsel, as to our eligibility to remain qualified as a REIT is not binding on the Internal Revenue Service (the “IRS”) and is not a guarantee that we will continue to qualify as a REIT. Accordingly, we cannot be certain that we will be successful in operating so that we can remain qualified as a REIT. Our ability to satisfy the asset tests depends on our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income or quarterly asset requirements also depends on our ability to successfully manage the composition of our income and assets on an ongoing basis. Accordingly, if certain of our operations were to be recharacterized by the IRS, such recharacterization could jeopardize our ability to satisfy all requirements for qualification as a REIT. Furthermore, future legislative, judicial or administrative changes to the U.S. federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT.
If we fail to continue to qualify as a REIT for any taxable year, and we do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax on our taxable income at the corporate rate. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we lose our REIT qualification. Losing our REIT qualification would reduce our net earnings available for investment or distribution to stockholders because of the additional entity-level tax liability. In addition, amounts paid to stockholders that are treated as dividends for U.S. federal income tax purposes would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If we lose our REIT qualification, we might be required to borrow funds or liquidate some investments in order to pay the applicable taxes.
Even as a REIT, in certain circumstances, we may incur tax liabilities that would reduce our cash available for distribution to our stockholders.
Even as a REIT, we may be subject to U.S. federal, state and local income taxes. For example, net income from the sale of properties that are “dealer” properties sold by a REIT and that do not meet a safe harbor available under the Code (a “prohibited transaction” under the Code) will be subject to a 100% tax. We may not make sufficient distributions to avoid excise taxes applicable to REITs. Similarly, if we were to fail an income test (and did not lose our REIT status because such failure was due to reasonable cause and not willful neglect), we would be subject to tax on the income that does not meet the income test requirements. We also may decide to retain net capital gains we earn from the sale or other disposition of our property and pay U.S. federal income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and seek a refund of such tax. We also will be subject to corporate tax on any undistributed REIT taxable income. We also may be subject to state and local taxes on our income or property, including franchise, payroll and transfer taxes, either directly or at the level of the OP or at the level of the other companies through which we indirectly own our assets, such as any TRSs, which are subject to full U.S. federal, state, local and foreign corporate-level income taxes. Any taxes we pay directly or indirectly will reduce our cash flow.
To qualify as a REIT, we must meet annual distribution requirements, which may force us to forgo otherwise attractive opportunities or borrow funds during unfavorable market conditions. This could delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.
In order to qualify as a REIT, we must distribute annually to our stockholders 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 gain. We will be subject to U.S. federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we make with respect to any calendar year are less than the sum of (a) 85% of our ordinary income, (b) 95% of our capital gain net income and (c) 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on investments in real estate assets and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these distributions. Although we intend to make distributions sufficient to meet the annual distribution requirements and to avoid U.S. federal income and excise taxes on our earnings while we qualify as a REIT, it is possible that we might not always be able to do so.
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Recharacterization of sale-leaseback transactions may cause us to lose our REIT status.
We will use commercially reasonable efforts to structure any sale-leaseback transaction we enter into so that the lease will be characterized as a “true lease” for U.S. federal income tax purposes, thereby allowing us to be treated as the owner of the property for U.S. federal income tax purposes. However, the IRS may challenge this characterization. In the event that any sale-leaseback transaction is challenged and recharacterized as a financing transaction or loan for U.S. federal income tax purposes, deductions for depreciation and cost recovery relating to the property would be disallowed. If a sale-leaseback transaction were so recharacterized, we might fail to continue to satisfy the REIT qualification asset tests or income tests and, consequently, lose our REIT status effective with the year of recharacterization. Alternatively, the amount of our REIT taxable income could be recalculated which might also cause us to fail to meet the distribution requirement for a taxable year.
Certain of our business activities are potentially subject to the prohibited transaction tax.
For so long as we qualify as a REIT, our ability to dispose of property during the first few years following acquisition may be restricted to a substantial extent as a result of our REIT qualification. Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT and provided we do not meet a safe harbor available under the Code, we will be subject to a 100% penalty tax on the net income from the sale or other disposition of any property (other than foreclosure property) that we own, directly or indirectly through any subsidiary entity, including the OP, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (a) conducting activities that may otherwise be considered prohibited transactions through a TRS (but such TRS will incur corporate rate income taxes with respect to any income or gain recognized by it), (b) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or indirectly through any subsidiary, will be treated as a prohibited transaction, and (c) structuring certain dispositions of our properties to comply with the requirements of the prohibited transaction safe harbor available under the Code for properties that, among other requirements, have been held for at least two years. Despite our present intention, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including the OP, but generally excluding TRSs, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
TRSs are subject to corporate-level taxes and our dealings with TRSs may be subject to a 100% excise tax.
A REIT may own up to 100% of the stock of one or more TRSs. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20% (25% for taxable years beginning prior to January 1, 2018) of the gross value of a REIT’s assets may consist of stock or securities of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT, including gross income from operations pursuant to management contracts. We may lease some of our seniors housing properties that are “qualified health care properties” to one or more TRSs which, in turn, contract with independent third-party management companies to operate those qualified health care properties on behalf of those TRSs. In addition, we may use one or more TRSs generally to hold properties for sale in the ordinary course of a trade or business or to hold assets or conduct activities that we cannot conduct directly as a REIT. A TRS is subject to applicable U.S. federal, state, local and foreign income tax on its taxable income, as well as limitations on the deductibility of its interest expenses. In addition, the Code imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.
If the OP failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT.
If the IRS were to successfully challenge the status of the OP as a partnership or disregarded entity for U.S. federal income tax purposes, the OP would be taxable as a corporation. In such event, this would reduce the amount of distributions that the OP could make to us. This also would result in our failing to qualify as a REIT, and we would become subject to a corporate-level tax on our income. This substantially would reduce our cash available to pay dividends and other distributions to our stockholders. In addition, if any of the partnerships or limited liability companies through which the OP owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise not disregarded for U.S. federal income tax purposes, the partnership or limited liability company would be subject to taxation as a corporation, thereby reducing distributions to the OP. Such a recharacterization of an underlying property owner could also threaten our ability to maintain our REIT qualification.
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If our qualified health care properties are not properly leased to a TRS or the managers of those qualified health care properties do not qualify as “eligible independent contractors,” we could fail to qualify as a REIT.
In general, under the REIT rules, we cannot directly operate any of our seniors housing properties that are qualified health care properties and can only indirectly participate in the operation of qualified health care properties on an after-tax basis by leasing those properties to independent health care facility operators or to TRSs. A qualified health care property is any real property (and any personal property incident to that real property), which is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facilities, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and is operated by a provider of those services that is eligible for participation in the Medicare program with respect to that facility. Furthermore, rent paid by a lessee of a qualified health care property that is a “related party tenant” of ours will not be qualifying income for purposes of the two gross income tests applicable to REITs. However, a TRS that leases qualified health care properties from us will not be treated as a related party tenant with respect to our qualified health care properties that are managed by an eligible independent contractor.
An eligible independent contractor is an independent contractor that, at the time such contractor enters into a management or other agreement with a TRS to operate a qualified health care property, is actively engaged in the trade or business of operating qualified health care properties for any person not related to us or the TRS. Among other requirements to qualify as an independent contractor, a manager must not own, directly or applying attribution provisions of the Code, more than 35% of the shares of our outstanding stock (by value), and no person or group of persons can own more than 35% of the shares of our outstanding stock and 35% of the ownership interests of the manager (taking into account only owners of more than 5% of our shares and, with respect to ownership interest in such managers that are publicly traded, only holders of more than 5% of such ownership interests). The ownership attribution rules that apply for purposes of the 35% thresholds are complex. There can be no assurance that the levels of ownership of our shares by our managers and their owners will not be exceeded.
If our leases with TRSs are not respected as true leases for U.S. federal income tax purposes, we likely would fail to qualify as a REIT.
To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” Rent paid by TRSs to the OP pursuant to the lease of our qualified healthcare properties will constitute a substantial portion of our gross income. For that rent to qualify as rents from real property for purposes of the REIT gross income tests, the leases must be respected as true leases for U.S. federal income tax purposes and not be treated as service contracts, joint ventures or some other type of arrangement. If our leases are not respected as true leases for U.S. federal income tax purposes, we may fail to qualify as a REIT.
We may choose to make distributions partly in cash and partly in shares of our common stock, in which case our stockholders may be required to pay U.S. federal income taxes in excess of the cash portion of such distributions they receive.
In connection with our qualification as a REIT, we are required to distribute annually to our stockholders 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 gain. The IRS has issued Revenue Procedures authorizing elective cash/stock distributions to be made by “publically offered REITs,” like us, in order to satisfy this requirement, provided that at least 20% of the aggregate amount of a distribution to stockholders is paid in cash and certain other parameters detailed in the Revenue Procedures are satisfied. Taxable stockholders receiving such distributions will be required to include the full amount of such distributions as ordinary dividend income to the extent of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. As a result, U.S. stockholders may be required to pay U.S. federal income taxes with respect to such distributions in excess of the cash portion of the distribution received.
Accordingly, U.S. stockholders receiving a distribution partly in cash and partly in shares of our common stock may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution. If a U.S. stockholder sells the shares that it receives as part of the distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the value of the shares at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such distribution, including in respect of all or a portion of such distribution that is payable in stock, by withholding or disposing of part of the shares included in such distribution and using the proceeds of such disposition to satisfy the withholding tax imposed. Because there is no established trading market for shares of our common stock, stockholders may not be able to sell shares of our common stock to pay taxes owed on dividend income.
Our current distribution policy with respect to distributions on shares of our common stock is to pay such distributions solely in shares of our common stock. Such distributions are not taxable to our stockholders.
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The taxation of distributions can be complex; however, distributions to stockholders that are treated as dividends for U.S. federal income tax purposes generally will be taxable as ordinary income, which may reduce our stockholders’ after-tax anticipated return from an investment in us.
Amounts that we pay to our taxable stockholders out of current and accumulated earnings and profits (and not designated as capital gain dividends or qualified dividend income) generally will be treated as dividends for U.S. federal income tax purposes and will be taxable as ordinary income. Noncorporate stockholders are entitled to a 20% deduction with respect to these ordinary REIT dividends which would, if allowed in full, result in a maximum effective U.S. federal income tax rate on these ordinary REIT dividends of 29.6% (or 33.4% including the 3.8% surtax on net investment income); however, the 20% deduction will end after December 31, 2025.
However, a portion of the amounts that we pay to our stockholders generally may (a) be designated by us as capital gain dividends taxable as long-term capital gain to the extent that such portion is attributable to net capital gain recognized by us, (b) be designated by us as qualified dividend income, taxable at capital gains rates, to the extent that such portion is attributable to dividends we receive from TRSs, or (c) constitute a return of capital to the extent that such portion exceeds our accumulated earnings and profits as determined for U.S. federal income tax purposes. With respect to qualified dividend income, the current maximum U.S federal tax rate applicable to U.S. noncorporate stockholders is 20% (or 23.8% including the 3.8% surtax on net investment income). Dividends payable by REITs, however, generally are not eligible for this reduced rate and, as described above, through December 31, 2025, will be subject to an effective rate of 29.6% (or 33.4% including the 3.8% surtax on net investment income). Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including shares of our stock. Tax rates could be changed in future legislation. A return of capital is not taxable but has the effect of reducing the tax basis of a stockholder’s investment in shares of our stock. Amounts paid to our stockholders that exceed our current and accumulated earnings and profits and a stockholder’s tax basis in shares of our stock generally will be taxable as capital gain.
Our stockholders may have tax liability on distributions that they elect to reinvest in shares of our common stock, but they would not receive the cash from such distributions to pay such tax liability.
Stockholders who participate in the DRIP generally will be deemed to receive distributions in an amount equal to the fair market value of the shares of our common stock received on the date of distribution, regardless of whether such shares were purchased at a discount to fair market value, and will be taxed on any such distribution to the extent it was not a tax-free return of capital. As a result, unless a stockholder is a tax-exempt entity, it may have to use funds from other sources to pay its tax liability on the distributions reinvested in shares of our common stock pursuant to the DRIP.
Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code may limit our ability to hedge our liabilities. Any income from a hedging transaction we enter into to manage the risk of interest rate changes, price changes or currency fluctuations with respect to borrowings made or to be made to acquire or carry real estate assets, or in certain cases to hedge previously acquired hedges entered into to manage risks associated with property that has been disposed of or liabilities that have been extinguished, if properly identified under applicable Treasury Regulations, does not constitute “gross income” for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions will likely be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because the TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of the TRS.
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Complying with REIT requirements may force us to forgo or liquidate otherwise attractive investment opportunities.
To maintain our qualification as a REIT, we must ensure that we meet the REIT gross income tests annually and that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and certain kinds of mortgage-related securities. The remainder of our investment in securities (other than securities that qualify for the 75% asset test and securities of qualified REIT subsidiaries and TRSs) generally cannot exceed 10% of the outstanding voting securities of any one issuer, 10% of the total value of the outstanding securities of any one issuer, or 5% of the value of our assets as to any one issuer. In addition, no more than 20% of the value of our total assets may consist of stock or securities of one or more TRSs and no more than 25% of our assets may consist of publicly offered REIT debt instruments that do not otherwise qualify under the 75% asset test. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate assets from our portfolio or not make otherwise attractive investments in order to maintain our qualification as a REIT.
The ability of the Board to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce distributions to our stockholders.
Our charter provides that the Board may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interests to continue to qualify as a REIT. While we intend to maintain our qualification as a REIT, we may terminate our REIT election if we determine that qualifying as a REIT is no longer in our best interests. If we cease to be a REIT, we would become subject to corporate-level U.S. federal income tax on our taxable income (as well as any applicable state and local corporate tax) and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the value of shares of our stock.
We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility, and reduce the value of shares of our stock.
Changes to the tax laws may occur, and any such changes could have an adverse effect on an investment in shares of our stock or on the market value or the resale potential of our assets. Our stockholders are urged to consult with an independent tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our stock.
Although REITs generally receive better tax treatment than entities taxed as non-REIT “C corporations,” it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a non-REIT “C corporation.” As a result, our charter provides the Board with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a non-REIT “C corporation,” without the vote of our stockholders. The Board has duties to us and could only cause such changes in our tax treatment if it determines that such changes are in our best interests.
The share ownership restrictions for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities.
In order to qualify as a REIT, five or fewer individuals, as defined in the Code, may not own, actually or constructively, more than 50% in value of the issued and outstanding shares of our stock at any time during the last half of each taxable year, other than the first year for which a REIT election is made. Attribution rules in the Code determine if any individual or entity actually or constructively owns shares of our stock under this requirement. Additionally, at least 100 persons must beneficially own shares of our stock during at least 335 days of a taxable year for each taxable year, other than the first year for which a REIT election is made. To help ensure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of shares of our stock.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT while we so qualify. Unless exempted by the Board, for so long as we qualify as a REIT, our charter prohibits, among other limitations on ownership and transfer of shares of our stock, any person from beneficially or constructively owning (applying certain attribution rules under the Code) more than 9.8% in value of the aggregate outstanding shares of our stock and more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of the outstanding shares of our stock. The Board may not grant an exemption from these restrictions to any proposed transferee whose ownership in excess of the 9.8% ownership limit would result in the termination of our qualification as a REIT. These restrictions on transferability and ownership will not apply, however, if the Board determines that it is no longer in our best interests to continue to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to continue to so qualify as a REIT.
These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for shares of our stock or otherwise be in the best interests of the stockholders.
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Non-U.S. stockholders will be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on dividends and other distributions received from us and upon the disposition of shares of our stock.
Subject to certain exceptions, amounts paid to non-U.S. stockholders will be treated as dividends for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits. Such dividends ordinarily will be subject to U.S. withholding tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty, unless the dividends are treated as “effectively connected” with the conduct by the non-U.S. stockholder of a U.S. trade or business. Capital gain distributions attributable to sales or exchanges of “U.S. real property interests” (“USRPIs”), generally will be taxed to a non-U.S. stockholder (other than a “qualified foreign pension fund,” certain entities wholly owned by a qualified foreign pension fund and certain foreign publicly-traded entities) as if such gain were effectively connected with a U.S. trade or business. However, a capital gain distribution will not be treated as effectively connected income if (a) the distribution is received with respect to a class of stock that is “regularly traded,” as defined in applicable Treasury regulations on an established securities market located in the United States and (b) the non-U.S. stockholder does not own more than 10% of such class of our stock at any time during the one-year period ending on the date the distribution is received.
Gain recognized by a non-U.S. stockholder upon the sale or exchange of shares of our stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI . Shares of our stock will not constitute a USRPI so long as we are a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT if at all times during a specified testing period, less than 50% in value of such REIT’s stock is held directly or indirectly by non-U.S. stockholders. Recently proposed regulations would apply special look-through rules to certain U.S. corporate stockholders in determining whether a REIT is domestically controlled. We believe that we currently are, but there can be no assurance that we will continue to be, a domestically-controlled qualified investment entity.
Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S. stockholder sells or exchanges shares of our stock, gain arising from such a sale or exchange would not be subject to U.S. taxation as a sale of a USRPI if (a) the shares are of a class of our stock that is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market, and (b) such non-U.S. stockholder owned, actually and constructively, 10% or less of the outstanding shares of such class of stock at all times during the shorter of (x) five-year period ending on the date of the sale and (y) the period during which the non-U.S. stockholders held such shares of our stock.
Potential characterization of dividends and other distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.
If (a) we are a “pension-held REIT,” (b) a tax-exempt stockholder has incurred (or is deemed to have incurred) debt to purchase or hold shares of our stock, or (c) a holder of shares of our stock is a certain type of tax-exempt stockholder, dividends on, and gains recognized on the sale of, shares of our stock by such tax-exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Code.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
We understand the importance of preventing, assessing, identifying, and managing material risks associated with cybersecurity threats. Cybersecurity processes to assess, identify and manage risks from cybersecurity threats have been incorporated as a part of our overall risk assessment process. On a regular basis we implement into our operations these cybersecurity processes, technologies, and controls to assess, identify, and manage material risks. Specifically, we engage a third-party cybersecurity firm to assist with network and endpoint monitoring, cloud system monitoring and assessment of our incident response procedures. Further, we employ periodic penetration testing and tabletop exercises to inform our risk identification and assessment of material cybersecurity threats.
To manage our material risks from cybersecurity threats and to protect against, detect, and prepare to respond to cybersecurity incidents, we undertake the below listed activities:
•Monitor emerging data protection laws and implement changes to our processes to comply;
•Conduct periodic data handling and use requirement training for our employees;
•Conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; and
•Conduct regular phishing email simulations for all employees
Our incident response plan coordinates the activities that we and our third-party cybersecurity providers take to prepare to respond and recover from cybersecurity incidents, which include processes to triage, assess severity, investigate, escalate, contain, and remediate an incident, as well as to comply with potentially applicable legal obligations.
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As part of the above processes, we engage with third party providers to review our cybersecurity program and help identify areas for continued focus, improvement, and compliance.
Our processes also include assessing cybersecurity threat risks associated with our use of third-party services providers in normal course of business use, including those in our supply chain or who have access to our tenant and employee data or our systems. Third-party risks are included within our cybersecurity risk management processes discussed above. In addition, we assess cybersecurity considerations in the selection and oversight of our third-party services providers, including due diligence on the third parties that have access to our systems and facilities that house systems and data.
Our Audit Committee of the Board of Directors is responsible for oversight of our risk assessment, risk management, disaster recovery procedures and cybersecurity risks. Members of the Board regularly engage in discussions with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.
As of the date of this Annual Report on Form 10-K, we have not encountered risks from cybersecurity threats that have materially affected us, or are reasonably likely to materially affect, our business strategy, results of operations or financial position.
Item 2. Properties
The following table presents certain additional information about the properties we owned as of December 31, 2023:
PortfolioNumber
of Properties		Rentable
Square Feet
Percent Leased (1)
Weighted Average Remaining Lease Term (2)
Gross Asset Value (3)
(In thousands)
Medical Office and Other Healthcare Related Buildings1565,153,419 90.6%4.7$1,468,401 
Seniors Housing — Operating Properties48(4)3,857,652 74.1%(5)N/A1,133,238 
Total Portfolio2049,011,071 $2,601,639 
__________
(1)Inclusive of leases signed but not yet commenced as of December 31, 2023.
(2)Weighted-average remaining lease term in years is calculated based on square feet as of December 31, 2023.
(3)Gross asset value represents total real estate investments, at cost ($2.6 billion total as of December 31, 2023), net of gross market lease intangible liabilities ($23.5 million total as of December 31, 2023). Impairment charges are already reflected within gross asset value.
(4)Includes two parcels of land with a total gross asset value of $3.7 million.
(5)Weighted by unit count as of December 31, 2023. As of December 31, 2023, we had 4,164 rentable units in our SHOP segment.
N/A    Not applicable.
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The following table details the geographic distribution, by state, of our portfolio as of December 31, 2023:
State
Number of Properties (1)
Annualized Rental Income (2)
Annualized Rental Income %Rentable Square FeetRentable Square Feet %Rentable Units in SHOP Segment
(In thousands)
Alabama1$176 0.1 %5,564 0.1 %—
Arizona1410,140 3.2 %509,806 5.7 %—
Arkansas316,274 5.1 %248,783 2.8 %299
California820,645 6.4 %446,723 5.0 %247
Colorado31,754 0.5 %67,016 0.7 %—
Florida2363,883 19.9 %1,099,729 12.2 %812
Georgia1629,596 9.2 %802,691 8.9 %624
Idaho13,480 1.1 %55,846 0.6 %95
Illinois2322,792 7.1 %879,289 9.8 %356
Indiana84,672 1.5 %208,672 2.3 %—
Iowa1226,946 8.4 %505,781 5.6 %583
Kansas14,695 1.5 %49,360 0.5 %71
Louisiana1656 0.2 %17,830 0.2 %—
Maryland11,046 0.3 %36,260 0.4 %—
Massachusetts3846 0.3 %36,563 0.4 %—
Michigan1116,027 5.0 %420,298 4.7 %311
Minnesota11,098 0.3 %36,375 0.4 %—
Mississippi31,124 0.4 %73,859 0.8 %—
Missouri28,594 2.7 %96,016 1.1 %146
Nevada23,279 1.0 %86,342 1.0 %—
New Jersey1734 0.2 %25,164 0.3 %—
New York52,881 0.9 %136,982 1.5 %—
North Carolina31,656 0.5 %90,650 1.0 %—
Ohio57,890 2.5 %172,085 1.9 %—
Oklahoma21,094 0.3 %47,407 0.5 %—
Oregon68,856 2.8 %322,354 3.6 %252
Pennsylvania1633,926 10.6 %1,413,595 15.7 %289
South Carolina21,103 0.3 %52,527 0.6 %—
Tennessee33,445 1.1 %175,669 1.9 %—
Texas96,629 2.1 %403,369 4.5 %—
Virginia11,633 0.3 %62,165 0.7 %—
Washington12,031 0.6 %52,900 0.6 %—
Wisconsin1311,122 3.5 %373,401 4.1 %79
Total204$320,723 100 %9,011,071 100 %4,164
__________
(1)Includes two land parcels located in Florida and Iowa.
(2)Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2023, which includes tenant concessions such as free rent, as applicable, as well as annualized gross revenue from our SHOPs based off the fourth quarter of 2023.
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Future Minimum Lease Payments
The following table presents future minimum base rental cash payments due to us (excluding our SHOP segment) over the next ten years and thereafter as of December 31, 2023. The SHOP segment is excluded as the leased units with residents are generally for annual periods or month-to-month. These amounts exclude tenant reimbursements and contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to performance thresholds and increases in annual rent based on exceeding certain economic indexes, among other items.
(In thousands)Future Minimum
Base Rent Payments
2024$109,451 
2025100,230 
202691,862 
202772,815 
202853,918 
202943,422 
203038,804 
203133,371 
203226,554 
203315,722 
Thereafter36,460 
$622,609 
Future Lease Expirations Table
The following is a summary of lease expirations for the next ten years at the properties we owned (excluding our SHOP segment) as of December 31, 2023:
Year of Expiration
Number of Leases Expiring
Annualized Rental Income (1)
Annualized Rental Income as a Percentage of the Total Portfolio
Leased Rentable Square Feet
Percent of Portfolio Rentable Square Feet Expiring
(In thousands)
202499$8,842 8.0%393,361 8.4%
2025759,034 8.2%367,191 7.9%
20269818,659 16.9%1,042,517 22.3%
202710316,884 15.3%863,913 18.5%
20286413,349 12.1%502,452 10.8%
2029355,759 5.2%240,317 5.1%
2030284,896 4.4%198,068 4.2%
2031164,820 4.4%184,357 3.9%
20323013,336 12.0%449,248 9.6%
2033133,377 3.1%128,488 2.8%
Total561$98,956 89.6%4,369,912 93.5%
__________
(1)Annualized rental income on a straight-line basis for the leases in place in the property portfolio as of December 31, 2023, which includes tenant concessions such as free rent, as applicable.
Tenant Concentration
As of December 31, 2023, we 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 more of total annualized rental income on a straight-line basis for our portfolio.
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Significant Portfolio Properties
As of December 31, 2023, the rentable square feet or annualized rental income on a straight-line basis of one property represented 5% or more of our total portfolio’s rentable square feet or annualized rental income on a straight-line basis:
Wellington at Hershey’s Mill - West Chester, PA
In December 2014, we purchased Wellington at Hershey’s Mill, a seniors housing property located in West Chester, Pennsylvania. Wellington at Hershey’s Mill, which is leased to our TRS and operated and managed on our behalf by a third-party operator in our SHOP segment, contains 491,710 rentable square feet and consists of 289 rentable units (193 units dedicated to independent living patients, 64 units dedicated to assisted living patients and 32 units dedicated to memory care patients). As of December 31, 2023, this property represented 5.5% of our total rentable square feet and 5.4% of our total annualized rental income on a straight-line basis.
Property Financings
See Note 4 — Mortgage Notes Payable, Net and Note 5 — Credit Facilities to our consolidated financial statements in this Annual Report on Form 10-K for property financings as of December 31, 2023 and 2022.
Item 3. Legal Proceedings.
We are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
No established public market currently exists for our shares of common stock. Until our shares are listed on a national exchange, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements.
Estimated Per-Share Net Asset Value
Overview
On March 31, 2023, the independent directors of the Board, who comprise a majority of the Board, unanimously approved an estimated per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2022 (the “Valuation Date”) equal to $14.00. The Estimated Per-Share NAV of $14.00 fell within the range of the values reported by Kroll, LLC ("Kroll"), an independent third-party real estate advisory firm engaged by us. The range of values provided by Kroll was based on the estimated fair value of our assets less the estimated fair value of our liabilities and the liquidation value of our Series A Preferred Stock and the liquidation value of our Series B Preferred Stock, divided by 105,541,612 shares of common stock outstanding as of December 31, 2022. The common stock outstanding amount used to calculate the Estimated Per-Share NAV as of December 31, 2021 included the dividends declared and issued entirely in shares of our common stock through December 31, 2021, but did not include any other dividend declared and payable in whole or in part in shares of our common stock subsequent to December 31, 2021.
In determining the Estimated Per-Share NAV of $14.00, the independent directors of the Board considered various factors, including the information provided by Kroll, the impact of the stock dividend that was issued in January 2023, the fact that properties held for sale or under contract for sale at December 31, 2022 were valued based on their contract sale prices and without giving consideration to the reinvestment of the sale proceeds.
The Estimated Per-Share NAV has not been adjusted for any stock dividends issued subsequent to December 31, 2022 and will not be until a new Estimated Per-Share NAV is published. We intend to publish an Estimated Per-Share NAV as of December 31, 2023 in late March 2024.
Process
Consistent with our valuation guidelines, we engaged Kroll to perform appraisals of our real estate assets (each asset individually, a “Real Estate Asset” and collectively, the “Real Estate Assets”) as of the Valuation Date and provided a valuation range for each Real Estate Asset. In addition, Kroll was engaged to review, and incorporate in its report, our market value estimate regarding other assets, liabilities, and the liquidation value of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock as of the Valuation Date. Kroll has extensive experience estimating the fair value of commercial real estate.
The method used by Kroll to appraise the Real Estate Assets in the report furnished to the Advisor and the Board by Kroll (the “Kroll Report”) complies with the Institute of Portfolio Alternatives (formerly known as the Investment Program Association) Practice Guideline 2013-01 titled “Valuations of Publicly Registered Non-Listed REITs,” issued April 29, 2013. Also, Kroll advised that the scope of work performed was conducted in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. We have engaged Kroll for the past six years to assist in determining our Estimated Per-Share NAV. For preparing the Kroll Report, we paid Kroll a customary fee for services of this nature, no part of which was contingent relating to the provision of services or specific findings. Other than its engagement as described herein and its engagements to provide certain purchase price allocation and other real estate valuation services, Kroll does not have any direct interests in any transaction with us.
Potential conflicts of interest between Kroll, on one hand, and us or the Advisor, on the other hand, may arise as a result of (i) the impact of the findings of Kroll in relation to our Real Estate Assets, or the assets of real estate investment programs sponsored by affiliates of the Advisor, on the value of ownership interests owned by, or incentive compensation payable to, directors, officers or affiliates of us and the Advisor, or (ii) Kroll performing valuation services for other programs sponsored by affiliates of the Advisor, as well as other services for us. While we and other programs sponsored by affiliates of the Advisor have engaged and may engage Kroll or its affiliates in the future for valuations and real estate-related services of various kinds, we believe that there are no material conflicts of interest with respect to our engagement of Kroll.
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Valuation Methodology
Kroll performed a full valuation of our Real Estate Assets utilizing an income capitalization approach consisting of the Direct Capitalization Method or the Discounted Cash Flow Method and certain other approaches, including the acquisition price, disposition price, and sales comparison approach. These approaches are commonly used in the commercial real estate industry.
The Estimated Per-Share NAV is generally comprised of (i) the sum of (A) the estimated value of the Real Estate Assets and (B) the estimated value of the other assets, minus (ii) the sum of (C) the estimated value of debt and other liabilities (D) the estimate of the aggregate incentive fees, participations and limited partnership interests held by or allocable to the Advisor, our management or any of the respective affiliates based on our aggregate net asset value and payable in our hypothetical liquidation as of the Valuation Date (which was zero as of December 31, 2022), and (E) the liquidation value of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock, divided by (iii) the number of shares of common stock outstanding as of the Valuation Date, which was 105,541,612. In determining the Estimated Per-Share NAV, the independent directors of the Board also considered the impact of other factors described herein that were not specifically quantified. Shares of common stock outstanding for these purposes is the sum of shares of common stock outstanding, including vested and unvested restricted shares, and partnership units of our operating partnership designated as “Common OP Units,” excluding performance-based restricted partnership units of our operating partnership designated as “Class B Units” because the Advisor concluded that, in a hypothetical liquidation at such Estimated Per-Share NAV, it may not be entitled to any incentive fees or Class B Units. The Advisor determined the Estimated Per-Share NAV in a manner consistent with the definition of fair value under U.S. generally accepted accounting principles set forth in FASB’s Topic ASC 820, Fair Value Measurements and Disclosures.
Limitations of the Estimated Per-Share NAV
The Estimated Per-Share NAV does not represent the: (i) the price at which shares of our common stock would trade at on a national securities exchange or a third party would pay for them, (ii) the amount stockholders would obtain if they tried to sell their shares of common stock or (iii) the amount stockholders would receive if we liquidated our assets and distributed the proceeds after paying all of our expenses and liabilities. Also, there is no assurance that the methodology used to establish the Estimated Per-Share NAV would be acceptable to the Financial Industry Regulatory Authority for use on customer account statements, or that the Estimated Per-Share NAV will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”) with respect to employee benefit plans subject to ERISA and other retirement plans or accounts subject to Section 4975 of the Code. Further, the Estimated Per-Share NAV was calculated as of a specific date, and the value of shares of common stock will fluctuate over time as a result of, among other things, developments related to individual assets, changes in the real estate and capital markets, acquisitions or dispositions of assets and the distribution of proceeds from the sale of real estate to stockholders.
Conclusion
The Estimated Per-Share NAV as of December 31, 2022 of $14.00, a value within the range determined by Kroll, was unanimously adopted by the independent directors of the Board, who comprise a majority of the Board, with Mr. Weil abstaining, on March 31, 2023. The independent directors of the Board based their conclusions on their review of the Advisor’s analysis and recommendation, the Kroll Report, estimates and calculations and the fundamentals of the Real Estate Assets. The Board is ultimately and solely responsible for the Estimated Per-Share NAV. Estimated Per-Share NAV was determined at a moment in time and will likely change over time as a result of changes to the value of individual assets as well as changes and developments in the real estate and capital markets, including changes in interest rates.
Holders
As of March 13, 2024 we had 113,185,753 shares of common stock outstanding held by a total of 44,774 stockholders of record.
Dividends and Other Distributions
We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2013. As a REIT, we are required to distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard for the deduction for dividends paid and excluding net capital gains.
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 dividends and other distribution, financial condition, provisions in our agreements that may restrict our ability to pay dividends and other distributions, capital expenditure requirements, as applicable, and annual dividends and other distribution requirements needed to maintain our status as a REIT under the Code. Our ability to make future cash distributions on our common stock will depend on our future cash flows and indebtedness and may further depend on our ability to obtain additional liquidity, which may not be available on favorable terms, or at all. Dividends and other distribution payments are not assured. Any accrued and unpaid dividends payable with respect to our Series A Preferred Stock must be paid upon redemption of those shares.
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Distributions to Common Stockholders
From March 1, 2018 until June 30, 2020, we generally paid distributions on our common stock on a monthly basis at a rate equivalent of $0.85 per annum, per share of common stock. Distributions were generally paid 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 our common stock distribution policy in order to preserve our liquidity and maintain additional financial flexibility. Under the revised policy, distributions authorized by the Board on our shares of common stock, if and when declared, are paid on a quarterly basis in arrears in shares of our common stock valued at our 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 following table details each stock dividend issued since October 1, 2020. The Board may further change our 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.
Stock Dividend Declaration DateStock Dividend Issue DateDividend Basis (per share)Applicable NAV (per share)Quarterly Stock Dividend Rate (per share)
October 1, 2020October 15, 2020$0.85 $15.75 0.013492
January 4, 2021January 15, 2021$0.85 $15.75 0.013492
April 2, 2021April 15, 2021$0.85 $14.50 0.014655
July 1, 2021July 15, 2021$0.85 $14.50 0.014655
October 1, 2021October 15, 2021$0.85 $14.50 0.014655
January 3, 2022January 15, 2022$0.85 $14.50 0.014655
April 1, 2022April 18, 2022$0.85 $15.00 0.014167
July 1, 2022July 15, 2022$0.85 $15.00 0.014167
October 3, 2022October 17, 2022$0.85 $15.00 0.014167
January 3, 2023January 18, 2023$0.85 $15.00 0.014167
April 3, 2023April 17, 2023$0.85 $14.00 0.015179
July 3, 2023July 17, 2023$0.85 $14.00 0.015179
October 2, 2023October 16, 2023$0.85 $14.00 0.015179
January 3, 2024
January 16, 2024
$0.85 $14.00 0.015179
Dividends to Series A Preferred Stockholders
Dividends on our Series A Preferred Stock are declared quarterly in an amount equal to $1.84 per share each year ($0.46 per share per quarter) to Series A Preferred Stockholders, which is equivalent to 7.375% per annum on 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 and declared by us.
Dividends to Series B Preferred Stockholders
Dividends on our Series B Preferred Stock are declared quarterly in an amount equal to $1.78 per share each year ($0.45 per share per quarter) to Series B Preferred Stockholders, which is equivalent to 7.125% per annum on 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 and declared by us.
Tax Characteristics of Dividends
All common dividends in the years ended December 31, 2023, 2022 and 2021 were issued as stock dividends, which do not represent taxable dividends to shareholders for U.S. federal income tax purposes. All dividends paid on the Series A Preferred Stock and Series B Preferred Stock (first payment was made in January 2022) were considered 100% return of capital for income for tax purposes for the years ended December 31, 2023, 2022 and 2021.
Sales of Unregistered Securities
None.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In light of the amendment to the Prior Credit Facility on August 10, 2020, the Board suspended repurchases under the SRP effective August 14, 2020. No further repurchase requests under the SRP may be made unless and until the SRP is reactivated. We did not repurchase any shares of our common stock during the year ended December 31, 2023. For additional information on the SRP, see Note 8 — Stockholders’ Equity to our consolidated financial statements included in this Annual Report on Form 10-K.
The following table summarizes our SRP activity for the period presented.
Number of Common Shares RepurchasedAverage Price per Share
Cumulative repurchases as of December 31, 2022
4,896,620 $20.60 
Year ended December 31, 2023
— — 
Cumulative repurchases as of December 31, 2023
4,896,620 $20.60 
Item 6. [Reserved].
Item 7. 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. The following information contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. Please see “Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K for a description of these risks and uncertainties.
Overview
We are an externally managed real estate investment trust for U.S. federal income tax purposes (“REIT”) that focuses on acquiring and managing a diversified portfolio of healthcare-related real estate focused on medical office and other healthcare-related buildings and senior housing operating properties. As of December 31, 2023, we owned 204 properties (including two land parcels) located in 33 states and comprised of 9.0 million rentable square feet.
Substantially all of our business is conducted through the OP, a Delaware limited partnership, and its wholly owned subsidiaries. Our Advisor manages our day-to-day business with the assistance of our Property Manager. Our Advisor and Property Manager are under common control with 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. The Special Limited Partner, which is also under common control with AR Global, also has an interest in us through ownership of interests in our OP.
We operate in two reportable business segments for management and financial reporting purposes: MOBs and SHOPs. In our MOB operating segment, we own, manage, and lease single and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. Our Property Manager or third party managers manage our MOBs. In our SHOP segment, we invest in seniors housing properties using the RIDEA structure. As of December 31, 2023, we had four eligible independent contractors operating 46 SHOPs. All of our properties across both business segments are located throughout the United States.
We have declared quarterly dividends entirely in shares of our common stock since October 2020 in order to preserve our liquidity.
Management Update on the Adverse Economic Impacts Since the COVID-19
During the first quarter of 2020, the global COVID-19 pandemic commenced. The pandemic and its aftermath have had, and could continue to have, adverse impacts on economic and market conditions. Our MOB segment has been less impacted than our SHOP segment, which continues to be challenged by the post-pandemic operating environment.
Further, recent increases in inflation brought about by labor shortages, supply chain disruptions, and higher property insurance, property tax and interest rates have had, and may continue to have, adverse impacts on our results of operations. Moreover, these adverse economic impacts may also impact the ability of our tenants and residents to pay rent and hence negatively affect our results of operations and liquidity.
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Seniors Housing Properties
SHOP Occupancy
Occupancy in our SHOP portfolio trended lower since December 31, 2019 to a low of 72.0% as of March 31, 2021, stabilized and partially recovered from June 30, 2021 until June 30, 2022 and has since stabilized in the mid-70% occupied range. As of December 31, 2023, occupancy in our SHOP segment was 74.1%.
The below table presents SHOP occupancy since December 31, 2019, which we consider the last period before the COVID-19 pandemic and its continuing impacts began:
As of
Number of Properties (1)
Rentable UnitsPercentage Leased
December 31, 2019594,926 85.1%
March 31, 2020635,198 84.4%
June 30, 2020635,198 79.2%
September 30, 2020675,350 77.4%
December 31, 2020594,878 74.5%
March 31, 2021554,682 72.0%
June 30, 2021544,530 73.2%
September 30, 2021544,494 74.3%
December 31, 2021544,494 74.1%
March 31, 2022504,378 75.9%
June 30, 2022504,374 76.3%
September 30, 2022504,374 75.8%
December 31, 2022504,374 75.1%
March 31, 2023504,374 73.3%
June 30, 2023464,164 73.3%
September 30, 2023464,164 74.1%
December 31, 2023464,164 74.1%
__________
(1) Exclusive of two land parcels.
Contract Labor and Wage Expenses
During the year ended December 31, 2022, our third party operators needed to increase their use of temporary contract labor and agencies, and the amount paid for overtime, training and bonus wages, in response to a shortage of workers, the cost of labor generally, lack of qualified personnel that our third party operators are able to employ on a permanent basis and training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor. During the year ended December 31, 2023, these contract and agency costs declined. In particular, costs incurred from contract labor and agencies for care providers decreased in our total SHOP segment by $5.6 million, from $7.6 million in the year ended December 30, 2022, to $2.0 million as compared to the year ended December 31, 2023.
However, these costs were partially offset by increased wage costs for direct employees of our third party operators in our total SHOP segment of $5.1 million, from $74.9 million in the year ended December 31, 2022 to $80.1 million in the year ended December 31, 2023. On a Same Store basis (as defined below in Results of Operations — Same Store Properties,), contract labor costs decreased $5.5 million but were more than offset by increases to wage costs of $7.7 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The results of operations in our SHOP segment have been significantly and adversely affected because occupancy levels have not recovered to their pre-pandemic rates (as noted in the table above) and labor costs have increased, even though resident leasing rates have increased.
Rent Concessions
We have also granted rent concessions which serve to reduce revenue in our SHOP segment. We offered $3.1 million and $3.3 million of rent concessions during the years ended December 31, 2023 and 2022, respectively.
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The CARES Act
On March 27, 2020, the CARES Act was signed into law providing, among other things, 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. We did not receive any funds through the CARES Act during the year ended December 31, 2023. During the years ended December 31, 2022 and 2021, we received $4.5 million and $5.1 million, respectively, from CARES Act grants. For accounting purposes, we treat the funds as grant contributions from the government and the full amounts were recognized as reductions of property operating and maintenance expenses in our consolidated statement of operations during the years ended December 31, 2022 and 2021. We do not anticipate that any further funds under the CARES Act will be received, and 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
Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our consolidated financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates and critical accounting policies include:
Revenue Recognition
Our revenues, which are derived primarily from lease contracts, include rent received from tenants in our MOB segment. As of December 31, 2023 these leases had a weighted average remaining lease term of 4.7 years. Rent from tenants in our MOB segment (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease. Because many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record a receivable for, and include in revenue from tenants on a straight-line basis, unbilled rent receivables that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When we acquire 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. We defer the revenue related to lease payments received from tenants in advance of their due dates. Pursuant to certain of our lease agreements, tenants are required to reimburse us 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, we have elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For expenses paid directly by the tenant, under both ASC 842 and 840, we have reflected them on a net basis.
Our revenues also include resident services and fee income primarily related to rent derived from lease contracts with residents in the Company’s SHOP segment, held using a structure permitted under RIDEA and to a lesser extent, fees for ancillary services performed for SHOP residents, which are generally variable in nature. Rental income from residents in our 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. Fees for ancillary services are recorded in the period in which the services are performed.
We defer the revenue related to lease payments received from tenants and residents in advance of their due dates. Pursuant to certain of our lease agreements, tenants are required to reimburse us for certain property operating and maintenance expenses related to non-SHOP assets (recorded in revenue from tenants), in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating and maintenance costs of the respective properties.
We continually review receivables related to rent and unbilled rents receivable and determine 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, we are required to assess, based on credit risk only, if it is probable that we 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 we determine 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 we determine it is not probable that we 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 accounting rules, on the accompanying consolidated statements of operations and comprehensive income (loss) in the period the related costs are incurred, as applicable.
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Under ASC 842, which was adopted effective on January 1, 2019, uncollectable amounts are reflected as reductions in revenue. Under ASC 840, we recorded such amounts as bad debt expense as part of property operating expenses. During the years ended December 31, 2023, 2022 and 2021 such amounts were $1.2 million, $3.2 million and $1.1 million, respectively. Approximately $1.3 million in the year ended December 31, 2022 related to previously disposed properties. There were no significant write-off’s related to previously disposed properties during the years ended December 31, 2023 and 2021.
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, we evaluate 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 below 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 our 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 years ended December 31, 2023, 2022 and 2021. 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. We evaluate 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 sale as of December 31, 2023 and 2022.
Purchase Price Allocation
In both a business combination and an asset acquisition, we allocate 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 years ended December 31, 2023, 2022 and 2021 were accounted for as asset acquisitions. We acquired seven properties during the year ended December 31, 2023.
For acquired properties with leases classified as operating leases, we allocate 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, we utilize 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. We also consider information obtained about each property as a result of our 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. We utilize various estimates, processes and information to determine the as-if vacant property value. We estimate 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 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, we include 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. We also estimate costs to execute similar leases including leasing commissions, legal and other related expenses.
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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 our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with the tenant. Characteristics considered by us 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. We did not record any intangible asset amounts related to customer relationships during the years ended December 31, 2023 and 2022.
Accounting for Leases
Lessor Accounting
In accordance with the lease accounting standard, all of our leases as lessor prior to adoption were accounted for as operating leases. We evaluate new leases originated after the adoption date (by us or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than a major part of the remaining economic useful life of the asset (e.g., equal to or greater than 75%), 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 the asset is 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. As of December 31, 2023 and 2022, we did not have any leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.
As a lessor of real estate, we elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating and maintenance expenses) as a single lease component as an operating lease because (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
We are 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 consolidated balance sheets as of December 31, 2023 and 2022, 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 years ended December 31, 2023, 2022 and 2021.
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 our operating leases, see Note 16 — Commitments and Contingencies to the consolidated financial statements included in this Annual Report on Form 10-K.
Impairment of Long-Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, we review the property for impairment. This review is based on an estimate of the future undiscounted cash flows 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, we would recognize an impairment loss in the consolidated statement of operations and comprehensive loss to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset.
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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 15 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.
Above-and Below-Market Lease Amortization
Capitalized above-market lease values are amortized as a reduction of revenue from tenants over the remaining terms of the respective leases and the capitalized below-market lease values are amortized as an increase to revenue from tenants over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases. If a tenant with a below-market rent renewal does not renew, any remaining unamortized amount will be taken into income at that time.
Capitalized above-market ground lease values are amortized as a reduction of property operating expense over the remaining terms of the respective leases. Capitalized below-market ground lease values are amortized as an increase to property operating expense over the remaining terms of the respective leases and expected below-market renewal option periods.
Equity-Based Compensation
The Company has a stock-based incentive award program for its directors, which is accounted for under the guidance of share based payments. The cost of services received in exchange for these stock awards is measured at the grant date fair value of the award and the expense for such awards is included in general and administrative expenses and is recognized over the service period (i.e., vesting) required or when the requirements for exercise of the award have been met.
CARES Act Grants
On March 27, 2020, the CARES Act was signed into law and it provides funding to Medicare providers in order to provide financial relief during the COVID-19 pandemic. Funds provided under the program were to be used for the preparation, prevention, and medical response to COVID-19, and were designated to reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19. We did not receive any funds through the CARES Act in the year ended December 31, 2023. During the years ended December 31, 2022 and 2021 we received $4.5 million and $5.1 million in funding from CARES Act grants, respectively. For accounting purposes, the CARES Act funds are treated as a grant contribution from the government. The funding we received was recognized as a reduction of property operating and maintenance expenses in our consolidated statements of operations to offset the negative impacts of COVID-19. We do not anticipate that any further funds under the CARES Act will be received, and there can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.
Recently Issued Accounting Pronouncements
See Note 2 — Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion.
Results of Operations
Below is a discussion of our results of operations for the years ended December 31, 2023 and 2022. Please see the “Results of Operations” section located on page 49 under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our results of operations for the year ended December 31, 2022 and comparisons between December 31, 2022 and 2021.
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Comparison of the Years Ended December 31, 2023 and 2022
Net loss attributable to common stockholders was $86.1 million and $93.3 million for the years ended December 31, 2023 and 2022, respectively. The following table shows our results of operations for the years ended December 31, 2023 and 2022 and the year to year change by line item of the consolidated statements of operations:
 Year Ended December 31,Increase (Decrease)
(in thousands)20232022$
Revenue from tenants$345,925 $335,846 $10,079 
Operating expenses:  
Property operating and maintenance217,792 213,444 4,348 
Impairment charges4,676 27,630 (22,954)
Operating fees to related parties25,527 25,353 174 
Acquisition and transaction related545 1,484 (939)
General and administrative18,928 17,287 1,641 
Depreciation and amortization82,873 82,064 809 
Total expenses350,341 367,262 (16,921)
Operating loss before loss on sale of real estate investments(4,416)(31,416)27,000 
Loss on sale of real estate investments(322)(125)(197)
Operating loss(4,738)(31,541)26,803 
Other income (expense):
Interest expense(66,078)(51,740)(14,338)
Interest and other income734 27 707 
(Loss) gain on non-designated derivatives(1,995)3,834 (5,829)
Total other expenses(67,339)(47,879)(19,460)
Loss before income taxes(72,077)(79,420)7,343 
Income tax expense(303)(201)(102)
Net loss(72,380)(79,621)7,241 
Net loss attributable to non-controlling interests82 135 (53)
Allocation for preferred stock(13,799)(13,799)— 
Net loss attributable to common stockholders$(86,097)$(93,285)$7,188 
Segment Income
We evaluate the performance of the combined properties in each segment based on total revenues from tenants, less property operating costs. As such, this excludes all other items of expense and income included in the financial statements in calculating net loss (each item discussed separately in “Other Results of Operations” below). We use segment income to assess and compare property level performance and to make decisions concerning the operation of our properties. We believe that segment income is useful as a performance measure because, when compared across periods, segment income 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 loss.
Same Store Properties
Information based on Same Store Properties, Acquired Properties and Disposed Properties (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered. As of December 31, 2023, we owned 204 properties (including two land parcels). There were 193 properties (our “Same Store Properties”) owned for the entire years ended December 31, 2023 and 2022 (including two land parcels). Since January 1, 2022 and through December 31, 2023, we acquired 11 properties (our “Acquired Properties”) and disposed of nine properties (our “Disposed Properties”).
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The following table presents a roll-forward of our properties owned from January 1, 2022 to December 31, 2023:
MOBSHOPTotal
Number of properties, December 31, 2021
146 56 202 
Acquisition activity during the year ended December 31, 2022
4 — 4 
Disposition activity during the year ended December 31, 2022
— (4)(4)
Number of properties, December 31, 2022
150 52 202 
Acquisition activity during the year ended December 31, 2023
7—7
Disposition activity during the year ended December 31, 2023
(1)(4)(5)
Number of properties, December 31, 2023
156 48 204 
Number of Same Store Properties145 48 193 
Number of Acquired Properties11 — 11 
Number of Disposed Properties1 8 9 
Segment Results — Medical Office Buildings
The following table presents the components of segment income and the period to period change within our MOB segment for the years ended December 31, 2023 and 2022:
Segment Same Store(1)
Acquisitions(2)
Dispositions(3)
Segment Total(4)
 Year Ended December 31,Increase (Decrease)Year Ended December 31,Increase (Decrease)Year Ended December 31,Increase (Decrease)Year Ended December 31,Increase (Decrease)
(In thousands)20232022$20232022$20232022$20232022$
Revenue from tenants$131,201 $130,542 $659 $4,187 $911 $3,276 $61 $(9)$70 $135,449 $131,444 $4,005 
Less: Property operating and maintenance37,347 35,665 1,682 425 84 341 182 196 (14)37,954 35,945 2,009 
Segment income$93,854 $94,877 $(1,023)$3,762 $827 $2,935 $(121)$(205)$84 $97,495 $95,499 $1,996 
__________
(1)Our MOB segment included 145 Same Store Properties.
(2)Our MOB segment included 11 Acquired Properties.
(3)Our MOB segment included one Disposed Property.
(4)Our MOB segment consisted of 156 total properties.
Revenue from tenants primarily reflects contractual rent received from tenants in our MOBs and operating expense reimbursements. These reimbursements generally increase in proportion with the increase in property operating and maintenance expenses in our MOB segment. Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, in addition to base rent.
Revenue from Tenants
During the year ended December 31, 2023, revenue from tenants increased by $4.0 million in our MOB segment as compared to the year ended December 31, 2022, primarily as a result of increased revenue from tenants of $3.3 million generated from our Acquired Properties, increased revenue from tenants of $0.7 million from our Same Store Properties and an increase in revenue from tenants of $0.1 million from our Disposed Properties. The increase in revenue from our Same Store Properties was primarily attributable from increased operating expense reimbursement revenue from increased property, operating and maintenance expenses.
Property Operating and Maintenance
Property operating and maintenance relates to the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third party property management fees. During the year ended December 31, 2023, property operating and maintenance costs in our MOB segment increased by $2.0 million as compared to the year ended December 31, 2022, primarily as a result of increased costs from our Same Store Properties of $1.7 million and increased costs from our Acquired Properties of $0.3 million. The increase in property operating and maintenance expenses from our Same Store properties is primarily the result of the impacts of inflation on utility and maintenance costs as well as increased property insurance and property tax expenses, which are largely reimbursed by tenants.
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Segment Results — Seniors Housing Operating Properties
The following table presents the revenue and property operating and maintenance expense and the period to period change within our SHOP segment for the years ended December 31, 2023 and 2022:
Segment Same Store (1)
Acquisitions (2)
Dispositions (3)
Segment Total
 Year Ended December 31,Increase (Decrease)Year Ended December 31,Increase (Decrease)Year Ended December 31,Increase (Decrease)Year Ended December 31,Increase (Decrease)
(In thousands)20232022$20232022$20232022$20232022$
Revenue from tenants$207,707 $196,749 $10,958 $— $— $— $2,769 $7,653 $(4,884)$210,476 $204,402 $6,074 
Less: Property operating and maintenance176,745 167,064 9,681 — — — 3,093 10,435 (7,342)179,838 177,499 2,339 
Segment income$30,962 $29,685 $1,277 $— $— $— $(324)$(2,782)$2,458 $30,638 $26,903 $3,735 
__________
(1)Our SHOP segment included 48 Same Store Properties, including two land parcels.
(2)Our SHOP segment included zero Acquired Properties.
(3)Our SHOP segment included eight Disposed Properties.
(4)Our SHOP segment included 48 total properties, including two land parcels.
Revenues from tenants within our SHOP segment are generated in connection with rent and services offered to residents 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.
Revenue from Tenants
During the year ended December 31, 2023, revenue from tenants increased by $6.1 million in our SHOP segment as compared to the year ended December 31, 2022, which was primarily driven by an increase in revenue from tenants of $11.0 million from our Same Store Properties, partially offset by a decrease in revenue from tenants of $4.9 million due to our Disposed Properties.
The increase to our Same Store Properties revenue from tenants was primarily driven by higher monthly leasing rates in the year ended December 31, 2023, as compared to the year ended December 31, 2022. We offered consistent levels of rent concessions between the periods of $3.2 million, which are recorded as reductions to revenue.
Additionally, during the years ended December 31, 2023 and 2022, we recorded reductions in revenue related to bad debt of $1.2 million and $3.2 million, respectively. Approximately $1.3 million of bad debt expense recorded in the year ended December 31, 2022 was related to our Disposed Properties. There were no significant write-off’s related to previously disposed properties during the year ended December 31, 2023.
Property Operating and Maintenance
During the year ended December 31, 2023, property operating and maintenance expenses increased $2.3 million in our SHOP segment as compared to the year ended December 31, 2022, primarily due to an increase in property operating and maintenance expenses of $9.7 million from our Same Store Properties, partially offset by a decrease in property operating and maintenance expenses of $7.3 million from our Disposed Properties.
Our Same Store properties operating and maintenance expenses increased significantly in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily from increased amounts incurred for wages, including overtime and bonus amounts, paid to employees of our third-party operators. These amounts increased our property maintenance and operating costs by $7.7 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022, but were partially offset by a decrease in amounts paid for contract labor of $5.5 million. The remainder of the increase in our Same Store property operating and maintenance expenses was attributable to the general increase in food, utilities and supplies from inflation, as well as increases to property insurance and property tax rates. For additional information on the risks and uncertainties associated with increases in inflation and labor costs, see the Inflation section below and Part 1 — Item 1A. Risk Factors section of this Annual Report on Form 10-K.
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The total increase in Same Store Properties operating and maintenance expenses was also impacted by the receipt of $4.5 million of funds through the CARES Act in the year ended December 31, 2022, as compared to no funds received through the CARES Act during the year ended December 31, 2023, which offset costs incurred from the COVID-19 pandemic. Of the $4.5 million of CARES Act funds received by us in the year ended December 31, 2022, $3.7 million was recognized as a reduction to our Same Store Property operating and maintenance expenses in the table above, with the remainder attributable to our Disposed properties. 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
Impairment Charges
We incurred $4.7 million of impairment charges for the year ended December 31, 2023 related to one held-for-use SHOP property and one held-for-use MOB property. These impairment charges were recorded to reduce the carrying values of the properties to their estimated fair values as determined by the estimated discounted cash flows over our intended holding periods. We are actively marketing these properties for sale.
We incurred $27.6 million of impairment charges for the year ended December 31, 2022, of which $10.6 million related to seven skilled nursing facilities in our MOB segment located in Illinois, $15.1 million related to six held-for-use SHOP properties and $1.8 million related to an MOB property located in Pennsylvania. All of these impairment charges were recorded to reduce the carrying value of the properties to their fair values, respectively, as determined by our estimated discounted cash flows over our intended holding periods.
See Note 3 — Real Estate Investments to our consolidated financial statements in this Annual Report on Form 10-K for additional information on impairment charges.
Operating Fees to Related Parties
Operating fees to related parties increased $0.2 million to $25.5 million for the year ended December 31, 2023 from $25.4 million for the year ended December 31, 2022.
Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis. We pay a fixed base management fee equal to $1.6 million per month, while the variable portion of the base management fee is equal, per month, to one twelfth of 1.25% of the cumulative net proceeds of any equity raised subsequent to February 17, 2017. Asset management fees were consistent at $21.8 million for the years ended December 31, 2023 and 2022. There are no fees earned for stock dividend issuances. Variable asset management fees will further increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the years ended December 31, 2023 or 2022.
Property management fees increased $0.2 million to $3.7 million during the year ended December 31, 2023 from $3.5 million for the year ended December 31, 2022, primarily due to additional property management fees on revenues from recently acquired MOBs. 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 found in this Annual Report on Form 10-K which provides detail on our asset and property management fees.
Acquisition and Transaction Related Expenses
Acquisition and transaction related expenses were $0.5 million for the year ended December 31, 2023 and $1.5 million for the year ended December 31, 2022.
The acquisition and transaction related expenses incurred during the year ended December 31, 2023 consist of dead deal costs of $0.2 million and legal fees related to terminated SHOP operators of $0.3 million.
The acquisition and transaction related expenses incurred during the year ended December 31, 2022 consisted of dead deal costs of $0.8 million, legal fees related to terminated SHOP operators of $0.5 million and mortgage repayment penalties of $0.2 million.
General and Administrative Expenses
General and administrative expenses increased $1.6 million to $18.9 million for the year ended December 31, 2023 compared to $17.3 million for the year ended December 31, 2022, which includes $10.6 million and $8.8 million for the years ended December 31, 2023 and 2022, respectively, incurred in professional fees and other expense reimbursements.
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The professional fees and other expense reimbursements relating to salaries, wages and benefits, including for executive officers and all other employees of the Advisor or its affiliates who provide services to us, increased by $0.9 million to $6.9 million for the year ended December 31, 2023 from $6.0 million for the year ended December 31, 2022. These reimbursable professional fees are subject to a limit (the “Capped Reimbursement Amount”), which was $8.0 million and $7.8 million as of December 31, 2023 and 2022, respectively. We expect that the general and administrative expenses we incur from salaries, wages, and benefits will continue to increase in the year ended December 31, 2024, and we expect that the Capped Reimbursement Amount for 2024 will be approximately $8.2 million. Please see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Depreciation and Amortization Expenses
Depreciation and amortization expense increased $0.8 million to $82.9 million for the year ended December 31, 2023 from $82.1 million for the year ended December 31, 2022. The increase in depreciation and amortization expense was primarily attributable to $0.3 million of increased expense from our Same Store Properties and $1.5 million of increased expense from our Acquired Properties, partially offset by $1.0 million of decreased expense from our Disposed Properties.
The increase to our 2023 Same Store depreciation and amortization includes $1.3 million of accelerated depreciation we recorded in the year ended December 31, 2022 on one MOB property in Florida which incurred damages as a result of Hurricane Ian, as well as 15 SHOPs across the Midwest which suffered cold weather-related damages.
The increase in depreciation and amortization expense in the year ended December 31, 2023 also includes an out-of period adjustment of $0.7 million recorded in the year ended December 31, 2023 due to the understatement of depreciation and amortization expense on certain capital improvements and deferred leasing commissions, thereby understating previously reported depreciation and amortization expense by $0.1 million and $0.6 million which related to the year ended December 31, 2022 and pre-2022 periods, respectively. For additional information, please see Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements included in this Annual Report on Form 10-K.
Loss on Sale of Real Estate Investments
During the year ended December 31, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of the four disposed SHOPs were impaired by $15.1 million in the year ended December 31, 2022 (see above). As a result, the Company recorded an aggregate loss on sale of $0.3 million in the year ended December 31, 2023.
During the year ended December 31, 2022 we disposed of four SHOPs for an aggregate contract sales price of $12.4 million. These four SHOPs had been previously impaired by $34.0 million in the year ended December 31, 2021. As a result, we recorded a loss on sale of $0.3 million for the year ended December 31, 2022. We also recorded a gain on sale of $0.2 million in the year ended December 31, 2022 related to the settlement of a lien on formerly disposed properties.
See Note 3 — Real Estate Investments, Net to our consolidated financial statements in this Annual Report on Form 10-K for additional information on the dispositions noted above.
Interest Expense
Interest expense increased by $14.3 million to $66.1 million for the year ended December 31, 2023 from $51.7 million for the year ended December 31, 2022. The increase in interest expense resulted from higher average interest rates on our variable debt in 2023 as compared to 2022, as well as from higher levels of debt. We also recorded $2.6 million of accelerated deferred financing cost amortization in the year ended December 31, 2023 from the termination of our Prior Credit Facility. These increases were partially offset by $4.2 million of reclassifications from AOCI as decreases to interest expense from our 2023 interest rate swap terminations which resulted in a gain of $5.4 million which is being amortized into earnings through March 2024 (see Note 7 — Derivatives and Hedging Activities for additional information).
As of December 31, 2023 we had total borrowings of $1.2 billion, at a weighted average interest rate of 5.56% per year. As of December 31, 2022, we had total borrowings of $1.1 billion, at a weighted average interest rate of 4.83% per year.
Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings (including current market rates) among other factors. Market interest rates continued to increase throughout the year ended December 31, 2023. Our weighted average interest rate as of December 31, 2023 was higher than that as of December 31, 2022. We anticipate that interest expense for the year ended December 31, 2024 may exceed the $66.1 million expense recorded for the year ended December 31, 2023 if interest rates remain at current levels or increase.
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 $0.7 million for the year ended December 31, 2023. Interest and other income was approximately $27,000 for the year ended December 31, 2022.
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(Loss) gain on Non-Designated Derivatives
(Loss) gain on non-designated derivative instruments for the years ended December 31, 2023 and 2022 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 and MOB Warehouse Facility, which have variable interest rates.
The loss recorded in the year ended December 31, 2023 was due to decreases in forward-interest rate curves, and represents the decrease in fair value as well as $5.6 million of cash received from our interest rate caps.
The gain recorded in the year ended December 31, 2022 was due to significant increases to interest rates during the period and represents the increase in fair value as well as $0.3 million of cash received from our interest rate caps.
Income Tax Expense
Income taxes generally relate to our SHOPs, which are leased to our TRS. We recorded income tax expense of $0.3 million and $0.2 million for the years ended December 31, 2023 and 2022, respectively.
Because of our TRS’s recent operating history of losses and the impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, in the third quarter of 2020, we were not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance. Since that time, our TRS’s operating performance has not significantly improved and thus we have recorded a 100% valuation allowance on our net deferred tax assets through December 31, 2023. 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 operations and comprehensive loss.
Net Loss Attributable to Non-Controlling Interests
Net loss attributable to non-controlling interests was $82,000 and $135,000 for the years ended December 31, 2023 and 2022, respectively. 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 other non-controlling interest holders in our subsidiaries that own certain properties.
Allocation for Preferred Stock
Allocation for preferred stock was $13.8 million for the years ended December 31, 2023 and 2022. These amounts represent the allocation of our net income that is related to holders of Series A Preferred Stock and holders of Series B Preferred Stock.
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Cash Flows from Operating Activities
The following table presents a reconciliation of our net cash provided by operations from our net loss for the years ended December 31, 2023 and 2022:
(in thousands)Year Ended December 31,Increase
Cash flows from operating activities:20232022(Decrease)
Net loss$(72,380)$(79,621)$7,241 
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization82,873 82,064 809 
Amortization (including write-offs) of deferred financing costs6,702 4,879 1,823 
Amortization of terminated swap(4,195)423 (4,618)
Amortization of mortgage premiums and discounts, net91 51 40 
(Accretion) amortization of market lease and other intangibles, net(890)(625)(265)
Bad debt expense1,225 3,159 (1,934)
Equity-based compensation919 1,185 (266)
(Gain) loss on non-designated derivative instruments1,995 (3,834)5,829 
Cash received from non-designated derivative instruments5,580 286 5,294 
(Gain) loss on sales of real estate investments, net322 125 197 
Impairment charges4,676 27,630 (22,954)
Deferred tax valuation allowance1,165 2,750 (1,585)
Changes in assets and liabilities:— 
Straight-line rent receivable(1,049)(1,523)474 
Prepaid expenses and other assets(6,069)(3,036)(3,033)
Accounts payable, accrued expenses and other liabilities83 (2,924)3,007 
Deferred rent576 (2,694)3,270 
Net cash provided by operating activities$21,624 $28,295 $(6,671)
The level of cash flows provided by operating activities is affected by, among other things, the number of properties owned, the performance of those properties, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses.
Cash Flows from Investing Activities
The following table presents our net cash used in investing activities for the years ended December 31, 2023 and 2022:
(in thousands)Year Ended December 31,Increase
Cash flows from investing activities:20232022(Decrease)
Property acquisitions$(35,261)$(25,538)$(9,723)
Investments in non-designated interest rate caps(9,962)— (9,962)
Capital expenditures(22,397)(27,993)5,596 
Proceeds from sales of real estate investments4,803 11,749 (6,946)
Net cash used in investing activities$(62,817)$(41,782)$(21,035)
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Cash Flows from Financing Activities
The following table presents our net cash provided by financing activities for the years ended December 31, 2023 and 2022:
(in thousands)Year Ended December 31,Increase
Cash flows from investing activities:20232022(Decrease)
Payments on credit facilities$(200,602)$(2,998)$(197,604)
Proceeds from credit facilities34,748 30,000 4,748 
Proceeds from mortgage notes payable240,000 — 240,000 
Payments on mortgage notes payable(1,139)(6,662)5,523 
Payments for non-designated derivative instruments— — — 
Proceeds from interest rate swap terminations5,413 — — 
Payments of deferred financing costs(8,748)(1,672)(7,076)
Proceeds from issuance of Series A Preferred Stock, net— — — 
Proceeds from issuance of Series B Preferred Stock, net— (42)42 
Dividends paid on Series A Preferred stock(7,334)(7,333)(1)
Dividends paid on Series B Preferred stock(6,466)(6,466)— 
Contributions from non-controlling interest holders284 — — 
Distributions to non-controlling interest holders(185)(184)(1)
Net cash provided by financing activities$55,971 $4,643 $45,631 
Liquidity and Capital Resources
Our existing principal demands for cash are to fund acquisitions, capital expenditures, payments for our operating and administrative expenses, debt service obligations (including principal repayments), and dividends to holders of our Series A Preferred Stock and holders of our 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 twelve months. Our future liquidity requirements, and available liquidity, however, depend on many factors, such as recent increases in inflation, labor shortages, supply chain disruptions, and higher property insurance, property tax and interest rates, all of which may adversely impact our results of operations and thus ultimately our liquidity. Moreover, these adverse impacts, as well as the ongoing wars in Ukraine, Israel and related sanctions, may also impact our tenant and residents’ ability to pay rent and thus our cash flows. For more information about the risks and uncertainties associated with inflation, the ongoing wars in Ukraine, Israel and related sanctions, and labor shortages and labor costs, please see the Inflation section below and Part I – Item 1A. Risk Factors section of this Annual Report on Form 10-K.
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, potential future advances under our Fannie Mae Master Credit Facilities and MOB Warehouse Facility, net cash provided by our property dispositions and potential new financings utilizing certain of our currently unencumbered properties.
As of December 31, 2023 and 2022, we had $46.4 million and $53.7 million of cash and cash equivalents, respectively, and our ability to use this cash on hand is restricted. The Barclays MOB Loan Agreement requires us to maintain a minimum balance of cash and cash equivalents of $12.5 million at all times.
Financings
As of December 31, 2023, our total debt leverage ratio (net debt divided by gross asset value) was approximately 43.7%. Our net debt totaled $1.1 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($46.4 million). Our gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion), net of gross market lease intangible liabilities ($23.5 million). Cumulative impairment charges are reflected within gross asset value.
As of December 31, 2023, we had total gross borrowings of $1.2 billion, at a weighted-average interest rate of 5.59% and a weighted-average remaining term of 5.1 years. As of December 31, 2022, we had total gross borrowings of $1.1 billion at a weighted average interest rate of 4.83%. Inclusive of the effect of our non-designated hedging instruments, our total portfolio economic interest rate was 5.00% and 4.47% as of December 31, 2023 and 2022, respectively.
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As of December 31, 2023, the carrying value of our real estate investments, at cost was $2.6 billion, with $1.3 billion of this amount secured as collateral for mortgage notes payable, $614.0 million of this amount pledged to secure advances under the Fannie Mae Master Credit Facilities and $23.0 million of this amount was pledged to secure advances under the MOB Warehouse 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 Fannie Mae Master Credit Facilities or MOB Warehouse Facility, which would impact availability thereunder.
Unencumbered real estate investments, at cost as of December 31, 2023 was $635.9 million. There can be no assurance as to the amount of liquidity we would be able to generate from leveraging these unencumbered real estate investments, if we are able to leverage them at all.
Mortgage Notes Payable
As of December 31, 2023, we had $821.4 million in gross mortgage notes payable outstanding with a weighted-average interest rate of 4.58% and a weighted-average remaining term of 6.1 years. Future scheduled principal payments on our mortgage notes payable for 2024 are $1.2 million. All of our mortgage debt is either fixed-rate, or effectively fixed-rate via our interest rate swap.
During the year ended December 31, 2023, we entered into one new mortgage note, which is described below:
Barclays MOB Loan
On May 24, 2023, we entered into the Barclays MOB Loan with the Lenders, in the aggregate amount of $240.0 million. In connection with the Barclays MOB Loan Agreement, we entered into the Guaranty and the Environmental Indemnity for the benefit of the Lenders.
The Barclays MOB Loan is secured by, among other things, first priority mortgages on 62 of our MOBs with an aggregate gross asset value of $417.5 million. The Barclays MOB Loan has a 10-year term and is interest-only at a fixed rate of 6.453% per year. Under the Barclays MOB Loan Agreement, we are required to make interest-only payments on a monthly basis with the principal balance due on the maturity date of June 6, 2033. The Barclays MOB Loan Agreement requires us to comply with certain covenants, including, maintaining combined cash and cash equivalents totaling at least $12.5 million at all times. We paid $7.8 million in deferred financing costs related to the Barclay’s MOB Loan, which is amortized into interest expense over the term of the loan.
At the closing of the Barclays MOB Loan, we applied $194.8 million of the proceeds to repay and terminate the Prior Credit Facility. The remaining proceeds of approximately $39.0 million (after the payment of Barclays MOB Loan closing costs and reimbursement of deposits) were used for general corporate purposes, subject to the terms of the Barclays MOB Loan Agreement. Additionally, by terminating the Prior Credit Facility, we are no longer subject to certain restrictive covenants previously imposed by the Prior Credit Facility (see Note 5 — Credit Facilities for additional information).
Credit Facilities
As of December 31, 2023, we had $361.0 million in total amounts outstanding under our credit facilities at a weighted-average interest rate of 7.90% and a weighted-average remaining term of 2.8 years. Inclusive of our non-designated interest rate caps, the economic interest rate on our credit facilities was 5.94% as of December 31, 2023. Future scheduled principal payments on our credit facilities for 2024 are $5.8 million.
Fannie Mae Master Credit Facilities
As of December 31, 2023, $346.3 million was outstanding under the Fannie Mae Master Credit Facilities. We may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. We do not expect to draw any further amounts on the Fannie Mae Master Credit Facilities. Borrowings under the Fannie Mae Master Credit Facilities bear annual interest at a rate that varies on a monthly basis and is equal to the sum of the current SOFR for one month U.S. dollar-denominated deposits and a spread (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively) with a combined floor of 2.62%. The Fannie Mae Master Credit Facilities mature on November 1, 2026. Future scheduled principal payments on our Fannie Mae Master Credit Facilities for 2024 are $5.8 million.
During the year ended December 31, 2023, we provided multiple deposits related to our interest rate swaps to Fannie Mae totaling $11.8 million. These deposits were provided because the debt service coverage ratios of the underlying properties of each facility were below those of the minimum required amounts per the debt agreements. These deposits will be refunded upon either (i) the achievement of debt service coverage ratios above those of the required minimum amounts or (ii) the maturity of the Fannie Mae Master Credit Facilities.
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MOB Warehouse Facility
On December 22, 2023, we, entered into a loan agreement with Capital One to provide up to $50.0 million of variable-rate financing.
As of December 31, 2023, $14.7 million was outstanding under the MOB Warehouse Facility. We may request future advances under the MOB Warehouse Facility by adding eligible MOBs to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Borrowings under the MOB Warehouse Facility bear interest at a monthly rate equal to the sum of the current SOFR for one-month denominated deposits and a spread of 3.0%. Interest payments are due monthly, with no principal payments due until maturity in December 2026.
Non-Designated Interest Rate Caps
Our interest rate caps are used to limit our exposure to interest rate movements on our credit facilities for economic purposes, however, we do not elect to apply hedge accounting to these instruments. As of December 31, 2023, we had seven SOFR-based interest rate caps with an aggregate notional amount of $364.2 million, which limits 30-day SOFR to 3.50% and have varying maturities through January 2027.
As 30-day SOFR has increased beyond 3.50%, we have received cash payments of $5.6 million in the year ended December 31, 2023. We received $0.3 million of cash payments in the year ended December 31, 2022.
We paid premiums of $9.6 million to renew five interest rate caps with an aggregate notional amount of $289.4 million which matured in the year ended December 31, 2023, and we also paid $0.4 million for a new interest rate cap entered into during the year ended December 31, 2023 for a notional amount of $14.7 million. One interest rate cap with a notional amount of $60.0 million matures in April 2024, which represents the next interest rate cap maturity. We estimate that this renewal will cost us approximately $1.3 million in premiums.
Upon the maturity and renewal of our interest rate caps, we have been obligated to provide cash deposits to Fannie Mae because the debt service coverage ratios of the underlying SHOPs of each facility were below those of the minimum required amounts per the debt agreements. In the year ended December 31, 2023, we provided a cash deposit of $11.8 million. We expect to provide another deposit, which we estimate to be $2.3 million, upon the maturity of one interest rate cap in April 2024. Please see the Fannie Mae Master Credit Facilities section above for additional information.
Capital Expenditures
During the year ended December 31, 2023, our capital expenditures, including accrued capital expenditures, were $25.3 million, of which $10.5 million related our MOB segment and $14.8 million related to our SHOP segment. We anticipate this rate of capital expenditures will be similar for the MOB segment and our SHOP capital expenditures will decrease in 2024.
Acquisitions — Year Ended December 31, 2023
During the year ended December 31, 2023, we acquired seven single-tenant MOBs for an aggregate contract purchase price of $34.9 million. These acquisitions were funded with $20.0 million from draws under our Prior Credit Facility and the remainder with cash on hand.
Acquisitions — Subsequent Year Ended December 31, 2023
We acquired four MOB properties subsequent to December 31, 2023 for an aggregate contract purchase price of $12.6 million. This acquisition was funded with $7.5 million of proceeds from a new mortgage note secured by the four acquired properties and the remainder with cash on hand.
Dispositions — Year Ended December 31, 2023
During the year ended December 31, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Pursuant to the terms of the Prior Credit Facility, $5.2 million of net proceeds were used to repay amounts then outstanding, and $2.7 million of net proceeds were used to partially repay the Multi-Property CMBS Loan mortgage note.
Dispositions — Subsequent to December 31, 2023
Subsequent to December 31, 2023, we did not dispose of any properties. However, we have one MOB and one SHOP scheduled for sale in the second quarter of 2024. There can be no assurance that these properties will be sold on favorable terms, or at all.
Share Repurchase Program
Under the Prior Credit Facility, we were restricted from repurchasing shares. Thus, the Board suspended repurchases under the SRP effective August 14, 2020. No further repurchase requests under the SRP may be made unless and until the SRP is reactivated. There can be no assurance, however, as to whether our SRP will be reactivated or on what terms.
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Non-GAAP Financial Measures
This section discusses the non-GAAP financial measures we use to evaluate our performance including Funds from Operations (“FFO”) and Modified Funds from Operations (“MFFO”). MFFO is based on our total performance as a company and therefore reflects the impacts of interest expense, general and administrative expenses and operating fees to related parties. A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net loss, are provided below:
Funds from Operations and Modified Funds from Operations
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and 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, business cycles, unemployment levels and consumer spending, presentations of operating results for REITs using the historical accounting convention for depreciation, amortization and certain other items may not be informative.
Because of these factors, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has published a standardized measure of performance known as FFO, which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance. FFO is not equivalent to our net loss as determined under GAAP, and FFO is not intended to replace financial performance measures 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 (i) depreciation and amortization related to real estate assets, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from changes in control and (iv) 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 the proportionate share of FFO attributable to our stockholders. Our FFO calculation complies with NAREIT’s definition.
We believe that 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 loss as determined by GAAP.
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 capitalized and depreciated 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 acquisition 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 loss as determined by GAAP. MFFO is not equivalent to our net loss as determined under GAAP, and MFFO is not intended to replace financial performance measures determined under GAAP.
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We calculate MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010, except that we adjust for deferred tax asset allowances based on management’s determination. The Practice Guideline defines MFFO as FFO further adjusted for acquisition fees and expenses and other items. In calculating MFFO, we follow the Practice Guideline (with the added adjustment for deferred tax asset allowances based on management’s determination as noted above) and exclude (i) acquisition fees and expenses, (ii) amortization of above and below-market leases and other intangible lease assets and liabilities, (iii) 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), (iv) accretion of discounts and amortization of premiums on debt investments, (v) mark-to-market adjustments included in net loss as determined by GAAP, (vi) hedges, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, and (vii) 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. In addition, because we have collected all concessions granted to our tenants as a result of the COVID-19 pandemic (see Accounting Treatment of Rent Deferrals below), we have excluded from the increase in straight-line rent for MFFO purposes the amounts recognized under GAAP relating to these deferrals, which is not considered by the Practice Guideline.
We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.
Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to pay dividends and other distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.
Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, updates to the White Paper or the Practice Guideline may be published or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.
Accounting Treatment of Rent Deferrals
All of the concessions granted to our tenants as a result of the COVID-19 pandemic were rent deferrals with the original lease term unchanged and all deferred rent has been collected (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 significantly impacted by these types of deferrals. As of December 31, 2021, all deferred amounts had been collected and we have not deferred any additional amounts since the year ended December 31, 2020. 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 Annual Report on Form 10-K.
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The table below reflects the items deducted from or added to net loss attributable to common stockholders in our calculation of FFO and MFFO for the periods indicated. In calculating our FFO and MFFO, we exclude the impact of amounts attributable to our non-controlling interests.
Year Ended December 31,
(In thousands)202320222021
Net loss attributable to common stockholders (in accordance with GAAP)$(86,097)$(93,285)$(92,942)
Depreciation and amortization (1)
80,057 80,063 78,115 
Impairment charges4,676 27,630 40,951 
Loss (gain) on sale of real estate investments322 125 (3,648)
Adjustments for non-controlling interests (2)
(403)(490)(529)
FFO (as defined by NAREIT) attributable to common stockholders(1,445)14,043 21,947 
Acquisition and transaction related545 1,484 2,714 
(Accretion) amortization of market lease and other lease intangibles, net(890)(625)(198)
Straight-line rent adjustments(1,049)(1,523)(780)
Straight-line rent (rent deferral agreements) (3)
— — (280)
Amortization of mortgage premiums and discounts, net91 51 55 
(Gain) loss on non-designated derivatives1,995 (3,834)(37)
Cash received from non-designated derivatives5,580 286 — 
Deferred tax asset valuation allowance (4)
1,165 2,750 (482)
Adjustments for non-controlling interests (2)
38 10 1 
MFFO attributable to common stockholders$6,030 $12,642 $22,940 
________
(1)Net of non-real estate depreciation and amortization.
(2)Represents the portion of the adjustments allocable to non-controlling interests.
(3)Represents the amount of 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 consolidated balance sheet but are considered to be earned revenue attributed to the current period for purposes of MFFO as they are expected to be collected.
(4)Represents the non-cash change of the reserve against our deferred tax asset, which has been fully reserved since December 31, 2020, which we do not consider part of our normal operations.
Dividends and Other Distributions
Dividends on our Series A Preferred Stock are declared quarterly 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% per annum on 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 and declared by us.
Dividends on our Series B Preferred Stock are declare quarterly 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 and declared by us. The first dividend on the Series B Preferred Stock was paid in January 2022.
On February 20, 2018, the Board authorized the rate at which we pay monthly distributions to stockholders, effective as of March 1, 2018, which is $0.85 per annum, per share of common stock. Also, 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 COVID-19 pandemic and to comply with the Prior Credit Facility at the time. Under this distribution 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 asset value in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter.
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.
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The following table shows the sources for the payment of distributions to common stockholders and preferred stockholders, including distributions on restricted shares and Common OP Units, but excluding distributions related to Class B Units because these distributions are recorded as an expense in our consolidated statement of operations and comprehensive loss, for the periods indicated. No cash distributions were made to common stockholders, restricted shareholders, holders of Common OP Units or holders of Class B Units in the year ended December 31, 2023.
Three Months EndedYear Ended
March 31, 2023June 30, 2023September 30, 2023December 31, 2023December 31, 2023
(In thousands)AmountsPercentage of DistributionsAmountsPercentage of DistributionsAmountsPercentage of DistributionsAmountsPercentage of DistributionsAmountsPercentage of Distributions
Distributions:
Dividends paid to holders of Series A Preferred Stock$1,833 52.4%$1,833 52.4%$1,834 52.5%$1,834 52.4%$7,334 52.4%
Dividends paid to holders of Series B Preferred Stock1,616 46.2%1,617 46.3%1,616 46.2%1,617 46.2%6,466 46.2%
Distributions paid to holders of Series A Preferred Units46 1.3%46 1.3%46 1.3%47 1.3%185 1.3%
Total cash distributions$3,495 100.0%$3,496 100.0%$3,496 100.0%$3,498 100.0%$13,985 100.0%
Source of distribution coverage:
Cash flows provided by operations (1)
$3,495 100.0 %$3,496 100.0 %$3,496 100.0 %$3,498 100.0 %$13,985 100.0 %
Total source of distribution coverage
$3,495 100.0 %$3,496 100.0 %$3,496 100.0 %$3,498 100.0 %$13,985 100.0 %
Cash flows provided by operations (in accordance with GAAP)
$4,989 $5,688 $5,681 $5,266 $21,624 
Net loss (in accordance with GAAP)$(14,068)$(17,332)$(16,125)$(24,855)$(72,380)
__________
(1)Assumes the use of available cash flows from operations before any other sources.
For the year ended December 31, 2023, cash flows provided by operations were $21.6 million. We had not historically generated sufficient cash flows from operations to fund the payment of dividends and other distributions at the current rate prior to switching from paying cash dividends to stock dividends on our common stock, which occurred on October 1, 2020. As shown in the table above, we funded dividends to holders of Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units 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 solely in stock instead of cash.
Our ability to pay dividends on our Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units and other distributions 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 our ability to complete acquisitions of new properties and our ability to improve operations at our existing properties, some of which have recently been impacted by the adverse effects of inflation, labor shortages, and supply chain disruptions. 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.
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 Fannie Mae Master Credit Facilities required interest only payments through November 2021 and principal and interest payments thereafter. The payment terms of our MOB Warehouse Facility require interest only payments with all unpaid principal due in December 2026. Our loan agreements require us to comply with specific financial and reporting covenants.
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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 believe 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 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 the leases with tenants in our MOB segment that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates. As of December 31, 2023, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 3.4%. To help mitigate the adverse impact of inflation, most of our leases with our tenants in our MOB segment contain rent escalation provisions which increase the cash that is due under these leases over their respective terms. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). Although most of our leases with tenants in our MOB segment contain rent escalation provisions, these escalation rates are generally below the rate of inflation.
In addition to base rent, depending on the specific lease, MOB tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases. Property operating and maintenance expenses include common area maintenance costs, real estate taxes and insurance. Increased operating costs paid by our tenants under these net leases could have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’ ability to pay rent owed to us or property expenses to be paid, or reimbursed to us, by our tenants. Renewals of leases or future leases for our net lease properties may not be negotiated on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs. If we are unable to lease properties on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs.
Leases with residents at our SHOPs typically do not have rent escalations, however, we are able to renew leases at market rates as they mature due to their short-term nature. As inflation rates increase or persist at high levels, the cost of providing medical care at our SHOPs, particularly labor costs, will increase. If we are unable to admit new residents or renew resident leases at market rates, while bearing these increased costs from providing services to our residents, our results of operations may be affected.
Related-Party Transactions and Agreements
Please see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Annual Report on Form 10-K 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our long-term debt, which consists of secured financings and the Fannie Mae Master Credit Facilities, bear interest at fixed rates and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars, and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We will not hold or issue these derivative contracts for trading or speculative purposes. As of December 31, 2023, we had entered into seven SOFR-based non-designated interest rate caps with a current notional amount of approximately $364.2 million and one SOFR-based designated interest rate swap with a notional amount of $378.5 million. We do not have any foreign operations and thus we are generally not directly exposed to foreign currency fluctuations.
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Mortgage Notes Payable
As of December 31, 2023, all of our mortgages are either fixed-rate ($442.9 million) or variable-rate ($378.5 million), before consideration of interest rate swaps. Our mortgages had a gross aggregate carrying value of $821.4 million and a fair value of $787.7 million as of December 31, 2023.
Credit Facilities
Our Fannie Mae Master Credit Facilities and MOB Warehouse Facility are variable-rate. Our Fannie Mae Master Credit Facilities had a gross aggregate carrying amount of $346.3 million and a fair value of $347.0 million, and our MOB Warehouse Facility had a gross carrying value of $14.7 million and a fair value of $14.8 million as of December 31, 2023.
Sensitivity Analysis - Interest Expense
Interest rate volatility associated with all of our variable-rate borrowings affects interest expense incurred and cash flow to the extent they are not fixed via interest rate swap or capped via interest rate cap contracts.
Interest Rate Swaps
As noted above, we have one SOFR-based designated interest rate swap with a notional amount of $378.5 million, which effectively create a fixed interest rate for a portion of our variable-rate debt. This interest rate swap effectively hedges all of our variable rate debt with the exception of our Fannie Mae Master Credit Facilities and MOB Warehouse Facility discussed below.
Interest Rate Caps
We also have entered into seven SOFR-based, non-designated interest rate cap contracts with a current notional amount of $364.2 million as of December 31, 2023, which limits SOFR exposure on our Fannie Mae Master Credit Facilities and MOB Warehouse Facility to 3.50%. The active caps began limiting SOFR during the fourth quarter of 2022 as SOFR rates exceeded the strike price of 3.50% and we are receiving monthly cash payments on these contracts. Because these are non-designated derivatives, the amounts received are included in (loss) gain on non-designated derivatives in our statement of operations and comprehensive loss.
Sensitivity
As of December 31, 2023, we are not currently negatively exposed to rising interest rates. Assuming all other variables besides interest rates remain constant, a 100 basis point increase in variable interest rates would not impact our net interest payments due to our interest rate swaps and effective interest rate caps. Assuming all other variables besides interest rates remain constant, a 100 basis point decrease in variable interest rates would also not impact our swapped debt, and based on the SOFR rate as of December 31, 2023, a 100 basis point decrease would not have a material impact on our net interest payments (inclusive of cash received from our non-designated derivatives included in (loss) gain on non-designated derivatives).
Sensitivity Analysis - Fair Value of Debt
Changes in market interest rates on our debt instruments impacts their fair value, even if it has no impact on interest due on them. For instance, if interest rates rise 100 basis points and the balances on our debt instruments remain constant, we expect the fair value of our obligations to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our debt assumes an immediate 100 basis point move in interest rates from their December 31, 2023 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our debt by $24.5 million. A 100 basis point decrease in market interest rates would result in an increase in the fair value of our debt by $26.8 million. A 100 basis point increase in market interest rates would result in an increase in the fair value of our designated interest rate swap by $9.7 million. A 100 basis point decrease in market interest rates would result in a decrease in the fair value of our designated interest rate swap by $10.1 million.
These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs, and assuming no other changes in our capital structure. The information presented above includes only those exposures that existed as of December 31, 2023 and does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 is hereby incorporated by reference to our Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
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Item 9A. 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”), our disclosure controls and procedures include internal controls and other procedures designed to provide reasonable assurance that information required to be disclosed in this and other reports filed under the Exchange Act is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. It should be noted that no system of controls can provide complete assurance of achieving a company’s objectives and that future events may impact the effectiveness of a system of controls.
Our Chief Executive Officer and Chief Financial Officer, carried out an evaluation, together with other members of our management, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of December 31, 2023 at a reasonable level of assurance.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making that assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on its assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective based on those criteria.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. The effectiveness of our internal control over financial reporting has not been audited by our independent registered public accounting firm because we are a “non-accelerated filer” as defined under SEC rules.
Changes in Internal Control Over Financial Reporting
During the three months ended December 31, 2023, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Trading Plans
During the last fiscal quarter, no director or officer, as defined in Rule 16-1(f), adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not Applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
We have adopted a Code of Business Conduct and Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer and principal financial officer. A copy of our code of ethics may be obtained, free of charge, by sending a written request to our executive office: 222 Bellevue Ave., Newport, RI 02840, Attention: Chief Financial Officer. Our Code of Business Conduct and Ethics is also publicly available on our website at www.healthcaretrustinc.com. If we make any substantive amendments to the code of ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Business Conduct and Ethics to our chief executive officer, chief financial officer, chief accounting officer or controller or persons performing similar functions, we will disclose the nature of the amendment or waiver on that website or in a report on Form 8-K.
The information required by this Item will be set forth in our definitive proxy statement with respect to our 2024 annual meeting of stockholders to be filed not later than 120 days after the end of the 2023 fiscal year, and is incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this Item will be set forth in our definitive proxy statement with respect to our 2024 annual meeting of stockholders to be filed not later than 120 days after the end of the 2023 fiscal year, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Securities Authorized for Issuance Under Equity Compensation Plans
Restricted Share Plan
We have an employee and director incentive restricted share plan (as amended from time to time, the “RSP”), which provides us with the ability to grant awards of restricted shares to our directors, officers and employees (if we ever have employees), and, among other eligible persons, employees of the Advisor and its affiliates who provide services to us. For additional information, see Note 11 — Equity-Based Compensation to our consolidated financial statements included in this Annual Report on Form 10-K.
The following table sets forth information regarding securities authorized for issuance under the RSP as of December 31, 2023:
Plan Category
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a) )
(a)
(b)
(c)
Equity Compensation Plans approved by security holders
—
—
3,649,668 
(1)
Equity Compensation Plans not approved by security holders
—
—
—
Total
—
—
3,649,668 
(1)
__________
(1)The total number of shares of common stock that may be subject to awards granted under the RSP may not exceed 5.0% of our outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 4,096,934 shares (as such number may be further adjusted for stock splits, stock dividends, combinations and similar events). As of December 31, 2023, we had 111,545,018 shares of common stock issued and outstanding and 447,266 shares of common stock that were subject to awards granted under the RSP. For additional information on the RSP, please see Note 11 — Equity-Based Compensation to our consolidated financial statements included in this Annual Report on Form 10-K.
The other information required by this Item will be set forth in our definitive proxy statement with respect to our 2024 annual meeting of stockholders to be filed not later than 120 days after the end of the 2023 fiscal year, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item will be set forth in our definitive proxy statement with respect to our 2024 annual meeting of stockholders to be filed not later than 120 days after the end of the 2023 fiscal year, and is incorporated herein by reference.
74

Item 14. Principal Accountant Fees and Services.
The information required by this Item will be set forth in our definitive proxy statement with respect to our 2024 annual meeting of stockholders to be filed not later than 120 days after the end of the 2023 fiscal year, and is incorporated herein by reference.
PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a) Financial Statements and Financial Statement Schedules
1.    Financial Statements:
        See the Index to Consolidated Financial Statements at page F-1 of this Annual Report on Form 10-K.
2.    Financial Statement Schedules:
The following financial statement schedule is included herein at page F-42 of this Annual Report on Form 10-K: Schedule III — Real Estate and Accumulated Depreciation

(b) Exhibits
See Exhibit Index below.


Table of Contents
EXHIBIT INDEX
The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the year ended December 31, 2023 (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)
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
3.3 (3)
Articles Supplementary relating to the designation of shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, dated December 6, 2019
3.4 (6)
Articles Supplementary designating additional shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, dated September 15, 2020
3.5 (28)
Articles Supplementary relating to the designation of shares of 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, dated October 4, 2021
3.6 (30)
Articles Supplementary designating additional shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, dated May 10, 2021
3.7 (4)
Amended and Restated Bylaws of Healthcare Trust, Inc.
3.8 (5)
Amendment to Amended and Restated Bylaws of Healthcare Trust, Inc.
3.9 (29)
Second Amendment to Amended and Restated Bylaws of Healthcare Trust, Inc.
4.1 (7)
Agreement of Limited Partnership of Healthcare Trust Operating Partnership, L.P. (f/k/a American Realty Capital Healthcare Trust II Operating Partnership, L.P.), dated as of February 14, 2013
4.2 (8)
First Amendment, dated December 31, 2013, to the Agreement of Limited Partnership of American Realty Capital Healthcare Trust II, L.P., dated February 14, 2013
4.3 (1)
Second Amendment, dated April 15, 2015, to the Agreement of Limited Partnership of American Realty Capital Healthcare Trust II, L.P., dated as of February 14, 2013
4.4 (10)
Third Amendment, dated December 6, 2019, to the Agreement of Limited Partnership of Healthcare Trust Operating Partnership, L.P., dated February 14, 2013
4.5 (6)
Fourth Amendment, dated September 15, 2020, to the Agreement of Limited Partnership of Healthcare Trust Operating Partnership, L.P., dated February 14, 2013
4.6 (30)
Fifth Amendment, dated May 7, 2021, to the Agreement of Limited Partnership of Healthcare Trust Operating Partnership, L.P., dated February 14, 2013
4.7 (28)
Sixth Amendment, dated October 4, 2021, to the Agreement of Limited Partnership of Healthcare Trust Operating Partnership, L.P., dated February 14, 2013
4.8 (5)
Rights Agreement, dated May 18, 2020, between Healthcare Trust, Inc.,and Computershare Trust Company, N.A., as Rights Agent
4.9 *
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
10.1 (9)
Second Amended and Restated Advisory Agreement, dated as of February 17, 2017, by and among the Company, Healthcare Trust Operating Partnership, L.P. and Healthcare Trust Advisors, LLC
10.2 (11)
Amendment No. 1, dated as of July 25, 2019, to the Second Amended and Restated Advisory Agreement, by and among Healthcare Trust, Inc., Healthcare Trust Operating Partnership, L.P. and Healthcare Trust Advisors, LLC

10.3 (9)

Amended and Restated Property Management and Leasing Agreement, dated as of February 17, 2017, by and among the Company, Healthcare Trust Operating Partnership, L.P. and Healthcare Trust Properties, LLC
10.4 (12)
First Amendment, dated as of April 9, 2018, to Amended and Restated Property Management and Leasing Agreement, by and among Healthcare Trust, Inc., Healthcare Trust Operating Partnership, L.P., and Healthcare Trust Properties, LLC
10.5 (32)
Second Amendment, dated as of November 11, 2021, to Amended and Restated Property Management and Leasing Agreement, by and among Healthcare Trust, Inc., Healthcare Trust Operating Partnership, L.P., and Healthcare Trust Properties, LLC
10.6 (13)
Indemnification Agreement, dated as of December 31, 2014, with Directors, Officers, Advisor and Dealer Manager
10.7 (13)
Indemnification Agreement, dated April 14, 2015, with Mr. Randolph C. Read
10.8 (14)
Form of Restricted Stock Award Agreement Pursuant to the Employee and Director Incentive Restricted Share Plan of Healthcare Trust, Inc.
10.9 (15)
Master Credit Facility Agreement, dated as of October 31, 2016, by and among the borrowers party thereto and KeyBank National Association
10.10 (4)
First Amendment to Master Credit Facility, dated April 26, 2017, by among the borrowers party thereto and KeyBank National Association

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Exhibit No.  Description
10.11 (4)
Reaffirmation, Joinder and Second Amendment to Master Credit Facility, dated October 26, 2017, by among the borrowers party thereto and KeyBank National Association

10.12 (15)
Master Credit Facility Agreement, dated as of October 31, 2016, by and among the borrowers party thereto and Capital One Multifamily Finance, LLC
10.13 (4)
Reaffirmation, Joinder and First Amendment to Master Credit Facility, dated March 30, 2017, by among the borrowers party thereto and Capital One Multifamily Finance, LLC

10.14 (4)
Second Amendment to Master Credit Facility, dated October 26, 2017, by among the borrowers party thereto and Capital One Multifamily Finance, LLC

10.15 (4)
Third Amendment to Master Credit Facility, dated March 2, 2018, by among the borrowers party thereto and Capital One Multifamily Finance, LLC

10.16 (16)
Amended and Restated Loan Agreement, dated as of December 20, 2019, by and among the borrower entities party thereto, Capital One, National Association and the other lenders party thereto

10.17 (16)
Amended and Restated Guaranty of Recourse Obligations, dated as of December 20, 2019, by Healthcare Trust Operating Partnership, L.P. in favor of Capital One, National Association

10.18 (16)
Amended and Restated Hazardous Materials Indemnity Agreement, dated as of December 20, 2019, by Healthcare Trust Operating Partnership, L.P. and the borrower entities party thereto, for the benefit of Capital One, National Association

10.19 (2)
Amended and Restated Employee and Director Incentive Restricted Share Plan of Healthcare Trust, Inc., effective as of August 31, 2017
10.20 (2)
Form of Restricted Stock Award Agreement Pursuant to the Amended and Restated Employee and Director Incentive Restricted Share Plan of Healthcare Trust, Inc.
10.21 (17)
Loan Agreement, dated as of December 28, 2017, among the borrower entities party thereto and Capital One, National Association
10.22 (17)
Guaranty of Recourse Obligation, dated as of December 28, 2017, by Healthcare Trust Operating Partnership, L.P. in favor of Capital One, National Association
10.23 (17)
Hazardous Materials Indemnity Agreement, dated as of December 28, 2017, by Healthcare Trust Operating Partnership, L.P. and the borrower entities party thereto, for the benefit of Capital One, National Association
10.24 (12)
 Loan Agreement, dated as of April 10, 2018, by and among the borrowers party thereto, and KeyBank National Association, as lender
10.25 (12)
Promissory Note A -1, dated as of April 10, 2018, by the borrowers party thereto in favor of KeyBank National
Association, as lender
10.26 (12)
 Promissory Note A-2, dated as of April 10, 2018, by the borrowers party thereto in favor of KeyBank National
Association, as lender
10.27 (12)
Guarantee Agreement, dated as of April 10, 2018, by Healthcare Trust Operating Partnership, L.P. in favor of KeyBank National Association, as lender
10.28 (12)
Environmental Indemnity Agreement, dated as of April 10, 2018, by the borrowers party thereto and Healthcare Trust Operating Partnership, L.P. in favor of KeyBank National Association, as indemnitee
10.29 (18)
Form of Indemnification Agreement
10.30 (19)
Amended and Restated Senior Secured Revolving Credit Agreement dated as of March 13, 2019 by and among Healthcare Trust Operating Partnership, L.P., KeyBank National Association and the other lender parties thereto

10.31 (20)
First Amendment to Amended and Restated Senior Secured Revolving Credit Agreement entered into as of March 13, 2019 by and among Healthcare Trust Operating Partnership, L.P., KeyBank National Association and the other lender parties thereto
10.32 (21)
Second Amendment to First Amended and Restated Senior Secured Credit Agreement, entered into as of August 10, 2020, among Healthcare Trust Operating Partnership, L.P., Healthcare Trust, Inc., the other guarantor parties thereto, Keybank National Association and the other lenders party thereto
10.33 (32)
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 other guarantor parties thereto, Keybank National Association and the other lenders party thereto
10.34 (31)
Fourth Amendment to First Amended and Restated Senior Credit Agreement, entered into as of August 11, 2022, among Healthcare Trust Operating Partnership, L.P., Healthcare Trust, Inc., the other guarantor parties thereto, Keybank National Association and the other lenders party thereto
10.35 (33)
Loan Agreement dated as of May 24, 2023, among the borrower entities party thereto, Barclays Capital Real Estate Inc., Société Générale Financial Corporation, and KeyBank National Association.
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Exhibit No.  Description
10.36 (33)
Guaranty Agreement dated as of May 24, 2023, by Healthcare Trust Operating Partnership, L.P. in favor of Barclays Capital Real Estate Inc., Société Générale Financial Corporation, and KeyBank National Association.
10.37 (33)
Environmental Indemnity Agreement, dated as of May 24, 2023, by Healthcare Trust Operating Partnership, L.P. and the borrower entities party thereto, for the benefit of Barclays Capital Real Estate Inc., Société Générale Financial Corporation, and KeyBank National Association.
Loan Agreement, dates as of December 22, 2023, among the borrower entities thereto and Capital One, National Association.
Loan Agreement, dated as of February 22, 2024, among the borrower entities party thereto and Bank of Montreal.
List of Subsidiaries of Healthcare Trust, Inc.
Consent of PricewaterhouseCoopers LLP
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
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
97 +
Compensation Clawback Policy
99.1 (22)
Second Amended and Restated Share Repurchase Program of Healthcare Trust, Inc.
99.2 (23)
Amendment to Second Amended and Restated Share Repurchase Program of Healthcare Trust, Inc.
99.3 (24)
Second Amendment to Second Amended and Restated Share Repurchase Program

99.4 (25)
Third Amendment to Second Amended and Restated Share Repurchase Program

99.5 (26)
Fourth Amendment to Second Amended and Restated Share Repurchase Program

99.6 (27)
Fifth Amendment to Second Amended and Restated Share Repurchase Program

101.INS *
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 *XBRL Taxonomy Extension Schema Document
101.CAL *XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF *XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *XBRL Taxonomy Extension Label Linkbase Document
101.PRE *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
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__________
*    Filed herewith
+    Furnished herewith
(1)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 6, 2016.
(2)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.
(3)Filed as an exhibit to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on December 6, 2019.
(4)Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 20, 2018.
(5)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 19, 2020.
(6)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 15, 2020.
(7)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed with the Securities and Exchange Commission on May 14, 2013.
(8)Filed as an exhibit to the Company’s Quarterly Report on Form 10-K for the fiscal year ended December 31, 2013 filed with the Securities and Exchange Commission on March 7, 2014.
(9)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 17, 2017.
(10)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2019.
(11)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 25, 2019.
(12)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2018.
(13)Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 15, 2015.
(14)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the Securities and Exchange Commission on August 15, 2016.
(15)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 filed with the Securities and Exchange Commission on November 10, 2016.
(16)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 27, 2019.
(17)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2018.
(18)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2018 filed with the Securities and Exchange Commission on August 3, 2018.
(19)Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 14, 2019.
(20)Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 24, 2020.
(21)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 13, 2020.
(22)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2017.
(23)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019.
(24)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 27, 2019.
(25)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2019.
(26)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2019.
(27)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 9, 2020.
(28)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 4, 2021, and incorporated by reference herein.
(29)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 19, 2022, and incorporated by reference herein.
(30)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2021.
(31)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed with the Securities and Exchange Commission on August 12, 2022.
(32)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 filed with the Securities and Exchange Commission on November 12, 2021.
(33)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 31, 2023.
Item 16. Form 10-K Summary.
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 15th day of March, 2024.
 HEALTHCARE TRUST, INC. 
 By/s/ Michael Anderson
Michael Anderson
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NameCapacityDate
/s/ Leslie D. MichelsonNon-Executive Chairman of the Board of Directors, Independent DirectorMarch 15, 2024
Leslie D. Michelson
/s/ Scott M. Lappetito Chief Financial Officer, Treasurer and SecretaryMarch 15, 2024
Scott M. Lappetito(Principal Financial Officer and Principal Accounting Officer)
/s/ Michael AndersonChief Executive OfficerMarch 15, 2024
Michael Anderson
/s/ Elizabeth K. TuppenyIndependent DirectorMarch 15, 2024
Elizabeth K. Tuppeny
/s/ Edward G. RendellIndependent DirectorMarch 15, 2024
Edward G. Rendell
/s/ B.J. PennIndependent DirectorMarch 15, 2024
B.J. Penn
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
F-2
F-4
F-5
F-6
F-7
F-9
Financial Statement Schedule:
F-52

F-1
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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Healthcare Trust, Inc.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Healthcare Trust, Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Purchase Price Allocations for Property Acquisitions
As described in Note 3 to the consolidated financial statements, during the year ended December 31, 2023, the Company completed real estate acquisitions, net of below market lease liabilities assumed, of $35.3 million. For acquired properties with leases classified as operating leases, management allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. Management utilizes various estimates, processes and information to determine the as-if vacant property value. Management estimates 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 acquire leases for above- and below-market lease rates and the value of in-place leases. 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 principal considerations for our determination that performing procedures relating to purchase price allocations for property acquisitions is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of tangible and intangible assets acquired and liabilities assumed; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to capitalization rates, fair market lease
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
rates, discount rates and land values per square foot; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) reading the purchase agreements and lease documents; (ii) testing the completeness and accuracy of underlying data used by management in the fair value estimates, and (iii) testing management’s process for estimating the fair value of tangible and intangible assets acquired and liabilities assumed, including testing management’s projected cash flows and evaluating the accuracy of valuation outputs. Testing management’s process included evaluating the appropriateness of the valuation methods and reasonableness of the significant assumptions related to capitalization rates, fair market lease rates, discount rates and land values per square foot. Evaluating the reasonableness of the significant assumptions included considering whether these assumptions were consistent with external market data, comparable transactions, and evidence obtained in other areas of the audit. In conjunction with certain purchase price allocations, professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of certain assumptions utilized by management related to capitalization rates, fair market lease rates, discount rates and land values per square foot.

/s/ PricewaterhouseCoopers LLP
New York, New York
March 15, 2024
We have served as the Company's auditor since 2019.
F-3
Table of Contents
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

December 31,
20232022
ASSETS 
Real estate investments, at cost:
Land
$207,987 $206,454 
Buildings, fixtures and improvements
2,120,352 2,089,133 
Acquired intangible assets
293,295 292,034 
Total real estate investments, at cost
2,621,634 2,587,621 
Less: accumulated depreciation and amortization
(681,977)(609,324)
Total real estate investments, net
1,939,657 1,978,297 
Cash and cash equivalents46,409 53,654 
Restricted cash44,907 22,884 
Derivative assets, at fair value28,370 40,647 
Straight-line rent receivable, net
26,325 25,276 
Operating lease right-of-use assets
7,713 7,814 
Prepaid expenses and other assets35,781 34,554 
Deferred costs15,997 17,223 
Total assets
$2,145,159 $2,180,349 
LIABILITIES AND EQUITY  
Mortgage notes payable, net$808,995 $578,700 
Credit facilities, net361,026 530,297 
Market lease intangible liabilities, net8,165 9,407 
Accounts payable and accrued expenses (including $295 and $47 due to related parties as of December 31, 2023 and 2022, respectively)
48,356 45,247 
Operating lease liabilities8,038 8,087 
Deferred rent6,500 5,925 
Distributions payable
3,496 3,496 
Total liabilities
1,244,576 1,181,159 
Stockholders’ Equity
7.375% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, 4,740,000 authorized as of December 31, 2023 and 2022; 3,977,144 issued and outstanding as of December 31, 2023 and 2022
40 40 
7.125% Series B cumulative redeemable perpetual preferred stock, $0.01 par value, 3,680,000 authorized; 3,630,000 issued and outstanding as of December 31, 2023 and 2022
36 36 
Common stock, $0.01 par value, 300,000,000 shares authorized, 111,545,018 shares and 105,080,531 shares issued and outstanding as of December 31, 2023 and 2022, respectively
1,115 1,051 
Additional paid-in capital2,509,303 2,417,059 
Accumulated other comprehensive income (loss)23,464 36,910 
Distributions in excess of accumulated earnings(1,639,804)(1,462,457)
Total stockholders’ equity
894,154 992,639 
Non-controlling interests6,429 6,551 
Total equity
900,583 999,190 
Total liabilities and equity
$2,145,159 $2,180,349 

The accompanying notes are an integral part of these consolidated financial statements.
F-4
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
 Year Ended December 31,
202320222021
Revenue from tenants$345,925 $335,846 $329,355 
Operating expenses:  
Property operating and maintenance217,792 213,444 205,813 
Impairment charges4,676 27,630 40,951 
Operating fees to related parties25,527 25,353 24,206 
Acquisition and transaction related545 1,484 2,714 
General and administrative18,928 17,287 16,828 
Depreciation and amortization82,873 82,064 79,926 
Total expenses
350,341 367,262 370,438 
Operating loss before gain on sale of real estate investments(4,416)(31,416)(41,083)
(Loss) gain on sale of real estate investments(322)(125)3,648 
Operating loss
(4,738)(31,541)(37,435)
Other income (expense):
Interest expense(66,078)(51,740)(47,900)
Interest and other income
734 27 61 
(Loss) gain on non-designated derivatives(1,995)3,834 37 
Total other expenses
(67,339)(47,879)(47,802)
Loss before income taxes(72,077)(79,420)(85,237)
Income tax expense(303)(201)(203)
Net loss(72,380)(79,621)(85,440)
Net loss attributable to non-controlling interests82 135 260 
Allocation for preferred stock(13,799)(13,799)(7,762)
Net loss attributable to common stockholders(86,097)(93,285)(92,942)
Other comprehensive income (loss):
Unrealized (loss) gain on designated derivatives(13,446)51,251 25,332 
Comprehensive loss attributable to common stockholders$(99,543)$(42,034)$(67,610)
Weighted-average common shares outstanding — Basic and Diluted (1)
113,121,721 113,043,339 112,965,632 
Net loss per common share attributable to common stockholders — Basic and Diluted (1)
$(0.76)$(0.83)$(0.82)
__________
(1)Retroactively adjusted for the effects of the Stock Dividends (see Note 1 — Organization for details).

The accompanying notes are an integral part of these consolidated financial statements.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended December 31, 2023, 2022 and 2021
(In thousands, except share data)
Series A Preferred StockSeries B Preferred StockCommon StockAccumulated Other Comprehensive Income (Loss)
Number of
Shares		Par ValueNumber of
Shares		Par ValueNumber of
Shares		Par ValueAdditional
Paid-in
Capital		Distributions in Excess of Accumulated EarningsTotal Stockholders’ EquityNon-controlling InterestsTotal Equity
Balance, December 31, 20201,610,000 $16 — $— 93,775,746 $938 $2,104,261 $(39,673)$(1,108,557)$956,985 $4,387 $961,372 
Issuance of Series A Preferred Stock, net2,367,144 24 — — — — 56,241 — — 56,265 — 56,265 
Issuance of Series B Preferred stock, net— — 3,630,000 36 — — 86,783 — — 86,819 — 86,819 
Share-based compensation, net— — — — — — 1,329 — — 1,329 — 1,329 
Distributions declared in common stock,
$0.85 per share
— — — — 5,506,008 55 81,316 — (81,371)— — — 
Dividends declared on Series A Preferred Stock, $1.57 per share
— — — — — — — — (6,236)(6,236)— (6,236)
Dividends declared on Series B Preferred stock, $0.42 per share
— — — — — — — — (1,527)(1,527)— (1,527)
Distributions to non-controlling interest holders— — — — — — — — — — (92)(92)
Issuance of Series A Preferred OP Units— — — — — — — — — — 2,578 2,578 
Net loss— — — — — — — — (85,180)(85,180)(260)(85,440)
Unrealized loss on designated derivative— — — — — — — 25,332 — 25,332 — 25,332 
Rebalancing of ownership percentage— — — — — — (91)— — (91)91 — 
Balance, December 31, 20213,977,144 40 3,630,000 36 99,281,754 993 2,329,839 (14,341)(1,282,871)1,033,696 6,704 1,040,400 
Issuance of Series B Preferred Stock, net— — — — — — (42)— — (42)— (42)
Share-based compensation, net— — — — — — 1,185 — — 1,185 — 1,185 
Distributions declared in common stock, $0.85 per share
— — — — 5,798,777 58 86,243 — (86,301)— — — 
Dividends declared on Series A Preferred Stock, $1.84 per share
— — — — — — — — (7,333)(7,333)— (7,333)
Dividends declared on Series B Preferred Stock, $1.78 per share
— — — — — — — — (6,466)(6,466)— (6,466)
Distributions to non-controlling interest holders— — — — — — — — — — (184)(184)
Net loss— — — — — — — — (79,486)(79,486)(135)(79,621)
Unrealized loss on designated derivative— — — — — — — 51,251 — 51,251 — 51,251 
Rebalancing of ownership percentage— — — — — — (166)— — (166)166 — 
Balance, December 31, 20223,977,144 40 3,630,000 36 105,080,531 1,051 2,417,059 36,910 (1,462,457)992,639 6,551 999,190 
Share-based compensation, net— — — — — — 919 — — 919 — 919 
Distributions declared in common stock, $0.85 per share
— — — — 6,464,487 64 91,186 — (91,250)— — — 
Dividends declared Series A Preferred Stock, $1.84 per share
— — — — — — — — (7,333)(7,333)— (7,333)
Dividends declared on Series B Preferred Stock, $1.78 per share
— — — — — — — — (6,466)(6,466)— (6,466)
Distributions to non-controlling interest holders— — — — — — — — — — (185)(185)
Contributions from non-controlling interest holders— — — — — — — — — — 284 284 
Net loss— — — — — — — — (72,298)(72,298)(82)(72,380)
Unrealized loss on designated derivative— — — — — — — (13,446)— (13,446)— (13,446)
Rebalancing of ownership percentage— — — — — — 139 — — 139 (139)— 
Balance, December 31, 20233,977,144 $40 3,630,000 $36 111,545,018 $1,115 $2,509,303 $23,464 $(1,639,804)$894,154 $6,429 $900,583 

The accompanying notes are an integral part of these consolidated financial statements.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
202320222021
Cash flows from operating activities:  
Net loss$(72,380)$(79,621)$(85,440)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization82,873 82,064 79,926 
Amortization (including write-offs) of deferred financing costs6,702 4,879 4,427 
Amortization of terminated swap(4,195)423 846 
Amortization of mortgage premiums and discounts, net91 51 55 
(Accretion) amortization of market lease and other intangibles, net
(890)(625)(198)
Bad debt expense1,225 3,159 1,094 
Equity-based compensation919 1,185 1,329 
(Gain) loss on non-designated derivative instruments1,995 (3,834)(37)
Cash received from non-designated derivative instruments5,580 286 — 
(Gain) loss on sales of real estate investments, net322 125 (3,648)
Impairment charges4,676 27,630 40,951 
Deferred tax valuation allowance1,165 2,750 (483)
Changes in assets and liabilities:
Straight-line rent receivable(1,049)(1,523)(761)
Prepaid expenses and other assets(6,069)(3,036)(2,139)
Accounts payable, accrued expenses and other liabilities83 (2,924)1,252 
Deferred rent576 (2,694)1,705 
Net cash provided by operating activities21,624 28,295 38,879 
Cash flows from investing activities:
Property acquisitions(35,261)(25,538)(159,300)
Investments in non-designated interest rate caps(9,962)— — 
Capital expenditures(22,397)(27,993)(19,071)
Proceeds from sales of real estate investments4,803 11,749 130,449 
Net cash used in investing activities(62,817)(41,782)(47,922)
Cash flows from financing activities: 
Payments on credit facilities(200,602)(2,998)(298,804)
Proceeds from credit facilities34,748 30,000 125,000 
Proceeds from mortgage notes payable240,000 — 42,750 
Payments on mortgage notes payable(1,139)(6,662)(1,264)
Payments for non-designated derivative instruments— — (85)
Proceeds from interest rate swap terminations5,413 — — 
Payments of deferred financing costs(8,748)(1,672)(1,490)
Proceeds from issuance of Series A Preferred Stock, net— — 56,265 
Proceeds from issuance of Series B Preferred Stock, net— (42)86,897 
Dividends paid on Series A Preferred stock(7,334)(7,333)(5,144)
Dividends paid on Series B Preferred stock(6,466)(6,466)— 
Contributions from non-controlling interest holders284 — — 
Distributions to non-controlling interest holders(185)(184)(46)
Net cash provided by financing activities55,971 4,643 4,079 
Net change in cash, cash equivalents and restricted cash14,778 (8,844)(4,964)
Cash, cash equivalents and restricted cash, beginning of year76,538 85,382 90,346 
Cash, cash equivalents and restricted cash, end of year$91,316 $76,538 $85,382 
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
202320222021
Cash, cash equivalents, end of period$46,409 $53,654 $59,738 
Restricted cash, end of period44,907 22,884 25,644 
Cash, cash equivalents and restricted cash, end of period$91,316 $76,538 $85,382 
Supplemental disclosures of cash flow information:
Cash paid for interest$63,720 $45,042 $42,815 
Cash paid for income taxes 454 566 311 
Non-cash investing and financing activities:
Common stock issued through stock dividends91,250 86,301 81,371 
Accrued capital expenditures2,902 — — 
Accrued offering costs on Series B Preferred Stock— — 78 
Proceeds from real estate sales used to repay mortgage notes payable2,663 — — 
Mortgage notes payable repaid with proceeds from real estate sales(2,663)— — 
Proceeds from real estate sales used to repay amounts outstanding under the Prior Credit Facility5,167 — — 
Amounts outstanding under the Prior Credit Facility repaid with proceeds from real estate sales(5,167)— — 

The accompanying notes are an integral part of these consolidated financial statements.
F-8
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023


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 and other healthcare-related buildings (“MOBs”), and senior housing operating properties (“SHOPs”).
As of December 31, 2023, the Company owned 204 properties (including two land parcels) located in 33 states and comprised of 9.0 million rentable square feet.
Substantially all of the Company’s business is conducted through the OP and its wholly owned subsidiaries, including taxable REIT subsidiaries. The Company’s advisor, Healthcare Trust Advisors, LLC (the “Advisor”) manages 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 the Company. The Company also reimburses these entities for certain expenses they incur in providing these services to the Company. Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, also has an interest in the Company through ownership of interests in the OP. As of December 31, 2023, the Company owned 46 seniors housing properties under the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure in its SHOP segment. Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by a person who qualifies as an eligible independent contractor.
The Company operates in two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs. In its MOB operating segment, the Company owns, manages, and leases 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. The Property Manager or third party managers manage the Company’s MOBs. In its SHOP segment, the Company invests in seniors housing properties using the RIDEA structure. As of December 31, 2023, the Company had four eligible independent contractors operating 46 SHOPs. All of the Company’s properties across both business segments are located throughout the United States.
The Company has declared quarterly dividends entirely in shares of its common stock since October 2020 in order to preserve its liquidity in response to the COVID-19 pandemic. 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. Since October 2020, the Company has issued an aggregate of approximately 19.0 million shares in respect to the Stock Dividends. No other additional shares of common stock have been issued since October 2020. 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 cumulative increase in shares outstanding resulting from the stock dividends since October 2020 and through January 2024, and are noted as such throughout the accompanying financial statements and notes. Any future issuances of stock dividends will also result in retroactive adjustments. Please see Note 8 — Stockholder’s Equity for additional information on the stock dividends.
On March 31, 2023, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2022. The Company’s previous Estimated Per-Share NAV was as of December 31, 2021. The Estimated Per-Share NAV published on March 31, 2023 has not been adjusted since publication and will not be adjusted 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 unless the Company lists its common stock.
Note 2 — Summary of Significant Accounting Policies
Basis of Accounting
The accompanying consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“GAAP”).
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All inter-company 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.
Out-of-Period Adjustments
During the year ended December 31, 2023, the Company identified certain historical errors in its statements of operations and comprehensive income (loss), consolidated statements of changes in equity, and statements of cash flows since 2019, which impacted the quarterly financial statements and annual periods previously issued. Specifically, the Company had understated depreciation and amortization expense on certain capital improvements and deferred leasing commissions, thereby understating previously reported depreciation and amortization expense by $0.1 million, $0.2 million and $0.4 million for the years ended December 31, 2022, 2021 and pre-2021 periods, respectively.
As of December 31, 2022, the cumulative impact of recording the correct depreciation and amortization expense is an understatement of depreciation and amortization expense of $0.7 million, accumulated depreciation of $0.3 million and deferred costs of $0.4 million. The Company concluded that the errors noted above were not material for the year ended December 31, 2023 or any prior periods, and has adjusted the amounts on a cumulative basis in the consolidated financial statements for the year ended December 31, 2023.
Adverse Economic Impacts Since the COVID-19 Pandemic
During the first quarter of 2020, the global COVID-19 pandemic commenced. The pandemic and its aftermath has had, and could continue to have, adverse impacts on economic and market conditions. The Company’s MOB segment has been less impacted than its SHOP segment, which continues to be challenged by the post-pandemic operating environment.
Further, recent and continuing increases in inflation brought about by labor shortages, supply chain disruptions and increases in interest rates have had, and may continue to have, adverse impacts on the Company’s results of operations. Moreover, these increases in the rate of inflation, the ongoing wars in Ukraine, Israel and related sanctions, supply chain disruptions and increases in interest rates may also impact the ability of the Company’s tenants to pay rent and hence the Company’s results of operations and liquidity.
COVID-19 Impact — MOB Segment
The financial stability and overall health of the Company’s MOB tenants is critical to its business. The Company took a proactive approach to achieve mutually agreeable solutions with its MOB tenants and in some cases, during the year ended December 31, 2020, the Company executed lease amendments providing for deferral of rent. Since the year ended December 31, 2020, the Company has not entered into any rent deferral agreements with any of its MOB tenants, and all amounts previously deferred under prior rent deferral agreements were collected in the year ended December 31, 2021.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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.
COVID-19 Impact — SHOP Segment
In the Company’s SHOP segment, occupancy trended downward from March 2020 until June 2021 and has since generally stabilized. The Company also experienced lower inquiry volumes and reduced in-person tours in post-pandemic periods as compared to pre-pandemic periods. In addition, beginning in 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 SHOPs, the Company generally bears these cost increases, which were partially offset by funds received under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and to a lesser extent, cost recoveries for personal protective equipment from residents. See the “CARES Act Grants” section below for additional information on the CARES Act.
During the year ended December 31, 2022, the Company relied more on the use of temporary contract labor and agencies than it had historically. The Company has since reduced its reliance on this labor source in the year ended December 31, 2023. However, the wage expenses (including overtime, training and bonus wages) incurred by the Company from employees of its third party operators has increased due to, among other things, inflation raising the cost of labor generally, a lack of qualified personnel that the Company’s third-party operators are able to employ on a permanent basis and training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor.
The persistence of high inflation, labor shortages and supply chain disruptions have caused adverse impacts to the Company’s occupancy and cost levels, and these trends may continue to impact the Company and have a material adverse effect on its operations in future periods.
The adverse financial impacts since the COVID-19 pandemic on the Company have been partially offset by funds received under the CARES Act. The Company did not receive any funds through the CARES Act in the year ended December 31, 2023. The Company received $4.5 million and $5.1 million in these funds during the years ended December 31, 2022 and 2021, respectively. The Company considers these funds to be grant contributions from the government. The full amounts received were recognized as reductions of property operating expenses in the Company’s consolidated statement of operations for the years ended December 31, 2022 and 2021, respectively, to partially offset incurred COVID-19 expenses. The Company does not anticipate that any further funds under the CARES Act will be received, and there can be no assurance that the CARES Act program will be extended or any further amounts received under currently effective or potential future government programs.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Revenue Recognition
The Company’s revenues, which are derived primarily from lease contracts, include rent received from tenants in its MOB segment. As of December 31, 2023, these leases had a weighted average remaining lease term of 4.7 years. Rent from tenants in the Company’s MOB operating segment (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease. 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. Tenant revenue also includes operating expense reimbursements which generally increase with the increase in property operating and maintenance expenses in our MOB segment. In addition to base rent, dependent on the specific lease, tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) the their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases. 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 both ASC 842 and 840, the Company has reflected 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 SHOP segment, held using a structure permitted under RIDEA, and to a lesser extent, 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. The Company did not record material amounts of ancillary revenue from non-residents during the years ended December 31, 2023 and 2022. The Company recorded ancillary revenue from non-residents of $3.5 million for the year ended December 31, 2021. Fees for ancillary services are recorded in the period in which the services are performed. The decline in ancillary revenue since the year ended December 31, 2021 is primarily due to the Company’s dispositions of its SNF property in Wellington, Florida, which was sold in May 2021.
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 and maintenance expenses related to non-SHOP assets (recorded in revenue from tenants), in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating and maintenance costs of the respective properties.
The following table presents future base rent payments on a cash basis due to the Company as of December 31, 2023 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.
(In thousands)Future 
Base Rent Payments
2024$109,451 
2025100,230 
202691,862 
202772,815 
202853,918 
Thereafter194,333 
Total$622,609 
F-12
Table of Contents

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
The Company continually reviews receivables related to rent and unbilled rents receivable 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 accounting rules, on the accompanying consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.
During the years ended December 31, 2023, 2022 and 2021, the Company recorded reductions in revenue of $1.2 million, $3.2 million and $1.1 million, respectively. Approximately $1.3 million of bad debt expense recorded in the year ended December 31, 2022, related to previously disposed properties. There were no significant write-off’s related to previously disposed properties during the year ended December 31, 2023 and 2021.
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 years ended December 31, 2023, 2022 and 2021. 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 sale as of December 31, 2023 or 2022.
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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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 acquire 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.
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 years ended December 31, 2023, 2022 and 2021.
Accounting for Leases
Lessor Accounting
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 a major part of the remaining economic useful life of the asset (e.g., equal to or greater than 75%), 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 the asset is 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. As of December 31, 2023 and 2022, the Company had no leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.
As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating and maintenance expenses) as a single lease component as an operating lease because (i) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (ii) 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.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Lessee Accounting
The Company is also the lessee under certain land leases which will continue to be classified as operating leases under transition elections unless subsequently modified. These leases are reflected on the consolidated balance sheets as of December 31, 2023 and 2022, 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 years ended December 31, 2023, 2022 and 2021.
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.
Gain on Dispositions of Real Estate Investments
Gains on sales of rental real estate are not considered sales to customers and will generally be recognized pursuant to the provisions included in ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”).
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 loss to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net earnings.
Reportable Segments
The Company has determined that it has two reportable segments, with activities related to investing in MOBs and SHOPs. Management evaluates the operating performance of the Company’s investments in real estate and seniors housing properties on an individual property level. For additional information see Note 15 — Segment Reporting.
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 15 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Above and Below-Market Lease Amortization
Capitalized above-market lease values are amortized as a reduction of revenue from tenants over the remaining terms of the respective leases and the capitalized below-market lease values are amortized as an increase to revenue from tenants over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases. If a tenant with a below-market rent renewal does not renew, any remaining unamortized amount will be taken into income at that time.
Capitalized above-market ground lease values are amortized as a reduction of property operating expense over the remaining terms of the respective leases. Capitalized below-market ground lease values are amortized as an increase to property operating expense over the remaining terms of the respective leases and expected below-market renewal option periods.
Derivative Instruments
The Company may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with its borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements is to minimize the risks and costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions.
The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply, or the Company elects not to apply hedge accounting.
The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designated and qualifies for hedge accounting treatment. If the Company elects not to apply hedge accounting treatment, any change in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the accompanying consolidated statements of operations and comprehensive loss prior to the adoption of ASU 2017-2 on January 1, 2019. If the derivative is designated and qualifies for hedge accounting treatment, the change in the estimated fair value of the derivative is recorded in other comprehensive loss to the extent that it is effective, with any ineffective portion of a derivative’s change in fair value immediately recognized in earnings. After the adoption of ASU 2017-2, if the derivative qualifies for hedge accounting, all of the change in value is recorded in other comprehensive loss.
Non-controlling Interests
The non-controlling interests represent the portion of the common and preferred equity in the OP that is not owned by the Company as well as certain 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. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheets and presented as net loss attributable to non-controlling interests on the consolidated statements of operations and comprehensive loss. Non-controlling interests are allocated a share of net income or loss based on their share of equity ownership, including any preferential amounts. See Note 13 — Non-Controlling Interests for additional information.
Cash and Cash Equivalents
Cash and cash equivalents includes cash in bank accounts as well as investments in highly-liquid money market funds with original maturities of three months or less. The Company did not have any cash invested in money market funds at December 31, 2023 or 2022.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
The Company deposits cash with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company (“FDIC”) up to an insurance limit. At December 31, 2023 and 2022, the Company had deposits of $46.4 million and $53.7 million, of which $34.2 million and $43.6 million, respectively, were in excess of the amount insured by the FDIC. Although the Company bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result.
Deferred Costs
Deferred costs, net, consists of deferred financing costs related to the Fannie Mae Master Credit Facilities (as defined in Note 5 — Credit Facilities), and deferred leasing costs. Deferred financing costs relating to mortgage notes payable (see Note 4 — Mortgage Notes Payable, Net) are reflected net of the related financing in the mortgage notes payable, net line item of the Company’s consolidated balance sheet.
Deferred financing costs associated with the Fannie Mae Master Credit Facilities and mortgage notes payable represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized over the term of the financing agreement using the effective interest method for the Fannie Mae Master Credit Facilities and using the effective interest method over the expected term for the mortgage notes payable.
Unamortized deferred financing costs are expensed if the associated debt is refinanced or paid down 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.
Deferred leasing costs, consisting primarily of lease commissions and professional fees incurred in connection with new leases, are deferred and amortized over the term of the lease.
Equity-Based Compensation
The Company has a stock-based incentive award program for its directors, which is accounted for under the guidance of share- based payments. The cost of services received in exchange for these stock awards is measured at the grant date fair value of the award and the expense for such awards is included in general and administrative expenses and is recognized over the service period (i.e., vesting) required or when the requirements for exercise of the award have been met (see Note 11 — Equity-Based Compensation).
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, 2023, 2022 and 2021. 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.
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.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
As of December 31, 2023, the Company owned 46 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. Significant components of the deferred tax assets and liabilities as of December 31, 2023 consisted of deferred rent and net operating loss carryforwards. During the year ended December 31, 2020, the Company modified 25 intercompany leases with the TRS which abated intercompany rent due to the ongoing COVID-19 pandemic. During the year ended December 31, 2023, the Company modified 26 intercompany leases with the TRS to reflect what management believes is an arm’s length behavior in light of the current operating environment. These intercompany lease modifications reduced intercompany rent to what a third-party would pay based on arm’s length principles as described under Section 482 of the Internal Revenue Code.
Because of the Company’s TRS's recent operating history of taxable losses and the 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 $8.1 million and $6.9 million as of December 31, 2023 and 2022, respectively. If and when the Company believes it is more likely than not that it will recover its deferred tax assets, the Company will reverse the valuation allowance as an income tax benefit in its consolidated statements of comprehensive loss. As of December 31, 2023, the Company’s consolidated TRS had net operating loss carryforwards for federal income tax purposes of approximately $30.3 million at December 31, 2023 (of which $6.8 million were incurred prior to January 1, 2018). Carryforwards from losses incurred prior to January 1, 2018, if unused, these will begin to expire in 2035. For net operating losses incurred subsequent to December 31, 2017, there is no expiration date. As of December 31, 2023, the Company had a deferred tax asset of $8.1 million with a full valuation allowance. As of December 31, 2022, the Company had a deferred tax asset of $6.9 million with a full valuation allowance.
The following table details the composition of the Company’s tax (expense) benefit for the years ended December 31, 2023, 2022 and 2021, which includes U.S. federal and state income taxes incurred by the Company’s TRS. The Company estimated its income tax (expense) benefit relating to its TRS using a combined federal and state rate of approximately 0.0% for the years ended December 31, 2023, 2022 and 2021. These income taxes are reflected in income tax (expense) benefit on the accompanying consolidated statements of operations and comprehensive loss.
Year Ended December 31,
202320222021
(In thousands)CurrentDeferredCurrentDeferredCurrentDeferred
Federal (expense) benefit $— $1,023 $— $2,145 $— $(319)
State (expense) benefit(303)142 (201)604 (203)(163)
Deferred tax asset valuation allowance— (1,165)— (2,749)— 482 
Total income tax benefit (expense)$(303)$— $(201)$— $(203)$— 
As of December 31, 2023 and 2022, the Company had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended December 31, 2018 remain open to examination by the major taxing jurisdictions to which the Company is subject.
Per Share Data
Net loss per basic share of common stock is calculated by dividing net loss by the weighted-average number of shares (retroactively adjusted for the stock dividends) of common stock issued and outstanding during such period. Diluted net loss per share of common stock considers the effect of potentially dilutive shares of common stock outstanding during the period.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
CARES Act Grants
On March 27, 2020, the CARES Ac) was signed into law and it provides funding to Medicare providers in order to provide financial relief during the COVID-19 pandemic. Funds provided under the program were to be used for the preparation, prevention, and medical response to COVID-19, and were designated to reimburse providers for healthcare related expenses and lost revenues attributable to COVID-19. The Company did not receive any funds through the CARES Act during the year ended December 31, 2023. During the years ended December 31, 2022 and 2021 the Company received $4.5 million and $5.1 million in funding from CARES Act grants, respectively. For accounting purposes, the CARES Act funds are treated as a grant contribution from the government. The funding the Company received was recognized as a reduction of property operating and maintenance expenses in the Company’s consolidated statements of operations to offset the negative impacts of COVID-19. There can be no assurance that the program will be extended or any further amounts received under currently effective or potential future government programs.
Recently Issued Accounting Pronouncements
Adopted as of January 1, 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 adopted the new guidance on January 1, 2021 and determined it did not have a material impact on its consolidated financial statements.
Adopted as Required Through December 31, 2023:
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 from March 12, 2020 through June 30, 2023 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 the Company’s 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 the Company’s derivatives, which will be consistent with the Company’s 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.
Not yet Adopted as of December 31, 2023:
In November 2023, the FASB issued ASU 2023-07, Segment Reporting — Improvements to Reportable Segment Disclosures (Topic 280). The new standard requires a public entity to disclose significant segment expense categories and amounts for each reportable segment. A significant expense is an expense that (i) is significant to the segment, (ii) regularly provided or easily computed from information regularly provided to management and (iii) included in the reported measure of profit or loss. The ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of the ASU is permitted, including in an interim period. If a public entity elects to early adopt the ASU in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. The ASU should be adopted retrospectively unless it is impracticable to do so. The Company has not adopted this ASU as of December 31, 2023, but is currently evaluating the impact on its segment disclosures and intends to adopt ASU 2023-07 during the year ending December 31, 2024.
Note 3 — Real Estate Investments, Net
Property Acquisitions
The Company invests in healthcare-related facilities, primarily MOBs and seniors housing properties which expand and diversify its portfolio and revenue base. The Company owned 204 properties (including two land parcels) as of December 31, 2023. During the year ended December 31, 2023, the Company, through wholly-owned subsidiaries of the OP, completed its acquisitions of seven single tenant MOBs for an aggregate contract purchase price of $34.9 million. All acquisitions in 2023, 2022 and 2021 were considered asset acquisitions for accounting purposes.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Subsequent to December 31, 2023, the Company acquired four MOB properties for an aggregate contract purchase price of $12.6 million (see Note 17 — Subsequent Events for additional details).
The following table presents the allocation of the assets acquired and liabilities assumed during the years ended December 31, 2023, 2022 and 2021:
Year Ended December 31,
(In thousands)202320222021
Real estate investments, at cost:
Land$3,373 $4,933 $12,848 
Buildings, fixtures and improvements27,069 16,606 121,376 
Total tangible assets30,442 21,539 134,224 
Acquired intangibles:
In-place leases and other intangible assets (1)
5,057 3,763 28,499 
Market lease and other intangible assets (1)
33 268 794 
Market lease liabilities (1)
(271)(32)(1,639)
Total intangible assets and liabilities4,819 3,999 27,654 
Issuance of Preferred OP Units (2)
— — (2,578)
Cash paid for real estate investments, including acquisitions$35,261 $25,538 $159,300 
Number of properties purchased7 4 17 
__________
(1)Weighted-average remaining amortization periods for in-place leases, above-market leases and below market leases acquired were 8.7 years, 11.3 years and 9.3 years, respectively, as of December 31, 2023. Weighted-average remaining amortization periods for in-place leases and above-market leases acquired were 8.9 years, 9.3 years and 12.1 years, respectively, as of December 31, 2022. Weighted-average remaining amortization periods for in-place leases, above-market leases and below market leases acquired were 11.2 years, 10.2 years and 8.5 years, respectively, as of December 31, 2021.
(2)See Note 8 — Stockholders’ Equity for additional information.
Significant Tenants
As of December 31, 2023, 2022 and 2021, 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 on a straight-line basis for the portfolio. 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 December 31, 2023, 2022 and 2021:
December 31,
State202320222021
Florida19.9%19.2%17.7%
Pennsylvania10.6%**
__________
*    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 period specified.
Intangible Assets and Liabilities
Acquired intangible assets and liabilities consisted of the following as of the periods presented:
December 31, 2023December 31, 2022
(In thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Intangible assets:
In-place leases$269,363 $210,172 $59,191 $268,135 $198,138 $69,997 
Market lease assets14,465 12,548 1,917 14,432 12,042 2,390 
Other intangible assets9,467 1,325 8,142 9,467 1,165 8,302 
Total acquired intangible assets$293,295 $224,045 $69,250 $292,034 $211,345 $80,689 
Intangible liabilities:
Market lease liabilities $23,520 $15,355 $8,165 $23,504 $14,097 $9,407 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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 of above-and below-market ground leases, for the periods presented:
Year Ended December 31,
(In thousands)202320222021
Amortization of in-place leases and other intangible assets (1)
$13,080 $15,076 $15,071 
Accretion of above-and below-market leases, net (2)
$(1,050)$(795)$(422)
Amortization of above-and below-market ground leases, net (3)
$159 $159 $214 
__________
(1)Reflected within depreciation and amortization expense.
(2)Reflected within revenue from tenants.
(3)Reflected within property operating and maintenance expense.
The following table provides the projected amortization and adjustments to revenue from tenants for the next five years:
(In thousands)20242025202620272028
In-place lease assets$11,790 $10,202 $8,957 $5,447 $4,014 
Total to be added to amortization expense$11,790 $10,202 $8,957 $5,447 $4,014 
Above-market lease assets$(419)$(366)$(331)$(243)$(203)
Below-market lease liabilities1,274 1,127 972 654 618 
Total to be added to revenue from tenants$855 $761 $641 $411 $415 
Dispositions
Year Ended December 31, 2023
During the year ended December 31, 2023, the Company disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million, which resulted in an aggregate loss on sale of $0.3 million. The Company had previously recorded $15.1 million of impairment charges on two of the four disposed SHOP properties in the year ended December 31, 2022.
Year Ended December 31, 2022
During the year ended December 31, 2022, the Company disposed of four SHOPs for an aggregate contract sales price of $12.4 million, which resulted in an aggregate loss on sale of $0.1 million. The Company had previously recorded $34.0 million of impairment charges on these properties in the year ended December 31, 2021.
Year Ended December 31, 2021
During the year ended December 31, 2021, we sold five SHOPs and three MOBs for an aggregate contract price of $133.6 million, which resulted in an aggregate gain on sale of $3.6 million. The Company had previously recorded $0.9 million of impairment charges on one of the disposed SHOPs in the year ended December 31, 2021.
The sales of the properties noted above did not represent a strategic shift that has a major effect on the Company’s operations and financial results. Accordingly, the results of operations of these properties remain classified within continuing operations for all periods presented until the respective sale dates.
Assets Held for Sale
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.
There were no assets held for sale as of December 31, 2023 or 2022.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Assets Held for Use
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 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.
Impairment Charges
The following table presents impairment charges by segment recorded during the years ended December 31, 2023, 2022 and 2021:
Year Ended December 31,
(In thousands)202320222021
MOB Segment:
Illinois skilled nursing facilities (1) (7)
$— $10,644 $— 
Sassafras MOB (2) (7)
— 1,844 — 
Sun City MOB (3) (7)
2,554 — 6,082 
Total MOB impairment charges2,554 12,488 6,082 
SHOP Segment:
Various held for use SHOPs (4) (7)
2,122 15,142 — 
LaSalle Properties (5) (7)
— — 34,000 
Wellington, Florida skilled nursing facility (6)
— — 869 
Total SHOP impairment charges2,122 15,142 34,869 
Total impairment charges$4,676 $27,630 $40,951 
(1)These seven properties were impaired after the Company received an offer by the tenant to purchase all seven properties, which caused the Company to reassess its expected holding period for these properties. As of December 31, 2023, these properties were not disposed nor are under contract for disposal.
(2)The Company began marketing this property for sale in the fourth quarter of 2022 and this property was disposed in the year ended December 31, 2023.
(3)This property has been actively marketed for sale since September 2021. As of December 31, 2023 this property was not disposed, but is scheduled for sale in the second quarter of 2024.
(4)Consists of eight properties actively marketed for sale. Of the eight properties, one property was impaired in the year ended December 31, 2023 and six properties were impaired in year ended December 31, 2022. During the year ended December 31, 2023, four of these properties were disposed. One of these properties is scheduled for sale in the second quarter of 2024.
(5)These four properties were disposed in the year ended December 31, 2022.
(6)This property was disposed in the year ended December 31, 2021. The Company recorded this impairment charge in the year ended December 31, 2021 to reduce the carrying value of the property to its estimated fair value as determined by an amendment to its purchase and sale agreement. The Company had previously recorded $2.3 million of impairment charges on this property in the year ended December 31, 2020.
(7)These properties were impaired to reduce their carrying values to their estimated fair values, respectively, as determined by the Assets Held for Use approach described above.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Note 4 — Mortgage Notes Payable, Net
The following table reflects the Company’s mortgage notes payable as of December 31, 2023 and 2022:
PortfolioEncumbered PropertiesOutstanding Loan Amount as of December 31,
Effective Interest Rate (1) as of December 31,
Interest Rate
2023202220232022Maturity
(In thousands)(In thousands)
Fox Ridge Bryant - Bryant, AR16,647 6,817 3.98 %3.98%FixedMay 2047
Fox Ridge Chenal - Little Rock, AR115,242 15,639 2.95 %2.95%FixedMay 2049
Fox Ridge North Little Rock - North Little Rock, AR19,458 9,704 2.95 %2.95%FixedMay 2049
Capital One MOB Loan41378,500 378,500 3.71 %3.73%Fixed(2)Dec. 2026
Multi-Property CMBS Loan20116,037 118,700 4.60 %4.60%FixedMay 2028
Shiloh - Illinois112,745 13,071 4.34 %4.34%FixedJan. 2025
BMO CMBS942,750 42,750 2.89 %2.89%FixedDec. 2031
Barclays MOB Loan62240,000 — 6.45 %—%FixedJune 2033
Gross mortgage notes payable136821,379 585,181 4.58 %3.83%
Deferred financing costs, net of accumulated amortization (3)
(11,111)(5,117)
Mortgage premiums and discounts, net(1,273)(1,364)
Mortgage notes payable, net$808,995 $578,700 
__________
(1)Calculated on a weighted average basis for all mortgages outstanding as of December 31, 2023 and 2022. For the SOFR/LIBOR based loans, SOFR/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.
(2)Variable rate loan, based on daily SOFR, which is fixed as a result of entering into “pay-fixed” interest rate swap agreements. The Company allocated $378.5 million of its “pay-fixed” interest rate swaps to this mortgage consistently as of December 31, 2023 and 2022.
(3)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 December 31, 2023, the Company had pledged $1.3 billion in real estate investments, at cost, as collateral for its $821.4 million of gross mortgage notes payable. This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable secured by these properties. 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 December 31, 2023, the Company was in compliance with these financial covenants.
Subsequent to December 31, 2023, the Company entered into one new secured mortgage note for a principal amount of $7.5 million (see Note 17 — Subsequent Events for additional details).
See Note 5 — Credit Facilities - Future Principal Payments for a schedule of principal payment requirements of the Company’s mortgage notes and credit facilities.
Barclays MOB Loan
On May 24, 2023, the Company, through certain subsidiaries of the OP, entered into a non-recourse loan agreement (the “Barclays MOB Loan Agreement”), with (i) Barclays Capital Real Estate Inc., (ii) Société Générale Financial Corporation and (iii) KeyBank National Association (each individually, a “Lender,” and collectively, the “Lenders”), in the aggregate amount of $240.0 million (the “Barclay’s MOB Loan”). In connection with the Barclay’s MOB Loan Agreement, the OP entered into a Guaranty Agreement (the “Guaranty”) and an Environmental Indemnity Agreement (the “Environmental Indemnity”) for the benefit of the Lenders.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
The Barclays MOB Loan is secured by, among other things, first priority mortgages on the Company’s interests in 62 MOBs with an aggregate gross asset value of $417.5 million. The Barclays MOB Loan has a 10-year term and is interest-only at a fixed rate of 6.453% per year. Under the Barclays MOB Loan Agreement, the Company is required to make interest-only payments on a monthly basis with the principal balance due on the maturity date of June 6, 2033. The Barclays MOB Loan Agreement requires the OP to comply with certain covenants, including, maintaining combined cash and cash equivalents totaling at least $12.5 million at all times.
Subject to certain conditions, the Company may prepay the Barclays MOB Loan in whole or in part at any time after one year from closing with a pre-payment premium equal to the Yield Maintenance Program (as defined in the Barclays MOB Loan Agreement) by providing the lenders thereunder with prior written notice of prepayment no less than thirty days before prepayment, subject to a pre-payment premium equal to the Yield Maintenance Premium (as defined in the Barclay’s MOB Loan Agreement). Following the earlier of May 24, 2026 and the date that is two years after the securitization of the Barclay’s MOB Loan, the Company may prepay the Barclays MOB Loan through defeasance, Notwithstanding the foregoing, the Barclays MOB Loan may be prepaid at par during the final six months of the term. The Company paid $7.8 million in deferred financing costs related to the Barclay’s MOB Loan, which is amortized into interest expense over the term of the loan.
At the closing of the Barclays MOB Loan, the Company applied $194.8 million of the Barclays MOB Loan proceeds to repay and terminate the Company’s then-existing credit facility (the “Prior Credit Facility”). The Company also terminated its interest rate swap contracts that formerly hedged interest rate changes under the Prior Credit Facility (see Note 7 — Derivatives and Hedging Activities for additional information). The remaining proceeds of approximately $39.0 million (after the payment of Barclays MOB Loan closing costs and reimbursement of deposits) were used for general corporate purposes, subject to the terms of the Barclays MOB Loan Agreement. Additionally, by terminating the Prior Credit Facility, the Company is no longer subject to certain restrictive covenants previously imposed by the Prior Credit Facility (see Note 5 — Credit Facilities for additional information).
Under the Guaranty, the OP has (i) guaranteed the full repayment of the Barclays MOB Loan in the case of certain major defaults by the Company or the OP, including bankruptcy, and (ii) indemnified the Lenders against losses, costs or liabilities related to certain other “bad boy” acts of the Company or the OP, including fraud, willful misconduct, bad faith, and gross negligence. Pursuant to the Environmental Indemnity, the OP and the Company have indemnified the Lenders against losses, costs or liabilities related to certain environmental matters.
BMO MOB Loan
On November 15, 2021, the Company, entered into a $42.8 million loan agreement (the “BMO MOB Loan”) with Bank of Montreal (“BMO”).
The BMO MOB Loan requires monthly interest-only payments, with the principal balance due on the maturity date. The BMO MOB Loan permits BMO to securitize the entire BMO MOB Loan or any portion thereof.
At the closing of the BMO MOB Loan, the net proceeds after accrued interest and closing costs were used to (i) repay approximately $37.0 million of indebtedness under the Prior Credit Facility, under which nine of the properties were included as part of the borrowing base prior to the BMO MOB Loan, (ii) fund approximately $2.5 million in deposits required to be made at closing into reserve accounts required under the loan agreement. The remaining $2.4 million net proceeds available to the Company were used for general corporate purposes and acquisitions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Note 5 — Credit Facilities, Net
The Company had the following credit facilities outstanding as of December 31, 2023 and 2022:
Outstanding Facility Amount as of December 31,
Effective Interest Rate as of December 31,(9) (10)
Credit Facility
Encumbered Properties (1)
2023202220232022Interest RateMaturity
(In thousands)(In thousands)
Prior Credit Facility:
Revolving Credit Facility$— $30,000 — %7.26 %VariableMar. 2024(8)
Term Loan — 150,000 — %5.11 %Fixed(6)Mar. 2024
Deferred financing costs — (1,750)
Term Loan, net — 148,250 
Total Prior Credit Facility —$— $178,250 
Fannie Mae Master Credit Facilities:
Capital One Facility11(2)$206,944 $210,483 7.86 %5.90 %Variable(7)Nov. 2026
KeyBank Facility10(3)139,334 141,564 7.91 %6.60 %Variable(7)Nov. 2026
Total Fannie Mae Master Credit Facilities21$346,278 $352,047 
Other Facilities:
MOB Warehouse Facility5(4)14,748 — 8.36 %— %Variable(7)Dec. 2026
Total Credit Facilities26$361,026 $530,297 7.90 %(5)5.94 %(5)
_______
(1)Encumbered properties are as of December 31, 2023.
(2)Secured by first-priority mortgages on 11 of the Company’s SHOPs as of December 31, 2023 with an aggregate carrying value of $351.3 million.
(3)Secured by first-priority mortgages on 10 of the Company’s SHOPs as of December 31, 2023 with an aggregate carrying value of $262.8 million.
(4)Secured by first-priority mortgages on five of the Company’s MOBs as of December 31, 2023 with an aggregate carrying value of $23.0 million.
(5)Calculated on a weighted average basis for all credit facilities outstanding as of December 31, 2023 and 2022, respectively.
(6)Variable rate loan, based on SOFR, all of which was economically fixed as a result of entering into “pay-fixed” interest rate swap agreements (the Company designates its SOFR “pay-fixed” interest rate swaps against all 30-day SOFR debt, see Note 7 — Derivatives and Hedging Activities for additional details).
(7)The effective rates above only include the impact of designated hedging instruments. The Company also has seven non-designated interest rate cap agreements with an aggregate notional amount of $364.2 million which limits 30-day SOFR to 3.50%. The Company did not designate these derivatives as hedges and accordingly, the changes in value and any cash received from these derivatives are presented within gain (loss) on derivative instruments on the consolidated statements of operations and comprehensive loss (see discussion below and Note 7 — Derivatives and Hedging Activities for additional details). Inclusive of the impact of these interest rate caps on these non-designated derivatives, the economic interest rate on the Capital One Fannie Mae Facility was 5.89%, the economic interest rate on the KeyBank Fannie Mae Facility was 5.95% and the economic interest rate on the MOB Warehouse Facility was 6.50%. as of December 31, 2023. The economic interest rate on the Capital One Fannie Mae Facility was 5.26% and the economic interest rate on the KeyBank Fannie Mae Facility was 5.96% as of December 31, 2022.
(8)During the year ended December 31, 2022, the Company exercised its option to extend the maturity one year to March 2024.
(9)Effective interest rate below for variable rate debt gives effect to any “pay-fixed” swaps entered into by the Company allocated to the loan for presentation purposes. If no “pay-fixed” swaps are allocated, the effective interest rate below represents the variable rate (or contractual floor if appropriate) and the applicable margin in effect as of December 31, 2023 and 2022.
As of December 31, 2023, the carrying value of our real estate investments, at cost was $2.6 billion, with $1.3 billion of this amount pledged as collateral for mortgage notes payable, $614.0 million of this amount pledged to secure advances under the Fannie Mae Master Credit Facilities and $23.0 million of this amount pledged to secure advances under the MOB Warehouse Facility. All of the real estate assets pledged to secure debt or comprising the borrowing base of the relevant facilities are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, unless, as applicable, the existing indebtedness associated with such real estate assets is satisfied or the asset is removed from the borrowing base of the relevant facilities, which would impact availability thereunder.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Unencumbered real estate investments, at cost as of December 31, 2023 was $635.9 million, although there can be no assurance as to the amount of liquidity the Company would be able to generate from using these unencumbered assets as collateral for mortgage loans, adding them to the borrowing base of the Fannie Mae Master Credit Facilities or MOB Warehouse Facility, or other future financings.
Prior Credit Facility
The Prior Credit Facility consisted of two components, a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”). The Revolving Credit Facility and Term Loan were interest-only and would have matured on March 13, 2024. The Prior Credit Facility was fully repaid and terminated in May 2023 with net proceeds provided by the Barclays MOB Loan (see Note 4 — Mortgage Notes Payable, Net for details).
Amounts outstanding under the Prior Credit Facility bore interest at the Company’s option of either (i) SOFR, plus an applicable margin that ranges, depending on the Company’s leverage, from 2.10% to 2.85% or (ii) the Base Rate (as defined in the Prior Credit Facility), plus an applicable margin that ranged, depending on the Company’s leverage, from 0.85% to 1.60%. For the period from January 1, 2023 through the termination of the Prior Credit Facility in May 2023, the Company elected to use the SOFR option for all of its borrowings under the Prior Credit Facility. At termination, the Company wrote off the remaining deferred financing costs associated with the Prior Credit Facility of $2.6 million which is included in interest expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.
The Prior Credit Facility contained various restrictions which no longer apply, that limited the Company’s ability to incur additional debt, maintain certain cash balances or pay dividends, among other things.
Fannie Mae Master Credit Facilities
On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement relating to a secured credit facility with KeyBank (the “KeyBank Facility”) and a master credit facility agreement with Capital One for a secured credit facility with Capital One Multifamily Finance LLC, an affiliate of Capital One (the “Capital One Facility”; the Capital One Facility and the KeyBank Facility are referred to herein individually as “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.
As of December 31, 2023, $346.3 million was outstanding under the Fannie Mae Master Credit Facilities. The Company may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Until June 30, 2023, borrowings under the Fannie Mae Master Credit Facilities bore annual interest at a rate that varied on a monthly basis and was equal to the sum of the current LIBOR for one month U.S. dollar-denominated deposits and a spread (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively). Effective July 1, 2023, the Fannie Mae Master Credit Facilities automatically transitioned to SOFR-based borrowings with monthly interest equal to the sum of the current SOFR for one-month denominated deposits and a spread of (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively). The Fannie Mae Master Credit Facilities mature on November 1, 2026.
In the year ended December 31, 2023, the Company provided cash deposits totaling $11.8 million to Fannie Mae because the debt service coverage ratios of the underlying properties of each facility were below the minimum required amount per the debt agreements. This amount is recorded as restricted cash and is pledged as additional collateral for the Fannie Mae Master Credit Facilities. This deposit will be refunded the earlier of the Company’s achievement of a debt service coverage ratio above the minimum required amount of 1.40 or the maturity of the Fannie Mae Master Credit Facilities.
MOB Warehouse Facility
On December 22, 2023, the Company, through wholly-owned subsidiaries of the OP, entered into a loan agreement with Capital One (the “MOB Warehouse Facility”) to provide up to $50.0 million of variable-rate financing.
As of December 31, 2023, $14.7 million was outstanding under the MOB Warehouse Facility. The Company may request future advances under the MOB Warehouse Facility by adding eligible MOBs to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Borrowings under the MOB Warehouse Facility bear interest at a monthly rate equal to the sum of the current SOFR for one-month denominated deposits and a spread of 3.0%. Interest payments are due monthly, with no principal payments due until maturity in December 2026.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Interest Rate Swaps Designated to Credit Facilities
As of December 31, 2023, the Company did not have any interest rate swaps designated to any of its credit facilities. As of December 31, 2022, the Company had $150.0 million of SOFR-based interest swap agreements, which were allocated to the Term Loan, and $50.0 million of LIBOR-based interest swap agreements which were allocated to the Capital One Facility. These swaps were all terminated in the year ended December 31, 2023. The Term Loan was fully repaid in the year ended December 31, 2023, but the Capital One Facility remains outstanding.
Non-Designated Interest Rate Caps Required by Credit Facilities
As of December 31, 2023, the Company had seven SOFR-based interest rate cap agreements with an aggregate current effective notional amount of $364.2 million which caps SOFR at 3.50% with terms through January 2027. The Company does not apply hedge accounting to these agreements and changes in value as well as any cash received are presented within (loss) gain on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss (see Note 7 — Derivatives and Hedging Activities for additional disclosure regarding the Company’s derivatives).
In connection with the Fannie Mae Master Credit Facilities, the Company was required to enter into interest rate cap agreements. Periodically, the Company renews these interest rate cap agreements upon their expiration. During the year ended December 31, 2023, the Company paid premiums of $9.6 million to renew five interest rate caps with an aggregate notional amount of $289.4 million which matured in the year ended December 31, 2023. The Company also paid a premium of $0.4 million for a new interest rate cap with a notional amount of $14.7 million in connection with the MOB Warehouse Facility.
Future Principal Payments
The following table summarizes the scheduled aggregate principal payments for the five years subsequent to December 31, 2023 and thereafter, on all of the Company’s outstanding debt (mortgage notes payable and credit facilities):
Future Principal Payments
(In thousands)Mortgage Notes PayableCredit FacilitiesTotal
2024$1,178 $5,769 $6,947 
202513,270 5,769 19,039 
2026379,393 349,488 728,881 
2027922 — 922 
2028116,989 — 116,989 
Thereafter309,627 — 309,627 
Total$821,379 $361,026 $1,182,405 
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 had no LIBOR-based borrowings or derivative instruments as of December 31, 2023. As of December 31, 2023, the Company had $346.3 million of variable-rate, SOFR-based borrowings under the Fannie Mae Master Credit Facilities which automatically transitioned from variable-rate, LIBOR-based borrowings on July 1, 2023. As of December 31, 2023, the Company had SOFR-based interest rate caps with an aggregate notional amount of $349.4 million which are not designated as hedging instruments which also transitioned from LIBOR-based contracts effective July 1, 2023.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
During the year ended December 31, 2022, the Company converted $150.0 million of its “pay-fixed” swaps on its Prior Credit Facility from LIBOR to SOFR, as well as its $378.5 million Capital One MOB Loan and the related “pay-fixed” swap from LIBOR to SOFR. During the year ended December 31, 2023, the Company terminated its remaining $50.0 million of LIBOR-based “pay-fixed” swaps. The “pay-fixed” swaps were terminated in an asset position and the Company received $5.4 million in cash following the termination. This amount was included in accumulated other comprehensive income (“AOCI”), and will amortize into earnings as a reduction to interest expense through March 2024 (the original term of the swap and variable hedged debt). See Note 7 — Derivatives and Hedging Activities for additional details.
Note 6 — Fair Value of Financial Instruments
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring asset 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 December 31, 2023 and 2022, 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
The following table presents information about the Company’s assets and liabilities measured at fair value as of December 31, 2023 and 2022, aggregated by the level in the fair value hierarchy within which those instruments fall.
(In thousands)Quoted Prices in Active Markets
Level 1		Significant
Other Observable Inputs
Level 2		Significant Unobservable Inputs
Level 3		Total
December 31, 2023
Derivative assets, at fair value (non-designated)$— $6,111 $— $6,111 
Derivative assets, at fair value (designated)— 22,259 — 22,259 
Total$— $28,370 $— $28,370 
December 31, 2022
Derivative assets, at fair value (non-designated)$— $3,737 $— $3,737 
Derivative assets, at fair value (designated)36,910 36,910 
Total$— $40,647 $— $40,647 
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 year ended December 31, 2023.
Real Estate Investments Measured at Fair Value on a Non-Recurring Basis
Real Estate Investments Held-for-Use
The Company has impaired real estate investments held-for-use, which are carried at fair value on a non-recurring basis on the consolidated balance sheet as of December 31, 2023 and 2022.
As of December 31, 2023, the Company owned 12 held-for-use properties (eight MOBs, three SHOPs and one land parcel) for which the Company has reconsidered its expected holding periods, of which four properties (one MOB and two SHOPs and one land parcel) are being marketed for sale.
As of December 31, 2022, the Company owned 17 held-for-use properties (nine MOB and eight SHOPs) for which the Company had reconsidered its expected holding periods, of which 10 properties (two MOBs and eight SHOPs) were being marketed for sale.
As a result, the Company evaluated the impact on its ability to recover the carrying values of the properties noted above 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.
See Note 3 — Real Estate investments, Net - “Assets Held for Use and Related Impairments” for additional details.
Real Estate Investments Held-for-Sale
Real estate investments held-for-sale are carried at net realizable value on a non-recurring basis and are generally classified in Level 3 of the fair value hierarchy. The Company did not have any real estate investments classified as held-for-sale as of December 31, 2023 and 2022.
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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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:
December 31, 2023December 31, 2022
(In thousands)Level
Carrying Amount 
Fair Value
Carrying Amount 
Fair Value
Gross mortgage notes payable and mortgage premium and discounts, net
3$820,106 $787,665 $583,817 $550,626 
Prior Credit Facility3$— $— $180,000 $179,496 
Fannie Mae Master Credit Facilities3$346,278 $346,996 $352,047 $353,034 
MOB Warehouse Facility3$14,748 $14,796 $— $— 
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.
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.
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 December 31, 2023 and 2022:
December 31,
(In thousands)Balance Sheet Location20232022
Derivatives designated as hedging instruments:
Interest rate “pay-fixed” swapsDerivative assets, at fair value$22,259 $36,910 
Derivatives not designated as hedging instruments:
Interest rate capsDerivative assets, at fair value$6,111 $3,737 
Cash Flow Hedges of Interest Rate Risk
As of December 31, 2023 and 2022, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk:
December 31, 2023December 31, 2022
Interest Rate DerivativesNumber of InstrumentsNotional AmountNumber of InstrumentsNotional Amount
(In thousands)(In thousands)
SOFR-based interest rate “pay-fixed” swaps1 $378,500 7 $528,500 
LIBOR-based interest rate “pay-fixed” swaps— — 2 50,000 
Total interest rate “pay-fixed” swaps1 $378,500 9 $578,500 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
The table below details the location in the financial statements of the loss recognized on interest rate derivatives designated as cash flow hedges for the periods ended December 31, 2023 and 2022:
Year Ended December 31,
(In thousands)202320222021
Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives$5,324 $50,098 $14,322 
Amount of gain (loss) reclassified from accumulated other comprehensive income into earnings as reductions to (increases in) interest expense$18,770 $(1,153)$(11,010)
Total amount of interest expense presented in the consolidated statements of operations and comprehensive loss$66,078 $51,740 $47,900 
As of December 31, 2023, the Company had one interest rate swap that is designated as a cash flow hedge. The interest rate swap is 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 term of the agreements without exchange of the underlying notional amount. During the years ended December 31, 2023 and 2022, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The interest rate “pay-fixed” swap has a base interest rate of 1.61% and matures in December 2026.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
MOB Loan Swap Termination
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 was being recorded as an adjustment to interest expense over the original term of the two terminated swaps and the MOB Loan prior to its refinancing. For the years ended December 31, 2022 and 2021, the Company reclassified $0.4 million and $0.9 million, respectively, from AOCI as increases to interest expense. No amounts remained in AOCI related to these previously terminated swaps as of December 31, 2023 and 2022.
2023 Swap Terminations
During the year ended December 31, 2023, the Company terminated two LIBOR-based interest rate swap agreements with an aggregate notional amount of $50.0 million and six SOFR-based interest rate swap agreements with an aggregate notional amount of $150.0 million. These borrowings were hedging a portion of the Company’s aggregate SOFR and LIBOR-based borrowings. The swaps were terminated in asset positions, and the Company received $1.9 million in cash from the LIBOR-based swap terminations, and $3.5 million in cash from the SOFR-based swap terminations. Because the Company continues to carry variable-rate borrowings in excess of the notional amounts of the terminated swaps, these amounts were included in AOCI and will be amortized into earnings as a reduction to interest expense from the termination dates of the swaps through March 2024 (the original term of the swap and the Prior Credit Facility). For the year ended December 31, 2023, the Company reclassified $4.2 million from AOCI as decreases to interest expense. The remaining $1.2 million associated with the 2023 terminated swaps in AOCI as of December 31, 2023 will be reclassified into earnings as a decrease to interest expense through March 2024.
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, from January 1, 2024 through December 31, 2024, the Company estimates that $13.5 million will be reclassified from other comprehensive income as a decrease to interest expense relating to the “pay-fixed” swaps designated as derivatives, inclusive of the reclassifications from the 2023 swap terminations described above.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Non-Designated Derivatives
The Company had the following outstanding interest rate derivatives that were not designated as a hedges in qualifying hedging relationships as of as of December 31, 2023 and 2022:
December 31, 2023December 31, 2022
Interest Rate DerivativesNumber of Instruments
Notional Amount (1)
Number of Instruments
Notional Amount (1)
(In thousands)(In thousands)
Interest rate caps (2)
7 $364,170 7 $354,624 
__________
(1)Notional amount represents the currently active interest cap contract and excludes one inactive cap agreements (included in the instrument count) with a notional amount of $52.6 million as of December 31, 2022, which took effect upon the expiration of a similar cap included above and effectively extended the term for the same notional amount.
(2)All of the Company’s interest rate cap agreements limit 30-day SOFR to 3.50% with terms through January 2027. The actual 30-day SOFR rates during the fourth quarter of 2022 exceeded the strike price rate of 3.50%, and since then the Company has received cash payments under these agreements. Changes in the fair market value of these non-designated derivatives, as well as any cash received, are presented within gain on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.
These derivatives are used to manage the Company’s exposure to interest rate movements, but the Company has not elected to apply hedge accounting. As of December 31, 2023, the Company had entered into seven SOFR-based interest rate caps with a notional amount of $364.2 million which limit 30-day SOFR borrowings to 3.50% and have varying expiration dates through January 2027.
Beginning in the fourth quarter of 2022, LIBOR exceeded 3.50% and the Company began receiving payments under these interest rate caps. While the Company does not apply hedge accounting for these interest rate caps, they are economically hedging the Capital One Facility, KeyBank Facility and MOB Warehouse Facility. Changes in the fair value of, and any cash received from, derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to earnings and are presented within (loss) gain on non-designated derivatives in our consolidated statements of operations and comprehensive loss. For the years ended December 31, 2023, 2022 and 2021, (loss) gain on non-designated derivatives were a loss of $2.0 million (including cash received of $5.6 million), a gain of $3.8 million (including cash received of $0.3 million) and a gain of $37,000, respectively.
The Company paid premiums of $9.6 million to renew five interest rate caps with an aggregate notional amount of $289.4 million which matured in the year ended December 31, 2023, and the Company also paid $0.4 million for a new interest rate cap entered into during the year ended December 31, 2023 for a notional amount of $14.7 million. One interest rate cap with a notional amount of $60.0 million matures in April 2024, which represents the next interest rate cap maturity. The Company is required to maintain an aggregate notional value of its interest rate caps equal to the aggregate principal value of its Fannie Mae Credit Facilities, and accordingly expects to renew this maturing cap which is actively hedging exposure to SOFR at a strike price of 3.50%. All of the Company’s LIBOR-based interest rate caps were transitioned to SOFR-based contracts effective July 1, 2023.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2023 and 2022. 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 sheets.
Gross Amounts Not Offset in the Consolidated Balance Sheet
(In thousands)Gross Amounts of Recognized AssetsGross Amounts of Recognized (Liabilities)Gross Amounts Offset in the Consolidated Balance SheetNet Amounts of Assets presented in the Consolidated Balance SheetFinancial InstrumentsCash Collateral ReceivedNet Amount
December 31, 2023
$28,370 — — $28,370 — — $28,370 
December 31, 2022
$40,647 — — $40,647 — — $40,647 
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 December 31, 2023 there were no derivatives in a net liability position. The Company is not required to post any collateral related to these agreements and was not in breach of any agreement provisions.
Note 8 — Stockholders’ Equity
Common Stock
As of December 31, 2023 and 2022, the Company had 111,545,018 and 105,080,531 shares of common stock outstanding, respectively, including unvested restricted shares, shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases, and shares issued as stock dividends since October 2020. Since October 2020, the Company has issued an aggregate of approximately 19.0 million shares in respect to the stock dividends. No other additional shares of common stock were issued during the years ended December 31, 2023 or 2022. 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 cumulative increase in shares outstanding due to the stock dividends (including the January 2024 stock dividend), and are noted as such throughout the accompanying financial statements and notes. Any future issuances of stock dividends will also result in retroactive adjustments. See Note 1 — Organization for additional information.
On March 31, 2023, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2022, which was approved by the Board on March 31, 2023. 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 unless the Company lists its common stock.
Share Repurchase Program
Under the Company’s share repurchase program (the “SRP”), as amended from time to time, 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 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.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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 Prior Credit Facility described in Note 5 — Credit Facilities, Net, which restricted the Company from repurchasing shares, the Board determined that, effective on August 14, 2020, repurchases under the SRP would be suspended. 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. 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 (retroactively adjusted for the stock dividends), under the SRP and does not include any repurchases under tender offers cumulatively through December 31, 2023:
Number of Shares RepurchasedAverage Price per Share
Cumulative repurchases as of December 31, 2022
4,896,620 $20.60 
Year ended December 31, 2023
— — 
Cumulative repurchases as of December 31, 2023
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 years ended December 31, 2023, 2022 and 2021, the Company did not issue any shares of common stock pursuant to the DRIP. Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as the Company pays distributions in stock instead of cash.
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 in its discretion. In May 2023, the stockholder rights plan expired and was not renewed or replaced. No purchase rights were executed pursuant to this agreement.
Preferred Stock
The Company is authorized to issue up to 50,000,000 shares of preferred stock. In connection with an underwritten offering in December 2019 (see details below), the Company classified and designated 1,610,000 shares of its authorized preferred stock as authorized shares of its Series A Preferred Stock as of December 31, 2023. In September 2020, the Board authorized the classification of 600,000 additional shares of the Company’s preferred stock as Series A Preferred Stock in connection with the Preferred Stock Equity Line (as defined below) 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 shares of Series A Preferred Stock issued and outstanding, as of December 31, 2023 and 2022.
In connection with an underwritten offering in October 2021, the Company classified and designated 3,680,000 shares of its authorized preferred stock on October 4, 2021 as authorized shares of its 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (“Series B Preferred Stock”). As a result of an underwritten offering in October 2021, the Company had 3,630,000 shares of Series B Preferred Stock issued and outstanding as of December 31, 2023 and 2022.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Series A Preferred Stock
Terms
Holders of Series A Preferred Stock are entitled to cumulative dividends in the amount of $1.84375 per share each year, which is equivalent to the rate of 7.375% of the $25.00 liquidation preference per share per annum. The Series A Preferred Stock has no stated maturity and will remain outstanding indefinitely unless redeemed, converted or otherwise repurchased. On and after December 11, 2024, at any time and from time to time, the Series A Preferred Stock will be redeemable in whole or in part, at the Company’s option, at a cash redemption price of $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date. In addition, upon the occurrence of a Delisting Event or a Change of Control (each as defined in the articles supplementary governing the terms of the Series A Preferred Stock (the “Series A Articles Supplementary”)), the Company may, subject to certain conditions, at its option, redeem the Series A Preferred Stock, in whole or in part, after the first date on which the Delisting Event occurred or within 120 days after the first date on which the Change of Control occurred, as applicable, by paying the liquidation preference of $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date. Upon the occurrence of a Change of Control during a continuing Delisting Event, unless the Company has elected to exercise its redemption right, holders of the Series A Preferred Stock will have certain rights to convert Series A Preferred Stock into shares of Company’s common stock. In addition, upon the occurrence of a Delisting Event, the dividend rate will be increased on the day after the occurrence of the Delisting Event by 2.00% per annum to the rate of 9.375% of the $25.00 liquidation preference per share per annum (equivalent to $2.34375 per share each year) from and after the date of the Delisting Event. Following the cure of such Delisting Event, the dividend rate will revert to the rate of 7.375% of the $25.00 liquidation preference per share per annum. The necessary conditions to convert the Series A Preferred Stock into common stock have not been met as of December 31, 2023. Therefore, Series A Preferred Stock did not impact Company’s earnings per share calculations for the year ended December 31, 2023, 2022 and 2021.
The Series A Preferred Stock ranks senior to common stock, with respect to dividend rights and rights upon the Company’s voluntary or involuntary liquidation, dissolution or winding up.
Voting rights for holders of Series A Preferred Stock exist primarily with respect to the ability to elect two additional directors to the board of directors if six or more quarterly dividends (whether or not authorized or declared or consecutive) payable on the Series A Preferred Stock are in arrears, and with respect to voting on amendments to the Company’s charter (which includes the Series A Articles Supplementary) that materially and adversely affect the rights of the Series A Preferred Stock or create additional classes or series of shares of the Company’s capital stock that are senior to the Series A Preferred Stock. Other than the limited circumstances described above and in the Series A Articles Supplementary, holders of Series A Preferred Stock do not have any voting rights.
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 $56.0 million after deducting the underwriters’ discount, structuring fee and other offering costs aggregating to $2.9 million. Pursuant to the terms of the Prior Credit Facility, all proceeds were used to repay amounts outstanding under the Prior 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).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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 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 under the Preferred Stock Equity Line during the year ended December 31, 2021, resulting in gross proceeds of $0.4 million and net proceeds of $0.3 million after fees and commissions.
In total, 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.
In the year ended December 31, 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, which totaled $1.2 million, within acquisition and transaction related costs on the consolidated statement of operations and comprehensive income during the year ended December 31, 2021.
The Company did not sell any Series A Preferred Stock under the Preferred Stock Equity Line during the year ended December 31, 2021.
Series B Preferred Stock
Series B Preferred Stock — Terms
Holders of Series B Preferred Stock are entitled to cumulative dividends in the amount of $1.78125 per share each year, which is equivalent to the rate of 7.125% of the $25.00 liquidation preference per share per annum. The Series B Preferred Stock has no stated maturity and will remain outstanding indefinitely unless redeemed, converted or otherwise repurchased. On and after October 6, 2026, at any time and from time to time, the Series B Preferred Stock will be redeemable in whole or in part, at the Company’s option, at a cash redemption price of $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date. In addition, upon the occurrence of a Delisting Event or a Change of Control (each as defined in the articles supplementary governing the terms of the Series B Preferred Stock (the “Series B Articles Supplementary”)), the Company may, subject to certain conditions, at its option, redeem the Series B Preferred Stock, in whole or in part, after the first date on which the Delisting Event occurred or within 120 days after the first date on which the Change of Control occurred, as applicable, by paying the liquidation preference of $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date. Upon the occurrence of a Change of Control during a continuing Delisting Event, unless the Company has elected to exercise its redemption right, holders of the Series B Preferred Stock will have certain rights to convert Series B Preferred Stock into shares of Company’s common stock. In addition, upon the occurrence of a Delisting Event, the dividend rate will be increased on the day after the occurrence of the Delisting Event by 2.00% per annum to the rate of 9.125% of the $25.00 liquidation preference per share per annum (equivalent to $2.28125 per share each year) from and after the date of the Delisting Event. Following the cure of such Delisting Event, the dividend rate will revert to the rate of 7.125% of the $25.00 liquidation preference per share per annum. The necessary conditions to convert the Series B Preferred Stock into common stock have not been met as of December 31, 2023. Therefore, Series B Preferred Stock did not impact Company’s earnings per share calculations for the year ended December 31, 2023 and 2022.
The Series B Preferred Stock ranks on parity with the Company’s Series A Preferred Stock, and senior to its common stock, with respect to dividend rights and rights upon the Company’s voluntary or involuntary liquidation, dissolution or winding up.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Voting rights for holders of Series B Preferred Stock exist primarily with respect to the ability to elect two additional directors to the board of directors if six or more quarterly dividends (whether or not authorized or declared or consecutive) payable on the Series B Preferred Stock are in arrears, and with respect to voting on amendments to the Company’s charter (which includes the Series B Articles Supplementary) that materially and adversely affect the rights of the Series B Preferred Stock or create additional classes or series of shares of the Company’s capital stock that are senior to the Series B Preferred Stock. Other than the limited circumstances described above and in the Series B Articles Supplementary, holders of Series B Preferred Stock do not have any voting rights.
Underwritten Offering — Series B Preferred Stock
On October 6, 2021, the Company completed the initial issuance and sale of 3,630,000 shares (which includes 430,000 shares issued and sold pursuant to the underwriters’ exercise of their option to purchase additional shares) of 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 $90.8 million and net proceeds of $86.8 million, after deducting underwriting discounts, structuring fees and other costs.
Pursuant to the terms of the Prior Credit Facility, all proceeds were used to repay amounts outstanding under the Prior Credit Facility.
Distributions and Dividends
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 Prior Credit Facility (see Note 5 — Credit Facility, Net for additional information) which restricted the Company from paying distributions on common stock. Under the new policy, distributions authorized by the Board on the Company’s shares of common stock, if and when declared, are now paid on a quarterly basis in arrears in shares of the Company’s common stock valued at the Company’s estimated per share net asset value of common stock in effect on the applicable date, based on a single record date to be specified at the beginning of each quarter. The following table details these stock dividends:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Stock Dividend Declaration DateStock Dividend Issue DateQuarterly Stock Dividend Rate (per share)
October 1, 2020October 15, 20200.013492
January 4, 2021January 15, 20210.013492
April 2, 2021April 15, 20210.014655
July 1, 2021July 15, 20210.014655
October 1, 2021October 15, 20210.014655
January 3, 2022January 15, 20220.014655
April 1, 2022April 18, 20220.014167
July 1, 2022July 15, 20220.014167
October 3, 2022October 17, 20220.014167
January 3, 2023January 18, 20230.014167
April 3, 2023April 17, 20230.015179
July 3, 2023July 17, 20230.015179
October 2, 2023October 16, 20230.015179
January 3, 2024
January 16, 2024
0.015179
Tax Characteristics of Dividends
All common dividends in the years ended December 31, 2023, 2022 and 2021 were issued as stock dividends, which do not represent taxable dividends to shareholders for U.S. federal income tax purposes. All dividends paid on the Series A Preferred Stock and Series B Preferred Stock were considered 100% return of capital for tax purposes for the years ended December 31, 2023, 2022 and 2021.
Note 9 — Related Party Transactions and Arrangements
As of December 31, 2023 and 2022, the Special Limited Partner owned 10,710 and 10,094 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 December 31, 2023 and 2022, 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
The Second Amended and Restated Advisory Agreement by and among the Company, the OP and the Advisor (as amended, the “Second A&R Advisory Agreement”) took effect on February 17, 2017, 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 A&R 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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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 December 31, 2023.
Asset Management Fees and Variable Management/Incentive Fees
Under the LPA and the advisory agreement that was superseded by the 0riginal amended and restated 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 December 31, 2023, 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. These cash 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. Stock dividends do not cause the OP to issue additional Common OP Units, rather, the redemption ratio to common stock is adjusted. 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. There are no variable management fees earned from the issuance of common stock dividends. The base management fee is payable to the Advisor or its assignees in cash, Common 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 Common 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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 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 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 years ended December 31, 2023, 2022 and 2021.
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 the Company’s 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 has provided notice of intent to terminate. The current term of the A&R Property Management Agreement expires February 17, 2023. 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. See the Mortgage Notes Payable table included in Note 4 — Mortgage Notes Payable, Net for additional information on the Multi- Property CMBS Loan.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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 year ended December 31, 2023, 2022 and 2021, the Company incurred $10.6 million, $8.8 million and $9.4 million, respectively, of reimbursement expenses from the Advisor for providing administrative services. These reimbursement expenses are included in general and administrative expense on the consolidated statements of operations and comprehensive loss. In September 2022, the Advisor terminated certain of its employees who provided services to the Company and for which the Company reimbursed the Advisor for salaries and benefits. In connection with the termination, the Company recognized a compensation charge, net of adjustments for previously accrued bonuses, of $0.3 million in the year ended December 31, 2022. Additionally, the Company incurred $0.3 million of severance costs for terminated employees in the year ended December 31, 2023.
On July 25, 2019, the Company entered into the Advisory Agreement Amendment. Under the Advisory Agreement Amendment, 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 Advisory Agreement 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%. As of December 31, 2023 and 2022, the Fixed Component exceeded the Variable Component for both periods, and the Capped Reimbursement Amount was $8.0 million and $7.8 million, respectively. The Company expects that the Capped Reimbursement Amount for the year ended December 31, 2024 will be approximately $8.2 million.
If the Company sells real estate investments aggregating an amount equal to or more than 25.0% of Real Estate Cost, in one or a series of related dispositions in which the proceeds of the disposition(s) are not reinvested in Investments (as defined in the Advisory Agreement Amendment), then within 12 months following the disposition(s), the Advisory Agreement Amendment requires the Advisor and the Company to negotiate in good faith to reset the Fixed Component; 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 amendment 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.
Professional Fee Credit Due from the Advisor
Prior to the COVID-19 pandemic, the Advisor had awarded bonuses to its employees, or employees of its affiliates, in March of each year as an all-cash award, prorated for the amount of time spent providing administrative services relating to the Company. Such bonus amounts were paid by the Advisor to its employees, or employees of its affiliates, throughout the year subsequent to the year in which such services were rendered.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
The bonus awards for the year ended December 31, 2020 (the “2020 Bonus Awards”) were awarded in May 2021. The finalized cash amounts of the 2020 Bonus Awards were less than the estimates provided to the Company by the Advisor throughout the year ended December 31, 2020, which resulted in a credit for professional fees to due to the Company from the Advisor of $1.0 million. The finalized cash amounts were less than the estimated amounts due to, among other things, 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 a general reduction in final bonuses for remaining personnel to mitigate the negative impacts of the COVID-19 pandemic. The 2020 Bonus Awards were paid by the Advisor to its employees, or employees of its affiliates, over a ten-month period from June 2021 to April 2022.
As a result, during the second quarter of 2021, the Company recorded a receivable from the Advisor of $1.0 million, which was recorded in prepaid expenses and other assets on the consolidated balance sheet and a corresponding reduction to general administrative expenses. Pursuant to authorization by the independent members of the Company’s Board, the $1.0 million receivable was required to be repaid to the Company on a pro rata basis over a six-month period from November 2021 through April 2022. As of December 31, 2022, the entire amount was repaid by the Advisor.
Reimbursements for the cash portion of 2021 bonuses paid by the Advisor to its employees, or employees of its affiliates, were expensed and reimbursed on a monthly basis during the year ended December 31, 2021 in accordance with estimates provided by the Advisor. These bonus awards were awarded in April 2022, and were paid to employees over a ten-month period from July 2022 to April 2023.
Reimbursements for the cash portion of 2022 bonuses paid by the Advisor to its employees, or employees of its affiliates, were expensed and reimbursed on a monthly basis during the year ended December 31, 2022 in accordance with estimates provided by the Advisor. These bonus awards were awarded in June 2023, and are being paid to employees over a six-month period from October 2023 to March 2024.
Reimbursements for the cash portion of 2023 bonuses paid by the Advisor to its employees, or employees of its affiliates, were expensed and reimbursed on a monthly basis during the year ended December 31, 2023 in accordance with estimates provided by the Advisor. These amounts have not yet been awarded or paid by the Advisor to its employees, or employees of its affiliates.
Summary of fees, expenses and related payables
The following table details amounts incurred and payable in connection with the Company’s operations-related services described above as of and for the periods presented:
Year Ended December 31,Payable (Receivable) as of
 202320222021December 31,
(In thousands)
Incurred
Incurred
Incurred20232022
One-time fees and reimbursements:
Acquisition cost reimbursements$32 $23 $90 $— $5 
Ongoing fees and reimbursements:
Asset management fees 21,831 21,831 20,710 — — 
Property management fees (1)
4,135 4,200 3,749 97 3 
Professional fees and other reimbursements (2)
10,595 

8,820 9,386 198 39 
Professional fees credit due from Advisor— — (1,030)— — 
Total related party operation fees and reimbursements$36,593 $34,874 $32,905 $295 $47 
__________
(1)Inclusive of $0.4 million and $0.7 million of leasing commissions which are included in prepaid expenses and other assets on the consolidated balance sheet as of December 31, 2023 and 2022.
(2)Included in general and administrative expenses in the consolidated statements of operations. Includes $6.9 million, $6.0 million and $6.2 million subject to the Capped Reimbursement Amount for the years ended December 31, 2023, 2022 and 2021, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Fees and Participations Incurred in Connection with a Listing or the Liquidation of the Company’s Real Estate Assets
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 years ended December 31, 2023, 2022 and 2021. 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 years ended December 31, 2023, 2022 and 2021. 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 a 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 Advisory Agreement Amendment, upon the termination or non-renewal of the agreement, the Advisor is 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 Advisory Agreement Amendment.
Upon a termination by either party in connection with a change of control (as defined in the Advisory Agreement Amendment), the Company would be required to pay the Advisor a change of control fee equal to the product of four and the “Subject Fees” described below.
Upon a termination by the Company in connection with a transition to self-management, the Company would be required to pay the Advisor a transition fee equal to (i) $15.0 million plus (ii) the product of four multiplied by the Subject Fees, provided that the transition fee shall not exceed an amount equal to 4.5 multiplied by the Subject Fees.
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
December 31, 2023
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 4.1 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 December 31, 2023 and activity for the period presented:
Number of Common Shares Weighted-Average Issue Price
Unvested, December 31, 2020215,384 $21.11 
Stock dividend12,646 14.79 
Granted— — 
Vested(68,603)19.72 
Forfeitures— — 
Unvested, December 31, 2021
159,427 21.21 
Stock Dividend8,313 14.86 
Granted— — 
Vested(70,397)23.67 
Forfeitures— — 
Unvested, December 31, 2022
97,343 18.89 
Stock dividend5,171 14.27 
Granted— — 
Vested(50,871)20.40 
Forfeitures— — 
Unvested, December 31, 2023
51,643 16.94 
As of December 31, 2023, the Company had $0.6 million of unrecognized compensation cost related to unvested restricted share awards granted under the RSP. That cost is expected to be recognized over a weighted-average period of 0.6 years. Compensation expense related to restricted shares was $0.9 million, $1.2 million and $1.3 million during the years ended December 31, 2023, 2022 and 2021, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Other Share-Based Compensation
The Company may issue common stock in lieu of cash to pay fees earned by the Company’s directors at the respective director’s election. There are no restrictions on shares issued in lieu of cash compensation since these payments in lieu of cash relate to fees earned for services performed. No such shares were issued during the years ended December 31, 2023, 2022 and 2021.
Note 12 — Accumulated Other Comprehensive Income
The following table illustrates the changes in accumulated other comprehensive income as of and for the periods presented:
(In thousands)Unrealized Gains (Losses) on Designated Derivative
Balance, December 31, 2020$(39,673)
Other comprehensive income, before reclassifications14,322 
Amount of gain reclassified from accumulated other comprehensive income11,010 
Balance, December 31, 2021
(14,341)
Other comprehensive income, before reclassifications50,098 
Amount of gain reclassified from accumulated other comprehensive income1,153 
Balance, December 31, 2022
36,910 
Other comprehensive income, before reclassifications5,324 
Amount of gain reclassified from accumulated other comprehensive income(18,770)
Balance, December 31, 2023
$23,464 
Accumulated other comprehensive income predominately relates to both realized and unrealized gains on designated derivatives. As previously discussed in Note 7 — Derivatives and Hedging, previously designated interest rate hedging instruments were terminated, and the termination costs/gains are being amortized over the term of the terminated instruments because the Company continues to carry variable-rate borrowings in excess of the notional amounts of the terminated instruments. The unamortized gain of the terminated swaps still remaining in accumulated other comprehensive income was $1.2 million as of December 31, 2023.
Note 13 — Non-Controlling Interests
Non-controlling interests on the Company’s consolidated balance sheet is comprised of the following:
Balance as of December 31,
(In thousands)20232022
Series A Preferred Units held by third parties$2,578 $2,578 
Common OP Units held by third parties3,156 3,584 
Total Non-controlling Interests in the OP5,734 6,162 
Non-controlling interests in property owning subsidiaries695 389 
Total Non-controlling Interests$6,429 $6,551 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Net loss attributable to non-controlling interests on the Company’s consolidated statement of operations is comprised of the following:
Year Ended December 31,
(in thousands)202320222021
Income attributable to Series A Preferred Units held by third parties$(185)$(184)$(92)
Loss attributable to Common OP Units held by third parties317 341 373 
Net loss attributable to non-controlling interests in the OP132 157 281 
Income attributable to non-controlling interests in property-owning subsidiaries(50)(22)(21)
Net loss attributable to non-controlling interests$82 $135 $260 
Non-Controlling Interests in the Operating Partnership
For preferred and common shares issued by the Company, the Company typically issues mirror securities with substantially equivalent economic rights between the Company and the OP. The securities held by the Company are eliminated in consolidation.
Series A Preferred OP 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 issuance at a then 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. During the years ended December 31, 2023 and 2022, Series A Preferred Unit holders were paid distributions of $0.2 million.
Common OP Units
The Company is the sole general partner and holds substantially all of the Common OP Units. As of December 31, 2023 and 2022, the Advisor held 90 Common OP Units, which represents a nominal percentage of the aggregate ownership in the OP.
In November 2014, the Company partially funded the purchase of an MOB from an unaffiliated third party by causing the OP to issue 405,908 Common OP Units, with an initial 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 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 years ended December 31, 2023 and 2022, Common OP Unit non-controlling interest holders were not paid any cash distributions.
Stock dividends do not cause the OP to issue additional Common OP Units, rather, the redemption ratio to common stock is adjusted. The 405,908 Common OP Units outstanding as of December 31, 2023 would be redeemable for 496,644 shares of common stock, giving effect to adjustments for the impact of the stock dividends through January 2024.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Non-Controlling Interests in Property Owning Subsidiaries
The Company has investment arrangements with unaffiliated third parties whereby such investors receive an ownership interest in certain of the Company’s property-owning subsidiaries and are entitled to receive proportionate shares of the net operating cash flows derived from the subsidiaries’ properties. Upon disposition of a property subject to non-controlling interests, 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.
The following table summarizes the activity related to investment arrangements with unaffiliated third parties:
Third Party Net Investment AmountNon-Controlling Ownership PercentageNet Real Estate Assets Subject to Investment ArrangementDistributions
Property NameAs of December 31,As of December 31,As of December 31,Year Ended December 31,
(Dollar amounts in thousands)
Investment Date2023202320232022202320222021
Plaza Del Rio Medical Office Campus Portfolio(1)
May 2015$695 6.7 %$12,687 $12,455 $— $— $— 
__________
(1)Of the six total properties in the Plaza Del Rio Medical Office Campus Portfolio, three properties were encumbered under the Capital One MOB Loan, two properties were pledged to the MOB Warehouse Facility and one property was encumbered under the Multi-Property CMBS Loan. Please see Note 4 — Mortgage Notes Payable and Note 5 — Credit Facilities for additional information.
Note 14 — Net Loss Per Share
The following is a summary of the basic and diluted net loss per share computation for the years ended December 31, 2023, 2022 and 2021 and has been retroactively adjusted to reflect the stock dividends (see Note 1 — Organization and Note 8 — Stockholder’s Equity for additional information):
Year Ended December 31,
202320222021
Net loss attributable to stockholders (in thousands)
$(86,097)$(93,285)$(92,942)
Basic and diluted weighted-average shares outstanding (1)
113,121,721 113,043,339 112,965,632 
Basic and diluted net loss per share$(0.76)$(0.83)$(0.82)
__________
(1)Weighted average number of shares of common stock outstanding for the periods presented. There were 111,545,018, 105,080,531 and 99,281,754 shares of common stock outstanding as of December 31, 2023, 2022 and 2021.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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. 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):
December 31,
202320222021
Unvested restricted shares (1)
83,308 150,151 227,854 
Common OP Units (2)
496,644 496,644 496,644 
Class B Units (3)
439,459 439,459 439,459 
Total weighted average antidilutive common share equivalents1,019,411 1,086,254 1,163,957 
________
(1)Weighted average number of antidilutive unvested restricted shares outstanding for the periods presented. There were 51,643, 97,343 and 159,427 unvested restricted shares outstanding as of December 31, 2023, 2022 and 2021, respectively.
(2)Weighted average number of antidilutive Common OP Units presented as shares outstanding for the periods presented, at the current conversion rate as retroactively adjusted for the effects of the stock dividends. There were 405,998 Common OP Units outstanding as of December 31, 2023, 2022 and 2021.
(3)Weighted average number of antidilutive Class B Units presented as shares outstanding for the periods presented, at the current conversion rate as retroactively adjusted for the effects of the stock dividends. There were 359,250 Class B Units outstanding as of December 31, 2023, 2022 and 2021.
Note 15 — Segment Reporting
The disclosures below for the years ended December 31, 2023, 2022 and 2021, are presented for the Company’s two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs.
The Company evaluates performance and makes resource allocations based on its two 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 as well as 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.
Segment Income
The Company evaluates the performance of the combined properties in each segment based on total revenues from tenants, less property operating costs. As such, this excludes all other items of expense and income included in the financial statements in calculating net loss. The Company uses segment income to assess and compare property level performance and to make decisions concerning the operation of the properties. The Company believes that segment income is useful as a performance measure because, when compared across periods, segment income 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 loss.
Segment income excludes certain components from net 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. Segment income presented by the Company may not be comparable to segment income reported by other REITs that define segment income differently.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
The following table presents the operating financial information for the Company’s two business segments for the years ended December 31, 2023, 2022 and 2021:
Year Ended December 31,
(In thousands)
2023
2022
2021
Medical Office Buildings:
Revenue from tenants$135,449 $131,444 $122,867 
Less: Property operating and maintenance37,954 35,945 34,480 
Segment income$97,495 $95,499 $88,387 
Senior Housing Operating Properties:
Revenue from tenants$210,476 $204,402 $206,488 
Less: Property operating and maintenance179,838 177,499 171,333 
Segment income$30,638 $26,903 $35,155 
Reconciliation to Consolidated Financial Information
A reconciliation of the total reportable segments’ revenue from tenants to consolidated revenue from tenants and the total reportable segments’ income to consolidated net loss attributable to common stockholders is presented below:
Year Ended December 31,
(In thousands)202320222021
Revenue from tenants
MOBs$135,449 $131,444 $122,867 
SHOPs210,476 204,402 206,488 
Total consolidated revenue from tenants$345,925 $335,846 $329,355 
Net loss attributable to common stockholders:
Segment income:
MOBs$97,495 $95,499 $88,387 
SHOPs30,638 26,903 35,155 
Total segment income128,133 122,402 123,542 
Impairment charges(4,676)(27,630)(40,951)
Operating fees to related parties(25,527)(25,353)(24,206)
Acquisition and transaction related(545)(1,484)(2,714)
General and administrative(18,928)(17,287)(16,828)
Depreciation and amortization(82,873)(82,064)(79,926)
Gain (loss) on sale of real estate investments(322)(125)3,648 
Interest expense(66,078)(51,740)(47,900)
Interest and other income734 27 61 
Gain (loss) on non-designated derivatives(1,995)3,834 37 
Income tax expense(303)(201)(203)
Net loss attributable to non-controlling interests82 135 260 
Allocation for preferred stock(13,799)(13,799)(7,762)
Net loss attributable to common stockholders$(86,097)$(93,285)$(92,942)
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
The following table reconciles real estate investments, net by segment to consolidated total assets as of the periods presented:
December 31,
(In thousands)20232022
ASSETS
Investments in real estate, net:
MOBs$1,114,963 $1,121,857 
SHOPs824,694 856,440 
Total investments in real estate, net1,939,657 1,978,297 
Cash and cash equivalents46,409 53,654 
Restricted cash44,907 22,884 
Derivative assets, at fair value28,370 40,647 
Straight-line rent receivable, net26,325 25,276 
Operating lease right-of-use asset7,713 7,814 
Prepaid expenses and other assets35,781 34,554 
Deferred costs, net15,997 17,223 
Total assets$2,145,159 $2,180,349 
The following table reconciles capital expenditures by reportable business segments, excluding corporate non-real estate expenditures, for the periods presented:
Year Ended December 31,
(In thousands)202320222021
MOBs$10,467 $10,542 $6,152 
SHOPs14,832 17,451 12,919 
Total capital expenditures$25,299 $27,993 $19,071 
Note 16 — Commitments and Contingencies
As of December 31, 2023, the Company has seven operating and six direct financing lease agreements related to certain acquisitions under leasehold interests arrangements. The seven operating leases have durations, including assumed renewals, ranging from 18.9 to 83.7 years, excluding an adjacent parking lot lease with a term of 0.8 years as of December 31, 2023. The Company did not enter into any additional ground leases during the year ended December 31, 2023. The classification of these leases were grandfathered in adoption of ASU 842, whereby they will continue to be classified as operating leases unless modified.
As of December 31, 2023, the Company’s balance sheet included ROU assets and liabilities of $7.7 million and $8.0 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively, on the Company’s consolidated balance sheet. In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the lease guidance issued in 2019, as well as for new operating leases since adoption, 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. During the year ended December 31, 2021, the Company sold a property which included a prepaid ground lease. Upon disposition, the carrying value of the ROU asset was $5.7 million, and was recorded as a reduction of the gain on sale for that property.
The Company’s ground operating leases have a weighted-average remaining lease term, including assumed renewals, of 33.5 years and a weighted-average discount rate of 7.36% as of December 31, 2023. For the years ended December 31, 2023, 2022 and 2021, the Company paid cash of $0.7 million, $0.7 million and $0.8 million for amounts included in the measurement of lease liabilities and recorded total rental expense from operating leases of $0.8 million, $0.9 million and $0.9 million, on a straight-line basis in accordance with the standard, during the years ended December 31, 2023, 2022 and 2021, respectively. The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss.
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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Future Base Rent Payments
(In thousands)Operating Leases
Direct Financing Leases (1)
2024$632 $90 
2025588 93 
2026599 95 
2027617 97 
2028619 100 
Thereafter21,324 7,115 
Total minimum lease payments24,379 7,590 
Less: amounts representing interest(16,341)(2,756)
Total present value of minimum lease payments$8,038 $4,834 
__________
(1)The Direct Finance Lease liability is included in Accounts Payable and accrued expenses on the balance sheet as of December 31, 2023. 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 December 31, 2023, 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 Annual Report on Form 10-K and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements except the following disclosures:
Stock Dividend
On January 3, 2024, the Company declared a quarterly stock dividend of 0.015179 shares of the Company’s common stock on each share of the Company’s outstanding common stock. The stock dividend was payable on January 16, 2024 to holders of record of the Company’s common stock at the close of business on January 12, 2024.
Property Acquisitions
Subsequent to December 31, 2023, the Company acquired four MOB properties for an aggregate contract purchase price of $12.6 million. This acquisition was funded with a mortgage note of $7.5 million secured by the acquired properties (described below) and the remainder with cash on hand.
New Indebtedness
In connection with the acquired MOBs described above, subsequent to December 31, 2023, the Company entered into a new secured mortgage note for $7.5 million. This mortgage bears interest at an annual rate of 6.84% with no principal payments due until maturity in March 2034.
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Healthcare Trust, Inc. and Subsidiaries

Real Estate and Accumulated Depreciation
Schedule III
December 31, 2023
(In thousands)
   Initial CostsSubsequent to Acquisition  
Property StateAcquisition
Date		Encumbrances at 
December 31, 2023		LandBuilding and
Improvements		LandBuilding and
Improvements
Gross Amount at
December 31, 2022(1) (2)
Accumulated
Depreciation(3) (4)
Fresenius Medical Care - Winfield, ALAL5/10/2013$1,166 $152 $1,568 $— $— $1,720 $490 
Adena Health Center - Jackson, OH(7)OH6/28/2013— 242 4,494 — (25)4,711 1,217 
Ouachita Community Hospital - West Monroe, LALA7/12/2013— 633 5,304 — — 5,937 1,469 
CareMeridian - Littleton, COCO8/8/2013— 976 8,900 — 111 9,987 3,272 
Oak Lawn Medical Center - Oak Lawn, ILIL8/21/20135,219 835 7,217 — 25 8,077 1,919 
Surgery Center of Temple - Temple, TXTX8/30/20133,975 225 5,208 — 432 5,865 1,572 
Greenville Health System - Greenville, SC(9)SC10/10/20133,035 720 3,045 — 713 4,478 886 
Stockbridge Family Medical - Stockbridge, GAGA2/21/20141,845 823 1,799 — 233 2,855 629 
Arrowhead Medical Plaza II - Glendale, AZ(11)AZ2/21/20147,756 — 9,758 — 2,246 12,004 3,911 
Village Center Parkway - Stockbridge, GAGA2/21/20142,468 1,135 2,299 — 386 3,820 916 
Creekside MOB - Douglasville, GAGA4/30/20147,229 2,709 5,320 — 1,035 9,064 2,082 
Bowie Gateway Medical Center - Bowie, MDMD5/7/20149,356 983 10,321 — 426 11,730 2,802 
Campus at Crooks & Auburn Building D - Rochester Mills, MIMI5/19/20143,964 640 4,166 — 164 4,970 1,266 
Berwyn Medical Center - Berwyn, ILIL5/29/2014— 1,305 7,559 — 196 9,060 1,897 
Countryside Medical Arts - Safety Harbor, FLFL5/30/20147,284 915 7,663 — 555 9,133 2,164 
St. Andrews Medical Park - Venice, FLFL5/30/201410,440 1,668 10,005 — 1,416 13,089 3,530 
Campus at Crooks & Auburn Building C - Rochester Mills, MIMI6/3/20143,749 609 3,893 — 198 4,700 1,213 
Laguna Professional Center - Elk Grove, CACA7/15/201410,808 1,811 14,598 — 318 16,727 4,090 
UC Davis MOB - Elk Grove, CACA7/15/20146,918 1,138 7,242 — 294 8,674 2,199 
Estate at Hyde Park - Tampa, FL(6),(8)FL7/31/2014— 1,777 20,308 — 1,130 23,215 5,799 
Autumn Ridge of Clarkston - Clarkston, MI(6),(8)MI8/12/2014— 655 19,967 — 2,098 22,720 5,678 
Sunnybrook of Burlington - Burlington, IA(5)IA8/26/2014— 518 16,739 — 519 17,776 4,964 
Sunnybrook of Carroll - Carroll, IA(5)IA8/26/2014— 473 11,263 — 67 11,803 2,968 
Prairie Hills at Cedar Rapids - Cedar Rapids, IA(6),(8)IA8/26/2014— 195 8,595 — 276 9,066 2,334 
Prairie Hills at Clinton - Clinton, IA(5)IA8/26/2014— 890 18,882 — 154 19,926 5,285 
Prairie Hills at Des Moines - Des Moines, IA(5)IA8/26/2014— 647 13,745 — 168 14,560 3,976 
Sunnybrook of Fairfield - Fairfield, IAIA8/26/2014— 340 14,115 — 353 14,808 4,016 
Prairie Hills at Independence - Independence, IAIA8/26/2014— 473 10,600 — 199 11,272 2,904 
Sunnybrook of Mt. Pleasant - Mt. Pleasant, IAIA8/26/2014— 205 10,935 — 432 11,572 2,895 
Sunnybrook of Muscatine - Muscatine, IA(5)IA8/26/2014— 302 13,840 — 283 14,425 3,745 
Prairie Hills at Tipton - Tipton, IAIA8/26/2014— 306 10,409 — 175 10,890 2,652 
Liberty Court - Dixon, ILIL8/29/2014— 119 1,998 — 69 2,186 610 
Lakeside Vista - Holland, MI(5)MI8/29/2014— 378 12,196 — 2,205 14,779 3,658 
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Healthcare Trust, Inc. and Subsidiaries

Real Estate and Accumulated Depreciation
Schedule III
December 31, 2023
(In thousands)
   Initial CostsSubsequent to Acquisition  
Property StateAcquisition
Date		Encumbrances at 
December 31, 2023		LandBuilding and
Improvements		LandBuilding and
Improvements
Gross Amount at
December 31, 2022(1) (2)
Accumulated
Depreciation(3) (4)
The Atrium - Rockford, ILIL8/29/2014— 164 1,746 — 317 2,227 463 
Arrowhead Medical Plaza I - Glendale, AZ(11)AZ9/10/20145,228 — 6,447 — 1,644 8,091 2,361 
Sunnybrook of Burlington - Land - Burlington, IAMO9/23/2014— 620 — — — 620 — 
Community Health MOB - Harrisburg, PA(10)PA9/26/20144,921 — 6,170 — — 6,170 1,474 
Brady MOB - Harrisburg, PA(10)PA9/26/201417,934 — 22,485 — — 22,485 5,247 
Landis Memorial - Harrisburg, PA(10)PA9/26/2014— — 32,484 — — 32,484 7,604 
FOC II - Mechanicsburg, PA(11)PA9/26/201413,277 — 16,473 — 173 16,646 4,462 
FOC Clinical - Mechanicsburg, PA(10)PA9/26/201415,660 — 19,634 — — 19,634 5,176 
FOC I - Mechanicsburg, PA(11)PA9/26/20147,375 — 8,923 — 324 9,247 2,632 
Copper Springs Senior Living - Meridian, ID(12)ID9/29/2014— 498 7,130 (197)(4,073)3,358 69 
Addington Place of Brunswick - Brunswick, GAGA9/30/2014— 1,509 14,402 — 616 16,527 4,160 
Addington Place of Dublin - Dublin, GAGA9/30/2014— 403 9,281 — 235 9,919 2,768 
Addington Place of Johns Creek - Johns Creek, GA(6),(8)GA9/30/2014— 997 11,943 — 545 13,485 3,536 
Allegro at Jupiter - Jupiter, FL(5)FL9/30/2014— 3,741 49,534 — 1,086 54,361 13,343 
Addington Place of Lee's Summit - Lee's Summit, MO(6),(8)MO9/30/2014— 2,734 25,008 — 467 28,209 6,844 
Addington Place at Mills - Roswell, GAGA9/30/2014— 1,000 8,611 — 2,730 12,341 3,783 
Addington Place of College Harbour - St Petersburg, FLFL9/30/2014— 3,791 8,684 — 2,843 15,318 3,591 
Allegro at Stuart - Stuart, FL(5)FL9/30/2014— 5,018 60,575 — 1,465 67,058 16,600 
Allegro at Tarpon - Tarpon Springs, FL(6),(8)FL9/30/2014— 2,360 13,728 — 3,760 19,848 5,138 
Addington Place of Titusville - Titusville, FL(5)FL9/30/2014— 1,379 13,976 — 814 16,169 4,481 
Allegro at St. Petersburg - Land - St. Petersburg, FLFL9/30/2014— 3,045 — — — 3,045 — 
Gateway MOB - Clarksville, TN(9)TN10/3/201413,953 — 16,367 — 1,127 17,494 4,681 
Dyer Building - Dyer, ININ10/17/20146,842 601 8,992 — 195 9,788 2,227 
757 Building - Munster, ININ10/17/20145,819 645 7,885 — 56 8,586 1,895 
761 Building - Munster, ININ10/17/20146,611 1,436 8,616 — 179 10,231 2,238 
759 Building - Munster, ININ10/17/20148,009 1,101 8,899 — 42 10,042 2,201 
Schererville Building - Schererville, ININ10/17/2014— 1,260 935 — 153 2,348 442 
Meadowbrook Senior Living - Agoura Hills, CA(6),(8)CA11/25/2014— 8,821 48,682 — 3,162 60,665 13,139 
Mount Vernon Medical Office Building - Mount Vernon, WA(9)WA11/25/201414,774 — 18,519 — 4 18,523 4,561 
Wellington at Hershey's Mill - West Chester, PAPA12/3/2014— 8,531 80,734 — 6,040 95,305 21,624 
Eye Specialty Group Medical Building - Memphis, TNTN12/5/20146,379 775 7,223 — — 7,998 1,721 
Addington Place of Alpharetta - Alpharetta, GAGA12/10/2014— 1,604 26,069 — 294 27,967 6,899 
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Healthcare Trust, Inc. and Subsidiaries

Real Estate and Accumulated Depreciation
Schedule III
December 31, 2023
(In thousands)
   Initial CostsSubsequent to Acquisition  
Property StateAcquisition
Date		Encumbrances at 
December 31, 2023		LandBuilding and
Improvements		LandBuilding and
Improvements
Gross Amount at
December 31, 2022(1) (2)
Accumulated
Depreciation(3) (4)
Addington Place of Prairie Village - Prairie Village, KS(6),(8)KS12/10/2014— 1,782 21,869 — 527 24,178 6,073 
Bloom MOB - Harrisburg, PA(10)PA12/15/201413,116 — 15,928 — 517 16,445 4,003 
Medical Sciences Pavilion - Harrisburg, PA(10)PA12/15/201417,793 — 22,309 — — 22,309 5,133 
Wood Glen Nursing and Rehab Center - West Chicago, IL(12)IL12/16/2014— 1,896 16,107 (367)(6,437)11,199 531 
Pinnacle Center - Southaven, MSMS12/16/20147,558 1,378 6,547 — 1,551 9,476 2,255 
Paradise Valley Medical Plaza - Phoenix, AZ(11)AZ12/29/201421,615 — 25,194 — 1,907 27,101 6,887 
Victory Medical Center at Craig Ranch - McKinney, TXTX12/30/2014— 1,596 40,475 — 1,249 43,320 9,909 
Rivershores Healthcare & Rehab Centre - Marseilles, IL(12)IL12/31/2014— 1,276 6,868 (247)(2,836)5,061 245 
Morton Terrace Healthcare & Rehab Centre - Morton, IL(12)IL12/31/2014— 709 5,649 (137)(2,521)3,700 181 
Morton Villa Healthcare & Rehab Centre - Morton, IL(12)IL12/31/2014— 645 3,687 (125)(1,545)2,662 149 
The Heights Healthcare & Rehab Centre - Peoria Heights, IL(12)IL12/31/2014— 214 7,952 (42)(3,369)4,755 296 
Colonial Healthcare & Rehab Centre - Princeton, IL(12)IL12/31/2014— 173 5,871 (33)(2,623)3,388 212 
Capitol Healthcare & Rehab Centre - Springfield, IL(12)IL12/31/2014— 603 21,699 (117)(8,561)13,624 735 
Acuity Specialty Hospital - Mesa, AZAZ1/14/2015— 1,977 16,203 — 543 18,723 4,136 
Acuity Specialty Hospital - Sun City, AZ(12)AZ1/14/2015— 2,329 15,795 (1,333)(10,791)6,000 — 
Addington Place of Shoal Creek - Kansas City, MO(6),(8)MO2/2/2015— 3,723 22,259 — 773 26,755 6,045 
Aurora Healthcare Center - Green Bay, WIWI3/18/20151,903 1,130 1,678 — — 2,808 474 
Aurora Healthcare Center - Greenville, WIWI3/18/2015825 259 958 — — 1,217 286 
Aurora Healthcare Center - Kiel, WIWI3/18/20151,959 676 2,214 — — 2,890 558 
Aurora Healthcare Center - Plymouth, WIWI3/18/201517,521 2,891 24,224 — — 27,115 6,131 
Aurora Healthcare Center - Waterford, WIWI3/18/20154,773 590 6,452 — — 7,042 1,575 
Aurora Healthcare Center - Wautoma, WIWI3/18/20154,281 1,955 4,361 — — 6,316 1,109 
Arbor View Assisted Living and Memory Care - Burlington, WIWI3/31/2015— 367 7,815 — 147 8,329 2,320 
Advanced Orthopedic Medical Center - Richmond, VAVA4/7/201517,390 1,523 19,229 — 1,051 21,803 4,532 
Palm Valley Medical Plaza - Goodyear, AZAZ4/7/20155,458 1,890 4,940 — 1,224 8,054 1,637 
Physicians Plaza of Roane County - Harriman, TNTN4/27/20156,472 1,746 7,842 — 428 10,016 2,005 
Adventist Health Lacey Medical Plaza - Hanford, CACA4/29/201511,469 328 13,302 — 750 14,380 3,009 
Medical Center I - Peoria, AZAZ5/15/20153,064 807 1,115 — 1,919 3,841 1,324 
Medical Center II - Peoria, AZ(7)AZ5/15/2015— 945 1,330 — 5,036 7,311 2,219 
Commercial Center - Peoria, AZAZ5/15/20152,358 959 1,110 — 887 2,956 682 
Medical Center III - Peoria, AZAZ5/15/20152,353 673 1,651 — 1,317 3,641 1,219 
Morrow Medical Center - Morrow, GAGA6/24/20154,831 1,155 5,674 — 648 7,477 1,541 
Belmar Medical Building -Lakewood, COCO6/29/20153,775 819 4,287 — 736 5,842 1,349 
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Table of Contents
Healthcare Trust, Inc. and Subsidiaries

Real Estate and Accumulated Depreciation
Schedule III
December 31, 2023
(In thousands)
   Initial CostsSubsequent to Acquisition  
Property StateAcquisition
Date		Encumbrances at 
December 31, 2023		LandBuilding and
Improvements		LandBuilding and
Improvements
Gross Amount at
December 31, 2022(1) (2)
Accumulated
Depreciation(3) (4)
Addington Place - Northville, MI(6),(8)MI6/30/2015— 440 14,975 — 1,267 16,682 3,953 
Conroe Medical Arts and Surgery Center - Conroe, TXTX7/10/201512,399 1,965 12,198 — 1,382 15,545 3,397 
Medical Center V - Peoria, AZAZ7/10/20153,675 1,089 3,200 — 1,133 5,422 1,218 
Legacy Medical Village - Plano, TXTX7/10/201529,647 3,755 31,097 — 2,318 37,170 7,742 
Scripps Cedar Medical Center - Vista, CACA8/6/201514,282 1,213 14,596 — 2,097 17,906 3,550 
Ramsey Woods Memory Care - Cudahy, WIWI10/2/2015— 930 4,990 — 176 6,096 1,305 
East Coast Square West - Cedar Point, NCNC10/15/20154,099 1,535 4,803 — 6 6,344 1,092 
East Coast Square North - Morehead City, NCNC10/15/20153,794 899 4,761 — 211 5,871 1,094 
Eastside Cancer Institute - Greenville, SCSC10/22/20156,041 1,498 6,637 — 779 8,914 1,667 
Sky Lakes Klamath Medical Clinic - Klamath Falls, OROR10/22/2015— 433 2,623 — — 3,056 579 
Courtyard Fountains - Gresham, OROR12/1/2015— 2,476 50,601 — 2,607 55,684 12,346 
Presence Healing Arts Pavilion - New Lenox, IL(9)IL12/4/20154,422 — 6,768 — 76 6,844 1,575 
Mainland Medical Arts Pavilion - Texas City, TXTX12/4/20155,546 320 7,923 — 340 8,583 2,007 
Renaissance on Peachtree - Atlanta, GA(5)GA12/15/2015— 4,535 68,895 — 3,778 77,208 15,621 
Fox Ridge Senior Living at Bryant - Bryant, AR(12)AR12/29/20156,647 1,687 12,936 (557)(6,152)7,914 418 
Fox Ridge Senior Living at Chenal - Little Rock, ARAR12/29/201515,242 6,896 20,579 — 687 28,162 5,549 
Fox Ridge North Little Rock - North Little Rock, AR(9)AR12/29/20159,458 — 19,265 — 548 19,813 4,730 
High Desert Medical Group Medical Office Building - Lancaster, CACA4/7/20176,952 1,459 9,300 — — 10,759 2,044 
Northside Hospital - Canton, GAGA7/13/20177,830 3,408 8,191 — 519 12,118 1,498 
West Michigan Surgery Center - Big Rapids, MIMI8/18/20174,022 258 5,677 — — 5,935 954 
Camellia Walk Assisted Living and Memory Care - Evans, GA(5)GA9/28/2017— 1,854 17,372 — 1,347 20,573 3,989 
Cedarhurst of Collinsville - Collinsville, ILIL12/22/2017— 1,228 8,652 — 417 10,297 1,662 
Beaumont Medical Center - Warren, MIMI12/22/20177,199 1,078 9,525 — 20 10,623 1,594 
DaVita Dialysis - Hudson, FLFL12/22/20171,576 226 1,979 — 121 2,326 333 
DaVita Bay Breeze Dialysis Center - Largo, FLFL12/22/20171,019 399 896 — 209 1,504 188 
Greenfield Medical Plaza - Gilbert, AZAZ12/22/20174,148 1,476 4,144 — 500 6,120 793 
RAI Care Center - Clearwater, FLFL12/22/20172,609 624 3,156 — 70 3,850 506 
Illinois CancerCare - Galesburg, ILIL12/22/20171,920 290 2,457 — — 2,747 441 
UnityPoint Clinic - Muscatine, IAIA12/22/2017— 570 4,541 — 18 5,129 779 
Lee Memorial Health System Outpatient Center - Ft. MyersFL12/22/20173,751 439 4,374 — 722 5,535 879 
Decatur Medical Office Building - Decatur, GA(9)GA12/22/20173,078 695 3,273 — 573 4,541 629 
F-55
Table of Contents
Healthcare Trust, Inc. and Subsidiaries

Real Estate and Accumulated Depreciation
Schedule III
December 31, 2023
(In thousands)
   Initial CostsSubsequent to Acquisition  
Property StateAcquisition
Date		Encumbrances at 
December 31, 2023		LandBuilding and
Improvements		LandBuilding and
Improvements
Gross Amount at
December 31, 2022(1) (2)
Accumulated
Depreciation(3) (4)
Madison Medical Plaza - Joliet, IL(9)IL12/22/201711,878 — 16,855 — 135 16,990 2,566 
Woodlake Office Center - Woodbury, MNMN12/22/20178,507 1,017 10,688 — 1,460 13,165 2,064 
Rockwall Medical Plaza - Rockwall, TXMN12/22/20174,138 1,097 4,582 — 427 6,106 889 
MetroHealth Buckeye Health Center - Cleveland, OHOH12/22/20173,396 389 4,367 — 255 5,011 805 
UnityPoint Clinic - Moline, ILIL12/22/2017— 396 2,880 — 5 3,281 494 
VA Outpatient Clinic - Galesberg, ILIL12/22/2017— 359 1,852 — — 2,211 363 
Philip Professional Center - Lawrenceville, GAGA12/22/20176,591 1,285 6,714 — 265 8,264 1,246 
Texas Children’s Hospital - Houston, TX
TX3/5/20184,133 1,368 4,428 — 116 5,912 855 
Florida Medical Heartcare - Tampa, FL
FL3/29/20181,686 586 1,902 — — 2,488 307 
Florida Medical Somerset - Tampa, FL
FL3/29/2018967 61 1,366 — — 1,427 199 
Florida Medical Tampa Palms - Tampa, FL
FL3/29/20181,046 141 1,402 — — 1,543 209 
Florida Medical Wesley Chapel - Tampa, FL
FL3/29/20181,675 485 1,987 — — 2,472 335 
Aurora Health Center - Milwaukee, WI
WI4/17/20183,690 1,014 4,041 — 224 5,279 746 
Vascular Surgery Associates - Tallahassee, FL
FL5/11/20184,260 902 5,383 — — 6,285 851 
Glendale MOB - Farmington Hills, MI
MI8/28/20188,708 504 12,332 — 13 12,849 1,702 
Crittenton Washington MOB - Washington Township, MI
MI9/12/20183,420 640 4,090 — 316 5,046 647 
Crittenton Sterling Heights MOB - Sterling Heights, MI
MI9/12/20182,949 1,398 2,695 — 258 4,351 550 
Advocate Aurora MOB - Elkhorn, WI
WI9/24/20187,683 181 9,452 — — 9,633 1,361 
Pulmonary & Critical Care Med - Lemoyne, PA
PA11/13/20183,530 621 3,805 — — 4,426 564 
Dignity Emerus Blue Diamond - Las Vegas, NV
NV11/15/201815,078 2,182 16,594 — 129 18,905 2,351 
Dignity Emerus Craig Rd - North Las Vegas, NV
NV11/15/201821,329 3,807 22,803 — 132 26,742 3,243 
Greenfield MOB - Greenfield, WI
WI1/17/20198,081 1,552 8,333 — 247 10,132 1,110 
Milwaukee MOB - South Milwaukee, WI
WI1/17/20194,348 410 5,041 — — 5,451 653 
St. Francis WI MOB - St. Francis, WI
WI1/17/20199,947 865 11,355 — 251 12,471 1,526 
Lancaster Medical Arts MOB - Lancaster, PA
PA6/20/20193,051 85 4,417 — — 4,502 475 
Women’s Healthcare Group MOB - York, PA
PA6/21/20191,887 624 2,161 — — 2,785 263 
Pioneer Spine Sports - Northampton, MA
MA7/22/20191,554 435 1,858 — — 2,293 252 
Pioneer Spine Sport - Springfield, MA
MA7/22/20191,940 333 2,530 — — 2,863 311 
Pioneer Spine Sports - West Springfield, MA
MA7/22/20193,164 374 4,295 — — 4,669 520 
Felicita Vida - Escondido, CA
CA9/3/2019— 1,677 28,953 — 546 31,176 3,823 
Cedarhurst of Edwardsville - Edwardsville, ILIL1/10/2020— 321 9,032 — 105 9,458 1,083 
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Table of Contents
Healthcare Trust, Inc. and Subsidiaries

Real Estate and Accumulated Depreciation
Schedule III
December 31, 2023
(In thousands)
   Initial CostsSubsequent to Acquisition  
Property StateAcquisition
Date		Encumbrances at 
December 31, 2023		LandBuilding and
Improvements		LandBuilding and
Improvements
Gross Amount at
December 31, 2022(1) (2)
Accumulated
Depreciation(3) (4)
UMPC Sir Thomas Court - Harrisburg, PAPA1/17/20204,756 745 6,272 — — 7,017 669 
UMPC Fisher Road - Mechanicsburg, PAPA1/17/20203,111 747 3,844 — — 4,591 447 
Swedish American MOB - Roscoe, ILIL1/22/20204,379 599 5,862 — — 6,461 790 
Cedarhurst of Sparta - Sparta, ILIL1/31/2020— 381 13,807 — 103 14,291 1,632 
UMPC Chambers Hill - Harrisburg, PAPA2/3/20203,210 498 4,238 — — 4,736 441 
Cedarhurst of Shiloh - Shiloh, ILIL3/13/202012,745 376 28,299 — 129 28,804 2,990 
Bayshore Naples Memory Care - Naples, FLFL3/20/2020— 3,231 17,112 — 879 21,222 1,805 
Circleville MOB - Circleville, OHOH12/7/20203,430 765 4,011 — 130 4,906 376 
Kingwood Executive Center - Kingwood, TXTX1/6/20213,920 1,522 4,166 — 96 5,784 389 
OrthoOne Hilliard - Hilliard, OHOH5/28/20212,710 760 3,118 — 120 3,998 344 
South Douglas MOB - Midwest City, OKOK6/23/20213,044 628 3,863 — — 4,491 321 
Fort Wayne Opthomology Engle - Fort Wayne, ININ6/29/20214,642 516 6,124 — — 6,640 434 
Fort Wayne Opthomology Dupont - Fort Wayne, ININ6/29/20212,272 597 2,653 — — 3,250 243 
St. Peters Albany 2 Palisades - Albany, NYNY6/30/20213,292 516 4,342 — — 4,858 337 
Hefner Pointe Medical Center - Oklahoma City, OKOK6/30/20213,943 678 4,819 — 144 5,641 380 
St. Peters Troy 2 New Hampshire - Troy, NYNY6/30/20211,932 330 2,444 — 76 2,850 192 
St Peters - Albany, NY - 4 PalisadesNY7/30/20212,079 542 2,416 — 110 3,068 226 
St Peters - Albany, NY - 5 PalisadesNY7/30/20214,053 593 5,359 — 28 5,980 385 
St Lukes Heart Vascular Center - East StroudsburgPA8/31/20212,470 363 3,224 — 58 3,645 206 
Metropolitan Eye Lakeshore Surgery - St. Clair, MIMI8/31/20213,277 203 4,632 — — 4,835 287 
Naidu Clinic - Odessa, TXTX9/1/20212,151 730 2,409 — 35 3,174 164 
Belpre V Cancer Center - Belpre, OHOH9/30/202144,084 1,153 63,894 — — 65,047 3,729 
Center for Advanced Dermatology - Lakewood, COCO12/1/20211,997 1,034 1,874 — 38 2,946 119 
Florida Medical Clinic - Tampa, FLFL12/1/20211,645 1,104 1,137 — 187 2,428 96 
Pensacola Nephrology MOB - Pensacola, FLFL12/29/20214,541 1,579 5,121 — — 6,700 270 
Millennium Eye Care - Freehold, NJNJ5/26/20224,506 635 6,014 — — 6,649 288 
Atlanta Gastroenterology Associates - Lawrenceville, GAGA6/29/20222,381 2,639 2,263 — — 4,902 81 
Bone and Joint Specialists - Merrillville, ININ6/29/20223,322 1,014 2,499 — — 3,513 100 
Eastern Carolina ENT - Greenville, NCNC12/21/20224,399 663 5,828 — — 6,491 160 
St. Peters - Albany, NYNY3/1/202311,611 1,331 15,802 — — 17,133 346 
Hope Orthopedics - Salem, OROR3/24/20232,977 754 3,639 — — 4,393 85 
OSF Healthcare - Dwight, IL(7)IL9/28/2023— 254 2,960 — — 3,214 21 
OSF Healthcare - Godfrey, IL(7)IL9/28/2023— 1,034 4,668 — — 5,702 34 
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Table of Contents
Healthcare Trust, Inc. and Subsidiaries

Real Estate and Accumulated Depreciation
Schedule III
December 31, 2023
(In thousands)
   Initial CostsSubsequent to Acquisition  
Property StateAcquisition
Date		Encumbrances at 
December 31, 2023		LandBuilding and
Improvements		LandBuilding and
Improvements
Gross Amount at
December 31, 2022(1) (2)
Accumulated
Depreciation(3) (4)
Fannie Mae Master Credit Facilities (5)(6)
346,278 
MOB Warehouse Facility (7)
14,748 
Total
$1,182,405 $211,142 $2,073,990 $(3,155)$46,362 $2,328,339 $458,010 
__________
(1)Acquired intangible lease assets allocated to individual properties in the amount of $293.3 million are not reflected in the table above.
(2)The tax basis of aggregate land, buildings and improvements as of December 31, 2023 is $2.1 billion.
(3)The accumulated depreciation column excludes $224.0 million of accumulated amortization associated with acquired intangible lease assets.
(4)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 and 5 years for fixtures.
(5)These properties collateralize the Capital One Facility, which had $206.9 million of outstanding borrowings as of December 31, 2023.
(6)These properties collateralize the KeyBank Facility, which had $139.3 million of outstanding borrowings as of December 31, 2023.
(7)These properties collateralize the MOB Warehouse Facility, which had $14.7 million of outstanding borrowings as of December 31, 2023.
(8)These properties were acquired from American Realty Capital Healthcare Trust III, Inc. in 2017, which was a related party to the Company’s Advisor.
(9)Some or all of the land underlying these properties is subject to an operating land lease. The related right-of-use assets are separately recorded. See Note 16 — Commitments and Contingencies for additional information.
(10)The building amount for these properties represents combined direct financing leases for the total assets as the land element was not required to be bifurcated under ASU 840. See Note 16 — Commitments and Contingencies for additional information.
(11)These properties were previously subject to operating land leases which have either been prepaid or otherwise satisfied as of December 31, 2023.
(12)These properties have been impaired as of December 31, 2023. See Note 3 — Real Estate Investments, Net “Assets Held for Use and Related Impairments” for additional information.
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Table of Contents
Healthcare Trust, Inc. and Subsidiaries

Real Estate and Accumulated Depreciation
Schedule III
December 31, 2023
(In thousands)
A summary of activity for real estate and accumulated depreciation for the years ended December 31, 2023, 2022 and 2021:
December 31,
(In thousands)202320222021
Real estate investments, at cost (1):
 
Balance at beginning of year$2,295,587 $2,345,708 $2,211,451 
Additions-acquisitions and capital expenditures51,923 44,926 98,364 
Disposals, impairments and reclasses (2)
(19,171)(95,047)35,893 
Balance at end of the year$2,328,339 $2,295,587 $2,345,708 
  
Accumulated depreciation (1):
 
Balance at beginning of year$397,982 $328,095 $260,399 
Depreciation expense64,445 63,143 63,393 
Disposals, impairments and reclasses (2)
(4,417)6,744 4,303 
Balance at end of the year$458,010 $397,982 $328,095 
__________
(1)Acquired intangible lease assets and related accumulated depreciation are not reflected in the table above.
(2)Includes amounts relating to dispositions and impairment charges on assets for the years ended December 31, 2023, 2022 and 2021.
F-59

EXHIBIT 4.9
DESCRIPTION OF REGISTRANT’S SECURITIES REGISTERED PURSUANT TO
SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
The following is a description of securities of Healthcare Trust, Inc. registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2023 and certain provisions of the Maryland General Corporation Law (the “MGCL”) and our charter and our bylaws. The description is a summary, does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and to our charter (including any applicable articles supplementary classifying a class or series of preferred stock) and bylaws, copies of which are filed as exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and are incorporated by reference herein.
As used herein, the terms “Company,” “we,” “our” and “us” refer to Healthcare Trust, Inc., a Maryland corporation. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms under our charter (including any applicable articles supplementary classifying a class or series of preferred stock).
General
Our charter authorizes us to issue up to 350,000,000 shares of stock, consisting of 300,000,000 shares of common stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share. As of December 31, 2023, we had the following stock issued and outstanding: (i) 115,545,018 shares of common stock; (ii) 3,977,144 shares of our 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and (iii) 3,630,000 shares of our 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (the “Series B Preferred Stock”).
Our board of directors, with the approval of a majority of the entire board of directors and without any action taken by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of our authorized shares of stock or the number of shares of stock of any class or series that we have authority to issue. Under Maryland law, stockholders are not generally liable for our debts or obligations solely as a result of their status as stockholders.
The transfer agent and registrar for our common stock, Series A Preferred Stock and Series B Preferred Stock is Computershare Trust Company, N.A..
Our Series A Preferred Stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “HTIA,” and our Series B Preferred Stock is listed on Nasdaq under the symbol “HTIBP.” Our common stock is registered under Section 12(g) of the Exchange Act but is not listed for trading on any national securities exchange.
Common Stock
Subject to the preferential rights, if any, of holders of any other class or series of our stock and to the provisions of our charter relating to the restrictions on ownership and transfer of our stock, the holders of our common stock:
•have the right to receive ratably any distributions from funds legally available therefor, when, as and if authorized by our board of directors and declared by us; and
•are entitled to share ratably in all of our assets available for distribution to holders of our common stock upon liquidation, dissolution or winding up of our affairs.
Upon issuance for full payment therefor, all common stock issued by us will be fully paid and non-assessable. There are no redemption, sinking fund, conversion or preemptive rights with respect to the shares of our common stock. Holders of our common stock generally will have no appraisal rights.
Subject to the provisions of our charter relating to the restrictions on ownership and transfer of our stock and except as may otherwise be provided in the charter, holders of our common stock are entitled to one vote per share on all matters on which holders of our common stock are entitled to vote at all meetings of our stockholders. The holders of our common stock do not have cumulative voting rights.


Preferred Stock
General
Under our charter, our board of directors, without stockholder approval, is authorized to cause us to issue shares of preferred stock in one or more classes or series, to establish the number of shares in each class or series and to fix the terms preferences, conversions or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series. Our board of directors could authorize the issuance of additional shares of preferred stock with terms and conditions that could have the effect of discouraging a takeover or other transaction that holders of common stock might believe to be in their best interests or in which holders of some, or a majority, of the shares of common stock might receive a premium for their shares over the then market price of such shares of common stock.
Some of the rights, preferences, privileges and restrictions of the shares of preferred stock of a class or series may include the following:
•distribution rights;
•conversion rights;
•voting rights;
•redemption rights and terms of redemptions; and
•liquidation preferences.
Series A Preferred Stock
As of December 31, 2023, 4,740,000 shares of preferred stock were classified and designated as Series A Preferred Stock pursuant to our charter.
Ranking
The Series A Preferred Stock ranks, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding-up:
•senior to our common stock and to all other equity securities, the terms of which expressly provide that such securities rank junior to the Series A Preferred Stock;
•on parity with the Series B Preferred Stock and all other equity securities, the terms of which expressly provide that such securities rank on parity with the Series A Preferred Stock; and
•junior to any class or series of equity securities, the terms of which expressly provide that such securities rank senior to the Series A Preferred Stock.
The authorization or issuance of equity securities ranking senior to the Series A Preferred Stock requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock and of any other similarly-affected classes and series of preferred stock ranking on parity with the Series A Preferred Stock, including the Series B Preferred Stock, and upon which like voting rights have been conferred and are exercisable. Any convertible debt securities that we may issue will not be considered to be “equity securities” for these purposes prior to the time of conversion. The Series A Preferred Stock ranks junior to all our existing and future indebtedness. The terms of the Series A Preferred Stock do not limit our ability to (i) incur indebtedness or (ii) issue additional equity securities that rank junior to or on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up.
Dividends
Holders of Series A Preferred Stock are entitled to receive, when, as and if authorized by our board of directors and declared by us, out of funds legally available for the payment of dividends, cumulative cash dividends in the amount of  $1.84375 per share each year, which is equivalent to the rate of 7.375% of the $25.00 liquidation


preference per share per annum. Dividends are 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. A dividend period is the respective quarterly period commencing on and including the 1st day of January, April, July and October of each year and ending on and including the day preceding the first day of the next succeeding dividend period to all holders of record on the applicable record date, when and as authorized by our board of directors and declared by us. Holders of record of all shares of Series A Preferred Stock issued and outstanding at the close of business on the record date fixed by our board of directors for any dividend will be entitled to receive the full dividend paid on the applicable dividend payment date even if such shares were not issued and outstanding for the full dividend period.
Any dividend, including any dividend payable on the Series A Preferred Stock for any partial dividend period, is computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends are payable to holders of record of Series A Preferred Stock as they appear in the transfer agent’s records at the close of business on the applicable record date, which will be the date that our board of directors sets as the record date for the payment of a dividend that is not more than 30 nor fewer than 10 days prior to the applicable dividend payment date.
Our board of directors will not authorize, and we will not pay or declare and set apart for payment, any dividend on the Series A Preferred Stock at any time that:
•the terms and conditions of any of our agreements, including our credit facility or any other agreement relating to our indebtedness, prohibit the authorization, payment or setting apart for payment;
•the terms and conditions of any of our agreements, including our credit facility or any other agreement relating to our indebtedness, provide that the authorization, payment or setting apart for payment would constitute a breach of, or a default under, the agreement; or
•the law restricts or prohibits the authorization, payment or setting apart for payment.
Notwithstanding the foregoing, dividends on the Series A Preferred Stock accrue whether or not the dividends are authorized by our board of directors and declared by us.
Accrued and unpaid dividends on the Series A Preferred Stock do not bear interest.
We will not pay or declare and set apart for payment any dividends (other than a dividend paid in common stock or other stock ranking junior to the Series A Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up) or declare and make any distribution of cash or other property on common stock or other stock that ranks junior to or on parity with the Series A Preferred Stock, including the Series B Preferred Stock, or redeem or otherwise acquire common stock or other stock that ranks junior to or on parity with the Series A Preferred Stock, including the Series B Preferred Stock (except (i) by conversion into or exchange for common stock or other stock ranking junior to the Series A Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up, (ii) for the redemption of shares of our stock pursuant to the provisions of our charter relating to the restrictions upon ownership and transfer of our stock and (iii) for a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series A Preferred Stock and any other stock that ranks on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up), unless we also have either paid or declared and set apart for payment full cumulative dividends on the Series A Preferred Stock for all past dividend periods.
Notwithstanding the foregoing, if we do not either pay or declare and set apart for payment full cumulative dividends on the Series A Preferred Stock and all stock that ranks on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to dividends, the amount which we have declared will be allocated pro rata to the holders of Series A Preferred Stock and to each equally ranked class or series of stock, including the Series B Preferred Stock, so that the amount declared for each share of Series A Preferred Stock and for each share of each equally ranked class or series of stock, including the Series B Preferred Stock, is proportionate to the accrued and unpaid dividends on those shares. Any dividend payment made on the Series A Preferred Stock will first be credited against the earliest accrued and unpaid dividend.
If, for any taxable year, we elect to designate as “capital gain dividends” (as defined in Section 857 of the Internal Revenue Code of 1986, as amended (the “Code”)) a portion (the “Capital Gains Amount”) of the dividends not in excess of our earnings and profits that are paid or made available for the year to the holders of all classes or series of shares (the “Total Dividends”), then the portion of the Capital Gains Amount that will be allocable to the holders of Series A Preferred Stock will be in the same proportion that the Total Dividends paid or made available to


the holders of Series A Preferred Stock for the taxable year bears to the Total Dividends for the taxable year made with respect to all classes or series of stock outstanding.
Holders of shares of Series A Preferred Stock are not entitled to any dividend, whether payable in cash, property or shares of capital stock, in excess of full cumulative dividends on the Series A Preferred Stock as described above.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of Series A Preferred Stock are entitled to be paid out of our assets legally available for distribution to our stockholders a liquidation preference of  $25.00 per share, plus an amount equal to any accrued and unpaid dividends (whether or not authorized or declared) to, but not including, the date of payment, after payment of or provision for our debts and liabilities and any other class or series of our capital stock ranking senior to the Series A Preferred Stock with respect to liquidation rights before any distribution or payment may be made to holders of common stock or any other class or series of our equity stock ranking junior to the Series A Preferred Stock with respect to liquidation rights. If, upon our voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the full amount of the liquidating distributions on all outstanding shares of Series A Preferred Stock and the corresponding amounts payable on all shares of each other class or series of stock ranking on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to liquidation rights, then the holders of Series A Preferred Stock and any other class or series of stock ranking on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to liquidation rights will share ratably in any distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Holders of Series A Preferred Stock are entitled to written notice of any voluntary or involuntary liquidation, dissolution or winding up at least 20 days before the payment date of the liquidating distribution. After the holders of Series A Preferred Stock have received the full amount of the liquidating distributions to which they are entitled, they will have no right or claim to any of our remaining assets.
In determining whether any distribution (other than upon voluntary or involuntary dissolution) by dividend, redemption or other acquisition of shares of stock of the Company or otherwise is permitted under the MGCL, amounts that would be needed, if the Company were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of the holders of Series A Preferred Stock will not be added to the Company’s total liabilities.
Our consolidation, conversion or merger with or into any other person or entity or the sale, lease, transfer or conveyance of all or substantially all of our property or business, whether in connection with a Change of Control (as defined below) or otherwise, will not be deemed to constitute our liquidation, dissolution or winding up.
Optional Redemption
The Series A Preferred Stock is not redeemable prior to December 11, 2024, except in the circumstances described in this section, in the section below titled “— Special Optional Redemption,” or pursuant to certain provisions of our charter. See “Certain Provisions of the Maryland General Corporation Law and our Charter and Bylaws — Restrictions on Transfer and Ownership of Stock” below.
Notwithstanding any other provision relating to redemption or repurchase of the Series A Preferred Stock, we may redeem any or all of the Series A Preferred Stock at any time, whether before or after December 11, 2024 at a redemption price of  $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), pursuant to the restrictions on ownership and transfer of our stock set forth in our charter or if our board of directors otherwise determines that redemption is necessary for us to preserve our status as a real estate investment trust for federal income tax purposes (“REIT”).
On and after December 11, 2024, the Series A Preferred Stock may be redeemed at our option, in whole or in part, at any time or from time to time, at a redemption price of  $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date (unless the redemption date is after a dividend record date and prior to the corresponding dividend payment date, in which case no additional amount for the accrued and unpaid dividend will be included in the redemption price), without interest, upon the giving of notice, as provided below.
If less than all of the outstanding shares of Series A Preferred Stock are to be redeemed, the shares to be redeemed will be determined pro rata (as nearly as may be practicable without creating fractional shares) or by lot. If the redemption is to be by lot, and if as a result of the redemption any holder of Series A Preferred Stock would


own, or be deemed by virtue of certain attribution provisions of the Code to own, more than 9.8% in value of the aggregate of our outstanding shares of stock (which includes the Series A Preferred Stock) or 9.8% in value or in number of shares (whichever is more restrictive) of any class or series of our outstanding shares of stock or violate any of the other restrictions on ownership and transfer of our stock set forth in our charter, then, except in certain instances, we will redeem the requisite number of shares of Series A Preferred Stock of that holder so that the holder will not own or be deemed by virtue of certain attribution provisions of the Code to own, subsequent to the redemption, more than 9.8% in value of the aggregate of our outstanding shares of stock or 9.8% in value or in number of shares (whichever is more restrictive) of any class or series of our outstanding shares of stock or violate any of the other restrictions on ownership and transfer set forth in our charter.
We will mail to record holders of the Series A Preferred Stock, a notice of redemption no less than 30 days nor more than 60 days prior to the redemption date. We will send the notice to the record holder’s address, as shown on our share transfer books. A failure to give notice of redemption or any defect in the notice or in its mailing will not affect the validity of the redemption of any Series A Preferred Stock except as to shares held by any holder to whom notice was defective or not given. Each notice will state the following:
•the redemption date;
•the redemption price;
•the total number of shares of Series A Preferred Stock to be redeemed (and, if less than all the shares held by any holder are to be redeemed, the number of shares to be redeemed from the holder);
•the place or places where the shares of Series A Preferred Stock are to be surrendered for payment, together with the certificates, if any, representing the shares (duly endorsed for transfer) and any other documents we require in connection with redemption; and
•that dividends on the Series A Preferred Stock will cease to accrue on the redemption date.
We are not required to provide such notice in the event we redeem Series A Preferred Stock in order to maintain our status as a REIT.
Unless full cumulative dividends on all shares of Series A Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods, no shares of Series A Preferred Stock may be redeemed unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed. In addition, unless full cumulative dividends on all shares of Series A Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods, we will not purchase or otherwise acquire directly or indirectly any Series A Preferred Stock (except (i) by exchange for our equity securities ranking junior to the Series A Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up, (ii) pursuant to the provisions of our charter relating to restrictions on ownership and transfer of our stock and (iii) pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding shares of Series A Preferred Stock and any other stock that ranks on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up). So long as no dividends on Series A Preferred Stock for any past dividend period are in arrears, we are entitled at any time and from time to time to repurchase Series A Preferred Stock in open-market transactions duly authorized by our board of directors and effected in compliance with applicable laws and these requirements will not prevent our purchase or acquisition of Series A Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series A Preferred Stock and any other stock that ranks on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up or our redemption of Series A Preferred Stock pursuant to the provisions of our charter relating to the restrictions on ownership and transfer of our stock.
Special Optional Redemption
During any period of time (whether before or after December 11, 2024) that the Series A Preferred Stock is not listed on the Nasdaq Stock Market, the NYSE or the NYSE American LLC, or listed or quoted on an exchange or quotation system that is a successor to the Nasdaq Stock Market, the NYSE or the NYSE American LLC (a “Series A Preferred Delisting Event”), we have the option to redeem the outstanding shares of Series A Preferred Stock, in whole or in part, after the occurrence of the Series A Preferred Delisting Event, for a redemption price of $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared),


if any, to, but not including, the redemption date (unless the redemption date is after a dividend record date and prior to the corresponding dividend payment date, in which case no additional amount for the accrued and unpaid dividend payable on the payment date will be included in the redemption price), upon the giving of notice, as provided below.
In addition to the foregoing, upon the occurrence of a Series A Preferred Delisting Event, the dividend rate specified shall be increased on the day after the occurrence of the Series A Preferred Delisting Event by 2.00% per annum to the rate of 9.375% of the $25.00 per share stated liquidation preference per annum (equivalent to $2.34375 per annum per share) from and after the date of the Series A Preferred Delisting Event. Following the cure of a Series A Preferred Delisting Event, the dividend rate shall revert to the rate of 7.375% of the $25.00 per share stated liquidation preference per annum.
In addition, upon the occurrence of a Change of Control, we may, at our option, redeem the Series A Preferred Stock, in whole or in part, within 120 days after the first date on which the Change of Control occurred, by paying $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date (unless the redemption date is after a dividend record date and prior to the corresponding dividend payment date, in which case no additional amount for the accrued and unpaid dividend payable on the payment date will be included in the redemption price). If, prior to the Conversion Date (as defined below), we provide notice of redemption with respect to the Series A Preferred Stock (whether pursuant to our optional redemption right or our special optional redemption rights), holders of Series A Preferred Stock will not have the conversion right described below under “— Change of Control Conversion Right.”
We will mail to record holders of the Series A Preferred Stock, a notice of redemption no less than 30 days nor more than 60 days prior to the redemption date. We will send the notice to the record holder’s address, as shown on our share transfer books. A failure to give notice of redemption or any defect in the notice or in its mailing with not affect the validity of the redemption of any Series A Preferred Stock except as to the holder to whom notice was defective or not given. Each notice will state the following:
•the redemption date;
•the redemption price;
•the total number of shares of Series A Preferred Stock to be redeemed;
•the place or places where the shares of Series A Preferred Stock are to be surrendered for payment, together with the certificates, if any, representing the shares (duly endorsed for transfer) and any other documents we require in connection with the redemption;
•that the Series A Preferred Stock is being redeemed pursuant to our special optional redemption right in connection with the occurrence of a Change of Control or a Series A Preferred Delisting Event, as applicable, and a brief description of the transaction or transactions constituting the Change of Control or Series A Preferred Delisting Event, as applicable;
•that holders of Series A Preferred Stock to which the notice relates will not be able to tender the Series A Preferred Stock for conversion in connection with a Change of Control during a continuous Series A Preferred Delisting Event, and each share of Series A Preferred Stock tendered for conversion that is selected, prior to the Conversion Date, for redemption will be redeemed on the related redemption date instead of converted on the Conversion Date; and
•that dividends on the Series A Preferred Stock to be redeemed will cease to accrue on the redemption date.
A “Change of Control” occurs when, after the original issuance of the Series A Preferred Stock, the following has occurred and is continuing:
•the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger, conversion or other acquisition transaction or series of purchases, mergers, conversions or other acquisition transactions, of shares of our stock entitling that person to exercise more than 50% of the total voting power of all outstanding shares of our stock entitled to vote generally in the election of directors (except that the person will be deemed to have beneficial ownership of all securities that the


person has the right to acquire, whether the right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
•following the closing of any transaction referred to in the bullet point above, neither we nor the acquiring or surviving entity, including any parent of the Company or the acquiring or surviving entity, has a class of common equity securities listed on the Nasdaq Stock Market, the NYSE or the NYSE American LLC, or listed or quoted on an exchange or quotation system that is a successor to the Nasdaq Stock Market, the NYSE or the NYSE American LLC.
Additional Provisions Relating to Optional Redemption and Special Optional Redemption
If  (i) we have given a notice of redemption, (ii) we have set apart sufficient funds for the redemption of the shares of Series A Preferred Stock called for redemption and (iii) irrevocable instructions have been given to pay the redemption price and an amount equal to all accrued and unpaid dividends to, but not including, the redemption date, then from and after the redemption date, those shares of Series A Preferred Stock so called for redemption will no longer be outstanding, no further dividends will accrue and all other rights of the holders of those shares of Series A Preferred Stock will terminate, except the right to receive the redemption price, without interest. The holders of those shares of Series A Preferred Stock will retain their right to receive the redemption price for their shares and any accrued and unpaid dividends payable upon redemption, without interest.
The holders of Series A Preferred Stock at the close of business on a dividend record date will be entitled to receive the dividend payable with respect to the Series A Preferred Stock on the corresponding dividend payment date notwithstanding the redemption of the Series A Preferred Stock between such record date and the corresponding dividend payment date. There is no restriction on the redemption of shares of Series A Preferred Stock by us while there is any arrearage in the payment of dividends.
All shares of Series A Preferred Stock that we redeem or reacquire in any manner will return to the status of authorized but unissued shares of preferred stock, without further designation as to series or class and may thereafter be classified, reclassified or issued as any series or class of preferred stock.
Change of Control Conversion Right
Upon the occurrence of a Change of Control during a continuing Series A Preferred Delisting Event, each holder of Series A Preferred Stock has the right, unless, prior to the Conversion Date, we have provided or provide notice of our election to redeem the shares of Series A Preferred Stock as described under “— Optional Redemption” or “— Special Optional Redemption,” to convert some of or all the shares of Series A Preferred Stock held by the holder (the “Change of Control Conversion Right”) on the Conversion Date into a number of shares of common stock per share of Series A Preferred Stock (the “Common Stock Conversion Consideration”), which is equal to the lesser of:
•the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per share of Series A Preferred Stock to be converted plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared) on the Series A Preferred Stock to, but not including, the Conversion Date (unless the Conversion Date is after a dividend record date and prior to the corresponding dividend payment date, in which case no additional amount for the accrued and unpaid dividend payable on the payment date will be included in this sum), by (ii) the Common Stock Price; and
•2.8571 (the “Share Cap”).
The Share Cap is subject to pro rata adjustments for any stock splits (including those effected pursuant to a common stock dividend), subdivisions or combinations (in each case, a “Stock Split”) with respect to shares of our common stock as follows: the adjusted Share Cap as the result of a Stock Split will be the number of shares of our common stock that is equivalent to the product of  (i) the Share Cap in effect immediately prior to the Stock Split, multiplied by (ii) a fraction, the numerator of which is the number of shares of our common stock outstanding after giving effect to the Stock Split and the denominator of which is the number of shares of our common stock outstanding immediately prior to the Stock Split.
If a Change of Control occurs during a continuing Series A Preferred Delisting Event, pursuant to or in connection with which shares of our common stock will be converted into cash, securities or other property or assets (including any combination thereof) (the “Alternative Form Consideration”), a holder of shares of Series A Preferred Stock will receive upon conversion of the shares of Series A Preferred Stock the kind and amount of Alternative Form Consideration which the holder would have owned or been entitled to receive had the holder held a number of


shares of our common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control during a continuing Series A Preferred Delisting Event, is referred to as the “Conversion Consideration”).
If the holders of shares of our common stock have the opportunity to elect the form of consideration to be received in connection with the Change of Control during a continuing Delisting Event, the Conversion Consideration that holders of Series A Preferred Stock will receive will be the form of consideration elected by the holders of a plurality of the shares of common stock held by stockholders who participate in the election and will be subject to any limitations to which all holders of shares of common stock are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in connection with the Change of Control during a continuing Delisting Event.
We will not issue fractional shares of common stock upon the conversion of the Series A Preferred Stock. Instead, we will pay the cash value of any fractional shares based on the Common Stock Price.
Within 15 days following the occurrence of a Change of Control during a continuing Series A Preferred Delisting Event, unless we have provided notice of our election to redeem the shares of Series A Preferred Stock as described under “— Optional Redemption” or “— Special Optional Redemption,” we will provide to holders of record of outstanding shares of Series A Preferred Stock a notice of occurrence of both the Change of Control and Series A Preferred Delisting Event that describes the resulting Change of Control Conversion Right. A failure to give notice of conversion or any defect in the notice or in its mailing will not affect the validity of the proceedings for the conversion of any Series A Preferred Stock except as to the holder to whom this notice was defective or not given. This notice will state the following:
•the events constituting the Change of Control during a continuing Series A Preferred Delisting Event;
•the date of the Change of Control during a continuing Series A Preferred Delisting Event;
•the last date on which the holders of shares of Series A Preferred Stock may exercise their Change of Control Conversion Right;
•the method and period for calculating the Common Stock Price;
•the “Conversion Date,” which will be a business day fixed by our board of directors that is not fewer than 20 and not more than 35 days following the date of the notice;
•that if, prior to the Conversion Date we provide notice of our election to redeem all or any portion of the shares of Series A Preferred Stock, holders of Series A Preferred Stock will not be able to convert the shares of Series A Preferred Stock so called for redemption and the shares of Series A Preferred Stock will be redeemed on the related redemption date, even if they have already been tendered for conversion pursuant to the Change of Control Conversion Right;
•if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series A Preferred Stock;
•the name and address of the paying agent and the conversion agent; and
•the procedures that the holders of shares of Series A Preferred Stock must follow to exercise the Change of Control Conversion Right.
We will issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if these organizations are not in existence at the time of issuance of the press release, another news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public) containing the information stated in the notice, and post the notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of record of Series A Preferred Stock.
To exercise the Change of Control Conversion Right, a holder of record of Series A Preferred Stock will be required to deliver, on or before the close of business on the Conversion Date, the certificates, if any, representing any certificated shares of Series A Preferred Stock to be converted, duly endorsed for transfer, together with a


completed written conversion notice and any other documents we reasonably require in connection with the conversion, to our conversion agent. The conversion notice must state:
•the Conversion Date; and
•the number of shares of Series A Preferred Stock to be converted.
The “Common Stock Price” for any Change of Control will be (i) if the consideration to be received in the Change of Control during a continuing Series A Preferred Delisting Event by holders of shares of our common stock is solely cash, the amount of cash consideration per share of common stock, and (ii) if the consideration to be received in the Change of Control during a continuing Series A Preferred Delisting Event by holders of shares of our common stock is other than solely cash, (x) the Non-traded Common Stock Price, if the common stock is not listed on a national exchange on the effective date of any Change in Control or (y) the Traded Common Stock Price, if the common stock is listed on a national securities exchange on the effective date of any Change in Control.
The “Non-traded Common Stock Price” is the currently applicable repurchase price for shares of common stock pursuant to our share repurchase program (our “SRP”) immediately prior to the effective date of the Change of Control. The “Traded Common Stock Price” is the average of the closing price per share of our common stock on the 10 consecutive trading days immediately preceding, but not including, the effective date of the Change of Control.
Holders of Series A Preferred Stock may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to our conversion agent prior to the close of business on the business day prior to the Conversion Date. The notice of withdrawal must state:
•the number of withdrawn shares of Series A Preferred Stock;
•if certificated shares of Series A Preferred Stock have been tendered for conversion and withdrawn, the certificate numbers of the withdrawn certificated shares of Series A Preferred Stock; and
•the number of shares of Series A Preferred Stock, if any, which remain subject to the conversion notice.
Notwithstanding the foregoing, if the Series A Preferred Stock is held in global form, the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of DTC.
Shares of Series A Preferred Stock as to which the Change of Control Conversion Right have been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration on the applicable Conversion Date, unless prior thereto we provide notice of our election to redeem those shares of Series A Preferred Stock, whether pursuant to our optional redemption right or our special optional redemption right. If we elect to redeem shares of Series A Preferred Stock that would otherwise be converted into the applicable Conversion Consideration on a Conversion Date, the shares of Series A Preferred Stock will not be so converted and the holders of the shares will be entitled to receive on the applicable redemption date the redemption price for the shares.
We will deliver amounts owing upon conversion no later than the third business day following the Conversion Date.
In connection with the exercise of any Change of Control Conversion Right, we will comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of shares of Series A Preferred Stock into shares of common stock. Notwithstanding any other provision of the Series A Preferred Stock, no holder of Series A Preferred Stock will be entitled to convert shares of Series A Preferred Stock for shares of our common stock to the extent that receipt of the shares of common stock would cause the holder (or any other person) to violate the restrictions on ownership and transfer of our stock contained in our charter. See “Certain Provisions of the Maryland General Corporation Law and our Charter and Bylaws—Restrictions on Transfer and Ownership of Stock” below.
These Change of Control conversion and redemption features may make it more difficult for or discourage a party from pursuing a takeover or other transaction that holders of common stock might believe to be in their best interests or in which holders of some, or a majority, of the shares of common stock might receive a premium for their shares over the then market price of such shares of common stock.


Except as provided above in connection with the occurrence of a Change of Control during a Series A Preferred Delisting Event, the Series A Preferred Stock is not convertible into or exchangeable for any other property or securities.
Voting Rights
Except as described below, holders of Series A Preferred Stock generally have no voting rights. On any matter in which the Series A Preferred Stock may vote (as expressly provided in our charter), each share of Series A Preferred Stock entitles the holder thereof to cast one vote, except that, when voting together as a single class with shares of any other class or series of voting preferred stock, shares of different classes or series will vote in proportion to the liquidation preference of the shares.
Whenever dividends on the Series A Preferred Stock are in arrears, whether or not authorized or declared, for six or more quarterly periods, whether or not these quarterly periods are consecutive, holders of Series A Preferred Stock and any other class or series of preferred stock ranking on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, which we refer to as “voting preferred stock,” and with which the holders of Series A Preferred Stock are entitled to vote together as a single class, will have the exclusive power, voting together as a single class, to elect, at any special meeting called by our secretary at the written request of holders of record of at least 10% of the outstanding shares of Series A Preferred Stock and any other class or series of voting preferred stock (unless the request is received more than 45 days and less than 90 days before our next annual meeting of stockholders at which the vote would occur) and at each subsequent annual meeting of stockholders, two additional directors to serve on our board of directors. The right of holders of Series A Preferred Stock to vote in the election of directors will terminate when all dividends accrued and unpaid on the outstanding shares of Series A Preferred Stock for all past dividend periods have been fully paid. Unless the number of our directors has previously been increased pursuant to the terms of any other class or series of voting preferred stock with which the holders of Series A Preferred Stock are entitled to vote together as a single class in the election of directors, the number of our directors will automatically increase by two at the time as holders of Series A Preferred Stock become entitled to vote in the election of two additional directors. The term of office of these directors will terminate, and the number of our directors will automatically decrease by two, when all dividends accrued and unpaid for all past dividend periods on the Series A Preferred Stock have been fully paid, unless shares of voting preferred stock remain outstanding and entitled to vote in the election of directors. If the right of holders of Series A Preferred Stock to elect the two additional directors terminates after the record date for determining holders of shares of Series A Preferred Stock entitled to vote in any election of directors but before the closing of the polls in the election, holders of Series A Preferred Stock outstanding as of the applicable record date will not be entitled to vote in the election of directors. The right of the holders of Series A Preferred Stock to elect the additional directors will again vest if and whenever dividends are in arrears for six quarterly periods, as described above. In no event will the holders of Series A Preferred Stock be entitled to nominate or elect an individual as a director, and no individual will be qualified to be nominated for election or to serve as a director, if the individual’s service as a director would cause us to fail to satisfy a requirement relating to director independence of any national securities exchange on which any class or series of our stock is listed or otherwise conflict with our charter or bylaws.
The additional directors will be elected by a plurality of the votes cast in the election of preferred stock directors, and each of these directors will serve until the next annual meeting of our stockholders and until his or her successor is duly elected and qualifies, or until the director’s term of office terminates as described above. Any director elected by the holders of Series A Preferred Stock and any other class or series of voting preferred stock, voting together as a single class, may be removed, with or without cause, only by a vote of the holders of a majority of the outstanding shares of Series A Preferred Stock and all classes or series of voting preferred stock with which the holders of Series A Preferred Stock are entitled to vote together as a single class in the election of directors, voting together as a single class. At any time that the holders of Series A Preferred Stock are entitled to vote in the election of the two additional preferred stock directors, holders of Series A Preferred Stock will be entitled to vote in the election of a successor to fill any vacancy on our board of directors that results from the removal of the director.
At any time that holders of Series A Preferred Stock have the right to elect two additional preferred stock directors as described above but these directors have not been elected, our secretary must call a special meeting for the purpose of electing the additional directors upon the written request of the holders of record of 10% of the outstanding shares of Series A Preferred Stock and any other class or series of voting preferred stock with which the holders of Series A Preferred Stock are entitled to vote together as a single class with respect to the election of directors, unless the request is received more than 45 days and less than 90 days before the date fixed for the next annual meeting of our stockholders at which the vote would occur, in which case, the additional directors may be elected either at the annual meeting or at a separate special meeting of our stockholders at our discretion.


So long as any shares of Series A Preferred Stock are outstanding, the approval of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock and each other class or series of voting preferred stock, including the Series B Preferred Stock, with which the holders of Series A Preferred Stock are entitled to vote as a single class on such matter (voting together as a single class), is required to authorize (a) any amendment, alteration, repeal or other change to any provision of our charter, including the articles supplementary setting forth the terms of the Series A Preferred Stock (whether by merger, conversion, consolidation, transfer or conveyance of all or substantially all of our assets or otherwise), that would materially and adversely affect the rights, preferences, privileges or voting powers of the Series A Preferred Stock, or (b) the creation, issuance or increase in the authorized number of shares of any class or series of stock ranking senior to the Series A Preferred Stock (or any equity securities convertible into or exchangeable for any such shares) with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up. Notwithstanding the foregoing, holders of voting preferred stock will not be entitled to vote together as a class with the holders of Series A Preferred Stock on any amendment, alteration, repeal or other change to any provision of our charter unless the action affects the holders of Series A Preferred Stock and the voting preferred stock equally.
The following actions will not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of the Series A Preferred Stock:
•any increase or decrease in the number of authorized shares of common stock or preferred stock of any other class or series, any increase in the number of shares of Series A Preferred Stock or the classification or reclassification of any unissued shares, or the creation or issuance of equity securities, of any class or series ranking junior to or on parity with the Series A Preferred Stock, including the Series B Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up;
•any amendment, alteration or repeal or other change to any provision of our charter, including the articles supplementary setting forth the terms of the Series A Preferred Stock, as a result of a merger, conversion, consolidation, transfer or conveyance of all or substantially all of our assets or other business combination, whether or not we are the surviving entity, if the Series A Preferred Stock (or stock into which the Series A Preferred Stock has been converted in any successor person or entity to us) remains outstanding with the terms thereof unchanged in all material respects or is exchanged for stock of the successor person or entity with substantially identical rights; or
•any amendment, alteration or repeal or other change to any provision of our charter, including the articles supplementary setting forth the terms of the Series A Preferred Stock, as a result of a merger, conversion, consolidation, transfer or conveyance of all or substantially all of our assets or other business combination, if the holders of Series A Preferred Stock receive the $25.00 liquidation preference per share of Series A Preferred Stock, plus an amount equal to accrued and unpaid dividends to, but not including, the date of the event.
The voting provisions above will not apply if, at or prior to the time when the act with respect to which the vote would otherwise be required would occur, we have redeemed or called for redemption all outstanding shares of Series A Preferred Stock.
No Maturity, Sinking Fund or Mandatory Redemption
The Series A Preferred Stock has no stated maturity date and is not subject to any sinking fund or mandatory redemption provisions.
Conversion
The Series A Preferred Stock is not convertible into any other property or securities, except as provided under “— Change of Control Conversion Right.”
Information Rights
During any period in which we are not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and any shares of Series A Preferred Stock are outstanding, we will (i) transmit by mail or other permissible means under the Exchange Act to all holders of Series A Preferred Stock as their names and addresses appear in our record books and without cost to the holders, copies of the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we would have been required to file with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13 or 15(d) of the Exchange Act if we were


subject thereto (other than any exhibits that would have been required) within 15 days after the respective dates by which we would have been required to file these reports with the SEC if we were subject to Section 13 or 15(d) of the Exchange Act and (ii) within 15 days following written request, supply copies of these reports to any prospective holder of Series A Preferred Stock.
Preemptive Rights
No holders of Series A Preferred Stock will, as a result of his, her or its status as such holder, have any preemptive rights to purchase or subscribe for shares of our common stock or any of our other securities.
Series B Preferred Stock
As of December 31, 2023, 3,680,000 shares of preferred stock were classified and designated as Series B Preferred Stock pursuant to our charter.
Ranking
The Series B Preferred Stock ranks, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding-up:
•senior to our common stock and to all other equity securities, the terms of which expressly provide that such securities rank junior to the Series B Preferred Stock;
•on parity with the Series A Preferred Stock and all other equity securities, the terms of which expressly provide that such securities rank on parity with the Series B Preferred Stock; and
•junior to any class or series of equity securities, the terms of which expressly provide that such securities rank senior to the Series B Preferred Stock.
The authorization or issuance of equity securities ranking senior to the Series B Preferred Stock requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock and of any other similarly-affected classes and series of preferred stock ranking on parity with the Series B Preferred Stock and upon which like voting rights have been conferred and are exercisable, including the Series A Preferred Stock. Any convertible debt securities that we may issue will not be considered to be “equity securities” for these purposes prior to the time of conversion. The Series B Preferred Stock ranks junior to all our existing and future indebtedness. The terms of the Series B Preferred Stock do not limit our ability to (i) incur indebtedness or (ii) issue additional equity securities that rank junior to or on parity with the Series B Preferred Stock, including the Series A Preferred Stock, with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up.

Dividends
Holders of Series B Preferred Stock are entitled to receive, when, as and if authorized by our board of directors and declared by us, out of funds legally available for the payment of dividends, cumulative cash dividends in the amount of  $1.78125 per share each year, which is equivalent to the rate of 7.125% of the $25.00 liquidation preference per share per annum. Dividends are 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. A dividend period is the respective quarterly period commencing on and including the 1st day of January, April, July and October of each year and ending on and including the day preceding the first day of the next succeeding dividend period to all holders of record on the applicable record date, when and as authorized by our board of directors and declared by us. Holders of record of all shares of Series B Preferred Stock issued and outstanding at the close of business on the record date fixed by our board of directors for any dividend will be entitled to receive the full dividend paid on the applicable dividend payment date even if such shares were not issued and outstanding for the full dividend period.
Any dividend, including any dividend payable on the Series B Preferred Stock for any partial dividend period, is computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends are payable to holders of record of Series B Preferred Stock as they appear in the transfer agent’s records at the close of business on the applicable record date, which will be the date that our board of directors sets as the record date for the payment of a dividend that is not more than 30 nor fewer than 10 days prior to the applicable dividend payment date.
Our board of directors will not authorize, and we will not pay or declare and set apart for payment, any dividend on the Series B Preferred Stock at any time that:


•the terms and conditions of any of our agreements, including our credit facility or any other agreement relating to our indebtedness, prohibit the authorization, payment or setting apart for payment;
•the terms and conditions of any of our agreements, including our credit facility or any other agreement relating to our indebtedness, provide that the authorization, payment or setting apart for payment would constitute a breach of, or a default under, the agreement; or
•the law restricts or prohibits the authorization, payment or setting apart for payment.
Notwithstanding the foregoing, dividends on the Series B Preferred Stock accrue whether or not the dividends are authorized by our board and declared by us.
Accrued and unpaid dividends on the Series B Preferred Stock do not bear interest.
We will not pay or declare and set apart for payment any dividends (other than a dividend paid in common stock or other stock ranking junior to the Series B Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up) or declare and make any distribution of cash or other property on common stock or other stock that ranks junior to or on parity with the Series B Preferred Stock or redeem or otherwise acquire common stock or other stock that ranks junior to or on parity with the Series B Preferred Stock, including the Series A Preferred Stock (except (i) by conversion into or exchange for common stock or other stock ranking junior to the Series B Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up, (ii) for the redemption of shares of our stock pursuant to the provisions of our charter relating to the restrictions upon ownership and transfer of our stock and (iii) for a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series B Preferred Stock and any other stock that ranks on parity with the Series B Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up, including the Series A Preferred Stock), unless we also have either paid or declared and set apart for payment full cumulative dividends on the Series B Preferred Stock for all past dividend periods.
Notwithstanding the foregoing, if we do not either pay or declare and set apart for payment full cumulative dividends on the Series B Preferred Stock and all stock that ranks on parity with the Series B Preferred Stock with respect to dividends, including the Series A Preferred Stock, the amount which we have declared will be allocated pro rata to the holders of Series B Preferred Stock and to each equally ranked class or series of stock, including the Series A Preferred Stock, so that the amount declared for each share of Series B Preferred Stock and for each share of each equally ranked class or series of stock, including the Series A Preferred Stock, is proportionate to the accrued and unpaid dividends on those shares. Any dividend payment made on the Series B Preferred Stock will first be credited against the earliest accrued and unpaid dividend.
If, for any taxable year, we elect to designate as “capital gain dividends” (as defined in Section 857 of the Code) a portion (the “Capital Gains Amount”) of the dividends not in excess of our earnings and profits that are paid or made available for the year to the holders of all classes or series of shares (the “Total Dividends”), then the portion of the Capital Gains Amount that will be allocable to the holders of Series B Preferred Stock will be in the same proportion that the Total Dividends paid or made available to the holders of Series B Preferred Stock for the taxable year bears to the Total Dividends for the taxable year made with respect to all classes or series of stock outstanding.
Holders of shares of Series B Preferred Stock are not entitled to any dividend, whether payable in cash, property or shares of capital stock, in excess of full cumulative dividends on the Series B Preferred Stock as described above.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of Series B Preferred Stock are entitled to be paid out of our assets legally available for distribution to our stockholders a liquidation preference of  $25.00 per share, plus an amount equal to any accrued and unpaid dividends (whether or not authorized or declared) to, but not including, the date of payment, after payment of or provision for our debts and liabilities and any other class or series of our capital stock ranking senior to the Series B Preferred Stock with respect to liquidation rights before any distribution or payment may be made to holders of common stock or any other class or series of our equity stock ranking junior to the Series B Preferred Stock with respect to liquidation rights. If, upon our voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the full amount of the liquidating distributions on all outstanding shares of Series B Preferred Stock and the corresponding amounts payable on all shares of each other class or series of stock ranking on parity


with the Series B Preferred Stock with respect to liquidation rights, including the Series A Preferred Stock, then the holders of Series B Preferred Stock and any other class or series of stock ranking on parity with the Series B Preferred Stock with respect to liquidation rights, including the Series A Preferred Stock, will share ratably in any distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Holders of Series B Preferred Stock are entitled to written notice of any voluntary or involuntary liquidation, dissolution or winding up at least 20 days before the payment date of the liquidating distribution. After the holders of Series B Preferred Stock have received the full amount of the liquidating distributions to which they are entitled, they will have no right or claim to any of our remaining assets.
In determining whether any distribution (other than upon voluntary or involuntary dissolution) by dividend, redemption or other acquisition of shares of stock of the Company or otherwise is permitted under the MGCL, amounts that would be needed, if the Company were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of the holders of Series B Preferred Stock will not be added to the Company’s total liabilities.
Our consolidation, conversion or merger with or into any other person or entity or the sale, lease, transfer or conveyance of all or substantially all of our property or business, whether in connection with a Change of Control (as defined below) or otherwise, will not be deemed to constitute our liquidation, dissolution or winding up.
Optional Redemption
The Series B Preferred Stock is not redeemable prior to October 6, 2026, except in the circumstances described in this section, in the section below titled “— Special Optional Redemption,” or pursuant to certain provisions of our charter. See “Certain Provisions of the Maryland General Corporation Law and our Charter and Bylaws — Restrictions on Transfer and Ownership of Stock” below.
Notwithstanding any other provision relating to redemption or repurchase of the Series B Preferred Stock, we may redeem any or all of the Series B Preferred Stock at any time, whether before or after October 6, 2026 at a redemption price of  $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), pursuant to the restrictions on ownership and transfer of our stock set forth in our charter or if our board of directors otherwise determines that redemption is necessary for us to preserve our status as a REIT.
On and after October 6, 2026, the Series B Preferred Stock may be redeemed at our option, in whole or in part, at any time or from time to time, at a redemption price of  $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date (unless the redemption date is after a dividend record date and prior to the corresponding dividend payment date, in which case no additional amount for the accrued and unpaid dividend will be included in the redemption price), without interest, upon the giving of notice, as provided below.
If less than all of the outstanding shares of Series B Preferred Stock are to be redeemed, the shares to be redeemed will be determined pro rata (as nearly as may be practicable without creating fractional shares) or by lot. If the redemption is to be by lot, and if as a result of the redemption any holder of Series B Preferred Stock would own, or be deemed by virtue of certain attribution provisions of the Code to own, more than 9.8% in value of the aggregate of our outstanding shares of stock (which includes the Series B Preferred Stock) or 9.8% in value or in number of shares (whichever is more restrictive) of any class or series of our outstanding shares of stock or violate any of the other restrictions on ownership and transfer of our stock set forth in our charter, then, except in certain instances, we will redeem the requisite number of shares of Series B Preferred Stock of that holder so that the holder will not own or be deemed by virtue of certain attribution provisions of the Code to own, subsequent to the redemption, more than 9.8% in value of the aggregate of our outstanding shares of stock or 9.8% in value or in number of shares (whichever is more restrictive) of any class or series of our outstanding shares of stock or violate any of the other restrictions on ownership and transfer set forth in our charter.
We will mail to record holders of the Series B Preferred Stock, a notice of redemption no less than 30 days nor more than 60 days prior to the redemption date. We will send the notice to the record holder’s address, as shown on our share transfer books. A failure to give notice of redemption or any defect in the notice or in its mailing will not affect the validity of the redemption of any Series B Preferred Stock except as to shares held by any holder to whom notice was defective or not given. Each notice will state the following:
•the redemption date;
•the redemption price;


•the total number of shares of Series B Preferred Stock to be redeemed (and, if less than all the shares held by any holder are to be redeemed, the number of shares to be redeemed from the holder);
•the place or places where the shares of Series B Preferred Stock are to be surrendered for payment, together with the certificates, if any, representing the shares (duly endorsed for transfer) and any other documents we require in connection with redemption; and
•that dividends on the Series B Preferred Stock will cease to accrue on the redemption date.
We are not required to provide such notice in the event we redeem Series B Preferred Stock in order to maintain our status as a REIT.
Unless full cumulative dividends on all shares of Series B Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods, no shares of Series B Preferred Stock may be redeemed unless all outstanding shares of Series B Preferred Stock are simultaneously redeemed. In addition, unless full cumulative dividends on all shares of Series B Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods, we will not purchase or otherwise acquire directly or indirectly any Series B Preferred Stock (except (i) by exchange for our equity securities ranking junior to the Series B Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up, (ii) pursuant to the provisions of our charter relating to restrictions on ownership and transfer of our stock and (iii) pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding shares of Series B Preferred Stock and any other stock that ranks on parity with the Series B Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up). So long as no dividends on Series B Preferred Stock for any past dividend period are in arrears, we are entitled at any time and from time to time to repurchase Series B Preferred Stock in open-market transactions duly authorized by our board of directors and effected in compliance with applicable laws and these requirements will not prevent our purchase or acquisition of Series B Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series B Preferred Stock and any other stock that ranks on parity with the Series B Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up or our redemption of Series B Preferred Stock pursuant to the provisions of our charter relating to the restrictions on ownership and transfer of our stock.
Special Optional Redemption
During any period of time (whether before or after October 6, 2026) that the Series B Preferred Stock is not listed on the Nasdaq Stock Market, the NYSE or the NYSE American LLC, or listed or quoted on an exchange or quotation system that is a successor to the Nasdaq Stock Market, the NYSE or the NYSE American LLC (a “Series B Preferred Delisting Event”), we have the option to redeem the outstanding shares of Series B Preferred Stock, in whole or in part, after the occurrence of the Series B Preferred Delisting Event, for a redemption price of $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date (unless the redemption date is after a dividend record date and prior to the corresponding dividend payment date, in which case no additional amount for the accrued and unpaid dividend payable on the payment date will be included in the redemption price), upon the giving of notice, as provided below.
In addition to the foregoing, upon the occurrence of a Series B Preferred Delisting Event, the dividend rate specified shall be increased on the day after the occurrence of the Series B Preferred Delisting Event by 2.00% per annum to the rate of 9.125% of the $25.00 per share stated liquidation preference per annum (equivalent to $2.28125 per annum per share) from and after the date of the Series B Preferred Delisting Event. Following the cure of a Series B Preferred Delisting Event, the dividend rate shall revert to the rate of 7.125% of the $25.00 per share stated liquidation preference per annum.
In addition, upon the occurrence of a Change of Control, we may, at our option, redeem the Series B Preferred Stock, in whole or in part, within 120 days after the first date on which the Change of Control occurred, by paying $25.00 per share, plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared), if any, to, but not including, the redemption date (unless the redemption date is after a dividend record date and prior to the corresponding dividend payment date, in which case no additional amount for the accrued and unpaid dividend payable on the payment date will be included in the redemption price). If, prior to the Conversion Date (as defined below), we provide notice of redemption with respect to the Series B Preferred Stock (whether pursuant to our optional redemption right or our special optional redemption rights), holders of Series B Preferred Stock will not have the conversion right described below under “— Change of Control Conversion Right.”


We will mail to record holders of the Series B Preferred Stock, a notice of redemption no less than 30 days nor more than 60 days prior to the redemption date. We will send the notice to the record holder’s address, as shown on our share transfer books. A failure to give notice of redemption or any defect in the notice or in its mailing with not affect the validity of the redemption of any Series B Preferred Stock except as to the holder to whom notice was defective or not given. Each notice will state the following:
•the redemption date;
•the redemption price;
•the total number of shares of Series B Preferred Stock to be redeemed;
•the place or places where the shares of Series B Preferred Stock are to be surrendered for payment, together with the certificates, if any, representing the shares (duly endorsed for transfer) and any other documents we require in connection with the redemption;
•that the Series B Preferred Stock is being redeemed pursuant to our special optional redemption right in connection with the occurrence of a Change of Control or a Series B Preferred Delisting Event, as applicable, and a brief description of the transaction or transactions constituting the Change of Control or Series B Preferred Delisting Event, as applicable;
•that holders of Series B Preferred Stock to which the notice relates will not be able to tender the Series B Preferred Stock for conversion in connection with a Change of Control during a continuous Series B Preferred Delisting Event, and each share of Series B Preferred Stock tendered for conversion that is selected, prior to the Conversion Date, for redemption will be redeemed on the related redemption date instead of converted on the Conversion Date; and
•that dividends on the Series B Preferred Stock to be redeemed will cease to accrue on the redemption date.
A “Change of Control” occurs when, after the original issuance of the Series B Preferred Stock, the following has occurred and is continuing:
•the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger, conversion or other acquisition transaction or series of purchases, mergers, conversions or other acquisition transactions, of shares of our stock entitling that person to exercise more than 50% of the total voting power of all outstanding shares of our stock entitled to vote generally in the election of directors (except that the person will be deemed to have beneficial ownership of all securities that the person has the right to acquire, whether the right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
•following the closing of any transaction referred to in the bullet point above, neither we nor the acquiring or surviving entity, including any parent of the Company or the acquiring or surviving entity, has a class of common equity securities listed on the Nasdaq Stock Market, the NYSE or the NYSE American LLC, or listed or quoted on an exchange or quotation system that is a successor to the Nasdaq Stock Market, the NYSE or the NYSE American LLC.
Additional Provisions Relating to Optional Redemption and Special Optional Redemption
If  (i) we have given a notice of redemption, (ii) we have set apart sufficient funds for the redemption of the shares of Series B Preferred Stock called for redemption and (iii) irrevocable instructions have been given to pay the redemption price and an amount equal to all accrued and unpaid dividends to, but not including, the redemption date, then from and after the redemption date, those shares of Series B Preferred Stock so called for redemption will no longer be outstanding, no further dividends will accrue and all other rights of the holders of those shares of Series B Preferred Stock will terminate, except the right to receive the redemption price, without interest. The holders of those shares of Series B Preferred Stock will retain their right to receive the redemption price for their shares and any accrued and unpaid dividends payable upon redemption, without interest.
The holders of Series B Preferred Stock at the close of business on a dividend record date will be entitled to receive the dividend payable with respect to the Series B Preferred Stock on the corresponding dividend payment date notwithstanding the redemption of the Series B Preferred Stock between such record date and the corresponding


dividend payment date. There is no restriction on the redemption of shares of Series B Preferred Stock by us while there is any arrearage in the payment of dividends.
All shares of Series B Preferred Stock that we redeem or reacquire in any manner will return to the status of authorized but unissued shares of preferred stock, without further designation as to series or class and may thereafter be classified, reclassified or issued as any series or class of preferred stock.
Change of Control Conversion Right
Upon the occurrence of a Change of Control during a continuing Series B Preferred Delisting Event, each holder of Series B Preferred Stock has the right, unless, prior to the Conversion Date, we have provided or provide notice of our election to redeem the shares of Series B Preferred Stock as described under “— Optional Redemption” or “— Special Optional Redemption,” to convert some of or all the shares of Series B Preferred Stock held by the holder (the “Change of Control Conversion Right”) on the Conversion Date into a number of shares of common stock per share of Series B Preferred Stock (the “Common Stock Conversion Consideration”), which is equal to the lesser of:
•the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per share of Series B Preferred Stock to be converted plus an amount equal to all dividends accrued and unpaid (whether or not authorized or declared) on the Series B Preferred Stock to, but not including, the Conversion Date (unless the Conversion Date is after a dividend record date and prior to the corresponding dividend payment date, in which case no additional amount for the accrued and unpaid dividend payable on the payment date will be included in this sum), by (ii) the Common Stock Price; and
•3.4483 (the “Share Cap”).
The Share Cap is subject to pro rata adjustments for any stock splits (including those effected pursuant to a common stock dividend), subdivisions or combinations (in each case, a “Stock Split”) with respect to shares of our common stock as follows: the adjusted Share Cap as the result of a Stock Split will be the number of shares of our common stock that is equivalent to the product of  (i) the Share Cap in effect immediately prior to the Stock Split, multiplied by (ii) a fraction, the numerator of which is the number of shares of our common stock outstanding after giving effect to the Stock Split and the denominator of which is the number of shares of our common stock outstanding immediately prior to the Stock Split.
If a Change of Control occurs during a continuing Series B Preferred Delisting Event, pursuant to or in connection with which shares of our common stock will be converted into cash, securities or other property or assets (including any combination thereof) (the “Alternative Form Consideration”), a holder of shares of Series B Preferred Stock will receive upon conversion of the shares of Series B Preferred Stock the kind and amount of Alternative Form Consideration which the holder would have owned or been entitled to receive had the holder held a number of shares of our common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control during a continuing Series B Preferred Delisting Event, is referred to as the “Conversion Consideration”).
If the holders of shares of our common stock have the opportunity to elect the form of consideration to be received in connection with the Change of Control during a continuing Series B Preferred Delisting Event, the Conversion Consideration that holders of Series B Preferred Stock will receive will be the form of consideration elected by the holders of a plurality of the shares of common stock held by stockholders who participate in the election and will be subject to any limitations to which all holders of shares of common stock are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in connection with the Change of Control during a continuing Series B Preferred Delisting Event.
We will not issue fractional shares of common stock upon the conversion of the Series B Preferred Stock. Instead, we will pay the cash value of any fractional shares based on the Common Stock Price.
Within 15 days following the occurrence of a Change of Control during a continuing Series B Preferred Delisting Event, unless we have provided notice of our election to redeem the shares of Series B Preferred Stock as described under “— Optional Redemption” or “— Special Optional Redemption,” we will provide to holders of record of outstanding shares of Series B Preferred Stock a notice of occurrence of both the Change of Control and Series B Preferred Delisting Event that describes the resulting Change of Control Conversion Right. A failure to give notice of conversion or any defect in the notice or in its mailing will not affect the validity of the proceedings


for the conversion of any Series B Preferred Stock except as to the holder to whom this notice was defective or not given. This notice will state the following:
•the events constituting the Change of Control during a continuing Series B Preferred Delisting Event;
•the date of the Change of Control during a continuing Series B Preferred Delisting Event;
•the last date on which the holders of shares of Series B Preferred Stock may exercise their Change of Control Conversion Right;
•the method and period for calculating the Common Stock Price;
•the “Conversion Date,” which will be a business day fixed by our board of directors that is not fewer than 20 and not more than 35 days following the date of the notice;
•that if, prior to the Conversion Date we provide notice of our election to redeem all or any portion of the shares of Series B Preferred Stock, holders of Series B Preferred Stock will not be able to convert the shares of Series B Preferred Stock so called for redemption and the shares of Series B Preferred Stock will be redeemed on the related redemption date, even if they have already been tendered for conversion pursuant to the Change of Control Conversion Right;
•if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series B Preferred Stock;
•the name and address of the paying agent and the conversion agent; and
•the procedures that the holders of shares of Series B Preferred Stock must follow to exercise the Change of Control Conversion Right.
We will issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if these organizations are not in existence at the time of issuance of the press release, another news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public) containing the information stated in the notice, and post the notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of record of Series B Preferred Stock.
To exercise the Change of Control Conversion Right, a holder of record of Series B Preferred Stock will be required to deliver, on or before the close of business on the Conversion Date, the certificates, if any, representing any certificated shares of Series B Preferred Stock to be converted, duly endorsed for transfer, together with a completed written conversion notice and any other documents we reasonably require in connection with the conversion, to our conversion agent. The conversion notice must state:
•the Conversion Date; and
•the number of shares of Series B Preferred Stock to be converted.
The “Common Stock Price” for any Change of Control will be (i) if the consideration to be received in the Change of Control during a continuing Series B Preferred Delisting Event by holders of shares of our common stock is solely cash, the amount of cash consideration per share of common stock, and (ii) if the consideration to be received in the Change of Control during a continuing Series B Preferred Delisting Event by holders of shares of our common stock is other than solely cash, (x) the Non-traded Common Stock Price, if the common stock is not listed on a national exchange on the effective date of any Change in Control or (y) the Traded Common Stock Price, if the common stock is listed on a national securities exchange on the effective date of any Change in Control.
The “Non-traded Common Stock Price” is the currently applicable repurchase price for shares of common stock pursuant to our SRP immediately prior to the effective date of the Change of Control, or, if our SRP has been terminated prior to that date, 100% of the Estimated Per-Share NAV applicable immediately prior to the effective date of the Change of Control. The “Traded Common Stock Price” is the average of the closing price per share of our common stock on the 10 consecutive trading days immediately preceding, but not including, the effective date of the Change of Control.


Holders of Series B Preferred Stock may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to our conversion agent prior to the close of business on the business day prior to the Conversion Date. The notice of withdrawal must state:
•the number of withdrawn shares of Series B Preferred Stock;
•if certificated shares of Series B Preferred Stock have been tendered for conversion and withdrawn, the certificate numbers of the withdrawn certificated shares of Series B Preferred Stock; and
•the number of shares of Series B Preferred Stock, if any, which remain subject to the conversion notice.
Notwithstanding the foregoing, if the Series B Preferred Stock is held in global form, the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of DTC.
Shares of Series B Preferred Stock as to which the Change of Control Conversion Right have been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration on the applicable Conversion Date, unless prior thereto we provide notice of our election to redeem those shares of Series B Preferred Stock, whether pursuant to our optional redemption right or our special optional redemption right. If we elect to redeem shares of Series B Preferred Stock that would otherwise be converted into the applicable Conversion Consideration on a Conversion Date, the shares of Series B Preferred Stock will not be so converted and the holders of the shares will be entitled to receive on the applicable redemption date the redemption price for the shares.
We will deliver amounts owing upon conversion no later than the third business day following the Conversion Date.
In connection with the exercise of any Change of Control Conversion Right, we will comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of shares of Series B Preferred Stock into shares of common stock. Notwithstanding any other provision of the Series B Preferred Stock, no holder of Series B Preferred Stock will be entitled to convert shares of Series B Preferred Stock for shares of our common stock to the extent that receipt of the shares of common stock would cause the holder (or any other person) to violate the restrictions on ownership and transfer of our stock contained in our charter. See “Certain Provisions of the Maryland General Corporation Law and our Charter and Bylaws—Restrictions on Transfer and Ownership of Stock” below.
These Change of Control conversion and redemption features may make it more difficult for or discourage a party from pursuing a takeover or other transaction that holders of common stock might believe to be in their best interests or in which holders of some, or a majority, of the shares of common stock might receive a premium for their shares over the then market price of such shares of common stock.
Except as provided above in connection with the occurrence of a Change of Control during a Series B Preferred Delisting Event, the Series B Preferred Stock is not convertible into or exchangeable for any other property or securities.
Voting Rights
Except as described below, holders of Series B Preferred Stock generally have no voting rights. On any matter in which the Series B Preferred Stock may vote (as expressly provided in our charter), each share of Series B Preferred Stock entitles the holder thereof to cast one vote, except that, when voting together as a single class with shares of any other class or series of voting preferred stock, shares of different classes or series will vote in proportion to the liquidation preference of the shares.
Whenever dividends on the Series B Preferred Stock are in arrears, whether or not authorized or declared, for six or more quarterly periods, whether or not these quarterly periods are consecutive, holders of Series B Preferred Stock and any other class or series of preferred stock ranking on parity with the Series B Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, including the Series A Preferred Stock, which we refer to as “voting preferred stock,” and with which the holders of Series B Preferred Stock are entitled to vote together as a single class, will have the exclusive power, voting together as a single class, to elect, at any special meeting called by our secretary at the written request of stockholders of record entitled to cast at least 10% of the votes entitled to be cast collectively by the holders of the outstanding shares of Series B Preferred Stock and any


other class or series of voting preferred stock (unless the request is received more than 45 days and less than 90 days before our next annual meeting of stockholders at which the vote would occur) and at each subsequent annual meeting of stockholders, two additional directors to serve on our board. The right of holders of Series B Preferred Stock to vote in the election of directors will terminate when all dividends accrued and unpaid on the outstanding shares of Series B Preferred Stock for all past dividend periods have been fully paid. Unless the number of our directors has previously been increased pursuant to the terms of any other class or series of voting preferred stock with which the holders of Series B Preferred Stock are entitled to vote together as a single class in the election of directors, the number of our directors will automatically increase by two at the time as holders of Series B Preferred Stock become entitled to vote in the election of two additional directors. The term of office of these directors will terminate, and the number of our directors will automatically decrease by two, when all dividends accrued and unpaid for all past dividend periods on the Series B Preferred Stock have been fully paid, unless shares of voting preferred stock remain outstanding and entitled to vote in the election of directors. If the right of holders of Series B Preferred Stock to elect the two additional directors terminates after the record date for determining holders of shares of Series B Preferred Stock entitled to vote in any election of directors but before the closing of the polls in the election, holders of Series B Preferred Stock outstanding as of the applicable record date will not be entitled to vote in the election of directors. The right of the holders of Series B Preferred Stock to elect the additional directors will again vest if and whenever dividends are in arrears for six quarterly periods, as described above. In no event will the holders of Series B Preferred Stock be entitled to nominate or elect an individual as a director, and no individual will be qualified to be nominated for election or to serve as a director, if the individual’s service as a director would cause us to fail to satisfy a requirement relating to director independence of any national securities exchange on which any class or series of our stock is listed or otherwise conflict with our charter or bylaws.
The additional directors will be elected by a plurality of the votes cast in the election of preferred stock directors, and each of these directors will serve until the next annual meeting of our stockholders and until his or her successor is duly elected and qualifies, or until the director’s term of office terminates as described above. Any director elected by the holders of Series B Preferred Stock and any other class or series of voting preferred stock, voting together as a single class, may be removed, with or without cause, only by a majority of the votes entitled to be cast collectively by the holders of the outstanding shares of Series B Preferred Stock and all classes or series of voting preferred stock with which the holders of Series B Preferred Stock are entitled to vote together as a single class in the election of directors, voting together as a single class. At any time that the holders of Series B Preferred Stock are entitled to vote in the election of the two additional preferred stock directors, holders of Series B Preferred Stock will be entitled to vote in the election of a successor to fill any vacancy on our board that results from the removal of the director.
At any time that holders of Series B Preferred Stock, and any other class or series of voting preferred stock with which the holders of Series B Preferred Stock will be entitled to vote as a single class in the election of directors, have the right to elect two additional preferred stock directors as described above but these directors have not been elected, our secretary must call a special meeting for the purpose of electing the additional directors upon the written request of stockholders of record entitled to cast at least 10% of the votes entitled to be cast collectively by the holders of the outstanding shares of Series B Preferred Stock and any other class or series of voting preferred stock with which the holders of Series B Preferred Stock are entitled to vote together as a single class with respect to the election of directors, unless the request is received more than 45 days and less than 90 days before the date fixed for the next annual meeting of our stockholders at which the vote would occur, in which case, the additional directors may be elected either at the annual meeting or at a separate special meeting of our stockholders at our discretion.
So long as any shares of Series B Preferred Stock are outstanding, the approval of at least two-thirds of the votes entitled to be cast collectively by the holders of the outstanding shares of Series B Preferred Stock and each other class or series of voting preferred stock, including the Series A Preferred Stock, with which the holders of Series B Preferred Stock are entitled to vote as a single class on such matter (voting together as a single class), is required to authorize (a) any amendment, alteration, repeal or other change to any provision of our charter, including the articles supplementary setting forth the terms of the Series B Preferred Stock (whether by merger, conversion, consolidation, transfer or conveyance of all or substantially all of our assets or otherwise), that would materially and adversely affect the rights, preferences, privileges or voting powers of the Series B Preferred Stock, or (b) the creation, issuance or increase in the authorized number of shares of any class or series of stock ranking senior to the Series B Preferred Stock (or any equity securities convertible into or exchangeable for any such shares) with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up. Notwithstanding the foregoing, holders of voting preferred stock will not be entitled to vote together as a class with the holders of Series B Preferred Stock on any amendment, alteration, repeal or other change to any provision of our charter unless the action affects the holders of Series B Preferred Stock and the voting preferred stock equally.
The following actions will not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of the Series B Preferred Stock:


•any increase or decrease in the number of authorized shares of common stock or preferred stock of any other class or series, any increase in the number of shares of Series B Preferred Stock or the classification or reclassification of any unissued shares, or the creation or issuance of equity securities, of any class or series ranking junior to or on parity with the Series B Preferred Stock with respect to dividend rights and rights upon our voluntary or involuntary liquidation, dissolution or winding up, including the Series A Preferred Stock;
•any amendment, alteration or repeal or other change to any provision of our charter, including the articles supplementary setting forth the terms of the Series B Preferred Stock, as a result of a merger, conversion, consolidation, transfer or conveyance of all or substantially all of our assets or other business combination, whether or not we are the surviving entity, if the Series B Preferred Stock (or stock into which the Series B Preferred Stock has been converted in any successor person or entity to us) remains outstanding with the terms thereof unchanged in all material respects or is exchanged for stock of the successor person or entity with substantially identical rights; or
•any amendment, alteration or repeal or other change to any provision of our charter, including the articles supplementary setting forth the terms of the Series B Preferred Stock, as a result of a merger, conversion, consolidation, transfer or conveyance of all or substantially all of our assets or other business combination, if the holders of Series B Preferred Stock receive the $25.00 liquidation preference per share of Series B Preferred Stock, plus an amount equal to accrued and unpaid dividends to, but not including, the date of the event.
The voting provisions above will not apply if, at or prior to the time when the act with respect to which the vote would otherwise be required would occur, we have redeemed or called for redemption all outstanding shares of Series B Preferred Stock.
No Maturity, Sinking Fund or Mandatory Redemption
The Series B Preferred Stock has no stated maturity date and is not subject to any sinking fund or mandatory redemption provisions.
Conversion
The Series B Preferred Stock is not convertible into any other property or securities, except as provided under “— Change of Control Conversion Rights.”
Information Rights
During any period in which we are not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and any shares of Series B Preferred Stock are outstanding, we will (i) transmit by mail or other permissible means under the Exchange Act to all holders of Series B Preferred Stock as their names and addresses appear in our record books and without cost to the holders, copies of the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required) within 15 days after the respective dates by which we would have been required to file these reports with the SEC if we were subject to Section 13 or 15(d) of the Exchange Act and (ii) within 15 days following written request, supply copies of these reports to any prospective holder of Series B Preferred Stock.
Preemptive Rights
No holders of Series B Preferred Stock will, as a result of his, her or its status as such holder, have any preemptive rights to purchase or subscribe for shares of our common stock or any of our other securities.
Certain Provisions of the Maryland General Corporation Law and our Charter and Bylaws
Power to Reclassify Shares of Our Stock
Our board of directors may classify any unissued shares of preferred stock, and reclassify any unissued shares of common stock or any previously classified but unissued shares of preferred stock, into other classes or series of stock, including one or more classes or series of stock that have priority over our common stock with respect to voting rights, distributions or upon liquidation, and authorize us to issue the newly classified shares. Prior to the issuance of shares of each class or series, our board of directors is required by the MGCL and our charter to


set, subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption for each such class or series. These actions can be taken without stockholder approval, unless stockholder approval is required by applicable law, the terms of any other class or series of our stock or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded.
Restrictions on Transfer and Ownership of Stock
In order for us to qualify as a REIT under the Code, shares of our stock must be owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be taxed as a REIT has been made) or during a proportionate part of a shorter taxable year. Also, under Section 856(h) of the Code, a REIT cannot be “closely held.” In this regard, not more than 50% of the value of the outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made).
Our charter contains restrictions on the ownership and transfer of shares of our common stock and other outstanding shares of stock. The relevant sections of our charter provide that, subject to the exceptions described below, no person or entity may own, or be deemed to own, by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% in value of the aggregate of our outstanding shares of stock or more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of shares of our stock; we refer to these limitations as the “ownership limits.”
The constructive ownership rules under the Code are complex and may cause shares of stock owned actually or constructively by a group of related individuals or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% in value of the aggregate of our outstanding shares of stock or 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of shares of our stock (or the acquisition of an interest in an entity that owns, actually or constructively, shares of our stock by an individual or entity), could, nevertheless, cause that individual or entity, or another individual or entity, to violate the ownership limits.
Our board of directors may, upon receipt of certain representations, undertakings and agreements and in its sole discretion, exempt (prospectively or retroactively) any person from the ownership limits and establish a different limit, or excepted holder limit, for a particular person if the person’s ownership in excess of the ownership limits will not then or in the future result in our being “closely held” under Section 856(h) of the Code (without regard to whether the person’s interest is held during the last half of a taxable year) or otherwise cause us to fail to qualify as a REIT. In order to be considered by our board of directors for exemption, a person also must not own, actually or constructively, an interest in one of our tenants (or a tenant of any entity which we own or control) that would cause us to own, actually or constructively, more than a 9.9% interest in the tenant unless the revenue derived by us from such tenant is sufficiently small that, in the opinion of our board of directors, rent from such tenant would not adversely affect our ability to qualify as a REIT. The person seeking an exemption must provide such representations and undertakings to the satisfaction of our board of directors that it will not violate these two restrictions. The person also must agree that any violation or attempted violation of these restrictions will result in the automatic transfer to a charitable trust of the shares of stock causing the violation. As a condition of granting an exemption or creating an excepted holder limit, our board of directors may, but is not required to, obtain an opinion of counsel or Internal Revenue Service ruling satisfactory to our board of directors with respect to our qualification as a REIT and may impose such other conditions or restrictions as it deems appropriate.
Our board of directors may increase or decrease the ownership limits. Any decrease in the ownership limits will not be effective for any person whose percentage ownership of shares of our stock is in excess of such decreased limits until such person’s percentage ownership of shares of our stock equals or falls below such decreased limits (other than a decrease as a result of a retroactive change in existing law, which will be effective immediately), but any further acquisition of shares of our stock in excess of such percentage ownership will be in violation of the applicable decreased limits. Our board of directors may not increase or decrease the ownership limits if, after giving effect to such increase or decrease, five or fewer persons could beneficially own or constructively own in the aggregate more than 49.9% in value of the shares of our stock then outstanding. Prior to any modification of the ownership limits, our board of directors may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure our qualification as a REIT.
Our charter further prohibits:


•any person from beneficially or constructively owning, applying certain attribution rules of the Code, shares of our stock that would result in our being “closely held” under Section 856(h) of the Code (without regard to whether the stockholder’s interest is held during the last half of a taxable year) or otherwise cause us to fail to qualify as a REIT; and
•any person from transferring shares of our stock if such transfer would result in shares of our stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution).
Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our stock that will or may violate the ownership limits or any of the other foregoing restrictions on ownership and transfer of our stock will be required to immediately give written notice to us or, in the case of a proposed or attempted transaction, give, at least 15 days’ prior written notice to us, and provide us with such other information as we may request in order to determine the effect of such transfer on our qualification as a REIT. The ownership limits and the other restrictions on ownership and transfer of our stock will not apply if our board of directors determines that it is no longer in our best interests to continue to qualify as a REIT or that compliance with the restrictions on ownership and transfer of our stock is no longer required in order for us to qualify as a REIT.
If any transfer of shares of our stock would result in shares of our stock being beneficially owned by fewer than 100 persons, such transfer will be void from the time of such purported transfer and the intended transferee will acquire no rights in such shares. In addition, if any purported transfer of shares of our stock or any other event would otherwise result in:
•any person violating the ownership limits or such other limit established by our board of directors; or
•us being “closely held” under Section 856(h) of the Code (without regard to whether the stockholder’s interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT,
then that number of shares (rounded up to the nearest whole share) that would cause us to violate such restrictions will automatically be transferred to, and held by, a charitable trust for the exclusive benefit of one or more charitable organizations selected by us, and the intended transferee will acquire no rights in such shares. The transfer will be deemed to be effective as of the close of business on the business day prior to the date of the violative transfer or other event that results in the transfer to the charitable trust. A person who, but for the transfer of the shares to the charitable trust, would have beneficially or constructively owned the shares so transferred is referred to as a “prohibited owner,” which, if appropriate in the context, also means any person who would have been the record owner of the shares that the prohibited owner would have so owned. If the transfer to the charitable trust as described above would not be effective, for any reason, to prevent violation of the applicable restriction on ownership and transfer contained in our charter, then our charter provides that the transfer of the shares will be void from the time of such purported transfer.
Shares of stock transferred to a charitable trust are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of (1) the price paid per share in the transaction that resulted in such transfer to the charitable trust (or, if the event that resulted in the transfer to the charitable trust did not involve a purchase of such shares of stock at market price, defined generally as the last reported sales price reported on the principal national securities exchange on which the shares are listed and admitted to trading, the market price per share of such stock on the day of the event which resulted in the transfer of such shares of stock to the charitable trust) and (2) the market price on the date we, or our designee, accept such offer. We may reduce the amount payable to the charitable trust by the amount of dividends and other distributions which have been paid to the prohibited owner and are owed by the prohibited owner to the charitable trust as described below. We may pay the amount of such reduction to the charitable trust for the benefit of the charitable beneficiary. We have the right to accept such offer until the trustee of the charitable trust has sold the shares held in the charitable trust as discussed below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates, and the charitable trustee must distribute the net proceeds of the sale to the prohibited owner.
Within 20 days of receiving notice from us of the transfer of the shares to the charitable trust, the charitable trustee will sell the shares to a person or entity designated by the charitable trustee who could own the shares without violating the ownership limits or the other restrictions on ownership and transfer of our stock described above. After that, the charitable trustee must distribute to the prohibited owner an amount equal to the lesser of (1) the price paid by the prohibited owner for the shares in the transaction that resulted in the transfer to the charitable trust (or, if the event that resulted in the transfer to the charitable trust did not involve a purchase of such shares at market price, the market price per share of such stock on the day of the event that resulted in the transfer to the charitable trust) and (2) the sales proceeds (net of commissions and other expenses of sale) received by the charitable trust for the shares. The charitable trustee may reduce the amount payable to the prohibited owner by the


amount of dividends and other distributions which have been paid to the prohibited owner and are owed by the prohibited owner to the charitable trust. Any net sales proceeds in excess of the amount payable to the prohibited owner will be immediately paid to the charitable beneficiary, together with any dividends and other distributions thereon. In addition, if, prior to discovery by us that shares of stock have been transferred to a charitable trust, such shares of stock are sold by a prohibited owner, then such shares will be deemed to have been sold on behalf of the charitable trust and to the extent that the prohibited owner received an amount for or in respect of such shares that exceeds the amount that such prohibited owner was entitled to receive, such excess amount will be paid to the charitable trust upon demand by the charitable trustee. The prohibited owner will have no rights in the shares held by the charitable trust.
The charitable trustee will be designated by us and will be unaffiliated with us and with any prohibited owner. Prior to the sale of any shares by the charitable trust, the charitable trustee will receive, in trust for the charitable beneficiary, all distributions made by us with respect to such shares and may also exercise all voting rights with respect to such shares. Any dividend or other distribution paid prior to our discovery that shares of stock have been transferred to the charitable trust will be paid by the recipient to the charitable trust upon demand by the charitable trustee. These rights will be exercised for the exclusive benefit of the charitable beneficiary.
Subject to Maryland law, effective as of the date that the shares have been transferred to the charitable trust, the charitable trustee will have the authority, at the charitable trustee’s sole discretion:
•to rescind as void any vote cast by a prohibited owner prior to our discovery that the shares have been transferred to the charitable trustee; and
•to recast the vote in accordance with the desires of the charitable trustee acting for the benefit of the charitable beneficiary.
However, if we have already taken irreversible corporate action, then the charitable trustee may not rescind and recast the vote.
If our board of directors determines that a proposed transfer would violate the restrictions on ownership and transfer of our stock set forth in our charter, our board of directors may take such action as it deems advisable to refuse to give effect to or to prevent such transfer, including, but not limited to, causing us to redeem shares of stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer.
Every owner of more than 5% (or such lower percentage as required by the Code or the regulations promulgated thereunder) of the outstanding shares of all classes or series of our stock, including common stock, will be required to give written notice to us within 30 days after the end of each taxable year stating the name and address of such owner, the number of shares of each class and series of our stock that the person beneficially owns and a description of the manner in which such shares are held. Each such owner will be required to provide to us such additional information as we may request in order to determine the effect, if any, of such beneficial ownership on our qualification as a REIT and to ensure compliance with the ownership limits. In addition, each stockholder will, upon demand, be required to provide to us such information as we may request in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance.
Any certificates representing shares of our stock, or any written statements of information delivered in lieu of certificates, will bear a legend referring to the restrictions described above.
Number of Directors; Vacancies; Removal
We presently have six directors. This number may be increased or decreased from time to time pursuant to the bylaws, but may never be less than one or more than fifteen. Our board of directors is divided into three classes of directors serving staggered three-year terms. At each annual meeting, directors of one class are elected to serve until the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualify.
We have elected by a provision of our charter to be subject to a provision of Maryland law requiring that, except as otherwise provided in the terms of any class or series of preferred stock, vacancies on our board of directors may be filled only by the remaining directors and that any individual elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred and until his or her successor is duly elected and qualifies. Any director may resign at any time by delivering his or her notice to the board of directors, the chairman of the board of directors or the Company’s secretary.


Our charter provides that, subject to the rights of holders of one or more classes or series of preferred stock, any or all directors may be removed from office only for “cause” by the affirmative vote of the stockholders, entitled to cast at least two-thirds of the votes entitled to be cast generally in the election of directors. For the purpose of this provision of our charter, “cause” means, with respect to any particular director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to us through bad faith or active and deliberate dishonesty.
Action by Stockholders
Under the MGCL, common stockholder action can be taken only at an annual or special meeting of stockholders or by unanimous consent in lieu of a meeting (unless the charter provides for a lesser percentage, which our charter does not). These provisions, combined with the requirements of our charter and bylaws regarding the calling of a stockholder-requested special meeting of stockholders discussed below, may have the effect of delaying consideration of a stockholder proposal until the next annual meeting.
Meetings and Special Voting Requirements
Subject to our charter restrictions on ownership and transfer of our stock and the terms of each class or series of stock, including with respect to the vote by the stockholders for the election of the directors, each holder of common stock is entitled at each meeting of stockholders to one vote per share owned by such stockholder on all matters submitted to a vote of stockholders. There is no cumulative voting in the election of our board of directors, which means that the holders of a majority of shares of our outstanding common stock can elect all the directors then standing for election and the holders of the remaining shares of common stock will not be able to elect any directors.
Under Maryland law, a Maryland corporation generally cannot dissolve, amend its charter, merge, convert, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business, unless declared advisable by the board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter. However, a Maryland corporation may provide in its charter for approval of these matters by a lesser percentage, but not less than a majority of all the votes entitled to be cast on the matter. Our charter provides for approval of these matters by the affirmative vote of stockholders entitled to cast a majority of all the votes entitled to be cast on the matter (except for certain charter amendments relating to director resignation and removal and the vote required for certain amendments). However, our operating assets are held by our subsidiaries and these subsidiaries may be able to merge or sell all or substantially all of their assets without the approval of our stockholders.
Pursuant to our charter and bylaws, an annual meeting of our stockholders for the purpose of the election of directors and the transaction of any business will be held annually on a date and at the time and place set by our board of directors. Special meetings of stockholders to act on any matter that may properly be considered at a meeting of stockholders may be called by the board of directors, the chairman of the board of directors, the president or the chief executive officer and, subject to the satisfaction of certain procedural requirements, must be called by our secretary to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast on the matter at the meeting. The presence of stockholders entitled to cast at least a majority of all the votes entitled to be cast at such meeting on any matter, either in person or by proxy, will constitute a quorum.
Our board of directors has the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws.
No Appraisal Rights
As permitted by the MGCL, our charter provides that stockholders will not be entitled to exercise appraisal rights unless a majority of our board of directors determines that appraisal rights apply, with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which stockholders would otherwise be entitled to exercise appraisal rights.
Dissolution
Our dissolution must be declared advisable by a majority of our entire board of directors and approved by the affirmative vote of stockholders entitled to cast not less than a majority of the votes entitled to be cast on such matter.
Business Combinations


Under the MGCL, certain “business combinations,” including a merger, consolidation, share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities, between a Maryland corporation and an “interested stockholder,” defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock or an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation, or an affiliate of such an interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding voting stock of the corporation and (2) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder. The super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. Under the MGCL, a person is not an “interested stockholder” if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. A corporation’s board of directors may provide that its approval is subject to compliance with any terms and conditions determined by it.
These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a board of directors prior to the time that the interested stockholder becomes an interested stockholder. As permitted by the MGCL, our board of directors has by resolution exempted business combinations between us and our advisor or any affiliate of our advisor. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to such business combinations. As a result, our advisor or any affiliate of our advisor may be able to enter into business combinations with us that may not be in the best interest of our stockholders without compliance by us with the supermajority vote requirements and other provisions of the statute. This resolution, however, may be altered or repealed in whole or in part at any time by our board of directors.
Control Share Acquisitions
The MGCL provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter, excluding shares of stock in respect of which any of the following persons is entitled to exercise or direct the exercise of the voting power of such shares in the election of directors: (1) the person that has made or proposed to make the control share acquisition, (2) an officer of the corporation or (3) an employee of the corporation who is also a director of the corporation. “Control shares” are shares of voting stock which, if aggregated with all other such shares owned by the acquirer, or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: (A) one-tenth or more but less than one-third, (B) one-third or more but less than a majority or (C) a majority or more of all voting power. Control shares do not include shares that the acquirer is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and making an “acquiring person statement” as described in MGCL), may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders’ meeting.
If voting rights are not approved at the meeting or if the acquirer does not deliver an “acquiring person statement” as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of any meeting of stockholders at which the voting rights of such shares are considered and not approved, or, if no such meeting is held, as of the date of the last control share acquisition by the acquirer. If voting rights for control shares are approved at a stockholders’ meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights, unless the corporation’s charter provides otherwise. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.


The control share acquisition statute does not apply to (1) shares acquired in a merger, consolidation or statutory share exchange if the corporation is a party to the transaction or (2) acquisitions approved or exempted by the charter or bylaws of the corporation.
Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our stock. This bylaw provision may be amended or eliminated at any time in the future.
Subtitle 8
Subtitle 8 of Title 3 of the MGCL permits the board of directors of a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:
•a classified board of directors;
•a two-thirds vote requirement for removing a director;
•a requirement that the number of directors be fixed only by vote of the directors;
•a requirement that a vacancy on the board of directors be filled only by the remaining directors and, if the board of directors is classified, for the remainder of the full term of the class of directors in which the vacancy occurred; and
•a majority requirement for the calling of a stockholder-requested special meeting of stockholders.
We have elected to be subject to the provisions of Subtitle 8 relating to a classified board of directors and the filling of vacancies on our board of directors. Through provisions in our charter and bylaws unrelated to Subtitle 8, we already (1) require a two-thirds vote for the removal of any director from the board of directors, which removal will be allowed only for cause, (2) vest in the board of directors the exclusive power to fix the number of directorships, and (3) require, unless called by the chairman of our board of directors, our president, our chief executive officer or our board of directors, the written request of stockholders entitled to cast not less than a majority of all votes entitled to be cast on any matter that may properly be considered at a meeting of stockholders in order to call a special meeting to act on such matter.
Advance Notice of Director Nominations and New Business
Our bylaws provide that nominations of individuals for election to the board of directors or proposals of other business may be made at an annual meeting (1) pursuant to our notice of meeting, (2) by or at the direction of our board of directors, or (3) by any stockholder of record both at the time of giving of notice pursuant to the bylaws and at the time of the annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with the advance notice procedures set forth in our bylaws. Our bylaws currently require the stockholder to provide notice to the secretary containing the information required by our bylaws not earlier than the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of our proxy statement for the preceding year’s annual meeting.
With respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of individuals for election to the board of directors may be made at a special meeting, (1) by or at the direction of the board of directors, or (2) provided that the special meeting has been called in accordance with our bylaws for the purpose of electing directors, by any stockholder who is a holder of record both at the time of giving of notice and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who complies with the notice procedures set forth in our bylaws. Such stockholder may nominate one or more individuals, as the case may be, for election as a director if the stockholder’s notice containing the information required by our bylaws is delivered to the secretary not earlier than the 120th day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of  (1) the 90th day prior to such special meeting or (2) the tenth day following the day on which public announcement is first made of the date of the special meeting and the proposed nominees of our board of directors to be elected at the meeting.
Indemnification and Limitation of Directors’ and Officers’ Liability


Maryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (1) actual receipt of an improper benefit or profit in money, property or services or (2) active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our charter contains a provision that eliminates such liability to the maximum extent permitted by Maryland law. This provision does not reduce the exposure of directors and officers to liability under federal or state securities laws, nor does it limit the stockholders’ ability to obtain injunctive relief or other equitable remedies for a violation of a director’s or an officer’s duties to us, although the equitable remedies may not be an effective remedy in some circumstances.
The MGCL requires a Maryland corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. The MGCL permits a Maryland corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that (1) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (A) was committed in bad faith or (B) was the result of active and deliberate dishonesty, (2) the director or officer actually received an improper personal benefit in money, property or services, or (3) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under the MGCL, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that a personal benefit was improperly received. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by us or in our right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses. In addition, the MGCL permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of  (1) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (2) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the appropriate standard of conduct was not met.
Our charter authorizes us to obligate ourselves and our bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:
•any present or former director or officer who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in that capacity; and
•any individual who, while our director or officer and at our request, serves or has served as a director, officer, partner, member, manager or trustee of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in that capacity.
Our charter and bylaws also permit us to indemnify and advance expenses to any person who served a predecessor of ours in any of the capacities described above and to any employee or agent of us or a predecessor of us.
We have entered into an indemnification agreement with each of our directors and officers, and certain former directors and officers, providing for indemnification of such directors and officers. The indemnification agreements provide that each indemnitee is entitled to indemnification unless it is established that (1) the act or omission of an indemnitee was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (2) such indemnitee actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, such indemnitee had reasonable cause to believe that his or her conduct was unlawful. The indemnification agreements further limit each indemnitee’s entitlement to indemnification in cases where (1) the proceeding was one by or in the right of us and such indemnitee was adjudged to be liable to us, (2) such indemnitee was adjudged to be liable on the basis that personal benefit was improperly received in any proceeding charging improper personal benefit to such indemnitee or (3) the proceeding was brought by such indemnitee, except in certain circumstances.


Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Exclusive Forum
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division, is the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, other than actions arising under federal securities laws, (b) any Internal Corporate Claim, as such term is defined in the MGCL, or any successor provision thereof, including, without limitation, (i) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders or (ii) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL, our charter or our bylaws, or (c) any other action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine.
Our bylaws also provide that, unless we consent in writing, none of the foregoing actions, claims or proceedings may be brought in any court sitting outside the State of Maryland and the federal district courts are, to the fullest extent permitted by law, the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.


CAPITAL ONE, NATIONAL ASSOCIATION
as Administrative Agent and as a Lender
THE PERSONS WHO ARE OR HEREAFTER
BECOME PARTIES TO THIS LOAN AGREEMENT AS LENDERS,
and
THE PARTIES LISTED ON EXHIBIT B ATTACHED HERETO
as Borrowers

LOAN AGREEMENT

Dated as of: December 22, 2023
DOCUMENT PREPARED BY:
Jason Kaplan
Polsinelli PC
150 N Riverside Plaza, Suite 3000
Chicago Illinois 60606
LOAN AGREEMENT
CONA – Healthcare Trust, Inc.
92119388.8

TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS........................................................................................................... 1
Section 1.1 Certain Definitions............................................................................................ 1
Section 1.2 Definitions....................................................................................................... 31
Section 1.3 Phrases.............................................................................................................31
Section 1.4 UCC Terms..................................................................................................... 32
ARTICLE 2 LOAN TERMS.........................................................................................................32
Section 2.1 The Loan......................................................................................................... 32
Section 2.2 Interest Rate; Late Charge...............................................................................36
Section 2.3 Terms of Payment........................................................................................... 36
Section 2.4 Prepayment......................................................................................................37
Section 2.5 Security; Establishment of Funds....................................................................38
Section 2.6 Application of Payments................................................................................. 39
Section 2.7 Sources and Uses.............................................................................................41
Section 2.8 Capital Adequacy; Increased Costs; Illegality................................................ 41
Section 2.9 Interest Rate Protection................................................................................... 42
Section 2.10 Effect of Benchmark Transition Event........................................................... 43
Section 2.11 Return of Payments......................................................................................... 44
Section 2.12 Evidence of Debt............................................................................................. 46
Section 2.13 Substitution of Lenders................................................................................... 47
Section 2.14 Pro Rata Treatment; Sharing of Payments...................................................... 48
Section 2.15 Fees and Expenses...........................................................................................49
Section 2.16 Withholding Taxes.......................................................................................... 49
Section 2.17 Several Obligations of Lenders....................................................................... 52
Section 2.18 Defaulting Lenders.......................................................................................... 52
ARTICLE 3 INSURANCE, CONDEMNATION AND IMPOUNDS......................................... 53
Section 3.1 Insurance......................................................................................................... 53
Section 3.2 Use and Application of Insurance Proceeds....................................................59
Section 3.3 Condemnation Awards.................................................................................... 60
Section 3.4 Insurance Impounds........................................................................................ 61
Section 3.5 Real Estate Tax Impounds.............................................................................. 62
ARTICLE 4 LEASING MATTERS............................................................................................. 63
Section 4.1 Representations and Warranties on Leases..................................................... 63
Section 4.2 Standard Lease Form; Approval Rights.......................................................... 63
Section 4.3 Covenants........................................................................................................ 64
Section 4.4 Tenant Estoppels............................................................................................. 64
Section 4.5 Deemed Approval........................................................................................... 65
ARTICLE 5 REPRESENTATIONS AND WARRANTIES........................................................ 65
Section 5.1 Organization, Power and Authority; Formation Documents, Organization, etc...................................................................................................................................................65
Section 5.2 Validity of Loan Documents........................................................................... 66
Section 5.3 Liabilities; Litigation.......................................................................................66
Section 5.4 Taxes and Assessments................................................................................... 67
Section 5.5 Other Agreements Defaults............................................................................. 67
Section 5.6 Compliance with Law..................................................................................... 67

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92119388.8

Section 5.7 Condemnation................................................................................................. 67
Section 5.8 Access............................................................................................................. 68
Section 5.9 Location of Borrowers; Trade Name.............................................................. 68
Section 5.10 ERISA Employees.......................................................................................... 68
Section 5.11 Use of Loan Proceeds..................................................................................... 68
Section 5.12 Forfeiture......................................................................................................... 68
Section 5.13 Tax Filings...................................................................................................... 69
Section 5.14 Fraudulent Transfer......................................................................................... 69
Section 5.15 Full and Accurate Disclosure; No Material Adverse Change......................... 69
Section 5.16 Flood Zone...................................................................................................... 70
Section 5.17 Single Purpose Entity/Separateness................................................................ 70
Section 5.18 Anti-Money Laundering/International Trade Law Compliance; Patriot Act.. 73
Section 5.19 Intentionally Omitted...................................................................................... 74
Section 5.20 Operators’ Agreements................................................................................... 74
Section 5.21 Physical Condition.......................................................................................... 74
ARTICLE 6 FINANCIAL REPORTING..................................................................................... 75
Section 6.1 Financial Statements....................................................................................... 75
Section 6.2 Compliance Certificate....................................................................................77
Section 6.3 Accounting Principles..................................................................................... 77
Section 6.4 Access..............................................................................................................77
Section 6.5 Agent for Borrowers........................................................................................78
Section 6.6 Books and Records/Audits.............................................................................. 78
ARTICLE 7 COVENANTS..........................................................................................................78
Section 7.1 Transfers or Encumbrance of Property........................................................... 78
Section 7.2 Taxes; Utility Charges.....................................................................................79
Section 7.3 Management.................................................................................................... 80
Section 7.4 Operation; Maintenance; Inspection............................................................... 81
Section 7.5 Taxes on Security............................................................................................ 81
Section 7.6 Legal Existence, Name, Etc............................................................................ 82
Section 7.7 Further Assurances.......................................................................................... 82
Section 7.8 Estoppel Certificates Regarding Loan............................................................ 83
Section 7.9 Notice of Certain Events................................................................................. 83
Section 7.10 Payment For Labor and Materials................................................................... 83
Section 7.11 Use of Proceeds and Revenues........................................................................83
Section 7.12 Compliance with Laws and Contractual Obligations......................................83
Section 7.13 Operating and Financial Covenants................................................................ 84
Section 7.14 Healthcare Laws and Covenants..................................................................... 86
Section 7.15 Transactions With Affiliates........................................................................... 86
Section 7.16 Alterations....................................................................................................... 87
Section 7.17 Business and Operations................................................................................. 87
Section 7.18 Intentionally Omitted...................................................................................... 87
Section 7.19 Forfeiture......................................................................................................... 87
Section 7.20 Patriot Act Compliance................................................................................... 87
Section 7.21 Post Closing Obligations................................................................................. 87
Section 7.22 Intentionally Omitted...................................................................................... 87
Section 7.23 Deposit Accounts............................................................................................ 87
ARTICLE 8 EVENTS OF DEFAULT......................................................................................... 88
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Section 8.1 Payments......................................................................................................... 88
Section 8.2 Insurance......................................................................................................... 88
Section 8.3 Prohibited Transfer..........................................................................................88
Section 8.4 Covenants........................................................................................................ 88
Section 8.5 Representations and Warranties...................................................................... 89
Section 8.6 Other Encumbrances....................................................................................... 89
Section 8.7 Involuntary Bankruptcy or Other Proceeding................................................. 89
Section 8.8 Voluntary Petitions, etc................................................................................... 89
Section 8.9 Default Under Operators’ Agreements........................................................... 89
Section 8.10 Certain Covenants........................................................................................... 89
Section 8.11 Financial Information...................................................................................... 89
Section 8.12 Default Under Guaranty.................................................................................. 90
Section 8.13 Criminal Act.................................................................................................... 90
Section 8.14 Environmental Indemnity Agreement............................................................. 90
Section 8.15 Required Repairs and Post Closing Requirements..........................................90
Section 8.16 Change of Control........................................................................................... 90
Section 8.17 Secured Hedge Agreement..............................................................................90
Section 8.18 Deposit Account Control Agreement.............................................................. 90
Section 8.19 Healthcare Investigations................................................................................ 90
ARTICLE 9 REMEDIES.............................................................................................................. 90
Section 9.1 Remedies - Insolvency Events........................................................................ 90
Section 9.2 Remedies - Other Events.................................................................................90
Section 9.3 Administrative Agent’s Right to Perform the Obligations............................. 91
Section 9.4 Deposit Account Control Agreement.............................................................. 91
ARTICLE 10 ADMINISTRATIVE AGENT............................................................................... 91
Section 10.1 Appointment....................................................................................................91
Section 10.2 Binding Effect................................................................................................. 93
Section 10.3 Use of Discretion.............................................................................................93
Section 10.4 Defaults........................................................................................................... 94
Section 10.5 Liability........................................................................................................... 98
Section 10.6 Administrative Agent Individually................................................................. 99
Section 10.7 Lender Credit Decision................................................................................. 100
Section 10.8 Resignation of Administrative Agent............................................................100
Section 10.9 Additional Secured Parties............................................................................ 101
Section 10.10 Reliance by Administrative Agent................................................................ 101
Section 10.11 Rights as a Lender......................................................................................... 102
Section 10.12 Standard of Care; Indemnification................................................................ 102
Section 10.13 Failure to Act.................................................................................................102
Section 10.14 The Platform..................................................................................................102
Section 10.15 Liability of Administrative Agent................................................................. 103
Section 10.16 USA Patriot Act Notice; Compliance........................................................... 103
Section 10.17 No Reliance on Administrative Agent’s Customer Identification Program. 103
Section 10.18 Defaulting Lenders........................................................................................ 103
Section 10.19 Limitations.................................................................................................... 107
ARTICLE 11 MISCELLANEOUS.............................................................................................108
Section 11.1 Notices...........................................................................................................108
Section 11.2 Amendments and Waivers............................................................................ 110
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Section 11.3 Assignments and Participations; Binding Effect...........................................112
Section 11.4 Renewal, Extension or Rearrangement......................................................... 115
Section 11.5 Indemnities.................................................................................................... 115
Section 11.6 Debtor-Creditor Relationship........................................................................ 116
Section 11.7 Right of Setoff; Sharing of Payments........................................................... 116
Section 11.8 Marshaling; Payments Set Aside.................................................................. 117
Section 11.9 Limitation on Interest.................................................................................... 117
Section 11.10 Invalid Provisions..........................................................................................118
Section 11.11 Reimbursement of Expenses......................................................................... 118
Section 11.12 Approvals; Third Parties; Conditions............................................................119
Section 11.13 Administrative Agent and Lenders Not in Control; No Partnership............. 119
Section 11.14 Contest of Certain Claims............................................................................. 120
Section 11.15 Time of the Essence...................................................................................... 120
Section 11.16 Successors and Assigns................................................................................. 120
Section 11.17 Waivers..........................................................................................................121
Section 11.18 Cumulative Rights; Joint and Several Liability............................................ 121
Section 11.19 Joint and Several Liability of Borrowers...................................................... 121
Section 11.20 Singular and Plural........................................................................................ 126
Section 11.21 Exhibits and Schedules................................................................................. 126
Section 11.22 Titles of Articles, Sections and Subsections................................................. 126
Section 11.23 Promotional Material.................................................................................... 126
Section 11.24 Survival......................................................................................................... 128
Section 11.25 WAIVER OF JURY TRIAL......................................................................... 128
Section 11.26 Waiver of Punitive or Consequential Damages............................................ 128
Section 11.27 Governing Law..............................................................................................128
Section 11.28 Entire Agreement.......................................................................................... 129
Section 11.29 Counterparts.................................................................................................. 129
Section 11.30 Consents and Approvals................................................................................129
Section 11.31 Effectiveness of Electronic Signatures..........................................................129
Section 11.32 Venue............................................................................................................ 129
Section 11.33 Important Information Regarding Procedures for Requesting Credit........... 130
Section 11.34 Method of Payment....................................................................................... 130
Section 11.35 Reserved........................................................................................................ 130
Section 11.36 Post Closing Obligations of Borrowers.........................................................130
Section 11.37 Joinder Borrower; Joinder Project; Construction..........................................130
Section 11.38 Component Notes.......................................................................................... 131
Section 11.39 Intentionally Omitted.................................................................................... 131
Section 11.40 Waivers..........................................................................................................131
Section 11.41 Acknowledgement Regarding Any Supported QFCs................................... 131
Section 11.42 Acknowledgement and Consent to Bail-In of EEA Financial Institutions... 133
ARTICLE 12 LIMITATIONS ON LIABILITY.........................................................................133
Section 12.1 Limitation on Liability.................................................................................. 133
Section 12.2 Limitation on Liability of Administrative Agent’s and Lender’s Officers, Employees, etc ............................................................................................................................137

LOAN AGREEMENT – Page iv
CONA – Healthcare Trust, Inc.
92119388.8

EXHIBITS AND SCHEDULES
Exhibits A-1 – A-4Description of Projects
Exhibit BNames of Borrowers
Exhibit CLoan Commitment
Exhibit DNames of Tenants
Exhibit E
Exhibit F
Exhibit G
Form of Assignment and Assumption
Form of Joinder Agreement
Joinder Borrowers; Joinder Projects
Schedule 2.1
Schedule 2.1(b)
Schedule 2.1(c)
Conditions to Advance of Loan Proceeds
Request for TI/LC Advance
Request for Joinder Advance
Schedule 2.5(b)Required Repairs
Schedule 2.6Form of ACH Authorization
Schedule 2.7Sources and Uses
Schedule 4.1Lease Termination Options; Prepaid Rent; Security Deposits; ROFRs; ROFOs
Schedule 5.1Organization; Formation
Schedule 6.2Compliance Certificate
Schedule 7.13Form of Special Compliance Certificate
Schedule 11.19Loan Allocations
Schedule 11.36Post-Closing Obligations



LOAN AGREEMENT – Page v
CONA – Healthcare Trust, Inc.
92119388.8

LOAN AGREEMENT

This Loan Agreement (this “Agreement”) is entered into as of December 22, 2023 by and among CAPITAL ONE, NATIONAL ASSOCIATION, a national banking association (“CONA”), as administrative agent and collateral agent for the Lenders (as defined herein) (in such capacity and together with its successors and permitted assigns, “Administrative Agent”), THE PERSONS WHO ARE OR HEREAFTER BECOME PARTIES TO THIS AGREEMENT as Lenders (together with their successors and permitted assigns, each a “Lender” and collectively, the “Lenders”), and THE PARTIES LISTED ON EXHIBIT B ATTACHED HERETO (AND ALL JOINDER BORROWERS LISTED ON EXHIBIT G OF THIS AGREEMENT THAT HEREAFTER JOIN AS AN ADDITIONAL BORROWER PURSUANT TO SECTION 11.37 OF THIS AGREEMENT), each a “Borrower” and collectively, the “Borrowers”).
ARTICLE 1
DEFINITIONS
Section 1.1Certain Definitions. As used herein, the following terms have the meanings indicated:
“Account Debtor” means “account debtor”, as defined in Article 9 of the UCC, and any other obligor in respect of an Account.
“ACH” has the meaning assigned in Section 2.6(c).
“ACH Authorization Form” means the form attached hereto as Schedule 2.6 to be executed by Borrowers authorizing ACH debits from Borrowers’ account designated therein for the payment of debt service and escrow payments required under Section 2.6 hereof.
“Acknowledgment and Agreement of Property Manager” means the Acknowledgment and Agreement of Property Manager executed by Property Manager in favor of Administrative Agent (on behalf of itself and the Lenders), as amended, restated, supplemented, or otherwise modified from time to time.
“Adena Health Center Project” means that certain Land described on Exhibit A-1 attached hereto, and medical office building or other facilities located on such Land, as applicable, and all related facilities, amenities, fixtures, and personal property owned by the Adena Health Center Project Borrower and any improvements now or hereafter located on the Land.
“Adena Health Center Project Borrower” means ARHC AHJACOH01, LLC, a Delaware limited liability company, together with its successors and permitted assigns.
“Adjusted Expenses” means actual operating expenses related to the Projects, on an accrual basis for the immediately preceding twelve (12) month period, unless indicated otherwise (in all circumstances, as the same may be reasonably adjusted by Administrative Agent), including: (i) recurring expenses as determined under GAAP (expressly excluding amortization and depreciation), (ii) real estate taxes, (iii) management fees (whether paid or not) equal to three percent (3%) of effective gross income (or the actual management fee paid, if higher) and (iv) a replacement reserve (whether reserved or not) of not less than $.25 per rentable square foot per annum. If operating statements for the period of time in question are not available, the operating statements covering any lesser period of time will be annualized to determine Adjusted Expenses.
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“Adjusted Net Operating Income” or “ANOI” means Adjusted Revenue less Adjusted Expenses, based upon the financial reports provided by Borrowers under Article 7 and approved by Administrative Agent in its reasonable discretion.
“Adjusted Revenue” means (i) the Projected Rental Revenue for the three (3) month period immediately following the testing date, plus the Revenue In Place Adjustment for the three (3) month period immediately following the testing date multiplied by (ii) four (4); provided, however, if actual occupancy of the Projects, in each case as determined on an individual Project basis (as applicable), exceeds 95%, Adjusted Revenue shall be proportionately reduced assuming an occupancy of 95% for Projects, taken as a whole, with multiple Tenants. Adjusted Revenue shall be calculated assuming an occupancy of 100% for Projects in each case as determined on an individual Project basis, as applicable, with a single Tenant.
“Adjustment Lease” means a Qualifying Lease which satisfies the following conditions:
(a)monthly rental payments under such Qualifying Lease are abated during the applicable testing period;
(b)the aggregate monthly rental abatements remaining under such Qualifying Lease as of the applicable testing date do not exceed the lesser of (i) one (1) month of remaining abatement per year of the remaining term of such Qualifying Lease (exclusive of any unexercised extension options) or (ii) ten (10) months remaining abatement during the remaining term of such Qualifying Lease; and
(c)such Qualifying Lease has a remaining term (exclusive of any unexercised extension options) of three (3) years or more as of the applicable testing date.
“Administrative Agent” has the meaning assigned in the preamble to this Agreement.
“Advanced Amount” has the meaning assigned in Section 10.18(d).
“Advisor” means Healthcare Trust Advisors, LLC, a Delaware limited liability company.
“Advisory Agreement” means that certain Second Amended and Restated Advisory Agreement, dated as of February 17, 2017, as amended by that certain Amendment No. 1 to Second Amended and Restated Advisory Agreement, dated as of July 25, 2019, by and among Advisor and REIT (as such agreement may be further amended and in effect from time to time).
“Affected Lender” has the meaning assigned in Section 2.13(a).
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls or is Controlled by or is under common Control with such Person or is a director or officer of such Person or of an Affiliate of such Person. Each Borrower Party shall be deemed an Affiliate of Borrowers.
“Affiliated Manager” means any property manager in which Borrowers, or any Affiliate of Borrowers has, directly or indirectly, any legal, beneficial or economic interest.
“Agent Parties” has the meaning assigned in Section 10.14.
“Agreement” means this Loan Agreement, as amended, restated, supplemented, or otherwise modified from time to time.
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“Allocated Loan Amount” has the meaning assigned in Section 11.19(i).
“Anti-Terrorism Laws” has the meaning assigned in Section 5.18(f).
“Applicable Margin” means (a) when the Contract Rate is determined by reference to a Benchmark, three percent (3.0%) per annum, or (b) when the Contract Rate is determined by reference to the Base Rate, a spread (which may be positive or negative), which spread will approximate the Contract Rate calculated based on the Benchmark immediately prior to the implementation of the Base Rate.
“Approved Fund” means, with respect to Administrative Agent or any Lender, any Person (other than a natural Person) that (a) is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and (b) is advised or managed or co-managed by (i) Administrative Agent or such Lender, (ii) any Affiliate of Administrative Agent or such Lender or (iii) any Person (other than an individual) or any Affiliate of any Person (other than an individual) that administers or manages Administrative Agent or such Lender.
“Assignment and Assumption” means an assignment and assumption agreement duly executed by the parties thereto in connection with the assignment of all or any portion of the Loan in accordance with Section 11.3, to be in the form attached hereto as Exhibit E.
“Assignment of Hedge Agreement” means the Collateral Assignment of Interest Rate Protection Agreement dated of even date herewith, executed and delivered by Borrowers and the counterparty under the Hedge Agreement to Administrative Agent (on behalf of itself and the Lenders), as amended, restated, supplemented, or otherwise modified from time to time.
“Assignment of Leases and Rents” means the Assignment of Leases and Rents, executed by Borrowers for the benefit of Administrative Agent (on behalf of itself and the Lenders), and pertaining to the Leases, as amended, restated, supplemented, or otherwise modified from time to time.
“ASTM” means the American Society for Testing and Materials.
“Award” has the meaning assigned in Section 3.3.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“Bank Secrecy Act” means the Bank Secrecy Act, 31 U.S.C. Section 5311, et seq.
“Bankruptcy Party” has the meaning assigned in Section 8.7.
“Base Rate” means, for any day, a floating interest rate per annum equal to the highest of (a) the rate of interest from time to time announced by CONA at its principal office as its prime commercial lending rate (it being understood that such prime commercial rate is a reference rate and does not necessarily represent the lowest or best rate being charged by CONA to any customer and such rate is set by CONA based upon various factors, including CONA’s costs and desired return, general economic conditions and other factors); (b) the sum of one half of one
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percent (0.50%) per annum and the Federal Funds Rate (which shall not be less than the Floor); and (c) SOFR calculated for each such day (giving effect to the Floor), in each instance, as of such day. Any change in the Base Rate due to a change in any of the foregoing shall be effective on the effective date of such change in CONA’s prime commercial lending rate, the Federal Funds Rate or SOFR.
“Benchmark” means, initially, Term SOFR; provided that if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred with respect to Term SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement Rate to the extent that such Benchmark Replacement Rate has become effective pursuant to Section 2.10(a).
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement Rate, the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero) that has been selected by Administrative Agent and Borrowers giving due consideration to any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the Benchmark with the applicable Unadjusted Benchmark Replacement Rate by a Relevant Governmental Body or any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the Benchmark with the applicable Unadjusted Benchmark Replacement Rate for U.S. dollar-denominated syndicated credit facilities at such time.
”Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement Rate, any technical, administrative or operational changes (including changes to the definition of “Business Day,” 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 Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement Rate and to permit the administration thereof by Administrative Agent in a manner substantially consistent with market practice (or, if Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if Administrative Agent determines that no market practice for the administration of such Benchmark Replacement Rate exists, in such other manner of administration as Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Replacement Date” the earlier to occur of the following events with respect to the then-current Benchmark:
(a)in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark permanently or indefinitely ceases to provide such Benchmark; or
(b)in the case of clause (c) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.
“Benchmark Replacement Rate” the sum of: (a) the alternate benchmark rate that has been selected by Administrative Agent and Borrowers giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate
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by a Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated syndicated credit facilities plus (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement Rate as so determined would be less than the Floor, the Benchmark Replacement Rate will be deemed to be the Floor for the purposes of this Agreement.
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a)a public statement or publication of information by or on behalf of the administrator of such Benchmark announcing that such administrator has ceased or will cease to provide such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof);
(b)a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such Benchmark (or such component thereof) are no longer representative.
“Benchmark Transition Start Date” means (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by Administrative Agent or the Required Lenders, as applicable, by notice to Borrowers, Administrative Agent (in the case of such notice by the Required Lenders) and the Lenders.
“Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date pursuant to clauses (a) or (b) of that definition has occurred if, at such time, no Benchmark Replacement Rate has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.10 and (b) ending at the time that a Benchmark Replacement Rate has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.10.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Borrower(s)” has the meaning assigned in the preamble to this Agreement.
“Borrower Formation Documents” has the meaning assigned in Section 5.1(b).
“Borrower Materials” has the meaning assigned in Section 11.23(e).
“Borrower Party” means Borrowers and Guarantor.
“Borrowers’ Account” means the operating account of Borrowers’ Agent which is subject to the Deposit Account Control Agreement.
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“Borrowers’ Agent” has the meaning assigned in Section 6.5.
“Borrowers’ Knowledge” means the actual knowledge, without additional due diligence, of a Borrower in the regular course of its activities, including without limitation the knowledge of a Borrower acquired through its administration of the Leases, written information received from any Property Manager and written notices provided to a Borrower by State regulators and/or other governmental or quasi-governmental agencies having jurisdiction over the Projects.
“Breakage Amount” means an amount, as reasonably calculated by any Lender, equal to the amount of any actual out-of-pocket losses, expenses and liabilities that such Lender or any of its Affiliates sustains as a result of any payment of the Loan (or any portion thereof) on any day that is not a Payment Date (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise).
“Business Day” means any day other than a Saturday, Sunday, or a public holiday or the equivalent for banks generally under the applicable federal law and if no applicable federal law exists, then the applicable state law. In addition (i) when a Business Day is to be determined in connection with (a) notices and determinations in respect of the Benchmark, or (b) any funding, conversion, continuation, accrual period or payment (including prepayments) of the Loan during any period in which the Loan bears interest at the Benchmark, such day must also be a U.S. Government Securities Business Day, and (ii) if any Payment Date (or other date on which any payment is required under this Agreement or any other Loan Document) shall be due on a day that is not a U.S. Government Securities Business Day, such payment shall be made or shall be debited on the next succeeding U.S. Government Securities Business Day, however, the accrual period and the amount of payment shall remain unchanged notwithstanding the adjustment to the date of payment.
“Cap” has the meaning assigned in Section 3.1(h).
“Cash Flow Requirements” has the meaning assigned in Section 7.13.
“Casualty” has the meaning assigned in Section 3.2.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith, and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.
“Change of Control” means the occurrence of any of the following, except as otherwise approved in advance in writing by Lenders in their sole and absolute discretion acting reasonably:
(a)before the Internalization, the Advisor or a replacement advisor consented to in writing by Administrative Agent, shall fail to be the advisor of the REIT or the Guarantor; or
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(b)any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of twenty percent (20%) or more of the equity securities of the REIT entitled to vote for members of the board of directors or equivalent governing body of the REIT on a fully-diluted basis; or
(c)after the Internalization, fewer than three-fifths of the members of the board of the directors of the REIT as of the date of the Internalization cease to be on the board of directors of the REIT or the Chief Executive Officer or Chief Financial Officer dies, becomes disabled or is replaced or resigns; provided it shall not be a “Change of Control” if a replacement executive of comparable experience and reasonably satisfactory to the Administrative Agent shall have been retained within six (6) months of such event; or
(d)the REIT, together with any Affiliates Controlled by the REIT, at any time ceases to own and Control, directly or indirectly, fifty-one percent (51%) or more of the issued and outstanding stock, partnership interests, or membership interests of Guarantor and Borrowers; or
(e)the REIT ceases to own and Control, directly or indirectly, one hundred percent (100%) of the general partnership interest of the Guarantor; or
(f)the Guarantor ceases to own and Control, directly or indirectly, (i) one hundred percent (100%) of the issued and outstanding stock, partnership interests, or membership interests of Borrowers other than Medical Center II – Peoria, AZ Project Borrower (for which Guarantor owns 95.915% of such Borrower).
in each instance in clause (d), free and clear of all liens, rights, options, warrants or other similar agreements or understandings, other than Liens in favor of Administrative Agent, for the benefit of the Secured Parties; and provided, that any Transfer of more than a twenty percent (20%) (or such lesser percentage as may be required from time to time to satisfy applicable regulatory requirements) direct or indirect interest in Borrowers shall be subject to completion of customer diligence by Administrative Agent and each Lender reasonably satisfactory to Administrative Agent and each Lender.
“CIP Regulations” has the meaning assigned in Section 10.17.
“Closing Date” means the date the Initial Funding Amount is funded by the Lenders.
“Code” means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.
“Collateral” means all real and personal property with respect to which Liens in favor of Administrative Agent (for the benefit of Lenders) are executed, identified or purported to be granted pursuant to the Loan Documents and which secure the Obligations described in the Loan Documents and the Secured Hedge Agreement, and includes, without limitation, all of Borrowers’ right, title and interest in, to and under all personal property, real property, and other assets that arise from, are used in connection with, are related to or are located at the Projects whether now owned by or owing to, or hereafter acquired by or arising in favor of Borrowers (including all personal property and other assets owned or acquired under any trade names, styles or derivations thereof), and whether owned or consigned by or to, or leased from or to, Borrowers, and regardless of where located.
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“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).
“Compliance Certificate” means the compliance certificate in the form of Schedule 6.2 attached hereto.
“CONA” has the meaning assigned in the Preamble to this Agreement.
“CONA Maximum Commitment Amount” means Fifty Million and no/100 Dollars ($50,000,000.00). For the avoidance of doubt, as of the Closing Date, CONA does not have a Commitment to make any advance pursuant to Section 2.1(c), and CONA (as with all other Lenders) shall not have any Commitment to make a Joinder Advance unless and until such time as CONA, in its sole discretion, executes and delivers a Joinder with respect to such Joinder Advance and each of the other conditions precedent set forth in Section 2.1(c) has been satisfied with respect to such Joinder Advance.
“Condemnation” has the meaning assigned in Section 3.3.
“Consent Required Provision” means any provision of the Major Lease concerning the square feet and location of the demised premises, lease term, rent (including base rent, operating and maintenance expenses, etc.), conditions for an extension of the lease term, subordination and attornment, insurance requirements, casualty and condemnation, assignment and subletting, indemnities, guaranty terms, release of a guarantor, monetary obligations on the landlord or a purchase option.
“Contest” has the meaning assigned in Section 12.1(b).
“Contract Rate” means (a) initially, a floating rate of interest equal to Term SOFR plus the Applicable Margin and (b) during any period in which the Benchmark is not Term SOFR, a floating rate of interest equal to the Benchmark Replacement Rate (or, if applicable, the Base Rate) plus, in each case, the Applicable Margin.
“Control” or “controls” means, when used with respect to any specified Person, the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract, by its position with such Person as general partner or managing member, or otherwise (even if such power is subject to the right of other equity holders to exercise veto rights over major decisions, removal rights upon a material default in the controlling party’s obligations, or a forced sale right upon the occurrence of specified events); and the terms “Controlling” and “Controlled” have the meanings correlative to the foregoing.
“Covered Entity” has the meaning assigned in Section 5.18(f).
“Debt” means, for any Person, without duplication: (a) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or any of its assets is liable, (b) all unfunded amounts under a loan agreement, letter of credit, or other credit facility for which such Person or any of its assets would be liable or subject, if such amounts were advanced under the credit facility, (c) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests, (d) all indebtedness guaranteed by such Person, directly or indirectly, (e) all obligations under leases that constitute capital leases for which such Person or any of its assets is liable or subject, and (f) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person or any of its assets is liable or subject contingently
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or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss.
“Debt Service” means as of any Determination Date or other specified testing date, the sum of the annualized interest payable on the outstanding principal balance of the Loan, assuming a rate of interest equal to (i) for each portion of the Loan that is subject to a Hedge Agreement then in effect that complies with Section 2.9 (and for the avoidance of doubt, the replacement Hedge Agreement will be used for purposes of calculating Debt Service), the fixed rate specified in such Hedge Agreement plus the Applicable Margin, which shall apply to the portion of the Loan corresponding to the notional amount of such Hedge Agreement, (ii) for each portion of the Loan that is not subject to a Hedge Agreement, the Contract Rate in effect as of the applicable Determination Date or testing date (as the case may be) provided that with respect to a calculation of the Debt Service Coverage Ratio for the purpose of making a Loan advance, (a) the annualized interest payable on the outstanding principal balance of the Loan assuming the fixed rate specified in such Hedge Agreement plus the Applicable Margin, assuming that such Loan advance is outstanding on the date of calculation, which rate shall apply to the amount of such Loan advance; plus (b) the principal payments that would be due and payable during a twelve (12) month period for a hypothetical, amortizing loan in the principal amount of the Loan outstanding as of the applicable Determination Date or other specified testing date (as increased by the amount of the requested Advance, if applicable), calculated using a thirty (30) year mortgage style amortization schedule and an interest rate equal to six percent (6%). 
“Debt Service Coverage Ratio” means the ratio of (i) Adjusted Net Operating Income for the Projects for a particular period, to (ii) Debt Service for such period.
“Default Rate” means the lesser of (a) the maximum rate of interest allowed by applicable law, and (b) five percent (5%) per annum in excess of the Contract Rate.
“Defaulting Lender” means a Lender that (a) has failed to fund any amounts to be funded under this Agreement or has given written notice to Borrowers, Administrative Agent, or any other Lender that it will fail to fund any amounts to be funded by such Lender after the Closing Date under this Agreement or otherwise fails to fund such amount under this Agreement, (b) is in default for failing to make payments under one or more syndicated credit facilities (unless subject to a good faith dispute), (c) has declared (or the holding company of such Lender has declared) bankruptcy or is otherwise involved in a liquidation proceeding and Administrative Agent has determined such Lender is reasonably likely to become a Defaulting Lender, or (d) is the subject of a receivership.
“Deposit Account Control Agreement” means individually and collectively, the control agreement, in form and substance reasonably satisfactory to Administrative Agent, among CONA (or another depository institution reasonably acceptable to Administrative Agent), Borrowers and Administrative Agent.
“Determination Date” means the last day of each calendar quarter commencing with the calendar quarter ending on March 31, 2024.
“Division Transaction” means, with respect to any Restricted Party that is a limited liability company, the adoption of a “plan of division,” the filing of a certificate of division” or the taking of any other action such that such Restricted Party (a) divides into two or more Persons (regardless of whether such Restricted Party survives such division) or (b) creates or reorganizes into one or more “series LLCs.”
“Dollars” and the sign “$” each mean the lawful money of the United States of America.
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“Early Opt-in Election” means the occurrence of:
(a)(i) a determination by Administrative Agent or (ii) a notification by the Required Lenders to Administrative Agent (with a copy to Borrowers’ Agent) that the Required Lenders have determined that U.S. dollar-denominated syndicated or bilateral credit facilities being executed at such time, or that include language similar to that contained in Section 2.10 are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the then-current Benchmark; or
(b)(i) the election by Administrative Agent or (ii) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and the provision, as applicable, by Administrative Agent of written notice of such election to Borrower and the Lenders or by the Required Lenders of written notice of such election to Administrative Agent.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Electronic Copy” has the meaning assigned in Section 11.31.
“Electronic Signature” means (a) the signing party’s manual signature on a signature page, converted by the signing party (or its agent) to facsimile or digital form (such as a .pdf file) and received from the customary email address or customary facsimile number of the signing party (or its counsel or representative), or other mutually agreed-upon authenticated source; or (b) the signing party’s digital signature executed using a mutually agreed-upon digital signature service provider and digital signature process.
“Enforcement Action” has the meaning assigned in Section 12.1(b).
“Environmental Indemnity Agreement” means that certain Hazardous Materials Indemnity Agreement dated of even date hereof in favor of Administrative Agent (for itself and on behalf of the Lenders) executed by Borrowers and Guarantor with respect to the Projects, as amended, restated, supplemented, or otherwise modified from time to time.
“Environmental Laws” means any federal, state or local law (whether imposed by statute, ordinance, rule, regulation, administrative or judicial order, or common law), now or hereafter enacted, governing Hazardous Materials, including, without limitation, such laws (a) governing or regulating the use, generation, storage, removal, recovery, treatment, handling, transport, disposal, control, release, discharge of, or exposure to, Hazardous Materials, (b) governing or regulating the transfer of Hazardous Materials, or (c) requiring notification or disclosure of releases of Hazardous Materials or other environmental conditions whether or not in connection with a transfer of title to or interest in property.
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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules and regulations promulgated thereunder.
“Erroneous Payment” has the meaning assigned in Section 2.11(c).
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Event of Default” has the meaning assigned in Article 8.
“Excess Cash Flow” means, for any period, the amount by which the actual revenue received from the Projects exceeds the actual expenses of the Projects.
“Excess Cash Flow Termination Date” means the date on which Administrative Agent has determined (which determination shall not be unreasonably withheld, conditioned or delayed) that the Project Yield has equaled or exceeded ten percent (10%) for two consecutive Determination Dates, based upon a calculation of the Project Yield provided by Borrowers and approved by Administrative Agent in its good faith discretion (which approval shall not be unreasonably withheld, conditioned or delayed, and (ii) no Potential Default or Event of Default exists.
“Excluded Hedge Agreement Obligations” means, with respect to any Loan Party Guarantor, any guarantee of any Swap Obligations under a Secured Hedge Agreement if, and only to the extent that and for so long as, all or a portion of the guarantee of such Loan Party Guarantor of, or the grant by such Loan Party Guarantor of a security interest to secure, such Swap Obligation under a Secured Hedge Agreement (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the guarantee of such Loan Party Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation under a Secured Hedge Agreement; provided, however, that if any Loan Party Guarantor that was not an “eligible contract participant” at the time any such guarantee of a Swap Obligation under a Secured Hedge Agreement was entered into thereafter becomes an “eligible contract participant,” such Loan Party Guarantor shall, by virtue of the guaranty or security agreement or joinder thereto and without any further action by any Person, be deemed to have guaranteed the Swap Obligations under Secured Hedge Agreements and granted a security interest to secure such Swap Obligations under Secured Hedge Agreements, and such Swap Obligations under Secured Hedge Agreements shall no longer constitute Excluded Hedge Agreement Obligations with respect to such Loan Party Guarantor. If a Swap Obligation under a Secured Hedge Agreement arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation under a Secured Hedge Agreement that is attributable to swaps for which such guarantee or security interest is or becomes illegal.
“Excluded Taxes” has the meaning assigned such term in Section 2.16(a).
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version of FATCA made after the Closing Date) and any current or future regulations (whether final, temporary or proposed) or official interpretations thereof.
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“Federal Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. § 101, et seq.), as amended.
“Federal Flood Insurance” means, for any Improvements (including any personal property Collateral located on any Project) located in a Special Flood Hazard Area, Federal or private insurance reasonably satisfactory to Administrative Agent, in either case, that (a) meets the requirements of FEMA and other applicable federal agencies, (b) includes a deductible not to exceed $50,000 and (c) has a coverage amount equal to the lesser of (i) the insurable value of the buildings and any personal property Collateral located on any Project as reasonably determined by Administrative Agent or (ii) the maximum policy limits set under the National Flood Insurance Program.
“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, then the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such next succeeding Business Day, then the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of one one-hundredth of 1.00%) charged to major money center banks on such day on such transactions as determined by Administrative Agent.
“Fee Letter” means the letter agreement, dated the date hereof, among Borrowers and Administrative Agent with respect to certain fees payable by Borrowers in connection with the Loan and certain other matters, as the same may be modified or amended from time to time.
“FEMA” means the Federal Emergency Management Agency, a component of the U.S. Department of Homeland Security that administers the National Flood Insurance Program.
“Financial Institution” means a United States Financial Institution as defined in 31 U.S.C. 5312, as amended from time to time.
“FIRREA” has the meaning assigned in Schedule 2.1.
“Flood Insurance Acts” has the meaning assigned in Section 3.1(a).
“Floor” means 1.0% per annum.
“Forfeiture Rights” has the meaning assigned in Section 5.12.
“Funds” means collectively, the Replacement Escrow Fund and the Required Repair Fund.
“GAAP” means generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board that are applicable on the date so indicated and consistently applied.
“Government Lists” means (i) the Specially Designated Nationals and Blocked Persons Lists maintained by OFAC, (ii) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC that Administrative Agent notified Borrowers in writing is now included in “Governmental Lists”, or (iii) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other Governmental Authority or pursuant to any Executive Order of the
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President of the United States of America that Administrative Agent notified Borrowers in writing is now included in “Governmental Lists”.
“Governmental Approvals” means, collectively, all consents, licenses and permits and all other authorizations or approvals required from any Governmental Authority to operate the Projects.
“Governmental Authority” means any United States federal, state, county or municipal government or political subdivision thereof, any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality or public body (including, without limitation, the State Regulator), or any court, administrative tribunal, or public body.
“Guarantor” means Healthcare Trust Operating Partnership, L.P., a Delaware limited partnership, together with its successors and permitted assigns, and each other Person who from time to time is party to a Recourse Guaranty Agreement or otherwise guarantees the Obligations or any portion thereof.
“Hazardous Materials” means (a) petroleum or chemical products, whether in liquid, solid, or gaseous form, or any fraction or by-product thereof, (b) asbestos or asbestos- containing materials, (c) polychlorinated biphenyls (pcbs), (d) radon gas, (e) underground storage tanks, (f) any explosive or radioactive substances, (g) lead or lead-based paint, (h) any other substance, material, waste or mixture which is or shall be listed, defined, or otherwise determined by any Governmental Authority to be hazardous, toxic, or otherwise regulated, controlled or giving rise to liability under any Environmental Laws, (i) any excessive moisture, mildews, mold or other fungi in quantities or concentrations that could reasonably be expected to pose a risk to human health or the environment, or (j) any elements, materials, compounds, mixtures, chemicals, wastes, pollutants, contaminants or substances known to cause cancer or reproductive toxicity, that, because of its quantity, concentration or physical or chemical characteristics, exposure is limited or regulated by any Governmental Authority having jurisdiction over human health and safety, natural resources or the environment, or which poses a significant present or potential hazard to human health and safety, or to the environment, if released into the workplace or the environment.
“Healthcare Investigations” means any inquiries, investigations, probes, audits or proceedings concerning the business affairs, practices, licensing or reimbursement entitlements of the Projects, Borrowers, any Guarantor or any Operator (including, without limitation, inquiries, investigations, probes, audit or procedures concerning potential or actual violations of Healthcare Laws).
“Healthcare Laws” means all provisions, rules and regulations pursuant to or promulgated under the False Claims Act (31 U.S.C. Section 3729 et seq.), the Anti-Kickback Act of 1986 (41 U.S.C. Section 51 et seq.), the Federal Health Care Programs Anti-Kickback statute (42 U.S.C. Section 1320-7a(b)), the Ethics in Patient Referrals Act of 1989, as amended (Stark Law) (42 U.S.C. 1395nn), the Civil Monetary Penalties Law (42 U.S.C. Section 1320a-7a), or the Truth in Negotiations (10 U.S.C. Section 2304 et seq.), Health Care Fraud (18 U.S.C. 1347), Wire Fraud (18 U.S.C. 1343), Theft or Embezzlement (18 U.S.C. 669), False Statements (18 U.S.C. 1001), False Statements (18 U.S.C. 1035), Patent Inducements Statute, and equivalent state statutes and regulations, and any and all rules and regulations promulgated by Governmental Authorities, including the Centers of Medicare and Medicaid Services (CMS), with respect to any of the foregoing.
“Hedge Agreement” means any and all swap agreements (as such term is defined in Section 101 of the Federal Bankruptcy Code) or interest rate cap agreements designed to provide
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protection against fluctuations in interest or currency exchange rates and any other agreements or arrangements designed to provide such protection.
“Hypothetical Project Yield” means, as of any Determination Date, the Project Yield that would exist on such date if the outstanding principal balance of the Loan on such date was reduced by (a) amounts on deposit in the Project Yield Fund on such date, and (b) the face amount of any Special Letter of Credit outstanding on such date.
“Improvements” means the buildings and other improvements now or hereafter located on the Land.
“Indebtedness” means all payment obligations of Borrowers or any other Borrower Party to Administrative Agent or to any Lender under the Loan or any of the Loan Documents, including, without limitation, any and all interest, whether or not accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or similar proceeding, and whether or not a claim for post-filing or post petition interest is allowed in any such proceeding.
“Indemnified Matters” has the meaning assigned in Section 11.5.
“Indemnified Person” has the meaning assigned in Section 11.4.
“Initial Funding Amount” has the meaning assigned in Section 2.1(a).
“Insurance Impound” has the meaning assigned in Section 3.4.
“Insurance Premiums” has the meaning assigned in Section 3.1(c).
“Internalization” means a transaction or series of related transactions (including, without limitation, mergers, consolidations, stock or other ownership interest purchases or modifications of agreements) whereby (a) the Advisor ceases or reduces the level of its services accompanied by an elimination or a commensurate reduction of the amount of the fees payable to the Advisor under the Advisory Agreement, (b) REIT or any of its wholly owned Subsidiaries employs persons previously employed by the Advisor and (c) REIT or any of its wholly owned Subsidiaries subsequently is to perform all or some of the duties previously performed by Advisor.
“Joinder” has the meaning assigned in Section 11.37.
“Joinder Advance” has the meaning assigned in Section 2.1(c).
“Joinder Advance Request” means has the meaning assigned in Section 2.1(c).
“Joinder Borrower” has the meaning assigned in Section 11.37.
“Joinder Holdback” has the meaning assigned in Section 2.1(c).
“Joinder Project” means that certain real property described on such loan amendment and joinder documents joined to this Agreement pursuant to which a Joinder Project and Joinder Borrower is incorporated herein from time to time, and medical office building or other facilities located on such real property, and all related facilities, amenities, fixtures, and personal property owned by the applicable Joinder Borrower and any improvements now or hereafter located on the Land.
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“Land” means the real property described in Exhibit A-1 through A-4 attached hereto, as amended, modified or supplemented from time to time to include the real property on which Joinder Projects are located.
“Lease Party” means each Borrower, as landlord under a Lease.
“Lease Subordination Agreement” means (whether one or more) those certain Lease Subordination, Non-Disturbance and Attornment Agreements dated of even date herewith, executed by Tenants, Borrowers and Administrative Agent (on behalf of itself and the Lenders).
“Leases” means all leases of, subleases of and occupancy agreements affecting all or any portion of the Projects or any part thereof now existing or hereafter executed and all amendments, modifications or supplements thereto.
“Lender(s)” has the meaning assigned in the preamble to this Agreement. In addition to the foregoing, solely for the purpose of identifying the Persons entitled to share in payments and collections from the Collateral and the benefit of any guarantees of the Obligations as more fully set forth in this Agreement and the other Loan Documents, the term “Lender” shall include Secured Hedge Providers, if any. For the avoidance of doubt, any Person to whom any Obligations in respect of a Secured Hedge Agreement are owed and which does not hold any portion of the Loan or any Loan Commitment hereunder shall not be entitled to any other rights as a “Lender” under this Agreement, the other Loan Documents or the Environmental Indemnity Agreement.
“Lender Party Payments” has the meaning assigned in Section 7.13.
“Lender Transferee” has the meaning assigned in Section 11.3.
“Liabilities” means all claims, actions, suits, judgments, damages, losses, liability, obligations, responsibilities, fines, penalties, sanctions, costs, fees, taxes, commissions, charges, disbursements and expenses, in each case of any kind or nature (including interest accrued thereon or as a result thereof and fees, charges and disbursements of financial, legal and other advisors and consultants), whether joint or several, whether or not indirect, contingent, actual, punitive, treble or otherwise but in no event any of the foregoing that are consequential except to the extent arising from a third party claim.
“Lien” means any interest, or claim thereof, in the Projects securing an obligation owed to, or a claim by, any Person other than the owner of the Projects whether such interest is based on common law, statute or contract, including the lien or security interest arising from a deed of trust, mortgage, assignment, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term “Lien” shall include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting the Projects
“Loan” means the loan made by the Lenders to Borrowers under this Agreement, together with all other amounts evidenced or secured by the Loan Documents.
“Loan Commitment” means, with respect to each Lender, the commitment of such Lender to make its Pro Rata Share of the Loan to Borrowers, which commitment is in the amount set forth opposite such Lender’s name on Exhibit C under the caption “Lender’s Loan Commitment.”
“Loan Documents” means: (a) this Agreement, (b) the Notes, (c) the Mortgage, (d) the Assignment of Leases and Rents, (e) UCC financing statements, (f) such assignments of
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management agreements, contracts and other rights as may be executed as of the date hereof or otherwise in accordance with the terms of this Agreement, (g) the Recourse Guaranty Agreement, (h) intentionally omitted, (i) Acknowledgment of Property Manager, (j) the Security Agreement, (k) Assignment of Hedge Agreement; (l) the Deposit Account Control Agreement; (m) any Secured Hedge Agreements, (n) all other documents evidencing, securing, governing or otherwise pertaining to the Loan, (o) any letter of credit provided to Administrative Agent (for itself and on behalf of the Lenders) in connection with the Loan, and (p) all amendments, modifications, renewals, substitutions and replacements of any of the foregoing; provided however, in no event shall the term “Loan Documents” include the Environmental Indemnity Agreement.
“Loan Origination Fee” means a non-refundable origination fee related to the Loan and evidenced by the Fee Letter, which is due and payable in full on the Closing Date and the closing of a Joinder Project hereunder, as applicable.
“Loan to Value Ratio” means the ratio, expressed as a percentage, resulting from a fraction, the numerator of which is the outstanding principal balance of the Loan plus any additional amounts being advanced under the Loan in connection with, as applicable, a Joinder Advance or TI/LC Advance (but expressly excluding in each case any unadvanced TI/LC Holdback or unadvanced Joinder Advance Holdback) and the denominator of which is the “as-stabilized” value of the Projects as shown in the most recent appraisal of the Projects approved by Administrative Agent in its reasonable discretion provided that Administrative Agent shall not undertake new appraisals for any Project after the date hereof unless (i) a Material Adverse Change shall have occurred since the prior appraisal; (ii) an Event of Default shall have occurred and be continuing; (iii) Administrative Agent, in its reasonable discretion, requires an updated appraisal, including without limitation for regulatory purposes or such other internal purposes; or (iv) more than twelve months have elapsed since the date of the last appraisal and Administrative Agent determines an updated appraisal is required for the purposes set forth in this Agreement. For the avoidance of doubt, new appraisals of each Joinder Project shall be required as a condition to a Joinder Advance.
“Loan Year” means (a) for the first Loan Year, the period commencing on the Closing Date and ending on the last day of the month in which the first anniversary of the Closing Date occurs (unless the Closing Date is on the first day of a month, in which case the first Loan Year shall commence on such Closing Date and end on the date twelve (12) months after the last day of the month immediately preceding the Closing Date) and (b) each consecutive twelve month calendar period after the first Loan Year until the Maturity Date.
“Major Lease” means each of the Leases (in each case, single Tenant) in place with respect to the Medical Center II – Peoria, AZ Project, OSF Healthcare – Dwight, IL Project and OSF Healthcare – Godfrey, IL Project, respectively.
“Management Agreement” means, individually and collectively, (a) that certain agreement between Borrowers and Property Manager for the management of the Projects, in the form approved by Administrative Agent on or before the Closing Date, (b) any subsequent management agreement, in form and substance approved by Administrative Agent in accordance with Section 7.3, between Borrowers and a Property Manager and (c) all amendments, restatements, modifications and supplements to a Management Agreement approved by Administrative Agent in accordance with Section 7.3.
“Material Action” means to file any insolvency, or reorganization case or proceeding, to institute proceedings to have any Borrower Party be adjudicated bankrupt or insolvent, to institute proceedings under any applicable insolvency law, to seek any relief under any law relating to relief from debts or the protection of debtors, to consent to the filing or institution of
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bankruptcy or insolvency proceedings against any Borrower Party, to file a petition seeking, or consent to, reorganization or relief with respect to any Borrower Party under any applicable federal or state law relating to bankruptcy or insolvency, to seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official of or for any Borrower Party or a substantial part of its respective property, to make any assignment for the benefit of creditors of any Borrower Party, the admission in writing by any Borrower Party of such Person’s inability to pay its debts generally as they become due, or to take action in furtherance of any of the foregoing.
“Material Adverse Change” or “material adverse change” means, in Administrative Agent’s reasonable discretion, the business operations or financial condition of a Person or property has changed in a manner which could reasonably be expected to materially impair the value of the Collateral, taken as a whole, prevent timely repayment of the Loan or otherwise prevent the applicable Person from timely performing any of its material obligations under the Loan Documents or Environmental Indemnity Agreement.
“Material Adverse Effect” or “material adverse effect” means, in Administrative Agent’s reasonable discretion, a material adverse effect on (i) the condition (financial or otherwise), operations, business, assets, liabilities or prospects of Borrowers taken as a whole, or any other Borrower Party, (ii) the ability of Borrowers taken as a whole, or any other Borrower Party to perform any material obligation required of them under the Loan Documents, (iii) the rights and remedies of Administrative Agent and the Lenders under the Loan Documents, or (iv) the ability of Borrowers to operate all or a material portion of the Projects.
“Maturity Date” means, as applicable, the earlier of (a) December 21, 2026, or (b) the date on which the entire Loan is required to be paid in full, by acceleration or otherwise, under this Agreement or any of the other Loan Documents.
“Maximum Commitment Amount” means Seventy Five Million Dollars ($75,000,000). For the avoidance of doubt, as of the Closing Date, Lenders do not have a Commitment to make any advance pursuant to Section 2.1(c), and no Lender shall have any Commitment to make a Joinder Advance until such time as such Lender executes and delivers a Joinder with respect to such Joinder Advance and each of the other conditions precedent set forth in Section 2.1(c) has been satisfied with respect to such Joinder Advance. In any event, the aggregate sum of the Initial Funding Amount, all Joinder Advances and all TI/LC Advances outstanding at any time shall not exceed the Maximum Commitment Amount.
“Medical Center II – Peoria, AZ Project” means that certain Land described on Exhibit A-2 attached hereto, and medical office building or other facilities located on such Land, as applicable, and all related facilities, amenities, fixtures, and personal property owned by the Medical Center II – Peoria, AZ Project Borrower and any improvements now or hereafter located on the Land.
“Medical Center II – Peoria, AZ Project Borrower” means ARHC PRPEOAZ02, LLC, a Delaware limited liability company, together with its successors and permitted assigns.
“MNPIs” has the meaning assigned in Section 11.23(a).
“Mortgage” means, collectively (whether one or more): (i) the Mortgage(s), Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by the applicable Borrowers in favor of Administrative Agent (for itself and on behalf of the Lenders), covering the Projects, as applicable; and (ii) the Deed(s) of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by the applicable Borrowers in favor of Administrative Agent (for itself and on behalf of the Lenders), covering the Projects, as
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applicable, in each case as amended, restated, supplemented, or otherwise modified from time to time.
“National Flood Insurance Program” means the program created by the U.S. Congress pursuant to the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as revised by the National Flood Insurance Reform Act of 1994, and as the same may be further amended, modified or supplemented, and including the regulations issued thereunder, that, among other things, mandates the purchase of flood insurance to cover real property improvements and contents located in Special Flood Hazard Areas in participating communities and may provide protection to property owners through a federal insurance program.
“Non-Conforming Policy” has the meaning assigned in Section 3.1.
“Non-U.S. Lender Party” means each of Administrative Agent, the Lenders and each participant, in each case that is not a U.S. Person.
“Note” and “Notes” means, respectively, (a) each promissory note executed at any time by Borrowers and payable to the order of a Lender in evidence of the Loan of such Lender and (b) all such promissory notes, together with all renewals, modifications and extensions thereof and any replacement or additional notes executed by Borrowers pursuant to the terms hereof.
“Obligations” means the Indebtedness and any and all existing and future debts, liabilities and obligations of every kind or nature at any time owing by Borrowers and any other Borrower Party to Administrative Agent and Lenders or any Affiliate of a Lender, whether under this Agreement or any other Loan Document, whether joint or several, related or unrelated, primary or secondary, matured or contingent, due or to become due (including debts, liabilities and obligations obtained by assignment), and whether principal, interest, fees, indemnification obligations hereunder or expenses (specifically including interest accruing after the commencement of any bankruptcy, insolvency or similar proceeding with respect to Borrowers or any other Borrower Party, whether or not a claim for such post-commencement interest is allowed), including, without limitation, any obligations under any Secured Hedge Agreements, any extensions, modifications, substitutions, increases and renewals of the Loan (provided that the Obligations of any Loan Party Guarantor shall not include Excluded Hedge Agreement Obligations of such Loan Party Guarantor); the payment of all amounts advanced by Administrative Agent, any Lender or any Affiliate of a Lender to preserve, protect and enforce rights hereunder and in the Collateral; and all expenses incurred by Administrative Agent, any Lender or any Affiliate of a Lender or any Secured Hedge Provider. Without limiting the generality of the foregoing, Obligations shall include any other debts, liabilities or obligations owing to Administrative Agent, any Lender or any Lender Affiliate in connection with any Secured Hedge Agreements and Hedge Obligations and, provided, however, that any obligations with respect to Secured Hedge Agreements, that are owing to a Lender or an Affiliate of a Lender other than Administrative Agent or its Affiliates shall only constitute “Obligations” hereunder if the applicable Secured Hedge Agreement was entered into on or after the Closing Date and the applicable Lender or Affiliate of a Lender gave written notice to Administrative Agent of the same within 10 days thereafter.
“OFAC” means the Office of Foreign Assets Control, Department of the Treasury.
“Operator”, individually, and “Operators”, collectively, means the Property Manager, property sublessee or operator under any Operators’ Agreement, reasonably approved by Administrative Agent and any successor to such Operator reasonably approved by Administrative Agent.
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“Operators’ Agreements” means the Management Agreement, and/or other similar agreements regarding the management and operation of the Projects between any Borrower and any Property Manager.
“OSF Healthcare – Dwight, IL Project” means that certain Land described on Exhibit A-3 attached hereto, and medical office building or other facilities located on such Land, as applicable, and all related facilities, amenities, fixtures, and personal property owned by the OSF Healthcare – Dwight, AZ Project Borrower and any improvements now or hereafter located on the Land.
“OSF Healthcare – Dwight, IL Project Borrower” means ARHC OSFWAIL01, LLC, a Delaware limited liability company, together with its successors and permitted assigns.
“OSF Healthcare – Godfrey, IL Project” means that certain Land described on Exhibit A-4 attached hereto, and medical office building or other facilities located on such Land, as applicable, and all related facilities, amenities, fixtures, and personal property owned by the OSF Healthcare – Godfrey Project Borrower and any improvements now or hereafter located on the Land.
“OSF Healthcare – Godfrey, IL Project Borrower” means ARHC OSFGDIL01, LLC, a Delaware limited liability company, together with its successors and permitted assigns
“Other Taxes” has the meaning assigned in Section 2.16(c).
“Overpaying Amount” has the meaning assigned in Section 11.19(j).
“Overpaying Borrower” has the meaning assigned in Section 11.19(j).
“Participant” has the meaning assigned in Section 11.3(d).
“Participant Register” has the meaning assigned in Section 11.3(d).
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 (Public Law 107-56), as the same may be amended from time to time, and corresponding provisions of future laws related thereto.
“Payment Date” means the (1st) first Business Day of each calendar month during the term of the Loan.
“Payment Notice” has the meaning assigned in Section 2.11(d).
“Payment Recipient” has the meaning assigned in Section 2.11(c).
“Permit” means, with respect to any Person, any permit, approval, authorization, license, registration, certificate (including certificates of occupancy), concession, grant, franchise, variance or permission from, and any other contractual obligations with, any Governmental Authority, in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Permitted Encumbrances” has the meaning assigned in Section 7.1(a).
“Permitted Exceptions” means, with respect to each Project, collectively (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other
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matters disclosed in the Title Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet delinquent or which are being contested in good faith, and for which adequate reserves are being maintained in accordance with GAAP, (d) statutory Liens for labor or materials that (i) secure sums not yet delinquent, (ii) secure sums not in excess of Seventy-Five Thousand Dollars ($75,000) in the aggregate (collectively, as to all Projects), (iii) are bonded over or discharged to Administrative Agent’s reasonable satisfaction within thirty (30) days, and (iv) are being contested in good faith in accordance with the terms and conditions of this Agreement, (e) the rights of customers, licensees, invitees, guests and other occupants at each Project to occupy the Project in the ordinary course, (f) rights of (i) tenants, as tenants only, under the terms of Leases either reasonably approved or deemed approved by Administrative Agent (if such approval is required under the Loan Documents) or for which Administrative Agent’s approval is not required hereunder, and (ii) the Property Manager under the Management Agreements, solely to the extent provided therein or in any amendment thereto reasonably approved or deemed approved by Administrative Agent (to the extent such approval is required by the terms hereof), (g) other encumbrances and restrictions not materially affecting the use or enjoyment of the Projects and not to exceed Seventy-Five Thousand Dollars ($75,000), and (h) any other encumbrances, liens or other matters approved by Administrative Agent or Required Lenders in their reasonable discretion.
“Permitted Transfer” means any of the following Transfers, and such other Transfers as otherwise approved in advance in writing by Administrative Agent in its sole and absolute discretion acting reasonably:
(a)a Transfer expressly permitted under Section 7.1(c);
(b)a Transfer, in one or a series of transactions including by way of merger, through which the REIT is merged with or into any Person so long as the survivor of any such Transfer is REIT and there is no Change of Control;
(c)the listing, offer, sale, transfer, pledge or issuance of shares of stock in (x) REIT (including by the owners thereof), (y) a Division Transaction by an owner(s) of the REIT or (z) in any other Restricted Party that, in each instance, is a publicly traded entity on a national exchange;
(d)the Transfer, in one or a series of transactions, of the stock, partnership interests or membership interests (as the case may be) by REIT or any direct or indirect legal or beneficial owner of REIT for estate planning purposes to the transferor’s spouse, child, parent, grandparent, grandchild, niece, nephew, aunt, uncle or other immediate family members of such transferor, or to a trust for the benefit of such spouse, child, parent, grandparent, grandchild, niece, nephew, aunt, uncle or other immediate family members; and
(e)an Internalization that does not result in a Change of Control.
In no event shall a Division Transaction be considered a Permitted Transfer.
“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, trustee, estate, limited liability company, unincorporated organization, real estate investment trust, government or any agency or political subdivision thereof, or any other form of entity.
“Platform” means any electronic system, including Intralinks®, ClearPar® and any other internet or extranet-based site, whether such electronic system is owned, operated or hosted by Administrative Agent or any Lender, any of their respective Related Parties or any other Person, providing for access to data protected by passcodes or other security system.
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“Policy” and “Policies” have the meaning assigned in Section 3.1(d).
“Post Closing Obligations” means the post closing obligations described on Schedule 11.36.
“Post-Foreclosure Plan” has the meaning assigned in Section 10.4(e).
“Potential Default” means the occurrence of any event or condition which, with the giving of notice, the passage of time, or both, would constitute an Event of Default.
“Prepayment Fee” means with respect to any prepayment (other than an acceleration occurring upon a casualty or condemnation as set forth in Section 2.4(e) of this Loan Agreement or a prepayment pursuant to Section 7.13(c) or pursuant to Section 2.8 of this Agreement, (a) during the first Loan Year, an amount equal to two percent (2.0%) of the principal amount of the Loan being prepaid or accelerated, (b) during the second Loan Year, an amount equal to one percent (1.0%) of the principal amount of the Loan being prepaid or accelerated, and (c) during the third Loan Year, zero ($0). Notwithstanding the foregoing, if Borrowers refinance the Loan with CONA during the first two Loan Years, Administrative Agent shall waive the Prepayment Fee in its entirety.
“Prepayment Premium” means, if and to the extent each may be applicable, the Prepayment Fee and the Breakage Amount.
“Prohibited Person” means any Person:
(i)listed in the Annex to, or otherwise subject to the provisions of, the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”);
(ii)that is owned or controlled by, or acting for or on behalf of, any person or entity that is listed to the Annex to, or is otherwise subject to the provisions of, the Executive Order;
(iii)with whom any Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law, including the Executive Order;
(iv)who is known to Borrowers to commit, threaten or conspire to commit or support “terrorism”, as defined in the Executive Order;
(v)that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov.ofac/t11sdn.pdf or at any replacement website or other replacement official publication of such list;
(vi)that is named on the consolidated list of asset freeze targets by the United Nations, the European Union and the United Kingdom (maintained by the Asset Freezing Unit of the United Kingdom Treasury: http://www.hm-treasury.gov.uklfinancialsanctions);
(vii)that is named on the most current lists pertaining to EU-Regulations Nos. 2580/2001 or 881/2002;
(viii)that violates any of the criminal laws of the United States of America or of any of the several states, or commits any act that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or
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the laundering of monetary instruments, including any offense under (a) the criminal laws against terrorism; (b) the criminal laws against money laundering, (c) the Bank Secrecy Act, as amended, (d) the Money Laundering Control Act of 1986, as amended, (e) the Trading with the Enemy Act, as amended, (f) the International Emergency Economic Powers Act, or the (g) Patriot Act; or (ix) who is known to Borrowers to be an Affiliate of or affiliated with a Person listed above.
“Prohibited Transfer” has the meaning assigned in Section 7.1(a).
“Projects” means individually and collectively, as applicable, the Land and medical office buildings described on Exhibit A-1 through A-4 attached hereto, together with such Joinder Project(s) described on loan amendments and joinder documents delivered pursuant to this Agreement, and all related facilities, amenities, fixtures, and personal property owned by Borrowers and any other improvements now or hereafter located on the Land.
“Project Yield” means the ratio, as of any particular date, expressed as a percentage, of (a) Adjusted Net Operating Income calculated as of the specified Determination Date (or other specified testing date), to (b) the outstanding principal balance of the Loan as of such date.
“Project Yield Fund” has the meaning assigned in Section 7.13.
“Projected Rental Revenue” means revenues and rental payments scheduled to be received by Borrowers under Qualifying Leases, but excluding (a) nonrecurring income and non-property related income (as determined by Administrative Agent in its sole discretion) and income from Tenants that is classified as “bad debt” under GAAP, and (b) late fees and interest income.
“Property Condition Report” has the meaning assigned in Schedule 2.1.
“Property Manager” means (i) Plaza Del Rio Management Corp., an Arizona corporation, with respect to the Medical Center II – Peoria, AZ Project; and (ii) Healthcare Trust Properties, LLC, a Delaware limited liability company, the manager of all remaining Projects, in each case previously approved by Administrative Agent, and any successor property manager reasonably approved by Administrative Agent.
“Pro Rata Outstandings” means, with respect to any Lender at any time, the outstanding principal amount of the Loan owing to such Lender at such time.
“Pro Rata Share” means, with respect to any Lender at any time (a) the percentage obtained by dividing (i) the Loan Commitment of such Lender then in effect by (ii) the sum of the Loan Commitments and (b) after the making of the Loan, the percentage obtained by dividing (i) the Pro Rata Outstandings of such Lender by (ii) the total outstanding principal amount of the Loan; provided, however, that, if there are no Loan Commitments and no Pro Rata Outstandings, such Lender’s Pro Rata Share shall be determined based on the Pro Rata Share most recently in effect, after giving effect to any subsequent assignment and any subsequent non-pro rata payments of any Lender pursuant to the terms of this Agreement.
“Prorated Interest” has the meaning assigned in Section 2.4.
“Protective Advances” has the meaning specified in Section 10.4(b).
“Qualified ECP Guarantor” means, in respect of any Swap Obligation under a Secured Hedge Agreement, each guarantor that has total assets exceeding $10,000,000 at the time the relevant guarantee or grant of the relevant security interest becomes effective with respect to
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such Swap Obligation under a Secured Hedge Agreement or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Qualifying Leases” means (i) fully executed and delivered Leases with unrelated third party Tenants and with an initial term of three (3) years or more, entered into in accordance with the terms of this Agreement, for which either (a) the Tenant under such Lease is in occupancy and has commenced rental payments and such Lease has a remaining term of six (6) months or more from the applicable testing date, or (b) the Tenant under such Lease is reasonably projected by Administrative Agent to (x) take occupancy of its premises and (y) commence rental payments, in each case, within six (6) months from the applicable testing date, and (ii) other fully executed and delivered Leases which Administrative Agent in its sole discretion determines are Qualifying Leases; provided, however, any Lease under which the applicable Tenant is not paying rent as required by the terms of the Lease or which is in material default (whether by landlord or tenant) as of the testing date or as of the reporting date will not be considered a Qualifying Lease.
“Radius” has the meaning assigned in Section 3.1(d).
“Real Estate Purchase Agreement” means individually and collectively, as applicable, those certain Purchase and Sale Agreements entered into between a Joinder Borrower (including as assignee of one or more of their Affiliates) and the seller of the subject Joinder Project, as amended or modified, between such seller, as applicable, and the applicable Joinder Borrower.
“Recipient” has the meaning assigned in Section 11.37.
“Recourse Guaranty Agreement” means collectively, (a) that certain Guaranty of Recourse Obligations executed and delivered by a Guarantor on the Closing Date; and (b) each additional guaranty of recourse obligations executed and delivered to Administrative Agent by each Person who from time to time becomes a Guarantor hereunder, as the same may be, in each case, amended, restated, supplemented, or otherwise modified from time to time.
“Register” has the meaning specified in Section 2.12(b).
“REIT” means Healthcare Trust, Inc., a Maryland corporation.
“Related Persons” means, with respect to any Person, each of such Person’s Affiliates, officers, directors, employees, agents, trustees, representatives, attorneys, accountants, and each insurance, environmental, legal, financial and other advisor and other consultants and agents of or to such Person or any of its Affiliates, together with, if such Person is Administrative Agent, each other Person or individual designated, nominated or otherwise mandated by or helping Administrative Agent pursuant to and in accordance with Section 10.4 or any comparable provision of any Loan Document or the Environmental Indemnity Agreement.
”Relevant Governmental Body” means the Board of Governors of Federal Reserve System and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of Federal Reserve System and/or the Federal Reserve Bank of New York or any successor thereto.
“Replacement Escrow Fund” has the meaning assigned in Section 2.5.
“Reportable Compliance Event” has the meaning assigned in Section 5.18(f).
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“Required Lenders” means, as to any consent, approval, authorization, direction or determination required to be given or made by the Lenders: (i) Lenders holding one hundred percent (100%) of the aggregate outstanding principal amount if there are two Lenders that are not Affiliates; or (ii) Lenders holding fifty one percent (51%) of the aggregate outstanding principal amount of the Loan if there are more than two Lenders that are not Affiliates.
“Required Repair Fund” has the meaning assigned in Section 2.5.
“Required Repairs” has the meaning assigned in Section 2.5.
“Requirements of Law” means, with respect to any Person or the Projects collectively, the common law and all federal, state, local, foreign, multinational or international laws, statutes, codes, treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments, writs, injunctions, decrees (including administrative or judicial precedents or authorities) and the interpretation or administration thereof by, and other determinations, directives, requirements or requests of, any Governmental Authority, in each case that are applicable to or binding upon such Person or the Projects or any of their property or to which such Person or any of its property is subject, as the same may be amended from time to time.
“Resize Amount” means an amount, as calculated by Administrative Agent upon the occurrence of any Resize Event, that, if applied to the outstanding principal balance of the Loan as of the most recent Determination Date, would have resulted in a Hypothetical Project Yield of nine and 50/100 percent (9.50%) as of such Determination Date.
“Resize Event” means that, as of any Determination Date, the Project Yield for such Determination Date is, and the Project Yield for the immediately preceding Determination Date was less than nine and 50/100 percent (9.50%).
“Restoration Threshold” means, as of any date, the lesser of (a) two and one-half percent (2.5%) of the replacement value of the Improvements at the Projects as of such date, and (b) $500,000.00.
“Restricted Party” means (i) Borrowers, (ii) any other Borrower Party, (iii) any Affiliated Manager, and (iv) any Person owning a direct or indirect legal or beneficial interest in any Person described in items (i) through (iii) above.
“Revenue In Place Adjustment” means an amount equal to the monthly rental payments abated under any Adjustment Leases during the applicable testing period, but without duplication of any Projected Rental Revenue for such period.
“ROFOs” means the rights of first offer in favor of a Tenant or any other party to make an offer to acquire any Project, all of such rights which are identified on Schedule 4.1 attached hereto.
“ROFRs” means the rights of first refusal in favor of a Tenant or any other party to acquire any Project, all of such rights which are identified on Schedule 4.1 attached hereto.
“Sanctioned Country” has the meaning assigned in Section 5.18(f).
“Sanctioned Person” has the meaning assigned in Section 5.18(f).
“Secured Hedge Agreement” means any (i) Hedge Agreement between Borrowers (or Affiliate of Borrowers) and a Secured Hedge Provider or (ii) any Hedge Agreement
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Administrative Agent has acknowledged in writing constitutes a “Secured Hedge Agreement” hereunder.
“Secured Hedge Provider” means (i) a Lender or an Affiliate of a Lender (or a Person who was a Lender or an Affiliate of a Lender at the time of execution and delivery of a Hedge Agreement) who has entered into a Hedge Agreement with Borrowers, or (ii) a Person with whom Borrowers have entered into a Hedge Agreement provided or arranged by CONA or an Affiliate of CONA, or for which CONA or an Affiliate of CONA has provided credit enhancement through either an assignment right or a letter of credit in favor of such Person, and any assignee thereof.
“Secured Party(ies)” means, the holders of the Obligations from time to time and shall include (i) each Lender, (ii) the Administrative Agent, and the Lenders in respect of all other present and future obligations and liabilities of the Borrower Parties of every type and description arising under or in connection with this Agreement or any other Loan Document and the Environmental Indemnity Agreement, (iii) each Lender and Affiliate of such Lender in respect of Hedge Agreements entered into with such Person by any Borrower Party in connection with the Loan, (iv) each indemnified party under Section 11.5 in respect of the obligations and liabilities of the Borrower Parties to such Person hereunder and under the other Loan Documents and the Environmental Indemnity Agreement, and (v) their respective successors and (in the case of a Lender, permitted) transferees and assigns.
“Security” means all of the real and personal property securing the Obligations described in the Loan Documents and the Secured Hedge Agreements.
“Security Agreement” means the Security Agreement executed by Borrowers in favor of Administrative Agent (for itself and on behalf of the Lenders) covering certain personal property described therein, as amended, restated, supplemented, or otherwise modified from time to time.
“Security Deposits” means any and all security deposits and entrance fees from any tenant or occupant of the Projects collected or held by Borrowers or any Operator.
“Senior Loans” has the meaning assigned in Section 10.18(h).
“Single Purpose Entity” means a Person (other than an individual, a government or any agency or political subdivision thereof), which exists solely for the purpose of owning and leasing the Projects observes corporate, company or partnership formalities, as applicable, independent of any other entity, and which otherwise complies with the covenants set forth in Section 5.17 hereof.
“Site Assessment” means an environmental engineering report for the Projects prepared at Borrowers’ expense by an engineer engaged by Borrowers, or by Administrative Agent on behalf of Borrowers, and approved by Administrative Agent in its reasonable discretion, and in a manner reasonably satisfactory to Administrative Agent, based upon an investigation relating to and making appropriate inquiries concerning the existence of Hazardous Materials on or about the Projects and the past or present discharge, disposal, release or escape of any such substances, all consistent with ASTM Standard E1527-13 (or any successor thereto published by ASTM) and good customary and commercial practice.
“SOFR” means, for any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day as 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
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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.
“Special Advance Lender” has the meaning assigned in Section 10.18(c).
“Special Compliance Certificate” means a compliance certificate in the form of Schedule 7.13.
“Special Flood Hazard Area” means an area that FEMA has designated as an area subject to special flood hazards, the current standard for which is at least a one percent (1%) chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year as per the applicable flood maps.
“Special Letter of Credit” means a letter of credit in form and substance reasonably satisfactory to Administrative Agent, issued to Administrative Agent, as beneficiary, for the account of Borrowers, as customer, issued by a depository institution acceptable to Administrative Agent in its reasonable discretion, that includes an “evergreen” provision providing for automatic renewal to the extent available, and that permits one or more drawings at any time by Administrative Agent.
“Specially Designated National and Blocked Persons” means those Persons that have been designated by executive order or by the sanction regulations of OFAC as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC.
“SPV” means any special purpose funding vehicle identified as such in a writing by any Lender to Administrative Agent.
“State Regulator” means the applicable state department of health or other applicable state or local regulatory agency having jurisdiction over the operation of the Projects
“Substitute Lender” has the meaning assigned in Section 2.13(a).
“Survey” has the meaning assigned in Schedule 2.1.
“Swap Obligation” means, with respect to any Loan Party Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
“Tax Impound” has the meaning assigned to such term in Section 3.5.
“Taxes” has the meaning assigned in Section 7.2.
“Tenant” means any tenant or occupant of the Projects under a Lease.
“Tenant Material Adverse Effect” means, in Administrative Agent’s reasonable discretion, a material adverse effect on the condition (financial or otherwise), operations, business, assets, or liabilities of the Tenant taken as a whole (including without limitation, any material obligations under the Major Lease).
“Term Sheet” means that certain letter agreement dated November 13, 2023, from Administrative Agent and accepted by and on behalf of Borrowers on November 14, 2023.
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“Term SOFR” means, for any Business Day, the Term SOFR Reference Rate for a one month tenor on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) Business Days prior to the Closing Date and, thereafter, two (2) Business Days prior to the first Business Day of each month, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding Business Day is not more than three (3) Business Days prior to such Periodic Term SOFR Determination Day; provided, however, that if Term SOFR determined as provided above shall ever be less than the Floor, then Term SOFR shall be deemed to be the Floor.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (or a successor administrator of the Term SOFR Reference Rate selected by Administrative Agent in its reasonable discretion).
“Term SOFR Reference Rate” means the rate per annum determined by Administrative Agent as the forward-looking term rate based on SOFR.
“TI/LC Advance” has the meaning assigned in Section 2.1(b).
“TI/LC Holdback” has the meaning assigned in Section 2.1(b).
“Title Policy” has the meaning assigned in Schedule 2.1.
“Transfer” means (a) a Division Transaction, or (b) any direct or indirect sale, transfer, conveyance, mortgage, grant of lien or other interest, bargain, installment sale, master lease, encumbrance, pledge, assignment, grant of any options with respect to, or any other transfer or disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) of all or any portion of the direct or indirect legal or beneficial ownership of, or any interest in, (i) any Project or any part thereof or (ii) any Restricted Party including any agreement to transfer or cede to another Person any voting management or approval rights, or any other rights, appurtenant to such legal or beneficial ownership or other interest.
“UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York; provided, however, that, in the event that, by reason of mandatory provisions of any Requirements of Law, any of the attachment, perfection or priority of Administrative Agent’s or any other Lender’s security interest in any Collateral is governed by the Uniform Commercial Code of a jurisdiction other than the State of New York, “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of the definitions related to or otherwise used in such provisions.
“Unadjusted Benchmark Replacement Rate” means the Benchmark Replacement Rate excluding the Benchmark Replacement Adjustment.
“Unpaid Amount” has the meaning assigned in Section 10.18(d).
“U.S. Government Securities Business Day” means any day other than a Saturday, Sunday, or a day on which the Securities Industry and Financial Markets Association
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recommends that the fixed income departments of its members be closed for the entire day for the purposes of trading in United States government securities.
“U.S. Lender Party” means each of Administrative Agent, the Lenders, and each participant of a Lender, in each case that is a U.S. Person.
“U.S. Person” means any United States citizen, any entity organized under the laws of the United States or its constituent states or territories, or any entity, regardless of where organized, having its principal place of business within the United States or any of its territories.
“Withholding Taxes” has the meaning assigned in Section 2.16.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
“Zoning Report” has the meaning assigned in Schedule 2.1.
Section 1.2Definitions. All terms defined in Section 1.1 above or otherwise in this Agreement shall, unless otherwise defined therein, have the same meanings when used in any other Loan Document or Environmental Indemnity Agreement, or any certificate or other document made or delivered pursuant hereto. The words “hereof”, “herein”, and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole. The words “include” and “include(s)” when used in this Agreement and the other Loan Documents or Environmental Indemnity Agreement means “include(s), without limitation,” and the word “including” means “including, but not limited to.” The word “or” when used in this Agreement and the other Loan Documents or Environmental Indemnity Agreement has the inclusive meaning represented by the phrase “and/or”, unless the usage would clearly indicate otherwise. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document or the Environmental Indemnity Agreement), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) all references in a Loan Document or the Environmental Indemnity Agreement to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document or the Environmental Indemnity Agreement in which such references appear, and (iv) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.
Section 1.3Phrases. When used in this Agreement and the other Loan Documents or Environmental Indemnity Agreement, the phrase “including” shall mean “including, but not limited to,” the phrases “satisfactory to Administrative Agent,” “satisfactory to Lenders,” and “satisfactory to Required Lenders” shall mean “in form and substance satisfactory to the applicable Person in all respects”, the phrases “with Administrative Agent’s consent,” “with the Lenders’ consent,” and “with the Required Lenders’ consent,” or “with Administrative Agent’s approval,” “with the Lenders’ approval,” and “with the Required Lenders’ approval” shall mean such consent or approval at such Person’s sole discretion, and the phrases “acceptable to Administrative Agent,” “acceptable to Lenders,” and “acceptable to the Required Lenders” shall mean “acceptable to such Person at such Person’s sole discretion” unless otherwise specified in this Agreement.
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Section 1.4UCC Terms. Unless otherwise specified herein, the following terms have the meanings ascribed to them in the UCC, provided that if such term shall be defined differently in multiple divisions or articles of the UCC, the definitions for such terms specified in Article or Division 9 of the UCC shall control: “Accounts,” “Account Debtor,” “Chattel Paper,” “Contracts,” “Deposit Accounts,” “Documents,” “Equipment,” “Fixtures,” “General Intangibles,” “Goods,” “Health-Care Insurance Receivable,” “Instruments,” “Inventory,” “Investment Property,” “Letter-of-Credit Rights,” “Payment Intangible,” “Securities Account,” “Software” and “Supporting Obligations.”
ARTICLE 2
LOAN TERMS
Section 1.1The Loan. Upon satisfaction of all the terms and conditions of this Agreement (including the items listed on Schedule 2.1 attached hereto), each Lender severally, but not jointly, agrees to make its Pro Rata Share of the Initial Funding Amount in Dollars to Borrowers, which shall be funded in one advance on the Closing Date and repaid in accordance with the terms of this Agreement and the Notes. Borrowers hereby agree to accept the Loan on the Closing Date, subject to and upon the terms and conditions set forth herein. The aggregate amount of all advances of the Loan on a cumulative basis shall not exceed the Maximum Commitment Amount. The Loan is not a revolving credit loan, and Borrowers are not entitled to any readvances of any portion of the Loan which they may (or are otherwise required to) prepay pursuant to the provisions of this Agreement.
(a)Initial Funding Amount. On the Closing Date, Lenders shall disburse to Borrowers from the proceeds of the Loan the amount of Fourteen Million Seven Hundred Forty Eight Thousand Dollars ($14,748,000) (the “Initial Funding Amount”).
(b)TI/LC Holdback. A portion of the Loan in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the “TI/LC Holdback”) will not be advanced on the Closing Date and will be used to reimburse Borrowers for funds expended for the construction of tenant improvements and payment of leasing commissions related to Leases entered into or rolling after the Closing Date provided that in no event may funds from the TI/LC Holdback be used to pay for a Tenant’s furniture, fixture or equipment or other property which will be owned by a Tenant. The amount of each advance from the TI/LC Holdback shall increase the outstanding principal of the Note, shall accrue interest from the date of advancement and shall reduce the proceeds available under the Note and under the TI/LC Holdback. Advances from the TI/LC Holdback will be made to Borrowers in one or more advances (each a “TI/LC Advance”) subject to satisfaction of the following conditions (and upon Borrowers’ satisfaction of the general conditions for advances described in Schedule 2.1):
(i)No Potential Default or Event of Default shall then exist;
(ii)No Material Adverse Change shall have occurred and be continuing with respect to Borrowers, Guarantor or any Project;
(iii)Administrative Agent shall have been provided with a copy of the signed Lease which is the subject of the TI/LC Advance request, which Lease shall have been approved or deemed approved by Administrative Agent pursuant to the terms of this Agreement;
(iv)Administrative Agent shall have determined that, after giving effect to the proposed TI/LC Advance and the Lease that is the subject thereof: the Loan has a Project Yield of not less than 10.5% and a Debt Service Coverage Ratio of not less than 1.25:1.00;
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(v)Administrative Agent shall have determined that, after giving effect to the proposed TI/LC Advance, the Loan to Value Ratio is not greater than sixty percent (60%);
(vi)Administrative Agent shall have been provided with (A) evidence satisfactory to Administrative Agent of the amount of costs incurred in support of the requested TI/LC Advance, (B) if applicable, invoices for labor or material provided in connection with the construction of the tenant improvements for which the TI/LC Advance is sought, together with conditional lien waivers and releases by all contractors with respect to the requested TI/LC Advance, and (C) if applicable, unconditional lien waivers and releases with respect to previous TI/LC Advances;
(vii)At Borrowers’ expense, Administrative Agent shall have been provided with a down date endorsement to the Title Policy (or other evidence satisfactory to Administrative Agent) confirming that there are no additional exceptions to title other than those permitted by the terms of the Loan Documents or consented to by Administrative Agent and to ensure that the Title Policy provides Administrative Agent with title insurance for the amount advanced to date. Notwithstanding the foregoing, Administrative Agent shall endeavor to obtain in lieu of an endorsement, updated title commitments or title reports (or such search instrument as may be available in the applicable jurisdiction), so long as the results of such search do not cause Administrative Agent to determine, in its reasonable discretion, that a date down endorsement is required in such circumstance;
(viii)TI/LC Advances for leasing commissions will be made as follows: one-half (½) upon Lease execution and one-half (½) upon the Tenant’s acceptance of the demised premises. Administrative Agent will advance proceeds from the TI/LC Holdback equal to one hundred percent (100%) of the actual costs of the tenant improvements and leasing commissions;
(ix)TI/LC Advances shall be made not more frequently than once per calendar month and the amount of each request (other than the final advance) in amounts of not less than Twenty Thousand Dollars ($20,000.00);
(x)At the time of the TI/LC Advance, Borrowers will reimburse Administrative Agent for all out of pocket costs and expenses incurred by Administrative Agent in connection with the advance from the TI/LC Holdback, including without limitation, attorneys’ fees and expenses, title charges and recording fees;
(xi)CONA’s Commitment hereunder (after giving effect to such TI/LC Advance) shall not exceed the CONA Maximum Commitment Amount;
(xii)No TI/LC Advance may be requested within six (6) months prior to the Maturity Date; and
(xiii)The request for a TI/LC Advance must be accompanied by a completed Request for TI/LC Holdback Advance in the form attached hereto as Schedule 2.1(b).
For purposes of calculating the Debt Service Coverage Ratio and Project Yield pursuant to this Section 2.1(b), (A) the calculation period for Adjusted Revenue shall commence on the first day
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of the calendar month in which the advance is to be made; (B) the calculation period for Adjusted Expenses shall end on the last day of the month prior to the month in which the advance is to be made; (C) the calculation period for Debt Service shall be the twelve month period ending on the last day of the month prior to the month in which the advance is made, and shall be calculated, on a pro forma basis, as if the amount of the requested advance were outstanding as of the first day of such period; and (D) the outstanding principal balance of the Loan shall be calculated as of the last day of the month prior to the month in which the advance is made, and shall be calculated, on a pro forma basis, as if the amount of the requested advance were outstanding as of such date.
(c)Joinder Holdback Amount. A portion of the Loan in the amount of Fifty Eight Million Seven Hundred Fifty Two Thousand Dollars ($58,752,000) (the “Joinder Advance Holdback”) will not be advanced on the Closing Date and will be reserved to be advanced to Borrower upon the addition, from time to time, to the Loan and the Loan Documents of one or more Joinder Projects and Joinder Borrowers or ownership of such Joinder Project(s) if such Joinder Borrower(s) already owns such Joinder Project(s). Administrative Agent shall cause Lenders, in their sole discretion, to make advances from the proceeds of the Joinder Advance Holdback (each a “Joinder Advance”) in a minimum amount of Five Million Dollars ($5,000,000). The amount of each Joinder Advance shall increase the principal amount outstanding under the Note, shall accrue interest from the date of advancement and shall reduce the proceeds available under the Note and the Joinder Advance Holdback. For the avoidance of doubt, Lenders shall not be obligated to make any Joinder Advance and shall not have any Loan Commitments with respect to the Joinder Advance Holdback. Upon the approval of Administrative Agent and Lenders in their sole discretion, Lenders acknowledge and agree that they shall fund the applicable Joinder Advance subject to satisfaction of all terms and conditions set forth in this Section 2.1(c). Upon such approval as aforesaid, Joinder Advances will be made to Borrowers in one or more advances subject to satisfaction of the following conditions (and upon Borrowers’ satisfaction of all conditions for advances described in Schedule 2.1):
(i)No Potential Default or Event of Default shall then exist;
(ii)No Material Adverse Change shall have occurred with respect to Borrowers, Guarantor or any Project;
(iii)Borrowers shall have provided to Administrative Agent executed copies of Leases for all leased space at the Joinder Project(s), which Leases are to be approved by Administrative Agent in accordance with the terms of this Agreement;
(iv)The Joinder Project(s) shall be fully cross-collateralized and cross defaulted with the Loan;
(v)If applicable, Administrative Agent shall have received a copy of the Real Estate Purchase Agreement for the Joinder Project(s), which, together with copies of all amendments and supplements to, and assignments of, shall be satisfactory to Administrative Agent in its reasonable discretion;
(vi)Administrative Agent shall have determined that, after giving effect to the proposed Joinder Advance, the Loan has a Debt Service Coverage Ratio of not less than 1.25:1.00;
(vii)At Borrowers’ expense, Administrative Agent shall have been provided with a down date endorsement to the Title Policy (or other evidence satisfactory to Administrative Agent) confirming that there are no additional
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exceptions to title other than those permitted by the terms of the Loan Documents or consented to by Administrative Agent and to ensure that the Title Policy provides Administrative Agent with title insurance for the amount advanced;
(viii)Administrative Agent shall have determined that, after giving effect to the proposed Joinder Advance, the Loan to Value Ratio is not greater than sixty percent (60%); which calculation, at Administrative Agent’s option, shall be based on a new appraisal ordered by Administrative Agent at Borrowers’ expense;
(ix)No Joinder Advance may be requested within six (6) months prior to the Maturity Date;
(x)At the time of the Joinder Advance, Borrowers will reimburse Administrative Agent for out of pocket costs and expenses incurred by Administrative Agent in connection with the Joinder Advance, including reasonable attorneys’ fees and expenses and title insurance premium charges;
(xi)CONA’s Commitment hereunder (after giving effect to such Joinder Advance) shall not exceed the CONA Maximum Commitment Amount; and
(xii)The request for a Joinder Advance must be accompanied by a completed Joinder Advance Request, no less than thirty (30) days prior to the date of the disbursement of the Joinder Advance, in the form attached as Schedule 2.1(c).
For purposes of calculating the Debt Service Coverage Ratio and Project Yield pursuant to this Section 2.1(c), (A) the calculation period for Adjusted Revenue shall commence on the first day of the calendar month in which the advance is to be made; (B) the calculation period for Adjusted Expenses shall end on the last day of the month prior to the month in which the advance is to be made; (C) the calculation period for Debt Service shall be the twelve month period ending on the last day of the month prior to the month in which the advance is made, and shall be calculated, on a pro forma basis, as if the amount of the requested advance were outstanding as of the first day of such period; and (D) the outstanding principal balance of the Loan shall be calculated as of the last day of the month prior to the month in which the advance is made, and shall be calculated, on a pro forma basis, as if the amount of the requested advance were outstanding as of such date.
Each Joinder Advance shall rank pari passu with each other and all other advances of the Loan. Upon satisfaction of the conditions set forth in this Section 2.1(c) (and provided that Administrative Agent and Lenders shall have granted approval in their sole discretion), each Lender shall be required to provide its Joinder Advance. For each Joinder Advance Request, Administrative Agent shall have thirty (30) days within which to complete its legal and business diligence.
Section 1.2Interest Rate; Late Charge. The outstanding principal balance of the Loan shall bear interest at the Contract Rate. If Borrowers fail to pay any installment of interest or, if applicable, principal within five (5) days after the date on which the same is due, excluding the final payment due on the Maturity Date, Borrowers shall pay to Administrative Agent, for the account of the Lenders (other than any Defaulting Lender but subject to Section 2.18(c), a late charge on such past due amount, as liquidated damages and not as a penalty, equal to five percent (5%) of such amount, but not in excess of the maximum amount of interest allowed by applicable law. Administrative Agent shall pay to each Lender (other than any Defaulting Lender but
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subject to Section 2.18(c) its portion of the late charge based on each Lender’s Pro Rata Share of the Loan. The foregoing late charge is intended to compensate each Lender for the expenses incident to handling any such delinquent payment and for the losses incurred by each Lender as a result of such delinquent payment. Borrowers agree that, considering all of the circumstances existing on the date this Agreement is executed, the late charge represents a reasonable estimate of the costs and losses each Lender will incur by reason of late payment. Borrowers and each Lender further agree that proof of actual losses would be costly, inconvenient, impracticable and extremely difficult to fix. Acceptance of the late charge shall not constitute a waiver of the Event of Default arising from the overdue installment, and shall not prevent any Lender from exercising any other rights or remedies available to such Lender with respect to such Event of Default. While any Event of Default exists, the Loan shall bear interest at the Default Rate.
Section 1.3Terms of Payment. The Loan shall be payable as follows:
(a)Interest Payments - Initial Funding Amount. Commencing on February 1, 2024, and continuing on each Payment Date thereafter through and including the Payment Date immediately prior to the Maturity Date. Borrowers shall pay interest only in arrears computed at the Contract Rate on the outstanding principal balance of the Loan from time to time and which, for clarification, shall at no time include any portion of the TI/LC Holdback or the Joinder Advance Holdback which Lenders have not yet advanced.
(b)Interest Payments – Joinder Advance. On the first Payment Date after an advance of the Joinder Holdback, Borrowers shall pay to Administrative Agent for the account of the Lenders (other than a Defaulting Lender) but subject to Section 2.18(c), interest only in arrears computed at the Contract Rate on the outstanding principal balance of the Joinder Advance from the date of such Joinder Advance. On each Payment Date thereafter during the term of the Loan, Borrowers shall pay to Administrative Agent for the account of the Lenders (other than a Defaulting Lender) but subject to Section 2.18(c), interest only in arrears computed at the Contract Rate on the outstanding principal balance of the Joinder Advance.
(c)Interest Payments – TI/LC Advance. On the first Payment Date after a TI/LC Advance, Borrowers shall pay to Administrative Agent for the account of the Lenders (other than a Defaulting Lender) but subject to Section 2.18(c), interest only in arrears computed at the Contract Rate on the outstanding principal balance of the TI/LC Advance from the date of such TI/LC Advance. Thereafter, on each Payment Date, during the term of the Loan, Borrowers shall pay to Administrative Agent for the account of the Lenders (other than a Defaulting Lender) but subject to Section 2.18(c), interest only in arrears computed at the Contract Rate on the outstanding principal balance of the TI/LC Advance.
(d)Maturity. On the Maturity Date, Borrowers shall pay to Administrative Agent for the account of the Lenders, all outstanding principal, accrued and unpaid interest, default interest, late charges, the Prepayment Premium (if applicable) and any and all other amounts due under the Loan Documents.
Section 1.4Prepayment.
(a)Right to Prepay. The Loan may be prepaid in whole, but not in part, provided Borrowers provide not less than five (5) Business Days’ notice to Administrative Agent of such prepayment (which notice may be withdrawn by Borrowers prior to such prepayment) and pays with such prepayment all accrued interest and all other outstanding amounts then due and unpaid under the Loan Documents, including, without limitation, in each case to the extent applicable, Prorated Interest and the Prepayment Premium.
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(b)Prepayment Not Made on a Payment Date. If for any reason the Loan or any portion thereof is prepaid on a day other than a scheduled monthly Payment Date, in addition to the amounts required to be paid under Section 2.4(a) above, Borrowers shall pay interest prorated through the date of prepayment (the “Prorated Interest”).
(c)Involuntary Prepayment. If for any reason other than Casualty or Condemnation or a prepayment pursuant to Section 7.13(c) or pursuant to Section 2.8 of this Agreement, Borrowers shall pay to Administrative Agent, for the account of the Lenders, in addition to all other amounts outstanding under the Loan Documents, to the extent applicable, the Prepayment Premium.
(d)Prepayment on a Business Day. Any prepayment made under this Section  2.4 may be made only on a U.S. Governmental Securities Business Day (and, if tendered on a day other than a U.S. Governmental Securities Business Day, shall be applied on the immediately succeeding U.S. Governmental Securities Business Day).
(e)Prepayment Due to Casualty or Condemnation. In the event of a prepayment resulting from the application of insurance or condemnation proceeds pursuant to Article 3 hereof, no Prepayment Premium shall be imposed.
(f)Character of Prepayment Premium. The Prepayment Premium does not constitute a penalty, but rather represents the reasonable estimate, agreed to between Borrowers and each Lender, of fair compensation for the loss that may be sustained by such Lender due to the payment of the principal Indebtedness prior to the Maturity Date or the increased cost and expense to such Lender resulting from an acceleration of the Loan. Any Prepayment Premium shall be paid without prejudice to the right of any Lender to collect on its behalf any of the amounts owing under the Note, this Agreement or the other Loan Documents or otherwise, to enforce any of its rights or remedies arising out of an Event of Default.
Section 1.5Security; Establishment of Funds.
(a)Security. The Loan shall be secured by, among other things, the Mortgage creating a first lien on Borrower’s fee interest in each of the Projects, the Assignment of Leases and Rents and the other Loan Documents.
(b)Establishment of Funds. Borrowers agree to establish the following reserves with Administrative Agent, to be held by Administrative Agent as further security for the Loan:
(i)on the Closing Date, Borrowers shall deposit with Administrative Agent the amount of One Hundred Eighty Seven Thousand Nine Hundred Fifty Five Dollars ($187,955) (the “Required Repair Fund”) which shall be held by Administrative Agent for the completion of the required repairs set forth on Schedule 2.5(b) annexed hereto (the “Required Repairs”) on or before the dates specified on Schedule 2.5(b). Upon completion of the Required Repairs, Borrowers shall (A) deliver notice of the same to Administrative Agent, which notice will contain a representation of Borrowers that the Required Repairs have been completed, and (B) provide supporting documentation or other evidence reasonably satisfactory to Administrative Agent of the completion of the Required Repairs, all of which shall be performed in a manner reasonably satisfactory to Administrative Agent and in accordance with all applicable Requirements of Law; and
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(ii)Borrowers shall deposit with Administrative Agent on each Payment Date one-twelfth (1/12th) of the product of 25/100 Dollars ($.25) multiplied by the number of rentable square feet in the Projects which shall be held by Administrative Agent for replacements and repairs reasonably required to be made to the Projects during the term of the Loan (the “Replacement Escrow Fund”).
Administrative Agent shall hold the Funds, and any and all other impounds or reserves otherwise provided for in this Agreement, for the benefit of all Lenders.
(c)Pledge and Disbursement of Funds. Borrowers hereby pledge to Administrative Agent and the Lenders, and grant a security interest in, any and all monies now or hereafter deposited in the Funds as additional security for the payment of the Loan. Administrative Agent may reasonably reassess its estimate of the amount necessary for the Funds from time to time and may reasonably adjust the monthly amounts required to be deposited into the Funds upon thirty (30) days’ notice to Borrowers. Administrative Agent shall make disbursements from the Funds as requested by Borrowers, and approved by Administrative Agent in its reasonable discretion, on no more than a monthly basis in increments of no less than Five Thousand Dollars ($5,000.00) upon delivery by Borrowers of Administrative Agent’s standard form of draw request accompanied by copies of paid invoices for the amounts requested and, if reasonably required by Administrative Agent, conditional lien waivers and releases from all parties furnishing materials or services in connection with the requested payment (which waivers and releases may be subject to receipt of the dollars being requested). If Borrower makes a request for disbursement of Funds in excess of Twenty-Five Thousand Dollars ($25,000), Administrative Agent may require an inspection of the Projects at Borrowers’ expense prior to making a disbursement in order to verify completion of replacements and repairs for which reimbursement is sought. The Lenders and Borrowers acknowledge and agree that the Funds shall be held without interest in Administrative Agent’s name and may be commingled with the general funds of Administrative Agent. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent may (and at the direction of the Required Lenders shall) apply any sums then present in the Funds to the payment of the Loan in any order in the reasonable discretion of Administrative Agent. Until expended or applied as above provided, the Funds shall constitute additional security for the Loan. Administrative Agent shall have no obligation to release any of the Funds while any Event of Default or Potential Default exists or any Material Adverse Change has occurred in Borrowers or any other Borrower Party or the Projects. All costs and expenses, if any, incurred by Administrative Agent in the disbursement of any of the Funds shall be paid by Borrowers promptly upon demand or, at Administrative Agent’s sole discretion, deducted from the Funds. Any amounts remaining in the Funds at the time of payment and performance in full of the Obligations or, if earlier, completion of all Required Repairs solely with respect to the Required Repair Fund so long as no Potential Default or Event of Default exists, shall be promptly disbursed to Borrowers. In no event may funds from the Replacement Escrow Fund be used to pay for a Tenant’s furniture, fixture or equipment or other property which will be owned by a Tenant.
Section 1.6Application of Payments.
(a)Waterfall. Prior to the occurrence of an Event of Default, all payments received by Administrative Agent under the Loan Documents shall be applied, (i) first, to pay Obligations in respect of any cost or expense reimbursements, fees or indemnities then due to Administrative Agent pursuant to this Agreement, any Loan Document or the Environmental Indemnity Agreement, (ii) second, to pay Default Rate interest or late charges, (iii) third, to pay interest then due and payable calculated at the Contract Rate, (iv) fourth, to principal payments due under the Loan and to any Obligations under the Secured Hedge Agreements, (v) fifth, to any reserves, escrows or other impounds required to be maintained pursuant to the Loan
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Documents, (vi) sixth, to any Prepayment Premium then due, and (vii) seventh, to the ratable payment of all other Obligations. Upon the occurrence and during the continuance of an Event of Default, all payments shall be applied in such order as Administrative Agent shall determine in its sole discretion. Notwithstanding anything herein to the contrary, if at any time during the existence of an Event of Default or following acceleration of the Obligations or on or after the Maturity Date, Administrative Agent applies any payments received or the proceeds of any Collateral to principal payments on the Loan, Administrative Agent shall apply such payments or proceeds pro rata between such principal payments on the Loan and the Obligations under the Secured Hedge Agreements based on the outstanding principal balance of the Loan and the Obligations under Secured Hedge Agreements.
(b)Application of Payments Generally. All repayments of the Loan shall be applied to reduce the outstanding principal amount of the Loan. If sufficient amounts are not available to repay all outstanding Obligations described in any priority level set forth in this Section 2.6, the available amounts shall be applied, unless otherwise expressly specified herein, to such Obligations ratably based on the proportion of the Secured Parties’ interest in such Obligations. Interest shall include all such interest, whether or not accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or similar proceeding, and whether or not a claim for post-filing or post-petition interest is allowed in any such proceeding. All prepayments of principal, if permitted hereunder or otherwise accepted by Administrative Agent, shall be applied to amounts owing in the inverse order of maturity (i.e., to the final principal installment due with respect to the Loan).
(c)Payments and Computations. Borrowers shall make each payment under any Loan Document not later than 11:00 a.m. (Eastern Standard or Daylight Savings time) on the day when due to Administrative Agent by wire transfer or Automated Clearing House (“ACH”) transfer to be initiated by Administrative Agent pursuant to the ACH Authorization Form (which shall be the exclusive means of payment hereunder) to the following account (or at such other account or by such other means to such other address as Administrative Agent shall have notified Borrowers in writing within a reasonable time prior to such payment) in immediately available Dollars and without setoff or counterclaim:
Bank Name:
Bank Address
Capital One, National Association
1680 Capital One Drive
McLean, VA 22102
ABA Number:065000090
Beneficiary Account Number:
Beneficiary Account
Name:
21100-10002131-38395

Syndication Cash Clearing ACBS
Reference:FIDR ID 825206
Administrative Agent shall cause to be distributed immediately available funds relating to the payment of principal, interest or fees to the Lenders, in accordance with the application of payments set forth in Section 2.6(a), promptly after receipt or deemed receipt, but not later than one Business Day following receipt (or deemed receipt) by Administrative Agent. Administrative Agent shall have no obligation to make any payments to a Lender except out of amounts received or applied by Administrative Agent with respect to the Loan, and only if and to the extent payable in accordance with said Section 2.6(a). Payments received by Administrative Agent after 11:00 a.m. (Eastern Standard or Daylight Savings time) shall be deemed to be received on the next Business Day.
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(d)Computations of Interests and Fees. All computations of interest and of fees shall be made by Administrative Agent on the basis of a fraction, the denominator of which is three hundred sixty (360) and the numerator of which is the actual number of days elapsed from (and including) the date of the initial disbursement under the Loan or the date of the preceding Payment Date, as the case may be, to (but not including) the date of the next Payment Date or the Maturity Date, as the case may be. Each determination of an interest rate or the amount of a fee hereunder shall be made by Administrative Agent and shall be conclusive, binding and final for all purposes, absent manifest error.
(e)Payments Due on Non-Business Days. Whenever any payment hereunder shall be stated to be due on a day that is not a U.S. Government Securities Business Day, the due date for such payment shall be extended to the next succeeding U.S. Government Securities Business Day, as provided in the definition of “Business Day”.
(f)Advancing Payments. Unless Administrative Agent shall have received notice from Borrowers prior to the date on which any payment is due hereunder that Borrowers will not make such payment in full, Administrative Agent may assume that Borrowers have made such payment in full to Administrative Agent on such date and Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that Borrowers shall not have made such payment in full to Administrative Agent, each Lender shall repay to Administrative Agent on demand such amount distributed to such Lender together with interest thereon (at the then current interest rate applicable to the Loan) for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to Administrative Agent.
Section 1.7Sources and Uses. The sources and uses of funds for the contemplated transaction are as described on Schedule 2.7 attached hereto.
Section 1.8Capital Adequacy; Increased Costs; Illegality.
(a)If any Change in Law increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender’s capital as a consequence of its obligations hereunder, then Borrowers shall from time to time upon demand by such Lender, pay to such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by the affected Lender to Borrowers shall, absent manifest error, be final, conclusive and binding for all purposes. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, such Lender shall, to the extent not inconsistent with such Lender’s internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 2.8(a).
(b)If, due to any Change in Law, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining the Loan, then Borrowers shall from time to time, upon demand by such Lender, pay to such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrowers by such Lender, shall be conclusive and binding on Borrowers for all purposes, absent manifest error. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, such Lender shall, to the extent not inconsistent with such Lender’s internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 2.8(b).
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(c)Notwithstanding anything to the contrary contained herein (but subject to the terms of Section 2.10), if after the Closing Date, (i) any Change in Law shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain its Loan Commitment bearing interest computed by reference to the then current Benchmark and Base Rate, or (ii) the then current Benchmark is discontinued or is otherwise no longer available (temporarily or otherwise) or, as a result of the Change of Law in clause (i), the Lender is not permitted to make a loan at the Benchmark but is permitted to make a loan at the Base Rate, then (A) with respect to the occurrence described in subsection (i) above, unless such Lender is able to make or to continue to fund or to maintain its Loan Commitment at another office of such Lender without, in such Lender’s opinion, adversely affecting it or its Loan Commitment or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrowers, (1) the obligation of such Lender to agree to make or to make or to continue to fund or maintain its Loan Commitment shall terminate and (2) Borrowers shall prepay in full such Lender’s Pro Rata Share of the Loan, together with interest accrued thereon, but without payment of any Prepayment Premium within thirty (30) days following such Lender’s demand for payment unless such Lender elects to use the Base Rate as a replacement index, plus an Applicable Margin (which may be negative) to approximate the Contract Rate before such change in law or regulation and (B) with respect to the occurrence described in subsection (ii) above, Administrative Agent will use the Base Rate as a replacement index, plus an Applicable Margin (which may be negative) to approximate the Contract Rate. If any Lender elects to use the Base Rate as contemplated by subsection (A) above or if subsection (B) above is applicable, Administrative Agent will notify Borrowers of the Base Rate and the Applicable Margin to be used and the same shall be applied to the Loan effective as of the date such Lender or Administrative Agent determined that the then current Benchmark was no longer available, as applicable.
(d)Notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith shall be deemed to be a change in any Requirements of Law under subsection (b) above and/or a change in capital adequacy requirements under subsection (a) above, as applicable, regardless of the date enacted, adopted or issued.
(e)Notwithstanding anything else to the contrary in this Section 2.8, Borrowers shall not be under any obligation to prepay any portion of the Loan or to compensate any Lender under this Section 2.8 as a result of or with respect to increased costs or reductions where such Lender is not demanding such repayment or compensation from all of its customers similarly situated.
Section 1.9Interest Rate Protection. Within five (5) Business Days following the Closing Date, Borrowers shall (or shall cause Guarantor to), at their sole cost and expense, for the three (3) year period after the Closing Date obtain and maintain an interest rate cap or interest rate swap with respect to the full notional amount of the Initial Funding Amount, each TI/LC Advance and each Joinder Advance (provided that such interest rate swap for each TI/LC Advance and Joinder Advance may be entered into at the time such advance(s) are made) for the benefit of Borrowers pursuant to a Hedge Agreement reasonably satisfactory to Administrative Agent having an initial term of at least three (3) years (or such shorter period of time if the Maturity Date is less than three (3) years, which Hedge Agreement shall: (i) be subject to Borrowers’ compliance with a Debt Service Coverage Ratio not less than 1.25 to 1.0, in each case determined at the time the Hedge Agreement is purchased by Borrowers; and (ii) at Administrative Agent’s request, be collaterally assigned to Administrative Agent (for the benefit of Lenders). Any such Hedge Agreement shall be provided by Administrative Agent or any Lender (or an Affiliate of such Person) or a bank or other financial institution whose long-term debt rating is equal to or greater than “A”. Upon repayment of the Loan in full, Administrative Agent shall assign the Hedge Agreement back to Borrowers or an Affiliate of Borrowers (at
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Borrower’s discretion). Except in connection with a Secured Hedge Agreement, the Projects shall not be pledged or encumbered in any manner to secure any obligation under a Hedge Agreement. Borrowers shall not enter into any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement pertaining to fluctuations in interest rates, or any swaps, caps or collar agreements or similar arrangements providing for protection against fluctuations in currency exchange rates, either generally or under specific contingencies, other than a Hedge Agreement contemplated by this Section 2.9 approved by Administrative Agent and not for speculative purposes.
Section 1.10Effect of Benchmark Transition Event.
(a)Benchmark Replacement Rate. Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, Administrative Agent and Borrowers may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement Rate. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after Administrative Agent has posted such proposed amendment to all Lenders and Borrowers so long as Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Lenders comprising the Required Lenders have delivered to Administrative Agent written notice that such Required Lenders accept such amendment. No replacement of the then-current Benchmark with a Benchmark Replacement Rate pursuant to this Section 2.10(a) will occur prior to the applicable Benchmark Transition Start Date.
(b)Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement Rate, Administrative 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.
(c)Notices; Standards for Decisions and Determinations. Administrative Agent will promptly notify Borrowers and the Lenders of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (ii) the implementation of any Benchmark Replacement Rate, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by Administrative Agent or Lenders pursuant to this Section 2.10(c), including any determination with respect to a tenor, rate or adjustment 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 absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 2.10(c).
(d)Benchmark Unavailability Period. During the existence of a Benchmark Unavailability Period, the Loan will bear interest at the Base Rate, plus the Applicable Margin.
(e)Conflict with Other Sections. In the event of a conflict between the terms of this Section 2.10 and the terms of Section 2.8 or any other section of this Agreement, the terms of this Section 2.10 shall control.
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Section 1.11Return of Payments.
(a)If Administrative Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Administrative Agent from the Borrowers and such related payment is not received by Administrative Agent, then Administrative Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim, defense or deduction of any kind.
(b)If Administrative Agent determines at any time that any amount received by Administrative Agent under this Agreement or any other Loan Document must be returned to any Secured Party or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Administrative Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Administrative Agent on demand any portion thereof to any Lender. In addition, each Lender will repay to Administrative Agent on demand any portion of such amount that Administrative Agent has distributed to each Lender, together with interest at such rate, if any, as Administrative Agent is required to pay to any Borrower or such other Person, without setoff, counterclaim or deduction of any kind, and Administrative Agent will be entitled to set-off against future distributions to such Lender any such amounts (with interest) that are not repaid on demand.
(c)If Administrative Agent notifies a Lender or other Secured Party, or any Person who has received funds on behalf of a Lender or other Secured Party (any such Lender, other Secured Party or other recipient, a ”Payment Recipient”), that Administrative Agent has determined in its sole discretion that any funds received by such Payment Recipient from Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender, other Secured Party or other Payment Recipient on its behalf) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of Administrative Agent and held in trust for the benefit of Administrative Agent, and such Lender or other Secured Party 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, return to Administrative 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 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 Administrative Agent in same day funds at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect. A notice of Administrative Agent to any Payment Recipient under this Section 2.11 shall be conclusive, absent manifest error.
(d)Without limiting the immediately preceding Section 2.11(c), each Payment Recipient 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 Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment (a “Payment Notice”), (y) that was not preceded or accompanied by a Payment Notice, or (z) that such Payment Recipient otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part) in each case, then (1) in the case of immediately preceding clauses (x) or (y), an error shall be presumed to have been
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made (absent written confirmation from Administrative Agent to the contrary) or (2) an error has been made (in the case of immediately preceding clause (z)), in each case, with respect to such payment, prepayment or repayment.
(e)Each Lender and Secured Party hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such Lender or Secured Party under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such Lender or Secured Party from any source, against any amount due to Administrative Agent under Section 2.11(c) above or under the indemnification provisions of this Agreement.
(f)The Borrowers and each other Borrower Party hereby agree that (x) in the event 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, Administrative Agent shall be contractually subrogated (irrespective of whether Administrative Agent may be equitably subrogated) to all the rights of such Lender or other Secured Party under the Loan Documents with respect to such amount, (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by Borrowers or any other Borrower Party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by Administrative Agent from the Borrower or any other Borrower Party for the purpose of making such Erroneous Payment, and (z) to the extent that an Erroneous Payment was in any way or at any time credited as a payment or satisfaction of any of the Obligations, the Obligations or part thereof that were so credited, and all rights of the applicable Lender, other Secured Party or Administrative Agent, as the case may be, shall be reinstated and continue in full force and effect as if such payment or satisfaction had never been received; provided, however, the amount of such Erroneous Payment that is comprised of funds received by Administrative Agent from the Borrowers or any other Borrower Party for the purpose of making such Erroneous Payment shall be credited as a payment or satisfaction of the Obligations and the Obligations or part thereof that were so credited shall not be reinstated.
(g)To the extent permitted by Requirements of 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 Administrative Agent for the return of any Erroneous Payment received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine.
Each party’s obligations, agreements and waivers under this Section 2.11 shall survive the resignation or replacement of Administrative Agent, or any transfer of rights or obligations by, or the replacement of, a Lender or other Secured Party, the termination of any Commitment or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.
Section 1.12Evidence of Debt.
(a)Records of Lenders. Each Lender shall maintain in accordance with its usual practice accounts evidencing the Indebtedness of Borrowers to each Lender resulting from the Pro Rata Share of the Loan of such Lender from time to time outstanding, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. In addition, with respect to each Lender having sold a participation interest in any of the Obligations owing to it, such Lender, acting as agent of Borrowers solely for this purpose and solely for tax purposes, shall establish and maintain at its address referred to in Section 11.1 (or at such other address as Administrative Agent shall notify Borrowers) a record of ownership, in
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which such Lender shall register by book entry (i) the name and address of each such participant (and each change thereto, whether by assignment or otherwise) and (ii) the rights, interest or obligation of each such participant in any Obligation owing to such Lender, in any Loan Commitment or any portion of the Loan and in any right of such Lender to receive any payment hereunder.
(b)Records of Administrative Agent. Administrative Agent, acting solely for this purpose as an agent of Borrowers, shall maintain at one of its offices in the United States a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Loan Commitments of, and principal amounts (and stated interest) of the Loan owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error; provided, however, that no error in such account and no failure of any Lender or Administrative Agent to maintain any such account shall affect the obligations of any Borrower Party to repay the Loan in accordance with its terms. Borrowers, Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrowers and any Lender at any reasonable time and from time to time upon reasonable prior notice.
(c)Registered Obligations. Notwithstanding anything to the contrary contained in this Agreement, the Loan (including any Notes evidencing the Loan) shall constitute a registered obligation, the right, title and interest of the Lenders and their assignees in and to the Loan shall be transferable only upon notation of such transfer in the Register and no assignment thereof shall be effective until recorded therein. This Section 2.12 and Section 11.2 shall be construed so that the Loan is at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related regulations (and any successor provisions).
Section 1.13Substitution of Lenders.
(a)In the event that any Lender that is not an Affiliate of Administrative Agent (an “Affected Lender”), (i) makes a claim under Section 2.8 or notifies Borrowers and Administrative Agent pursuant to Section 2.8 that it becomes illegal for such Lender to continue to fund or maintain its Pro Rata Share of the Loan using the then current Benchmark Rate or (ii) does not consent to any amendment, waiver or consent to any Loan Document or the Environmental Indemnity Agreement for which the consent of the Required Lenders is obtained but that requires the consent of other Lenders, Borrowers may either pay in full such Affected Lender with respect to amounts due with the consent of Administrative Agent (without payment of any Prepayment Premium) or, if Administrative Agent provides a proposed Substitute Lender, consent to the substitution of such Affected Lender by any Lender or any Affiliate or Approved Fund of any Lender or any other Person acceptable (which acceptance shall not be unreasonably withheld or delayed) to Administrative Agent (in each case, a “Substitute Lender”).
(b)To substitute such Affected Lender or pay in full the Obligations owed to such Affected Lender, Borrowers shall deliver a notice to Administrative Agent and such Affected Lender. The effectiveness of such payment or substitution shall be subject to the delivery to Administrative Agent by Borrowers (or, as may be applicable in the case of a substitution, by the Substitute Lender) of (i) payment for the account of such Affected Lender, of, to the extent accrued through, and outstanding on, the effective date for such payment or substitution, all Obligations owing to such Affected Lender (including those that will be owed because of such payment and all Obligations that would be owed to such Lender if it was solely a Lender), and (ii) in the case of a substitution, (A) payment by the Substitute Lender of the
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assignment fee set forth in Section 11.3 and (B) an Assignment and Assumption (but no obligation on the part of Borrowers to pay any fees in connection therewith.
(c)Upon satisfaction of the conditions set forth in clause (b) above, Administrative Agent shall record such substitution or payment in the Register, whereupon (i) in the case of any payment in full, such Affected Lender’s Loan Commitment shall be terminated and (ii) in the case of any substitution, (A) the Affected Lender shall sell and be relieved of, and the Substitute Lender shall purchase and assume, all rights and claims of such Affected Lender under the Loan Documents with respect to the Loan, except that the Affected Lender shall retain such rights expressly providing that they survive the repayment of the Obligations and the termination of the Loan Commitments, (B) the Substitute Lender shall become a “Lender” hereunder having a Loan Commitment in the amount of such Affected Lender’s Loan Commitment and (C) the Affected Lender and the applicable Substitute Lender shall execute and deliver to Administrative Agent an Assignment and Assumption to evidence such substitution and deliver any Note in its possession; provided, however, that the failure of any Affected Lender to execute any such Assignment and Assumption or deliver any such Note shall not render such sale and purchase (or the corresponding assignment) invalid.
Section 1.14Pro Rata Treatment; Sharing of Payments.
(a)Pro Rata Treatment. (i) Each advance of the Loan from the Lenders under Section 2.1 shall be made by the Lenders, and any termination of the obligation to make an advance of the Loan shall be applied to the respective Loan Commitments of the Lenders, based on their Pro Rata Share; (ii) each payment or prepayment of principal of the Loan by Borrowers shall be made for account of the Lenders based on their Pro Rata Share; and (iii) each payment of interest on the Loan by Borrowers shall be made for account of the Lenders pro rata in accordance with the amounts of interest on the Loan then due and payable to the respective Lenders.
(b)Sharing of Payments, Etc.If any Lender shall obtain from Borrowers payment of any principal of or interest on the Loan owing or payment of any other amount under this Agreement or any other Loan Document through the exercise of any right of set off, banker’s lien or counterclaim or similar right or otherwise (other than from Administrative Agent as provided herein), and, as a result of such payment, such Lender shall have received a greater percentage of the principal of or interest on the Loan or such other amounts then due hereunder or thereunder by Borrowers to such Lender (other than pursuant to any Secured Hedge Agreements) than the percentage received by any other Lender, it shall promptly purchase from such other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Loan or such other amounts, respectively, owing to such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Loan or such other amounts, respectively, owing to each of the Lenders. To such end, all Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored.
(i)Borrowers agree that any Lender so purchasing such a participation (or direct interest) may exercise all rights of set off, banker’s lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of the Loan or other amounts (as the case may be) owing to such Lender in the amount of such participation.
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(ii)Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of Borrowers. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set off to which this Section 2.14(b) applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 2.14(b) to share in the benefits of any recovery on such secured claim.
Section 1.15Fees and Expenses. Borrowers agree to pay to Administrative Agent for the benefit of the Lenders the fees and expenses provided in the Term Sheet.
Section 1.16Withholding Taxes.
(a)Payments Free and Clear of Withholding Taxes. Except as otherwise provided in this Section 2.16, each payment by Borrowers under any Loan Document or the Environmental Indemnity Agreement shall be made free and clear of all present or future taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (and without deduction for any of them) (collectively, but excluding the taxes set forth in clauses (i) through (iv) below, the “Withholding Taxes”) other than for (i) taxes measured by net income (including branch profits taxes) and franchise taxes imposed in lieu of net income taxes, in each case imposed on any Lender as a result of a connection between such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than such connection arising solely from any Lender having executed, delivered or performed its obligations or received a payment under, or enforced, any Loan Document or the Environmental Indemnity Agreement), (ii) Withholding Taxes to the extent that the obligation to withhold amounts existed on the date that such Lender became a “Lender” under this Agreement in the capacity under which such Lender makes a claim under this clause (ii), except in each case to the extent such Lender is a direct or indirect assignee (other than pursuant to Section 2.13 (Substitution of Lenders)) of any other Lender that was entitled, at the time the assignment of such other Lender became effective, to receive additional amounts under Section 2.16(b), (iii) taxes that are directly attributable to the failure (other than as a result of a change in any Requirements of Law) by any Lender to deliver the documentation required to be delivered pursuant to clause (f) below and (iv) any United States federal withholding Taxes imposed under FATCA (the taxes described in subsections (i) through (iv) of this Section 2.16(a) herein called “Excluded Taxes”).
(b)Gross-Up. If any Taxes shall be required by any Requirements of Law to be deducted from or in respect of any amount payable under any Loan Document or the Environmental Indemnity Agreement to any Lender and such Taxes are Withholding Taxes, (i) such amount payable shall be increased as necessary to ensure that, after all required deductions for Withholding Taxes are made (including deductions applicable to any increases to any amount under this Section 2.16), such Lender receives the amount it would have received had no such deductions been made, (ii) the relevant Borrower Party shall make such deductions, (iii) the relevant Borrower Party shall timely pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable Requirements of Law and (iv) within 30 days after such payment is made, Borrowers shall deliver to Administrative Agent an original or certified copy of a receipt evidencing such payment.
(c)Other Taxes. In addition, Borrowers agree to pay, and authorize Administrative Agent to pay in its name, any stamp, documentary, excise or property tax, charges or similar levies imposed by any applicable Requirements of Law or Governmental Authority and all Liabilities with respect thereto (including by reason of any delay in payment
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thereof), in each case arising from the execution, delivery or registration of, or otherwise with respect to, any Loan Document, the Environmental Indemnity Agreement or any transaction contemplated therein (collectively, “Other Taxes”). Within thirty (30) days after the date of any payment of Withholding Taxes or Other Taxes by any Borrower Party, Borrowers shall furnish to Administrative Agent, at its address referred to in Section 11.1, the original or a certified copy of a receipt evidencing payment thereof.
(d)Indemnification. Borrowers shall reimburse and indemnify, within thirty (30) days after receipt of demand therefor (with copy to Administrative Agent), each Lender for all Withholding Taxes and Other Taxes (including any Withholding Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.16) paid by such Lender and any Liabilities arising therefrom or with respect thereto, whether or not such Withholding Taxes or Other Taxes were correctly or legally asserted. A certificate of the Lender (or of Administrative Agent on behalf of such Lender) claiming any compensation under this clause (d), setting forth the amounts to be paid thereunder and delivered to Borrowers with copy to Administrative Agent, shall be conclusive, binding and final for all purposes, absent manifest error.
(e)Mitigation. Any Lender claiming any additional amounts payable pursuant to this Section 2.16 shall use its reasonable efforts (consistent with its internal policies and Requirements of Law) to change the jurisdiction of its lending office if such a change would reduce any such additional amounts (or any similar amount that may thereafter accrue) and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender.
(f)Tax Forms.
(i)Each Non-U.S. Lender Party that, at any of the following times, is entitled to an exemption from United States withholding Tax or, after a change in any Requirements of Law, is subject to such withholding Tax at a reduced rate under an applicable Tax treaty, shall (w) on or prior to the date such Non-U.S. Lender Party becomes a “Non-U.S. Lender Party” hereunder, (x) on or prior to the date on which any such form or certification expires or becomes obsolete, (y) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it pursuant to this clause (i) and (z) from time to time if requested by Borrowers or Administrative Agent (or, in the case of a participant or SPV, the relevant Lender), provide Administrative Agent and Borrowers (or, in the case of a participant or SPV, the relevant Lender) with two completed originals of each of the following, as applicable: (A) Forms W-8ECI (claiming exemption from U.S. withholding tax because the income is effectively connected with a U.S. trade or business), W-8BEN or W-8BEN-E, as applicable (claiming exemption from, or a reduction of, U.S. withholding tax under an income tax treaty) or W-8IMY (together with appropriate forms, certifications and supporting statements) or any successor forms, (B) in the case of a Non-U.S. Lender Party claiming exemption under Sections 871(h) or 881(c) of the Code, Form W-8BEN or W-8BEN-E, as applicable (claiming exemption from U.S. withholding tax under the portfolio interest exemption) or any successor form and a certificate in form and substance acceptable to Administrative Agent that such Non-U.S. Lender Party is not (1) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (2) a “10 percent shareholder” of Borrowers within the meaning of Section 881(c)(3)(B) of the Code or (3) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code or (C) any other applicable document prescribed by the IRS certifying as to the entitlement of such Non-U.S. Lender Party to such exemption from United States withholding tax or
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reduced rate with respect to all payments to be made to such Non-U.S. Lender Party under the Loan Documents. Unless Borrowers and Administrative Agent have received forms or other documents satisfactory to them indicating that payments under any Loan Document to or for a Non-U.S. Lender Party are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, Borrower Parties and Administrative Agent shall withhold amounts required to be withheld by applicable Requirements of Law from such payments at the applicable statutory rate.
(ii)Each U.S. Lender Party shall (A) on or prior to the date such U.S. Lender Party becomes a “U.S. Lender Party” hereunder, (B) on or prior to the date on which any such form or certification expires or becomes obsolete, (C) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it pursuant to this clause (f) and (D) from time to time if requested by Borrowers or Administrative Agent (or, in the case of a participant, the relevant Lender), provide Administrative Agent and Borrowers (or, in the case of a participant, the relevant Lender) with two completed originals of Form W-9 (certifying that such U.S. Lender Party is entitled to an exemption from U.S. backup withholding tax) or any successor form.
(iii)Each Lender having sold a participation in any of its Obligations shall collect from such participant the documents described in this clause (f) and provide them to Administrative Agent.
(iv)If a payment made to a Lender would be subject to United States federal withholding Tax imposed by FATCA if such Lender fails to comply with the applicable reporting requirements of FATCA, such Lender Party shall deliver to Administrative Agent and Borrowers’ Agent any documentation under any Requirements of Law or reasonably requested by Administrative Agent or Borrowers’ Agent sufficient for Administrative Agent or Borrowers to comply with their obligations under FATCA and to determine that such Lender has complied with its obligations under FATCA or to determine the amount to deduct and withhold from such payment.
(g)Refunds. If a Lender has received a refund of (or tax credit with respect to) any Withholding Taxes or Other Taxes as to which it has been indemnified by Borrowers or with respect to which Borrowers have paid additional amounts pursuant to this Section 2.16, it shall pay over such refund (or the benefit realized as a result of such tax credit) to Borrowers (but only to the extent of indemnity payments made, or additional amounts paid, by Borrowers under this Section 2.16 with respect to the Withholding Taxes or Other Taxes giving rise to such refund), net of all out of pocket expenses of the Lender (including any Withholding Taxes imposed with respect to such refund) as is determined by the Lender in good faith, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that Borrowers, upon the request of the Lender, agrees to repay as soon as reasonably practicable the amount paid over to Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Lender in the event the Lender is required to repay such refund to such Governmental Authority. This Section 2.16 shall not be construed to require the Lender to make available its tax returns (or any other information relating to its Withholding Taxes or Other Taxes which it deems in good faith to be confidential) to Borrowers or any other person.
(h)Survival. Each party’s obligations under this Section 2.16 shall survive the resignation or replacement of Administrative Agent or any assignment of rights by, or the
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replacement of, a Lender, the termination of the Loan Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
Section 1.17Several Obligations of Lenders. The failure of any Lender to make any advance of its Loan Commitment to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make the advance of its Loan Commitment, but neither any Lender nor Administrative Agent shall be responsible for the failure of any other Lender to make the advance to be made by such other Lender.
Section 1.18Defaulting Lenders.
(a)Cure of Defaulting Lender Status. A Defaulting Lender may regain its status as a non-defaulting Lender hereunder upon satisfaction of each of the following conditions, as applicable: (i) payment by such Defaulting Lender of all amounts owing hereunder (whether to Administrative Agent for indemnity purposes or otherwise); (ii) receipt by Administrative Agent of (A) a written revocation by Defaulting Lender of any written notice by Defaulting Lender to Borrowers, Administrative Agent, or any other Lender that such Defaulting Lender will fail to fund under this Agreement, or (B) evidence satisfactory to Administrative Agent (in consultation with the Required Lenders) that such Defaulting Lender has publicly revoked any public announcement of the same; (iii) evidence satisfactory to Administrative Agent (in consultation with the Required Lenders) that such Defaulting Lender is no longer in default for failing to make payments under one or more syndicated credit facilities; and (iv) evidence satisfactory to Administrative Agent (in consultation with the Required Lenders) that such Defaulting Lender (or the holding company of such Defaulting Lender) is no longer the subject of a bankruptcy proceeding and is not otherwise involved in any liquidation proceeding, and Administrative Agent has determined such Defaulting Lender is able to meet its obligations hereunder.
(b)Right of Offset. Administrative Agent may, in its discretion, hold any payment made by Borrowers toward the Loan that is owing to a Defaulting Lender in a non-interest bearing account. Administrative Agent may use such amount to set-off any unfunded reimbursement obligations of such Defaulting Lender until the earliest to occur of (i) such Lender’s no longer being a Defaulting Lender hereunder, (ii) such Defaulting Lender being replaced pursuant to Section 2.18(c), and (iii) indefeasible payment in full by Borrowers of all amounts owing hereunder and performance by Borrowers of all Obligations.(c)
(c)Replacement of Defaulting Lender. If any Lender is a Defaulting Lender, Administrative Agent may, upon notice to such Lender and Borrowers, replace such Lender by causing such Lender to assign its Loan (with the related assignment fee to be paid by such Defaulting Lender) pursuant to Section 11.3 to one or more Persons eligible under such Section procured by Administrative Agent. Borrowers shall pay in full all principal, interest, fees and other amounts then currently due to such Defaulting Lender through the date of replacement. Any Defaulting Lender being replaced under this Section 2.18(c) shall execute and deliver an Assignment and Assumption with respect to such Lender’s Pro Rata Share of the Loan.
ARTICLE 3
INSURANCE, CONDEMNATION AND IMPOUNDS
Section 1.1Insurance. Borrowers, at their sole cost and expense, shall obtain and maintain (or cause to be maintained) during the entire term of the Loan, insurance for the Borrowers and the Projects providing at least the following coverages:
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(a)Property; Business Interruption. Borrowers shall (i) keep the Projects insured against damage by fire, acts of domestic and foreign terrorism, any type of wind (including named storms) and such other hazards covered by a special form or all-risk insurance policy (A) in an amount equal to one hundred percent (100%) of the “Full Replacement Cost” (which for the purposes of this Agreement shall mean actual replacement value exclusive of costs of excavation, foundations, underground utilities and footings) with a waiver of depreciation and written on a replacement cost basis without any coinsurance or containing an agreed amount endorsement with respect to Projects waiving all co-insurance provisions (B) with a deductible not to exceed $50,000, except for wind/named storms, tornado, hail and earthquake, which shall provide for a deductible of no more than five percent (5%) of the total insurable value of the applicable Project, (C) containing Law & Ordinance coverage if any of the Improvements or the use of the Projects shall at any time constitute legal non-conforming structures or uses, including coverage for loss to the undamaged portion of the building (with a limit equal to the Full Replacement Cost), the cost of demolition and the increased costs of construction (each in amounts as required by Administrative Agent but not exceeding 10% of the total insurable value of the applicable Project) and (D) shall maintain comprehensive boiler and machinery/equipment breakdown insurance, if steam boilers or other pressure-fixed vessels are in operation, in amounts as shall be reasonably required by Administrative Agent and such other property insurance as reasonably required by Administrative Agent. Notwithstanding the foregoing, a Tenant may provide all or portion of the property damage coverages required herein or such coverages acceptable to Administrative Agent, as agreed to by Administrative Agent in its sole and absolute discretion. Administrative Agent reserves the right to require upon sixty (60) days written notice to Borrowers such other types of insurance from time to time, including but not limited to sinkhole or land subsidence insurance, each in amounts reasonably acceptable to Administrative Agent. The full insurable value shall be re-determined from time to time (but not more frequently than once in any twelve (12) calendar months) at the request of Administrative Agent by an appraiser or contractor designated and paid by Borrowers and reasonably approved by Administrative Agent, or by an engineer or appraiser in the regular employ of the insurer. Further, Borrowers shall obtain: (y) if any portion of the Improvements is currently or at any time in the future identified by (A) the Federal Emergency Management Agency in the Federal Register as an area having special flood hazards and/or (B) the Secretary of Housing and Urban Development or any successor thereto as an area having special flood hazards pursuant to the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended, or any successor law (the “Flood Insurance Acts”), flood hazard insurance (1) in an amount equal to the maximum limit of coverage available under the Flood Insurance Acts plus (2) such greater amounts or other related and/or excess coverage as Lenders shall require in their sole discretion with deductibles no greater than the maximum limit of coverage available under the Flood Insurance Acts, and (z) earthquake insurance in amounts and in form and substance satisfactory to Lenders in the event the Project is located in an area with a high degree of seismic activity and the PML/SEL of the Project exceeds twenty percent (20%); provided that the insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this subsection (a). Borrowers shall maintain business income insurance, including rental income loss and extra expense, (A) with loss payable to Administrative Agent, (B) covering all perils required herein to be insured against, (C) in an amount equal to one hundred percent (100%) of the projected gross revenues from the operation of the Projects (as reduced to reflect expenses not incurred during a period of restoration) covering a period of restoration of at least eighteen (18) months after the date of the Casualty, and (D) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of twelve (12) months from the date that the damaged Project is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period. The amount of such business interruption insurance shall
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be determined prior to the date hereof and at least once each year thereafter based on Administrative Agent’s reasonable estimate of the gross revenues (less non-continuing expenses not incurred during a period of restoration) from the Projects for the succeeding eighteen (18) month period. All business interruption proceeds shall be held by Administrative Agent and shall be applied to the Obligations secured by the Loan Documents from time to time due and payable hereunder and under the Note; provided, however, that nothing herein contained shall be deemed to relieve Borrowers of their Obligations to pay debt service on the Payment Dates set forth herein, except to the extent such amounts are actually paid out of the proceeds of such business interruption insurance.
(b)Liability. Borrowers shall maintain (i) commercial general liability insurance (with no exclusion for acts of domestic and foreign terrorism) with respect to the Projects for both personal injury, bodily injury to or death of a person and for property damage occurring upon, in or about the Projects, including “Dram Shop” or other liquor liability coverage if the Borrowers and/or their agents sells or distributes alcoholic beverages from the Projects, such insurance (A) to be on the so-called “occurrence” form (“claims-made” is also acceptable if coverage is written in conjunction with professional liability) providing for limits of liability in the amount reasonably approved by Administrative Agent but in no event less than $1,000,000 per occurrence and $2,000,000 in the aggregate (and, if on a blanket policy, containing a “General Aggregate Per Location” endorsement), (B) to continue at not less than the aforesaid limit until required to be changed by Lenders in writing by reason of changed economic conditions making such protection inadequate and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations on an “if any” basis; (3) independent contractors, if insurable; (4) contractual liability for all insured contracts, (ii) umbrella and excess liability coverage in the amount of not less than $75,000,000 per occurrence on terms consistent with the general liability insurance required hereinabove, including, but not limited to, supplemental coverage for employer liability and automobile liability, if applicable, which umbrella/excess liability coverage shall apply in excess of such supplemental coverage, and (iii) other liability insurance as reasonably required by Administrative Agent, including but limited to commercial auto liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of $1,000,000 or, if applicable, worker’s compensation insurance, subject to the statutory limits of the state in which the Projects are located, and employer’s liability insurance with a limit of at least $1,000,000 per accident and per disease per employee, and $1,000,000 for disease aggregate in respect of any work or operations on or about the Projects, or in connection with the Projects or their operation, covering employees of Borrowers. In addition, Borrowers shall cause each Operator, if applicable, to maintain (A) worker’s compensation insurance, subject to the statutory limits of the state in which the Projects are located, and employer’s liability insurance with a limit of at least $1,000,000 per accident and per disease per employee, and $1,000,000 for disease aggregate in respect of any work or operations on or about the Projects, or in connection with the Projects or their operation and (B) professional liability insurance, including coverages against claims for errors and omissions, negligence, or medical malpractice occurring upon, in or about such Project, such insurance (A) to be on the so-called “occurrence” form (“claims-made” is also acceptable if coverage is written in conjunction with general liability) and containing minimum limits per occurrence of One Million and No/100 Dollars ($1,000,000.00), with a combined limit per policy year, excluding umbrella coverage, of not less than Three Million and No/100 Dollars ($3,000,000.00) in the aggregate; (B) to continue at not less than the aforesaid limit until required to be changed by Agent by reason of changed economic conditions making such protection inadequate. Without the approval of Administrative Agent, in no event shall Borrowers consent to any decrease in the amount or scope of coverage or increase the deductibles from those previously approved by Administrative Agent.
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(c)Construction, Repairs, Alterations. At all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the property or liability coverage forms do not otherwise apply, (A) commercial general liability and umbrella/excess liability insurance covering claims related to the structural construction, repairs or alterations being made which are not covered by or under the terms or provisions of the commercial general liability and umbrella/excess liability insurance policy required in Section 3.1(b); and (B) the insurance provided for in Section 3.1(a) written in a so-called builder’s risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to Section 3.1(a), (3) including permission to occupy the applicable Projects and (4) with an agreed amount endorsement waiving all co-insurance provisions.
(d)Form and Quality. All insurance policies shall be obtained under valid and enforceable policies (individually, a “Policy”, and collectively, the “Policies”), and shall be subject to the reasonable approval of Administrative Agent as to form and substance, including insurance companies, amounts, deductibles, loss payees and insureds. Such policies shall be endorsed in form and substance reasonably acceptable to Administrative Agent to name Administrative Agent (on behalf of the Lenders) thereunder as an additional insured, as its interest may appear, on liability insurance policies and as mortgagee/lender’s loss payable, as its interest may appear, on all property insurance policies, including but not limited to special form/all-risk, business interruption, boiler and machinery, terrorism, windstorm, flood and earthquake insurance, with all loss payable to Administrative Agent, without contribution, under a standard non-contributory mortgagee clause. All policies shall include a waiver of subrogation in favor of Administrative Agent when permitted by law. No policy shall contain a Protective Safeguard Endorsement. Administrative Agent shall act on behalf of the Lenders in respect of insurance matters. The proceeds of insurance paid on account of any damage or destruction to a Project shall be paid to Administrative Agent, on behalf of the Lenders, to be applied as provided in Section 3.2. In the event Borrowers, Operator, or Property Manager receives any insurance proceeds (without the same having been disbursed to Administrative Agent), Borrowers will or will cause Operator or Property Manager to immediately return such proceeds to Administrative Agent for application in accordance with the provisions of Section 3.2. All such insurance policies and endorsements shall be fully paid for and contain such provisions and expiration dates and be in such form acceptable to Administrative Agent and issued by financially sound and responsible insurance companies authorized or otherwise approved to do business in the state in which the Projects are located, with a rating of “A-:VIII” or better as established by Best’s Rating Guide or “A-” or better by Standard & Poor’s Ratings Group. Each property insurance policy shall provide that such policy may not be canceled except upon thirty (30) days’ prior written notice (except ten (10) days’ prior notice for non-renewal or cancellation due to non-payment of premium) to Administrative Agent and that no act or negligence of Borrowers, or any other insured under the policy, or failure to comply with the provisions of any policy which might otherwise result in a forfeiture of the insurance or any part thereof, or commencement of foreclosure or similar action, shall in any way affect the validity or enforceability of the insurance insofar as Administrative Agent is concerned. If available using commercially reasonable efforts, each liability insurance policy shall provide that such policy may not be canceled except upon thirty (30) days’ prior written notice (except ten (10) days’ prior notice for non-renewal or cancellation due to non-payment of premium) to Administrative Agent (provided that, if the insurer will not or cannot provide the required notice, Borrowers shall be obligated to provide such notice). Additionally, Borrowers further covenant and agree to promptly send to Administrative Agent any notices of non-renewal or cancellation they receive from the insurers with respect to the Policies required pursuant to this Section 3.1. Blanket policies shall be permitted only if (i) such blanket insurance policies shall specifically allocate to the Projects the amount of coverage from time to time required hereunder or shall otherwise provide the same protection as would a separate Policy insuring only the Projects in compliance with the requirements of this Section, (ii) any such policy shall in all other respects comply with the requirements of this Section, and (iii) such policy is approved in advance in writing by
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Administrative Agent (such approval not to be unreasonably withheld or delayed) and such policy includes changes to the coverages and requirements set forth herein as may be required by Administrative Agent (including, without limitation, increases to the amount of coverages required herein); provided, however, that Borrowers shall not be required to obtain approval from Administrative Agent for any renewal of a previously approved blanket policy unless the terms of such policy have been changed in a materially adverse manner to Administrative Agent. Such Policies may be “blanket policies” covering multiple locations so long as the coverages for the Projects provide the protections listed above and, provided further that, any material changes to such blanket policies or an aggregation of the insured values covered under such blanket policies, the reduction or erosion of flood, windstorm / named storm limits or the addition of locations that are subject to the perils of flood, windstorm / named storm, shall be subject to Administrative Agent’s review and reasonable approval by Administrative Agent based on the portfolio PML report(s) for the catastrophic perils and such other information as requested by Administrative Agent. Further, any such material changes, changes to the limits under the policy as of Closing Date or an aggregation of the insured values covered under the blanket policy, including the reduction or erosion of flood, windstorm / named storm limits or the addition of locations that are subject to the perils of flood, windstorm / named storm, shall be subject to Administrative Agent approval. Further, to the extent that any blanket policy covers more than one location within a one-thousand-foot radius of the Project (the “Radius”), the limits of such blanket policy must be sufficient to maintain coverage as set forth in Section 3.1 for the Project and any and all other locations combined within the Radius that are covered by such blanket policy calculated on a total insured value basis. Notwithstanding Administrative Agent’s approval of any blanket policy hereunder, Administrative Agent reserves the right, in its sole discretion, to require Borrowers to obtain a separate policy in compliance with this Section 3.1. Borrowers authorize Administrative Agent to pay the premiums for such policies (the “Insurance Premiums”) from the Insurance Impound as the same become due and payable annually in advance pursuant to the terms of Section 3.4. If Borrowers fail to deposit funds into the Insurance Impound sufficient to permit Administrative Agent to pay the Insurance Premiums pursuant to the provisions of Section 3.4 and does not provide Administrative Agent evidence that the required insurance is in place, Administrative Agent may obtain such insurance and pay the premium therefor and Borrowers shall, on demand, reimburse Administrative Agent for all expenses incurred in connection therewith and the costs of such Insurance Premiums paid by the Administrative Agent. Borrowers shall not maintain any separate or additional insurance which is contributing in the event of loss unless it is properly endorsed and otherwise reasonably satisfactory to Administrative Agent in all respects.
(e)Delivery of Certificates and Policies. In the event of a foreclosure of the Mortgage or other transfer of title to the Projects in extinguishment in whole or in part of the Obligations, all right, title and interest of Borrowers in and to the proceeds from such policies then in force concerning the Projects shall thereupon vest exclusively in Administrative Agent or the purchaser at such foreclosure or other transferee in the event of such other transfer of title. Unless otherwise approved by Administrative Agent, with respect to the property insurance required under this Section 3.1, Borrowers shall provide (i) on or before the Closing Date, an ACORD 28 along with a policy binder which is valid for at least 60 days following the effective date or a complete copy of the policy, (ii) endorsements required by Administrative Agent within thirty (30) days following the Closing Date if not provided on or before the Closing Date and (iii) a copy of the full policy within sixty (60) days following the Closing Date or prior to expiration of the binder. Unless otherwise approved by Administrative Agent, with respect to the liability insurance required under this Section 3.1, Borrowers shall provide (i) on or before the Closing Date, an ACORD 25 along with evidence of 30-day notice of cancellation of coverage along with a policy binder which is valid for at least 60 days following the effective date or a complete copy of the policy, (ii) endorsements required by Administrative Agent within thirty (30) days following the Closing Date if not provided on or before the Closing Date and (c) a copy of the full policy within sixty (60) days following the Closing Date. If Borrowers elect to obtain any
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insurance which is not required under this Agreement, all related insurance policies shall be endorsed in compliance with Section 3.1(d). From time to time upon Administrative Agent’s request, Borrowers shall identify to Administrative Agent all insurance maintained by Borrowers with respect to the Projects. The proceeds of insurance policies coming into the possession of Administrative Agent shall not be deemed trust funds, and Administrative Agent shall apply such proceeds as provided in this Agreement.
(f)Adjustments. Borrowers shall give prompt written notice of any loss in excess of $100,000 to the insurance carrier and to Administrative Agent. Borrowers hereby irrevocably authorize and empower Administrative Agent, as attorney in fact for Borrowers coupled with an interest, to (i) notify any of Borrowers’ insurance carriers to add Administrative Agent (for itself and the benefit of the Lenders) as a lender’s loss payable, mortgagee insured or additional insured, as the case may be, to any policy maintained by Borrowers (regardless of whether such policy is required under this Agreement), (ii) if such loss exceeds the Restoration Threshold, make proof of loss, adjust and compromise any claim under insurance policies, and appear in and prosecute any action arising from such insurance policies, and (iii) collect and receive insurance proceeds, and to deduct therefrom Administrative Agent’s reasonable expenses incurred in the collection of such proceeds. Nothing contained in this Section 3.1(f), however, shall require Administrative Agent to incur any expense or take any action hereunder
(g)WARNING REGARDING RIGHT OF ADMINISTRATIVE AGENT TO PURCHASE INSURANCE. IF BORROWERS FAIL TO PROVIDE ADMINISTRATIVE AGENT WITH EVIDENCE OF THE INSURANCE COVERAGES REQUIRED BY THIS AGREEMENT BY SUCH DATES AS REQUIRED HEREIN, ADMINISTRATIVE AGENT SHALL HAVE THE RIGHT TO TAKE SUCH ACTION DEEMED NECESSARY TO PROTECT THE INTEREST OF ADMINISTRATIVE AGENT AND LENDERS, INCLUDING, WITHOUT LIMITATION, THE PURCHASING OF INSURANCE AT BORROWERS’ EXPENSE AS ADMINISTRATIVE AGENT IN ITS SOLE AND REASONABLE DISCRETION DEEMS APPROPRIATE. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT BORROWERS’ INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE ADMINISTRATIVE AGENT PURCHASES MAY NOT PAY ANY CLAIM BORROWERS MAKE OR ANY CLAIM MADE AGAINST ANY BORROWER. BORROWERS ARE RESPONSIBLE FOR ALL EXPENSES INCURRED BY ADMINISTRATIVE AGENT IN CONNECTION WITH SUCH ACTION AND THE COST OF ANY INSURANCE PURCHASED PURSUANT TO THIS PROVISION AND SUCH COST IS PAYABLE WITHIN THIRTY (30) DAYS AFTER WRITTEN DEMAND; IF BORROWERS FAIL TO PAY SUCH COST, IT MAY BE ADDED TO THE INDEBTEDNESS AND BEAR INTEREST AT THE DEFAULT RATE. THE EFFECTIVE DATE OF COVERAGE MAY BE THE DATE BORROWERS’ PRIOR COVERAGE LAPSED OR THE DATE BORROWERS FAILED TO PROVIDE PROOF OF COVERAGE. THE COVERAGE ADMINISTRATIVE AGENT PURCHASES MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE BORROWERS CAN OBTAIN AND MAY NOT SATISFY ANY NEED FOR PROPERTY DAMAGE SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE IMPOSED BY REQUIREMENTS OF LAW. AFTER RECEIVING WRITTEN CONSENT FROM ADMINISTRATIVE AGENT, BORROWERS MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT THE REQUIRED PROPERTY COVERAGE WAS PURCHASED ELSEWHERE. THIS NOTICE IS PROVIDED PURSUANT TO PARAGRAPH (3) OF 815 ILCS 180/10.
(h)Terrorism Insurance. Notwithstanding the requirements in this Section 3.1, Borrowers shall not be required to pay Insurance Premiums for terrorism insurance coverage that are more than two (2) times the amount of the Insurance Premiums that are payable in respect of the property and rental loss and/or business income insurance required hereunder
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(without giving effect to the cost of terrorism, earthquake components and catastrophic premium surcharges of such property and rental loss and/or business income insurance) on the date of this Agreement (the “Cap”), and, if the cost of Insurance Premiums for terrorism insurance exceeds such amount, Borrowers shall only be required to purchase the maximum amount of terrorism insurance available with funds equal to such Cap.
(i)Non-Conforming Policy. As an alternative to the policies required to be maintained pursuant to the preceding provisions of this Section 3.1, Borrowers will not be in default under this Section 3.1 if Borrowers maintain (or causes to be maintained) policies which (i) have coverages, deductibles or other related provisions other than those specified above or (ii) are provided by insurance companies not meeting the credit ratings requirements set forth above (any such policy, a “Non-Conforming Policy”), provided, that, prior to obtaining such Non-Conforming Policies (or permitting such Non-Conforming Policies to be obtained), Borrowers shall have received Administrative Agent’s prior written consent thereto. Notwithstanding the foregoing, Administrative Agent hereby reserves the right to deny its consent to any Non-Conforming Policy regardless of whether or not Administrative Agent has consented to the same on any prior occasion.
Section 1.2Use and Application of Insurance Proceeds.
(a)Notice; Repair Obligation. If any Project shall be damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrowers shall give prompt notice thereof to Administrative Agent. Following the occurrence of a Casualty, provided Administrative Agent makes insurance proceeds available to Borrowers, Borrowers shall promptly proceed to restore, repair, replace or rebuild the same to be of at least equal value and of substantially the same character as prior to such damage or destruction, all to be effected in accordance with applicable Requirements of Law. If Administrative Agent is entitled to receive such proceeds and, pursuant to the terms hereof, does not make insurance proceeds available to Borrowers, Borrowers, at Borrowers’ expense, shall promptly proceed to remove any debris and secure the Projects.
(b)Application of Insurance Proceeds. Administrative Agent shall make insurance proceeds available to Borrowers for application to the costs of restoring the damaged Project or to the payment of the Loan as follows:
(i)if the loss is less than or equal to the Restoration Threshold, Administrative Agent shall make the insurance proceeds available to Borrowers, which proceeds shall be used by Borrowers to pay for the restoration of the damaged Project provided (A) no Event of Default exists, and (B) the applicable Borrower promptly commences and is diligently pursuing restoration of the damaged Project;
(ii)if the loss exceeds the Restoration Threshold but is not more than 30% of the replacement value of the Improvements comprising the damaged Project, Administrative Agent shall disburse the insurance proceeds to Borrowers, which proceeds shall be used by the applicable Borrower for the restoration of the damaged Project provided that (A) at all times during such restoration no Event of Default exists; (B) the applicable Borrower delivers reasonably detailed plans and a budget to Administrative Agent for the proposed restoration; (C) Administrative Agent determines at each request for a draw that there are sufficient funds available to restore and repair the damaged Project to substantially the same condition existing immediately prior to such Casualty or, if Administrative Agent reasonably determines there is any such insufficiency, Borrowers provide additional security to address such insufficiency to Administrative Agent’s
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satisfaction; (D) Administrative Agent reasonably determines that the Adjusted Net Operating Income of the Projects during restoration, taking into account rent loss or business interruption insurance, will be sufficient to pay debt service; (E) Administrative Agent determines that the ratio of the outstanding principal balance of the Loan to appraised value of the Projects after restoration of the damaged Project will not exceed the loan-to-value ratio that existed on the Closing Date; (F) Administrative Agent determines that after restoration of the damaged Project, the Projects and Borrowers will comply with the financial covenants set forth in Section 7.13, (G) the Debt Service Coverage Ratio will be at least 1.25:1.00; (H) Administrative Agent determines that restoration and repair of the damaged Project to a condition reasonably approved by Administrative Agent will be completed within nine (9) months after the date of loss or casualty and in any event ninety (90) days prior to the Maturity Date; (I) the applicable Borrower promptly commences and is diligently pursuing restoration of the damaged Project; and (J) the damaged Project after the restoration will be in compliance with and permitted under all Requirements of Law; and
(iii)if the conditions set forth in (i) and (ii) above are not satisfied or the loss exceeds the maximum amount specified in Section 3.2(b)(ii) above, then Administrative Agent may elect, in its sole discretion unless otherwise directed by the Required Lenders, to apply any insurance proceeds Administrative Agent receives as a prepayment of the Loan, or allow all or a portion of such proceeds to be used for the restoration of the damaged Project. Any such prepayment will be made by the Administrative Agent on a Payment Date and shall not be subject to any Prepayment Premium.
(c)Disbursement of Insurance Proceeds. Provided that the applicable Borrower is diligently pursuing completion of restoration of the damaged Project, insurance proceeds received by Administrative Agent and to be applied to restoration pursuant to the terms of this Section 3.2, will be disbursed by Administrative Agent to Borrowers on a monthly basis, commencing within ten (10) Business Days following receipt by Administrative Agent of plans and specifications, contracts and subcontracts, schedules, budgets, conditional lien waivers and architects’ certificates all in form reasonably satisfactory to Administrative Agent, and otherwise in accordance with prudent commercial construction lending practices for construction loan advances (including appropriate retainages to ensure that all work is completed in a workmanlike manner). Any insurance proceeds remaining after payment of all restoration costs shall be remitted to Borrowers provided there is not then a continuing Event of Default.
Section 1.3Condemnation Awards. Borrowers shall promptly give Administrative Agent written notice of the actual or threatened commencement of any condemnation or eminent domain proceeding affecting any Project (a “Condemnation”) and shall deliver to Administrative Agent copies of any and all papers served in connection with such Condemnation. Following the occurrence of a Condemnation, Borrowers, regardless of whether any award or compensation (an “Award”) is available, shall promptly proceed to restore, repair, replace or rebuild the same to the extent practicable to be of at least equal value and of substantially the same character as prior to such Condemnation, all to be effected in accordance with all Requirements of Law. Administrative Agent may participate in any such proceeding (for itself and on behalf of the Lenders) and Borrowers will deliver to Administrative Agent all instruments necessary or required by Administrative Agent to permit such participation. Without Administrative Agent’s prior consent, Borrowers (a) shall not agree to any Award, and (b) shall not take any action or fail to take any action which would cause the Award to be determined. All Awards for the taking or purchase in lieu of condemnation of the applicable Project or any part thereof are hereby assigned to and shall be paid to Administrative Agent to be held and disbursed or applied as hereinafter provided. Administrative Agent is hereby irrevocably appointed as
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Borrowers’ attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any Award and to make any compromise or settlement in connection with any such Condemnation and to give proper receipts and acquittances therefor, and in Administrative Agent’s sole discretion (in consultation with the Required Lenders) to apply the same toward the payment of the Loan, notwithstanding that the Loan may not then be due and payable, or to the restoration of the applicable Project; provided, however, if the Award is less than or equal to the Restoration Threshold and Borrowers request in writing that such proceeds be used for nonstructural site improvements (such as landscape, driveway, walkway and parking area repairs) required to be made as a result of such Condemnation, Administrative Agent will apply the Award to such restoration in accordance with disbursement procedures applicable to insurance proceeds provided there exists no Potential Default or Event of Default. Borrowers, upon request by Administrative Agent, shall execute all instruments requested to confirm the assignment of the Awards to Administrative Agent, free and clear of all liens, charges or encumbrances. Anything herein to the contrary notwithstanding, if a Potential Default or Event of Default exists, Administrative Agent is authorized to adjust such Award without the consent of Borrowers and to collect such Award in the name of Administrative Agent (on behalf of itself and the Lenders) and Borrowers.
Section 1.4Insurance Impounds. Borrowers shall deposit with Administrative Agent, monthly on each Payment Date, a sum of money (the “Insurance Impound”) equal to one-twelfth (l/12th) of the annual charges for the Insurance Premiums. Deposits shall be made on the basis of Administrative Agent’s estimate from time to time of the Insurance Premiums for the current year. All funds so deposited shall be held without interest in Administrative Agent’s name and shall not be deemed to be held in trust for the benefit of Borrowers. All funds so deposited may be commingled with the general funds of Administrative Agent. Borrowers hereby grant to Administrative Agent (for its benefit and the benefit of the Lenders) a security interest in all funds so deposited with Administrative Agent for the purpose of securing the Loan. Until an Event of Default exists, Administrative Agent shall apply the funds deposited to pay Insurance Premiums as provided herein. While an Event of Default exists, the funds deposited may be applied in payment of the Insurance Premiums for which such funds have been deposited, or to the payment of the Loan or any other charges affecting the security of Administrative Agent, as Administrative Agent may elect, but no such application shall be deemed to have been made by operation of law or otherwise until actually made by Administrative Agent. Borrowers shall furnish Administrative Agent with bills for the Insurance Premiums for which such deposits are required at least thirty (30) days prior to the date on which the Insurance Premiums first become payable. If at any time the amount on deposit with Administrative Agent, together with amounts to be deposited by Borrowers before such Insurance Premiums are payable, is insufficient to pay such Insurance Premiums, Borrowers shall deposit any deficiency with Administrative Agent immediately upon demand. Administrative Agent shall pay such Insurance Premiums on or before the due date therefore; provided that the amount on deposit with Administrative Agent is sufficient to pay such Insurance Premiums and Administrative Agent has received a bill for such Insurance Premiums. On the Maturity Date, the monies then remaining on deposit with Administrative Agent under this Section 3.4 shall, at Administrative Agent’s option, be applied against the Indebtedness or if no Event of Default exists hereunder, returned to Borrowers. Notwithstanding anything to the contrary contained in this Agreement, the Insurance Impound shall be waived so long as (i) no Event of Default has occurred, (ii) Borrowers are not required to deposit Excess Cash Flow into the Project Yield Fund, and (iii) Borrowers provide to Administrative Agent, at least ten (10) days prior to the date any delinquency or penalty becomes due with respect to Insurance Premiums, evidence reasonably acceptable to Administrative Agent that the Insurance Premiums which have become due have been paid in full. Administrative Agent shall waive the Insurance Impound requirement in the case of the foregoing clauses (i) and (ii) to the extent that Borrowers promptly provide all evidence reasonably requested by Administrative Agent to confirm that the
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Tenants have paid (and continue to pay) insurance current as required under the terms of their Leases.
Section 1.5Real Estate Tax Impounds. Borrowers shall deposit with Administrative Agent, monthly on each Payment Date, a sum of money (the “Tax Impound”) equal to one-twelfth (1/12th) of the annual Taxes for Projects. Deposits shall be made on the basis of Administrative Agent’s reasonable estimate from time to time of the Taxes for the current year (after giving effect to any reassessment or, at Administrative Agent’s election, on the basis of the Taxes for the prior year, with adjustments when the Taxes are fixed for the then current year). All funds so deposited shall be held without interest in Administrative Agent’s name and shall not be deemed to be held in trust for the benefit of Borrowers. All funds so deposited may be commingled with the general funds of Administrative Agent. Borrowers hereby grant to Administrative Agent (for its benefit and the benefit of the Lenders) a security interest in all funds so deposited with Administrative Agent for the purpose of securing the Loan. Until an Event of Default exists, Administrative Agent shall apply the funds deposited to pay the Taxes as provided herein. While an Event of Default exists, the funds deposited may be applied in payment of the charges for which such funds have been deposited, or to the payment of the Loan or any other charges affecting the security of Administrative Agent, as Administrative Agent may elect, but no such application shall be deemed to have been made by operation of law or otherwise until actually made by Administrative Agent. Borrowers shall furnish Administrative Agent with bills for the Taxes for which such deposits are required at least thirty (30) days prior to the date on which the Taxes first become payable. If at any time the amount on deposit with Administrative Agent, together with amounts to be deposited by Borrowers before such Taxes are payable, is insufficient to pay such Taxes, Borrowers shall deposit any deficiency with Administrative Agent immediately upon demand. Administrative Agent shall pay such Taxes before any penalty or interest accrued thereon provided that the amount on deposit with Administrative Agent is sufficient to pay such Taxes and Administrative Agent has received a bill for such Taxes. The obligation of Borrowers to pay the Taxes, as set forth in the Loan Documents, is not affected or modified by the provision of this paragraph; provided, however, that Borrowers shall not be in default under the Loan for failure to pay Taxes if and to the extent there are sufficient funds on deposit in the Tax Impound to timely pay such Taxes. On the Maturity Date, the monies then remaining on deposit with Administrative Agent under this Section 3.5 shall, at Administrative Agent’s option, be applied against the Indebtedness or if no Event of Default exists hereunder, returned to Borrowers. Notwithstanding anything to the contrary contained in this Agreement, the Tax Impound shall be waived so long as (i) no Event of Default has occurred, (ii) Borrowers are not required to deposit Excess Cash Flow into the Project Yield Fund, and (iii) Borrowers provide to Administrative Agent, on or before the date of delinquency, evidence reasonably acceptable to Administrative Agent that all Taxes which have become due have been paid in full. Administrative Agent shall waive the Tax Impound requirement in the case of the foregoing clauses (i) and (ii) to the extent that Borrowers promptly provide all evidence reasonably requested by Administrative Agent to confirm that the Tenants have paid (and continue to pay) Taxes current as required under the terms of their Leases.
ARTICLE 4
LEASING MATTERS
Section 1.1Representations and Warranties on Leases. Borrowers represent and warrant to Administrative Agent and Lenders with respect to the Leases that, (i) the rent roll delivered to Administrative Agent with respect to such Leases is true and correct; (ii) such Leases are in full force and effect; (iii) the Leases (including amendments) are in writing, and there are no oral agreements with respect thereto; (iv) the copies of the Leases delivered to Administrative Agent are true and complete; (v) except as set forth on Schedule 4.1, neither the landlord nor, to Borrowers’ Knowledge, any tenant is in default under any of the Leases; (vi) except as disclosed in estoppel certificates delivered by or on behalf of any Tenants prior to the
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Closing Date or as otherwise set forth on Schedule 4.1, Borrowers have no knowledge of any notice of termination or default with respect to any Lease; (vii) Borrowers have not assigned or pledged any of the Leases, the rents or any interests therein except to Administrative Agent and the Lenders; (viii) except as set forth on Schedule 4.1, no Tenant or other party has an option to purchase all or any portion of any Project; (ix) except as set forth on Schedule 4.1 attached hereto, no Tenant has the right to terminate its Lease prior to expiration of the stated term of such Lease; and (x) except as set forth on Schedule 4.1 attached hereto or any estoppel certificate delivered by or on behalf of any Tenant, no Tenant has prepaid more than one month’s rent in advance (except for bona fide security deposits not in excess of an amount equal to two months’ rent).
Section 1.2Standard Lease Form; Approval Rights. All Leases and other rental arrangements shall in all respects be reasonably approved by Administrative Agent and shall be on a standard lease form reasonably approved by Administrative Agent with no modifications (except as approved by Administrative Agent, which approval will not be unreasonably withheld or delayed). Such lease form shall provide that (a) the lease is subordinate to the Mortgage, (b) the tenant shall attorn to Administrative Agent, and (c) that any cancellation, surrender, or amendment of such lease without the prior written consent of Administrative Agent shall be voidable by Administrative Agent. Borrowers shall hold, in trust, all tenant security deposits in a segregated account to the extent required by Requirements of Law. Within ten (10) days after Administrative Agent’s request, Borrowers shall furnish to Administrative Agent a statement of all tenant security deposits, and copies of all Leases not previously delivered to Administrative Agent, certified by Borrowers as being true and correct. Notwithstanding anything contained in the Loan Documents, provided no Event of Default exists. Borrowers shall have the right to enter into Leases without Administrative Agent’s prior written consent so long as the proposed Lease meets the following criteria: (i) the economic terms of the Lease conform to those of the market, (ii) the initial term is no longer than five (5) years (excluding the existing Lease), and (iii) the leased premises are not in excess of 5% of the leased premises are not in excess of 5% of the rentable square feet of such Project and the Lease represents less than 5% of the annual revenue of such Project, (iv) the Lease is in the form reasonably previously approved by Administrative Agent without material modification, and (v) the tenant is a physician, physician group or surgical center tenant.
Section 1.3Covenants. Borrowers shall (or cause Operators to) (i) perform the obligations which any Lease Party is required to perform under the Leases; (ii) enforce the obligations to be performed by the Tenants under the Leases; (iii) promptly furnish to Administrative Agent any notice of default or termination received by Borrowers from any Tenant under a Lease, and any notice of default or termination given by Borrowers to any Tenant; (iv) not collect any rents for more than one month in advance of the time when the same shall become due, except for bona fide Security Deposits not in excess of an amount equal to two month’s rent (and any such prepayments shall be paid to Administrative Agent); (v) not enter into any ground lease or master lease of any part of any Project; (vi) not further assign or encumber any Lease; (vii) not, except with Administrative Agent’s prior written consent, cancel or accept surrender or termination of any Lease; (viii) not, except with Administrative Agent’s prior written consent, modify or amend any Lease or guaranty thereof (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not affecting the economic terms of the Lease); (ix) cause all Lease termination fees due from Tenants to be paid to Administrative Agent provided the same are made available to Borrowers to cover costs of the applicable Project; and (x) assign to Administrative Agent any letter of credit evidencing a security deposit on such terms as may be required by Administrative Agent and shall deliver the original of such letter(s) of credit to Administrative Agent (provided that absent a continuing Event of Default, upon the request of Borrowers’ Agent, Administrative Agent shall make available to the applicable Borrower such letter of credit to be used and/or returned to the applicable Tenant in accordance with the terms
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of the applicable Lease); and (x) not, except with Administrative Agent’s consent, (such consent not to be unreasonably withheld or delayed), consent to an assignment or sublease of any Lease by the Tenant thereunder. Any action in violation of clauses (v), (vi), (vii), and (viii) of this Section 4.3 shall be void at the election of Administrative Agent. Borrowers and Operators, as applicable, will not suffer or permit any breach or default to occur in any of any Lease Party’s obligations under any of the Leases, nor suffer or permit the same to terminate by reason of any failure of Lease Party to meet any requirement of any Lease. Notwithstanding the foregoing, without the prior written consent of Administrative Agent, Borrowers shall not (x) cancel or accept a surrender or termination of any Major Lease, or (y) consent to an assignment or subletting of the Major Lease where landlord’s consent is required under the terms of the Major Lease, or (z) modify any Consent Required Provision of a Major Lease.
Section 1.4Tenant Estoppels. At Administrative Agent’s request, Borrowers shall use commercially reasonable efforts to obtain and furnish (or cause Operator to obtain and furnish) to Administrative Agent, written estoppels in form and substance reasonably satisfactory to Administrative Agent, executed by Tenants under Leases in excess of 3,000 square feet of such Project and confirming the term, rent, and other provisions and matters relating to such Leases that is reasonable and customary to address in such estoppels.
Section 1.5Deemed Approval. In the event that (a) any Borrower delivers to Administrative Agent a written request pursuant to Section 11.1 for Administrative Agent’s approval of (i) a Lease or other leasing matter requiring Administrative Agent consent under this Article 4 with respect to a matter, amendment or new Lease with comparable or superior economic terms and conditions from the immediately preceding provision or Lease in the reasonable judgment of the Borrowers’ Agent or (ii) the termination of a Lease pursuant to the terms of such Lease due to the Tenant’s default thereunder provided such termination is in the best interest of the applicable Borrower in the reasonable business judgment of the Borrowers’ Agent, (b) Administrative Agent has failed to respond to such request within ten (10) Business Days after Administrative Agent’s receipt of such request, and (c) Borrowers have delivered to Administrative Agent by such method a second copy of such request with such supporting documents and information required above, then, if Administrative Agent has failed to respond to such second written request pursuant to Section 11.1 within five (5) Business Days after Administrative Agent’s receipt of such second written request and such supporting documents and information, such request shall be deemed approved; provided that each such request included a legend prominently displayed at the top of the first page thereof in solid capital letters in bold face type of a font size not less than fourteen (14) as follows: “WARNING: IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10)/FIVE (5) BUSINESS DAYS AFTER YOUR RECEIPT, YOU WILL BE DEEMED TO HAVE APPROVED THIS REQUEST.” For the avoidance of doubt, if Administrative Agent responds to any such request with a request for further information or documentation, the initial ten (10) Business Day period or subsequent five (5) Business Day period, as the case may be, shall not commence until all such requested information and/or documentation has been received by Administrative Agent.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants to Administrative Agent and Lenders unless otherwise specified, as of the Closing Date and as of the date of each Compliance Certificate delivered to Administrative Agent pursuant to Section 6.2 hereof that:
Section 1.1Organization, Power and Authority; Formation Documents, Organization, etc. Each Borrower and each other Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation or existence and each
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Borrower is in compliance with all Requirements of Law applicable to doing business in the state in which the Project which it owns is located. No Borrower is a “foreign person” within the meaning of §1445(f)(3) of the Code. Borrowers and each other Borrower Party has only one state of incorporation or organization which is set forth in Schedule 5.1. All other information regarding each Borrower and each other Borrower Party contained in Schedule 5.1, including the ownership structure of Borrowers and its constituent entities, is true and correct as of the Closing Date.
(a)Formation Documents. A true and complete copy of the formation documents creating Borrowers and each other Borrower Party and any and all amendments thereto (collectively, the “Borrower Formation Documents”) has been furnished to Administrative Agent. The Borrower Formation Documents constitute the entire agreement governing the formation and existence of Borrowers and each other Borrower Party among the members of Borrowers or such other Borrower Party and are binding upon and enforceable against each of the members in accordance with their terms. No breach exists under the Borrower Formation Documents and no condition exists which, with the giving of notice or the passage of time, would constitute a breach under the Borrower Formation Documents.
(b)Proceedings; Enforceability. Borrowers have taken all necessary action to authorize the execution, delivery and performance of the Loan Documents and the Environmental Indemnity Agreement. The Loan Documents and the Environmental Indemnity Agreement have been duly executed and delivered by Borrowers and constitute legal, valid and binding obligations of Borrowers enforceable against Borrowers in accordance with their respective terms, subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and general principles of equity. The Loan Documents and the Environmental Indemnity Agreement are not subject to, and Borrowers have not asserted, any right of rescission, set-off, counterclaim or defense, including the defense of usury. No exercise of any of the terms of the Loan Documents or the Environmental Indemnity Agreement, or any right thereunder, will render any Loan Document unenforceable.
(c)No Conflicts. The execution, delivery and performance of the Loan Documents and the Environmental Indemnity Agreement by Borrowers and the transactions contemplated hereby will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any Lien (other than pursuant to the Loan Documents and the Environmental Indemnity Agreement) upon any of the property of Borrowers pursuant to the terms of, any agreement or instrument to which any Borrower is a party or by which its property is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrowers or any of their properties. Any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrowers of the Loan Documents and the Environmental Indemnity Agreement has been obtained and is in full force and effect.
Section 1.2Validity of Loan Documents. The execution, delivery and performance by each Borrower Party of the Loan Documents and the Environmental Indemnity Agreement to which it is a party: (a) are duly authorized and do not require the consent or approval of any other party or Governmental Authority which has not been obtained; and (b) will not violate any law or result in the imposition of any Lien upon the assets of any such party, except as contemplated by the Loan Documents or the Environmental Indemnity Agreement. The Loan Documents or the Environmental Indemnity Agreement constitute the legal, valid and binding obligations of Borrowers and each other Borrower Party who is a party to such Loan Documents and/or the Environmental Indemnity Agreement, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, or similar laws generally affecting the enforcement of creditors’ rights.
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Section 1.3Liabilities; Litigation.
(a)Financial Statements. The financial statements delivered by Borrowers and each other Borrower Party are true and correct in all material respects as of the date prepared. Except as disclosed in such financial statements, if any, there are no liabilities (fixed or contingent) affecting any Project, any Borrower or any other Borrower Party. Except as disclosed in such financial statements, there is no litigation, administrative proceeding, investigation or other legal action (including any proceeding under any state or federal bankruptcy or insolvency law) pending or, to Borrowers’ Knowledge, threatened, against the Projects Borrowers or any other Borrower Party which if adversely determined could have a Material Adverse Effect on such Person, a Borrower, Guarantor, any Project or the Loan.
(b)Contemplated Actions. No Borrower Party intends to file a petition under state or federal bankruptcy or insolvency laws or to liquidate all or a major portion of its assets or property, and no Borrower Party has knowledge of any Person contemplating the filing of any such petition against it.
(c)Litigation. There are no actions, suits or other proceedings at law or in equity by or before any Governmental Authority now pending or threatened against or affecting Borrowers or any Project, which, if adversely determined, might materially adversely affect the condition (financial or otherwise) or business of Borrowers (including the ability of Borrowers to carry out its obligations under the Loan Documents and the Environmental Indemnity Agreement), or the use, value, condition or ownership of the Projects
Section 1.4Taxes and Assessments. There are no unpaid or outstanding real estate or other taxes or assessments on or against the Projects or any part thereof, except general real estate taxes not yet due or payable. The Projects are comprised of one or more parcels, each of which constitutes a separate tax lot and none of which constitutes a portion of any other tax lot. There are no pending or, to Borrowers’ Knowledge, proposed, special or other assessments for public improvements or otherwise affecting any Project, nor are there any contemplated improvements to the Projects that may result in such special or other assessments.
Section 1.5Other Agreements Defaults. No Borrower Party is a party to any agreement or instrument or subject to any court order, injunction, permit, or restriction which might adversely affect the Projects or the business, operations, or condition (financial or otherwise) of Borrowers or any other Borrower Party. Borrower Party is in violation of any agreement which violation could reasonably be expected to have a Material Adverse Effect.
Section 1.6Compliance with Law. Each Borrower and, to Borrowers’ Knowledge, each Operator has all requisite Permits necessary to own, lease and operate its applicable Project and carry on its business, and, except as disclosed in the Zoning Report or Property Condition Report delivered to Administrative Agent prior to the Closing Date, the Projects are in compliance with all applicable Requirements of Law. The Projects do not constitute, in whole or in part, a legally non-conforming use under applicable Requirements of Law. To Borrowers’ Knowledge, no Borrower, nor any Guarantor or any Operator is in violation in any material respect of any Healthcare Laws or the subject of a material Healthcare Investigation.
Section 1.7Condemnation. No condemnation has been commenced or, to Borrowers’ Knowledge, is contemplated with respect to all or any portion of the Projects or for the relocation of roadways providing access to the Projects.
Section 1.8Access. The Projects have adequate rights of access to public ways and is served by adequate water, sewer, sanitary sewer and storm drain facilities. All public utilities necessary or convenient to the full use and enjoyment of the Projects are located in the public
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right-of-way abutting the Projects and all such utilities are connected so as to serve the Projects without passing over other property, except to the extent such other property is subject to a perpetual easement for such utility benefiting the Projects. All roads necessary for the full utilization of the Projects for their current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities.
Section 1.9Location of Borrowers; Trade Name. Borrowers’ principal place of business and chief executive offices are located at the address stated in Schedule 5.1 and, except as otherwise set forth in Schedule 5.1, Borrowers at all times has maintained its principal place of business and chief executive office at such location or at other locations within the same state. Borrowers do not use and will not use any trade name and have not done and will not do business under any name other than its actual name set forth herein.
Section 1.10ERISA Employees.
(a)As of the Closing Date and throughout the term of the Loan, (i) no Borrower is nor will it be an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Part 4 of Subtitle B of Title I of ERISA, and (ii) the assets of Borrowers do not and will not constitute “plan assets” of one or more such plans for purposes of Title I of ERISA, as determined under Section 3(42) of ERISA.
(b)As of the Closing Date hereof and throughout the term of the Loan (i) Borrowers are not nor will they be a “governmental plan” within the meaning of Section 3(3) of ERISA and (ii) assuming that the Loan will not be funded or held with “plan asets” of any governmental plan and assuming that the counterparty to any such transaction is not a governmental plan or any entity whose assets are deemed to be “plan assets” of any governmental plan, transactions by or with Borrowers are not and will not be subject to state statutes applicable to Borrowers regulating investments of and fiduciary obligations with respect to governmental plans.
(c)Borrower has no employees.
Section 1.11Use of Loan Proceeds. The proceeds of the Loan are intended and will be used for agricultural, business or commercial purposes and are not intended and will not be used for personal, family or household purposes. No proceeds of the Loan will be used for purchasing or acquiring any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System. Each Borrower is acting on its own behalf and for the benefit of itself and the other Borrowers. The Loan has been requested by Borrowers, collectively, and the proceeds of the Loan shall be utilized by Borrowers for their collective accounts.
Section 1.12Forfeiture. There has not been committed by any Borrower Party or any Operator, any other person in occupancy of or involved with the operation or use of the Projects any act or omission affording the federal government or any state or local government the right of forfeiture as against the Projects or any part thereof or any monies paid in performance of Borrowers’ obligations under any of the Loan Documents or the Environmental Indemnity Agreement (the “Forfeiture Rights”).
Section 1.13Tax Filings. Each Borrower Party has filed (or has obtained effective extensions for filing) all federal, state and local tax returns required to be filed and have paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by such Borrower Party, respectively. Each Borrower Party believes that its respective tax returns properly reflect the income and taxes of such Borrower Party for the
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periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit.
Section 1.14Fraudulent Transfer. Borrowers have not entered into the Loan, any Loan Document or the Environmental Indemnity Agreement with the actual intent to hinder, delay, or defraud any creditor, and Borrowers have received reasonably equivalent value in exchange for its obligations under the Loan Documents and the Environmental Indemnity Agreement. Giving effect to the transactions contemplated by the Loan Documents and the Environmental Indemnity Agreement, the fair saleable value of Borrowers’ assets exceeds and will, immediately following the execution and delivery of the Loan Documents and the Environmental Indemnity Agreement, exceed Borrowers’ total probable liabilities, including subordinated, unliquidated, disputed and contingent liabilities, including the maximum amount of their contingent liabilities or their debts as such debts become absolute and matured. Borrowers’ assets do not, and immediately following the Closing Date and each advance of the proceeds of the Loan will not, constitute unreasonably small capital to carry out their business as conducted or as proposed to be conducted. Borrowers do not intend to incur debts and liabilities (including contingent liabilities and other commitments) beyond their ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).
Section 1.15Full and Accurate Disclosure; No Material Adverse Change.
(a)No statement of fact made by or on behalf of any Borrower Party in this Agreement, in any of the other Loan Documents or the Environmental Indemnity Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading, nor has there been any material adverse change in any condition, fact, circumstance or event that would make the financial statements, rent rolls, reports, certificates or other documents submitted in connection with the Loan inaccurate, incomplete or otherwise misleading in any material respect as of the date of such statements, rent rolls, reports, certificates or other documents. There is no fact presently known to Borrowers which has not been disclosed to Administrative Agent which could reasonably be expected to have a Material Adverse Effect. To Borrowers’ Knowledge, the information supplied by Borrowers regarding any Collateral is accurate and complete in all material respects. All evidence of Borrowers’ and each other Borrower Party’s identity provided to Administrative Agent and Lenders is genuine, and all related information is accurate.
(b)As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.
Section 1.16Flood Zone. No portion of the Improvements comprising any Project is located in an area identified by the Secretary of Housing and Urban Development or any successor thereto as an area having special flood hazards pursuant to the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Act of 1994, as amended, or any successor law, or, if located within any such area, Borrowers have obtained and will maintain the insurance prescribed in Section 3.1 hereof.
Section 1.17Single Purpose Entity/Separateness. Borrowers represent, warrant and covenant, from and after the Closing Date for so long as any obligation under the Loan Documents remains outstanding, as follows:
(a)Limited Purpose. The sole purpose conducted or promoted by each Borrower is to engage in the following activities:
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(i)to acquire, own, hold, lease, operate, manage, maintain, develop and improve the applicable Project (or an undivided interest therein) and to contract for the operation, maintenance, management and development of the applicable Project;
(ii)to enter into and perform its obligations under the Loan Documents and Environmental Indemnity Agreement;
(iii)to sell, transfer, service, convey, dispose of, pledge, assign, borrow money against, finance, refinance or otherwise deal with the applicable Project to the extent permitted under the Loan Documents; and
(iv)to engage in any lawful act or activity and to exercise any powers permitted to limited liability companies organized under the laws of its jurisdiction of formation that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above mentioned purposes.
(b)Limitations on Debt, Actions. Notwithstanding anything to the contrary in the Loan Documents or in any other document governing the formation, management or operation of Borrowers, Borrowers shall not:
(i)other than with respect to the pledge of its assets to secure the debt of the other Borrowers and the obligations of Guarantor under a Secured Hedge Agreement, guarantee any obligation of any Person, including any Affiliate of Borrowers, or become obligated for the debts of any other Person or hold out its credit as being available to pay the obligations of any other Person;
(ii)engage, directly or indirectly, in any business other than as required or permitted to be performed under this Section 5.17;
(iii)incur, create or assume any Debt other than (A) the Loan and (B) unsecured trade payables incurred in the ordinary course of its business that are related to the ownership and operation of the Projects and which shall (1) not exceed two percent (2%) of the outstanding balance of the Loan, (2) not be evidenced by a note, (3) be paid within sixty (60) days, and (4) otherwise expressly be permitted under the Loan Documents; and (C) a reimbursement obligation for any Special Letter of Credit delivered pursuant to Section 7.13;
(iv)make or permit to remain outstanding any loan or advance to, or own or acquire any stock or securities of, any Person, except that Borrowers may invest in those investments permitted under the Loan Documents;
(v)to the fullest extent permitted by law, engage in any dissolution, liquidation, consolidation, merger, sale or other transfer any of their assets outside the ordinary course of each Borrower’s business or other than in accordance with the Loan Documents;
(vi)buy or hold evidence of indebtedness issued by any other Person (other than cash or investment-grade securities);
(vii)form, acquire or hold any subsidiary (whether corporate, partnership, limited liability company or other) or own any equity interest in any other entity;
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(viii)own any asset or property other than the Projects (or an undivided interest therein) and incidental personal property necessary for the ownership or operation of the Projects;
(ix)enter into a Division Transaction; or
(x)take any Material Action without the unanimous written approval of the members of such Borrower.
(c)Separateness Covenants. In order to maintain its status as a separate entity and to avoid any confusion or potential consolidation with any Affiliate of Borrower, each Borrower represents and warrants that in the conduct of its operations since its organization it has observed, and covenants that it will continue to observe, the following covenants:
(i)maintain books and records and bank accounts separate from those of any other Person;
(ii)except the commingling of assets permitted pursuant to the terms of this Agreement, maintain its assets in such a manner that it is not costly or difficult to segregate, identify or ascertain such assets and shall not commingle its assets or funds;
(iii)comply with all organizational formalities necessary to maintain its separate existence;
(iv)hold itself out to creditors and the public as a legal entity separate and distinct from any other entity;
(v)maintain separate financial statements, showing its assets and liabilities separate and apart from those of any other Person and not have its assets listed on any financial statement of any other Person; except that Borrowers’ assets may be included in a consolidated financial statement of its Affiliate so long as appropriate notation is made on such consolidated financial statements to indicate the separateness of Borrowers from such Affiliate;
(vi)other than with respect to the consolidated tax return of its Affiliates, , and other than with respect to a “disregarded entity” (whose income is reported on the tax return of its owner), prepare and file its own tax returns separate from those of any Person to the extent required by Requirements of Law, and pay any taxes required to be paid by Requirements of Law;
(vii)allocate and charge fairly and reasonably any common employee or overhead shared with Affiliates, constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing, including, but not limited to, paying for shared office space and for services performed by any employee of an Affiliate;
(viii)not enter into any transaction with any Person owned or controlled by an Affiliate of Borrowers except on an arm’s-length basis on terms which are intrinsically fair and no less favorable than would be available for unaffiliated third parties, and pursuant to written, enforceable agreements;
(ix)[reserved];
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(x)not commingle its assets or funds with those of any other Person other than as required or permitted by this Agreement;
(xi)except as otherwise provided in this Agreement or in any other Loan Documents, not assume, guarantee or pay the debts or obligations of any other Person other than with respect to the pledge of its assets to secure the debt of the other Borrowers;
(xii)correct any known misunderstanding as to its separate identity;
(xiii)not permit any Affiliate of Borrowers to guarantee or pay its obligations (other than as set forth in this Agreement and in the limited guarantees and indemnities set forth in the Loan Documents and in the Environmental Indemnity Agreement);
(xiv)not make loans or advances to any other Person;
(xv)pay its liabilities and expenses out of and to the extent of its own funds (and that of the other Borrowers as provided in this Agreement) and provided, however, the foregoing shall not require any owners of any Borrower to make capital contributions to any Borrower;
(xvi)pay the salaries of their own employees, if any, only from its own funds;
(xvii)maintain adequate capital in light of its contemplated business purpose, transactions and liabilities to the extent of sufficient cash flow from the applicable Project; provided, however, that the foregoing shall not require any equity owner to make capital contributions to any Borrower;
(xviii)cause the managers, officers, employees, agents and other representatives of such Borrower to act at all times with respect to such Borrower consistently and in furtherance of the foregoing and in the best interests of such Borrower;
(xix)except as expressly provided in this Loan Agreement or in the other Loan Documents, not have any obligation to, and will not, indemnify its partners, officers, directors or members, as the case may be, unless such an obligation is fully subordinated to the Indebtedness and will not constitute a claim against it in the event that cash flow in excess of the amount required to pay the Indebtedness is insufficient to pay such obligation; and
(xx)except as otherwise provided in this Agreement or in any other Loan Document, not pledge its assets for the benefit of any other Person other than to Administrative Agent and Lenders in connection with the Loan.
Failure of any Borrower to comply with any of the foregoing covenants or any other covenants contained in this Agreement shall not affect the status of any other Borrower as a separate legal entity.
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Section 1.18Anti-Money Laundering/International Trade Law Compliance; Patriot Act.
(a)No Covered Entity (i) is a Sanctioned Person; (ii) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person; or (iii) does business in or with, or derives any of its operating income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any law, regulation, order or directive enforced by any Compliance Authority.
(b)The proceeds of the Loan will not be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Country or Sanctioned Person in violation of any law, regulation, order or directive enforced by any Compliance Authority.
(c)The funds used to repay the Loan are not derived from any unlawful activity.
(d)Each Covered Entity is in compliance with, and no Covered Entity engages in any dealings or transactions prohibited by, any laws of the United States, including but not limited to any Anti-Terrorism Laws.
(e)Borrowers covenant and agree that they shall immediately notify Administrative Agent in writing upon the occurrence of a Reportable Compliance Event.
(f)As used herein: “Anti-Terrorism Laws” means any laws relating to terrorism, trade sanctions programs and embargoes, import/export licensing, money laundering, or bribery, all as amended, supplemented or replaced from time to time; “Compliance Authority” means each and all of the (a) U.S. Treasury Department/Office of Foreign Assets Control, (b) U.S. Treasury Department/Financial Crimes Enforcement Network, (c) U.S. State Department/Directorate of Defense Trade Controls, (d) U.S. Commerce Department/Bureau of Industry and Security, (e) U.S. Internal Revenue Service, (f) U.S. Justice Department, and (g) U.S. Securities and Exchange Commission; “Covered Entity” means Borrowers, their affiliates and subsidiaries, all guarantors, pledgors of collateral, all owners of the foregoing, and all brokers or other agents of Borrowers acting in any capacity in connection with the Loan; “Reportable Compliance Event” means that any Covered Entity becomes a Sanctioned Person, or is indicted, arraigned, investigated or custodially detained, or receives an inquiry from regulatory or law enforcement officials, in connection with any Anti-Terrorism Law or any predicate crime to any Anti-Terrorism Law, or self-discovers facts or circumstances implicating any aspect of its operations with the actual or possible violation of any Anti-Terrorism Law; “Sanctioned Country” means a country subject to a sanctions program maintained by any Compliance Authority; and “Sanctioned Person” means any individual person, group, regime, entity or thing listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person or entity, or subject to any limitations or prohibitions (including but not limited to the blocking of property or rejection of transactions), under any order or directive of any Compliance Authority or otherwise subject to, or specially designated under, any sanctions program maintained by any Compliance Authority.
(g)No Borrower Party nor any partner in any Borrower Party or member of such partner nor any owner of a direct or indirect interest in any Borrower Party (i) is listed on any Government Lists, (ii) is a Prohibited Person, (iii) has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude, or (iv) is currently under investigation by any Governmental Authority for alleged criminal activity.
Section 1.19Intentionally Omitted.
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Section 1.20Operators’ Agreements. A true, correct and complete copy of each of the Operators’ Agreements, together with all amendments thereto, have been delivered to Administrative Agent, and the Operators’ Agreements and all amendments thereto are in full force and effect, each as of the Closing Date.
Section 1.21Physical Condition. Except as specifically set forth in the Property Condition Report, to Borrowers’ Knowledge, (a) the Projects, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects, subject to ordinary wear and tear; and (b) there exists no structural or other material defects or damages in the Projects. Borrowers have not received written notice from any insurance company or bonding company of any defects or inadequacies in any Project, or any part thereof, which would adversely affect the insurability of the Projects or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.
All of the representations and warranties in this Article 5 and elsewhere in the Loan Documents and the Environmental Indemnity Agreement (i) shall survive the funding or repayment of the Loan, and (ii) shall be deemed to have been relied upon by Administrative Agent and the Lenders notwithstanding any investigation heretofore or hereafter made by Administrative Agent or any Lender or on their respective behalves.
ARTICLE 6
FINANCIAL REPORTING
Section 1.1Financial Statements. Borrowers shall furnish to Administrative Agent and shall cause each other Borrower Party to furnish to Administrative Agent such financial statements and other financial information required pursuant to this Article 6 and such other financial information as Administrative Agent may reasonably request from time to time. All such financial statements shall accurately and fairly present the results of operations and the financial condition of Borrowers on a consolidated basis at the dates and for the period indicated, shall be in scope and detail reasonably satisfactory to Administrative Agent and shall be otherwise sufficient to permit Administrative Agent and Lenders to calculate or verify Borrowers’ compliance with the financial covenants in Section 7.13 or, as applicable, elsewhere in this Agreement and Guarantor’s compliance with the financial covenants in the Guaranty. All financial statements shall be delivered in Excel format.
(a)Financial Information. In furtherance of the foregoing, Borrowers will furnish to Administrative Agent (or cause to be furnished to Administrative Agent) the following financial information and reports with respect to Borrowers, Guarantor, the Projects and/or each Operator (as applicable), in each case in form and format and providing information satisfactory to Administrative Agent in its reasonable discretion:
(i)[Reserved];
(ii)within fifty (50) days after the end of each calendar quarter, (A) a detailed operating statement (showing quarterly activity and year-to-date) stating operating revenues, operating expenses and operating income, income statement, and balance sheet for the calendar quarter just ended and year-to-date for each Project, and (B) a current rent roll;
(iii)[Reserved];
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(iv)within sixty (60) days after the end of each fiscal year, internally prepared annual financial statements prepared for each Borrower in accordance with GAAP (except for the absence of footnotes and year-end adjustments) and based on an accrual basis of accounting consistent with industry standards;
(v)within ninety-five (95) days after the end of each fiscal year, annual consolidated audited financial statements prepared for Borrowers, Guarantor and REIT in accordance with GAAP and prepared by a firm of independent public accountants reasonably satisfactory to Administrative Agent, it being acknowledged by Administrative Agent that any of KPMG US LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP and Deloitte LLP shall each be deemed satisfactory; provided, however, Administrative Agent and Lenders agree that the REIT’s publicly available 10K for such period shall be sufficient for the purpose of this Section 6.1(a)(v);
(vi)financial statements provided to any Borrower Party by any Tenant under any Lease;
(vii) within fifty (50) days after the end of each calendar quarter, internally prepared quarterly financial statements (including income statements and balance sheets) prepared for Borrowers and Guarantor which fairly present the financial condition for Borrowers and Guarantor for such period;
(viii)    during any Excess Cash Flow Period, within the period set forth in Section 7.13(c)(ii), the Cash Flow Requirements in accordance with Section 7.13(c)(ii); and
(viii)such additional information, reports or statements regarding Borrowers, the Projects and each Guarantor as Administrative Agent may from time to time reasonably request.
All property related financial statements will contain the requested information on a Project by Project basis, as well as a consolidated basis.
(b)Certification of Financial Statements. If requested by Administrative Agent or if attached to the Compliance Certificate, each financial statement provided hereunder shall be certified by the chief financial representative of each Borrower (or Borrowers’ Agent on behalf of Borrowers) or Guarantor, as applicable. Borrowers will maintain a system of accounting established and administered in accordance with sound business practices to (i) permit preparation of financial statements on an accrual basis consistent with industry standards and substantially in accordance with GAAP, and (ii) provide the information required to be delivered to Administrative Agent hereunder.
(c)Additional Reports and Information. Borrowers shall deliver to Administrative Agent the following additional reports and information:
(i)from time to time, if any Lender determines that obtaining appraisals is necessary in order for such Lender to comply with applicable Requirements of Law (including any appraisals required to comply with FIRREA), Borrowers shall furnish to Administrative Agent appraisal reports in form and substance and from appraisers reasonably satisfactory to Administrative Agent stating the then current fair market value of the Projects; provided, however, that such report shall not be required more frequently than once during the term of the Loan unless (A) an Event of Default exists or (B) any Lender is required to obtain such report under applicable Requirements of Law more frequently than once during the term of the Loan;
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(ii)within thirty (30) days following the request of Administrative Agent, a description of the type and amount of all capital expenditures at the Projects during the prior calendar year;
(iii)within thirty (30) days following the request of Administrative Agent, evidence satisfactory to Administrative Agent that all federal and state taxes, including without limitation, payroll taxes, that are due have been paid in full by Borrowers and each other Borrower Party, to be delivered to Administrative Agent (A) with respect to federal and state taxes (other than payroll taxes), within ten (10) days after the required filing date of the applicable tax return, and (B) with respect to payroll taxes, within thirty (30) days following the end of each calendar quarter;
(iv)within thirty (30) days after Administrative Agent’s request therefor, (A) a general ledger for Borrowers (which may be prepared on a consolidated basis) and (B) an accounts receivable and accounts payable aging report for the Projects;
(v)to the extent requested by Administrative Agent, copies of the regular monthly bank statements of Borrowers; and
(vi)promptly following any request therefor, information and documentation reasonably requested by Administrative Agent or any Lender for purposes of compliance with applicable “know your customer” requirements under the Patriot Act or other applicable anti-money laundering laws.
Section 1.2Compliance Certificate. Within fifty (50) days after the end of each calendar quarter, Borrowers shall deliver and shall cause Guarantor to deliver such financial reports and information as Administrative Agent shall reasonably require evidencing compliance with the applicable financial covenants set forth herein and in the Recourse Guaranty, together with a fully completed Compliance Certificate executed by an officer of Borrowers and by Guarantor (or of their managing member or general partner), in his/her capacity as an officer, and, if requested by Administrative Agent, back-up documentation as Administrative Agent shall reasonably require evidencing compliance.
Section 1.3Accounting Principles. All financial statements shall be prepared in accordance with GAAP (or such other accounting basis reasonably acceptable to Administrative Agent). Notwithstanding the foregoing, all financial statements delivered hereunder shall be prepared, and all financial covenants contained herein shall be calculated, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any similar accounting principle) permitting a Person to value its financial liabilities at the fair value thereof.
Section 1.4Access. Borrowers shall permit Administrative Agent and any Lender to examine such records, books and papers of Borrowers which reflect upon its financial condition and the income and expenses of the Projects. In the event that Borrowers fail to forward the financial statements required in this Article 6 within thirty (30) days after written request, Administrative Agent shall have the right to audit such records, books and papers at Borrowers’ expense.
Section 1.5Agent for Borrowers.
(a)Each Borrower hereby irrevocably appoints and constitutes Medical Center II - Peoria, AZ Project Borrower as its agent (“Borrowers’ Agent”) to request and receive advances in respect of the Loan (and to otherwise act on behalf of each such entity
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pursuant to this Agreement and the other Loan Documents) in the name or on behalf of each such Borrower. Administrative Agent may disburse proceeds of the Loan to the bank account of Medical Center II - Peoria, AZ Project Borrower without notice to any of the other entities comprising Borrowers or any other Person at any time obligated on or in respect of the Obligations.
(b)Each Borrower hereby irrevocably appoints and constitutes Borrowers’ Agent as its agent to receive statements of account and all other notices from Administrative Agent with respect to the Obligations or otherwise under or in connection with this Agreement and the other Loan Documents.
(c)No purported termination of the appointment of Borrowers’ Agent as agent for such Borrowers shall be effective without the prior written consent of Administrative Agent.
Section 1.6Books and Records/Audits. Borrowers shall keep and maintain or cause to be kept and maintained at all times at the Projects, or at such other place as Administrative Agent may reasonably approve in writing, complete and accurate books of accounts and records adequate to reflect the results of the operation of the Projects and to provide the financial statements required to be provided to Administrative Agent pursuant to Section 6.1 above and copies of all written contracts, material correspondence, and other material documents affecting the Projects. Administrative Agent and its designated agents shall have the right to inspect and copy any of the foregoing. Additionally, if an Event of Default exists or if Administrative Agent or any Lender has a reasonable basis to believe that Borrowers’ records are materially inaccurate, Administrative Agent and each Lender may conduct a joint audit and determine, in such Person’s reasonable discretion, the accuracy of Borrowers’ records and computations, such audit to be at Borrowers’ expense.
ARTICLE 7
COVENANTS
Borrowers covenant and agree with each Lender and Administrative Agent as follows:
Section 1.1Transfers or Encumbrance of Property.
(a)No Borrower shall cause or permit a Transfer of its fee interest in any Project or any part thereof or any legal or beneficial interest therein nor permit a Transfer of an interest in any Borrower Party (in each case, a “Prohibited Transfer”) without the prior written consent of Administrative Agent, other than pursuant to Leases of space in the improvements to Tenants (or other occupants as applicable) in accordance with the provisions of Article 4 hereof; provided, however, that involuntary liens being contested pursuant to Section 11.14, and the Permitted Exceptions (such liens together with the Permitted Exceptions, collectively, the “Permitted Encumbrances”) shall not constitute Prohibited Transfers hereunder.
(b)A Prohibited Transfer shall include, but not be limited to, (i) an installment sale agreement wherein any Borrower agrees to sell its Project or any part thereof for a price to be paid in installments; (ii) an agreement by any Borrower leasing all or a substantial part of its Project for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, any Borrower’s right, title and interest in and to any Leases or any rents; (iii) if a Borrower Party is a corporation, any merger, consolidation or Transfer of such corporation’s stock or the creation or issuance of new stock in one or a series of transactions; (iv) if a Borrower Party is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Transfer of the partnership interest of any general or limited partner or any
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profits or proceeds relating to such partnership interests (but not including distributions or dividends) or the creation or issuance of new partnership interests; (v) if a Borrower Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Transfer of the membership interest of any member; or (vi) if a Borrower Party is a trust or nominee trust, any merger, consolidation or the Transfer of the legal or beneficial interest in a Borrower Party or the creation or issuance of new legal or beneficial interests.
(c)Notwithstanding anything to the contrary contained in this Agreement, including, without limitation, Sections 7.1(a) and (b) above, or the other Loan Documents, (i) any Transfer that does not result in a Change of Control shall not be deemed to be a Prohibited Transfer, and (ii) any Permitted Transfer shall not be deemed to be a Prohibited Transfer and, in the case of clauses (b) and (c) of the definition of Permitted Transfer only, shall not be deemed to result in a Change of Control; provided, further, (A) Borrower shall give Lender thirty (30) days’ prior written notice of such Transfer pursuant to clause (b) of the definition of Permitted Transfer or, with respect to clause (d) of the definition of Permitted Transfer, as soon as practicable, and (B) in any event, Administrative Agent shall have received KYC searches with respect to any Person that will, as a result of the Transfer, own twenty (20%) or more of the direct or indirect legal or beneficial ownership interests in Borrowers, with results reasonably acceptable to Administrative Agent. All expenses, if any, incurred by Administrative Agent and Lenders in connection with a Permitted Transfer or a request for a consent to a Prohibited Transfer, whether or not the Administrative Agent’s consent to the Prohibited Transfer, shall be payable by Borrowers. Neither Administrative Agent nor any Lender shall be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Indebtedness immediately due and payable upon a Prohibited Transfer made without Administrative Agent’s consent. This provision shall apply to each and every Prohibited Transfer, whether or not the Administrative Agent has consented to any previous Prohibited Transfer.
Section 1.2Taxes; Utility Charges. Except to the extent sums sufficient to pay all Taxes (defined herein) have been previously deposited with Administrative Agent as part of the Tax Impound and subject to Borrowers’ right to contest in accordance with Section 11.13 hereof, Borrowers shall pay before any fine, penalty, interest or cost may be added thereto, and shall not enter into any agreement to defer, any real estate taxes and assessments, franchise taxes and charges, and other governmental charges (the “Taxes”) that may become a Lien upon any Project or become payable during the term of the Loan. Borrowers’ compliance with Section 3.5 of this Agreement relating to impounds for Taxes shall, with respect to payment of such Taxes, be deemed compliance with this Section 7.2. Borrowers shall not suffer or permit the joint assessment of any Project with any other real property constituting a separate tax lot or with any other real or personal property. Borrowers shall promptly pay for all common area utility services provided to the Projects.
Section 1.3Management.
(a)Borrowers acknowledge that the Lenders are making the Loan, in part, based upon the operational expertise of the Property Manager. Borrowers shall not surrender, terminate, cancel, modify or amend in any material respect, renew or extend the Management Agreement (provided that (x) termination of a Management Agreement upon a default by the Property Manager thereunder or (y) expiration of the term of any Management Agreement shall not violate the terms of this clause (i) so long as the applicable Borrower enters into a replacement Management Agreement reasonably approved by Administrative Agent within thirty (30) days thereafter), or (ii) enters into any other agreement relating to the management or operation of the Projects with Property Manager or any other Person, or consent to the assignment by the Property Manager of its interest under the Management Agreement, in each
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case without the express written consent of Administrative Agent, which consent shall not be unreasonably withheld, conditioned or delayed and shall be based upon Administrative Agent’s evaluation of the proposed substitute manager’s and operator’s financial condition, credit history and credit worthiness, experience in operating and managing properties similar to the Projects, performance and compliance history in connection with healthcare facilities, reputation for honesty and integrity and prior experience with Administrative Agent and the Lenders. Administrative Agent shall approve renewals and extensions of the existing Property Manager and existing Management Agreement that were approved on Closing Date provided that the replacement Management Agreement is on substantially the same terms and conditions and such Property Manager satisfies the requirements of this Section 7.3. The existing Management Agreement with the non-Affiliate Property Manager that is scheduled for renewal or extension every thirty (30) days may be extended by the applicable Borrower without the approval of the Administrative Agent. Borrowers shall not be required to obtain Administrative Agent’s consent to the termination of the non-Affiliate Management Agreement entered into on the Closing Date provided that the Affiliated Manager Management Agreement is amended to include such Projects thereunder on substantially the same terms and conditions in effect as of the Closing Date, and the terms and conditions of this Section 7.3 remain satisfied. If at any time Administrative Agent consents to the appointment of a new manager, the Management Agreement to which such manager is party shall be in form and substance reasonably acceptable to Administrative Agent, and such new manager and Borrowers shall, as a condition of Administrative Agent’s consent, execute an Acknowledgment and Agreement of Property Manager in form and substance similar to the Acknowledgment and Agreement of Property Manager executed by the Property Manager as of the Closing Date. Any change in ownership or control of the Property Manager shall be cause for Administrative Agent to re-approve such Property Manager and Management Agreement, only if Administrative Agent, in its reasonable discretion, deems such re-approval to be necessary to determine compliance with the terms of this Section 7.3. Each Property Manager shall hold and maintain all necessary licenses, certifications and permits required under applicable Requirements of Law to operate and manage the Projects for which it is providing management services. Borrowers’ written requests to Administrative Agent contemplated in this Section 7.3 shall be deemed approved upon the satisfaction of the conditions set forth in Section 4.5; provided, however, such deemed approval shall be limited to the matters set forth above to the extent such proposals have comparable or superior economic terms and conditions from the immediately preceding provisions in the applicable Management Agreement or equivalent or superior experience and reputation compared to the applicable Property Manager in the reasonable judgment of the Borrowers.
(b)Each applicable Borrower shall cause each Property Manager to manage its applicable Project in accordance with the Management Agreement. Borrowers shall (i) diligently perform and observe all of the terms, covenants and conditions of the Management Agreement on the part of Borrowers to be performed and observed, (ii) promptly notify Administrative Agent of any notice received by Borrowers of any default by Borrowers in the performance or observance of any of the material terms, covenants or conditions of the Management Agreement on the part of Borrowers to be performed and observed, and (iii) promptly deliver to Administrative Agent a copy of each financial statement, business plan, capital expenditures plan, report and estimate received by them under the Management Agreement. The management fee payable under the Management Agreement shall not exceed four percent (4.0%) of rental collections with respect to the Projects.
(c)Administrative Agent shall have the right to require Borrowers to replace the Property Manager with a Person which is not an Affiliate of, but is chosen by, Borrowers and approved by Administrative Agent, such approval not to be unreasonably withheld or delayed, upon the occurrence of any one or more of the following events: (i) at any time following the occurrence and continuance of an Event of Default, (ii) if the applicable Property Manager shall be in default under the Management Agreement beyond any applicable notice or cure period, or
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(iii) if the Property Manager has engaged in gross negligence, fraud or willful misconduct or is insolvent or a debtor in a bankruptcy proceeding. Further, upon a Resize Event Administrative Agent may discuss with Borrowers replacement of the Property Manager if Administrative Agent reasonably believes that the Resize Event was caused by the Property Manager’s failure to manage the applicable Project in accordance with its Property Management Agreement.
Section 1.4Operation; Maintenance; Inspection. Borrowers shall observe and comply with all applicable Requirements of Law applicable to the ownership, use and operation of the Projects. Borrowers shall maintain the Projects in good condition and promptly repair any damage or casualty, normal wear and tear excepted. Borrowers shall permit Administrative Agent, Lenders and their agents, representatives and employees, upon reasonable prior notice to Borrowers, to inspect the Projects and conduct such environmental and engineering studies as Administrative Agent may require, provided such inspections and studies do not materially interfere with the use and operation of the Projects.
Section 1.5Taxes on Security. Borrowers shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Liens created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Administrative Agent or any Lender. If there shall be enacted any law (a) deducting the Loan from the value of the Projects for the purpose of taxation, or (b) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by real property, or changing the manner of collecting any such taxes, Borrowers shall promptly pay to Administrative Agent, on demand, all taxes, costs and charges for which Administrative Agent or any Lender is or may be liable as a result thereof; however, if such payment would be prohibited by law or would render the Loan usurious, then instead of collecting such payment, Administrative Agent may declare all amounts owing under the Loan Documents to be due and payable within ninety (90) days following receipt of such notice by Borrowers without payment of any Prepayment Premium.
Section 1.6Legal Existence, Name, Etc. Each Borrower shall preserve and keep in full force and effect its existence as, and at all times operate as, a Single Purpose Entity, and shall preserve and keep in full force and effect its entity status, franchises, rights and privileges under the laws of the state of its formation, and all qualifications, licenses and permits applicable to and required for the ownership, use and operation of its Project. No Borrower nor any general partner, manager or managing member of any Borrower shall wind up, liquidate, dissolve, reorganize, merge, or consolidate with or into any Person, or permit any subsidiary or Affiliate of any Borrower to do so. Without limiting the foregoing, no Borrower shall reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the Closing Date. Each Borrower shall conduct business only in its name and shall not change its name, identity, state of formation, or organizational structure, or the location of its chief executive office or principal place of business unless Borrower (a) shall have obtained the prior written consent of Administrative Agent to such change, and (b) shall have taken all actions necessary or requested by Administrative Agent to file or amend any financing statement or continuation statement to assure perfection and continuation of perfection of security interests under the Loan Documents.
Section 1.7Further Assurances. Borrowers shall promptly (a) cure any defects in the execution and delivery of the Loan Documents and the Environmental Indemnity Agreement, (b) provide, and cause each other Borrower Party to provide, Administrative Agent such additional information and documentation on Borrowers’ and each other Borrower Party’s legal or beneficial ownership, policies, procedures, and sources of funds as Administrative Agent deems necessary or prudent to enable Administrative Agent and each Lender to comply with anti-money laundering laws as now in existence or hereafter amended, and (c) execute and deliver, or cause to be executed and delivered, all such other documents, agreements and
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instruments as Administrative Agent may reasonably request to further evidence and more fully describe the Collateral for the Loan, to correct any omissions in the Loan Documents or the Environmental Indemnity Agreement to perfect, protect or preserve any liens created under any of the Loan Documents and the Environmental Indemnity Agreement, or to make any recordings, file any notices, or obtain any consents, as may be necessary or appropriate in connection therewith. Each Borrower grants Administrative Agent an irrevocable power of attorney coupled with an interest for the purpose of perfecting any security interest in and to the Collateral for the Loan. Each Borrower grants Administrative Agent an irrevocable power of attorney coupled with an interest for the purpose of exercising any and all rights and remedies available to Administrative Agent and Lenders under the Loan Documents and the Environmental Indemnity Agreement, at law and in equity, including without limitation such rights and remedies available to Administrative Agent pursuant to this Section 7.7; provided that Administrative Agent shall have no right to exercise such power of attorney unless there shall be a continuing Event of Default under this Agreement. From time to time upon the reasonable written request of Administrative Agent, Borrowers shall deliver to Administrative Agent a schedule of the name, legal domicile address and jurisdiction of organization, if applicable, for each Borrower Party and each holder of a legal interest in Borrowers.
Section 1.8Estoppel Certificates Regarding Loan. Borrowers, within ten (10) Business Days after request, shall furnish to Administrative Agent a written statement, duly acknowledged, setting forth the amount due on the Loan, the terms of payment of the Loan, the date to which interest has been paid, whether any offsets or defenses exist against the Loan and, if any are alleged to exist, the nature thereof in detail, and such other matters as Administrative Agent reasonably may request.
Section 1.9Notice of Certain Events. Borrowers shall promptly notify Administrative Agent of (a) any written notice of default received by Borrowers under other obligations relating to the Projects or otherwise material to Borrowers’ business, including any notices of violations of any laws, regulations, codes or ordinances which could reasonably be expected to have a Material Adverse Effect; (b) any threatened or pending legal, judicial or regulatory proceedings, including any dispute between Borrowers and any Governmental Authority; (c) a copy of each notice of default or termination given or made to any Operator by Borrowers or received by Borrowers from any Operator; (d) a copy of each notice of default or termination under any license or permit necessary for the operation of the Projects in the manner required by this Agreement; (e) any notice of a material Healthcare Investigation; (f) any threatened or pending legal, judicial or regulatory proceedings pertaining to a material Healthcare Investigation and (g) any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in such certification; and in the case of clauses (a), (c), (d), (e) or (f), promptly provide Administrative Agent with copies of such notices referred to therein.
Section 1.10Payment For Labor and Materials. Subject to Borrowers’ right to contest in accordance with Section 11.14 hereof, Borrowers will promptly pay, or cause to be paid, when due all bills and costs for labor, materials, and specifically fabricated materials incurred by Borrower in connection with the Projects and never permit to exist beyond the due date thereof in respect of the Projects or any part thereof any Lien, even though inferior to the Liens hereof, and in any event never permit to be created or exist in respect of the Projects or any part thereof any other or additional Lien other than the Liens hereof, except for the Permitted Exceptions; provided that nothing herein shall limit any Borrower’s obligations under this Agreement to enforce the terms and conditions of the Leases.
Section 1.11Use of Proceeds and Revenues. No portion of the proceeds of the Loan shall be used by Borrowers in any manner that might cause the borrowing or the application of such proceeds to violate Regulation D, Regulation T or Regulation X or any other regulation of
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the Board of Governors of the Federal Reserve System or to violate the Securities Act of 1933 or the Securities Exchange Act of 1934. Revenues and other proceeds from the Projects received by Borrowers shall be applied to the Obligations then due and owing in any month under the Loan Documents and Environmental Indemnity Agreement, actual operating expenses relating to the Projects of the type included in the definition of “Adjusted Expenses”, or other budgeted capital improvements, repairs or replacements for the Projects before distribution by Borrowers to members, partners or shareholders, as applicable, or any other Borrower Party. No distribution may be made by any Borrower to its members, partners or shareholders, as applicable, or to any other Borrower Party during any period in which (a) an Event of Default is in existence or (b) Borrowers are required to deposit Excess Cash Flow into the Project Yield Fund.
Section 1.12Compliance with Laws and Contractual Obligations.
(a)Borrowers will comply with and will cause Operators to comply with the Requirements of Law as are now in effect and which may be imposed upon Borrowers or Operators or the maintenance, use or operation of the Projects or the provision of services to the occupants of the Projects and the obligations, covenants and conditions contained in all other material contractual obligations of Borrowers, and as they relate to the Projects and Operators. Without limitation of the foregoing, Borrowers shall cooperate with Administrative Agent in connection with compliance with laws governing the National Flood Insurance Program, including by providing any information reasonably required by Administrative Agent in order to confirm compliance with such laws.
(b)Borrowers will obtain and maintain and will cause Operators to obtain and maintain, all licenses, qualifications and permits now held or hereafter required to be held by Borrowers or Operators for which the loss, suspension, revocation or failure to obtain or renew, could reasonably be expected to have a Material Adverse Effect.
Section 1.13Operating and Financial Covenants. The Projects shall satisfy each of the following covenants as of each Determination Date:
(a)Intentionally Omitted.
(b)Project Yield. If on any Determination Date during the first Loan Year, operating statements for the prior twelve (12) month period are not available, the operating statements covering any lesser period of time will be annualized to determine compliance with Section 7.13(c).
(c)Special Provisions Relating to Project Yield.
(i)If a Resize Event exists on any Determination Date, Administrative Agent shall deliver notice thereof to Borrowers and of any applicable Resize Amount and, within ten (10) Business Days after Borrowers’ receipt of such notice, Borrowers shall either (A) make a partial prepayment of the Loan in an amount equal to such Resize Amount (without payment of a Prepayment Premium), (B) deposit with Administrative Agent in one or more Deposit Accounts designated by the Administrative Agent an amount equal to such Resize Amount, which deposit shall be held without interest in Administrative Agent’s name, shall not be deemed to be held in trust for the benefit of Borrowers and may be commingled with the general funds of Administrative Agent (the “Project Yield Fund”), or (C) deliver to Administrative Agent a Special Letter of Credit with a face amount equal to such Resize Amount.
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(ii)If, as of any Determination Date, no Resize Event exists but the Project Yield as of such Determination Date is less than ten percent (10%), Borrowers shall, within ten (10) days after the end of each calendar month thereafter until such time as an Excess Cash Flow Termination Date shall have occurred, (i) deliver to Administrative Agent (A) internally prepared income and cash flow statements for such month, (B) a monthly statement for each Deposit Account maintained by Borrowers (or by Property Manager on behalf of Borrowers), (C) a calculation of Excess Cash Flow for such month, and (D) a Special Compliance Certificate as of the end of such month (collectively, the “Cash Flow Requirements”), and deposit the Excess Cash Flow for such month into the Project Yield Fund.
(iii)If the Project Yield is less than nine and 50/100 percent (9.50%), on four (4) consecutive Determination Dates, Administrative Agent may, upon not less than ten (10) days’ prior written notice to Borrowers (i) cause any or all of the funds on deposit in the Project Yield Fund to be withdrawn, and (ii) draw all or any portion of any Special Letter of Credit then outstanding. Any amounts received by Administrative Agent as a result of the foregoing shall be applied (without payment of a Prepayment Premium) (A) if no Event of Default is then in existence, to the then-outstanding principal balance of the Loan or (B) if an Event of Default is then in existence, to the Obligations in any order and any manner determined by Administrative Agent in its sole discretion.
(iv)Upon the occurrence of the Excess Cash Flow Termination Date, Administrative Agent, upon Borrowers’ written request, shall release to Borrowers the amounts then on deposit in the Project Yield Fund (less any then required for a Resize Event) and take such steps as Borrowers may reasonably request (and at Borrowers’ expense) to effectuate termination of any then outstanding Special Letters of Credit. For the avoidance of doubt, funds needed to address the Resize Event pursuant to clause (i) above shall not be released to Borrowers but shall instead be held or used pursuant to clause (i).
(v)Each Borrower grants to Administrative Agent, as security for the Obligations, a security interest in any interest such Borrower has in the Project Yield Fund. If an Event of Default shall occur and be continuing, Administrative Agent may (i) cause any or all of the funds on deposit in the Project Yield Fund to be withdrawn, and (ii) draw all or any portion of any Special Letter of Credit then outstanding. Any amounts received by Administrative Agent as a result of the foregoing may be applied on account of the Obligations in any order and any manner determined by Administrative Agent in its sole discretion (without payment of a Prepayment Premium).
(vi)If Borrowers deliver to Administrative Agent pursuant to clause (i) above a Special Letter of Credit, Borrowers shall deliver to Administrative Agent not later than thirty (30) days prior to the expiration date of such Special Letter of Credit a renewal or replacement Special Letter of Credit, substantially identical in terms and amount to the expiring Special Letter of Credit, or alternatively, may (A) make a partial prepayment of the Loan in an amount equal to such Resize Amount (without payment of a Prepayment Premium), or (B) deposit an amount equal to such Resize Amount into a Project Yield Fund (to the extent such Resize Amount is not already in the Project Yield Fund). Failure to deliver any renewal or replacement Special Letter of Credit in accordance with the foregoing requirements (and provided that Borrowers do not otherwise deliver the Resize Amount or have such Resize Amount available in the Project Yield Fund in
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accordance with the requirements of this Section 7.13) within seven (7) Business Days after such thirty (30) days prior to expiration shall permit Administrative Agent, in its discretion, to draw upon any Special Letter of Credit then in its possession and apply proceeds in accordance with the terms hereof to satisfy the requirements of Section 7.13(c)(i) and the same shall not constitute an Event of Default. Borrowers’ failure to comply with the foregoing terms shall constitute an immediate Event of Default without any further notice or opportunity to cure. Administrative Agent reserves the right to periodically review the financial condition of the issuing financial institution for each Special Letter of Credit and any renewal or replacement Special Letter of Credit and if Administrative Agent determines that the issuing financial institution is no longer acceptable to Administrative Agent, Administrative Agent may require a replacement Special Letter of Credit in form and substance and from a United States bank acceptable to Administrative Agent, in its reasonable discretion.
(vii)Other than for purposes of calculating cash payments to be applied to satisfy the Resize Amount or after Borrowers deliver amounts to Administrative Agent in the Resize Amount to reduce the outstanding principal amount of the Loan, when calculating the Project Yield the outstanding principal balance of the Loan will not be deemed reduced by any amounts in the Project Yield Fund or by the balance of any Special Letter of Credit.
(viii)If Borrowers fail to perform their obligations under Section 7.13(c)(i), (ii), or (iii) Administrative Agent may exercise its rights under the Deposit Account Control Agreement to cause all revenues generated by Borrowers and the Projects to be deposited into the Project Yield Fund to the extent contemplated by clauses (i), (ii) or (iii), as applicable. In such event, to the extent contemplated by clauses (i), (ii) or (iiii), as applicable, Borrowers hereby authorize Administrative Agent to disburse monies in the Project Yield Fund for the payment of all debt service, impounds, escrows, reserves and other amounts required to be paid to Administrative Agent or Lenders under the Loan Documents (the “Lender Party Payments”).
Section 1.14Healthcare Laws and Covenants. Without limiting the generality of any other provision of this Agreement, Borrowers and each Operator shall be in compliance in all material respects with all Healthcare Laws that are applicable to Borrowers and each Operator, and shall use commercially reasonable efforts to cause their employees and contractors (other than contracted agencies) in the exercise of their duties on behalf of Borrowers or any Operator (with respect to its operation of the Project) to also be in compliance in all material with all applicable Healthcare Laws. Borrowers and each Operator have maintained and shall continue to maintain in all material respects all records required to be maintained by any Governmental Authority or otherwise under the Healthcare Laws.
Section 1.15Transactions With Affiliates. Without the prior written consent of Administrative Agent, Borrowers shall not engage in any transaction affecting any Project with an Affiliate of Borrowers, except as expressly contemplated by this Agreement or otherwise on arm’s-length market terms.
Section 1.16Alterations. Borrowers shall not, without the prior written consent of Administrative Agent, make any alteration to any Project (except tenant improvements under any Lease approved by Administrative Agent or deemed approved by Administrative Agent under the terms of this Agreement) (a) that affects the structural components of the Projects, utilities, HVAC or the exterior of any Project, (b) that are reasonably likely to cause a Material Adverse Change or (c) the cost of which (including any related alteration, improvement or replacement) is
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reasonably anticipated to exceed the Restoration Threshold, which approval may be granted or withheld in Administrative Agent’s reasonable discretion.
Section 1.17Business and Operations. Borrowers will continue to engage only in the businesses currently conducted by it on the date hereof, as and to the extent the same are necessary for, the ownership and leasing of the Projects. Borrowers shall at all times cause the Projects to be maintained in accordance with the Project’s use as a medical office building.
Section 1.18Intentionally Omitted.
Section 1.19Forfeiture. Borrowers hereby covenant and agree not to commit, permit or suffer to exist any act or omission affording any Person Forfeiture Rights with respect to the Projects.
Section 1.20Patriot Act Compliance. Borrowers shall comply with the Patriot Act and all applicable requirements of Governmental Authorities having jurisdiction over the Borrower Parties and the Projects, including those relating to money laundering and terrorism. Administrative Agent shall have the right to audit any Borrower Party’s compliance with the Patriot Act and all applicable requirements of Governmental Authorities having jurisdiction over any Borrower Party and the Projects including those relating to money laundering and terrorism. In the event that Borrowers fail to comply with the Patriot Act or any such requirements of Governmental Authorities, then Administrative Agent may, at its option, cause Borrowers to comply therewith and any and all reasonable costs and expenses incurred by Administrative Agent in connection therewith shall be secured by the Mortgage and the other Loan Documents and shall be immediately due and payable.
Section 1.21Post Closing Obligations. Borrowers shall satisfy the Post Closing Obligations within the time periods set forth on Schedule 11.35.
Section 1.22Intentionally Omitted.
Section 1.23Deposit Accounts. Borrowers shall cause all rents payable under the Leases to be deposited into Borrowers’ Account that is subject to a Deposit Account Control Agreement within five (5) Business Days of receipt of same by Borrowers (or their agent).
(a)No later than fifteen (15) days after the Closing Date, Borrowers shall open or cause to be opened the Borrower Account and commence with the provisions of this Section 7.23. Borrowers shall deposit, and cause to be deposited, all collections, proceeds, funds, or revenues from the Projects, including, without limitation, all receivables and all amounts due under the Leases into the Borrowers’ Account. Borrowers and each other Borrower Party hereby authorize Administrative Agent to automatically debit the Borrowers’ Account for the payment of debt service. All rents, additional rent and all other amounts received by Borrowers with respect to the Projects (i) shall be deemed to be collateral for the Loan, shall be deposited by Borrowers into the Borrowers’ Account within five (5) Business Days after receipt of the same but may then be transferred by Borrowers (or Borrowers’ Agent) to another operating account. In furtherance of the foregoing, other than during the existence of an Event of Default, Borrowers may give instructions regarding the disposition of funds in the Borrowers’ Account for any purpose not prohibited by the terms and conditions of this Agreement or the other Loan Documents; provided, however, that during the existence of an Event of Default, Administrative Agent shall have the exclusive right to give instructions regarding the disposition of funds in the Borrowers’ Account.
(b)Notwithstanding anything in any other agreement to the contrary, Borrowers agree that Borrowers shall be liable for any commercially reasonable fees and charges
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in effect from time to time and charged in connection with the Borrowers’ Account, and that Administrative Agent shall not have any liability therefor. Borrowers further acknowledge and agrees that, to the extent such fees and charges are not paid by Borrowers directly but are satisfied using amounts in the Borrower’s Account such fees and charges shall be immediately (upon notice) due and payable from Borrower to Administrative Agent.
(c)During the existence of an Event of Default, Borrowers agree that all amounts in the Borrowers’ Account or otherwise received by Administrative Agent, may be applied on account of the Obligations in accordance with the terms of this Agreement.
ARTICLE 8
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default hereunder and under the Loan:
Section 1.1Payments. Failure of Borrowers to pay any regularly scheduled installment of principal, interest or other amount due under the Loan Documents within five (5) days of (and including) the date when due, or failure of Borrowers to pay the Loan at the Maturity Date, whether by acceleration or otherwise.
Section 1.2Insurance. Borrowers’ failure to maintain insurance as required under Section 3.1 of this Agreement.
Section 1.3Prohibited Transfer. A Prohibited Transfer occurs in violation of this Agreement.
Section 1.4Covenants. Borrowers’ failure to perform, observe or comply with any of the agreements, covenants or provisions contained in this Agreement or in any of the other Loan Documents or Environmental Indemnity Agreement (other than those agreements, covenants and provisions referred to elsewhere in this Article 8), and the continuance of such failure for thirty (30) days after notice by Administrative Agent to Borrowers’ Agent; however, subject to any shorter period for curing any failure by Borrowers as specified in any of the other Loan Documents or Environmental Indemnity Agreement, Borrowers shall have an additional sixty (60) days to cure such failure if (a) such failure does not involve the failure to make payments on a monetary obligation; (b) such failure is susceptible of cure but cannot reasonably be cured within thirty (30) days; and (c) Borrowers are diligently undertaking to cure such default. The notice and cure provisions of this Section 8.4 do not apply to the other Events of Default described in this Article 8 or to Borrowers’ failure to perform, observe or comply with any of the agreements, covenants or provisions referenced elsewhere in this Article 8 (for which no notice and cure period shall apply).
Section 1.5Representations and Warranties. Any representation or warranty made in any Loan Document, the Environmental Indemnity Agreement or any Compliance Certificate proves to be untrue in any material respect when made or deemed made.
Section 1.6Other Encumbrances. Any material default by Borrowers under any material document or instrument, other than the Loan Documents, evidencing or creating a Lien on the Projects or any part thereof, is not cured within any applicable grace or cure period therein.
Section 1.7Involuntary Bankruptcy or Other Proceeding. Commencement of an involuntary case or other proceeding against Borrowers or any other Borrower Party (each, a “Bankruptcy Party”) which seeks liquidation, reorganization or other relief with respect to it or its debts or other liabilities under any bankruptcy, insolvency or other similar law now or
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hereafter in effect or seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of ninety (90) days; or an order for relief against a Bankruptcy Party shall be entered in any such case under the Federal Bankruptcy Code.
Section 1.8Voluntary Petitions, etc. Commencement by a Bankruptcy Party of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its Debts or other liabilities under any bankruptcy, insolvency or other similar law or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or any of its property, or consent by a Bankruptcy Party to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or the making by a Bankruptcy Party of a general assignment for the benefit of creditors, or the failure by a Bankruptcy Party, or the admission by a Bankruptcy Party in writing of its inability, to pay its debts generally as they become due, or any action by a Bankruptcy Party to authorize or effect any of the foregoing.
Section 1.9Default Under Operators’ Agreements. The occurrence of a material default by any Borrower under any of the Operators’ Agreements, which remains uncured beyond any applicable grace or cure periods.
Section 1.10Certain Covenants. Any Borrower’s failure to (a) maintain its status as a Single Purpose Entity; (b) comply with the provisions of Section 7.13; (c) comply with any other provision of this Agreement or the other Loan Documents, if such failure is not susceptible of cure; (d) comply with Section 7.23; or (e) provide Administrative Agent with ten (10) Business Days subsequent written notice of changes of the state of any Borrower’s formation or any Borrower’s name.
Section 1.11Financial Information. Borrowers’ failure to deliver financial statements, each Compliance Certificate and the other reports when and as required by Article 6 and the continuance of such failure for ten (10) days after the required delivery date.
Section 1.12Default Under Guaranty. The occurrence of a default under the Recourse Guaranty Agreement and such default is not cured within any grace or cure periods provided therein.
Section 1.13Criminal Act. Any Borrower is convicted of a felony involving fraud, embezzlement or moral turpitude.
Section 1.14Environmental Indemnity Agreement. There shall have occurred any default under the Environmental Indemnity Agreement which remains uncured beyond any applicable grace or cure periods available under the Environmental Indemnity Agreement.
Section 1.15Required Repairs and Post Closing Requirements. The failure to complete the Required Repairs within the time periods set forth on Schedule 2.5(b) or satisfy the Post Closing Obligations within the time periods set forth on Schedule 11.36; provided, however, that Administrative Agent, in its sole discretion, may extend the time periods to complete Required Repairs upon receipt of evidence that Borrowers are diligently pursuing completion of such Required Repairs.
Section 1.16Change of Control. A Change of Control occurs.
Section 1.17Secured Hedge Agreement. The occurrence of a default by Borrower under a Secured Hedge Agreement which remains uncured beyond any applicable grace or cure periods provided therein.
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Section 1.18Deposit Account Control Agreement. The occurrence of a default by any Borrower under the Deposit Account Control Agreement which remains uncured beyond any applicable grace or cure periods provided therein.
Section 1.19Healthcare Investigations. The occurrence of a Healthcare Investigation affecting any Project, any Borrower, any Guarantor or any Operator that is reasonably likely to have a Material Adverse Effect as determined in Administrative Agent’s reasonable discretion.
ARTICLE 9
REMEDIES
Section 1.1Remedies - Insolvency Events. Upon the occurrence of any Event of Default described in Sections 8.7 or 8.8, all amounts due under the Loan Documents shall immediately and automatically become due and payable, all without written notice and without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or any other notice of default of any kind, all of which are hereby expressly waived by Borrowers; however, if the Bankruptcy Party under Sections 8.7 or 8.8 is other than Borrowers, then all amounts due under the Loan Documents shall become immediately due and payable at Administrative Agent’s election, in Administrative Agent’s sole discretion.
Section 1.2Remedies - Other Events. Except as set forth in Section 9.1 above, while any Event of Default exists, Administrative Agent may and at the direction of the Required Lenders shall (a) by written notice to Borrowers, declare the entire Loan to be immediately due and payable without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or other notice of default of any kind, all of which are hereby expressly waived by Borrowers, and (b) exercise all rights and remedies therefor under the Loan Documents (including any Deposit Account Control Agreement) and at law or in equity. Notwithstanding anything to the contrary contained in the Loan Documents or the Environmental Indemnity Agreement, the enforcement of the obligations of Borrowers and the other Borrower Parties under the Loan Documents and the Environmental Indemnity Agreement and the exercise of rights and remedies thereunder shall be undertaken solely by Administrative Agent in its capacity as agent for the Lenders.
Section 1.3Administrative Agent’s Right to Perform the Obligations. If Borrowers shall fail, refuse or neglect to make any payment or perform any act required by the Loan Documents or the Environmental Indemnity Agreement, then while any Event of Default exists, and without notice to or demand upon Borrowers and without waiving or releasing any other right, remedy or recourse Administrative Agent may have because of such Event of Default, Administrative Agent may (but shall not be obligated to) make such payment or perform such act for the account of and at the expense of Borrowers, and shall have the right to enter upon the Projects for such purpose and to take all such action thereon and with respect to the Projects as it may deem necessary or appropriate. If Administrative Agent shall so elect to pay any sum due with reference to the Projects, Administrative Agent may do so in reliance on any bill, statement or assessment procured from the appropriate Governmental Authority or other issuer thereof without inquiring into the accuracy or validity thereof. Similarly, in making any payments to protect the security intended to be created by the Loan Documents, Administrative Agent shall not be bound to inquire into the validity of any apparent or threatened adverse title, lien, encumbrance, claim or charge before making an advance for the purpose of preventing or removing the same. Borrowers shall indemnify, defend and hold Administrative Agent harmless from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs, or disbursements of any kind or nature whatsoever, including reasonable attorneys’ fees, actually incurred by reason of any acts performed by Administrative Agent pursuant to the provisions of this Section 9.3, including those arising from the joint,
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concurrent, or comparative negligence of Administrative Agent. All sums expended by Administrative Agent to which it shall be entitled to be indemnified, together with interest thereon at the Default Rate from the date of such payment or expenditure until paid, shall constitute additions to the Loan, shall be secured by the Loan Documents and shall be paid by Borrowers to Administrative Agent upon demand.
Section 1.4Deposit Account Control Agreement. During any period in which an Event of Default is in existence, Administrative Agent may exercise its rights under each Deposit Account Control Agreement to take exclusive control of the applicable account and apply the funds on deposit therein for payment of debt service, impounds, escrows, reserves and other amounts required to be paid to Administrative Agent or Lenders under the Loan Documents as the same become due and payable and, upon acceleration of the Loan, to the Indebtedness and the other Obligations.
ARTICLE 10
ADMINISTRATIVE AGENT
Section 1.1Appointment.
(a)Each Lender hereby appoints CONA (together with any successor Administrative Agent pursuant to Section 10.8) as Administrative Agent hereunder and authorizes Administrative Agent to (i) execute and deliver the Loan Documents and the Environmental Indemnity Agreement and accept delivery thereof on its behalf from Borrowers or any other Borrower Party, (ii) take such action on its behalf and to exercise all rights, powers and remedies and perform the duties as are expressly delegated to Administrative Agent under such Loan Documents and the Environmental Indemnity Agreement, and (iii) exercise such powers as are reasonably incidental thereto.
(b)Without limiting the generality of clause (a) above, Administrative Agent shall have the sole and exclusive right and authority (to the exclusion of the Lenders), and is hereby authorized, to (i) act as the disbursing and collecting agent for the Lenders with respect to all payments and collections arising in connection with the Loan Documents and the Environmental Indemnity Agreement (including in any proceeding described in Section 8.7 or Section 8.8 or any other bankruptcy, insolvency or similar proceeding), and each Person making any payment in connection with any Loan Document and the Environmental Indemnity Agreement to any Secured Party is hereby authorized to make such payment to Administrative Agent, (ii) file and prove claims and file other documents necessary or desirable to allow the claims of the Secured Parties with respect to any Obligation in any proceeding described in Section 8.7 or Section 8.8 or any other bankruptcy, insolvency or similar proceeding (but not to vote, consent or otherwise act on behalf of such Secured Party), (iii) act as collateral agent for each Secured Party for purposes of the perfection of all Liens created by such agreements and all other purposes stated therein, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such other action as is necessary or desirable to maintain the perfection and priority of the Liens created or purported to be created by the Loan Documents, (vi) except as may be otherwise specified in any Loan Document or the Environmental Indemnity Agreement, exercise all remedies given to Administrative Agent and the other Secured Parties with respect to the Collateral, whether under the Loan Documents or the Environmental Indemnity Agreement, applicable law or otherwise, (vii) execute any amendment, consent or waiver under the Loan Documents and the Environmental Indemnity Agreement on behalf of any Lender that has consented in writing to such amendment, consent or waiver to the extent such consent is required hereunder; provided, however, that Administrative Agent hereby appoints, authorizes and directs each Lender to act as collateral sub-agent for Administrative Agent and the Lenders for purposes of the perfection of all Liens with respect to the Collateral, including any deposit account maintained by Borrowers or any other Borrower Party with, and cash and cash equivalents held
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by, such Lender, and may further authorize and direct the Lenders to take further actions as collateral sub-agents for purposes of enforcing such Liens or otherwise to transfer the Collateral subject thereto to Administrative Agent, and each Lender hereby agrees to take such further actions to the extent, and only to the extent, so authorized and directed and (viii) provide each Lender within ten (10) Business Days following receipt, copies of the reports and financial information received from Borrowers under Article 6 and notices of default delivered by or received by Administrative Agent under this Agreement.
(c)Under the Loan Documents and the Environmental Indemnity Agreement, Administrative Agent (i) is acting solely on behalf of the Lenders (except to the limited extent provided in Section 2.12(b) with respect to the Register), with duties that are entirely administrative in nature, notwithstanding the use of the defined term “Administrative Agent”, the terms “agent”, “administrative agent” and “collateral agent” and similar terms in any Loan Document and the Environmental Indemnity Agreement to refer to Administrative Agent, which terms are used for title purposes only, (ii) is not assuming any obligation under any Loan Document or the Environmental Indemnity Agreement other than as expressly set forth therein or any role as agent, fiduciary or trustee of or for any Lender or any other Secured Party and (iii) shall have no implied functions, responsibilities, duties, obligations or other liabilities under any Loan Document or the Environmental Indemnity Agreement, and each Lender hereby waives and agrees not to assert any claim against Administrative Agent based on the roles, duties and legal relationships expressly disclaimed in clauses (i) through (iii) above.
(d)The relationship between Administrative Agent and each Lender is a contractual relationship only, and nothing herein shall be deemed to impose on Administrative Agent any obligations other than those for which express provision is made herein or in the other Loan Documents. Administrative Agent may employ agents and attorneys, and may delegate all or any part of its obligations hereunder, to third parties and shall not be responsible for the negligence or misconduct of any such agents, attorneys in fact or third parties selected by it in good faith. Administrative Agent may deem and treat the payee of a Note as the holder thereof for all purposes hereof unless and until a notice of the assignment or transfer thereof shall have been filed with Administrative Agent, any such assignment or transfer to be subject to the provisions of Section 11.3. The provisions of this Article 10 are solely for the benefit of Administrative Agent and the Lenders, and Borrowers shall not have any rights as a third-party beneficiary of any of the provisions hereof and Administrative Agent and the Lenders may modify, amend or waive such provisions of this Article 10 in their sole and absolute discretion.
Section 1.2Binding Effect.
(a)Each Lender agrees that as between Lenders and Administrative Agent, (i) any action taken by Administrative Agent or the Required Lenders (or, if expressly required hereby, a greater proportion of the Lenders) in accordance with the provisions of the Loan Documents or the Environmental Indemnity Agreement, (ii) any action taken by Administrative Agent in reliance upon the instructions of Required Lenders (or, where so required, such greater proportion) of Lenders) or without reliance on any Lenders to the extent neither this Agreement nor any of the other Loan Documents explicitly requires the approval of Lenders or Required Lenders, and (iii) the exercise by Administrative Agent or the Required Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Secured Parties.
(a)Borrowers may rely conclusively on any written consent, approval or waiver of Administrative Agent that it has the authority to act for and bind the Lenders pursuant to this Agreement or the other Loan Documents (excluding, if applicable, any Hedge Agreement provided by a Secured Hedge Provider).
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Section 1.3Use of Discretion.
(a)Administrative Agent shall not be required to exercise any discretion or take, or to omit to take, any action, including with respect to enforcement or collection of amounts owing hereunder after an Event of Default, except any action it is required to take or omit to take (i) under any Loan Document or the Environmental Indemnity Agreement, or (ii) pursuant to instructions from the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders).
(b)Notwithstanding clause (a) of this Section 10.3, Administrative Agent shall not be required to take, or to omit to take, any action (other than granting consents or approvals, receiving payments or any other matters explicitly set forth in this Agreement or the other Loan Documents and the Environmental Indemnity Agreement, in each case being in the sole discretion of Administrative Agent) (i) unless, upon demand, Administrative Agent receives an indemnification satisfactory to it from the Lenders (or, to the extent applicable and acceptable to Administrative Agent, any other Secured Party) against all Liabilities that, by reason of such action or omission, may be imposed on, incurred by or asserted against Administrative Agent or any Related Person thereof or (ii) that is, in the opinion of Administrative Agent or its counsel, contrary to any Loan Document or the Environmental Indemnity Agreement or applicable Requirement of Law.
Section 1.4Defaults.
(a)Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Potential Default or an Event of Default unless Administrative Agent has received notice from a Lender or any Borrower Party specifying such Potential Default or Event of Default and stating that such notice is a “Notice of Default.” In the event that Administrative Agent receives such a notice of the occurrence of a Potential Default or Event of Default, Administrative Agent shall give prompt notice thereof to the Lenders. Within ten (10) days of delivery of such notice of Potential Default or Event of Default from Administrative Agent to the Lenders (or such shorter period of time as Administrative Agent determines is necessary), Administrative Agent and the Lenders shall consult with each other to determine a proposed course of action. Administrative Agent shall (subject to Section 10.13) take such action with respect to such Potential Default or Event of Default as shall be directed by the Required Lenders, provided that, (A) unless and until Administrative Agent shall have received such directions, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, including decisions (1) to make Protective Advances that Administrative Agent determines are necessary to protect or maintain the Projects and (2) to foreclose on any of the Projects or exercise any other remedy, with respect to such Potential Default or Event of Default as it shall deem advisable in the interest of the Lenders except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of all of the Lenders; provided, however, that no actions approved by the Required Lenders shall violate the Loan Documents or applicable Requirements of Law. Each of the Lenders acknowledges and agrees that no individual Lender may separately enforce or exercise any of the provisions of any of the Loan Documents or Environmental Indemnity Agreement (including the Notes) other than through Administrative Agent. Administrative Agent shall advise the Lenders of all material actions which Administrative Agent takes in accordance with the provisions of this Section 10.4(a) and shall continue to consult with the Lenders with respect to all of such actions. Notwithstanding the foregoing, if the Required Lenders shall at any time direct that a different or additional remedial action be taken from that already undertaken by Administrative Agent, including the commencement of foreclosure proceedings, such different or additional remedial action shall be taken in lieu of or in addition to, the prosecution of such action taken by Administrative Agent; provided that all actions already taken by Administrative Agent pursuant to this Section 10.4(a) shall be valid and
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binding on each Lender. All cash proceeds (other than cash proceeds subject to the provisions of Section 10.4(i)) received from any enforcement actions, including the cash proceeds of a foreclosure sale of any of the Projects, shall be applied, first, to the payment or reimbursement of Administrative Agent for expenses incurred in accordance with the provisions of Sections 10.4(b) and (c) and Section 10.13 and to the payment of any servicing fees to the extent not paid by Borrowers pursuant to Section 10.13, second, to the payment or reimbursement of the Lenders for expenses incurred in accordance with the provisions of Sections 10.4(b) and (c) and Section 10.13; third, to the payment or reimbursement of the Lenders for any advances made pursuant to Section 10.4(b) or (g); fourth, pari passu to the Lenders in accordance with their respective Pro Rata Share, unless an Unpaid Amount is owed pursuant to Section 10.15, in which event such Unpaid Amount shall be deducted from the portion of such proceeds of the Defaulting Lender and be applied to payment of such Unpaid Amount to the Special Advance Lender and to pay any indebtedness of Borrowers under any Secured Hedge Agreement provided by Administrative Agent or any Affiliate.
(b)All losses incurred in connection with the Loan (including with respect to interest (including interest at the Default Rate to the extent applicable) and other sums payable pursuant to the Notes), the enforcement thereof or the realization of the security therefor, shall be borne by the Lenders in accordance with their respective Pro Rata Share of the Loan. The Lenders shall promptly, upon request by Administrative Agent, remit to Administrative Agent their respective Pro Rata Share of (i) any expenses incurred or to be incurred by Administrative Agent in connection with any Potential Default or Event of Default to the extent any such expenses have not been paid by Borrowers or Guarantor, (ii) any advances or disbursements made or to be made to pay Taxes (including special assessments or payments in lieu of real estate taxes), maintenance costs, ground rent, insurance premiums or other items (including capital items) which Administrative Agent or Required Lenders determine are necessary to preserve the Lien (or priority of the Lien) of the Mortgage from any intervening lien, forfeiture, casualty, loss, waste or other impairment, diminution or reduction in value (including, without limitation, the completion of any applicable alterations or improvements which have theretofore been commenced or are deemed necessary for the leasing, marketing or maintenance of the Projects or to preserve, protect, sell, operate, manage, lease, improve, maintain, repair, defend or dispose of the Projects or any portion thereof), whether or not the amount necessary to be advanced for such purposes exceeds the amount of the Mortgage (all such advances, collectively, “Protective Advances”), (iii) any other expenses incurred in connection with the enforcement of the Mortgage, other Loan Documents or the Environmental Indemnity Agreement, and (iv) any expenses incurred in connection with the consummation of the Loan not paid or provided for by Borrowers. Protective Advances shall not exceed One Million Dollars ($1,000,000) annually unless approved by the Required Lenders in advance. Each Lender’s Pro Rata Share of any Protective Advance shall constitute obligatory advances of that Lender under this Agreement, shall be payable by each Lender on demand by Administrative Agent and secured by the Collateral, and if unpaid by any Lender as set forth below, its Pro Rata Share thereof shall bear interest at the rate applicable to such amount under the Loan or if no longer applicable, at the Base Rate.  Administrative Agent shall notify each Lender in writing of its Pro Rata Share of each Protective Advance.  Upon receipt of notice from Administrative Agent of its making of a Protective Advance, each Lender shall make the amount of such Lender’s Pro Rata Share of the Protective Advance available to Administrative Agent, in same day funds, to such account of Administrative Agent as Administrative Agent may designate, (i) on or before 3:00 p.m. (Administrative Agent’s time) on the day Administrative Agent provides Lenders with notice of the making of such Protective Advance if Administrative Agent provides such notice on or before 12:00 p.m. (Administrative Agent’s time), or (ii) on or before 12:00 p.m. on the Business Day immediately following the day Administrative Agent provides Lenders with notice of the making of such advance if Administrative Agent provides notice after 12:00 p.m. (Administrative Agent’s time).
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(c)If, at the direction of the Required Lenders or otherwise as provided in Section 10.4(a), any action(s) is brought to foreclose the Mortgage, such action shall (to the extent permitted under applicable Requirements of Law and the decisions of the court in which such action is brought) be an action brought by Administrative Agent on behalf and for the benefit of the Lenders, collectively, to foreclose all or a portion of the Mortgage and collect on the Notes. Counsel selected by Administrative Agent shall prosecute any such foreclosure on behalf of Administrative Agent and the Lenders and Administrative Agent and the Lenders shall consult and cooperate with each other in the prosecution thereof. If requested by Administrative Agent, each Lender shall join as a party in any such lawsuit or proceeding. All decisions concerning the appointment of a receiver, the conduct of such receivership, the conduct of such foreclosure action, the acceptance of a deed in lieu of foreclosure, the bid on behalf of Administrative Agent and the Lenders at the foreclosure sale of the Projects, the manner of taking and holding title to the Projects (other than as set forth in Section 10.4(d) below), the sale of the Projects after foreclosure pursuant to Section 10.4(e), and the commencement and conduct of any deficiency judgment proceeding shall be made by Administrative Agent subject to this Article 10. The costs and expenses of foreclosure to the extent not paid by Borrowers or Guarantor will be borne by the Lenders in accordance with their respective Pro Rata Share. If requested by Administrative Agent, each Lender shall join as a party in any such lawsuit or proceeding brought to foreclose the Mortgage and collect on the Notes.
(d)If the Projects (or any part thereof) is acquired by Administrative Agent or its nominee as a result of a foreclosure or the acceptance of a deed or assignment in lieu of foreclosure, or is retained in satisfaction of all or any part of the obligations, the title to the Projects shall be held as required by the Required Lenders and as acceptable to Administrative Agent provided title is held in an entity or structure which limits liability of the Lenders and is a “pass-through” entity or structure for income tax purposes, or, in the absence of such direction of the Required Lenders, at the sole option of Administrative Agent, be held in the name of Administrative Agent, or a nominee or subsidiary of Administrative Agent, as administrative agent, for the ratable benefit of the Lenders, or a limited liability company of which Administrative Agent (or a nominee or subsidiary of Administrative Agent, as administrative agent, for the ratable benefit of the Lenders) is the manager and the Lenders (or their permitted assignees) are the members in proportion to their Pro Rata Share, which shall be formed pursuant to a form of limited liability company agreement approved by Administrative Agent and the Required Lenders prior to the completion of such foreclosure, which agreement shall include provisions in all material respects similar to this Section 10.4 and Article 10 in relation to the duties, rights and immunities of Administrative Agent (or a nominee or subsidiary of Administrative Agent, in its capacity as the manager thereunder) and rights and obligations of the Lenders. In the event any Lender fails to execute and deliver such agreement in accordance with and after written request therefor from Administrative Agent, each such Lender hereby grants to Administrative Agent a power of attorney to execute and deliver such agreement on its behalf and to take on its behalf any other actions as may reasonably be required to form and qualify such company, which power of attorney is coupled with an interest and irrevocable.
(e)Administrative Agent shall prepare for the approval of the Required Lenders a recommended course of action for the Projects (a “Post-Foreclosure Plan”). Subject to its standard of care contained herein, Administrative Agent (or a nominee or subsidiary of Administrative Agent, as administrative agent, for the account of, and ratable benefit of, the Lenders) shall manage, operate, repair, administer, complete, construct, restore or otherwise deal with the Projects acquired, and shall administer all transactions relating thereto, substantially in accordance with the Post-Foreclosure Plan, including, without limitation, employing a management agent, leasing agent and other agents, contractors and employees, including agents for the sale of the Projects, and the collecting of rents and other sums from the Projects and paying the expenses of the Projects. Once approved by the Required Lenders, Administrative Agent shall use commercially reasonable efforts, consistent with its standard of care contained in
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this Article 10, to operate and maintain the Projects in accordance with the Post-Foreclosure Plan in all material respects (subject to the effect of force majeure events, fire, earthquake, floods, explosion, actions of the elements, other accidents or casualty, declared or undeclared war, riots, mob violence, acts of terrorism, inability to procure or a general shortage of labor, equipment, facilities, energy, materials or supplies in the open market, the effect of orders of Governmental Authorities, laws, rules, regulations or other cause beyond the reasonable control of Administrative Agent) and shall be authorized to make expenditures and pay expenses in accordance with the Post-Foreclosure Plan. It is understood and agreed that Administrative Agent is not warranting that the results contemplated by the Post-Foreclosure Plan shall be realized. If the Required Lenders shall fail to approve of the proposed Post-Foreclosure Plan, however, the following shall apply: (i) if the proposed Post-Foreclosure Plan is the initial Post-Foreclosure Plan, then Administrative Agent, on behalf of the Lenders, may approve an interim plan to govern the operations of the Projects until the Required Lenders approve the first plan; and, (ii) if the proposed Post-Foreclosure Plan is other than the plan referred to in the preceding clause (i), then the Projects shall be operated under the most recent Post-Foreclosure Plan until a new Post-Foreclosure Plan shall be approved by the Required Lenders, subject to adjustments as Administrative Agent shall deem appropriate to take into account emergency or serious maintenance situations at the Projects, any tenant improvement costs and leasing commissions for leases executed after approval of the most recently approved budget and any expenditures for the Projects required by applicable Requirements of Law, which, if not made, may result in the imposition of a fine or penalty or other sanction against the Lenders, Administrative Agent or entity that holds title to the Projects for the benefit of the Lenders. Administrative Agent shall not make any material changes to the approved Post-Foreclosure Plan without the consent of the Required Lenders.
(f)Upon demand therefor from time to time, each Lender shall contribute its Pro Rata Share of all costs and expenses incurred by Administrative Agent pursuant to the approved Post-Foreclosure Plan in connection with the construction, operation, management, maintenance, leasing and sale of the Projects. In addition, Administrative Agent shall render or cause to be rendered to each Lender, on a periodic basis (but in any event once per calendar quarter), an income and expense statement for the Projects, and each Lender shall promptly contribute its Pro Rata Share of any operating loss for the Projects, and such other expenses and operating reserves as Administrative Agent shall deem reasonably necessary pursuant to and in accordance with the approved Post-Foreclosure Plan.
(g)To the extent there is net operating income from the Projects, Administrative Agent shall, in accordance with the approved Post-Foreclosure Plan, determine the amount and timing of distributions to the Lenders in accordance with Section 10.4(i).
(h)The Lenders acknowledge and agree that if title to the Projects is obtained by Administrative Agent or its nominee or limited liability company as provided above, the Projects will not be held as a permanent investment but will be liquidated and the proceeds of such liquidation will be distributed in accordance with the Post-Foreclosure Plan as soon as practicable. Administrative Agent shall undertake to sell the Projects, at such price and upon such terms and conditions as the Required Lenders reasonably shall determine to be most advantageous to the Lenders. Any purchase money mortgage or deed of trust taken in connection with the disposition of the Projects in accordance with the immediately preceding sentence shall name Administrative Agent, as agent for the Lenders, as the beneficiary or mortgagee; provided, however, that purchase money financing shall not be provided in connection with the disposition of the Projects without the prior consent of each Lender. If purchase money financing is so provided, then, Administrative Agent and the Lenders shall enter into an agreement with respect to such purchase money mortgage or deed of trust defining the rights and obligations of Administrative Agent and the rights and obligations of the Lenders in the same Pro Rata Share as provided hereunder, which agreement shall be in all material respects
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similar to this Article insofar as the same is appropriate or applicable and shall contain such other terms and conditions as may be satisfactory to each of the Lenders.
(i)All cash proceeds received with respect to the Projects after so acquiring title to or taking possession of the Projects, including cash proceeds from the rental, operation and management of the Projects and the proceeds of a sale of the Projects, shall be applied, first, to the payment or reimbursement of Administrative Agent for expenses incurred in accordance with the provisions of this Article 10 or for any other sums then due to Administrative Agent hereunder; second, to the payment of operating expenses with respect to the Projects; third, to the establishment of reasonable reserves for the operation of the Projects, including, without limitation, to fund any capital improvement, leasing and other reserves; fourth, to the payment or reimbursement of the Lenders for any advances made pursuant to Section 10.4(c) or (f); fifth, in accordance with clauses first through fourth of Section 10.4(a); and sixth, pari passu to the Lenders in accordance with their respective Pro Rata Share on account of all sums due and unpaid under the Loan Documents, unless an Unpaid Amount is owed pursuant to Section 10.18, in which event such Unpaid Amount shall be deducted from the portion of such proceeds of the Defaulting Lender and be applied to payment of such Unpaid Amount to the Special Advance Lender.
Section 1.5Liability. None of Administrative Agent and its Related Persons shall be liable for any action taken or omitted to be taken by any of them under or in connection with any Loan Document or the Environmental Indemnity Agreement, and each Lender and Borrowers (on their own behalf and on behalf of the other Borrower Parties) hereby waives and shall not assert any right, claim or cause of action based thereon, except to the extent of liabilities resulting primarily from the gross negligence or willful misconduct of Administrative Agent or, as the case may be, such Related Person (each as determined in a final, non-appealable judgment by a court of competent jurisdiction) in connection with the duties expressly set forth herein. Without limiting the foregoing, Administrative Agent:
(a)shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Loan Documents and the Environmental Indemnity Agreement, and shall not by reason of this Agreement, any other Loan Document or the Environmental Indemnity Agreement, be a trustee for any Lender;
(b)shall not be responsible or otherwise incur liability for any action or omission taken in reliance upon the instructions of the Required Lenders or for the actions or omissions of any of its Related Persons selected with reasonable care (other than employees, officers and directors of Administrative Agent, when acting on behalf of Administrative Agent);
(c)shall not be responsible for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, any Loan Document or the Environmental Indemnity Agreement;
(d)makes no warranty or representation, and shall not be responsible, to any Secured Party for any statement, document, information, representation or warranty made or furnished by or on behalf of any Related Person or any Borrower Party in connection with any Loan Document, the Environmental Indemnity Agreement or any transaction contemplated therein or any other document or information with respect to any Borrower Party, whether or not transmitted or (except for documents expressly required under any Loan Document or the Environmental Indemnity Agreement to be transmitted to the Lenders) omitted to be transmitted by Administrative Agent, including as to completeness, accuracy, scope or adequacy thereof, or for the scope, nature or results of any due diligence performed by Administrative Agent in connection with the Loan Documents or the Environmental Indemnity Agreement; and
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(e)shall not have any duty to ascertain or to inquire as to the performance or observance of any provision of any Loan Document or the Environmental Indemnity Agreement, whether any condition set forth in any Loan Document or the Environmental Indemnity Agreement is satisfied or waived, as to the financial condition of any Borrower Party or as to the existence or continuation or possible occurrence or continuation of any Potential Default or Event of Default and shall not be deemed to have notice or knowledge of such occurrence or continuation unless it has received a notice from Borrowers, any Lender describing such Potential Default or Event of Default clearly labeled “notice of default” (in which case Administrative Agent shall promptly give notice of such receipt to all Lenders) ;and, for each of the items set forth in clauses (a) through (e) above, each Lender and Borrowers (on behalf of themselves and each of the other Borrower Parties) hereby waives and agrees not to assert any right, claim or cause of action it might have against Administrative Agent based thereon.
Section 1.6Administrative Agent Individually. Administrative Agent and its Affiliates may make loans and other extensions of credit to, acquire stock and stock equivalents of, engage in any kind of business with each Borrower or any other Borrower Party or Affiliate thereof as though it were not acting as Administrative Agent and may receive separate fees and other payments therefor. To the extent Administrative Agent or any of its Affiliates makes any Loan or otherwise becomes a Lender hereunder, it shall have and may exercise the same rights and powers hereunder and shall be subject to the same obligations and liabilities as any other Lender and the terms “Lender,” and “Required Lender,” and any similar terms shall, except where otherwise expressly provided in any Loan Document or the Environmental Indemnity Agreement, include, without limitation, Administrative Agent or such Affiliate, as the case may be, in its individual capacity as Lender or as one of the Required Lenders, respectively.
Section 1.7Lender Credit Decision. Each Lender acknowledges that it shall, independently and without reliance upon Administrative Agent, any other Lender or any of their Related Persons or upon any document solely or in part because such document was transmitted by Administrative Agent or any of its Related Persons, conduct its own independent investigation of the financial condition and affairs of Borrowers and each other Borrower Party and make and continue to make its own credit decisions in connection with entering into, and taking or not taking any action under, any Loan Document or the Environmental Indemnity Agreement or with respect to any transaction contemplated in any Loan Document or the Environmental Indemnity Agreement, in each case based on such documents and information as it shall deem appropriate. Except for documents expressly required by any Loan Document or the Environmental Indemnity Agreement to be transmitted by Administrative Agent to the Lenders, Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any Borrower or any other Borrower Party or any Affiliate of any Borrower or any other Borrower Party that may come into the possession of Administrative Agent or any of its Related Persons.
Section 1.8Resignation of Administrative Agent.
(a)Administrative Agent may resign at any time by delivering written notice of such resignation to the Lenders and Borrowers, effective on the date set forth in such notice or, if no such date is set forth therein, upon the date such notice shall be effective. If Administrative Agent delivers any such notice, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the reasonable approval of Borrower and provided that (i) no Event of Default shall have occurred and be continuing and (ii) Borrowers’ Agent shall be deemed to have consented to any such appointment unless it shall object thereto by written notice to Administrative Agent within ten (10) Business Days after receipt of notice of such successor. If, within 30 days after the retiring Administrative Agent having given notice of resignation, no successor Administrative Agent has been appointed by the Required Lenders that
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has accepted such appointment, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent from among the Lenders.
(b)Effective immediately upon its resignation, (i) the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents and the Environmental Indemnity Agreement, (ii) the Lenders shall assume and perform all of the duties of Administrative Agent until a successor Administrative Agent shall have accepted a valid appointment hereunder, (iii) the retiring Administrative Agent and its Related Persons shall no longer have the benefit of any provision of any Loan Document or the Environmental Indemnity Agreement other than with respect to any actions taken or omitted to be taken while such retiring Administrative Agent was, or because such Administrative Agent had been, validly acting as Administrative Agent under the Loan Documents and (iv) subject to its rights under Section 9.3, the retiring Administrative Agent shall take such action as may be reasonably necessary to assign to the successor Administrative Agent its rights as Administrative Agent under the Loan Documents and the Environmental Indemnity Agreement. Effective immediately upon its acceptance of a valid appointment as Administrative Agent, a successor Administrative Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Administrative Agent under the Loan Documents and the Environmental Indemnity Agreement.
(c)Administrative Agent may be removed as Administrative Agent upon the request of all Lenders (other than Affiliates of Administrative Agent) upon the determination by a court of competent jurisdiction that Administrative Agent has committed actions constituting gross negligence or willful misconduct under this Agreement. The provisions of subsection (b) above shall apply upon such removal and Lenders shall appoint such successor Administrative Agent in consultation with Borrowers.
Section 1.9Additional Secured Parties. The benefit of the provisions of the Loan Documents and the Environmental Indemnity Agreement directly relating to the Collateral or any Lien granted thereunder shall extend to and be available to any Secured Party that is not a Lender as long as, by accepting such benefits, such Secured Party agrees, as among Administrative Agent and all other Secured Parties, that such Secured Party is bound by (and, if requested by Administrative Agent, shall confirm such agreement in a writing in form and substance acceptable to Administrative Agent) this Article 10, Section 11.7 (Right of Setoff; Sharing of Payments), Section 2.14(b) (Sharing of Payments, Etc.) and Section 11.35 (Non-Public Information; Disclosure) and the decisions and actions of Administrative Agent and the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders) to the same extent a Lender is bound; provided, however, that, notwithstanding the foregoing, (a) such Secured Party shall be bound by Section 10.12 only to the extent of Liabilities, costs and expenses with respect to or otherwise relating to the Collateral held for the benefit of such Secured Party, in which case the obligations of such Secured Party thereunder shall not be limited by any concept of Pro Rata Share or similar concept, (b) except as set forth specifically herein, each of Administrative Agent and each Lender shall be entitled to act at its sole discretion, without regard to the interest of such Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby, and without any duty or liability to such Secured Party or any such Obligation and (c) except as set forth specifically herein, such Secured Party shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under any Loan Document or the Environmental Indemnity Agreement.
Section 1.10Reliance by Administrative Agent. Administrative Agent shall be entitled to rely and act upon any certification, notice or other communication (including any thereof by telephone, facsimile, telegram or cable) reasonably believed by it to be genuine and
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correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document or the Environmental Indemnity Agreement, Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders, and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders.
Section 1.11Rights as a Lender. With respect to CONA’s Loan Commitment, if any, and the advances of the Loan made by it, CONA (and any successor permitted by the terms of this Agreement acting as Administrative Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Administrative Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include Administrative Agent in its individual capacity. CONA (and any successor permitted by the terms of this Agreement acting as Administrative Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of lending, trust or other business with Borrowers (and any of their Affiliates) as if it were not acting as Administrative Agent, and CONA and its Affiliates may accept fees and other consideration from Borrowers for services in connection with this Agreement or otherwise without having to account for the same to the Lenders.
Section 1.12Standard of Care; Indemnification. In performing its duties under the Loan Documents and the Environmental Indemnity Agreement, Administrative Agent will exercise the same degree of care as Administrative Agent normally exercises in connection with similar loans held for its own account, but Administrative Agent shall have no further responsibility to any Lender except as expressly provided herein and except for its own gross negligence or willful misconduct which resulted in actual loss to such Lender, and, except to such extent, Administrative Agent shall have no responsibility to any Lender for the failure by Administrative Agent to comply with any of Administrative Agent’s obligations to Borrowers under the Loan Documents, the Environmental Indemnity Agreement or otherwise. The Lenders agree to indemnify Administrative Agent (to the extent not reimbursed under Sections 11.5 or 11.11, but without limiting the obligations of Borrowers under Sections 11.5 or 11.11) ratably in accordance with each Lender’s Pro Rata Share, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Administrative Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Loan Document, the Environmental Indemnity Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Borrowers are obligated to pay under Section 11.11, but excluding, unless an Event of Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from Administrative Agent’s breach of its standard of care set forth in the first sentence of this Section.
Section 1.13Failure to Act. Except for actions expressly required of Administrative Agent hereunder and under the other Loan Documents and the Environmental Indemnity Agreement, Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from the Lenders of their indemnification obligations under Section 10.12 against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.
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Section 1.14The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF BORROWERS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF BORROWERS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF BORROWERS OR THE PLATFORM. In no event shall Administrative Agent or any of its Related Persons (collectively, the “Agent Parties”) have any liability to Borrowers, any Lender, or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of Borrowers’ or Administrative Agent’s transmission of any materials or information provided by or on behalf of Borrowers through the internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to Borrowers, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
Section 1.15Liability of Administrative Agent. Administrative Agent shall not have any liabilities or responsibilities to Borrowers on account of the failure of any Lender (other than Administrative Agent in its capacity as a Lender) to perform its obligations hereunder or to any Lender on account of the failure of Borrowers to perform their obligations hereunder, under any other Loan Document or under the Environmental Indemnity Agreement.
Section 1.16USA Patriot Act Notice; Compliance. In order for Administrative Agent to comply with the USA Patriot Act of 2001 (Public Law 107-56), prior to any Lender that is organized under the laws of a jurisdiction outside of the United States of America becoming a party hereto, Administrative Agent may request, and such Lender shall provide to Administrative Agent, its name, address, tax identification number and/or such other identification information as shall be necessary for Administrative Agent to comply with federal law.
Section 1.17No Reliance on Administrative Agent’s Customer Identification Program. Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on Administrative Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA PATRIOT Act or the regulations thereunder, including the regulations contained in 31 CFR 1020.220 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with Borrowers or any other loan parties, their Affiliates or their agents, the Loan Documents, the Environmental Indemnity Agreement or the transactions hereunder or contemplated hereby: (i) any identity verification procedures, (ii) any recordkeeping, (iii) comparisons with government lists, (iv) customer notices, or (v) other procedures required under the CIP Regulations or such other Anti-Terrorism Law.
Section 1.18Defaulting Lenders.
(a)Generally. A Lender shall be a “Defaulting Lender” hereunder if it (a) shall for any reason fail to (i) make any advance of the Loan required pursuant to the terms of
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this Agreement or (ii) pay its Pro Rata Share of any advance pursuant to Sections 10.8(b), 10.8(c) or 10.8(f) or any Protective Advance, or otherwise made or requested by Administrative Agent to be made in connection with the exercise by Administrative Agent of any of its remedies hereunder, or of any indemnification payment required pursuant to Section 10.12, and such failure shall continue for a period of two (2) Business Days following the delivery of written notice thereof by Administrative Agent to such Lender; (b) shall assign or transfer its interest hereunder or in or to its Loan or Commitment in violation of Section 11.3; (c) shall exercise any rights of set-off in violation of Section 11.7; (d) has notified Borrowers or Administrative Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund its Pro Rata Share of the Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied); (e) has failed, within three (3) Business Days after written request by Administrative Agent or Borrowers, to confirm in writing to Administrative Agent and Borrowers that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (e) upon receipt of such written confirmation by Administrative Agent and Borrowers); or (f) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any debtor relief law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by Administrative Agent that a Lender is a Defaulting Lender under one or more of clauses (a) through (f) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender upon delivery of written notice of such determination to the Borrowers and each Lender. If for any reason a Lender fails to make timely payment to Administrative Agent of any amount required to be paid to Administrative Agent hereunder (without giving effect to any notice or cure periods), in addition to other rights and remedies which Administrative Agent or Borrowers may have under the immediately preceding provisions or otherwise, Administrative Agent shall be entitled (i) to collect interest from such Defaulting Lender on such delinquent payment for the period from the date on which the payment was due until the date on which the payment is made at the Federal Funds Rate, (ii) to withhold or setoff and to apply in satisfaction of the defaulted payment and any related interest, any amounts otherwise payable to such Defaulting Lender under this Agreement or any other Loan Document and (iii) to bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. Any amounts received by Administrative Agent in respect of a Defaulting Lender’s Pro Rata Share of the Loan shall not be paid to such Defaulting Lender and shall be held uninvested by Administrative Agent and either applied against the purchase price of such Pro Rata Share of the Loan under the following Section 10.18(b) or paid to such Defaulting Lender upon the Defaulting Lender’s curing of its default.
(b)Purchase or Cancellation of Defaulting Lender’s Commitment. Any Lender who is not a Defaulting Lender shall have the right, but not the obligation, in its sole discretion, to acquire by assignment all of a Defaulting Lender’s Commitments. Any Lender desiring to exercise such right shall give written notice thereof to Administrative Agent and Borrowers no sooner than two (2) Business Days and not later than five (5) Business Days after
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such Defaulting Lender became a Defaulting Lender. If more than one Lender exercises such right, each such Lender shall have the right to acquire an amount of such Defaulting Lender’s Commitments in proportion to the respective Commitments of the Lenders exercising such right. If after such fifth (5th) Business Day, the Lenders have not elected to acquire all of the Commitments of such Defaulting Lender, then Borrowers may (but shall not be obligated to), by giving written notice thereof to Administrative Agent, such Defaulting Lender and the other Lenders, demand that such Defaulting Lender assign its Commitments to an assignee subject to and in accordance with the provisions of Section 11.3 for the purchase price provided for below. Upon any such assignment, the Defaulting Lender’s interest in the Loan and its rights hereunder (but not its liability in respect thereof or under the Loan Documents to the extent the same relate to the period prior to the effective date of the purchase) shall terminate on the date of purchase, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest to the purchaser or assignee thereof, including an appropriate Assignment and Assumption and, notwithstanding Section 11.3, shall pay to Administrative Agent an assignment fee in the amount of $10,000. The purchase price for the Commitments of a Defaulting Lender shall be equal to the amount of the principal balance of the Loan outstanding and owed by Borrowers to the Defaulting Lender plus interest thereon, accrued fees and all other amounts payable to such Defaulting Lender hereunder and under the other Loan Documents. Prior to payment of such purchase price to a Defaulting Lender, Administrative Agent shall apply against such purchase price any amounts retained by Administrative Agent pursuant to the last sentence of the immediately preceding Section 10.18(a).
(c)Optional Advance by Lender of Defaulting Lender’s Pro Rata Share. If a Defaulting Lender shall for any reason fail to (i) make any respective advance of the Loan required pursuant to the terms of this Agreement or (ii) pay its Pro Rata Share of a Protective Advance, any of the other Lenders may, but shall not be obligated to, make all or a portion of the Defaulting Lender’s advance under the Loan or Pro Rata Share of such Protective Advance, provided that such Lender gives the Defaulting Lender and Administrative Agent prior notice of its intention to do so. The right to make such advances in respect of the Defaulting Lender shall be exercisable first by the Lender holding the greatest Pro Rata Share and thereafter to each of the Lenders in descending order of their respective Pro Rata Share of the Loan or in such other manner as the Required Lenders (excluding the Defaulting Lender) may agree on. Any Lender making all or any portion of the Defaulting Lender’s Pro Rata Share of the applicable Loan or advance in accordance with the foregoing terms and conditions shall be referred to as a “Special Advance Lender”.
(d)Special Advance Lender. In any case where a Lender becomes a Special Advance Lender, the Special Advance Lender shall be deemed to have purchased, and the Defaulting Lender shall be deemed to have sold, a senior participation in the Defaulting Lender’s interest in the Loan to the extent of the amount so advanced or disbursed (the “Advanced Amount”) bearing interest (including interest at the Default Rate, if applicable). It is expressly understood and agreed that each of the respective obligations under this Agreement and the other Loan Documents, including making advances under the Loan, losses incurred in connection with the Loan, costs and expenses of enforcement, advancing to preserve the Lien of the Mortgage or to preserve and protect the Projects, shall be without regard to any adjustment in the Pro Rata Share occasioned by the acts of a Defaulting Lender. The Special Advance Lender shall be entitled to an amount (the “Unpaid Amount”) equal to the applicable Advanced Amount, plus any unpaid interest due and owing with respect thereto, less any repayments thereof made by the Defaulting Lender immediately upon demand. The Defaulting Lender shall have the right to repurchase the senior participation in its interest in the Loan from the Special Advance Lender, pro rata if there is more than one Special Advance Lender, at any time by the payment of the Unpaid Amount.
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(e)Notice Requirements. A Special Advance Lender shall (i) give notice to the Defaulting Lender, Administrative Agent and each of the other Lenders (provided that failure to deliver said notice to any party other than the Defaulting Lender shall not constitute a default under this Agreement) of the Advanced Amount and the percentage of the Special Advance Lender’s senior participation in the Defaulting Lender’s interest in the Loan and (ii) in the event of the repayment of any of the Unpaid Amount by the Defaulting Lender, give notice to the Defaulting Lender and Administrative Agent of the fact that the Unpaid Amount has been repaid (in whole or in part), the amount of such repayment and, if applicable, the revised percentage of the Special Advance Lender’s senior participation. Provided that Administrative Agent has received notice of such participation, Administrative Agent shall have the same obligations to distribute interest, principal and other sums received by Administrative Agent with respect to a Special Advance Lender’s senior participation as Administrative Agent has with respect to the distribution of interest, principal and other sums under this Agreement; and at the time of making any distributions to the Lenders, shall make payments to the Special Advance Lender with respect to a Special Advance Lender’s senior participation in the Defaulting Lender’s interest in the Loan out of the Defaulting Lender’s share of any such distributions.
(f)Special Advance Lender’s Rights to Sums Paid to Defaulting Lender. A Defaulting Lender shall immediately pay to a Special Advance Lender all sums of any kind paid to or received by the Defaulting Lender from Borrowers, whether pursuant to the terms of this Agreement or the other Loan Documents or in connection with the realization of the security therefor until the Unpaid Amount is fully repaid. Notwithstanding the fact that the Defaulting Lender may temporarily hold such sums, the Defaulting Lender shall be deemed to hold same as a trustee for the benefit of the Special Advance Lender, it being the express intention of the Lenders that the Special Advance Lender shall have an ownership interest in such sums to the extent of the Unpaid Amount.
(g)Defaulting Lender’s Indemnification of Administrative Agent and Lenders. Each Defaulting Lender shall indemnify, defend and hold Administrative Agent and each of the other Lenders harmless from and against any and all losses, damages, liabilities or expenses (including reasonable attorneys’ fees and expenses and interest at the Default Rate) which they may sustain or incur by reason of the Defaulting Lender’s failure or refusal to abide by its obligations under this Agreement or the other Loan Documents. Administrative Agent shall, after payment of any amounts due to any Special Advance Lender pursuant to the terms of Section 10.18(c) above, set-off against any payments due to such Defaulting Lender for the claims of Administrative Agent and the other Lenders pursuant to this indemnity.
(h)Subordination of Rights of Defaulting Lender. Notwithstanding any provision hereof to the contrary, until such time as a Defaulting Lender has funded its Pro Rata Share of any advance described in Sections 10.18(b), 10.18(c), 10.18(g) or 10.12 or prior Loan disbursement which was previously a Non-Pro Rata Advance (including through the funding thereof on its behalf by a Special Advance Lender), or all other Lenders have received payment in full (whether by repayment or prepayment) of the amounts due in respect of such Non-Pro Rata Advance, all of the indebtedness and obligations owing to such Defaulting Lender hereunder shall be subordinated in right of payment, as provided in the following sentence, to the prior payment in full of all principal, interest and fees in respect of all Non-Pro Rata Advances in which the Defaulting Lender has not funded its Pro Rata Share (including through the funding thereof on its behalf by a Special Advance Lender) (such principal, interest and fees being referred to as “Senior Loans”). All amounts paid by Borrowers and otherwise due to be applied to the indebtedness and obligations owing to the Defaulting Lender pursuant to the terms hereof shall be distributed by Administrative Agent to the other Lenders in accordance with their respective Pro Rata Share of the Loan (recalculated for purposes hereof to exclude the Defaulting Lender’s Pro Rata Share of the Loan), until all Senior Loans have been paid in full. This provision governs only the relationship among Administrative Agent, each Defaulting Lender,
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and the other Lenders; nothing hereunder shall limit the obligations of Borrowers under this Agreement. The provisions of this paragraph shall apply and be effective regardless of whether a Potential Default or Event of Default occurs and is then continuing, and notwithstanding (i) any other provision of this Agreement to the contrary, (ii) any instruction of Borrowers as to their desired application of payments or (iii) the suspension of such Defaulting Lender’s right to vote on matters which are subject to the consent or approval of Required Lenders or all Lenders. The failure of any Defaulting Lender to timely receive any amounts otherwise payable to such Defaulting Lender under this Agreement or the other Loan Documents on account of the provisions of this paragraph shall not constitute a Potential Default or Event of Default.
(i)Removal of Rights. A Defaulting Lender shall have no voting rights or rights to grant any consent or approval whatsoever under this Agreement or any other Loan Documents (including, without limitation, under Section 11.2 of this Agreement) and shall not be considered in the calculation of “Required Lenders” so long as it is a Defaulting Lender. This Section shall remain effective with respect to a Defaulting Lender until such time as the Defaulting Lender shall no longer be in default of any of its obligations under this Agreement by curing such default with the consent of the non-Defaulting Lenders.  Such Defaulting Lender nonetheless shall be bound by any amendment to or waiver of any provision of, or any consent, approval or other action granted, taken or omitted to be taken by Administrative Agent and/or the non-Defaulting Lenders under any Loan Document which is made subsequent to that Lender’s becoming a Defaulting Lender and prior to such cure or waiver.
Section 1.19Limitations. No Secured Party that is party to a Hedge Agreement that obtains the benefits of Section 2.6(a) or any Collateral with respect to Hedge Obligations, as applicable, by virtue of the provisions hereof or of any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article 10 to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to Hedge Agreements unless the Administrative Agent has received written notice of such Hedge Agreements, as applicable, together with such supporting documentation as the Administrative Agent may request, from the applicable Secured Party.
ARTICLE 11
MISCELLANEOUS
Section 1.1Notices.
(a)Notices; Physical Addresses. Any notice required or permitted to be given under this Agreement shall be in writing and either shall be mailed by registered or certified mail, postage prepaid, return receipt requested, or sent by overnight air courier service, or personally delivered to a representative of the receiving party, or sent by facsimile or email (provided an identical notice is also sent simultaneously by mail, overnight courier, or personal delivery as otherwise provided in this Section 11.1). All such communications shall be mailed, sent or delivered, addressed to the party for whom it is intended at its address set forth below.
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To Borrowers:
c/o AR Global
97 John Clarke Road, Suite 2
Middletown, Rhode Island 02842
Attention: Michael Anderson
Email: Manderson@ar-global.com
With a copy to:
Arnold & Porter
601 Massachusetts Avenue, NW
Washington, DC 20001
Attention: Amy Rifkind
Email: Amy. Rifkind@arnoldporter.com
If to Administrative Agent:
Capital One, National Association
77 West Wacker Drive, 10th Floor
Chicago, Illinois 60601
Attention: Tiffany Holznecht
Facsimile: (855) 299-3238
Email: Tiffany.Holznecht@capitalone.com
Reference: Healthcare Trust, Inc.
With a copy to:
Capital One, National Association
77 West Wacker Drive, 10th Floor
Chicago, Illinois 60601
Attention: Jeffrey M. Muchmore, Credit Executive
Facsimile: (855) 332-1699
Email: Jeffrey.muchmore@capitalone.com
Reference: Healthcare Trust, Inc.____________________
And a copy to:
Capital One, National Association
5804 Trailridge Drive
Austin, Texas 78731
Attention: Diana Pennington, Senior Director, Associate General Counsel
Facsimile: (855) 438-1132
Email: diana.pennington@capitalone.com
Reference: Healthcare Trust, Inc.____________
If to a Lender:
To the address set forth on Exhibit C attached hereto
Any notice or request so addressed and sent by United States registered or certified mail or overnight courier shall be deemed to be given on the earliest of (1) when actually delivered, (2) on the first Business Day after deposit with an overnight air courier service, or (3) on the third Business Day after deposit in the United States mail, postage prepaid, in each case to the address of the intended addressee (except as otherwise provided in the Mortgage). Any notice or request so delivered in person shall be deemed to be given when receipted for by, or actually received by Administrative Agent, a Lender, or Borrowers, as the case may be. If given by email or facsimile, a notice or request shall be deemed given and received when the email or facsimile is transmitted to the party’s facsimile number or email address specified above and confirmation of complete receipt is received by the transmitting party during normal business hours or on the next Business Day if not confirmed during normal business hours, and an identical notice is also sent simultaneously by mail, overnight courier, or personal delivery as otherwise provided in this Section 11.1. Any party may designate a change of address by written notice to the other by giving at least ten (10) days prior written notice of such change of address.
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(b)Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Administrative Agent, provided that the foregoing shall not apply to notices to any Lender if such Lender has notified Administrative Agent that it is incapable of receiving notices by electronic communication. Administrative Agent or Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
(c)Unless otherwise agreed to by Borrower and Administrative Agent, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
Section 1.2Amendments and Waivers.
(a)No amendment or waiver of any provision of any Loan Document or the Environmental Indemnity Agreement and no consent to any departure by Borrowers or any other Borrower Party therefrom shall be effective unless the same shall be in writing and signed (i) in the case of an amendment, consent or waiver to cure any ambiguity, omission, defect or inconsistency or granting a new Lien for the benefit of the Secured Parties or extending an existing Lien over additional property, by Administrative Agent and Borrowers, (ii) in the case of any other waiver or consent, by the Required Lenders (or by Administrative Agent with the written consent of the Required Lenders) and (ii) in the case of any other amendment, by the Required Lenders (or by Administrative Agent with the consent of the Required Lenders) and Borrowers; provided, however, that no amendment, consent or waiver described in clause (ii) or (iii) above shall be effective, unless in writing and signed by each Lender (or by Administrative Agent with the consent of the Lenders), in addition to any other Person the signature of which is otherwise required pursuant to any Loan Document or the Environmental Indemnity Agreement, and such amendment, consent or waiver does any of the following:
(i)waives any condition precedent to the effectiveness of this Agreement, except any condition referring to any other provision of any Loan Document or the Environmental Indemnity Agreement;
(ii)increases the Loan Commitment of any Lender or subjects any Lender to any additional obligation or otherwise increases the principal amount of the Loan;
(iii)reduces (including through release, forgiveness, assignment or otherwise) (i) the principal amount of, the interest rate on, or any obligation of Borrowers to repay (whether or not on a fixed date), any outstanding amount under the Loan owing to Lenders or (ii) any fee or accrued interest payable to any Lender; provided, however, that this clause (C) does not apply to (x) any change to any provision increasing any interest rate or fee during the continuance of an Event of Default or to any payment of any such increase or (y) any modification to any financial covenant set forth in Article 7 or the Recourse Guaranty Agreement or in any definition set forth therein or principally used therein;
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(iv)waives or postpones any scheduled maturity date or other scheduled date fixed for the payment, in whole or in part, of principal of or interest on the Loan (including any agreement to forbear that would have the same effect) or fee owing to such Lender or for the reduction of such Lender’s Loan Commitment; provided, however, that this clause (iv) does not apply to any change to mandatory prepayments, including those required under this Agreement, or to the application of any payment, including as set forth in Section 2.6;
(v)releases all or substantially all of the Collateral or any Guarantor from its guaranty of any Obligation of Borrowers;
(vi)reduces or increases the proportion of Lenders required for the Lenders (or any subset thereof) to take any action hereunder or change the definition of the terms “Required Lenders,” “Pro Rata Share,” or “Pro Rata Outstandings”; or
(vii)amends Section 2.14(b) (Sharing of Payments, Etc.) or this Section 11.2;
(b)Anything herein to the contrary notwithstanding, (A) any waiver of any payment applied pursuant to Section 2.6 (Application of Payments) to, and any modification of the application of any such payment to the Loan shall require the consent of the Required Lenders, (B) no amendment, waiver or consent shall affect the rights or duties under any Loan Document or the Environmental Indemnity Agreement of, or any payment to, Administrative Agent (or otherwise modify any provision of Article 10 or the application thereof), and (C) (1) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that (x) the Loan Commitment or of such Lender may not be increased or extended without the consent of such Lender, (y) the outstanding balance of such Lender’s Pro Rata Share of the Loan may not be forgiven without the consent of such Lender, and (z) the interest rate on the Loan cannot be reduced unless the Defaulting Lender is treated the same as all other Lenders; (2) each Lender is entitled to vote as such Lender sees fit on any bankruptcy or insolvency reorganization plan that affects the Loan; (3) each Lender acknowledges that the provisions of Section 1126(c) of the Federal Bankruptcy Code supersedes the unanimous consent provisions set forth herein; and (4) the Required Lenders may consent to allow Borrowers to use cash collateral in the context of a bankruptcy or insolvency proceeding.
(c)Each waiver or consent under any Loan Document (including the Recourse Guaranty Agreement) or t he Environmental Indemnity Agreement shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrowers or any other Borrower Party shall entitle such Person to any notice or demand in the same, similar or other circumstances. No failure on the part of any Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. To the extent the consent of any Lender is required with respect to any amendment or waiver of any Loan Document or the Environmental Indemnity Agreement under the terms of this Section 11.2, each Lender will respond to any such request in a commercially reasonable manner and timeframe.
(d)Intentionally omitted.
(e)Unless also consented to in writing by such Secured Hedge Provider or, in the case of a Secured Hedge Agreement provided or arranged by CONA or an Affiliate of CONA, CONA, no such amendment, waiver or consent with respect to this Agreement or any
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other Loan Document or the Environmental Indemnity Agreement shall (i) alter the ratable treatment of Obligations arising under Secured Hedge Agreements such that such Obligations become junior in right of payment to principal on the Loan or (ii) result in Obligations owing to any Secured Hedge Provider becoming unsecured (other than releases of Liens applicable to all Lenders and otherwise permitted in accordance with the terms hereof), in each case in a manner adverse to such Secured Hedge Provider.
Section 1.3Assignments and Participations; Binding Effect.
(a)Binding Effect. Subject to the provisions of this Section 11.3, this Agreement shall be binding upon and inure to the benefit of Administrative Agent, the Lenders and Borrowers and their respective successors and permitted assigns, provided that neither Borrowers nor any other Borrower Party shall, without the prior written consent of Administrative Agent and Lenders, assign any of its rights, duties or obligations hereunder to any other Person.
(b)Assignments by the Lenders. Each Lender (other than a Defaulting Lender) may sell, transfer, negotiate or assign all or a portion of its rights and obligations hereunder (including all or a portion of its Loan Commitment and its rights and obligations with respect to the Loan) to (i) any existing Lender (other than a Defaulting Lender), (ii) any Affiliate or Approved Fund of any existing Lender (so long as such Person would not, upon acceptance of such rights and obligations hereunder, constitute a Defaulting Lender) or (iii) any other Person (other than Borrowers, Guarantor or an Affiliate thereof) acceptable (which acceptance shall not be unreasonably withheld or delayed) to Administrative Agent (each such transferee, assignee or purchaser herein called a “Lender Transferee”); provided, however, that the aggregate outstanding principal amount (determined as of the effective date of the applicable Assignment) of the Loan subject to any such sale shall be in a minimum amount of $3,000,000, unless such sale is made to an existing Lender or an Affiliate or Approved Fund of any existing Lender, is of the assignor’s (together with its Affiliates and Approved Funds) entire interest in the Loan or is made with the prior consent of Administrative Agent. A Defaulting Lender may not sell, transfer, negotiate or assign all or a portion of its rights and obligations hereunder except with Administrative Agent’s consent or at Administrative Agent’s direction in accordance with Section 2.18(c) hereof unless the circumstance which caused such Lender to become a Defaulting Lender will be fully cured in connection with such sale, transfer, negotiation or assignment. A Defaulting Lender (or Person that would constitute a Defaulting Lender upon acceptance of rights and obligations hereunder) may not be the recipient of the sale, transfer, negotiation or assignment of any rights or obligations hereunder except with the consent of Administrative Agent and Required Lenders.
(c)Assignment Procedures. The parties to each transfer or sale made in reliance on clause (b) above shall execute and deliver to Administrative Agent an Assignment and Assumption via an electronic settlement system designated by Administrative Agent (or if previously agreed with Administrative Agent, via a manual execution and delivery of the Assignment and Assumption) evidencing such transfer or sale, together with any existing Note subject to such transfer or sale (or any affidavit of loss therefor acceptable to Administrative Agent), any tax forms or other forms required to be delivered by Administrative Agent, and payment of an assignment fee in the amount of $5,000, provided that (1) if a transfer or sale by a Lender is made to an Affiliate or an Approved Fund of such assigning Lender, then no assignment fee shall be due in connection with such transfer or sale, and (2) if a transfer or sale by a Lender is made to an assignee that is not an Affiliate or Approved Fund of such assignor Lender, and concurrently to one or more Affiliates or Approved Funds of such assignee, then only one assignment fee of $5,000 (unless waived by Administrative Agent), shall be due in connection with such transfer or sale. Upon receipt of all the foregoing, and conditioned upon such receipt and, if such assignment is made in accordance with Section 11.3(b)(iii), upon
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Administrative Agent consenting to such Assignment and Assumption, from and after the effective date specified in such Assignment and Assumption, Administrative Agent shall record or cause to be recorded in the Register the information contained in such Assignment and Assumption.
(d)Participations. A Lender may sell or agree to sell to one or more other Persons (each a “Participant”) a participation in all or any part of the Pro Rata Share of the Loan held by it, or in its Loan Commitment, provided that such Participant shall not have any rights or obligations under this Agreement or any Note or any other Loan Document (the Participant’s rights against such Lender in respect of such participation to be those set forth in the agreements executed by such Lender and the applicable Participant) and Borrowers and Guarantor shall continue to deal solely and directly with Administrative Agent and the Lenders (and not such Participants) All amounts payable by Borrowers to any Lender under Section 2.6 in respect of its Pro Rata Share and its Loan Commitment shall be determined as if such Lender had not sold or agreed to sell any participations in the Loan and its Loan Commitment, and as if such Lender were funding its Pro Rata Share of the Loan (if applicable) and its Loan Commitment in the same way that it is funding its Pro Rata Share of the Loan and its Loan Commitment in which no participations have been sold.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in clauses (i) through (vi) of Section 11.2(a) that affects such Participant.
Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loan or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(e)Effect of Assignment. Subject to the recording of an Assignment and Assumption by Administrative Agent in the Register pursuant to Section 2.12(b), (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents and the Environmental Indemnity Agreement have been assigned to such assignee pursuant to such Assignment and Assumption, shall have the rights and obligations of a Lender, (ii) any applicable Note shall be transferred to such assignee through such entry and (iii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment and Assumption, relinquish its rights (except for those surviving the termination of the Loan Commitments and the payment in full of the Obligations) and be released from its obligations under the Loan Documents and the Environmental Indemnity Agreement, other than those relating to events or circumstances occurring prior to such assignment (and, in the case of an Assignment and Assumption covering
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all or the remaining portion of an assigning Lender’s rights and obligations under the Loan Documents and the Environmental Indemnity Agreement, such Lender shall cease to be a party hereto except that each Lender agrees to remain bound by Article 10, Section 11.7 (Right of Setoff; Sharing of Payments) and Section 11.35 (Non-Public Information; Confidentiality).
(f)Certain Pledges. In addition to the assignments and participations permitted under the foregoing provisions of this Section 11.3 (but without being subject thereto):
(i)Any Lender may (without notice to Borrowers, Administrative Agent or any other Lender and without payment of any fee) assign and pledge all or any portion of its Pro Rata Share of the Loan and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A and any operating circular issued by such Federal Reserve Bank, and such Pro Rata Share of the Loan and Note shall be fully transferable as provided therein. No such assignment shall release the assigning Lender from its obligations hereunder.
(ii)Any Lender may pledge its Pro Rata Share of the Loan and its Note to any Person that has provided a credit facility or source of liquidity to such Lender. No such pledge shall release the assigning Lender from its obligations hereunder. Any subsequent assignment upon the exercise of pledge remedies shall be subject to the terms of Section 11.3(b).
(g)Provision of Information to Assignees and Participants. Subject to the provisions of Section 11.35, a Lender may furnish any information concerning Borrowers or any of their Affiliates in the possession of such Lender from time to time to Lender Transferees and Participants (including prospective Lender Transferees and Participants).
(h)No Assignments to Borrower or Affiliates. Anything in this Section 11.3 to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it hereunder to Borrower or any of its Affiliates without the prior written consent of each Lender.
(i)Provision of Information to Assignees and Participants. A Lender may furnish any information concerning Borrowers or any of their Affiliates in the possession of such Lender from time to time to assignees and Participants (including prospective assignees and Participants) subject to the obligation to keep all such information, other than publicly available information, confidential.
(j)No Assignments to Borrowers or Affiliates. Anything in this Section 11.3 to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it hereunder to Borrowers or any of its Affiliates without the prior written consent of each Lender.
Section 1.4Renewal, Extension or Rearrangement. Subject to Section 11.9, all provisions of the Loan Documents shall apply with equal effect to each and all promissory notes and amendments thereof hereinafter executed which in whole or in part represent a renewal, extension, increase or rearrangement of the Loan.
Section 1.5Indemnities.
(a)Borrowers shall protect, defend, indemnify and save harmless Administrative Agent and each Lender and its respective shareholders, directors, officers, employees and agents (each, an “Indemnified Person”) from and against all Liabilities imposed upon or incurred by or asserted against any Indemnified Person, whether brought by a third party
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or any Borrower Party, by reason of (i) credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith; (ii) ownership of the Mortgage, the Projects or any interest therein or receipt of any rents and the exercise of rights and remedies thereunder; (iii) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Projects or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (iv) any use, nonuse or condition in, on or about the Projects or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (v) performance of any labor or services or the furnishing of any materials or other property in respect of the Projects or any part thereof; (vi) the failure of any Person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Agreement, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the transaction in connection with which this Agreement is made; (vii) any securities filing of, or with respect to, Borrowers, any other Borrower Party or the Projects; (viii) any actual or prospective investigation, litigation or other proceeding, whether or not brought by any such Indemnified Person or any of its Related Persons, any holders of securities or creditors, whether or not any such Indemnified Person, Related Person, holder or creditor is a party thereto, and whether or not based on any securities or commercial law or regulation or any other Requirements of Law or theory thereof, including common law, equity, contract, tort or otherwise; (ix) all sums paid by Administrative Agent pursuant to Section 9.3, or (x) any other act, event or transaction related, contemplated in or attendant to any of the foregoing (collectively, the “Indemnified Matters” and, each, an “Indemnified Matter”); provided, however, that Borrowers shall have no liability under this Section 11.5 to any Indemnified Person with respect to any Indemnified Matter, and no Indemnified Person shall have any liability with respect to any Indemnified Matter other than to the extent such liability has resulted from the gross negligence or willful misconduct of such Indemnified Person, as determined by a court of competent jurisdiction in a final non-appealable judgment or order or any dispute solely between or among Indemnified Persons. Furthermore, each Borrower (on its own behalf and on behalf of each other Borrower Party) waives and agrees not to assert against any Indemnified Person any right of contribution with respect to any Liabilities that may be imposed on, incurred by or asserted against any Related Person.
(b)Any indemnification or other protection provided to any Indemnified Person pursuant to any Loan Document and the Environmental Indemnity Agreement and all representations and warranties made in any Loan Document and the Environmental Indemnity Agreement shall (i) survive the termination of the Loan Commitment and the payment in full of other Obligations and (ii) inure to the benefit of any Person that at any time held a right thereunder (as an Indemnified Person) and, thereafter, its successors and permitted assigns to the extent the same is an Indemnified Person.
(c)Without limiting the terms of Section 11.26 hereof, in no event shall any Indemnified Person be liable on any theory of liability for any special, indirect, consequential or punitive damages (including any loss of profits, business or anticipated savings). Borrowers (on their own behalf and on behalf of the other Borrower Parties) hereby waive, release and agree not to sue upon any such claim for any special, indirect, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor.
Section 1.6Debtor-Creditor Relationship. The relationship between the Lenders and Administrative Agent, on the one hand, and Borrowers, on the other hand, is solely that of debtor and creditor. No Secured Party has any fiduciary relationship or duty to any Borrower Party arising out of or in connection with, and there is no agency, tenancy or joint venture relationship between the Secured Parties and Borrowers and any other Borrower Party by virtue
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of, any Loan Document, the Environmental Indemnity Agreement or any transaction contemplated therein.
Section 1.7Right of Setoff; Sharing of Payments. Each of Administrative Agent, each Lender, and each Affiliate (including each branch office thereof) of any of them is hereby authorized, without notice or demand (each of which is hereby waived by Borrowers), at any time and from time to time during the continuance of any Event of Default and to the fullest extent permitted by applicable Requirements of Law, to set off and apply any and all deposits (whether general or special, time or demand, provisional or final) at any time held and other indebtedness, claims or other obligations at any time owing by Administrative Agent, such Lender, or any of their respective Affiliates to or for the credit or the account of Borrowers against any Obligation of any Borrower Party now or hereafter existing, whether or not any demand was made under any Loan Document or the Environmental Indemnity Agreement with respect to such Obligation and even though such Obligation may be unmatured. Each of Administrative Agent and each Lender agrees promptly to notify Borrowers and Administrative Agent after any such setoff and application made by such Lender or its Affiliates; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights under this Section 11.7 are in addition to any other rights and remedies (including other rights of setoff) that Administrative Agent, the Lenders, and their Affiliates and other Secured Parties may have.
If any Lender, directly or through an affiliate or branch office thereof, obtains any payment of any Obligation of Borrowers or any other Borrower Party (whether voluntary, involuntary or through the exercise of any right of setoff or the receipt of any Collateral or “proceeds” (as defined under the applicable UCC) of Collateral) other than pursuant to Section 2.8 (Capital Adequacy; Increased Costs; Illegality) and Section 2.9 (Interest Rate Protection), and such payment exceeds the amount such Lender would have been entitled to receive if all payments had gone to, and been distributed by, Administrative Agent in accordance with the provisions of the Loan Documents, such Lender shall purchase for cash from other Secured Parties such participations in their Obligations as necessary for such Lender to share such excess payment with such Secured Parties to ensure such payment is applied as though it had been received by Administrative Agent and applied in accordance with this Agreement (or, if such application would then be at the discretion of Borrowers, applied to repay the Obligations in accordance herewith); provided, however, that (i) if such payment is rescinded or otherwise recovered from such Lender in whole or in part, such purchase shall be rescinded and the purchase price therefor shall be returned to such Lender without interest and (ii) such Lender shall, to the fullest extent permitted by applicable Requirements of Law, be able to exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount of such participation.
Section 1.8Marshaling; Payments Set Aside. No Secured Party shall be under any obligation to marshal any property in favor of any Borrower Party or any other party or against or in payment of any Obligation. To the extent that any Secured Party receives a payment from any Borrower Party, from the proceeds of the Collateral, from the exercise of its rights of setoff, any enforcement action or otherwise, and such payment is subsequently, in whole or in part, invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not occurred.
Section 1.9Limitation on Interest. It is the intention of the parties hereto to conform strictly to applicable usury laws. Accordingly, all agreements between Borrowers, Administrative Agent and Lenders with respect to the Loan are hereby expressly limited so that in no event, whether by reason of acceleration of maturity or otherwise, shall the amount paid or
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agreed to be paid to Administrative Agent and any Lender or charged by Administrative Agent or any Lender for the use, forbearance or detention of the money to be lent hereunder or otherwise, exceed the maximum amount allowed by law. If the Loan would be usurious under applicable law (including the laws of the State of New York and the laws of the United States of America), then, notwithstanding anything to the contrary in the Loan Documents: (a) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under the Loan Documents and the Environmental Indemnity Agreement shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited on the Note by the holder thereof or, if the Note has been paid in full, refunded to Borrowers; and (b) if maturity is accelerated by reason of an election by Administrative Agent permitted by the express terms of the Loan Documents, or in the event of any prepayment, then any consideration which constitutes interest may never include more than the maximum amount allowed by applicable law. In such case, excess interest, if any, provided for in the Loan Documents and the Environmental Indemnity Agreement or otherwise, to the extent permitted by applicable law, shall be amortized, prorated, allocated and spread from the date of advance until payment in full so that the actual rate of interest is uniform through the term hereof. If such amortization, proration, allocation and spreading is not permitted under applicable law, then such excess interest shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the Note or, if the Note has been paid in full, refunded to Borrowers. The terms and provisions of this Section 11.9 shall control and supersede every other provision of the Loan Documents and the Environmental Indemnity Agreement. The Loan Documents and the Environmental Indemnity Agreement are contracts made under and shall be construed in accordance with and governed by the laws of the State of New York, except that if at any time the laws of the United States of America permit Administrative Agent or the Lenders to contract for, take, reserve, charge or receive a higher rate of interest than is allowed by the laws of the State of New York (whether such federal laws directly so provide or refer to the law of any state), then such federal laws shall to such extent govern as to the rate of interest which Administrative Agent or the Lenders may contract for, take, reserve, charge or receive under the Loan Documents and the Environmental Indemnity Agreement.
Section 1.10Invalid Provisions. If any provision of any Loan Document or the Environmental Indemnity Agreement is held to be illegal, invalid or unenforceable, such provision shall be fully severable; the Environmental Indemnity Agreement and the Loan Documents shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof; the remaining provisions thereof shall remain in full effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance therefrom; and in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part of such Environmental Indemnity Agreement or such Loan Document a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible to be legal, valid and enforceable.
Section 1.11Reimbursement of Expenses.
(a)Any action taken by any Borrower Party under or with respect to any Loan Document or the Environmental Indemnity Agreement, even if required under any Loan Document or the Environmental Indemnity Agreement or at the request of any Secured Party, shall be at the expense of such Borrower Party, and no Secured Party shall be required under any Loan Document or the Environmental Indemnity Agreement to reimburse any Borrower Party therefor except as expressly provided herein or therein. In addition, Borrowers agree to pay or reimburse upon demand (a) Administrative Agent for all reasonable out-of-pocket costs and expenses incurred by it or any of its Related Persons in connection with the investigation, development, preparation, negotiation, syndication, execution, interpretation or administration of, any modification of any term of or termination of, any Loan Document or the Environmental
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Indemnity Agreement, any commitment or proposal letter therefor, any other document prepared in connection therewith or the consummation and administration of any transaction contemplated therein (including periodic audits in connection therewith and environmental audits and assessments), in each case including the reasonable fees, charges and disbursements of legal counsel to Administrative Agent or such Related Persons, fees, costs and expenses incurred in connection with Intralinks® or any other Platform and allocated to the Loan by Administrative Agent in its sole discretion and fees, charges and disbursements of the auditors, appraisers, printers and other of their Related Persons retained by or on behalf of any of them or any of their Related Persons, charges for wire transfers and check processing charges, charges for security delivery fees, charges for overnight delivery, recording fees, treasury, management and other service fees and overdraft charges, (b) Administrative Agent and each Lender for all reasonable costs and expenses incurred by them or any of their Related Persons in connection with internal audit reviews, field examinations, financial investigation, and Collateral examinations, including, without limitation, any tax service company (which shall be reimbursed, in addition to the out-of-pocket costs and expenses of such examiners, at the per diem rate per individual charged by Administrative Agent for its examiners), (c) each of Administrative Agent, its Related Persons, and each Lender for all costs and expenses incurred in connection with (i) any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out”, (ii) the enforcement or preservation of any right or remedy with respect to any Obligation, the Collateral or under any Loan Document or the Environmental Indemnity Agreement, or any other related right or remedy or (iii) the commencement, defense, conduct of, intervention in, or the taking of any other action with respect to, any proceeding (including any bankruptcy or insolvency proceeding) related to any Borrower Party, any Loan Document, the Environmental Indemnity Agreement, any Obligation or related transaction (or the response to and preparation for any subpoena or request for document production relating thereto), including reasonable fees and disbursements of counsel, (d) costs incurred in connection with settlement of condemnation and casualty awards, premiums for title insurance and endorsements thereto, and (e) fees and costs for Uniform Commercial Code and litigation searches and background checks customarily undertaken by Administrative Agent.
(b)Borrowers shall also pay to Administrative Agent on each Payment Date during the term of the Loan, in addition to all other amounts due under the Loan Documents, the sum of One Hundred Fifty Dollars ($150), per Project which Administrative Agent shall apply against the cost and expenses incurred in connection with the annual on-site audit and inspection of the Projects.
Section 1.12Approvals; Third Parties; Conditions. All approval rights retained or exercised by Administrative Agent or Lenders with respect to Leases, contracts, plans, studies and other matters are solely to facilitate Administrative Agent’s and the Lenders’ credit underwriting, and shall not be deemed or construed as a determination that Administrative Agent or Lenders have passed on the adequacy thereof for any other purpose and may not be relied upon by Borrowers or any other Person. This Agreement is for the sole and exclusive use of Administrative Agent (and its successors and permitted assigns), Lenders (and their successors and permitted assigns and participants), and Borrowers and may not be enforced, nor relied upon, by any Person other than Administrative Agent (and its successors and permitted assigns), Lenders (and their successors and permitted assigns and participants), and Borrowers. All conditions of the obligations of Administrative Agent and the Lenders hereunder, including the obligation to make advances, are imposed solely and exclusively for the benefit of Administrative Agent and Lenders, their successors and assigns, and no other Person shall have standing to require satisfaction of such conditions or be entitled to assume that any Lender will refuse to make advances in the absence of strict compliance with any or all of such conditions, and no other Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by any Lender at any time in such Lender’s sole discretion.
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Section 1.13Administrative Agent and Lenders Not in Control; No Partnership. None of the covenants or other provisions contained in this Agreement shall, or shall be deemed to, give Administrative Agent or Lenders the right or power to exercise control over the affairs or management of Borrowers, the power of Administrative Agent and Lenders being limited to the rights to exercise the remedies referred to in the Environmental Indemnity Agreement or the Loan Documents. No covenant or provision of the Environmental Indemnity Agreement or the Loan Documents is intended, nor shall it be deemed or construed to, and Administrative Agent, Lenders and Borrowers disclaim any intention to, create a partnership, joint venture, agency or common interest in profits or income among Administrative Agent and the Lenders or any of them, on the one hand, and Borrowers, on the other hand, or to create an equity interest in any Project in Administrative Agent or any Lender. None of Administrative Agent nor any Lender undertakes or assumes any responsibility or duty to Borrowers or to any other Person with respect to the Projects or the Loan, except as expressly provided in the Environmental Indemnity Agreement and the Loan Documents; and notwithstanding any other provision of the Environmental Indemnity Agreement or the Loan Documents: (a) none of Administrative Agent or any Lender are, and shall not be construed as, a partner, joint venturer, alter ego, manager, controlling person or other business associate or participant of any kind of Borrowers or Borrowers’ stockholders, members, or partners and Administrative Agent and Lenders do not intend to ever assume such status; (b) Administrative Agent and Lenders shall in no event be liable for any Debts, expenses or losses incurred or sustained by Borrowers; and (c) Administrative Agent and Lenders shall not be deemed responsible for or a participant in any acts, omissions or decisions of Borrowers or Borrowers’ stockholders, members, or partners. Administrative Agent and Lenders and Borrowers disclaim any intention to create any partnership, joint venture, agency or common interest in profits or income among Administrative Agent and Lenders or any of them, on the one hand, and Borrowers, on the other hand, or to create an equity interest in the Projects in Administrative Agent or Lenders, or any sharing of liabilities, losses, costs or expenses.
Section 1.14Contest of Certain Claims. Borrowers may contest the validity of Taxes or any mechanic’s or materialman’s or other lien asserted against the Projects so long as (a) Borrowers notify Administrative Agent that it intends to contest such Taxes or liens, as applicable, (b) Borrowers provide Administrative Agent with an indemnity, bond or other security reasonably satisfactory to Administrative Agent assuring the discharge of Borrowers’ obligations for such Taxes or liens, as applicable, including interest and penalties, (c) Borrowers are diligently contesting the same by appropriate legal proceedings in good faith and at its own expense and concludes such contest prior to the tenth (10th) day preceding the earlier to occur of the Maturity Date or the date on which any Project is scheduled to be sold for non-payment, and (d) Borrowers promptly upon final determination thereof pays the amount of any such Taxes or liens, as applicable, together with all costs, interest and penalties which may be payable in connection therewith. Notwithstanding the foregoing, Borrowers shall immediately upon request of Administrative Agent pay any such Taxes or liens, as applicable, notwithstanding such contest if, in the opinion of Administrative Agent, the Projects or any part thereof or interest therein may be in danger of being sold, forfeited, foreclosed, terminated, canceled or lost.
Section 1.15Time of the Essence. Time is of the essence with respect to this Agreement.
Section 1.16Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Administrative Agent, the Lenders, and Borrowers and their respective permitted successors and assigns, provided that neither Borrowers nor any other Borrower Party shall, without the prior written consent of the Lenders, assign any of its rights, duties or obligations hereunder.
Section 1.17Waivers.
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(a)No course of dealing on the part of Administrative Agent or the Lenders or their respective officers, employees, consultants or agents, nor any failure or delay by Administrative Agent or any Lender with respect to exercising any right, power or privilege of Administrative Agent or the Lenders under the Environmental Indemnity Agreement and any of the Loan Documents, shall operate as a waiver thereof.
(b)Borrowers hereby waive any right under the UCC or any other applicable law to receive notice and/or copies of any filed or recorded financing statements, amendments thereto, continuations thereof or termination statements and releases and excuses Administrative Agent and each Lender from any obligation under the UCC or any other applicable law to provide notice or a copy of any such filed or recorded documents.
Section 1.18Cumulative Rights; Joint and Several Liability. Rights and remedies of Administrative Agent (on behalf of the Lenders) under the Environmental Indemnity Agreement and the Loan Documents shall be cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy. If more than one person or entity has executed this Agreement as “Borrower,” the obligations of all such persons or entities hereunder shall be joint and several.
Section 1.19Joint and Several Liability of Borrowers.
(a)Each of the Borrowers is accepting joint and several liability hereunder in consideration of the financial accommodation to be provided by the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of each of the Borrowers to accept joint and several liability for the obligations of each of them.
(b)Each Borrower hereby agrees such Borrower is, and each such Borrower’s successors and assigns are, jointly and severally liable for, and hereby absolutely and unconditionally guarantees to Administrative Agent and Lenders and their respective successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of, all of the Indebtedness and all other Obligations of Borrowers, it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each of Borrowers without preferences or distinction among them. Each Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, that its obligations under this Section 11.19 shall not be discharged until payment and performance, in full, of the Obligations has occurred, and that its obligations under this Section 11.19 shall be absolute and unconditional.
(c)If and to the extent that any Borrower shall fail to make any payment with respect to any of the Obligations hereunder as and when due or to perform any of such Obligations in accordance with the terms thereof, then in each such event, the other Borrowers will make such payment with respect to, or perform, such Obligation.
(d)Subject to Section 12.1 hereof, the guaranty obligations of each Borrower under the provisions of this Section 11.19 constitute full recourse obligations of such Borrower, enforceable against it to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever (except the defense of payment), including the following:
(i)the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Loan Document, the Environmental Indemnity Agreement, or any other agreement, document or instrument to which any other Borrower is or may become a party;
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(ii)the absence of any action to enforce this Agreement (including this Section 11.19) or any other Loan Document or the waiver or consent by Administrative Agent and Lenders with respect to any of the provisions thereof;
(iii)the existence, value or condition of, or failure to perfect any lien or any security for the Obligations or any action, or the absence of any action, by Administrative Agent and Lenders in respect thereof (including the release of any such security);
(iv)the insolvency of any other Borrower;
(v)the institution of any proceeding under the Federal Bankruptcy Code, or any similar proceeding, by or against a Borrower or Administrative Agent’s election in any such proceeding of the application of Section 1111(b)(2) of the Federal Bankruptcy Code;
(vi)any borrowing or grant of a security interest by any Borrower as debtor-in-possession, under Section 364 of the Federal Bankruptcy Code;
(vii)the disallowance, under Section 502 of the Federal Bankruptcy Code, of all or any portion of Administrative Agent’s claim(s) for repayment of any of the Obligations; or
(viii)any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor other than the payment and performance, in full, of the Obligations.
Each Borrower shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder.
(e)Except as otherwise expressly provided herein, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of occurrence of any Potential Default or Event of Default (except to the extent notice is expressly required to be given pursuant to the terms of this Agreement), or of any demand for any payment under this Agreement (except to the extent demand is expressly required to be given pursuant to the terms of this Agreement), notice of any action at any time taken or omitted by Administrative Agent or any Lender under or in respect of any of the Obligations hereunder, any requirement of diligence and, generally, all demands, notices and other formalities of every kind in connection with this Agreement. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations hereunder, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Lenders at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Administrative Agent or Lenders in respect of any of the Obligations hereunder, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such Obligations or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or any failure to act on the part of Administrative Agent or any Lender, including any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with Requirements of Laws or regulations thereunder which might, but for the provisions of this Section 11.19, afford grounds for terminating, discharging or relieving such Borrower, in whole or in part, from any of its obligations under this Section 11.19, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the obligations of such Borrower under this Section 11.19 shall not be discharged except by performance and then
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only to the extent of such performance. The obligations of each Borrower under this Section 11.19 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower, Administrative Agent or any Lender. The joint and several liability of Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower, Administrative Agent or any Lender.
(f)Notwithstanding anything to the contrary in this Agreement or in any other Loan Document or the Environmental Indemnity Agreement, and except as set forth in Section 11.19(j), each Borrower hereby expressly and irrevocably subordinates to payment of the Obligations any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor until the Obligations are indefeasibly paid in full in cash. Each Borrower acknowledges and agrees that this subordination is intended to benefit Administrative Agent and Lenders and shall not limit or otherwise affect such Borrower’s liability hereunder or the enforceability of this Section 11.19, and that Administrative Agent, Lenders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 11.19.
(g)If Administrative Agent or any Lender may, under Requirements of Law, proceed to realize its benefits under any of the Loan Documents or the Environmental Indemnity Agreement giving Administrative Agent or such Lender a lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Administrative Agent or any Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section 11.19. If, in the exercise of any of its rights and remedies, Administrative Agent or any Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Borrower or any other Person, whether because of any applicable Requirements of Law pertaining to “election of remedies” or the like, each Borrower hereby consents to such action by Administrative Agent or such Lender and waives any claim based upon such action, even if such action by Administrative Agent or such Lender shall result in a full or partial loss of any rights of subrogation that each Borrower might otherwise have had but for such action by Administrative Agent or such Lender. Any election of remedies that results in the denial or impairment of the right of Administrative Agent or any Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower’s obligation to pay the full amount of the Obligations. In the event Administrative Agent or any Lender shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law or the Loan Documents, Administrative Agent or such Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Administrative Agent or such Lender but shall be credited against the Obligations. The amount of the successful bid at any such sale, whether Administrative Agent, Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section 11.19, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Administrative Agent or any Lenders might otherwise be entitled but for such bidding at any such sale.
(h)The provisions of this Section 11.19 are made for the benefit of Administrative Agent, the Lenders and their respective successors and assigns, and may be enforced by any such Person from time to time against any of Borrowers as often as occasion therefor may arise and without requirement on the part of Administrative Agent or any Lender first to marshal any of its claims or to exercise any of its rights against any of the other
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Borrowers or to exhaust any remedies available to it against any of the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations or to elect any other remedy. The provisions of this Section 11.19 shall remain in effect until all the Obligations hereunder shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Lenders upon the insolvency, bankruptcy or reorganization of any of Borrowers, or otherwise, the provisions of this Section 11.19 will forthwith be reinstated and in effect as though such payment had not been made.
(i)Each Borrower’s liability under this Section 11.19 shall be limited to an amount not to exceed as of any date of determination the greater of the following:
(i)the amount of the Loan allocated to the Project owned by each Borrower as set forth on Schedule 11.19 hereto (with respect to the applicable Project, the “Allocated Loan Amount”); and
(ii)the amount that could be claimed by Administrative Agent and any Lender from such Borrower under this Section 11.19 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, such Borrower’s right of contribution and indemnification from each other Borrower under Section 11.19(j) below.
(j)Contribution with Respect to Guaranty Obligations:
(i)To the extent that any Borrower (the “Overpaying Borrower”) incurs (i) any payment in excess of its Allocated Loan Amount, or (ii) a loss of its Collateral due to the foreclosure (or other realization by Lenders) of, or the delivery of deeds in lieu of foreclosure relating to it Collateral, and the value of such Collateral exceeded its Allocated Loan Amount (the “Overpayment Amount”), then such Overpaying Borrower shall be entitled, after indefeasible payment in full and the satisfaction of all Obligations to Lenders under this Agreement, to contribution from each of the benefited Borrowers, on a pro rata basis, for the amounts so paid, advanced or benefited, in an amount equal to the difference between the Overpayment Amount and such benefited Borrower’s then current Allocated Loan Amount. Any such contribution payments shall be made within ten (10) Business Days after demand therefor.
(ii)This Section 11.19(j) is intended only to define the relative rights of Borrowers and nothing set forth in this Section 11.19(j) is intended to or shall impair the obligations of Borrowers, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including Section 11.19(a) above. Nothing contained in this Section 11.19(j) shall limit the liability of any Borrower to pay all or any part of the Loan made directly or indirectly to that Borrower and accrued interest, fees and expenses with respect thereto for which such Borrower shall be primarily liable.
(iii)The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Borrowers to which such contribution and indemnification is owing.
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(iv)The rights of the indemnifying Borrowers against other Borrowers under this Section 11.19(j) shall be exercisable only upon the full and indefeasible payment of the Obligations.
(k)The liability of Borrowers under this Section 11.19 is in addition to and shall be cumulative with all liabilities of each Borrower to Administrative Agent and Lenders under this Agreement, the other Loan Documents and the Environmental Indemnity Agreement to which such Borrower is a party or in respect of any Obligations or obligation of the other Borrowers, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.
(l)Each Qualified ECP Guarantor hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Borrower to honor all of its obligations in respect of Swap Obligations under any Secured Hedge Agreement (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 11.19(l) for the maximum amount of such liability than can be hereby incurred without rendering its obligations under this Section 11.19(l), voidable under applicable Requirements of Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section 11.19(l) shall remain in full force and effect until the guarantees in respect of Swap Obligations under each Secured Hedge Agreement have been discharged, or otherwise released or terminated in accordance with the terms of this Agreement. Each Qualified ECP Guarantor intends that this Section 11.19(l) constitute, and this Section 11.19(l) shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Borrower for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Section 1.20Singular and Plural. Words used in this Agreement, the other Loan Documents and the Environmental Indemnity Agreement, in the singular, where the context so permits, shall be deemed to include the plural and vice versa. The definitions of words in the singular in this Agreement, the other Loan Documents, and the Environmental Indemnity Agreement shall apply to such words when used in the plural where the context so permits and vice versa.
Section 1.21Exhibits and Schedules. The exhibits and schedules attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein.
Section 1.22Titles of Articles, Sections and Subsections. All titles or headings to articles, sections, subsections or other divisions of this Agreement, the other Loan Documents, and the Environmental Indemnity Agreement or the exhibits hereto and thereto are only for the convenience of the parties and shall not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content being controlling as to the agreement between the parties hereto.
Section 1.23Promotional Material.
(a)Non-Public Information. Each of Administrative Agent and each Lender acknowledges and agrees that it may receive material non-public information (“MNPI”) hereunder concerning the Borrower Parties and their Affiliates and agrees to use such information in compliance with all relevant policies, procedures and applicable Requirements of Laws (including United States federal and state security laws and regulations).
(b)Confidential Information. Each of Administrative Agent and each Lender severally agrees to maintain the confidentiality of information obtained by it pursuant to any
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Loan Document, except that such information may be disclosed (i) with the Borrower Representative’s consent, (ii) to Related Persons of such Lender, or Administrative Agent, as the case may be, that are advised of the confidential nature of such information and are instructed to keep such information confidential in accordance with the terms hereof, (iii) to the extent such information presently is or hereafter becomes (A) publicly available other than as a result of a breach of this Section 11.23 or (B) available to such Lender, or Administrative Agent or any of their Related Persons, as the case may be, from a source (other than any Borrower Party) not known by them to be subject to disclosure restrictions, (iv) to the extent disclosure is required by applicable Requirements of Law or other legal process or requested or demanded by any Governmental Authority, provided that the applicable Borrower Party shall be given prior written notice thereof to the extent permitted by applicable Requirements of Law or no Governmental Authority has requested otherwise, (v) to the extent necessary or customary for inclusion in league table measurements, (vi) (A) to the National Association of Insurance Commissioners or any similar organization, any examiner or any nationally recognized rating agency or (B) otherwise to the extent consisting of general portfolio information that does not identify Borrower Parties, (vii) to current or prospective assignees, financing sources to any Lender, SPVs (including the investors or prospective investors therein) or participants, direct or contractual counterparties to any Hedge Agreements and to their respective Related Persons, in each case to the extent such assignees, investors, participants, counterparties or Related Persons agree to be bound by provisions substantially similar to the provisions of this Section 11.23 (and such Person may disclose information to their respective Related Persons in accordance with clause (ii) above), (viii) to any other party hereto, and (ix) in connection with the exercise or enforcement of any right or remedy under any Loan Document, in connection with any litigation or other proceeding to which such Lender, or Administrative Agent or any of their Related Persons is a party or bound, or to the extent necessary to respond to public statements or disclosures by Borrower Parties or their Related Persons referring to a Lender, or Administrative Agent or any of their Related Persons. In the event of any conflict between the terms of this Section 11.23 and those of any other contractual obligation entered into with any Borrower Party (whether or not a Loan Document), the terms of this Section 11.23 shall govern. This Section 11.23(b) shall survive the termination of this Agreement for a period of 12 months.
(c)Tombstones. Each Borrower Party consents to the publication by Administrative Agent or any lead arranger named on the cover hereto of advertising material relating to the financing transactions contemplated by this Agreement using any Borrower Party’s name, product photographs, logo or trademark. Administrative Agent or such lead arranger shall provide a draft of any additional advertising material to Borrower Representative for review and comment prior to the publication thereof.
(d)Press Release and Related Matters. No Borrower Party shall, and no Borrower Party shall permit any of its Affiliates to, issue any press release or other public disclosure (other than any document filed with any Governmental Authority relating to a public offering of securities of any Borrower Party) using the name, logo or otherwise referring to Administrative Agent or of any of its Affiliates, the Loan Documents or any transaction contemplated therein to which Administrative Agent is party without the prior consent of Administrative Agent (such consent not to be unreasonably withheld or delayed) except to the extent required to do so under applicable Requirements of Law and then, only after delivering a copy thereof to Administrative Agent. Neither Administrative Agent nor any Lender shall issue any press release or other public disclosure with respect to the Loan Documents or any transaction contemplated therein using the name, logo or otherwise referring to any Borrower Party or any terms and conditions with respect to the Loan Documents without the prior consent of Borrower Representative except to the extent required to do so under applicable Requirements of Law.
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(e)Distribution of Materials to Lenders. The Borrower Parties acknowledge and agree that the Loan Documents and all reports, notices, communications and other information or materials provided or delivered by, or on behalf of, the Borrower Parties hereunder (collectively, the “Borrower Materials”) may be disseminated by, or on behalf of, Administrative Agent, and made available, to Lenders by posting such Borrower Materials on an E-System. The Borrower Parties authorize Administrative Agent to download copies of their logos from its website and post copies thereof on an E-System reasonably selected by Administrative Agent.
Section 1.24Survival. All of the indemnities hereunder, under the indemnification provisions of the other Loan Documents and under the Environmental Indemnity Agreement (and only the representations, warranties and covenants related to such indemnities), shall survive the repayment in full of the Loan and the release of the liens evidencing or securing the Loan, and shall survive the transfer (by sale, foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all right, title and interest in and to the Projects to any party, whether or not an Affiliate of Borrowers, in accordance with the provisions of any such Loan Documents.
Section 1.25WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWERS, ADMINISTRATIVE AGENT, AND EACH LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE ENVIRONMENTAL INDEMNITY AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY AGREEMENT OR IN ANY WAY RELATING TO THE LOAN OR THE PROJECTS (INCLUDING ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR ADMINISTRATIVE AGENT AND EACH LENDER TO ENTER INTO THIS AGREEMENT.
Section 1.26Waiver of Punitive or Consequential Damages. None of Administrative Agent, any Lender, nor Borrowers shall be responsible or liable to the other or to any other Person for any punitive, exemplary or consequential damages which may be alleged as a result of the Loan or the transaction contemplated hereby, including any breach or other default by any party hereto. Borrowers represent and warrant to Administrative Agent and each Lender that as of the Closing Date neither Borrowers nor any other Borrower Party has any claims against Administrative Agent or any Lender in connection with the Loan.
Section 1.27Governing Law. UNLESS OTHERWISE NOTED THEREIN TO THE CONTRARY, THE LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES THEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO NEW YORK’S PRINCIPLES OF CONFLICTS OF LAW) AND APPLICABLE UNITED STATES FEDERAL LAW, EXCEPT FOR THOSE PROVISIONS IN THE LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY AGREEMENT PERTAINING TO THE CREATION, PERFECTION, PRIORITY OR VALIDITY OF OR EXECUTION ON LIENS OR SECURITY INTERESTS ON PROPERTY LOCATED IN THE STATE WHERE THE PROJECTS ARE LOCATED, WHICH PROVISIONS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE PROJECTS ARE LOCATED AND APPLICABLE UNITED STATES FEDERAL LAW.
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Section 1.28Entire Agreement. This Agreement, the other Loan Documents and the Environmental Indemnity Agreement embody the entire agreement and understanding between Administrative Agent, each Lender and Borrowers and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Loan Documents and the Environmental Indemnity Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties.
Section 1.29Counterparts. This Agreement may be executed in multiple counterparts, each of which shall constitute an original, but all of which shall constitute one document.
Section 1.30Consents and Approvals. To the extent that Administrative Agent, Lenders and/or Required Lenders provide any consent or approval as provided for in this Agreement, such consent shall be limited to the specific matter approved and shall NOT be construed to (a) relieve Borrowers from compliance with all of the other terms and obligations of this Agreement, or (b) constitute a consent to any further similar action (as to which a prospective consent or approval shall be required and may not necessarily be granted), or (c) constitute a consent to any other obligation to which any Lender may be a party.
Section 1.31Effectiveness of Electronic Signatures . This Agreement and any consent, waiver, amendment, supplement or other modification hereto, may be executed in counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. This Agreement, each of the other Loan Documents and the Environmental Indemnity Agreement may be delivered by facsimile transmission, by electronic mail, or by other electronic transmission, in portable document format (.pdf), facsimile format, or other electronic format, all with the same force and effect as if the same was a fully executed and delivered original counterpart. Each party (a) agrees that it will be bound by its own Electronic Signature, (b) accepts the Electronic Signature of each other party, and (c) agrees that such Electronic Signatures shall be the legal equivalent of manual signatures. Administrative Agent may, at its option, create one or more copies of this Agreement, any other Loan Document and the Environmental Indemnity Agreement in an electronic form (“Electronic Copy”), which shall be deemed created in the ordinary course of Administrative Agent’s business, and destroy the original paper document. Administrative Agent may also require that any such documents and signatures be confirmed by a manually signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any permitted facsimile, portable document format (.pdf), electronic record or Electronic Signature. The words “execution,” “executed,” “signed,” “signature,” and words of like import in this paragraph shall be deemed to include Electronic Signatures and the use and keeping of records in electronic form, each of which shall have the same legal effect, validity and enforceability as manually executed signatures and the use of paper records and paper-based recordkeeping systems, 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, state laws based on the Uniform Electronic Transactions Act, the New York State Electronic Signatures and Records Act, the New York Electronic Signatures and Record Act, or any other similar state laws.
Section 1.32Venue. EACH PARTY HERETO HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH PARTY HERETO EXPRESSLY SUBMITS AND CONSENTS TO
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THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. BORROWERS HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWERS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWERS, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
Section 1.33Important Information Regarding Procedures for Requesting Credit. Each of Administrative Agent and Lenders hereby notifies the Borrower Parties that in order to comply with the Patriot Act, each Lender may be required to obtain, verify and record information that identifies Borrowers and each Guarantor, which information includes the name, address, tax identification number and other information regarding Borrowers and each Guarantor that will allow such Lender to identify Borrowers and each Guarantor in accordance with the Patriot Act. This notice is given in accordance with the requirements of the Patriot Act and is effective as to each Lender.
Section 1.34Method of Payment. All amounts payable under this Agreement and the other Loan Documents must be paid by Borrowers in accordance with Section 2.6(c). Payments in the form of cash, money order, third party payment, cashier’s check, a check drawn on a foreign bank or non-bank financial institution, or any form of payment other than those provided in the preceding sentence will not be accepted.
Section 1.35Reserved.
Section 1.36Post Closing Obligations of Borrowers. Notwithstanding the fact that Borrowers have not satisfied certain of the conditions to the advance of the Loan proceeds as of the Closing Date, Lenders have agreed to advance the proceeds of the Loan to Borrowers, subject to the satisfaction of the other conditions to funding contained herein and each of the requirements set forth in Schedule 11.36 attached hereto (the “Post-Closing Obligations”). Borrowers shall provide evidence reasonably satisfactory to Administrative Agent of the completion of the Post-Closing Obligations, all of which shall be performed in a manner reasonably satisfactory to Administrative Agent.
Section 1.37Joinder Borrower; Joinder Project; Construction. Following the Closing Date, Borrowers, Administrative Agent and Lenders anticipate joining the owner(s) of each Joinder Project(s) (each a “Joinder Borrower”) as an additional Borrower hereunder in accordance with the Joinder set forth at Exhibit F (“Joinder”). Unless and until such time as a Joinder Borrower is joined as an additional Borrower hereunder, all references to the Projects shall not include the Joinder Project(s); all references to the Land shall not include the Joinder Project(s); and all references to Borrowers shall not include the Joinder Borrower(s). In the event that the Joinder Project and Joinder Borrower(s) are not joined hereunder, all references to “Borrowers” hereunder shall mean the Borrower(s) joined hereunder only and all references to “Borrowers” in this Agreement, each of the other Loan Documents and in the Environmental Indemnity Agreement shall be construed in such manner. Following the joinder of a Joinder Borrower, “Borrowers” as used herein shall include the Joinder Borrower, and “Projects” as used herein shall include the Joinder Project.
Section 1.38Component Notes. Administrative Agent, without in any way limiting Administrative Agent’s other rights hereunder, in its sole and absolute discretion and at Administrative Agent’s sole cost and expense and, so long as no Event of Default shall be continuing hereunder, at no cost or expense to Borrowers or any Borrower Party (including without limitation to Administrative Agent’s attorneys’ fees for review of any documentation, all of which shall be at the sole cost and expense of Administrative Agent), shall have the right at
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any time to require Borrowers to execute and deliver “component” notes (including senior and junior notes) in replacement of the Notes as evidence of the Loan, which notes may be paid in such order of priority as may be designated by Administrative Agent, provided that (i) the aggregate principal amount of such “component” notes shall equal the outstanding principal balance of the Loan immediately prior to the creation of such “component” notes, plus any committed but unfunded Loan proceeds (ii) the weighted average interest rate of all such “component” notes shall on the date created equal the interest rate which was applicable to the Loan immediately prior to the creation of such “component” notes, (iii) the debt service on all such “component” notes shall on the date created equal the debt service which was due under the Loan immediately prior to the creation of such component notes and (iv) the other terms and provisions of each of the “component” notes shall be identical in substance and substantially similar in form to the Loan Documents. Borrowers, at their cost and expense, shall cooperate with all reasonable requests of Administrative Agent in order to establish the “component” notes and shall execute and deliver such documents as shall reasonably be required by Administrative Agent in connection therewith, all in form and substance reasonably satisfactory to Administrative Agent, including, without limitation, the severance of security documents if requested. In the event Borrowers fail to execute and deliver such documents to Administrative Agent within ten (10) Business Days following such request by Administrative Agent, Borrowers hereby absolutely and irrevocably appoint Administrative Agent as their true and lawful attorney, coupled with an interest, in their name and stead to make and execute all documents necessary or desirable to effect such transactions, Borrowers ratifying all that such attorney shall do by virtue thereof.
Section 1.39Intentionally Omitted.
Section 1.40Waivers. No waiver of any provision of the Loan Documents or Environmental Indemnity Agreement shall be effective unless in writing and signed by the party against whom enforcement is sought, provided that a written waiver signed by Administrative Agent on behalf of the Lenders shall be deemed to have been signed by the Lenders.
Section 1.41Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
(a)In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent
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than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
(b)As used in this Section 12.43, the following terms have the following meanings:
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Covered Entity” means any of the following:
(i)a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
(ii)a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii)a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
Section 1.42Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b)the effects of any Bail-in Action on any such liability, including, if applicable:
(i)a reduction in full or in part or cancellation of any such liability;
(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
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(iii)the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
ARTICLE 12
LIMITATIONS ON LIABILITY
Section 1.1Limitation on Liability.
(a)Subject to the qualifications below, neither Administrative Agent nor any Lender shall enforce the liability and obligation of Borrowers to perform and observe the Obligations by any action or proceeding wherein a money judgment shall be sought against Borrowers, except that Administrative Agent and Lenders may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Administrative Agent and Lenders to enforce and realize upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in any Project, or any other Collateral given to Administrative Agent and Lenders pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrowers only to the extent of Borrowers’ interest in the Projects and in any other collateral given to Administrative Agent and Lenders to secure the Obligations, and Administrative Agent and each Lender, as applicable, by accepting the Note, this Agreement, the Mortgage and the other Loan Documents, shall not sue for, seek or demand any deficiency judgment against Borrowers in any such action or proceeding under or by reason of or under or in connection with the Note, this Agreement, the Mortgage or the other Loan Documents.
(b)The provisions of this Section 12.1 shall not, however, (i) constitute a waiver, release or impairment of any Obligation evidenced or secured by any of the Loan Documents; (ii) impair the right of Administrative Agent or any Lender to name any Borrower as a party defendant in any action or suit for foreclosure and sale under the Mortgage; (iii) affect the validity or enforceability of any guaranty made in connection with the Loan or any of the rights and remedies of Administrative Agent or any Lender thereunder; (iv) impair the right of Administrative Agent or any Lender to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment of Leases and Rents; (vi) constitute a prohibition against Administrative Agent or any Lender to commence any appropriate action or proceeding in order for Administrative Agent or any Lender to exercise its remedies against the Collateral; or (vii) constitute a waiver of the right of Administrative Agent or any Lender to enforce the liability and obligation of Borrowers, by money judgment or otherwise, to the extent of any Liability which may be imposed upon, incurred by or awarded against Administrative Agent or any Lender or any Affiliate thereof as a result of, arising out of or in connection with (and Borrowers shall be personally liable and shall indemnify Administrative Agent and such Lender for) the following:
(i)[Reserved]
(ii)commission of a criminal act by any Borrower Party, Guarantor or any Affiliate or agent of any Borrower Party or Guarantor (which agent is under the Control of such Borrower Party or such Guarantor) which results in the exercise by any Person of Forfeiture Rights with respect to the Projects;
(iii)the failure by any Borrower Party or Affiliated Manager to apply any insurance proceeds and condemnation awards in accordance with the terms of the Loan Documents;
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(iv)any intentional material misrepresentation by any Borrower or any other Borrower Party made in or in connection with the Loan Documents or the Loan;
(v)misappropriation by any Borrower or any Affiliated Manager (including without limitation, failure to turn over to Administrative Agent on demand following the occurrence and during the continuation of an Event of Default, funds derived from the Projects after a written request therefor from Administrative Agent, or to apply funds from the Project to customary operating expenses of the Projects;
(vi)Borrowers’ or Affiliated Manager’s collection of rents more than one month in advance or entering into, modifying or canceling Leases in violation of this Agreement or any of the other Loan Documents;
(vii)any Borrower, Guarantor or any Affiliate of any of them contesting, directly or indirectly (collectively, a “Contest”) in bad faith, any foreclosure action or sale commenced by Administrative Agent or any Lender or with any other enforcement of Administrative Agent’s or any Lender’s rights, powers or remedies under any of the Loan Documents, the Environmental Indemnity Agreement (whether by making any motion, bringing any counterclaim, claiming any defense, seeking any injunction or other restraint, commencing any action seeking to consolidate any such foreclosure or other enforcement with any other action, or otherwise) (any of the foregoing, an “Enforcement Action”);
(viii)Borrowers’ or Affiliated Manager’s failure to turn over to Administrative Agent all Security Deposits upon Administrative Agent’s demand following an Event of Default, except to the extent any such Security Deposits were applied in accordance with the terms and conditions of any of the Leases prior to the occurrence of such Event of Default;
(ix)Borrowers’ failure to maintain insurance as required by this Agreement, in each case (1) to the extent that Borrowers failed to apply cash flow from the Projects to do so, and (2) there are not sufficient funds available to Administrative Agent in the Insurance Impound to pay for such insurance;
(x)Borrowers’ failure to pay any Taxes or assessments affecting the Projects (prior to delinquency) in each case (1) to the extent that Borrowers failed to apply cash flow from the Projects to do so, and (2) the funds deposited by or on behalf of Borrowers in the Tax Impound are not sufficient to pay such Taxes or assessments, provided that no Borrower Party has taken action to restrict Administrative Agent from applying such sums for the purpose of paying such items;
(xi)damage or destruction to the Projects caused by the intentional acts or omissions of any Borrower Party;
(xii)Borrowers’ failure to perform their obligations under the Environmental Indemnity Agreement;
(xiii)any physical waste of the Projects (excluding alterations made in good faith, casualty, condemnation and ordinary wear and tear);
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(xiv)the removal or disposal by Borrowers of any material personal property from the Projects in which Administrative Agent or the Lenders have a security interest in violation of the terms and conditions of the Loan Documents unless (A) the property removed is replaced by property of the same utility and of the same or greater value or (B) such removal takes place in the ordinary course of operation of the applicable Project and does not constitute material physical waste;
(xv)the payment of any distributions to any Borrower or any Guarantor or any of their Affiliates that are expressly prohibited by this Agreement in violation of Section 7.11;
(xvi)any fees paid by any Borrower to Guarantor or any of their Affiliates after the occurrence and during the continuation of an Event of Default under the Loan Documents;
(xvii)either or both (A) the modification or termination of a Lease without Administrative Agent’s prior written consent (to the extent such consent is required pursuant to the terms of the Loan Documents) or (B) any Borrower’s consent (to the extent Borrower has the ability or right to consent) to an assignment or surrender of a Lease without Administrative Agent’s prior written consent (to the extent such consent is required pursuant to the terms of the Loan Documents);
(xviii)any Borrower’s failure to pay amounts owed any Lender under a Secured Hedge Agreement;
(xix)any of the following without the prior written consent of Administrative Agent and the Required Lenders: (x) the modification of any Consent Required Provision of a Major Lease, (y) the termination or acceptance of a surrender of the Major Lease, or (z) if landlord’s consent is required pursuant to the terms of a Major Lease, the consent to or acceptance by any Borrower of an assignment or sublease of a Major Lease; or
(xx)the commission of a fraud by any Borrower or any other Borrower Party in connection with the Loan.
(c)Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan Documents, all of the Obligations shall be fully recourse to Borrowers and Borrowers shall be personally liable therefor in the event of:
(i)any Transfer of any Project or any part thereof or any legal or beneficial interest therein, any Transfer of an interest in any Restricted Party in breach of any of the covenants in this Agreement or the Mortgage, or any Transfer resulting from the adoption of a “plan of division” or the filing of a “certificate of division”;
(ii)any Borrower’s failure to comply with the covenants in Section 5.17 hereof and such failure results in the actual or substantive consolidation in whole or in part of such Borrower’s assets with the assets of another Person in any bankruptcy or insolvency proceeding;
(iii)any Borrower Party files a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law;
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(iv)a Person, an Affiliate, officer, director, or representative which Controls any Borrower Party files, or joins in the filing of, an involuntary petition against any Borrower under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against any Borrower from any Person;
(v)any Borrower Party files an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law or solicits or causes to be solicited petitioning creditors for any involuntary petition from any Person;
(vi)a Person, any Affiliate, officer, director, or representative which Controls Borrowers consents to or acquiesces in or joins in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrowers or any portion of the Collateral; or
(vii)any Borrower Party makes an assignment for the benefit of creditors, or admits, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due.
Borrowers also shall be personally liable to Administrative Agent and the Lenders for any and all reasonable attorneys’ fees and expenses and court costs incurred by Administrative Agent and the Lenders in enforcing this Section 12.1 or otherwise incurred by Administrative Agent or any Lender in connection with any of the foregoing matters, regardless whether such matters are legal or equitable in nature or arise under tort or contract law. The limitation on the personal liability of Borrowers in this Section 12.1 shall not modify, diminish or discharge the personal liability of Guarantor under any Guaranty. Nothing herein shall be deemed to be a waiver of any right which Administrative Agent or any Lender may have under Sections 506(a), 506(b), 1111(b) or any other provision of the Federal Bankruptcy Code, as such sections may be amended, or corresponding or superseding sections of the Bankruptcy Amendments and Federal Judgeship Act of 1984, to file a claim for the full amount due to Administrative Agent and the Lenders under the Loan Documents or to require that all collateral shall continue to secure the amounts due under the Loan Documents.
Section 1.2Limitation on Liability of Administrative Agent’s and Lender’s Officers, Employees, etc. Any obligation or liability whatsoever of Administrative Agent or any Lender which may arise at any time under this Agreement, any other Loan Document, or the Environmental Indemnity Agreement shall be satisfied, if at all, out of Administrative Agent’s or such Lender’s assets only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the property of any of Administrative Agent’s or such Lender’s shareholders, directors, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise. None of Administrative Agent and its Related Persons shall be liable for any action taken or omitted to be taken by any of them under or in connection with any Loan Document or the Environmental Indemnity Agreement in its capacity as Administrative Agent (or Related Person of Administrative Agent), and Borrowers (on their own behalf and on behalf of the other Borrower Parties) hereby waive and shall not assert any right, claim or cause of action based thereon, except to the extent of liabilities resulting solely from the gross negligence or willful misconduct of Administrative Agent or, as the case may be, such Related Person (each as determined in a final, non-appealable judgment by a court of competent jurisdiction) in connection with the duties expressly set forth herein.

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EXECUTED as of the date first written above.

[SIGNATURE PAGES FOLLOW]
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SIGNATURE PAGE OF ADMINISTRATIVE AGENT AND LENDER
TO LOAN AGREEMENT

CAPITAL ONE, NATIONAL ASSOCIATION
By: /s/ Tiffany Holznecht    
Name: Tiffany Holznecht
Title: Duly Authorized Signatory

LOAN AGREEMENT – Signature Page
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SIGNATURE PAGE OF BORROWERS TO LOAN AGREEMENT

ARHC AHJACOH01, LLC
ARHC OSFWAIL01, LLC
ARHC OSFGDIL01, LLC
ARHC PRPEOAZ02, LLC,
each a Delaware limited liability company
 
 
By:  /s/ Michael R. Anderson___________________________________________
Name:  Michael R. Anderson
Title:    Authorized Signatory for Each Entity Listed
             Above
LOAN AGREEMENT – Signature Page
CONA – Healthcare Trust, Inc.
92119388.8


Exhibit 10.39
LOAN AGREEMENT
Dated as of February 22, 2024
Between
THE ENTITIES SET FORTH ON SCHEDULE IV ATTACHED HERETO,
collectively, as Borrower
and
BANK OF MONTREAL,
as Lender

Loan No. 20240105

0123905.0782082 4863-1270-3898v11


TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION.. ..........................................1
Section 1.1 Definitions......................................................................................................1
Section 1.2 Principles of Construction..........................................................................39
ARTICLE II. GENERAL TERMS................................................................................................40
Section 2.1 Loan Commitment; Disbursement to Borrower......................................40
2.1.1 Agreement to Lend and Borrow..................................................................40
2.1.2 Single Disbursement to Borrower...............................................................40
2.1.3 The Note, Security Instrument and Loan Documents...............................40
2.1.4 Use of Proceeds.............................................................................................40
Section 2.2 Interest Rate; Loan Payments; Late Payment Charge............................40
2.2.1 Payments........................................................................................................40
2.2.2 Interest Calculation......................................................................................41
2.2.3 Payment on Maturity Date..........................................................................41
2.2.4 Payments after Default ................................................................................41
2.2.5 Late Payment Charge. .................................................................................41
2.2.6 Usury Savings. ..............................................................................................42
2.2.7 Indemnified Taxes. ......................................................................................42
2.2.8 Invalidated Payments. .................................................................................43
2.2.9 New Payment Date. ......................................................................................43
Section 2.3 Prepayments. ...............................................................................................43
2.3.1 Voluntary Prepayments. .............................................................................43
2.3.2 Mandatory Prepayments. ............................................................................45
2.3.3 Prepayment During Existence of Event of Default ...................................45
2.3.4 Making of Payments. ...................................................................................45
2.3.5 Application of Principal Prepayments. ......................................................45
Section 2.4 Defeasance. ..................................................................................................45
2.4.1 Voluntary Defeasance. .................................................................................45
2.4.2 Successor Borrower. ....................................................................................48
Section 2.5 Release of Property. ....................................................................................49
2.5.1 Release of All Property. ...............................................................................49
2.5.2 Release of Individual Property. ..................................................................50
Section 2.6 Clearing Account/Cash Management .......................................................53
2.6.1 Clearing Account .........................................................................................53
2.6.2 Cash Management Account ........................................................................55
2.6.3 Payments Received under the Cash Management Agreement ................56
ARTICLE III. INTENTIONALLY OMITTED.. .........................................................................56
ARTICLE IV. REPRESENTATIONS AND WARRANTIES. ...................................................56
Section 4.1 Borrower Representations. ........................................................................56
4.1.1 Organization. ................................................................................................56
4.1.2 Proceedings. ..................................................................................................56
4.1.3 No Conflicts. .................................................................................................56
4.1.4 Litigation. .....................................................................................................57
4.1.5 Agreements. ..................................................................................................57
4.1.6 Title. ..............................................................................................................57
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4.1.7 Solvency. .......................................................................................................58
4.1.8 Full and Accurate Disclosure. .....................................................................58
4.1.9 No Plan Assets. .............................................................................................58
4.1.10 Compliance. ..................................................................................................58
4.1.11 Financial Information. ................................................................................59
4.1.12 Condemnation. .............................................................................................59
4.1.13 Federal Reserve Regulations. .....................................................................59
4.1.14 Utilities and Public Access. .........................................................................60
4.1.15 Not a Foreign Person. ..................................................................................60
4.1.16 Separate Lots. ..............................................................................................60
4.1.17 Assessments. .................................................................................................60
4.1.18 Enforceability. ..............................................................................................60
4.1.19 No Prior Assignment ...................................................................................60
4.1.20 Insurance. .....................................................................................................60
4.1.21 Use of Property. ...........................................................................................60
4.1.22 Certificate of Occupancy; Licenses. ...........................................................61
4.1.23 Flood Zone. ...................................................................................................61
4.1.24 Physical Condition. ......................................................................................61
4.1.25 Boundaries. ...................................................................................................61
4.1.26 Leases. ...........................................................................................................61
4.1.27 Survey. ..........................................................................................................62
4.1.28 Inventory. .....................................................................................................62
4.1.29 Filing and Recording Taxes. .......................................................................62
4.1.30 Special Purpose Entity/Separateness/No Prohibited Entity/Ownership Structure .....................................................................................................................................63
4.1.31 Management Agreement .............................................................................63
4.1.32 Illegal Activity. .............................................................................................63
4.1.33 No Change in Facts or Circumstances; Disclosure. ..................................63
4.1.34 Investment Company Act ...........................................................................64
4.1.35 Embargoed Person. .....................................................................................64
4.1.36 Principal Place of Business; State of Organization. .................................64
4.1.37 Environmental Representations and Warranties. ....................................64
4.1.38 Cash Management Account ........................................................................65
4.1.39 Property Documents. ...................................................................................66
4.1.40 Condominium Provisions. ...........................................................................66
Section 4.2 Survival of Representations. ......................................................................66
ARTICLE V. BORROWER COVENANTS. ...............................................................................66
Section 5.1 Affirmative Covenants. ..............................................................................66
5.1.1 Existence; Compliance with Legal Requirements. ...................................67
5.1.2 Taxes and Other Charges. ..........................................................................68
5.1.3 Litigation. .....................................................................................................68
5.1.4 Access to Property. ......................................................................................68
5.1.5 Notice of Material Adverse Change. ..........................................................69
5.1.6 Cooperate in Legal Proceedings. ................................................................69
5.1.7 [Intentionally Omitted]. ..............................................................................69
5.1.8 Award and Insurance Benefits. ..................................................................69
5.1.9 Further Assurances. ....................................................................................69
5.1.10 Principal Place of Business, State of Organization. ..................................70
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5.1.11 Financial Reporting. ....................................................................................70
5.1.12 Business and Operations. ............................................................................73
5.1.13 Title to the Property. ...................................................................................74
5.1.14 Costs of Enforcement ..................................................................................74
5.1.15 Estoppel Statement ......................................................................................74
5.1.16 Loan Proceeds. .............................................................................................75
5.1.17 O&M Program.. ...........................................................................................75
5.1.18 Confirmation of Representations. ..............................................................75
5.1.19 Environmental Covenants. .........................................................................75
5.1.20 Leasing Matters. ..........................................................................................78
5.1.21 Alterations. ...................................................................................................80
5.1.22 Operation of Property. ................................................................................81
5.1.23 Embargoed Person. .....................................................................................81
5.1.24 Property Document Covenants. .................................................................81
Section 5.2 Negative Covenants. ...................................................................................82
5.2.1 Operation of Property. ................................................................................82
5.2.2 Liens. .............................................................................................................83
5.2.3 Dissolution. ...................................................................................................83
5.2.4 Change In Business. .....................................................................................83
5.2.5 Debt Cancellation. ........................................................................................83
5.2.6 Zoning. ..........................................................................................................83
5.2.7 No Joint Assessment ....................................................................................83
5.2.8 Intentionally Omitted. .................................................................................84
5.2.9 ERISA.. .........................................................................................................84
5.2.10 Transfers. .....................................................................................................84
ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION.. ...........................................90
Section 6.1 Insurance. ....................................................................................................90
Section 6.2 Casualty. ......................................................................................................94
Section 6.3 Condemnation. ............................................................................................95
Section 6.4 Restoration. .................................................................................................95
ARTICLE VII. RESERVE FUNDS. ..........................................................................................100
Section 7.1 Required Repairs. .....................................................................................100
7.1.1 Deposits. ......................................................................................................101
7.1.2 Release of Required Repair Funds. ..........................................................101
Section 7.2 Tax and Insurance Escrow Fund. ...........................................................102
Section 7.3 Replacements and Replacement Reserve. ..............................................103
7.3.1 Replacement Reserve Fund. .....................................................................103
7.3.2 Disbursements from Replacement Reserve Account ..............................104
7.3.3 Performance of Replacements. .................................................................104
7.3.4 Failure to Make Replacements. ................................................................105
7.3.5 Balance in the Replacement Reserve Account ........................................105
Section 7.4 Rollover Reserve. ......................................................................................105
7.4.1 Deposits to Rollover Reserve Fund. .........................................................105
7.4.2 Disbursements from Rollover Reserve Account. ....................................105
Section 7.5 Excess Cash Flow Reserve Fund. ............................................................106
7.5.1 Deposits to Excess Cash Flow Reserve Account .....................................106
7.5.2 Release of Excess Cash Flow Reserve Funds. ..........................................107
Section 7.6 Reserve Funds, Generally. .......................................................................107
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Section 7.7 Condominium Assessments Reserve. ......................................................108
7.7.1 Deposits to Condominium Assessment Reserve Fund. ...........................108
Section 7.8 Free Rent Reserve. ....................................................................................109
7.8.1 Deposits to Free Rent Reserve Fund. .......................................................109
7.8.2 Disbursement of Free Rent Reserve Funds. ............................................109
Section 7.9 Outstanding TI/LC Reserve. ...................................................................109
7.9.1 Deposits to Outstanding TI/LC Reserve Account ...................................109
7.9.2 Disbursements of Outstanding TI/LC Reserve Funds. ..........................109
Section 7.10 Letters of Credit. ......................................................................................110
Section 7.11 Intentionally Omitted. ..............................................................................112
ARTICLE VIII. DEFAULTS. ....................................................................................................112
Section 8.1 Event of Default ........................................................................................112
Section 8.2 Remedies. ...................................................................................................115
Section 8.3 Remedies Cumulative; Waivers. .............................................................116
ARTICLE IX. SPECIAL PROVISIONS. ...................................................................................117
Section 9.1 Securitization. ...........................................................................................117
9.1.1 Sale of Notes and Securitization. ..............................................................117
Section 9.2 Disclosure. .................................................................................................119
Section 9.3 Exculpation. ..............................................................................................121
Section 9.4 Matters Concerning Manager. ................................................................126
Section 9.5 Servicer. .....................................................................................................126
Section 9.6 Lender/Servicer Loan Administration. ..................................................127
Section 9.7 Mezzanine Financing. ...............................................................................127
Section 9.8 Condominium Provisions. ........................................................................128
9.8.1 Compliance with Condominium Act and Condominium Documents....128
9.8.2 [Intentionally Omitted]. ............................................................................129
9.8.3 Additional Condominium Provisions. ......................................................129
ARTICLE X. MISCELLANEOUS. ...........................................................................................130
Section 10.1 Survival .....................................................................................................130
Section 10.2 Intentionally Omitted. ..............................................................................131
Section 10.3 Governing Law.. .......................................................................................131
Section 10.4 Modification, Waiver in Writing. ...........................................................132
Section 10.5 Delay Not a Waiver. .................................................................................132
Section 10.6 Notices. ......................................................................................................133
Section 10.7 Trial by Jury. ............................................................................................134
Section 10.8 Headings. ...................................................................................................134
Section 10.9 Severability. ..............................................................................................134
Section 10.10 Preferences. ...............................................................................................134
Section 10.11 Waiver of Notice. ......................................................................................134
Section 10.12 Remedies of Borrower. ............................................................................135
Section 10.13 Expenses; Indemnity. ...............................................................................135
Section 10.14 Schedules Incorporated. ..........................................................................136
Section 10.15 Offsets, Counterclaims and Defenses. ....................................................136
Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries. .......137
Section 10.17 Publicity. ...................................................................................................137
Section 10.18 Waiver of Marshalling of Assets. ............................................................137
Section 10.19 Waiver of Counterclaim.. ........................................................................137
Section 10.20 Conflict; Construction of Documents; Reliance. ...................................137
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Section 10.21 Prior Agreements......................................................................................138
Section 10.22 Liability......................................................................................................138
Section 10.23 Certain Additional Rights of Lender (VCOC) ......................................138
Section 10.24 OFAC.........................................................................................................139
Section 10.25 Duplicate Originals; Counterparts..........................................................139
Section 10.26 Confidentiality...........................................................................................139
Section 10.27 Acknowledgement and Consent to Bail-In of EEA Financial Institutions..................................................................................................................................140
Section 10.29 Lender’s Right to Unwind Cross-Collateralization/Cross-Default .....141
Section 10.30 Contributions and Waivers..................................................................... 141

SCHEDULES
Schedule I    –    Rent Roll
Schedule II    –    Required Repairs - Deadlines for Completion
Schedule III    –    Organizational Chart of Borrower
Schedule IV    –    Allocated Loan Amounts
Schedule V    –    Property Managers and Underwritten Management Fees
Schedule VI    –    Tenant Direction Letter Form
Schedule VII    –    Disbursement Certification and Schedule
Schedule VIII    –    Intentionally Omitted
Schedule IX    –    Intentionally Omitted
Schedule X –        Intentionally Omitted
Schedule XI    –    Property Documents
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of February 22, 2024 (this “Agreement”), between BANK OF MONTREAL, a Canadian Chartered bank acting through its Chicago Branch, having an address at c/o BMO Capital Markets Corp., 3 Times Square, New York, New York 10036 (together with its successors and/or assigns, “Lender”) and THE ENTITIES SET FORTH ON SCHEDULE IV ATTACHED HERETO, each a Delaware limited liability company and each having its principal place of business at 97 John Clarke Road, Suite 2, Middletown, Rhode Island 02842 (hereinafter referred to individually as a “Borrower” and collectively as “Borrower” or “Borrowers” as the context may require, provided, however, that the context shall always be one which affords Lender the broadest possible rights and remedies under the Loan Documents and which permits Lender, in its discretion, to enforce the obligations and liabilities hereunder against one or more of the entities comprising Borrower).
RECITALS:
A.    Borrower desires to obtain the Loan (as hereinafter defined) from Lender.
B.    Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined).
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1Definitions. For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent:
“Accounts” shall mean, collectively, the Clearing Account, the Tax and Insurance Escrow Account, the Required Repair Account, the Condominium Assessments Reserve Account and, if opened in accordance with this Agreement, the Replacement Reserve Account, the Rollover Reserve Account, the Cash Management Account, all subaccounts of the Cash Management Account established pursuant to the Cash Management Agreement, the Excess Cash Flow Reserve Account, the Free Rent Reserve Account, or any other escrow accounts or reserve accounts established by the Loan Documents.
“Accrual Period” means the period beginning on (and including) the sixth (6th) day of each calendar month during the term of the Loan and terminating on the fifth (5th) day of the next succeeding calendar month; provided, however, that the initial Accrual Period shall begin on the Closing Date and shall end on the immediately following fifth (5th) day of a calendar month.
“Action” has the meaning set forth in Section 10.3 hereof.
“Additional Association Insurance” shall have the meaning set forth in Section 6.1(a)(i) hereof.
“Additional Permitted Transfer” has the meaning set forth in Section 5.2.10(f) hereof.
“Adjusted Release Amount” shall mean, for each Individual Property, the sum of (a) the Allocated Loan Amount for such Individual Property and (b) fifteen percent (15%) of the Allocated Loan Amount for such Individual Property.
0123905.0782082 4863-1270-3898v11

“Advisor Party” shall mean Healthcare Trust Advisors, LLC, a Delaware limited liability company, or any direct or indirect owner of Healthcare Trust Advisors, LLC, a Delaware limited liability.
“Affected Financial Institution” has the meaning set forth in Section 10.27 hereof.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, is in Control of, is Controlled by or is under common Control with such Person or is a director or officer of such Person or of an Affiliate of such Person.
“Affiliated Manager” means any Manager in which Borrower or Guarantor has, directly or indirectly, any material legal, beneficial or economic interest.
“Agent” means any Eligible Institution acting as Agent under the Cash Management Agreement.
“Aggregate Retention Amount” has the meaning set forth in Section 6.1(a)(i) hereof.
“Allocated Loan Amount” shall mean the portion of the principal amount of the Loan allocated to any applicable Individual Property as set forth on Schedule IV hereof, as such amounts may be adjusted from time to time as hereinafter set forth. Notwithstanding the foregoing or anything herein to the contrary, in the event of a Casualty or Condemnation whereby Net Proceeds (or any portion thereof) are to be applied to the principal amount of the Debt pursuant to the terms of Article VI hereof (such Net Proceeds, the “Applied Net Proceeds”), (a) then such Applied Net Proceeds shall be applied (1) first, to reduce the Allocated Loan Amount of the Individual Property affected by such Casualty or Condemnation until reduced to zero and (2) second, pro rata to reduce the Allocated Loan Amounts of each of the other Individual Properties and (b) notwithstanding the terms of the foregoing clause (a), with respect to a Condemnation or Casualty affecting one hundred percent (100%) of an Individual Property, the Allocated Loan Amount for such Individual Property shall be reduced to zero (such Allocated Loan Amount prior to reduction being referred to as the “Withdrawn Allocated Amount”) and each other Allocated Loan Amount shall, if the Withdrawn Allocated Amount exceeds the Applied Net Proceeds realized with respect to such Individual Property (such excess being referred to as the “Proceeds Deficiency”), be increased by an amount equal to the product of (1) the Proceeds Deficiency and (2) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the aggregate of all of the Allocated Loan Amounts (prior to the adjustment in question) other than the Withdrawn Allocated Amount. Additionally, in connection with any Partial Release, the Allocated Loan Amounts for the Individual Properties shall be adjusted as provided for in Section 2.5.2(k) hereof.
“Annual Budget” means an operating budget, including all planned Capital Expenditures, for each Individual Property prepared by Borrower in accordance with Section 5.1.11(g) hereof for the applicable Fiscal Year or other period.
“Applicable Contribution” has the meaning set forth in Section 10.30(f) hereof.
“Appraisal” shall mean an appraisal prepared in accordance with the requirements of FIRREA, prepared by an independent third party appraiser holding an MAI designation, who is state licensed or state certified if required under the laws of the state where each applicable Individual Property is located, who meets the requirements of FIRREA and who is otherwise satisfactory in Lender’s reasonable discretion.
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“Approved Accountant” means a “Big Four” accounting firm or other independent certified public accountant acceptable to Lender.
“Approved Annual Budget” has the meaning set forth in Section 5.1.11(g) hereof.
“Assignment of Leases and Rents” means individually or collectively, as the context requires, each Assignment of Leases and Rents or similar document dated the date hereof, executed and delivered by Borrower to Lender as security for the Loan and encumbering the Property (or any portion thereof), as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
“Assignment of Management Agreement” means, individually or collectively as the context requires, each Assignment of Management Agreement and Subordination of Management Fees, dated as of the date hereof, among Lender, Borrower and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
“Association” shall have the meaning set forth in the Security Instrument for the LaPorte Property.
“Availability Threshold” means, with respect to each Individual Property, an amount equal to the greater of (i) $375,000 and (ii) five percent (5%) of the outstanding Allocated Loan Amount for such Individual Property.
“Award” means any compensation paid by any Governmental Authority in connection with a Condemnation.
“Bail-In Action” has the meaning set forth in Section 10.27 hereof.
“Bail-In Legislation” has the meaning set forth in Section 10.27 hereof.
“Bankruptcy Action” means with respect to any Person (a) such Person filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (c) such Person filing an answer consenting in writing to or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, provided that, notwithstanding the foregoing, the delivery and/or submission of factual statements in connection with any involuntary petition filed against a Person as required by Legal Requirements shall not constitute a Bankruptcy Action; (d) such Person consenting in writing to or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for such Person or any portion of the Property; (e) such Person making an assignment for the benefit of creditors, or admitting, in writing to a third party (other than Lender or Servicer or any of their respective Affiliates or representatives) or in any legal proceeding (other than in connection with an answer or in testimony), its insolvency or inability to pay its debts as they become due provided that, notwithstanding the foregoing, the delivery and/or submission of factual statements in connection with any involuntary petition filed against a Person as required by Legal Requirements shall not constitute a Bankruptcy Action.
“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. §101, et seq., as the same may be amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors’ rights or any other Federal or state bankruptcy or insolvency law.
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“Benefit Amount” has the meaning set forth in Section 10.30(d) hereof.
“Borrower” has the meaning set forth in the introductory paragraph hereto, together with its successors and permitted assigns.
“Borrower Party” means each of Borrower and Guarantor.
“Business Day” means a day upon which commercial banks are not authorized or required by law to close in New York City or such other city designated in writing by Lender from time to time as the place for receipt of payments.
“Bylaws” shall have the meaning set forth in Section 9.8.3 hereof.
“Capital Expenditures” means, for any period, the amount expended for items capitalized under GAAP (including expenditures for building improvements or major repairs, leasing commissions and tenant improvements).
“Cash Management Account” has the meaning set forth in Section 2.6.2 hereof.
“Cash Management Agreement” means that certain Cash Management Agreement, dated as of the date hereof, by and among Borrower, Lender and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
“Cash Sweep Event” means the occurrence of: (a) an Event of Default; (b) a Debt Yield Trigger Event; (c) a CPC Bankruptcy Trigger Event; or (d) a CPC Goes Dark Trigger Event.
“Cash Sweep Event Cure” means:
(a)if the Cash Sweep Event is caused by an Event of Default, a cure of such Event of Default (which cure Lender may accept in Lender’s reasonable discretion; provided, however, that if (i) Lender has applied for the appointment of a receiver pursuant to the Security Instrument, (ii) Lender shall have declared the entire unpaid Debt to be immediately due and payable, or (iii) Lender shall have commenced a foreclosure action pursuant to the Security Instrument, Lender is not obligated to accept such cure and may reject or accept such cure in Lender’s sole and absolute discretion);
(b)if the Cash Sweep Event is caused solely by the occurrence of a Debt Yield Trigger Event, (i) the occurrence of a Debt Yield Cure, (ii) the delivery by Borrower to Lender of the Debt Yield Cure – Letter of Credit in accordance with the terms hereof, (iii) Borrower’s completion of a Debt Yield Cure –Partial Prepayment in accordance with the terms hereof, or (iv) a Debt Yield Reserve Funds Cap Cure occurs;
(c)if the Cash Sweep Event is caused solely by the occurrence of a CPC Bankruptcy Trigger Event, the occurrence of a CPC Bankruptcy Trigger Event Cure; or
(d) if the Cash Sweep Event is caused solely by the occurrence of a CPC Goes Dark Trigger Event, the occurrence of a CPC Goes Dark Trigger Event Cure.
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provided, however, that, such Cash Sweep Event Cure set forth in this definition shall be subject to the following conditions, (i) no Event of Default shall have occurred and be continuing and (ii) Borrower shall have paid, or Lender shall, at Borrower’s election, deduct from Excess Cash Flow, all of Lender’s reasonable out-of-pocket expenses incurred in connection with such Cash Sweep Event Cure including, reasonable out-of-pocket attorney’s fees and expenses. For the avoidance of doubt, if a Partial Release of an Individual Property would result in the achievement of a Cash Sweep Event Cure, Borrower shall be permitted to effectuate such Partial Release pursuant to Section 2.5.2 hereof.
“Cash Sweep Period” means each period commencing on the occurrence of a Cash Sweep Event and continuing until the earlier of (a) the Payment Date next occurring following the related Cash Sweep Event Cure, or (b) payment in full of all principal and interest on the Loan and all other amounts payable under the Loan Documents or defeasance in full of the Loan in accordance with the terms and provisions of the Loan Documents.
“Casualty” has the meaning set forth in Section 6.2 hereof.
“Casualty Consultant” has the meaning set forth in Section 6.4(b)(iii) hereof.
“Casualty Retainage” has the meaning set forth in Section 6.4(b)(iv) hereof.
“Clearing Account” has the meaning set forth in Section 2.6.1 hereof.
“Clearing Account Agreement” means that certain Deposit Account Control Agreement dated the date hereof among Borrower, Lender and Clearing Bank, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Clearing Account.
“Clearing Bank” means the clearing bank which establishes, maintains and holds the Clearing Account, which shall be PNC Bank, National Association, or another Eligible Institution appointed pursuant to Section 2.6.1(h) hereof.
“Closing Date” means the date of the funding of the Loan (which, for the avoidance of doubt, is the date of this Agreement).
“Code” means the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.
“Collateral” has the meaning set forth in the Security Instruments.
“Condemnation” means a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof.
“Condemnation Proceeds” has the meaning set forth in Section 6.4(b) hereof.
“Condominium Act” shall have the meaning set forth in the Security Instrument for the LaPorte Property.
“Condominium Assessments Reserve Account” has the meaning set forth in Section 7.7.1 hereof.
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“Condominium Assessments Reserve Funds” has the meaning set forth in Section 7.7.1 hereof.
“Condominium Board” means the board or organization governing the Regime.
“Condominium Documents” shall have the meaning set forth in the Security Instrument for the LaPorte Property.
“Condominium Rules” shall have the meaning set forth in Section 9.8.3 hereof.
“Constituent Members” means the constituent equity owners of Borrower.
“Contribution” has the meaning set forth in Section 10.30(a) hereof.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. “Controlled” and “Controlling” have correlative meanings.
“Covered Rating Agency Information” means any Provided Information furnished to the Rating Agencies in connection with issuing, monitoring and/or maintaining the Securities.
“CPC” CPC Pain & Wellness, Inc., a Delaware corporation., or, if applicable, any CPC Replacement Tenant.
“CPC Bankruptcy Trigger Event” means that CPC or its parent company, or the guarantor of any CPC Lease, shall become a debtor in any bankruptcy or insolvency proceeding or has its assets made subject to the jurisdiction of a bankruptcy court.
“CPC Bankruptcy Trigger Event Cure” means:
(i)Borrower provides Lender with (a) reasonably satisfactory evidence that the assets of CPC or its parent company or lease guarantor (as applicable) are no longer subject to the jurisdiction of the bankruptcy court, and (b) reasonably satisfactory evidence that each CPC Lease or its guaranty (as applicable) has been affirmed and is unmodified and in full force and effect, including an updated tenant estoppel certificate from CPC that is reasonably acceptable to Lender confirming that each CPC Lease is in full force and effect, CPC is paying full contractual rent, without offset or free rent credit (unless the amount of any such free rent (less any amounts on deposit in the Excess Cash Flow Reserve Account) is deposited with Lender pursuant to Section 7.8.1 hereof) and that, to CPC’s actual knowledge, there is no default by either party under any CPC Lease; or
(ii)the satisfaction of the CPC Replacement Lease Criteria with respect to all of the CPC Premises at each Individual Property (or such portion thereof that is leased to a Tenant that is the subject of a CPC Bankruptcy Trigger Event).
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“CPC Lease” means, collectively or individually as the context shall require, (i) that certain Lease Agreement dated as of August 1, 2023 by and between CPC Holdings LLC (“Holdings”, as predecessor-in-interest to AHRC CPCHBIN01, LLC), as landlord, and CPC, as tenant, as amended by that certain Amendment to Lease dated on or about the date hereof by and between Holdings (as predecessor-in-interest to AHRC CPCHBIN01, LLC), as landlord, and CPC, as tenant, (ii) that certain Lease Agreement dated as of August 1, 2023 by and between Holdings (as predecessor-in-interest to AHRC CPCMRIN01, LLC), as landlord, and CPC, as tenant, as amended by that certain Amendment to Lease dated on or about the date hereof by and between Holdings (as predecessor-in-interest to AHRC CPCMRIN01, LLC), as landlord, and CPC, as tenant, (iii) that certain Lease Agreement dated as of August 1, 2023 by and between Holdings (as predecessor-in-interest to AHRC CPCVPIN01, LLC), as landlord, and CPC, as tenant, as amended by that certain Amendment to Lease dated on or about the date hereof by and between Holdings (as predecessor-in-interest to AHRC CPCVPIN01, LLC), as landlord, and CPC, as tenant, (iv) that certain Lease Agreement dated as of August 1, 2023 by and between Holdings (as predecessor-in-interest to AHRC CPCLPIN01, LLC), as landlord, and CPC, as tenant, as amended by that certain Amendment to Lease dated on or about the date hereof by and between Holdings (as predecessor-in-interest to AHRC CPCLPIN01, LLC), as landlord, and CPC, as tenant, and (v) if applicable, a CPC Replacement Lease, in each case as the same may have been (or may be) modified, amended and/or assigned from time to time.
“CPC Goes Dark Cure Space” means one hundred percent (100%) of the CPC Premises that was subject to the CPC Goes Dark Trigger Event.
“CPC Goes Dark Trigger Event” means that a CPC Occupant (as defined below) has not been in occupancy of, or has not been open for business in, fifty percent (50%) or more of the aggregate square footage of the CPC Premises (on a combined basis across all of the Individual Properties (as opposed any single Individual Property)), for more than five (5) consecutive Business Days, subject to Force Majeure (for a period of no more than thirty (30) consecutive days) and excluding any periods during which construction or repair work is being performed at or on the applicable Individual Property in accordance with the applicable CPC Lease, or as otherwise approved by Lender (unless Lender’s consent for such construction or repair work is not required pursuant to the terms of the Loan Documents). For the avoidance of doubt, the location of equipment, furniture, inventory or other personal property at the applicable Individual Property is not, in and of itself, sufficient to establish that such CPC Occupant is in occupancy of, or operating in, such leased space. For purposes hereof, the term “CPC Occupant” means, individually or collectively, as the context may require, (i) CPC and/or (ii) one or more subtenants of CPC (as long as CPC continues to be directly liable to Borrower for the performance of CPC’s obligations under the CPC Lease).
“CPC Goes Dark Trigger Event Cure” means:
(a) a CPC Occupant resumes occupancy of the CPC Goes Dark Cure Space and Lender receives an updated tenant estoppel certificate from each applicable CPC Occupant that is acceptable to Lender confirming (1) that the applicable CPC Lease is in full force and effect, and (2) that the CPC Occupant is, and has been for a period of no less than thirty (30) consecutive days, in physical occupancy of, and open for normal operations in, the CPC Goes Dark Cure Space and paying full contractual rent, without offset or free rent credit (unless the amount of any such free rent (less any amounts on deposit in the Excess Cash Flow Reserve Account) is deposited with Lender pursuant to Section 7.8.1 hereof); or
(b)the satisfaction of the CPC Replacement Lease Criteria with respect to the CPC Goes Dark Cure Space.
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“CPC Occupant” has the meaning set forth in the definition of “CPC Goes Dark Trigger Event”.
“CPC Premises” means, collectively or individually, as the context may require, the space demised at each applicable Individual Property pursuant to a CPC Lease in effect as of the Closing Date.
“CPC Replacement Lease” or “CPC Replacement Leases” means a Lease or Leases entered into with one or more CPC Replacement Tenants approved by Lender in accordance with Section 5.1.20 of this Agreement.
“CPC Replacement Lease Criteria” means satisfaction of the following conditions with respect to all (or the applicable portion of) the CPC Premises:
(i)Borrower shall have entered into one or more CPC Replacement Leases;
(ii)Each CPC Replacement Tenant shall be in physical occupancy of the space covered by the applicable CPC Replacement Lease, open for business and paying full contractual rent, without offset, free rent credit (unless the amount of any such free rent (less any amounts on deposit in the Excess Cash Flow Reserve Account) is deposited with Lender pursuant to Section 7.8.1 hereof) or outstanding tenant improvement or leasing commission obligations on the part of Borrower (unless the amount of any such outstanding tenant improvements or leasing commission obligations (less any amounts on deposit in the Rollover Reserve Account or Excess Cash Flow Reserve Account) is deposited with Lender pursuant to Section 7.4.1 hereof); and
(iii)Borrower shall provide Lender with the following:
(A)a copy of each executed CPC Replacement Lease;
(B)a tenant estoppel certificate in form and substance reasonably satisfactory to Lender executed by each CPC Replacement Tenant which confirms that (aa) the applicable CPC Replacement Lease is in full force and effect, (bb) to the tenant’s actual knowledge, there is no default under such CPC Replacement Lease, and (cc) such CPC Replacement Tenant is in physical occupancy of its space and paying full contractual rent, without offset or free rent credit (unless the amount of any such free rent (less any amounts on deposit in the Excess Cash Flow Reserve Account) is deposited with Lender pursuant to Section 7.8.1 hereof));
(C)upon request of Lender, unless the CPC Replacement Lease is fully subordinate to the Loan by its terms, a subordination, non-disturbance and attornment agreement in form and substance satisfactory to Lender executed by each CPC Replacement Tenant and Lender;
(D)satisfactory evidence that Borrower has performed and paid for all tenant improvements relating to such CPC Replacement Tenant and that there are no unpaid leasing commissions associated with such CPC Replacement Tenant (unless the amount of any such outstanding tenant improvements or leasing commission obligations (less any amounts on deposit in the Rollover Reserve Account or Excess Cash Flow Reserve Account) is deposited with Lender pursuant to Section 7.9.1 hereof); and
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(E)an updated rent roll.
“CPC Replacement Tenant” or “CPC Replacement Tenants” means a new tenant or tenants reasonably approved by Lender and leasing all or part of the CPC Premises.
“Crowdfunding” means, any offer or sale of equity or debt securities of Borrower or Guarantor or any Affiliate of any of them, involving or relating to direct or indirect interests, or any combination of direct or indirect interests, in any of the foregoing Persons, that is conducted or proposed to be conducted via the internet or through the use of other general solicitation or advertising of the investment opportunity to prospective investors by the issuer of such securities or an online or other funding portal in a transaction or series of transactions intended to be exempt from the registration requirements of the Securities Act of 1933, as amended, including but not limited to pursuant to the exemptions provided by Section 4(a)(6) thereof or Rule 506(c) promulgated thereunder, any other similar state securities law, or any similar transaction. Lender agrees that the foregoing shall not apply to non-Controlling shareholders of the REIT.
“Current Owner” has the meaning set forth in Section 5.2.10(f) hereof.
“Debt” means the outstanding principal amount of the Loan set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums (including any Defeasance Payment Amount, any Yield Maintenance Premium, any Yield Maintenance Default Premium and any Individual Property Release Yield Maintenance Premium) due to Lender in respect of the Loan under the Note, this Agreement, the Security Instrument or any other Loan Document.
“Debt Service” means, with respect to any particular period of time, the scheduled interest payments due under this Agreement and the Note.
“Debt Service Coverage Ratio” means a ratio for the applicable period in which:
(a)    the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth in the statements required hereunder, without deduction for (i) actual management fees incurred in connection with the operation of the Property, or (ii) amounts paid to the Reserve Funds, less (A) management fees equal to the greater of (1) assumed management fees of 3.0% of Gross Income from Operations and (2) the actual management fees incurred, and (B) during a Cash Sweep Period only, (i) annual Replacement Reserve Fund contributions equal to $0.20 per square foot of gross leasable area at the Property, and (ii) annual Rollover Reserve Fund contributions equal to $1.00 per square foot of gross leasable area at the Property; and
(b)    the denominator is the aggregate amount of Debt Service for such period.
“Debt Yield” means a ratio in which:
(a)    the numerator is the same numerator that would be calculated in connection with the definition of Debt Service Coverage Ratio herein; and
(b)    the denominator is the outstanding balance of the Loan as of the date of calculation.
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Anything contained herein to the contrary notwithstanding, for purposes of calculating Debt Yield following a Partial Release, Lender shall (i) exclude Rent from the applicable Released Property from the numerator and (ii) reduce the denominator by the amount of the applicable Adjusted Released Amount paid by Borrower.
“Debt Yield as of the Closing Date” means thirteen and 1/10 percent (13.1%).
“Debt Yield Cure” means the achievement of a Debt Yield of equal to or greater than nine and 50/100 percent (9.50%) for two (2) consecutive quarters based upon the trailing twelve (12) month period immediately preceding the date of determination.
“Debt Yield Cure – Letter of Credit” means a Letter of Credit in an amount equal to the Excess Cash Flow that would have been swept in the three (3) month period immediately preceding the applicable date of determination if a Cash Sweep Period had been in effect during such time, as reasonably determined by Lender. Each Debt Yield Cure – Letter of Credit shall be effective for a period of three (3) months and Borrower may continue to prevent subsequent Debt Yield Trigger Events after each three (3) month period by depositing with Lender additional Debt Yield Cure – Letters of Credit on, or prior to, the expiration of each such three (3) month period. The Debt Yield Cure – Letter of Credit and all proceeds thereof shall be deemed part of the Reserve Funds, and shall be held in escrow by Lender according to the terms of this Agreement. Borrower will pay all costs associated with the initial issuance, any modification or re-issuance of the Debt Yield Cure – Letter of Credit, now or in the future, in connection with any transfer of the Loan by Lender, in connection with any Securitization or otherwise. Upon such transfer, Borrower agrees that Lender is released from all liability in respect of the Debt Yield Cure – Letter of Credit, and that Borrower shall look solely to the transferee with respect to all matters relating to the Debt Yield Cure – Letter of Credit. In the event that a Debt Yield Cure occurs during a period wherein Lender is in possession of the Debt Yield Cure – Letter of Credit (or proceeds therefrom), Lender will promptly return the Debt Yield Cure – Letter of Credit (or proceeds therefrom) to Borrower.
“Debt Yield Cure – Partial Prepayment” means a partial prepayment of the Loan in accordance with Section 2.3.1(c) hereof in an amount (including any required Yield Maintenance Premium) that results in a reduction of the then-outstanding principal balance of the Loan sufficient to achieve a Debt Yield equal to or greater than nine and 50/100 percent (9.50%) for the trailing twelve (12) month period immediately preceding the date of determination.
“Debt Yield Reserve Funds Cap” means an amount equal to $1,500,000.00.
“Debt Yield Reserve Funds Cap Cure” means that the aggregate amount on deposit in the Reserve Funds equals, or exceeds, the Debt Yield Reserve Funds Cap. For the avoidance of doubt, a Debt Yield Reserve Funds Cap Cure may be satisfied by Borrower depositing with Lender an amount (in cash) that, when combined with all amounts then on deposit in the Reserve Funds, equals or exceeds the Debt Yield Reserve Funds Cap
“Debt Yield Trigger Event” means either (i) as of the date of determination, the Debt Yield based on the trailing twelve (12) month period immediately preceding the date of such determination is less than nine and 50/100 percent (9.50%) for two (2) consecutive calendar quarters, or (ii) if Borrower previously cured or prevented a Debt Yield Trigger Event by depositing a Debt Yield Cure – Letter of Credit with Lender, the expiration of the three (3) month period that commenced on the date Borrower delivered such Debt Yield Cure – Letter of Credit to Lender; provided, however, that a Debt Yield Trigger Event shall not be deemed to have occurred if, within five (5) Business Days of the date described in clause (i) or (ii) of this definition, Borrower deposits with Lender the applicable Debt Yield Cure – Letter of Credit or completes the applicable Debt Yield Cure – Partial Prepayment.
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“Declaration” shall have the meaning set forth in the Security Instrument for the LaPorte Property.
“Default” means the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default.
“Default Rate” means, with respect to the Loan, a rate per annum equal to the lesser of (a) the Maximum Legal Rate or (b) five percent (5%) above the Interest Rate.
“Defeased Note” has the meaning set forth in Section 2.4.1 hereof.
“Defeasance Collateral” has the meaning set forth in Section 2.4.1 hereof
“Defeasance Date” means either the Total Defeasance Date or the Partial Defeasance Date, as applicable.
“Defeasance Deposit” means an amount equal to the remaining principal amount of the Note or the Defeased Note, as applicable, the Defeasance Payment Amount, an amount sufficient to purchase the Defeasance Collateral necessary to meet the Scheduled Defeasance Payments, and any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the transfer of the Note or the Defeased Note, as applicable, the creation of the Defeased Note and the Undefeased Note, if applicable, or otherwise required to accomplish the agreements of Sections 2.4 or 2.5 hereof (including, without limitation, any reasonable, out-of-pocket fees and expenses of accountants, attorneys and the Rating Agencies incurred in connection therewith).
“Defeasance Event” means either a Total Defeasance Event or a Partial Defeasance Event, as applicable.
“Defeasance Payment Amount” shall mean the amount which, when added to the remaining principal amount of the Note, or the principal amount of a Defeased Note, as applicable, will be sufficient to purchase U.S. Obligations providing the required Scheduled Defeasance Payments.
“Disbursement Certification and Schedule” means a certificate in the form attached hereto as Schedule VII, delivered to Lender by Borrower which is signed by an authorized officer of Borrower or the general partner, managing member or sole member of Borrower, as applicable.
“Disclosure Documents” means, collectively and as applicable, any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering document, in each case, in connection with a Securitization.
“EEA Bail-In Legislation Schedule” has the meaning set forth in Section 10.27 hereof.
“EEA Financial Institution” has the meaning set forth in Section 10.27 hereof.
“EEA Member Country” has the meaning set forth in Section 10.27 hereof.
“EEA Resolution Authority” has the meaning set forth in Section 10.27 hereof.
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“Eligible Account” means a separate and identifiable account from all other funds held by the holding institution that is either (i) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (ii) a segregated trust account or accounts maintained with the corporate trust department of a federal or state-chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a federally chartered depository institution or trust company acting in its fiduciary capacity is subject to the regulations regarding fiduciary funds on deposit therein under 12 C.F.R. §9.10(b), and in the case of a state-chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority. An Eligible Account shall not be evidenced by a certificate of deposit, passbook or other instrument. For the avoidance of doubt, as of the Closing Date, each Clearing Account satisfies the requirements of this definition.
“Eligible Institution” means a (i) depository institution or trust company insured by the Federal Deposit Insurance Corporation (a) the short-term unsecured debt obligations, commercial paper or other short-term deposits of which are rated at least “A-1” by S&P, “P-1” by Moody’s, “F-1” by Fitch and “R-1 (middle)” by DBRS Morningstar (to the extent rated by DBRS Morningstar), in the case of accounts in which funds are held for thirty (30) days or less, and (b) the long-term unsecured debt obligations or deposits of which are rated at least “A” by S&P, “A2” by Moody’s, “A” by Fitch and “A” by DBRS Morningstar (to the extent rated by DBRS Morningstar), in the case of accounts in which funds are held for more than thirty (30) days; provided that after a Securitization only the foregoing ratings requirements of each Rating Agency rating such Securitization shall apply, or (ii) an institution for which the applicable Rating Agencies have confirmed that such institution acting in the applicable capacity will not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof. For the avoidance of doubt, as of the Closing Date, PNC Bank, National Association, satisfies the requirements of this definition.
“Embargoed Person” means any person, entity or government subject to trade restrictions under U.S. law, including The USA PATRIOT Act (including the anti-terrorism provisions thereof), the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701, et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder including those related to Specially Designated Nationals and Specially Designated Global Terrorists, with the result that the investment in Borrower or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan made by the Lender is in violation of law.
“Emergency Expenses” means an expense which, in Borrower’s good faith judgment is necessary to (a) prevent an immediate threat to the health, safety or welfare of any person in the immediate vicinity of any Individual Property, (b) prevent immediate material damage or material loss to any Individual Property, (c) avoid the suspension of any necessary service in or to any portion of any Individual Property, or (d) avoid criminal liability or material civil liability on the part of Borrower with respect to activities at any Individual Property or pursuant to this Agreement or the other Loan Documents.
“Emergency Law” shall mean any Legal Requirement related to, in connection with, or in response to any epidemic, pandemic and/or widespread medical emergency, including without limitation the COVID-19 pandemic.
“Environmental Indemnity” means that certain Environmental Indemnity Agreement, dated as of the date hereof, executed by Borrower and Guarantor in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
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“Environmental Law” means any applicable federal, state and local laws, statutes, ordinances, rules and regulations, as well as common law, now or in the future relating to protection of human health or the environment, regulating Hazardous Substances, or relating to liability for or costs of Remediation or prevention of Releases of Hazardous Substances. Environmental Law includes the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local corollary statutes, ordinances, rules and regulations: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the environmental provisions of the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the environmental provisions of the River and Harbors Appropriation Act. Environmental Law also includes any applicable federal, state and local laws, statutes, ordinances, rules and regulations, as well as common law, now or in the future: conditioning transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of the Property; requiring notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Property to any governmental authority, whether or not in connection with transfer of title to or interest in property.
“Environmental Liens” has the meaning set forth in Section 5.1.19 hereof.
“Environmental Report” has the meaning set forth in Section 4.1.37 hereof.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.
“Event of Default” has the meaning set forth in Section 8.1(a) hereof.
“Excess Cash Flow” has the meaning set forth in the Cash Management Agreement.
“Excess Cash Flow Reserve Account” has the meaning set forth in Section 7.5.1 hereof.
“Excess Cash Flow Reserve Fund” has the meaning set forth in Section 7.5.1 hereof.
“Extraordinary Expense” has the meaning set forth in Section 5.1.11(h) hereof.
“Fiscal Year” means each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Loan.
“Fitch” means Fitch, Inc.
“Flood Insurance Acts” has the meaning set forth in Section 6.1(a)(i) hereof.
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“Force Majeure” means natural disaster, fire, earthquake, floods, explosion, declared or undeclared war, terrorist acts, riots, mob violence, insurrections, order of Governmental Authorities, pandemics or epidemics, quarantines or other restrictions on operations, business or activities as a result of epidemic, disease, contagion or other health conditions, delay or failure in the performance by any Governmental Authority of its statutory or regulatory duties and/or functions not arising from the acts or omissions of Borrower, any Guarantor, Manager or any Affiliate of any of the foregoing, or other similar matters beyond the control of Borrower; provided, however, that any lack of funds shall not be deemed to be a condition, matter or occurrence beyond the control of Borrower and shall not constitute a Force Majeure event.
“Free Rent Reserve Account” has the meaning set forth in Section 7.8.1 hereof.
“Free Rent Reserve Fund” has the meaning set forth in Section 7.8.1 hereof.
“Funding Borrower” has the meaning set forth in Section 10.30(c) hereof.
“GAAP” means generally accepted accounting principles in the United States of America as of the date of the applicable financial report.
“Governing State” has the meaning set forth in Section 10.3 hereof.
“Governmental Authority” means any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (foreign, federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence having jurisdiction over Borrower or the applicable Individual Property. For the avoidance of doubt, the use of this term throughout this Agreement (or any other Loan Document) shall not include any Tenant at any Property.
“Gross Income from Operations” means all income, computed in accordance with GAAP derived from the ownership and operation of the Property from whatever source, including, but not limited to, the Rents, reimbursements, utility charges, escalations, service fees or charges, license fees, parking fees, rent concessions or credits disbursed by Lender to Borrower from the Free Rent Reserve Fund, and other required pass-throughs, but excluding (i) sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, (ii) refunds and uncollectible accounts, (iii) sales of furniture, fixtures and equipment, (iv) Insurance Proceeds (other than business interruption or other loss of income insurance), (v) Awards, (vi) interest on credit accounts, security deposits, utility and other similar deposits, (vii) interest on the Reserve Funds, (viii) any disbursements to Borrower from the Reserve Funds (except the Free Rent Reserve Fund), and (ix) rental income attributable to any Tenant (1) in bankruptcy that has rejected its Lease in the applicable bankruptcy proceeding pursuant to a final, non-appealable order of a court of competent jurisdiction, (2) not paying rent under its Lease (except to the extent the amount of such unpaid rent has been deposited by Borrower with Lender) or otherwise in monetary or material non-monetary default under its Lease beyond any applicable notice and cure periods, (3) that has expressed its intention (directly, constructively or otherwise) to not renew, terminate, cancel and/or reject its applicable Lease, and such Lease expires, will terminate, be canceled or be rejected within 6 months or less of the applicable date of calculation hereunder, (4) whose tenancy at the Property is month-to-month, (5) under a Lease which expires within 6 months or less of the applicable date of calculation hereunder, and the applicable Tenant has not provided written notice of its intention to renew or extend the terms of the applicable Lease and/or (6) that is not in physical occupancy of, and operating in, the space demised under its Lease, and such Lease expires within 6 months or less of the applicable date of calculation hereunder. Gross income shall not be diminished as a result of the Security Instrument or the creation of any intervening estate or interest in the Property or any part thereof.
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“Guarantor” means (i) Healthcare Trust Operating Partnership, L.P., a Delaware limited partnership and (ii) following any Qualified Equityholder Transfer, a Qualified Replacement Guarantor.
“Guaranty” means that certain Guaranty Agreement, dated as of the date hereof, executed and delivered by Guarantor in connection with the Loan to and for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
“Hazardous Substances” means any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar regulatory effect under any Environmental Laws, including petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables, explosives, toxic mold or uncontrolled microbial matter and mycotoxins, but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purpose of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Laws.
“Immaterial Easements” shall mean the granting of easements, restrictions, covenants, reservations and rights of way in the ordinary course of business for access, water and sewer lines, telephone or other fiber optic or other data transmission lines, electric lines or other utilities or for other similar purposes; provided, however, that any such Transfer shall be subject to the following conditions precedent:
(i)Borrower has provided Lender with thirty (30) days prior written notice of the proposed Transfer;

(ii)Borrower has provided Lender with a copy of the instrument or instruments of Transfer;
(iii)Borrower has provided Lender with an Officer’s Certificate of Borrower stating (1) with respect to any Transfer, the consideration, if any, being paid for the Transfer, and (2) that such Transfer would not reasonably be expected to have, and does not have, a material adverse effect on the use, operation and/or financial condition of the Property or the operations or financial condition of Borrower or Guarantor;
(iv)Borrower shall reimburse all of Lender’s reasonable out-of-pocket costs and expenses (including reasonable third-party attorneys’ fees and disbursements) incurred in connection with such Transfer (which shall be paid by Borrower whether or not the proposed Transfer actually occurs); and
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(v)so long as the Loan is included in a REMIC Trust in connection with a Securitization, no Immaterial Easement will be permitted unless, immediately after such Immaterial Easement, either (1) the Loan to Value Ratio is equal to or less than one hundred twenty-five percent (125%) (such value to be determined, in Lender’s sole discretion, by any commercially reasonable method permitted to a REMIC Trust, based solely on the value of the real property excluding personal property and going concern value, if any) or (2) the principal balance of the Loan is paid down by the least of the following amounts: (A) an amount equal to the net proceeds or other compensation paid in connection with such Immaterial Easement, (B) the fair market value of the portion of the Property, or the right with respect to the Property, being transferred at the time of such Immaterial Easement, or (C) an amount such that the Loan to Value Ratio (as so determined by Lender) does not increase after the Immaterial Easement, unless the Lender receives an opinion of counsel that such Securitization will not fail to maintain its status as a REMIC Trust as a result of the Immaterial Easement.
“Immediate Family Member” has the meaning set forth in Section 5.2.10(f).
“Improvements” means, individually or collectively (as the context requires), the “Improvements” as defined in each applicable Security Instrument.
“Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such date of (a) all indebtedness or liability of such Person (including amounts for borrowed money and indebtedness in the form of mezzanine debt or preferred equity); (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations secured by any Liens, whether or not the obligations have been assumed (other than the Permitted Encumbrances).
“Indemnified Liabilities” has the meaning set forth in Section 10.13(b) hereof.
“Indemnified Parties” means Lender, any Affiliate of Lender who is or will have been involved in the origination of the Loan, any Person who is or will have been involved in the servicing of the Loan, any Person in whose name the encumbrance created by the Security Instrument is or will have been recorded, Persons who may hold or acquire or will have held a full or partial interest in the Loan, the holders of any Securities, as well as custodians, trustees or other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties as well as the respective directors, officers, shareholders, partners, members, employees, agents, servants, representatives, contractors, subcontractors, Affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including but not limited to any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loan or the Property, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of Lender’s assets and business).
“Indemnified Taxes” means any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority.
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“Individual Property” shall mean each parcel of real property, the Improvements thereon and all personal property now or hereafter owned by a Borrower and encumbered by the applicable Security Instrument, together with all rights pertaining to such property and Improvements, as more particularly described in the granting clauses of the applicable Security Instrument and referred to therein as the “Property.” Such parcels of individual real property, along with their respective Borrower owners, are set forth in Schedule IV attached hereto. Anything contained herein or in the other Loan Documents to the contrary notwithstanding (including any representations, warranties and covenants of Borrower set forth herein or in the other Loan Documents), Lender acknowledges that Borrower’s ownership of the portion of the LaPorte Property that constitutes real property (including the Land and Improvements) is limited to LaPorte Borrower’s ownership of the Unit and appurtenant rights thereto pursuant to the Condominium Documents.
“Individual Property Release Yield Maintenance Premium” shall mean an amount equal to the greater of (a) one percent (1%) of the Adjusted Release Amount for the Individual Property and (b) the excess, if any, of (i) the sum of the present values of all then-scheduled payments of principal and interest under the Loan with respect to a principal amount equal to the Adjusted Release Amount for the Individual Property, assuming that all scheduled payments are made timely and that the remaining outstanding principal and interest on the Loan with respect to a principal amount equal to the Adjusted Release Amount for the Individual Property is paid on the Permitted Par Prepayment Date (with each such payment and assumed payment discounted to its present value at the date of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when compounded semi-annually and deducting from the sum of such present values any short-term interest paid from the date of prepayment to the next succeeding Payment Date in the event that such payment is not made on a Payment Date), over (ii) a principal amount equal to the Adjusted Release Amount for the Individual Property.
“Institutional Controls” means any legal or physical restrictions or limitations on the use of, or access to, the Property to eliminate or minimize potential exposures to any Hazardous Substance, to prevent activities that would reasonably be expected to interfere with the effectiveness of any Remediation, or to ensure maintenance of a level of risk to human health or the environment, including physical modifications to the Property such as slurry walls, capping, hydraulic controls for ground water, restrictive covenants, environmental protection easements, or property use limitations, subject to the terms of the Leases and rights of Tenants thereunder.
“Insurance Premiums” has the meaning set forth in Section 6.1(b) hereof.
“Insurance Proceeds” has the meaning set forth in Section 6.4(b) hereof.
“Interest Rate” means six and 841/1,000 percent (6.8410%) per annum.
“Land” means, individually or collectively (as the context requires), the “Land” as defined in each applicable Security Instrument.
“LaPorte Borrower” means AHRC CPCLPIN01, LLC, a Delaware limited liability company.
“LaPorte Property” means the Individual Property located in LaPorte, IN.
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“Lease” means any lease, sublease or subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect), in each case to which Borrower is a party, pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in the Property by or on behalf of Borrower, and (a) every modification, amendment or other agreement relating to such lease, sublease, subsublease, or other agreement entered into in connection with such lease, sublease, subsublease, or other agreement and (b) every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto.
“Legal Requirements” means, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities related to the Property or any part thereof, or the construction, use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting Borrower, the Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to the Property or any part thereof, or (b) in any way materially limit the use and enjoyment thereof.
“Lender” has the meaning set forth in the introductory paragraph hereto, together with its successors and assigns.
“Lender Affiliate” has the meaning set forth in Section 9.2(c) hereof.
“Lender Group” has the meaning set forth in Section 9.2(c) hereof.
“Letter of Credit” shall mean an irrevocable, auto-renewing, unconditional, transferable, clean sight draft standby letter of credit in form and substance reasonably acceptable to Lender (i) that is issued by KeyBank National Association (so long as KeyBank is not downgraded below BBB by S&P or the equivalent by another Rating Agency), or an Eligible Institution, to Guarantor or a Person reasonably approved by Lender, (ii) that has an initial term of not less than one year from the date of issuance and is automatically renewable for successive one-year periods (unless the obligation being secured by, or otherwise requiring the delivery of, such letter of credit is required to be performed at least thirty (30) days prior to the initial expiry date of such letter of credit), (iii) the reimbursement obligation for which is not payable by the Borrower and is not secured by the Property, the Collateral or any other property pledged to secure the Note, (iv) that is in favor of Lender and entitling Lender to draw thereon in New York, New York, based solely on a statement that Lender has the right to draw thereon executed by an officer or authorized signatory of Lender, (v) that permits multiple draws, and (vi) that is transferable from time to time by Lender and its successors and assigns without the consent of the issuing bank and without cost or expense to the beneficiary.
“Liabilities” has the meaning set forth in Section 9.2 hereof.
“Lien” means, any mortgage, deed of trust, deed to secure debt, indemnity deed of trust, lien, pledge, hypothecation, assignment, security interest, PACE Lien or any other encumbrance evidencing a financing or monetary obligation, charge or transfer of, on or affecting Borrower, the Property, any portion thereof or any interest therein, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.
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“Liquid Assets” means assets in the form of cash, cash equivalents, obligations of (or fully guaranteed as to principal and interest by) the United States or any agency or instrumentality thereof (provided the full faith and credit of the United States supports such obligation or guarantee), certificates of deposit issued by a commercial bank having net assets of not less than $500 million, securities listed and traded on a recognized stock exchange or traded over the counter and listed in the National Association of Securities Dealers Automatic Quotations, or liquid debt instruments that have a readily ascertainable value and are regularly traded in a recognized financial market.
“Liquid Assets Threshold” means Liquid Assets having a market value of at least $1,000,000.00.
“Loan” means the loan in the Original Principal Amount made by Lender to Borrower pursuant to this Agreement.
“Loan Bifurcation” has the meaning set forth in Section 9.1 hereof.
“Loan Documents” means, collectively, this Agreement, the Note, the Security Instrument, the Environmental Indemnity, the Assignment of Management Agreement, the Guaranty, the Clearing Account Agreement, the Cash Management Agreement, the Assignment of Leases and Rents and all other documents executed or delivered by Borrower or Guarantor in connection with the Loan.
“Loan to Value Ratio” shall mean, as of the date of its calculation, the ratio of (i) the sum of the outstanding principal amount of the Loan as of the date of such calculation to (ii) the fair market value of all applicable Individual Properties, as determined, in Lender’s reasonable discretion, by any commercially reasonable method permitted to a REMIC Trust.
“Major Lease” means (i) a Lease which (A) together with all other Leases to the same Tenant or any Affiliate of such Tenant, constitutes ten percent (10%) or more of the aggregate annual Rent of all of the Property, or demises ten percent (10%) or more of the aggregate rentable square feet of all of the Property, (B) contains an option or preferential right to purchase any portion of the Property, or (C) is with a Tenant that is an Affiliate of Borrower; and (ii) any instrument guaranteeing or providing credit support for any Lease identified in clause (i) above. The only Major Leases in effect as of the Closing Date are each CPC Lease.
“Management Agreement” means individually or collectively (as the context may require), each management agreement entered into by and between Borrower and Manager, pursuant to which the applicable Manager is to provide management and other services with respect to the Property or any portion thereof, or, if the context requires, a Qualified Manager who is managing the Property in accordance with the terms and provisions of this Agreement pursuant to a Replacement Management Agreement.
“Manager” means with respect to each Individual Property, the Person associated therewith as set forth on Schedule V hereof (including any Affiliated Manager), or, if the context requires, a Qualified Manager who is managing the Property or any portion thereof in accordance with the terms and provisions of this Agreement pursuant to a Replacement Management Agreement.
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“Material Action” means to consolidate or merge Borrower with or into any Person, or to institute proceedings to have Borrower be adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against Borrower or file a petition seeking, or consent to, reorganization or relief with respect to Borrower under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of Borrower or a substantial part of its property, or make any assignment for the benefit of creditors of Borrower, or admit in writing in a legal proceeding Borrower’s inability to pay its debts generally as they become due (unless otherwise required by Legal Requirements), or take action in furtherance of any such action (unless otherwise required by Legal Requirements), or, to the fullest extent permitted by law, dissolve or liquidate Borrower.
“Maturity Date” means March 6, 2034, or such other date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise.
“Maximum Legal Rate” means the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or in the other Loan Documents, under the laws of such State or States whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.
“Mezzanine Borrower” has the meaning set forth in Section 9.7 hereof.
“Mezzanine Control Event” has the meaning set forth in the Guaranty.
“Mezzanine Loan” has the meaning set forth in Section 9.7 hereof.
“Mezzanine Option” has the meaning set forth in Section 9.7 hereof.
“Monthly Debt Service Payment Amount” with respect to each Payment Date, a payment equal to the amount of interest which has accrued during the immediately preceding Accrual Period computed at the Interest Rate.
“Moody’s” means Moody’s Investors Service, Inc.
“Mortgage Loan” has the meaning set forth in Section 9.7 hereof.
“Net Cash Flow” means, with respect to the Property for any period, the amount obtained by subtracting Operating Expenses and Capital Expenditures for such period from Gross Income from Operations for such period.
“Net Operating Income” means the amount obtained by subtracting Operating Expenses from Gross Income from Operations.
“Net Proceeds” has the meaning set forth in Section 6.4(b) hereof.
“Net Proceeds Deficiency” has the meaning set forth in Section 6.4(b)(vi) hereof.
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“Net Worth” means, as of a given date, (a) all amounts (excluding the value of the Property) that would be included under net assets (the result of total assets minus total liabilities) on the consolidated statement of net assets of Guarantor and its consolidated subsidiaries at such date, determined pursuant to the fair value basis of accounting in conformity with GAAP, plus (b) seventy-five percent (75%) of all Qualified Capital Commitments to which Guarantor is entitled. Provided, however, that any amounts included in Qualified Capital Commitments shall be excluded from the amounts in clause (a) above.
“Net Worth Threshold” means a Net Worth of at least $10,000,000.00.
“New Interest Accrual Period” has the meaning set forth in Section 2.2.9 hereof.
“New Payment Date” has the meaning set forth in Section 2.2.9 hereof.
“Non-Discretionary Expenses” means any non-discretionary expense required for any Individual Property, including, without limitation, any expense which, in Borrower’s good faith judgment is necessary to (a) comply with any of the material obligations of the Borrower as landlord under any Lease, (b) comply with any material agreements, encumbrances or other instruments affecting the Property with respect to which the failure to comply could reasonably be expected to have a material adverse effect on Borrower or the Property, (c) comply with any other material obligations of Borrower under material agreements to which Borrower is a party (including, without limitation, under any Management Agreement) with respect to which the failure to comply could reasonably be expected to have a material adverse effect on Borrower or the Property, (d) pay Taxes or pay Emergency Expenses, (e) maintain insurance for the Property and Borrower as required under Section 6.1, or (f) pay utility bills for the Property as and when due and payable.
“Non-U.S. Entity” has the meaning set forth in Section 2.2.7(b) hereof.
“Note” means that certain Promissory Note, dated the date hereof, in the principal amount of $7,500,000.00, made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, including any Defeased Note and Undefeased Note that may exist from time to time.
“O&M Program” shall mean, collectively, the asbestos, operations and maintenance programs developed by Borrower and approved by Lender, as the same may be amended, replaced, supplemented or otherwise modified from time to time.
“OFAC” has the meaning set forth in Section 10.25 hereof.
“Officer’s Certificate” means a certificate delivered to Lender by Borrower which is signed by an authorized officer, authorized signatory or authorized designee of Borrower or the general partner, managing member or sole member of Borrower, as applicable.
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“Operating Expenses” means the total of all expenditures, computed in accordance with GAAP, of whatever kind relating to the operation, maintenance and management of the Property that are incurred on a regular monthly or other periodic basis, including, ground rent, utilities, ordinary repairs and maintenance, insurance, license fees, property taxes and assessments, advertising expenses, management fees, payroll and related taxes, computer processing charges, operational equipment or other lease payments as approved by Lender in its reasonable discretion, and other similar costs, but excluding depreciation, amortization and other non-cash items and other non-cash charges, Debt Service, Capital Expenditures, tenant improvements and leasing commissions and contributions to the Reserve Funds, income taxes or other taxes in the nature of income taxes on sales, or use taxes required to be paid to any Governmental Authority, equity distributions, and other extraordinary and non-recurring items, and legal or other professional services fees and expenses unrelated to the operation of the Property.
“Original Principal Amount” means $7,500,000.00.
“Other Charges” means all maintenance charges, impositions other than Taxes, and any other charges, including vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property or any part thereof, now or hereafter levied or assessed or imposed against the Property or any part thereof.
“Other Obligations” has the meaning as set forth in the Security Instrument.
“Outstanding Principal Balance” or “OPB” means the portion of the Original Principal Amount that remains outstanding from time to time.
“PACE Lien” shall mean (x) any “Property-Assessed Clean Energy loan” or (y) any other indebtedness, without regard to the name given to such indebtedness, which is (i) incurred for improvements to the Property for the purpose of increasing energy efficiency, increasing use of renewable energy sources, resource conservation, or a combination of the foregoing, and (ii) repaid through multi-year assessments against the Property.
“Partial Defeasance Date” has the meaning set forth in Section 2.4.1 hereof.
“Partial Defeasance Event” has the meaning set forth in Section 2.4.1 hereof.
“Partial Release” has the meaning set forth in Section 2.5.2 hereof.
“Partial Release Notice Date” has the meaning set forth in Section 2.5.2 hereof.
“Payment Date” means the sixth (6th) day of each calendar month during the term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day.
“Permitted Defeasance Date” means the date that is the earlier of (a) three (3) years from the Closing Date or (b) two (2) years from the “startup day” within the meaning of Section 860G(a)(9) of the Code of the final REMIC Trust.
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“Permitted Encumbrances” means, with respect to each Individual Property, collectively, (a) the Liens and security interests created by, or expressly permitted under, the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the applicable Title Insurance Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent (but expressly excluding any PACE Lien) or being contested in accordance with the Loan Documents, (d) mechanic’s or materialmen’s liens, if any being contested in good faith and by appropriate proceedings in accordance with the Loan Documents, (e) rights of existing and future tenants pursuant to Leases entered into in accordance with this Agreement, (f) liens securing assessments or charges payable to a property owner association or similar entity, which assessments are not yet due or delinquent, (g) liens relating to equipment financing which are incurred in the ordinary course of business in connection with the ownership of the Property in an amount not to exceed one percent (1%) of the amount of the Loan (“Permitted Equipment Financing”), provided, however, that Borrower shall not enter into any equipment financing arrangement with respect to any equipment that is necessary and material to the operating of any of the Property; provided, further, however, any “landlord lien waiver” or like agreement with any financing party to a Tenant whereby Borrower, as landlord, waives its landlord lien rights to Tenant’s personal property shall be a Permitted Encumbrance, (h) bankers’ liens, rights of setoff and other similar liens existing solely with respect to cash and other investments on deposit in one or more accounts maintained by or on behalf of Borrower, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, solely securing amounts owing to such bank with respect to cash management and operating account arrangements, (i) the Property Documents, (j) Immaterial Easements and (k) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s reasonable discretion.
“Permitted Equipment Financing” has the meaning set forth in the definition of “Permitted Encumbrances”.
“Permitted Indebtedness” has the meaning set forth in clause (xxiii) of the definition of “Special Purpose Entity”.
“Permitted Investments” means “permitted investments” as then defined and required by the Rating Agencies.
“Permitted Par Prepayment Date” means the Payment Date which is four (4) months prior to the Maturity Date.
“Permitted Prepayment Date” means the Payment Date occurring in April, 2025.
“Permitted Trade Payables” has the meaning set forth in clause (xxiii) of the definition of “Special Purpose Entity”.
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“Permitted Transfer” means any one or more of the following: (a) any transfer, directly as a result of the death of a natural person, of stock, membership interests, partnership interests or other ownership interests previously held by the decedent in question to the Person or Persons lawfully entitled thereto, (b) any transfer, directly as a result of the legal incapacity of a natural person, of stock, membership interests, partnership interests or other ownership interests previously held by such natural person to the Person or Persons lawfully entitled thereto, (c) any transfer of stock or membership interests in any publicly-held corporation or other publicly-held entity (in each case) which is listed on the New York Stock Exchange, the NASDAQ Global Select Market or another nationally-recognized stock exchange, (d) the offer, sale, listing, trading, pledging, transfer, withdrawal, cancellation or issuance of securities of the REIT, any publicly-held corporation or other publicly-held entity provided that such securities are listed on the New York Stock Exchange, the NASDAQ Global Select Market or another nationally recognized stock exchange (e) intentionally omitted, (f) a Qualified Equityholder Transfer, (g) any Mezzanine Control Event, (h) any Lease entered into after the date hereof that does not require Lender consent or is approved or deemed approved pursuant to the terms of Section 5.1.20 hereof, (i) a Permitted Encumbrance, (j) a Condemnation affecting any Individual Property, (k) the release of an Individual Property pursuant to Section 2.5.2 hereof and (l) an assumption of the Loan in accordance with Section 5.2.10(e) hereof.
“Person” means any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.
“Personal Property” means, individually or collectively (as the context requires), the “Personal Property” as defined in each applicable Security Instrument.
“Policies” has the meaning specified in Section 6.1(b) hereof.
“Policy” has the meaning specified in Section 6.1(b) hereof.
“Post Defeasance Payment Date” has the meaning set forth in Section 2.4.1(a)(ii) hereof.
“Prepayment Rate” shall mean the bond equivalent yield (in the secondary market) on the United States Treasury Security that as of the Prepayment Rate Determination Date has a remaining term to maturity closest to, but not exceeding, the remaining term to the Permitted Par Prepayment Date as most recently published in “Statistical Release H.15 (519), Selected Interest Rates,” or any successor publication, published by the Board of Governors of the Federal Reserve System, or on the basis of such other publication or statistical guide as Lender may reasonably select.
“Prepayment Rate Determination Date” shall mean the date which is fifteen (15) Business Days prior to the date that the applicable prepayment shall be applied in accordance with the terms and provisions of Section 2.3.1 hereof.
“Prohibited Entity/Ownership Structure” means any direct or indirect ownership of either the Property or Borrower by (a) a statutory trust organized under 12 Del.C. § 3801 et seq., or any successor statute thereto, or under any similar other state of federal law, (b) any one or more Persons as tenants in common or any similar ownership structure, or (c) any one or more Persons as a result of any Crowdfunding; provided that none of the foregoing shall apply to the Advisor Party or to shareholders of the REIT.
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“Property” means, individually or collectively (as the context requires), each Individual Property, the Improvements thereon and all Personal Property owned by Borrower and encumbered by the Security Instruments, together with all rights pertaining to the real property, Personal Property and Improvements, as more particularly described in the Security Instruments, and any portion of any of the foregoing which is subject to the terms hereof and of the other Loan Documents. For the avoidance of doubt, following the release of any Individual Property pursuant to Section 2.5.2 hereof, the term “Property” and related definitions in this Agreement and the other Loan Documents shall no longer include such released Individual Property or any portion thereof.
“Property Document” shall mean, individually or collectively (as the context may require), each document listed on Schedule XI attached hereto, and any replacements, amendments, or supplements thereto; it being understood that if any Property Document is terminated in accordance with this Agreement then such terminated Property Document shall not be treated under the Loan Documents as a Property Document thereafter.
“Property Document Event” shall mean any event which would, directly or indirectly, cause a termination right, right of first refusal, first offer or any other similar right by a party thereto other than Borrower, cause any material termination fees to be due from Borrower or would cause a material default of any Borrower to occur after all applicable notice and cure periods under any Property Document (in each case, beyond any applicable notice and cure periods under the applicable Property Document); provided, however, any of the foregoing shall not be deemed a Property Document Event to the extent Lender’s prior written consent is obtained (or deemed obtained) with respect to the same.
“Provided Information” means any and all financial and other information provided at any time prepared by, or on behalf of, Borrower, Guarantor or Manager.
“Prudent Lender Standard” shall, with respect to any matter, be deemed to have been met if the matter in question (i) prior to a Securitization, is acceptable to Lender in its commercially reasonable discretion and (ii) after a Securitization, (A) if permitted by the applicable legal requirements relating to any REMIC Trust (including, without limitation, those relating to the continued treatment of the Loan (or the applicable portion thereof and/or interest therein) as a “qualified mortgage” held by such REMIC Trust), the continued qualification of such REMIC Trust as such, the non-imposition of any tax on such REMIC Trust (including, without limitation, taxes on “prohibited transactions” and “contributions”) and any other REMIC Requirements, would be acceptable to Lender in its commercially reasonable discretion or (B) if the Lender discretion in the foregoing subsection (A) is not permitted under such applicable REMIC Requirements, would be acceptable to a prudent lender of commercial mortgage loans exercising its commercially reasonable discretion.
“Qualified Capital Commitments” means, as of the date of calculation, the sum of (a) the amount of any uncalled capital commitments of Guarantor’s investors to Guarantor that are (i) payable in cash, (ii) readily available to be called by such Guarantor without restriction or any other condition at any time and from time to time other than notice and (iii) remain open through at least six (6) months beyond the then scheduled Maturity Date, plus (b) the amount of any properly called capital commitments of Guarantor’s investors to Guarantor that have not yet been funded provided that (i) such commitments are payable in cash and in less than five (5) days, (ii) such commitments are irrevocable by such investors, (iii) such investors are not in default under the applicable fund documents governing such capital commitments and (iv) such commitments remain open through at least six (6) months beyond the then scheduled Maturity Date; provided further than all “Qualified Capital Commitments” must be unpledged and otherwise unencumbered, and must be from an investor that is not subject to a bankruptcy or similar proceeding.
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“Qualified Equityholder” means (i) the REIT or (ii) a bank, savings and loan association, investment bank, insurance company, trust company, commercial credit corporation, pension plan, pension fund or pension advisory firm, mutual fund, real estate investment trust, government entity or plan, real estate company, investment fund, a company regularly engaged in the ownership, operation or investing in or funding of real estate assets, or an institution substantially similar to any of the foregoing, provided in each case under this clause (ii) that such Person (x) has total assets (in name or under management) in excess of $500,000,000.00 and (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity in excess of $100,000,000.00 (in both cases, exclusive of the Property), and (y) is regularly engaged in the business of owning and operating real estate (and if such real estate is not comparable to the Property, then such Person will engage a Qualified Manager to manage the Property) or (iii) any other Person reasonably (and promptly) approved by Lender. Additionally, for a Qualified Equityholder under either clause (ii) or (iii) above, Lender must receive a credit check and bankruptcy, litigation, judgment lien and other customary comparable searches which must be reasonably acceptable to Lender, including that (A) such Qualified Equityholder has not been the subject of any bankruptcy proceedings, voluntary or involuntary, made an assignment for the benefit of creditors or taken advantage of any insolvency act, or any act for the benefit of debtors within the previous seven (7) years, (B) such Qualified Equityholder has not been, and is not controlled by any party which has ever been, convicted of a capital offense or fraud, embezzlement or other financial crime felony, and has no litigation or regulatory action pending or threatened in writing against it which would reasonably be expected to result in a material adverse effect on such Person, and (C) such Qualified Equityholder has never been, and is not affiliated with any person which has been, indicted or convicted for a Patriot Act offense and is not on any anti-terrorism list of the United States of America.
“Qualified Equityholder Transfer” has the meaning set forth in Section 5.2.10(g) hereof.
“Qualified Manager” means either (a) Manager; or (b) in the reasonable judgment of Lender, a reputable and experienced management organization (which may be an Affiliate of Borrower) possessing experience in managing properties similar in size, scope, use and value as the Property, provided, that, if required by Lender, Borrower shall have obtained, if a Securitization has occurred, prior written confirmation from the applicable Rating Agencies that management of the Property by such entity will not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof. Lender hereby pre-approves each of the following as a “Qualified Manager”: NAI Hiffman, Plaza Companies, CBRE, Cushman & Wakefield, Jones Lang LaSalle, Transwestern, Lincoln and Healthcare Trust Properties, LLC or another Affiliate of Borrower.
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“Qualified Replacement Guarantor” shall mean a Person (a) who/that has its principal address and place business in the United States, (b) who/that (i) has a tangible Net Worth of not less than $10,000,000.00 and Liquid Assets of not less than $1,000,000.00, (ii) is a Qualified Equityholder or is twenty-five percent (25%) owned and Controlled by a Qualified Equityholder or (iii) is otherwise approved by Lender, (c) for which Lender has received a credit check and bankruptcy, litigation, judgment lien and other customary comparable searches which must be reasonably acceptable to Lender, including that (A) such Person has not been the subject of any bankruptcy proceedings, voluntary or involuntary, made an assignment for the benefit of creditors or taken advantage of any insolvency act, or any act for the benefit of debtors within the previous seven (7) years, (B) such Person has not been, and is not Controlled by any party which has ever been, convicted of a capital offense or fraud, embezzlement or other financial crime felony, and has no material litigation or regulatory action pending or threatened in writing against it, (C) such Person has never been, and is not Affiliated with any person which has been, indicted or convicted for a Patriot Act offense and is not on any anti-terrorism list of the United States of America, and (d) if a Securitization has occurred, for which Lender has received a written confirmation from the Rating Agencies that the replacement of the Guarantor with a Qualified Replacement Guarantor shall not result in a downgrade, withdrawal or qualification of the ratings then assigned to the Securities from each applicable Rating Agency.
“Rating Agencies” means whichever of S&P, Moody’s, Fitch, and Morningstar Credit Ratings, LLC which has been approved by Lender and designated by Lender to assign a rating to the Securities, or any other nationally recognized statistical rating agency which has been approved by Lender and designated by Lender to assign a rating to the Securities.
“Regime” shall have the meaning set forth in Section 4.1.40 hereof.
“Registration Statement” has the meaning set forth in Section 9.2 hereof.
“Reimbursement Contribution” has the meaning set forth in Section 10.30(c) hereof.
“Related Entities” has the meaning set forth in Section 5.2.10(e)(v) hereof.
“Release” means any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances in violation of Environmental Laws.
“Released Property” shall have the meaning set forth in Section 2.5.2 hereof.
“Remediation” means any response, remedial, removal, or corrective action, any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance, any actions to prevent, cure or mitigate any Release of any Hazardous Substance, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Release of Hazardous Substances at or emanating from any Individual Property, in each case, to the extent required under Environmental Law.
“REIT” means Healthcare Trust, Inc., a Maryland corporation.
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“REMIC Requirements” shall mean any applicable legal requirements relating to any REMIC Trust (including, without limitation, those relating to the continued treatment of the Loan (or the applicable portion thereof or interest therein) as a “qualified mortgage” held by such REMIC Trust, the continued qualification of such REMIC Trust as such under the Code, the non-imposition of any tax on such REMIC Trust under the Code (including, without limitation, taxes on “prohibited transactions” and “contributions”) and any other constraints, rules or other regulations or requirements relating to the servicing, modification or other similar matters with respect to the Loan (or any portion thereof or interest therein) that may now or hereafter exist under applicable legal requirements (including, without limitation under the Code)).
“REMIC Trust” means a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code that holds the Note or a portion thereof.
“Rents” means, all rents (including percentage rents), rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, payments (including payments in connection with the exercise of any purchase option or termination rights), deposits (including security, utility and other deposits, to the extent the same have not been applied by Borrower or returned to the applicable Tenant in accordance with such Tenant’s Lease), accounts, cash, issues, profits, charges for services rendered, all other amounts payable as rent under any Lease or other agreement relating to the Property, including charges for electricity, oil, gas, water, steam, heat, ventilation, air-conditioning and any other energy, telecommunication, telephone, utility or similar items or time use charges, HVAC equipment charges, sprinkler charges, escalation charges, license fees, maintenance fees, charges for Taxes, operating expenses or other reimbursables payable to Borrower (or to the Manager for the account of Borrower) under any Lease, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower or its agents or employees from any and all sources arising from or attributable to the Property.
“Replacement Management Agreement” means, collectively, (a) either (i) a management agreement with a Qualified Manager substantially in the same form and substance as the Management Agreement, or (ii) a management agreement with a Qualified Manager, which management agreement shall be reasonably acceptable to Lender in form and substance (it being understood that a Replacement Management Agreement on a substantially similar form as the Management Agreement provided to Lender in connection with the closing of the Loan is approved by Lender), provided, however, with respect to either subclause (i) or (ii) above, that without Lender’s prior consent, in its sole discretion, the management fee with respect to such Individual Property for such Qualified Manager shall not exceed the fee provided for in the Management Agreement with respect to such Individual Property in effect as of the closing of the Loan, and provided, further, with respect to subclause (ii) above, if a Securitization has occurred, Lender, at its option, may require that Borrower shall have obtained prior written confirmation from the applicable Rating Agencies that such management agreement will not cause a downgrade, withdrawal or qualification of the then current rating of the Securities or any class thereof and (b) an assignment of management agreement and subordination of management fees substantially in the form delivered to Lender in connection with the origination of the Loan (or of such other form and substance reasonably acceptable to Lender), executed and delivered to Lender by Borrower and such Qualified Manager at Borrower’s expense.
“Replacement Reserve Account” has the meaning set forth in Section 7.3.1 hereof.
“Replacement Reserve Fund” has the meaning set forth in Section 7.3.1 hereof.
“Replacement Reserve Monthly Deposit” has the meaning set forth in Section 7.3.1 hereof.
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“Replacements” has the meaning set forth in Section 7.3.1 hereof.
“Required Repair Account” has the meaning set forth in Section 7.1.1 hereof.
“Required Repair Fund” has the meaning set forth in Section 7.1.1 hereof.
“Required Repairs” has the meaning set forth in Section 7.1.1 hereof.
“Reserve Funds” means, collectively, the Tax and Insurance Escrow Fund, the Required Repair Fund, the Condominium Assessments Reserve Fund and, if established pursuant to the terms of this Agreement, the Replacement Reserve Fund, the Rollover Reserve Fund, the Excess Cash Flow Reserve Fund, the Free Rent Reserve Fund, and any other escrow fund established by the Loan Documents.
“Restoration” means the repair and restoration of the Property (or applicable portion thereof) after a Casualty or Condemnation as nearly as possible to the condition the Property (or applicable portion thereof) was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender.
“Restricted Party” means collectively, (a) Borrower and any Guarantor and (b) any shareholder, partner, member, non-member manager, or any direct or indirect legal or beneficial owner of Borrower, any Guarantor, or any non-member manager of Borrower and any Guarantor, in each case, excluding shareholders or owners of stock or membership interests in any publicly-held corporation or other publicly-held entity (in each case) which is listed on the New York Stock Exchange, the NASDAQ Global Select Market or another nationally-recognized stock exchange that are not Affiliates of Borrower, Guarantor or any Affiliated Manager; provided, however that no Advisor Party shall be a Restricted Party so long as such Advisor Party does not have Control of a Borrower or Guarantor, nor own more than 15% of the direct or indirect ownership interests in a Borrower.
“Required Deductible” has the meaning set forth in Section 6.1(a)(i) hereof.
“Rollover Reserve Account” has the meaning set forth in Section 7.4.1 hereof.
“Rollover Reserve Fund” has the meaning set forth in Section 7.4.1 hereof.
“Rollover Reserve Monthly Deposit” has the meaning set forth in Section 7.4.1 hereof.
“S&P” means Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies.
“Sale or Pledge” means a voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance, pledge, grant of option or other transfer or disposal of a legal or beneficial interest, whether direct or indirect.
“Satisfactory Search Results” shall mean the results of credit history check, litigation, lien, bankruptcy, judgment and other similar customary searches with respect to the applicable transferee and its applicable affiliates, in each case, (i) revealing no matters which would have a material and adverse effect on Borrower’s financial condition, the value, use or operation of the applicable Individual Property (and taking into account relativity to all Properties); (ii) demonstrating that any transferee is not an Embargoed Person and (iii) yielding results which are otherwise acceptable to Lender in its commercially reasonable discretion.
“Scheduled Defeasance Payments” has the meaning set forth in Section 2.4.1(c) hereof.
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“Second Level SPE” has the meaning set forth in Section 9.7 hereof.
“Securities” has the meaning set forth in Section 9.1.1 hereof.
“Securitization” has the meaning set forth in Section 9.1.1 hereof.
“Securitization/Loan Component Provisions” has the meaning set forth in Section 9.1.1 hereof.
“Security Agreement” has the meaning set forth in Section 2.4.1 hereof.
“Security Instrument” and “Security Instruments” means individually or collectively, as the context requires, each first priority Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, or similar document dated the date hereof, executed and delivered by Borrower to Lender as security for the Loan and encumbering the Property (or any portion thereof), as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.
“Severed Loan Documents” has the meaning set forth in Section 8.2(c) hereof.
“Servicer” has the meaning set forth in Section 9.5 hereof.
“Special Purpose Entity” means a corporation, limited partnership or limited liability company that:
(i)    is and shall be organized solely for the purpose of acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing and operating the Property, entering into and performing its obligations under the Loan Documents with Lender, refinancing the Property in connection with a permitted repayment (or partial repayment) of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing;
(ii)    has not engaged and shall not engage in any business unrelated to the acquisition, development, ownership, holding, sale, lease, transfer, exchange, management or operation of the Property;
(iii)    has not owned and shall not own any real property other than the Property;
(iv)    does not have, shall not have and at no time had any assets other than the Property and personal property necessary or incidental to its ownership and operation of the Property;
(v)    has not engaged in, sought, consented to or permitted and shall not engage in, seek, consent to or permit (A) any dissolution, winding up, liquidation, consolidation or merger or division into two (2) or more limited liability companies or other legal entities, or (B) any sale or other transfer of all or substantially all of its assets or any sale of assets outside the ordinary course of its business, except as permitted by the Loan Documents (including any delivery of a deed in lieu of foreclosure to Lender);
(vi)    shall not cause, consent to or permit any amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation, operating agreement or other formation document or organizational document (as applicable) with respect to the matters set forth in this definition;
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(vii)    intentionally omitted;
(viii)    intentionally omitted;
(ix)    intentionally omitted;
(x)    if such entity is a single-member limited liability company, (A) is and shall be a Delaware limited liability company, (B) intentionally omitted, (C) shall not take any Material Action with respect to itself and shall not cause or permit the members or managers of such entity to take any Material Action with respect to itself without the prior unanimous written consent of the company’s members and managers, as applicable, and (D) has and shall have either (1) a member which owns no economic interest in the company, has signed the company’s limited liability company agreement and has no obligation to make capital contributions to the company, or (2) a natural person that is not a member of the company, that has signed its limited liability company agreement and that, under the terms of such limited liability company agreement becomes a member of the company immediately prior to the withdrawal or dissolution of the last remaining member of the company;
(xi)    from and after the date hereof shall not (and, if such entity is (a) a limited liability company, has and shall have a limited liability agreement or an operating agreement, as applicable, (b) a limited partnership, has a limited partnership agreement, or (c) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity shall not) (1) dissolve, merge, liquidate, consolidate, divide into two (2) or more limited liability companies or other legal entities; (2) sell all or substantially all of its assets while this Loan is outstanding, unless in accordance with the terms of this Agreement; (3) amend its organizational documents with respect to the matters set forth in this definition without the consent of Lender; or (4) without the prior unanimous written consent of all general partners/managing members/directors: (A) file or consent in writing to the filing of any bankruptcy, insolvency or reorganization case or proceeding, institute any proceedings under any applicable insolvency law or otherwise seek relief under any laws relating to the relief from debts or the protection of debtors generally, file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings; (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for the entity or a substantial portion of its property; (C) make an assignment for the benefit of the creditors of the entity; or (D) take any action in furtherance of any of the foregoing;
(xii)    has at all times been and intends at all times to remain solvent and has paid and intends to pay its debts and liabilities (including, a fairly-allocated portion of any personnel and overhead expenses that it shares with any Affiliate) from its assets as the same shall become due, and has maintained and intends to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations provided that the foregoing shall in no event obligate any direct or indirect member, partner or shareholder (or any other party) of Borrower or any other Person to contribute equity (or make any capital contributions (additional or otherwise)) into Borrower;
(xiii)    holds itself out as a legal entity, separate and apart from any other person or entity, has not failed and shall not fail to correct any known misunderstanding regarding the separate identity of such entity and has not identified and shall not identify itself as a division of any other Person;
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(xiv)    has maintained and shall maintain its bank accounts (if any), books of account, books and records separate from those of any other Person (other than the other Borrowers) and, to the extent that it is required to file tax returns under applicable law, has filed and shall file its own tax returns, except to the extent that it is required by law to file consolidated tax returns and, if it is a corporation, has not filed and shall not file a consolidated federal income tax return with any other corporation, except to the extent that it is required by law to file consolidated tax returns;
(xv)    has maintained and shall maintain its own records, books, resolutions and agreements;
(xvi)    has not commingled and shall not commingle its funds or assets with those of any other Person and has not participated and shall not participate in any cash management system with any other Person, excepting, however, (a) any cash management system entered into in connection with any mortgage loan encumbering the Property or any part thereof prior to the date hereof, which prior cash management systems, if any, have been terminated, and (b) the cash management system required by Lender in connection with the Loan;
(xvii)    has held and shall hold its assets in its own name (except to the extent delegated to the Manager pursuant to the Management Agreement);
(xviii)    has conducted and shall conduct its business in its name or in a name franchised or licensed to it by an entity other than an Affiliate of itself or of Borrower, except for business conducted on behalf of itself by another Person under a business management services agreement that is on commercially-reasonable terms, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of Borrower;
(xix)    (A) has maintained and shall maintain its financial statements, accounting records and other entity documents separate from those of any other Person; (B) has shown and shall show, in its financial statements, its asset and liabilities separate and apart from those of any other Person; and (C) has not permitted and shall not permit its assets to be listed as assets on the financial statement of any of its Affiliates (other than the other co-Borrowers) except as required by GAAP; provided, however, that any such consolidated financial statement contains a note indicating that the Special Purpose Entity’s separate assets and credit are not available to pay the debts of such Affiliate (other than the other co-Borrowers) and that the Special Purpose Entity’s liabilities do not constitute obligations of the consolidated entity;
(xx)    has paid and intends to pay its own liabilities and expenses, including the salaries of its own employees, out of its own funds and assets provided that the foregoing shall in no event obligate any direct or indirect member, partner or shareholder (or any other party) of Borrower or any other Person to contribute equity (or make any capital contributions (additional or otherwise)) into Borrower, and has maintained and shall maintain a sufficient number of employees in light of its contemplated business operations;
(xxi)    has observed and shall observe all partnership, corporate or limited liability company formalities, as applicable;
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(xxii)    has not incurred any Indebtedness other than (i) acquisition financing with respect to the Property; construction financing with respect to the Improvements and certain off-site improvements required by municipal and other authorities as conditions to the construction of the Improvements; and first mortgage financings secured by the Property; and Indebtedness pursuant to letters of credit, guaranties, interest rate protection agreements and other similar instruments executed and delivered in connection with such financings, (ii) unsecured trade payables and operational debt not evidenced by a note, (iii) Indebtedness incurred in the financing of equipment and other personal property used on the Property, and (iv) any other Permitted Indebtedness;
(xxiii)    shall have no Indebtedness other than (a) the Loan, (b) liabilities incurred in the ordinary course of business relating to the ownership and operation of the Property and the routine administration of Borrower, in amounts not to exceed two percent (2%) of the amount of the Loan which liabilities are not more than sixty (60) days past the date incurred and are not evidenced by a note, and which amounts are commercially reasonable under the circumstances when incurred (“Permitted Trade Payables”), (c) Permitted Equipment Financing and (d) such other liabilities that are permitted pursuant to this Agreement (collectively, the “Permitted Indebtedness”), provided that the foregoing items (a) - (d) shall in no event obligate any direct or indirect owner of Borrower or any other Person to contribute equity into Borrower, and provided further, that “Indebtedness” shall not include any liability for Taxes or Other Charges or Insurance Premiums;
(xxiv)    has not assumed, guaranteed or become obligated and shall not assume or guarantee or become obligated for the debts of any other Person, has not held out and shall not hold out its credit as being available to satisfy the obligations of any other Person or has not pledged and shall not pledge its assets for the benefit of any other Person, in each case except for the Loan, debts that have been repaid in full as of the Closing Date, and as otherwise permitted pursuant to this Agreement;
(xxv)    has not acquired and shall not acquire obligations or securities of its partners, members or shareholders or any other owner or Affiliate;
(xxvi)    has allocated and shall allocate fairly and reasonably any overhead expenses that are shared with any of its Affiliates, constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing, including paying for shared office space and for services performed by any employee of an Affiliate;
(xxvii)    has maintained and used and shall maintain and use separate stationery, invoices and checks bearing its name and not bearing the name of any other entity unless such entity is clearly designated as being the Special Purpose Entity’s agent;
(xxviii)     has not pledged and shall not pledge its assets to or for the benefit of any other Person other than with respect to loans secured by the Property, and no such pledge remains outstanding except to Lender to secure the Loan;
(xxix)    has held itself out and identified itself and shall hold itself out and identify itself as a separate and distinct entity under its own name or in a name franchised or licensed to it by an entity other than an Affiliate of Borrower and not as a division or part of any other Person;
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(xxx)    has maintained and shall maintain its assets in such a manner that it shall not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;
(xxxi)    has not made and shall not make loans to any Person and has not held and shall not hold evidence of indebtedness issued by any other Person or entity (other than cash and investment-grade securities and letters of credit held as security deposits issued by an entity that is not an Affiliate of or subject to common ownership with such entity);
(xxxii)    intentionally omitted;
(xxxiii)     other than capital contributions and distributions permitted under the terms of its organizational documents (and other than any Management Agreement with an Affiliated Manager and any other transactions permitted by this Agreement or approved by Lender), has not entered into or been a party to, and shall not enter into or be a party to, any transaction with any of its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are commercially reasonable terms comparable to those of an arm’s-length transaction with an unrelated third party;
(xxxiv)     Except in connection with the Loan, from and after the date hereof, shall not have any obligation to, and shall not, indemnify its partners, officers, directors or members, as the case may be, in each case unless such an obligation or indemnification is fully subordinated to the Debt and shall not constitute a claim against it if its cash flow is insufficient to pay the amount of the Debt that is then due and payable;
(xxxv)    if such entity is a corporation, has considered and shall consider the interests of its creditors in connection with all corporate actions;
(xxxvi)     has not had and shall not have any of its obligations guaranteed by any Affiliate except as provided by the Loan Documents;
(xxxvii) has not formed, acquired or held and shall not form, acquire or hold any subsidiary;
(xxxviii) has complied and shall comply in all respects with all of the terms and provisions contained in its organizational documents regarding the matters set forth in this definition of “Special Purpose Entity”;
(xxxix)     intentionally omitted;
(xl)    has not permitted and shall not permit any Affiliate (other than an Affiliated Manager) or constituent party (other than a Manager) independent access to its bank accounts;
(xli)    has not identified and shall not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it, and has not identified itself and shall not identify itself as a division of any other Person;
(xlii)    is, has always been and intends to continue to be duly formed, validly existing, and in good standing in the state of its incorporation or formation and in all other jurisdictions where it is qualified to do business;
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(xliii)    has paid all taxes which are due and payable (unless otherwise being contested pursuant to the Loan Documents) and is not currently involved in any dispute with any taxing authority (excluding any tax appeals or tax certiorari proceedings being conducted in the ordinary course of Borrower’s business in accordance with the Loan Documents);
(xliv)    is not now, nor has ever been, party to any lawsuit, arbitration, summons, or legal proceeding that resulted in a final, non-appealable judgment against it that has not been paid in full;
(xlv)    has no judgments or Liens of any nature against it except for tax liens not yet due and the Permitted Encumbrances;
(xlvi)    [intentionally omitted]; and
(xlvii)    has no material contingent or actual obligations not related to the Property.
“State” means, the applicable State or Commonwealth in which the applicable Individual Property is located.
“Successor Borrower” has the meaning set forth in Section 2.4.2 hereof.
“Survey” means, individually or collectively (as the context requires), each survey of each Individual Property prepared by a surveyor licensed in the State and reasonably satisfactory to Lender and the company or companies issuing the Title Insurance Policy, and containing a certification of such surveyor reasonably satisfactory to Lender.
“Tax and Insurance Escrow Account” has the meaning set forth in Section 7.2 hereof.
“Tax and Insurance Escrow Fund” has the meaning set forth in Section 7.2 hereof.
“Taxes” means all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against the Property or part thereof.
“Tenant” means the lessee of all or a portion of the Property under a Lease.
“Tenant Direction Letter” means an instruction letter to Tenants substantially in the form attached hereto as Schedule VI.
“Threshold Amount” means, with respect to each Individual Property, an amount equal to the greater of (i) $375,000 and (ii) five percent (5%) of the outstanding Allocated Loan Amount for such Individual Property.
“TILC Obligations” has the meaning set forth in Section 7.4.1 hereof.
“Title Insurance Policy” means each mortgagee title insurance policy issued with respect to one or more Individual Properties and insuring the lien of each applicable Security Instrument.
“Total Defeasance Date” has the meaning set forth in Section 2.4.1 hereof.
“Total Defeasance Event” has the meaning set forth in Section 2.4.1 hereof.
“Transfer” has the meaning set forth in Section 5.2.10(b) hereof.
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“Transferee” has the meaning set forth in Section 5.2.10(e) hereof.
“Transferee’s Principals” means collectively, (A) Transferee’s managing members, general partners or principal shareholders and (B) such other members, partners or shareholders which directly or indirectly shall own a fifty-one percent (51%) or greater economic and voting interest in Transferee.
“Trapped Reserve Funds” has the meaning set forth in Section 7.5.2 hereof.
“U.S. Obligations” means nonredeemable, nonprepayable, noncallable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that constitute “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, and are (a) direct obligations of the United States of America for the payment of which its full faith and credit is pledged, or (b) to the extent acceptable to the Rating Agencies, other “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended.
“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect in the State in which applicable Individual Property is located.
“UK Financial Institution” has the meaning set forth in Section 10.27 hereof.
“UK Resolution Authority” has the meaning set forth in Section 10.27 hereof.
“Undefeased Note” has the meaning set forth in Section 2.4.1 hereof.
“Underwriter Group” has the meaning set forth in Section 9.2 hereof.
“Unit” shall have the meaning set forth in the Security Instrument for the LaPorte Property.
“Updated Information” has the meaning set forth in Section 9.1 hereof.
“Write-Down and Conversion Powers” has the meaning set forth in Section 10.27 hereof.
“Yield Maintenance Default Premium” shall mean an amount equal to the greater of (a) three percent (3%) of the outstanding principal balance of the Loan to be prepaid or satisfied and (b) the excess, if any, of (i) the sum of the present values of all then-scheduled payments of principal and interest under the Note assuming that all scheduled payments are made timely and that the remaining outstanding principal and interest on the Loan is paid on the Permitted Par Prepayment Date (with each such payment and assumed payment discounted to its present value at the date of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when compounded semi-annually and deducting from the sum of such present values any short-term interest paid from the date of prepayment to the next succeeding Payment Date in the event such payment is not made on a Payment Date), over (ii) the principal amount being prepaid.
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“Yield Maintenance Premium” means an amount equal to the greater of (a) one percent (1%) of the outstanding principal of the Loan to be prepaid or satisfied and (b) the excess, if any, of (i) the sum of the present values of all then-scheduled payments of principal and interest under the Note assuming that all scheduled payments are made timely and that the remaining outstanding principal and interest on the Loan is paid on the Permitted Par Prepayment Date (with each such payment and assumed payment discounted to its present value at the date of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when compounded semi-annually and deducting from the sum of such present values any short-term interest paid from the date of prepayment to the next succeeding Payment Date in the event such payment is not made on a Payment Date), over (ii) the principal amount being prepaid.
Section 1.2Principles of Construction. The following rules of construction shall be applicable for all purposes of this Agreement and all documents or instruments supplemental hereto, unless the context otherwise clearly requires:
(a)any pronoun used herein shall be deemed to cover all genders, and words importing the singular number shall mean and include the plural number, and vice versa;
(b)the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”;
(c)an Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by Lender or a cure has been accepted by Lender (which cure Lender may accept in Lender’s reasonable discretion; provided, however, that if (i) Lender has applied for the appointment of a receiver pursuant to the Security Instrument, (ii) Lender shall have declared the entire unpaid Debt to be immediately due and payable, or (iii) Lender shall have commenced a foreclosure action pursuant to the Security Instrument, Lender is not obligated to accept such cure and may reject or accept such cure in Lender’s sole and absolute discretion);
(d)no inference in favor of or against any party shall be drawn from the fact that such party has drafted any portion hereof or any other Loan Document;
(e)the cover page (if any) of, all recitals set forth in, and all Exhibits to, any Loan Document are hereby incorporated therein;
(f)References herein to “the Property or any portion thereof” and words of similar import shall be deemed to refer, as applicable, to any portion of the Property taken as a whole (including any Individual Property) and any portion of any Individual Property;
(g)all references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified;
(h)all uses of the words “include,” “including” and similar terms shall be construed as if followed by the phrase “without being limited to” unless the context shall indicate otherwise;
(i)unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision of such Loan Document;
(j)unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined;
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(k)all captions to the Sections in any Loan Document are used for convenience and reference only and in no way define, limit or describe the scope or intent of, or in any way affect, such Loan Document; and
(l)Wherever Lender’s judgment, consent, approval or discretion is required under any Loan Document for any matter or thing or Lender shall have an option, election, or right of determination or any other power to decide any matter relating to the terms and conditions of such Loan Document, including any right to determine that something is satisfactory or not (“Decision Power”), such Decision Power shall be exercised in the sole and absolute discretion of Lender unless otherwise expressly stated. Such Decision Power and each other power granted to Lender may be exercised by Lender or by any authorized agent of Lender (including any servicer and/or attorney-in-fact), and Borrower hereby expressly agrees to recognize the exercise of such Decision Power by such authorized agent acting at the direction of Lender. Without limiting the generality of the foregoing, any authorized agent of Lender (including any servicer and/or attorney-in-fact) is hereby specifically authorized to remove a trustee under any applicable Security Instrument and select and appoint a successor trustee with respect to such Security Instrument so long as such removal does not prejudice Borrower or any of its rights thereunder (other than to a de minimis extent).
ARTICLE II. GENERAL TERMS
Section 1.1Loan Commitment; Disbursement to Borrower.
1.1.1Agreement to Lend and Borrow. Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date.
1.1.2Single Disbursement to Borrower. Borrower may request and receive only one (1) borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed. Borrower acknowledges and agrees that the Loan has been fully funded as of the Closing Date.
1.1.3The Note, Security Instrument and Loan Documents. The Loan shall be evidenced by the Note and secured by the Security Instruments and the other Loan Documents.
1.1.4Use of Proceeds. Borrower shall use the proceeds of the Loan to (a) acquire the Property, recapitalize Borrower equity or repay and discharge any existing loans relating to the Property, (b) pay all past due basic carrying costs, if any, with respect to the Property, (c) make deposits into the Reserve Funds on the Closing Date in the amounts provided herein, (d) pay costs and expenses incurred in connection with the closing of the Loan, and pay other amounts set forth on the settlement statement approved by Lender on or prior to the Closing Date, (e) fund any working capital requirements of the Property and (f) distribute the balance, if any, to Borrower or its direct or indirect owners.
Section 1.2Interest Rate; Loan Payments; Late Payment Charge.
1.1.1Payments.
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(a)On the Closing Date, Borrower shall pay to Lender interest on the outstanding principal amount of the Loan for the period through and including March 5, 2024. In addition, Borrower shall make a payment to Lender of interest in the amount of the Monthly Debt Service Payment Amount on the Payment Date occurring in April, 2024 and on each Payment Date thereafter to but excluding the Maturity Date. Provided no Event of Default shall have occurred and be continuing, each payment and prepayment under this Agreement shall be applied first to accrued and unpaid interest and then (as applicable) to the portion of the principal allocable to the Note. Any amounts recovered by or paid to Lender during the continuance of an Event of Default may be applied to the Debt in such order, proportion and priority as Lender may determine in its sole and absolute discretion.
(b)All payments and other amounts due under the Note, this Agreement and the other Loan Documents shall be made without any setoff, defense or irrespective of, and without deduction for, counterclaims.
1.1.2Interest Calculation. Interest on the outstanding principal balance of the Loan shall be calculated by multiplying (a) the actual number of days elapsed in the period for which the calculation is being made by (b) the Interest Rate divided by three hundred sixty (360) by (c) the Outstanding Principal Balance. The accrual period for calculating interest due on each Payment Date shall be the Accrual Period in which the related Payment Date occurs.
1.1.3Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the outstanding principal balance of the Loan, all accrued and unpaid interest thereon, and all other amounts due hereunder and under the Note, the Security Instrument and the other Loan Documents, including, without limitation, all interest accrued on the outstanding principal balance of the Loan through and including the Maturity Date.
1.1.4Payments after Default. Upon the occurrence and during the continuance of an Event of Default, (a) interest on the outstanding principal balance of the Loan and, to the extent permitted by applicable law, overdue interest and other amounts due in respect of the Loan, shall accrue at the Default Rate, calculated from the date such payment was delinquent taking into account any grace or cure periods contained herein. Interest at the Default Rate shall be computed from the occurrence of the Event of Default until the actual receipt and collection of the Debt (or that portion thereof that is then due). To the extent permitted by applicable law, interest at the Default Rate shall be added to the Debt, shall itself accrue interest at the same rate as the Loan and shall be secured by the Security Instrument. This paragraph shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default. Lender retains its rights under the Note to accelerate and to continue to demand payment of the Debt upon the happening and during the continuance of any Event of Default.
1.1.5Late Payment Charge. If any principal, interest or any other sums due under the Loan Documents is not paid by Borrower on the date on which it is due (other than any principal due on the Maturity Date), Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment; provided, however, the failure by Agent during the continuance of a Cash Sweep Period to disburse any payments due to Lender and/or allocate such funds to the appropriate Reserve Account in violation of the Loan Documents shall not result in a late payment charge under this Section 2.2.5. Any such amount shall be secured by the Security Instrument and the other Loan Documents to the extent permitted by applicable law.
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1.1.6Usury Savings. This Agreement and the Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.
1.1.7Indemnified Taxes.
(a)All payments made by Borrower hereunder shall be made free and clear of, and without reduction for or on account of, Indemnified Taxes, excluding (i) Indemnified Taxes measured by Lender’s net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which Lender is resident or organized, or any political subdivision thereof, (ii) taxes measured by Lender’s overall net income, and franchise taxes imposed on it, by the jurisdiction of Lender’s lending office or any political subdivision thereof or in which Lender is resident or engaged in business, and (iii) withholding taxes imposed by the United States of America, any state, commonwealth, protectorate territory or any political subdivision or taxing authority thereof or therein as a result of the failure of Lender which is a Non-U.S. Entity to comply with the terms of paragraph (b) below. If any non-excluded Indemnified Taxes are required to be withheld from any amounts payable to Lender hereunder, the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after payment of all non-excluded Indemnified Taxes) interest or any such other amounts payable hereunder at the rate or in the amounts specified hereunder. Whenever any non-excluded Indemnified Tax is payable pursuant to applicable law by Borrower, Borrower shall send to Lender an original official receipt showing payment of such non-excluded Indemnified Tax or other evidence of payment reasonably satisfactory to Lender. Borrower hereby indemnifies Lender for any incremental taxes, interest or penalties that may become payable by Lender which may result from any failure by Borrower to pay any such non-excluded Indemnified Tax when due to the appropriate taxing authority or any failure by Borrower to remit to Lender the required receipts or other required documentary evidence.
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(b)In the event that Lender or any successor and/or assign of Lender is not incorporated under the laws of the United States of America or a state thereof (a “Non-U.S. Entity”) Lender agrees that, prior to the first date on which any payment is due such entity hereunder, it will deliver to Borrower two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI or successor applicable form, as the case may be, certifying in each case that such entity is entitled to receive payments under the Note, without deduction or withholding of any United States federal income taxes. Each entity required to deliver to Borrower a Form W-8BEN or W-8ECI pursuant to the preceding sentence further undertakes to deliver to Borrower two further copies of such forms, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such form expires (which, in the case of the Form W-8ECI, is the last day of each U.S. taxable year of the Non-U.S. Entity) or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to Borrower, and such other extensions or renewals thereof as may reasonably be requested by Borrower, certifying in the case of a Form W-8BEN or W-8ECI that such entity is entitled to receive payments under the Note without deduction or withholding of any United States federal income taxes, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such entity from duly completing and delivering any such form with respect to it and such entity advises Borrower that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.
1.1.8Invalidated Payments. If any payment received by Lender is deemed by a court of competent jurisdiction to be a voidable preference or fraudulent conveyance under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, and is required to be returned by Lender, then the obligation to make such payment shall be reinstated, notwithstanding that the Note may have been marked satisfied and returned to Borrower or otherwise canceled, and such payment shall be immediately due and payable upon demand.
1.1.9New Payment Date. Lender shall have the right, to be exercised not more than one (1) time during the term of the Loan, to change the Payment Date to a date other than the sixth (6th) day of each month (a “New Payment Date”), on not less than sixty (60) days’ written notice to Borrower; provided, however, that any such change in the Payment Date: shall not (x) increase any of Borrower’s obligations hereunder (other than to a de minimis extent), (y) change the Maturity Date or (z) modify the Monthly Debt Service Payment Amount, except that the first (1st) payment of interest payable on the New Payment Date shall be accompanied by interest at the Interest Rate for the period from the Payment Date in the month in which the New Payment Date first occurs to the New Payment Date. In addition, in the event that Lender elects to change the Payment Date to a New Payment Date pursuant to this Section 2.2.9, Lender may, but shall not be obligated to, change the Accrual Period to a corresponding period of thirty-one (31) days or less selected by Lender (a “New Interest Accrual Period”), and in the event that Lender elects to change the Accrual Period to a New Interest Accrual Period, the first (1st) payment of interest payable on the New Payment Date shall be adjusted accordingly to accommodate such change in the Accrual Period.
Section 1.3Prepayments.
1.1.1Voluntary Prepayments.
(a)Except as otherwise expressly provided herein, Borrower shall not have the right to prepay the Loan in whole or in part prior to the Maturity Date.
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(b)After the Permitted Prepayment Date, Borrower may, at its option and upon thirty (30) days prior written notice to Lender, prepay the Debt in full (but not in part), provided that (i) [intentionally omitted], (ii) Borrower submits a notice to Lender setting forth the projected date of prepayment (the “Prepayment Date”), which date shall be no less than thirty (30) days from the date of such notice, (iii) Borrower pays to Lender (A) the unpaid principal amount of the Note, (B) all interest accrued and unpaid on the principal balance of the Note to and including the date of prepayment, (C) all other sums due under the Note, this Agreement and the other Loan Documents, (D) if such prepayment occurs prior to the Permitted Par Prepayment Date, the Yield Maintenance Premium (or, if an Event of Default then exists, the Yield Maintenance Default Premium pursuant to Section 2.3.3), and (E) if such prepayment is not paid on a regularly scheduled Payment Date, interest for the full Accrual Period during which the prepayment occurs, notwithstanding that such Accrual Period extends beyond the date of prepayment. If a notice of prepayment is given by Borrower to Lender pursuant to this Section 2.3.1, the amount designated for prepayment and all other sums required under this Section 2.3.1 shall be due and payable on the Prepayment Date. A notice of prepayment may be revoked by Borrower or Borrower may change the repayment date if written notice of such revocation or change is delivered by Borrower to Lender on or before the date that is five (5) Business Days prior to the repayment date set forth in the notice of prepayment and Borrower pays any reasonable actual third-party costs and expenses incurred by Lender in connection with such revocation.
(c)After the Permitted Prepayment Date, Borrower may, at its option and upon thirty (30) days prior written notice to Lender, prepay the Debt in part in connection with a Debt Yield Cure – Partial Prepayment or a prepayment pursuant to Section 6.4(b)(i)(C) hereof, provided that (i) no Event of Default then exists, (ii) Borrower submits the notice to Lender described in Section 2.3.1(b)(ii) above to Lender setting forth the Prepayment Date, which date shall be no less than thirty (30) days from the date of such notice, (iii) Borrower pays to Lender (A) the amount described in the definition of “Debt Yield Cure – Partial Prepayment” in Article I hereof, or the amount needed to achieve the Debt Service Coverage Ratio required by Section 6.4(b)(i)(C) (as applicable), (B) all interest accrued and unpaid on the principal balance of the Note being prepaid, including the date of prepayment, (C) all other sums due under the Note, this Agreement and the other Loan Documents, (D) if such prepayment occurs prior to the Permitted Par Prepayment Date, the Yield Maintenance Premium applicable to the amount being prepaid, and (E) if such prepayment is not paid on a regularly scheduled Payment Date, interest for the full Accrual Period during which the prepayment occurs, notwithstanding that such Accrual Period extends beyond the date of prepayment. If a notice of prepayment is given by Borrower to Lender pursuant to this Section 2.3.1, the amount designated for prepayment and all other sums required under this Section 2.3.1 shall be due and payable on the Prepayment Date. A notice of prepayment may be revoked by Borrower or Borrower may change the repayment date if written notice of such revocation or change is delivered by Borrower to Lender on or before the date that is five (5) Business Days prior to the repayment date set forth in the notice of prepayment and Borrower pays any reasonable actual third-party costs and expenses incurred by Lender in connection with such revocation. Notwithstanding the foregoing, Borrower shall also have the right to prepay the Debt in part in accordance with Section 2.5.2 hereof.
(d)In addition to Borrower’s right to prepay pursuant to Section 2.3.1(b) and (c) above and Section 2.5.2 below, Borrower shall also have the right to voluntarily defease the Loan pursuant to Section 2.4 and Section 2.5.2 hereof.
(e)For the avoidance of doubt, prepayments during an Event of Default are subject to the terms and conditions set forth in Section 2.3.3 hereof.
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1.1.2Mandatory Prepayments. On each date on which Borrower actually receives any Net Proceeds, if and to the extent Lender is not obligated (and does not elect) to make such Net Proceeds available to Borrower for the Restoration of the Property, Borrower shall prepay the outstanding principal balance of the Note together with all interest which would have accrued on the amount of the Loan through and including the last day of the Accrual Period related to the Payment Date next occurring following the date of such prepayment (or, if such prepayment occurs on a Payment Date, through and including the last day of the Accrual Period related to such Payment Date) in an amount equal to one hundred percent (100%) of such Net Proceeds. No Yield Maintenance Premium shall be due in connection with any prepayment made pursuant to this Section 2.3.2.
1.1.3Prepayment During Existence of Event of Default. Except in connection with a repayment pursuant to Section 2.3.2 or Section 2.5.2 hereof, if, during the continuance of an Event of Default, Borrower tenders payment of all or any part of the Debt, or if all or any portion of the Debt is recovered by Lender after such Event of Default, Borrower shall pay, in addition to the Debt, (i) the Yield Maintenance Default Premium if such tender or recovery occurs on or prior to the Permitted Prepayment Date, or the Yield Maintenance Premium if such tender or recovery occurs after the Permitted Prepayment Date and prior to the Permitted Par Prepayment Date, (ii) all accrued and unpaid interest on the amount of principal being prepaid through and including the date of prepayment, together with an amount equal to the interest that would have accrued at the Default Rate through and including the end of the Accrual Period in which such prepayment occurs, notwithstanding that such Accrual Period extends beyond the date of prepayment and (iii) all other sums due and payable under the Loan Documents.
1.1.4Making of Payments. Each payment by Borrower hereunder or under the Note shall be made in funds settled through the New York Clearing House Interbank Payments System or other funds immediately available to Lender by 4:00 p.m., New York City time, on or prior to the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower. Whenever any payment hereunder or under the Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the first Business Day preceding such scheduled due date.
1.1.5Application of Principal Prepayments. All voluntary and involuntary prepayments on the Debt shall be applied, to the extent thereof, to accrued but unpaid interest on the amount prepaid, to the Outstanding Principal Balance, and any other sums due and unpaid to the Lender in connection with the Loan, in such order. During the continuance of an Event of Default, any payment made on the Debt shall be applied to accrued but unpaid interest, late charges, accrued fees, the unpaid principal amount of the Debt, and any other sums due and unpaid to Lender in connection with the Loan, in such manner and order as Lender may elect in its sole and absolute discretion.
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Section 1.4Defeasance.
1.1.1Voluntary Defeasance.
(a)Provided no Event of Default shall then exist (other than an Event of Default that will be cured by such defeasance in accordance with Section 2.5.2 hereof, and provided that Lender has not applied for the appointment of a receiver, declared the entire unpaid Debt to be immediately due and payable or commenced a foreclosure action), Borrower shall have the right at any time after the Permitted Defeasance Date to voluntarily defease all of the Loan, or a portion thereof in connection with a release of one or more Individual Properties pursuant to Section 2.5.2 hereof, by and upon satisfaction of the following conditions (such event being a “Total Defeasance Event” with respect to the defeasance of the entire Loan and a “Partial Defeasance Event” with respect to a defeasance of only a portion of the Loan in connection with the release of an Individual Property pursuant to Section 2.5.2 hereof):
(i)Borrower shall provide not less than fifteen (15) (but not more than ninety (90)) days prior written notice to Lender specifying the Business Day on which the defeasance will occur (with respect to a Total Defeasance Event such date being the “Total Defeasance Date” and with respect to a Partial Defeasance Event, such date being the “Partial Defeasance Date”), provided, however, that Borrower shall have the right to cancel such notice by providing Lender with notice of cancellation not less than five (5) Business Days prior to the scheduled Total Defeasance Date or Partial Defeasance Date, as appliable, provided that Borrower shall pay all of Lender’s reasonable costs and expenses incurred as a result of such cancellation;
(ii)If the Defeasance Date is not a Payment Date, then Borrower shall pay to Lender the Monthly Debt Service Payment Amount due on the Payment Date next following the Defeasance Date (the “Post Defeasance Payment Date”);
(iii)Borrower shall pay to Lender all other sums, not including scheduled interest or principal payments, then due under the Note, this Agreement, the Security Instrument, and the other Loan Documents;
(iv)Borrower shall deliver to Lender the Defeasance Deposit applicable to the Defeasance Event;
(v)In connection with a Partial Defeasance Event, Borrower shall cooperate and execute all necessary documents to modify this Agreement and to amend and restate the Note and issue two (2) substitute notes (or, if there is more than one note prior to such Partial Defeasance Event, such number of notes required to split all such notes, and the splitting of such notes shall be pro rata), one (1) note having a principal balance equal to the defeased portion of the original Note and a maturity date equal to the Maturity Date (the “Defeased Note”), which Defeased Note shall set forth that portion of the Monthly Debt Service Payment Amount that shall be due thereunder on each Payment Date, and the other note having a principal balance equal to the undefeased portion of the Note (the “Undefeased Note”), which Undefeased Note shall set forth that portion of the Monthly Debt Service Payment Amount due thereunder on each Payment Date and which together with the Defeased Note(s) shall total the Monthly Debt Service Payment Amount due on each Payment Date. The Defeased Note and Undefeased Note shall otherwise have terms identical to the Note, except that a Defeased Note cannot be the subject of any further Defeasance Event;
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(vi)Borrower shall execute and deliver a security agreement, in a form and substance that would be reasonably satisfactory to a prudent institutional lender, creating a first priority lien on the Defeasance Deposit and the Defeasance Collateral purchased with the Defeasance Deposit in accordance with the provisions of this Section 2.4 (the “Security Agreement”);
(vii)Borrower shall deliver an opinion of counsel for Borrower in a form and substance that would be reasonably satisfactory to a prudent institutional lender stating, among other things, that Borrower has legally and validly transferred and assigned the Defeasance Collateral and all obligations, rights and duties under and to the Note (or the Defeased Note, as applicable) to the Successor Borrower, that Lender has a perfected first priority security interest in the Defeasance Deposit and the Defeasance Collateral delivered by Borrower and that any REMIC Trust formed pursuant to a Securitization will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code as a result of such Defeasance Event;
(viii)if a Securitization has occurred, (A) Borrower shall deliver confirmation in writing from the applicable Rating Agencies to the effect that such defeasance and release will not result in a downgrading or withdrawal or qualification of the respective ratings in effect for the Securities immediately prior to such Defeasance Event, and (B) if required by the applicable Rating Agencies, Borrower shall also deliver or cause to be delivered a non-consolidation opinion with respect to the Successor Borrower in form and substance reasonably satisfactory to Lender and satisfactory to the applicable Rating Agencies;
(ix)Borrower shall deliver an Officer’s Certificate certifying that the requirements set forth in this Section 2.4.1(a) have been satisfied;
(x)Borrower shall deliver a certificate of an Approved Accountant certifying that the Defeasance Collateral purchased with the Defeasance Deposit generates monthly amounts equal to or greater than the Scheduled Defeasance Payments;
(xi)Borrower shall deliver such other certificates, documents or instruments as Lender may reasonably request which are necessary to effectuate the Defeasance Event; and
(xii)Borrower shall pay all costs and expenses of Lender incurred in connection with the Defeasance Event, including, without limitation, (A) any costs and expenses associated with the release of the Lien of the Security Instrument as provided in Section 2.5 hereof, (B) Lender’s reasonable attorneys’ fees and expenses, (C) the costs and expenses of the Rating Agencies, (D) any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the transfer of the Note, or otherwise required to accomplish the defeasance and (E) the costs and expenses incurred by Lender, Servicer and any trustee, including attorneys’ fees. Notwithstanding the foregoing or anything to the contrary in the Loan Documents, the defeasance fee charged by the Servicer, exclusive of its actual out-of-pocket expenses, shall not exceed an aggregate amount of (1) $10,000 with respect to each Partial Defeasance Event or (2) $25,000 with respect to any Total Defeasance Event.
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(a)In no event shall Lender have any obligation to notify Borrower that the Permitted Defeasance Date has occurred with respect to the Loan, except that Lender shall notify Borrower whether or not the Permitted Defeasance Date has occurred with respect to the Loan after receiving Borrower’s notice described in Section 2.4(a)(i) hereof; provided, however, that the failure of Lender to so notify Borrower shall not impose any liability upon Lender or grant Borrower any right to defease the Loan on or prior to the occurrence of the Permitted Defeasance Date.
(b)In connection with each Defeasance Event, Borrower retains the right to direct the purchase of U.S. Obligations (the “Defeasance Collateral”), subject to the prior written consent of Lender, such consent not to be unreasonably withheld, conditioned or delayed, which provide payments on or prior to, but as close as possible to, all successive scheduled Payment Dates after the Post Defeasance Payment Date upon which interest and (if applicable) principal payments are required under this Agreement and the Note or the Defeased Note (as applicable), and in amounts equal to or more than the scheduled payments due on such Payment Dates under this Agreement and the Note or the Defeased Note (as applicable) (including, without limitation, scheduled payments of principal (if any), interest, servicing fees (if any), and any other amounts due under the Loan Documents on such Payment Dates) and assuming the Note or the Defeased Note (as applicable) is repaid in full on the Permitted Par Prepayment Date (the “Scheduled Defeasance Payments”). Each of the U.S. Obligations that are part of the Defeasance Collateral shall be duly endorsed by the holder thereof as directed by Lender or accompanied by a written instrument of transfer in form and substance that would be satisfactory to a prudent institutional lender (including, without limitation, such instruments as may be required by the depository institution holding such securities or by the issuer thereof, as the case may be, to effectuate book entry transfers and pledges through the book entry facilities of such institution) in order to perfect upon the delivery of the Defeasance Collateral a first priority security interest therein in favor of Lender in conformity with all applicable state and federal laws governing the granting of such security interests. Borrower, pursuant to the Security Agreement or other appropriate document, shall authorize and direct that the payments received from the Defeasance Collateral may be made directly to the Cash Management Account (unless otherwise directed by Lender) and applied to satisfy the obligations of Borrower under the Note or the Defeased Note (as applicable). Any portion of the Defeasance Deposit in excess of the amount necessary to purchase the Defeasance Collateral required by this Section 2.4 and satisfy Borrower’s other obligations under this Section 2.4 and Section 2.5 hereof shall be remitted to Borrower.
1.1.2Successor Borrower. In connection with any Defeasance Event, Borrower shall establish or designate a successor entity (the “Successor Borrower”) which shall be a single purpose bankruptcy remote entity (meeting the requirements of Section 4.1.30 below, as applicable) and Borrower shall transfer and assign all obligations, rights and duties under and to the Note or the Defeased Note (as applicable) together with the pledged Defeasance Collateral to such Successor Borrower. Such Successor Borrower shall assume the obligations under the Note or the Defeased Note (as applicable) and the Security Agreement and Borrower shall be relieved of its obligations under such documents and the other Loan Documents, except with respect to those obligations which are expressly stated to survive. Borrower shall pay $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note or the Defeased Note (as applicable) and the Security Agreement. Notwithstanding anything in this Agreement to the contrary, no other assumption fee shall be payable upon a transfer of the Note or the Defeased Note (as applicable) in accordance with this Section 2.4.2, but Borrower shall pay all costs and expenses incurred by Lender, including Lender’s reasonable attorneys’ fees and expenses, actually incurred in connection therewith.
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Section 1.5Release of Property. Except as set forth in Section 2.4 hereof and this Section 2.5 (and without limiting the terms of the next sentence), no repayment, prepayment or defeasance of all or any portion of the Loan shall cause, give rise to a right to require, or otherwise result in, the release of the Lien of the Security Instrument on the Property. Lender shall, upon the written request and at the expense of Borrower, upon payment in full of the Debt and all other amounts due and payable under the Loan Documents in accordance with the terms and provisions of the Note and this Agreement, release the Lien of the Security Instrument.
1.1.1Release of All Property.
(a)After the Permitted Defeasance Date, if Borrower has elected to defease the entire Loan, and after the Permitted Prepayment Date, if Borrower has elected to prepay the entire Loan, and all the applicable requirements of Section 2.4 hereof and this Section 2.5 have been satisfied, all of the Property shall be released from the Lien of the respective Security Instruments.
(b)In connection with the release of the Security Instruments, Borrower shall submit to Lender, not less than ten (10) Business Days prior to the Defeasance Date or prepayment date (as applicable), a release of Lien (and related Loan Documents) for each Individual Property for execution by Lender. Each such release shall be in a form appropriate in the jurisdiction in which the Individual Property is located and that would be satisfactory to a prudent lender and contains standard provisions, if any, protecting the rights of the releasing lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release. Borrower shall reimburse Lender and Servicer for any reasonable out-of-pocket costs and expenses Lender and Servicer incur arising from such release (including reasonable out-of-pocket attorneys’ fees and expenses) and Borrower shall pay, in connection with such release, all recording charges, filing fees, taxes or other reasonable expenses payable in connection therewith.
(c)Lender shall, upon the written request and at the expense of Borrower, upon payment in full of the Debt (or upon the occurrence of a Total Defeasance Event) in accordance with the terms and provisions of the Note and this Agreement, in lieu of applying monies as a full repayment of the Debt, and in lieu of releasing the Lien of the Security Instrument and the other Loan Documents, in consideration of an amount equal to that necessary for a full repayment of the Debt in accordance with the terms and provisions of the Note and this Agreement, endorse the Note, and assign the Security Instrument and the other Loan Documents (if the same is so requested), without representation or warranty by or recourse to Lender (other than representations relating to due execution and authority), to a lender designated by Borrower, and Lender shall execute and deliver to Borrower or such lender such instruments and other documents as shall be reasonably necessary, in compliance with all applicable laws, to evidence any such assignment of the Security Instrument and the Loan (including, if applicable, any of the note splitter agreements, Assigned Loan Documents and other documents referenced in Section 2.5.2(n) hereof). Borrower shall reimburse Lender and Servicer for any reasonable out of pocket costs and expenses Lender and Servicer incur arising from such assignment (including reasonable out-of-pocket attorneys’ fees and expenses) and Borrower shall pay, in connection with such assignment all recording charges, filing fees, taxes or other reasonable expenses in connection with therewith.
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1.1.2Release of Individual Property. No release of an Individual Property shall occur on or prior to the Permitted Prepayment Date (or prior to the date that is ninety (90) days following the Permitted Prepayment Date, if Lender delivers a written notice to Borrower on or prior to the Permitted Prepayment Date stating that a Securitization is imminently pending). Thereafter, Borrower shall have the right at any time to obtain the release (the “Partial Release”) of any one or more of the Individual Properties (individually and collectively, as the context requires, the “Released Property”) from the lien of the applicable Security Instrument thereon (and related Loan Documents) and the release of Borrower’s obligations under the Loan Documents with respect to such Released Property (other than those expressly stated to survive), upon the satisfaction (or written waiver by Lender or Servicer) of each of the following conditions precedent:
(a)Borrower shall provide Lender with fifteen (15) days (or a shorter period of time if permitted by Lender in its sole discretion) prior written notice of the proposed Partial Release (the date of Lender’s receipt of such notice shall be referred to herein as a “Partial Release Notice Date,” and the proposed date of such Partial Release the “Partial Release Date”).
(b)Any and all sums due and payable to Lender under the Loan Documents on each of the Partial Release Notice Date and the date of consummation of the Partial Release, shall be fully paid and no Event of Default (other than an Event of Default which applies only to the Released Property and Lender has determined in its reasonable discretion that such Partial Release will result in a cure of such Event of Default) shall be continuing as of the Partial Release Notice Date or the date of consummation of the Partial Release.
(c)Borrower shall have paid or reimbursed Lender for all out-of-pocket expenses reasonably incurred by Lender in connection with the Partial Release (including without limitation, reasonable out-of-pocket attorneys’ fees, recording costs, Rating Agency fees and the current fee then being assessed by Servicer to all similarly situated borrowers to effect such release).
(d)Borrower shall submit to Lender, not less than ten (10) days prior to the date of such Partial Release, a release of lien (and related Loan Documents) for the Released Property for execution by Lender. Such release shall be in a form appropriate in each jurisdiction in which the Released Property is located and shall contain standard provisions, if any, protecting the rights of Lender. In addition, Borrower shall provide all other documentation as may reasonably be required to satisfy the Prudent Lender Standard in connection with such release, together with an Officer’s Certificate certifying that such documentation (i) is in compliance with all applicable Legal Requirements, (ii) will effect such release in accordance with the terms of this Agreement and (iii) will not impair or otherwise adversely affect the Liens, security interests and other rights of Lender under the Loan Documents not being released (or as to the parties to the Loan Documents and Individual Properties subject to the Loan Documents not being released).
(e)To the extent there is one Clearing Account in the name of one Borrower utilized for all of the Property (rather than a separate Clearing Account for each Individual Property), and such Borrower is released from the obligations of the Loan Documents pursuant to this Section 2.5.2, then the name of the Clearing Account shall be changed to the name of a different Borrower.
(f)Subsequent to such release, each remaining Borrower shall continue to be a Special Purpose Entity pursuant to, and in accordance with, Section 4.1.30 hereof.
(g)[Intentionally omitted].
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(h)Borrower shall provide updated title reports for the remaining Individual Properties confirming no change in the priority of each of the unreleased Security Instruments on such remaining Individual Properties.
(i)If required under the operative documents with respect to any Securitization, Lender shall have received evidence in writing from any applicable Rating Agency to the effect that the proposed Partial Release will not result in a qualification, reduction, downgrade or withdrawal of any rating initially assigned or to be assigned in such Securitization, or a waiver from any such rating agency stating that it has declined to review the Partial Release.
(j)If a Securitization has occurred, the Partial Release shall be permitted under REMIC Requirements in effect as of the consummation of the Partial Release, and, if reasonably required by Lender to confirm the same, Borrower shall (i) deliver to Lender opinions of counsel satisfying the Prudent Lender Standard and acceptable to the Rating Agencies (issued by counsel satisfying the Prudent Lender Standard and acceptable to the Rating Agencies) (1) stating that the Partial Release will not cause (A) the Loan to cease to be a “qualified mortgage” within the meaning of Section 860G of the Code, either under the provisions of Treasury Regulation Sections 1.860G-2(a)(8) or 1.860G-2(b) (as such regulations may be amended or superseded from time to time) or under any other provision of the Code or otherwise, and (B) the failure of any REMIC Trust or any other entity that holds the Note to maintain its tax status and (2) with respect to such other matters as may be required by Lender and (ii) pay all of Lender’s reasonable out-of-pocket costs and expenses and the costs and expenses of the Rating Agencies in connection with the Partial Release, including, without limitation, reasonable out-of-pocket costs counsel fees.
(k)[Intentionally omitted].
(l)As of the date of consummation of the Partial Release, after giving effect to the release of the lien of the Security Instrument(s) encumbering the applicable Released Property: (i) if seventy percent (70%) or more of the aggregate rentable square footage of such Released Property is occupied by Tenants as of the Partial Release Date, then the Debt Yield with respect to the remaining Individual Properties (based upon the trailing twelve (12) month period) shall be no less than the greater of (A) the Debt Yield as of the Closing Date and (B) the Debt Yield immediately prior to the consummation of the Partial Release; or (ii) if less than seventy percent (70%) of the aggregate rentable square footage of such Released Property is occupied by Tenants as of the Partial Release Date, then the Debt Yield with respect to the remaining Individual Properties (based upon the trailing twelve (12) month period) shall be no less than the Debt Yield immediately prior to the consummation of the Partial Release; provided, however, that Borrower will have the right to satisfy the foregoing applicable test in this Section 2.5.2(l) by prepaying, in accordance with the requirements of Section 2.3.1 hereof and in addition to the Adjusted Release Amount payable pursuant to Section 2.5.2(m) below, an additional portion of the outstanding principal balance of the Loan in an amount sufficient, when applied to the outstanding principal balance of the Loan, to cause such applicable Debt Yield test to be satisfied.
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(m)Borrower shall either, (i) provided the Partial Release Date is after the Permitted Defeasance Date, have satisfied all of the requirements of Section 2.4 (or Lender shall have waived any such requirements in writing) hereof for a Partial Defeasance Event and partially defease the Loan in an amount equal to or greater than the Adjusted Release Amount for the applicable Individual Property, and such defeasance shall be deemed a voluntary defeasance for all purposes hereunder, or (ii) have paid to Lender the Adjusted Release Amount for the applicable Individual Property together with the Individual Property Release Yield Maintenance Premium and all other amounts payable in connection with such voluntary prepayment due hereunder, including without limitation that if the Adjusted Release Amount is not paid on a regularly scheduled Payment Date, Borrower shall pay interest on the entire principal balance of the Loan for the full Accrual Period during which payment of the Adjusted Release Amount occurs. Any portion of the Adjusted Release Amount applied to the principal amount of the Debt shall be applied first, to reduce the Allocated Loan Amount attributable to the Released Property to zero and second, pro rata to reduce the Allocated Loan Amounts of each of the other remaining Individual Properties. Notwithstanding the foregoing, in the event that Lender has applied the Net Proceeds from a Casualty or Condemnation of an Individual Property to the repayment of the Debt and a Partial Release of such Individual Property is thereafter completed, (1) the Adjusted Release Amount for such Individual Property shall be reduced by the amount of such Net Proceeds so applied, and (2) no Yield Maintenance Premium or similar sum shall be due in connection therewith.
(n)If, in connection with a Partial Release effectuated by a partial prepayment (and not a Partial Defeasance Event), Borrower advises Lender that it desires Lender to assign the applicable Security Instrument and other Loan Documents (collectively, the “Assigned Loan Documents”) encumbering the Released Properties that are the subject of a Partial Release (collectively, the “Assigned Properties”) to a Person designated by Borrower (the “Partial Assignee Lender”), then Lender shall (a) cooperate in all reasonable respects with Borrower (i) to split and sever each promissory note constituting the Note into two Notes, with one such Note (each, a “Remaining Note”) continuing to evidence the portion of the Loan secured by the Individual Properties that are not Assigned Properties (collectively, the “Remaining Properties”), and the other such Note (each, an “Assigned Note”) securing the portion of the Loan to be secured by the Assigned Properties, and (ii) to assign the Assigned Note and the Assigned Loan Documents to the Partial Assignee Lender, with assignments of the recorded Assigned Loan Documents in recordable form and otherwise in form and substance reasonably acceptable to Lender and the Partial Assignee Lender, (b) deliver to the Partial Assignee Lender or as directed by Borrower the originally executed Assigned Note, (c) execute and deliver to the Partial Assignee Lender or as directed by Borrower, (i) an allonge with respect to the Assigned Note, (ii) executed assignments of the recorded Assigned Loan Documents (and the original applicable Assigned Loan Documents or a certified copy of record to the assignee thereof), and (iii) such other instruments of conveyance, assignment, termination, severance and release (including appropriate UCC-3 termination statements and terminations of rent direction notices to Tenants and other third parties), all in recordable form as may reasonably be requested by Borrower to evidence such assignment; provided, however, that such assignment shall be made without representation, warranty or covenant by Lender (other than that Lender is the lawful owner of such Assigned Note and the Assigned Loan Documents, and Lender has the power to assign the same and the outstanding principal balance thereof). In connection with any assignment effected in accordance with this paragraph, Borrower shall deliver such documents and agreements as may be reasonably required by Lender.
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(o)Borrower shall deliver to Lender such additional information and documentation with respect to such Partial Release as Lender may reasonably request and shall deliver or take, as the case may be, any other documents, items or actions reasonably requested by Lender in connection with such release; provided, however, no such documents or actions shall increase Borrower’s liability or decrease Borrower’s rights under the Loan Documents, other than to a de minimis extent.
(p)Notwithstanding the foregoing provisions of this Section 2.5.2, if the Loan is included in a REMIC Trust and the Loan to Value Ratio (as determined by Lender in its sole discretion using any commercially reasonable method permitted to a REMIC Trust and excluding the value of personal property and going concern value) exceeds 125% immediately after the release of the applicable Individual Property, no release will be permitted unless the principal balance of the Loan is paid down by the greater of (i) the Adjusted Release Amount and (ii) an amount such that the Loan to Value Ratio (as so determined by Lender) after the release of the applicable Individual Property is not greater than 125% immediately after the release of the applicable Individual Property, unless Lender receives an opinion of counsel that, if this clause (ii) is not followed, the Securitization will not fail to maintain its status as a REMIC Trust as a result of the release of the applicable Individual Property.
Notwithstanding anything to the contrary contained in this Section 2.5.2, the parties hereto hereby acknowledge and agree that after the Securitization of the Loan (or any portion thereof or interest therein), with respect to any Lender approval or similar discretionary rights over any matters contained in this Section 2.5.2, such rights shall be construed such that Lender shall only be permitted to withhold its consent or approval with respect to any such matters if the same fails to meet the Prudent Lender Standard.
Section 1.6Clearing Account/Cash Management.
1.1.1Clearing Account.
(a)During the term of the Loan, Borrower shall establish and maintain an Eligible Account (the “Clearing Account”) with Clearing Bank for the benefit of Lender, which Clearing Account shall be under the sole dominion and control of Lender. Subject to Section 2.5.2(e), the Clearing Account shall be entitled in the name of AHRC CPCLPIN01, LLC, for the benefit of Lender. Borrower hereby grants to Lender a first-priority security interest in the Clearing Account and all deposits at any time contained therein and the proceeds thereof and shall take all actions reasonably necessary to maintain in favor of Lender a perfected first priority security interest in the Clearing Account, including (at Lender’s request) filing UCC-1 Financing Statements and continuations thereof. Lender and Servicer shall have the sole right to make withdrawals from the Clearing Account. All actual, reasonable costs and expenses for establishing and maintaining the Clearing Account shall be paid by Borrower. All monies on deposit in the Clearing Account shall be deemed additional security for the Debt. The Clearing Account Agreement and Clearing Account shall remain in effect until the Loan has been repaid in full.
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(b)Borrower shall, or shall cause Manager to, (i) within ten (10) days of the Closing Date with respect to Leases in existence on the date hereof and (ii) simultaneously with the execution of any Lease entered into after the date hereof, deliver Tenant Direction Letters to all Tenants, directing such Tenants to deliver all Rents payable under their respective Leases directly to the Clearing Account. Without the prior written consent of Lender (except in connection with the delivery to Tenants of a Released Property following satisfaction of the conditions set forth in Section 2.5.2 with respect to such Released Property), neither Borrower nor Manager shall (i) terminate, amend, revoke or modify any Tenant Direction Letter in any manner or (ii) direct or cause any Tenant to pay any amount in any manner other than as provided in the Tenant Direction Letter. Borrower shall, and shall cause Manager to, deposit all amounts received by Borrower or Manager constituting Rents into the Clearing Account within one (1) Business Day after receipt thereof. Until so deposited, all Rents received by Borrower or Manager shall be held in trust for the benefit of Lender and shall not be commingled with any other funds or property of Borrower or Manager. Notwithstanding the foregoing terms of this Section 2.6.1 or anything to the contrary in the other Loan Documents (including the Cash Management Agreement), and without limiting Borrower’s obligation to cause all amounts received by Borrower or Manager constituting Rents to be deposited into the Clearing Account within one (1) Business Day after receipt thereof, Borrower shall not be required to send Tenant Direction Letters to the Tenants that use VersaPay to pay their Rent, provided that Borrower shall (using VersaPay) direct all such Rent to the Clearing Account.
(c)The Clearing Account Agreement shall provide that Clearing Bank shall transfer on each Business Day all amounts on deposit in the Clearing Account at the direction of Borrower (including a transfer to Borrower) unless a Cash Sweep Period is in effect, in which case such funds shall be transferred to the Cash Management Account.
(d)During the continuance of an Event of Default or any Bankruptcy Action of Borrower, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in the Clearing Account to the payment of the Debt in any order in its discretion. Upon cessation (or waiver) of such Event of Default or Bankruptcy Action, all such funds (to the extent same have not been applied to the Debt) shall be returned to the Clearing Account.
(e)The Clearing Account shall not be commingled with other monies held by Borrower, Manager or Clearing Bank.
(f)Borrower shall not further pledge, assign or grant any security interest in the Clearing Account or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto.
(g)Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, and demands, and actual out-of-pocket liabilities, losses, damages (excluding, consequential, punitive, special, exemplary and indirect damages, except to the extent such damages are actually paid or payable to a third-party), obligations and reasonable, actual costs and expenses (including litigation costs and reasonable out-of-pocket attorneys’ fees and expenses) arising from or in any way connected with the Clearing Account or the Clearing Account Agreement (unless arising from the gross negligence, fraud or willful misconduct of Lender).
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(h)Upon (i) Clearing Bank ceasing to be an Eligible Institution, (ii) the Clearing Account ceasing to be an Eligible Account, (iii) any resignation by Clearing Bank or termination of the Clearing Account Agreement in accordance with the terms and conditions thereof or (iv) the occurrence and continuance of an Event of Default, Borrower shall, within fifteen (15) days of Lender’s written request, (A) terminate the existing Clearing Account Agreement, (B) appoint a new Clearing Bank (which such Clearing Bank shall (I) be an Eligible Institution, (II) other than during the continuance of an Event of Default, be selected by Borrower and approved by Lender and (III) during the continuance of an Event of Default, be selected by Lender), (C) cause such Clearing Bank to open a new Clearing Account (which such account shall be an Eligible Account) and enter into a new Clearing Account Agreement with Lender on substantially the same terms and conditions as the previous Clearing Account Agreement and (D) send any notices required pursuant to the terms hereof relating to such new Clearing Account Agreement and Clearing Account and new Tenant Direction Letters.
1.1.2Cash Management Account.
(a)Upon the occurrence of a Cash Sweep Event, a segregated Eligible Account (the “Cash Management Account”) shall be established and maintained with Agent in Borrower’s name for the benefit of Lender, which Cash Management Account shall be under the sole dominion and control of Lender. Borrower hereby grants to Lender a first priority security interest in the Cash Management Account and all deposits at any time contained therein and the proceeds thereof and shall take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Cash Management Account, including, at Lender’s request, filing UCC-1 Financing Statements and continuations thereof. Lender and Servicer shall have the sole right to make withdrawals from the Cash Management Account and all reasonable costs and expenses for establishing and maintaining the Cash Management Account shall be paid by Borrower.
(b)The insufficiency of funds on deposit in the Cash Management Account shall not relieve Borrower from the obligation to make any payments, as and when due pursuant to this Agreement and the other Loan Documents, and such obligations shall be separate and independent, and not conditioned on any event or circumstance whatsoever.
(c)All funds on deposit in the Cash Management Account during the continuance of an Event of Default or any Bankruptcy Action of Borrower may be applied by Lender in such order and priority as Lender shall determine. Upon cessation (or waiver) of such Event of Default or Bankruptcy Action, all such funds (to the extent same have not been applied to the Debt) shall be returned to the Clearing Account.
(d)Borrower hereby agrees that Lender may, at no cost or expense of Borrower, modify the Cash Management Agreement for the sole purpose of establishing additional sub-accounts in connection with any payments otherwise required under this Agreement and the other Loan Documents and Lender shall provide notice thereof to Borrower.
1.1.3Payments Received under the Cash Management Agreement. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, and provided no Event of Default has occurred and is continuing, during a Cash Sweep Period, Borrower’s obligations with respect to the payment of the Monthly Debt Service Payment Amount and amounts required to be deposited into the Reserve Funds, if any, shall be deemed satisfied to the extent sufficient amounts are deposited in the Cash Management Account to satisfy such obligations pursuant to this Agreement on the dates each such payment is required, regardless of whether any of such amounts are so applied by Lender.
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ARTICLE III. INTENTIONALLY OMITTED
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
Section 1.1Borrower Representations. Borrower (as to itself and not as to all Borrowers, as the context may require) represents and warrants as of the date hereof that:
1.1.1Organization. Each Borrower has been duly organized and is validly existing and in good standing with requisite power and authority to own the applicable Individual Property and to transact the businesses in which it is now engaged. Borrower is duly qualified to do business and is in good standing in the jurisdiction in which the applicable Individual Property is located and each other jurisdiction where it is required to be so qualified in connection with its businesses and operations. Borrower possesses all material rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own the applicable Individual Property and activities incidental thereto and to transact the businesses in which it is now engaged, and the sole business of Borrower is the ownership, management and operation of the applicable Individual Property. As of the Closing Date, direct and indirect ownership interests in Borrower are as set forth on the organizational chart attached hereto as Schedule III. The direct and indirect ownership interests in Borrower or the Property do not include any Prohibited Entity/Ownership Structure.
1.1.2Proceedings. Borrower has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents. This Agreement and such other Loan Documents have been duly executed and delivered by or on behalf of Borrower and constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms, except as such enforcement may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization or other similar laws affecting the enforcement of creditors’ rights generally, and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).
1.1.3No Conflicts. The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement or other agreement or instrument to which Borrower is a party or by which any of the Property or Borrower’s assets is subject, nor, to the best of Borrower’s knowledge, will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower or any of Borrower’s properties or assets, and, to the best of Borrower’s knowledge, any consent, approval, authorization, order, registration or qualification of or with any court or any such Governmental Authority required for the execution, delivery and performance by Borrower of this Agreement or any other Loan Documents has been obtained and is in full force and effect.
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1.1.4Litigation. There are no actions, suits or proceedings at law or in equity, arbitrations, or governmental investigations by or before any Governmental Authority or other agency now pending, filed, or, to Borrower’s knowledge, threatened in writing against or affecting Borrower, Guarantor or the Property or any portion thereof, which would reasonably be expected to materially and adversely affect (a) title to the Property or any portion thereof; (b) the validity or enforceability of the Security Instruments; (c) Borrower’s ability to perform under the Loan; (d) Guarantor’s ability to perform under the Guaranty; (e) the use, operation or value of the Property or any portion thereof; (f) the principal benefit of the security intended to be provided by the Loan Documents; (g) the current ability of the Property to generate Net Cash Flow sufficient to service the Loan; or (h) the current principal use of the Property or any portion thereof.
1.1.5Agreements. Other than any exceptions reflected on the Title Insurance Policy, Borrower is not a party to any agreement or instrument or subject to any restriction which would reasonably be expected to materially and adversely affect Borrower or the Property (or any portion thereof), or Borrower’s business, properties or assets, operations or condition, financial or otherwise. Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or the Property (or any portion thereof) is bound. Borrower has no Indebtedness under any indenture, mortgage, deed of trust, loan agreement or other written agreement or instrument to which Borrower is a party or by which Borrower or the Property (or any portion thereof) is otherwise bound, other than (a) obligations incurred in the ordinary course of Borrower’s business or the operation of the Property as permitted pursuant to clause (xxiii) of the definition of “Special Purpose Entity” set forth in Section 1.1 hereof and (b) obligations under the Loan Documents.
1.1.6Title. Borrower has good and insurable fee simple title to the real property comprising part of the Property and good title to the balance of the Property, free and clear of all Liens whatsoever except the Permitted Encumbrances, such other Liens as may be expressly permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. The Permitted Encumbrances in the aggregate do not materially and adversely affect the value, operation or use of the Property (or any portion thereof) as currently used or Borrower’s ability to repay the Loan. To the best of Borrower’s knowledge, each Security Instrument, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first priority lien on the applicable Individual Property, subject only to Permitted Encumbrances and the Liens created by the Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. To the best of Borrower’s knowledge, are no claims for payment for work, labor or materials affecting the Property which are or may become a Lien prior to, or of equal priority with, the Liens created by the Loan Documents.
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1.1.7Solvency. Borrower has (a) not entered into this transaction or executed the Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under such Loan Documents. Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities, including subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of Borrower’s assets is and will, immediately following the making of the Loan, be greater than Borrower’s probable liabilities, including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured. Borrower’s assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower). No petition in bankruptcy has been filed against Borrower or any Person Controlling Borrower in the last seven (7) years, and neither Borrower nor any Person Controlling Borrower in the last seven (7) years has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors. Neither Borrower nor any of its Persons Controlling Borrower are contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of Borrower’s assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or such constituent Persons.
1.1.8Full and Accurate Disclosure. No statement of fact made by Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no material fact presently known to Borrower which has not been disclosed to Lender which materially and adversely affects, or, based on Borrower’s reasonable determination, would reasonably be expected to materially and adversely affect, the Property or the business, operations or condition (financial or otherwise) of Borrower (provided that the foregoing is meant to relate specifically to Borrower and the Property and not, by way of example only, to the economy of the United States or the location of the Property or the medical profession).
1.1.9No Plan Assets. Borrower does not sponsor, is not obligated to contribute to, and is not itself an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA or Section 4975 of the Code, and none of the assets of Borrower constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA. In addition, (a) Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower are not subject to any state or other statute, regulation or other restriction regulating investments of, or fiduciary obligations with respect to, governmental plans within the meaning of Section 3(32) of ERISA which is similar to the provisions of Section 406 of ERISA or Section 4975 of the Code which, as of the date hereof, prohibit or otherwise restrict the transactions contemplated by this Agreement, including the exercise by Lender of any of its rights under the Loan Documents.
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1.1.10Compliance. Except as disclosed in the separate zoning report for each Individual Property delivered to Lender in connection with the closing of the Loan, to the best of Borrower’s knowledge, Borrower and each Individual Property and the use thereof comply in all material respects with all applicable Legal Requirements, including building and zoning ordinances and codes. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority. There has not been committed by Borrower or, to Borrower’s knowledge, any other Person in occupancy of or involved with the operation or use of the Property any act or omission affording the federal government or any other Governmental Authority the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents. Except as disclosed in the separate property condition report for each Individual Property delivered to Lender in connection with the closing of the Loan, the Improvements at each Individual Property were in material compliance with applicable law on the Closing Date.
1.1.11Financial Information. All financial data, including the statements of cash flow and income and operating expense, that have been delivered to Lender in connection with the Loan (a) are true, complete and correct in all material respects, (b) except for financial data with respect to dates prior to the date Borrower acquired title to the applicable Individual Property, accurately represent the financial condition of Borrower and the Property, as applicable, as of the date of such reports, and (c) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein. Except for Permitted Encumbrances, Borrower does not have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and reasonably likely to have a material adverse effect on the Property (or any portion thereof) or the current operation thereof, except as referred to or reflected in said financial statements. Since the date of such financial statements, there has been no material adverse change in the financial condition, operations or business of Borrower from that set forth in said financial statements.
1.1.12Condemnation. Except as disclosed in the separate zoning report, title report or survey for each Individual Property delivered to Lender in connection with the closing of the Loan, no Condemnation or other similar proceeding has been commenced or, to Borrower’s knowledge, is threatened with respect to all or any portion of the Property or for the relocation of roadways providing access to any Individual Property.
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1.1.13Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents. None of Borrower, Guarantor, and/or (to Borrower’s knowledge with respect to shareholders of the REIT) any Constituent Member of the foregoing is affiliated with or is an insider with respect to Lender (or its affiliates) in any manner that implicates either Regulation W or Regulation O of the Federal Reserve Act (as each of the same may be amended, modified, supplemented, and/or replaced from time to time). To the best of Borrower’s knowledge, neither the Loan nor any transaction contemplated herein and/or in the other Loan Documents is in violation of Regulation W and/or Regulation O. Borrower shall, from time to time, provide Lender with such information relating to Borrower, Guarantor, and/or (to the extent Borrower has access to such information) any Constituent Member thereof as Lender shall deem necessary (in Lender’s sole and absolute discretion) in determining Lender’s ongoing compliance with Regulation W and Regulation O of the Federal Reserve Act (as each of the same may be amended, modified, supplemented, and/or replaced from time to time). Notwithstanding anything to contrary contained herein, neither Borrower nor Guarantor shall take any action that will cause Lender and/or the Loan to violate Regulation W and/or Regulation O.
1.1.14Utilities and Public Access. To the best of Borrower’s knowledge and except as otherwise disclosed in the Title Insurance Policy and/or the Survey, each Individual Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service the applicable Individual Property for its intended uses. To the best of Borrower’s knowledge, all public utilities necessary or convenient to the full use and enjoyment of each Individual Property are located either in the public right of way abutting the applicable Individual Property (which are connected so as to serve the applicable Individual Property without passing over other property) or in recorded easements serving and appurtenant to the applicable Individual Property. To the best of Borrower’s knowledge, all roads necessary for the use of each Individual Property for its current purposes have been completed and dedicated to public use and accepted by all Governmental Authorities.
1.1.15Not a Foreign Person. Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code.
1.1.16Separate Lots. Each Individual Property is comprised of one (1) or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of the applicable Individual Property.
1.1.17Assessments. To the best of Borrower’s knowledge and except as otherwise disclosed in the Title Insurance Policy and/or the Survey, there are no pending or, to Borrower’s knowledge, proposed special or other assessments for public improvements, PACE Liens or otherwise affecting the Property of any portion thereof, nor are there any contemplated improvements to the Property (or any portion thereof) that would reasonably be expected to result in such special or other assessments.
1.1.18Enforceability. The Loan Documents are not subject to any right of rescission, set off, counterclaim or defense by Borrower or Guarantor, and neither Borrower nor Guarantor has asserted any right of rescission, set off, counterclaim or defense with respect thereto.
1.1.19No Prior Assignment. There are no prior assignments of the Leases or any portion of the Rents due and payable or to become due and payable which are presently outstanding.
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1.1.20Insurance. No material claims have been made or are currently pending, outstanding or otherwise remain unsatisfied with respect to the Properties under any of the Policies, and neither Borrower nor any other Person, has done, by act or omission, anything which would impair the coverage of any of the Policies.
1.1.21Use of Property. Except for use of (i) a portion of the Individual Property located in Merrillville, IN as a physical therapy office, and (ii) portions of the Individual Property located in Valparaiso, IN as a restaurant and learning center, in each case, pursuant to the subleases affecting such Individual Property, each Individual Property is used exclusively for medical office purposes and other appurtenant and related uses.
1.1.22Certificate of Occupancy; Licenses. To the best of Borrower’s knowledge, and except as shown on the Survey or the zoning reports delivered to Lender in connection with the closing of the Loan, all certifications, permits, franchises, licenses, consents, authorizations, and approvals, including, certificates of completion and occupancy permits, required for the legal use, occupancy and operation of each Individual Property have been obtained and are in full force and effect. The use being made of each Individual Property is in conformity with the certificate of occupancy issued for the applicable Individual Property.
1.1.23Flood Zone. To the best of Borrower’s knowledge, except as shown on the Survey, none of the Improvements on the Property (or any portion thereof) are located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards, or, if so located, the flood insurance required pursuant to Section 6.1(a) is in full force and effect with respect to the applicable Individual Property.
1.1.24Physical Condition. Except as disclosed in the separate property condition report for each Individual Property delivered to Lender in connection with the closing of the Loan, each Individual Property, including all buildings, Improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, is in good condition, order and repair in all material respects; there exists no structural or other material defects or damages in the Property (or any portion thereof), whether latent or otherwise, and Borrower has not received notice from any insurance company or bonding company of any defects or inadequacies in the Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.
1.1.25Boundaries. To the best of Borrower’s knowledge and except as shown on the Survey, all of the Improvements which constitute Property (or any portion thereof) lie wholly within the boundaries and building restriction lines of the applicable Individual Property, and no improvements on adjoining properties encroach upon the Property or any portion thereof, and no easements or other encumbrances upon the Property (or any portion thereof) encroach upon any of the Improvements, so as to materially and adversely affect the value or marketability of the Property (or any portion thereof) except those which are insured against by the applicable Title Insurance Policy.
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1.1.26Leases. The Property is not subject to any leases other than the Leases described in the rent roll attached hereto as Schedule I and made a part hereof, which rent roll is true, complete and accurate in all respects as of the Closing Date. Borrower is the owner and lessor (or sublessor) of landlord’s interest in the Leases. Except with respect to the Permitted Encumbrances, no Person has any possessory interest in the Property (or any portion thereof) or right to occupy the same except under and pursuant to the provisions of the Leases. The current Leases are in full force and effect and, except as set forth on the rent roll attached hereto as Schedule I or in any tenant estoppel certificate delivered to Lender, there are no uncured defaults thereunder by Borrower nor, to the best of Borrower’s knowledge, any other party thereunder and, to the best of Borrower’s knowledge, there are no conditions that, with the passage of time or the giving of notice, or both, would constitute defaults thereunder. Except as set forth in any tenant estoppel certificate delivered to Lender, or as otherwise disclosed to Lender in the Lease or by Borrower, no Rent has been paid more than one (1) month in advance of its due date (other than in connection with the first month’s Rent under a new Lease). All security deposits are held by Borrower in accordance with applicable law. Except as set forth in any tenant estoppel certificate delivered to Lender, or as otherwise disclosed to Lender in the Lease or by Borrower, all work to be performed by Borrower under each Lease as of the Closing Date has been performed as required and has been accepted by the applicable Tenant, and any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by Borrower to any Tenant as of the Closing Date has already been received by (or credited to) such Tenant. There has been no prior sale, transfer or assignment, hypothecation or pledge of any Lease or of the Rents received therein, in each case, which is outstanding. To Borrower’s knowledge, no Tenant listed on Schedule I has assigned its Lease or except as set forth in any tenant estoppel certificate delivered to Lender, or as otherwise disclosed to Lender in the Lease or by Borrower, sublet all or any portion of the premises demised thereby, no such Tenant holds its leased premises under assignment. Except as disclosed to Lender or except as set forth in a Lease or in any tenant estoppel certificate delivered to Lender, no Tenant under any Lease has a right or option pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the building of which the leased premises are a part. Except as disclosed to Lender or as set forth in the Leases or except as set forth in any tenant estoppel certificate delivered to Lender, no Tenant under any Lease has any right or option for additional space in the Improvements. Except as disclosed to Lender in writing or as set forth in the Leases or in any tenant estoppel certificate delivered to Lender, no tenant has (i) asserted any defense or otherwise sought or given notice (whether written or oral) that it intends to seek any relief or concessions with respect to the payment of rent or other sums or the performance of any obligations under its Lease or (ii) made any other bona fide request for or otherwise given written notice that it intends to seek any amendment, waiver, deferral, forbearance or other modification of any term or provision of its Lease, in each case (A) pursuant to any force majeure clause contained in its Lease or otherwise as a result of the COVID-19 pandemic or any Emergency Law and (B) other than requests, notices or defenses that have been withdrawn or resolved or are otherwise no longer outstanding.
1.1.27Survey. To Borrower’s knowledge, each Survey for each Individual Property delivered to Lender in connection with this Agreement does not fail to reflect any material matter affecting the applicable Individual Property or the title thereto.
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1.1.28Inventory. Borrower is the owner of all of the Equipment, Fixtures and Personal Property (as such terms are defined in the Security Instrument) located on or at the Property (except for any equipment or personal property owned by Tenants or third-party service providers or the Association pursuant to the Condominium Documents) and shall not lease any Equipment, Fixtures or Personal Property other than as permitted hereunder. All of the Equipment, Fixtures and Personal Property (together with any equipment and personal property owned by Tenants or third-party service providers or the Association pursuant to the Condominium Documents) are sufficient to operate the Property in the manner required hereunder and in the manner in which it is currently operated.
1.1.29Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by Borrower under applicable Legal Requirements have been paid. All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including the Security Instrument, have been paid.
1.1.30Special Purpose Entity/Separateness/No Prohibited Entity/Ownership Structure.
(a)Until the Debt has been paid in full, Borrower hereby represents, warrants and covenants that (i) Borrower is, shall be and shall continue to be a Special Purpose Entity, (ii) no direct ownership interests in Borrower or the Property shall include any Prohibited Entity/Ownership Structure, and (iii) Guarantor has implemented procedures to confirm that no direct or indirect ownership interests in Guarantor shall include any Prohibited Entity/Ownership Structure.
(b)The representations, warranties and covenants set forth in Section 4.1.30(a) and Section 4.1.30(c) shall survive for so long as any amount remains payable to Lender under this Agreement or any other Loan Document.
(c)Borrower hereby represents and warrants to Lender that:
(i)Borrower is in compliance (in all material respects) with all laws, regulations and orders applicable to Borrower and has received all permits necessary for Borrower to operate and for which a failure to possess would materially and adversely affect the condition, financial or otherwise, of Borrowers;
(ii)Borrower is not aware of any pending or threatened litigation involving Borrower that, if adversely determined, would reasonably be expected to materially adversely affect the condition (financial or otherwise) of Borrowers, or the condition or ownership of the property owned by Borrower;
(d)Intentionally omitted.
(e)Intentionally omitted.
(f)Intentionally omitted.
1.1.31Management Agreement. The Management Agreement is in full force and effect and there is no default beyond applicable notice and grace periods by Borrower, or to Borrower’s knowledge, Manager. The Management Agreement was entered into on commercially reasonable terms.
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1.1.32Illegal Activity. No portion of the Property has been or will be purchased with proceeds of any illegal activity.
1.1.33No Change in Facts or Circumstances; Disclosure. All information submitted by Borrower to Lender and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by Borrower in this Agreement or in any other Loan Document, are accurate, complete and correct in all material respects. There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or is reasonably likely to materially and adversely affect the use, operation or value of the Properties or the business operations or the financial condition of Borrowers. Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any Provided Information or information described in this Section 4.1.33 or any representation or warranty made herein to be materially misleading.
1.1.34Investment Company Act. Borrower is not (a) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; (b) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 2005, as amended; or (c) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.
1.1.35Embargoed Person. As of the date hereof and at all times throughout the term of the Loan, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower and Guarantor constitute property of, or are beneficially owned, directly or, to Borrower’s knowledge, indirectly, by any Embargoed Person; (b) to Borrower’s knowledge, no Embargoed Person has any interest of any nature whatsoever in Borrower or Guarantor, as applicable, with the result that the investment in Borrower or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) to the best of Borrower’s knowledge, none of the funds of Borrower or Guarantor, as applicable, have been derived from any unlawful activity with the result that the investment in Borrower or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law.
1.1.36Principal Place of Business; State of Organization. Borrower’s principal place of business as of the date hereof is the address set forth in the introductory paragraph of this Agreement. Borrower’s state of organization is as set forth in the introductory paragraph of this Agreement.
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1.1.37Environmental Representations and Warranties. Except as otherwise disclosed by each Phase I environmental report (or Phase II environmental report, if required) delivered to Lender in connection with the origination of the Loan (such report is referred to below as the “Environmental Report”), (a) to Borrower’s knowledge, there are no Hazardous Substances or underground storage tanks in, on, or under any Individual Property and no Hazardous Substances have been handled, manufactured, generated, stored, processed, or disposed of on or released or discharged from any Individual Property, in each case, except those that are (i) in material compliance with Environmental Laws and with permits issued pursuant thereto (to the extent such permits are required under Environmental Law), or (ii) de-minimis amounts necessary to operate the Property for the purposes set forth in this Agreement and which are otherwise permitted under and used in compliance with Environmental Law; (b) to Borrower’s knowledge, there are no past, present or threatened Releases of Hazardous Substances, which would require the same to be reported to Governmental Authorities or otherwise remediated, in, on, under or from any Individual Property which have not been remediated in accordance with Environmental Law or otherwise addressed in a manner so that no violation of Environmental Law exists in connection therewith; (c) to Borrower’s knowledge, there is no threat of any Release of Hazardous Substances migrating to any Individual Property in violation of Environmental Law; (d) to Borrower’s knowledge, there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Property which has not been remediated in accordance with Environmental Law or otherwise addressed in a manner so that no violation of Environmental Law exists in connection therewith; (e) Borrower does not know of, and has not received, any written notice from any Governmental Authority relating to Hazardous Substances or the Remediation thereof, in connection with any Individual Property, of alleged liability of any Person pursuant to any Environmental Law, in connection with any Individual Property, or any administrative or judicial proceedings in connection with any of the foregoing, in each case, which have not been remediated in accordance with Environmental Law or otherwise addressed in a manner so that no violation of Environmental Law exists in connection therewith; (f) there are no Institutional Controls on or affecting any Individual Property; and (g) Borrower has truthfully and fully disclosed to Lender, in writing, any and all information relating to environmental conditions in, on, under or from the Property that is known to Borrower and has provided to Lender all information that is contained in Borrower’s files and records.
1.1.38Cash Management Account. Borrower hereby represents and warrants to Lender that:
(a)This Agreement, together with the other Loan Documents, create a valid and continuing security interest (as defined in the Uniform Commercial Code) in the Clearing Account and Cash Management Account (when and to the extent opened) in favor of Lender, which security interest is prior to all other Liens, other than Permitted Encumbrances, and is enforceable as such against creditors of and purchasers from Borrower, subject to applicable bankruptcy, insolvency and similar laws affecting rights of credits generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). Other than in connection with the Loan Documents and except for Permitted Encumbrances, Borrower has not sold, pledged, transferred or otherwise conveyed the Clearing Account or Cash Management Account;
(b)Each of the Clearing Account and Cash Management Account (when and to the extent opened) constitutes a “deposit account” or “securities account” within the meaning of the Uniform Commercial Code;
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(c)Pursuant and subject to the terms hereof and the other applicable Loan Documents, the Clearing Bank has agreed to comply with all instructions originated by Lender, without further consent by Borrower, directing disposition of the Clearing Account and Cash Management Account (when and to the extent opened) and all sums at any time held, deposited or invested therein, together with any interest or other earnings thereon, and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities;
(d)The Clearing Account and Cash Management Account are not in the name of any Person other than Borrower, as pledgor, or Lender, as pledgee. Borrower has not consented to the Clearing Bank and Agent complying with instructions with respect to the Clearing Account and Cash Management Account from any Person other than Lender; and
(e)The Property is not subject to any cash management system (other than pursuant to the Loan Documents), and any and all existing tenant instruction letters issued in connection with any previous financing have been duly terminated prior to the date hereof (or will be terminated by delivery of the Tenant Direction Letters in accordance with the terms of this Agreement).
1.1.39Property Documents. With respect to each Property Document, Borrower hereby represents that (a) to the best of Borrower’s knowledge, each such Property Document is in full force and effect and has not been amended, restated, replaced or otherwise modified (except, in each case, as expressly set forth on Schedule XI attached hereto), (b) there are no material defaults under such Property Document by Borrower, or to Borrower’s knowledge, by any party thereto and, to Borrower’s knowledge, no event has occurred which, but for the passage of time, the giving of notice, or both, would constitute a material default under any such Property Document, and (c) to Borrower’s knowledge, no party to any Property Document has commenced any action or given or received any notice for the purpose of terminating (or contemplating the termination of) such Property Document.
1.1.40Condominium Provisions.
(a)    The Unit constitutes four and eighty-two hundredths percent (4.82%) of the condominium units, common areas and all other property interests comprising the Sagamore Business Center Condominiums (the “Regime”).
(b)    (i) The Unit is a portion of the Regime which consists of fifteen (15) condominium units, of which one (1) is owned by LaPorte Borrower and fourteen (14) are owned by Persons which are not Affiliates of Borrower, and (ii) the Property granted, conveyed and assigned to Lender will include all rights, easements, rights of way, reservations and powers of the LaPorte Borrower under the Condominium Act and the Condominium Documents in LaPorte Borrower’s capacity as owner of the Unit as well as any rights that LaPorte Borrower may have, in any capacity, under the Condominium Act and the Condominium Documents, specifically including but not limited to all rights to approve any amendments to the Condominium Documents.
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Section 1.2Survival of Representations. Borrower agrees that all of the representations and warranties of Borrower set forth in Section 4.1 hereof and elsewhere in this Agreement and in the other Loan Documents shall survive for so long as any amount remains owing to Lender under this Agreement or any of the other Loan Documents by Borrower; it being understood and agreed, however, that such representations and warranties shall only be deemed to have been made as of the date hereof, as set forth in Section 4.1. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.
ARTICLE V. BORROWER COVENANTS
Section 1.1Affirmative Covenants. From the date hereof and until payment and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of the Security Instrument encumbering the Property (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, Borrower (as to itself and not as to all Borrowers, as the context may require) hereby covenants and agrees with Lender that:
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1.1.1Existence; Compliance with Legal Requirements. Each Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits, authorizations, and franchises and comply in all material respects with all Legal Requirements applicable to it and the Property, including all regulations, building and zoning codes and certificates of occupancy. Borrower has never, and shall not in the future, commit, and Borrower shall exercise commercially reasonable efforts to ensure that no other Person in occupancy of or involved with the operation or use of the Property shall commit, any act or omission affording the federal government or any state or local government the right of forfeiture against the Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents. Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording such right of forfeiture. Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property used or useful in the conduct of its business and shall keep each Individual Property in good working order and repair, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto, all as more fully provided in the Loan Documents. Borrower shall keep each Individual Property insured, or shall cause each Individual Property to be insured, at all times by financially sound and reputable insurers, to such extent and against such risks, and maintain liability and such other insurance, as is more fully provided in this Agreement. Borrower shall give prompt notice to Lender of the receipt by Borrower of any notice related to a violation of any Legal Requirements and of the commencement of any proceedings or investigations which relate to compliance with Legal Requirements if such violation would reasonably be expected to have a material adverse effect on Borrowers or the Property. After prior written notice to Lender, Borrower, at Borrower’s own expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Borrower or any Individual Property or any alleged violation of any Legal Requirement, provided that (i) no Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) neither the applicable Individual Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly upon final determination thereof comply with any such Legal Requirement determined to be valid or applicable or cure any violation of any Legal Requirement; (v) such proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or the applicable Individual Property; and (vi) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith. Lender may apply any such security, as necessary to cause compliance with such Legal Requirement at any time when, in the reasonable judgment of Lender, the validity, applicability or violation of such Legal Requirement is finally established or the applicable Individual Property (or any part thereof or interest therein) shall be in imminent danger of being sold, forfeited, terminated, cancelled or lost.
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1.1.2Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Property or any part thereof prior to the date the same shall become delinquent; provided, however, Borrower’s obligation to directly pay Taxes shall be suspended for so long as Borrower complies with the terms and provisions of Section 7.2 hereof. Upon Lender’s written request therefor from time to time, Borrower shall furnish to Lender receipts for the payment of Taxes and Other Charges prior to the date same shall become delinquent (provided, however, Borrower is not required to furnish such receipts for payment of Taxes in the event that such Taxes have been paid by Lender pursuant to Section 7.2 hereof). Except for any Permitted Encumbrances, Borrower shall not suffer and shall cause to be paid and discharged any Lien or charge whatsoever which may be or become a Lien or charge against the Property, and shall pay for all utility services provided to the Property prior to the date the same shall become delinquent. After prior written notice to Lender, Borrower, at Borrower’s own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (i) no Event of Default has occurred and is continuing; (ii) such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost as a result of such contest; (iv) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; and (v) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon. Lender may pay over any such cash deposit or part thereof held by Lender to the claimant entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is established or the Property (or part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost or there shall be any danger of the Lien of the Security Instrument being primed by any related Lien.
1.1.3Litigation. Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened in writing against Borrower or Guarantor which would reasonably be expected to materially adversely affect Borrowers’ or Guarantor’s condition (financial or otherwise) or business or the Property.
1.1.4Access to Property. Subject to the rights of Tenants and the Association, Borrower shall permit agents, representatives and employees of Lender to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice. In addition, if (i) Lender receives written notice from Borrower or a Tenant that a Tenant has “gone dark” in all or a material portion of an Individual Property, (ii) Tenant makes any public, disclosure of its intention to cease operating at an Individual Property or (iii) any nationally recognized reputable media outlet reports that such Tenant intends to cease or has ceased operations at all or any material portion of an Individual Property, in each case, a special servicer of the Loan may inspect such Individual Property or any part thereof at reasonable hours upon reasonable advance written notice, subject to the rights of Tenants and the Association. Unless an Event of Default is continuing, Borrower shall have the right to have Borrower’s representative present during any such inspection. Without limiting Borrower’s general obligations under Section 5.1.1 to keep each Individual Property in good working order and repair, Borrower shall not be required to make any repairs, replacements or improvements requested by Lender or Servicer based on any inspection of an Individual Property by Lender or Servicer other than any repairs, replacements or improvements that are necessary to comply with Legal Requirements or address any material damage or life-safety issues at an Individual Property.
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1.1.5Notice of Material Adverse Change. Borrower shall promptly advise Lender of any material adverse change in Borrower’s or Guarantor’s condition, financial or otherwise of which Borrower has knowledge; provided, however, that this Section 5.1.5 shall not apply so long as the REIT remains subject to filing periodic reports with the United States Securities and Exchange Commission (i.e., Forms 10-K, 10Q and 8-K) and the REIT remains in Control of Borrower.
1.1.6Cooperate in Legal Proceedings. Borrower shall cooperate with Lender with respect to any proceedings before any court, board or other Governmental Authority which would reasonably be expected to materially and adversely affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings.
1.1.7[Intentionally Omitted].
1.1.8Award and Insurance Benefits. Borrower shall cooperate with Lender in a commercially reasonable matter in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with the Property, and Lender shall be reimbursed for any reasonable expenses incurred in connection therewith (including reasonable attorneys’ fees and disbursements, and the payment by Borrower of the reasonable expense of an appraisal on behalf of Lender in case of Casualty or Condemnation affecting a portion of the Property or any part thereof) out of such Insurance Proceeds.
1.1.9Further Assurances. Provided the following further assurances do not increase Borrower’s obligations and/or liability under the Loan Documents (other than in de minimis respects) or decrease Borrower’s rights under the Loan Documents, Borrower shall, at Borrower’s sole cost and expense:
(a)permit Lender to inspect at Borrower’s offices all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument in Borrower’s possession or readily available to it at no material out-of-pocket cost (subject, however, with respect to those which are by their nature confidential or subject to a privilege of confidentiality, to Lender’s delivery of a confidentiality agreement acceptable to Lender in it’s reasonable discretion) required to be furnished by Borrower pursuant to the terms of the Loan Documents or which are reasonably requested by Lender in connection therewith;
(b)execute and deliver to Lender such customary documents, instruments, certificates, assignments and other writings, and do such other customary acts necessary, to evidence, preserve or protect the collateral at any time securing or intended to secure the obligations of Borrower under the Loan Documents, as Lender may reasonably require; and
(c)do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time provided that Borrower’s rights are not reduced or obligations increased.
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1.1.10Principal Place of Business, State of Organization. Borrower shall not cause or permit any change to be made in its name, identity (including its trade name or names), place of organization or formation (as set forth in Section 4.1.36 hereof), except as may be permitted in connection with a Permitted Transfer, or Borrower’s corporate or partnership or other structure unless Borrower shall have first notified Lender in writing of such change at least thirty (30) days prior to the effective date of such change, and shall have first taken all action reasonably required by Lender for the purpose of perfecting or protecting the lien and security interests of Lender pursuant to this Agreement, and the other Loan Documents and, in the case of a change in Borrower’s structure, without first obtaining the prior written consent of Lender, which consent may be given or denied in Lender’s reasonable discretion. Upon Lender’s request, Borrower shall, at Borrower’s sole cost and expense, execute and deliver additional security agreements and other customary instruments which may be necessary to effectively evidence or perfect Lender’s security interest in the Property (or any portion thereof) as a result of such change of principal place of business or place of organization. Borrower’s principal place of business and chief executive office, and the place where Borrower keeps its books and records, including recorded data of any kind or nature, regardless of the medium or recording, including software, writings, plans, specifications and schematics, has been for the preceding four months (or, if less, the entire period of the existence of Borrower) and will continue to be the address of Borrower set forth at the introductory paragraph of this Agreement (unless Borrower notifies Lender in writing at least thirty (30) days prior to the date of such change). Borrower shall promptly notify Lender of any change in its organizational identification number. If Borrower does not now have an organizational identification number and later obtains one, Borrower promptly shall notify Lender of such organizational identification number.
1.1.11Financial Reporting.
(a)Borrower shall keep and maintain or shall cause to be kept and maintained on a Fiscal Year basis, in accordance with the requirements for a Special Purpose Entity set forth herein and GAAP (or such other accounting basis reasonably acceptable to Lender), proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower and all items of income and expense in connection with the operation of each Individual Property. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, records and accounts at the office of Borrower or any other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. During the continuance of an Event of Default, Borrower shall pay any costs and expenses reasonably incurred by Lender to examine Borrower’s accounting records with respect to each Individual Property, as Lender shall reasonably determine to be necessary or appropriate in the protection of Lender’s interest; provided, however, in no event shall Borrower be responsible for any such cost exceeding $2,000 per inspection.
(b)Borrower shall furnish to Lender annually, within one hundred twenty (120) days following the end of each Fiscal Year of Borrower, (i) a complete copy of Borrower’s annual financial statements certified by the chief financial officer of the REIT, prepared in accordance with GAAP (or such other accounting basis acceptable to Lender), covering each Individual Property for such Fiscal Year and containing statements of profit and loss for Borrower and each Individual Property, (ii) an annual rent roll and a balance sheet for Borrower, and (iii) the quarterly reports for the fourth (4th) calendar quarter required under Section 5.1.11(c) hereof. If Borrower consists of more than one entity, said financial statements shall be in the form of an annual combined balance sheet of the Borrower entities (and no other entities), together with the related combined statements of operations, members’ capital and cash flows, including a combining balance sheet and statement of income for the Individual Properties on a combined basis. Such statements shall set forth the financial condition and the results of operations for each Individual Property for such Fiscal Year, and shall include amounts representing annual net operating income, Net Cash Flow, gross income, and operating expenses.
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(c)Borrower shall furnish, or cause to be furnished, to Lender on or before sixty (60) days after the end of each calendar quarter the following items, accompanied by an Officer’s Certificate stating that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and each Individual Property (subject to normal year-end adjustments) as applicable, all prepared in accordance with GAAP (or such other accounting basis acceptable to Lender): (i) a rent roll for the subject quarter, along with copies of any new Leases and any amendments, extensions or modifications of any Leases entered into during the preceding quarter; (ii) quarterly and year-to-date operating statements (including Capital Expenditures) prepared for each calendar quarter, noting net operating income, gross income, and operating expenses (not including any contributions to the Replacement Reserve Fund and the Required Repair Fund), and other information necessary and sufficient to fairly represent the financial position and results of operation of each Individual Property during such calendar quarter, and containing a comparison of budgeted income and expenses and the actual income and expenses; (iii) a balance sheet for Borrower; and (iv) a calculation reflecting the annual Debt Service Coverage Ratio for the immediately preceding three (3), six (6), and twelve (12) month periods as of the last day of such quarter (to the extent the Loan has been outstanding for such periods). In addition, if no CPC Bankruptcy Trigger Event or CPC Goes Dark Trigger Event has occurred to the best of Borrower’s knowledge, then such Officer’s Certificate shall also state that, to the best of Borrower’s knowledge, no CPC Bankruptcy Trigger Event or CPC Goes Dark Trigger Event has occurred. Notwithstanding the foregoing, Borrower may deliver the quarterly reports for the fourth (4th) calendar quarter required under this Section 5.1.11(c) with the annual financial statements delivered to Lender within one hundred twenty (120) days following the end of each Fiscal Year of Borrower under Section 5.1.11(b) hereof.
(d)Prior to a Securitization, Borrower shall furnish, or cause to be furnished, to Lender on or before twenty (20) days after the end of each calendar month, all of the following items with respect to the previous calendar month, accompanied by an Officer’s Certificate stating that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and each Individual Property (subject to normal year-end adjustments) as applicable: (A) a rent roll for the subject month; (B) monthly operating statement(s) of each Individual Property; and (C) year-to-date operating statement(s) of each Individual Property.
(e)Intentionally omitted.
(f)Upon request, Borrower and its affiliates shall furnish to Lender (but not more frequently than quarterly) an accounting of all security deposits held in connection with any Lease of any part of the Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to obtain information regarding such accounts directly from such financial institutions.
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(g)For the partial year period commencing on the date hereof, and for each Fiscal Year thereafter, Borrower shall submit to Lender a draft Annual Budget not later than thirty (30) days prior to the commencement of such period or Fiscal Year in form reasonably satisfactory to Lender. If a Cash Sweep Period exists, the Annual Budget shall be subject to Lender’s written approval (each such Annual Budget, an “Approved Annual Budget”), not to be unreasonably withheld, delayed or conditioned. If Lender objects to a proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of such objections within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed written description of such objections) and Borrower shall promptly revise such Annual Budget and resubmit the same to Lender. Lender shall advise Borrower of any objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed written description of such objections) and Borrower shall promptly revise the same in accordance with the process described in this subsection until Lender approves the Annual Budget. Until such time that Lender approves a proposed Annual Budget, the most recently Approved Annual Budget shall apply; provided that, such Approved Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance Premiums and Other Charges and other Non-Discretionary Expenses and an increase of an additional five percent (5%) of each line item to account for inflation. Notwithstanding anything to the contrary contained herein, to the extent Lender’s prior approval is required for an Annual Budget as set forth in this Section 5.1.11(g), such approval shall be deemed given if the first correspondence from Borrower to Lender requesting such approval contains a conspicuous legend at the top of the first page thereof stating that “THIS IS A REQUEST FOR APPROVAL OF AN ANNUAL BUDGET. IF YOU FAIL TO APPROVE OR DISAPPROVE SUCH ANNUAL BUDGET IN WRITING WITHIN SEVEN (7) BUSINESS DAYS, BORROWER MAY DELIVER A DEEMED APPROVAL NOTICE”, and any customary information and documents in Borrower’s possession reasonably requested by Lender in writing prior to the expiration of such seven (7) Business Day period in order to adequately review the same has been delivered to Lender and, if Lender fails to approve or disapprove in writing within the seven (7) Business Day period, a second notice is delivered to Lender from Borrower in an envelope marked “PRIORITY” requesting approval containing a conspicuous legend at the top of the first page thereof stating that “THIS IS A REQUEST FOR APPROVAL OF AN ANNUAL BUDGET. IF YOU FAIL TO APPROVE OR DISAPPROVE SUCH ANNUAL BUDGET IN WRITING WITHIN THREE (3) BUSINESS DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN” and Lender fails to approve or disapprove within the three (3) Business Day period. Upon receipt thereof, LaPorte Borrower shall furnish to Lender a copy of the annual budget of the Association.
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(h)If Borrower must incur an extraordinary operating expense or capital expense not set forth in the Approved Annual Budget (each an “Extraordinary Expense”), then Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense for Lender’s approval, not to be unreasonably withheld, conditioned or delayed. Notwithstanding anything to the contrary contained herein, Lender’s approval of an Extraordinary Expense shall be deemed given if the first correspondence from Borrower to Lender requesting such approval contains a conspicuous legend at the top of the first page thereof stating that “THIS IS A REQUEST FOR APPROVAL OF AN EXTRAORDINARY EXPENSE. IF YOU FAIL TO APPROVE OR DISAPPROVE SUCH EXTRAORDINARY EXPENSE IN WRITING WITHIN SEVEN (7) BUSINESS DAYS, BORROWER MAY DELIVER A DEEMED APPROVAL NOTICE”, and any customary information and documents in Borrower’s possession reasonably requested by Lender in writing prior to the expiration of such seven (7) Business Day period in order to adequately review the same has been delivered to Lender and, if Lender fails to approve or disapprove in writing within the seven (7) Business Day period, a second notice is delivered to Lender from Borrower in an envelope marked “PRIORITY” requesting approval containing a conspicuous legend at the top of the first page thereof stating that “THIS IS A REQUEST FOR APPROVAL OF AN EXTRAORDINARY EXPENSE. IF YOU FAIL TO APPROVE OR DISAPPROVE SUCH EXTRAORDINARY EXPENSE IN WRITING WITHIN THREE (3) BUSINESS DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN” and Lender fails to approve or disapprove within the three (3) Business Day period.
(i)Borrower shall furnish to Lender, within ten (10) Business Days after written request (or as soon thereafter as may be reasonably possible), such further detailed information with respect to the operation of the applicable Individual Property (or any portion thereof) and the financial affairs of Borrower as may be reasonably requested by Lender.
(j)Borrower shall furnish to Lender, within ten (10) Business Days after Lender’s written request (or as soon thereafter as may be reasonably possible), financial information from any Tenant designated by Lender (to the extent such financial information is required to be provided under the applicable Lease and same is received by Borrower after written request therefor).
(k)Subject to the last sentence of this Section 5.1.11(k), Borrower shall cause Guarantor to furnish to Lender annually, within one hundred twenty (120) days following the end of each Fiscal Year of Guarantor: (i) if such Guarantor is an entity, financial statements prepared by an Approved Accountant in accordance with GAAP (or such other method of accounting reasonably acceptable to Lender) (or, alternatively, if such Guarantor is a publicly-held corporation or other publicly-held entity (in each case) which is listed on the New York Stock Exchange, the NASDAQ Global Select Market or another nationally-recognized stock exchange, the 10-K of such Guarantor), which shall include an annual balance sheet and profit and loss statement of Guarantor, in the form reasonably required by Lender, or (ii) if such Guarantor is an individual, a signed personal financial statement in a form reasonably satisfactory to Lender. Notwithstanding the foregoing, the delivery of the 10-K of Healthcare Trust, Inc (so long as Healthcare Trust Operating Partnership, L.P., is Guarantor) will satisfy the foregoing.
(l)Any reports, statements or other information required to be delivered under this Agreement shall be delivered (i) in paper form, (ii) on a diskette (e.g., a thumb drive), or (iii) if requested by Lender and within the capabilities of Borrower’s data systems without change or modification thereto, in electronic form and prepared using Microsoft Word for Windows files (which files may be prepared using a spreadsheet program and saved as word processing files). Borrower agrees that Lender may disclose information regarding the Property and Borrower that is provided to Lender pursuant to this Section 5.1.11 in connection with the Securitization to such parties requesting such information in connection with such Securitization.
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1.1.12Business and Operations. Borrower shall continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of each Individual Property. Borrower shall qualify to do business and shall remain in good standing in the jurisdiction in which each Individual Property is located and the jurisdiction of its formation. Borrower shall at all times during the term of the Loan, continue to own all Equipment, Fixtures and Personal Property which (together with any equipment, fixtures and personal property owned by tenants or third parties or the Association pursuant to the Condominium Documents) are necessary to operate each Individual Property in the manner required hereunder and in substantially the same manner in which it is currently operated.
1.1.13Title to the Property. Borrower shall warrant and defend (a) the title to each Individual Property and every part thereof, subject only to Liens permitted hereunder (including Permitted Encumbrances) and (b) the validity and priority of the Lien of the Security Instrument on each Individual Property, subject only to Liens permitted hereunder (including Permitted Encumbrances), in each case against the claims of all Persons whomsoever. Borrower shall reimburse Lender for any actual losses, reasonable costs, damages exclusive of consequential, punitive, special, exemplary and indirect damages or reasonable expenses (including reasonable out-of-pocket attorneys’ fees and expenses) incurred by Lender if an interest in the Property (or any part thereof), other than as permitted hereunder, is claimed by another Person.
1.1.14Costs of Enforcement. In the event (a) that the Security Instrument encumbering the Property (or any portion thereof) is foreclosed in whole or in part or that the Security Instrument is put into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any mortgage encumbering the Property (or any portion thereof) prior to or subsequent to the Security Instrument in which proceeding Lender is made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or any of its constituent Persons or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors, Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including reasonable out-of-pocket attorneys’ fees and expenses, incurred by Lender or Borrower in connection therewith and in connection with any appellate proceeding or post judgment action involved therein, together with all required service or use taxes.
1.1.15Estoppel Statement.
(a)After request by Lender, Borrower shall within ten (10) Business Days furnish Lender or any proposed assignee of the Loan with a statement, duly acknowledged and certified, setting forth (i) the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the Interest Rate of the Note, (iv) the Maturity Date, (v) the date the most recent Monthly Debt Service Payment Amount was paid and (vi) that, except as provided in such statement, to Borrower’s knowledge, there are no Events of Default under this Agreement or any of the other Loan Documents; provided that Borrower shall not be required to deliver such statement more frequently than two (2) times in any calendar year unless an Event of Default has occurred and is continuing.
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(b)After request by Borrower, Lender shall within ten (10) Business Days furnish Borrower or any proposed assignee of the Loan with a statement, duly acknowledged and certified, setting forth (i) the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the Interest Rate of the Note, (iv) the Maturity Date, (v) the date the most recent Monthly Debt Service Payment Amount was paid, and (vi) that, except as provided in such statement, to Lender’s knowledge, there are no Events of Default under this Agreement or any of the other Loan Documents; provided that Lender shall only deliver such statements if an Event of Default has not occurred and is continuing and, in any event, shall not be required to deliver such statement more frequently than two (2) times in any calendar year.
(c)Borrower shall use commercially reasonable efforts to deliver to Lender upon request, tenant estoppel certificates from each commercial Tenant leasing space at the Property in form and substance reasonably satisfactory to Lender; provided that Borrower shall not be required to use such efforts to deliver such certificates with respect to more than (i) five (5) Tenants not under a Major Lease in any calendar year, or (ii) more frequently than one (1) time in any calendar year for any Tenants under a Major Lease unless an Event of Default has occurred and is continuing.
(d)Subject to the terms thereof and the rights of third parties thereunder, Borrower shall use commercially reasonable efforts (without the obligation to expend sums of money or incur any liability) to deliver to Lender, within thirty (30) days of request therefor by Lender, estoppel certificates from the other parties to each Property Document in form and substance reasonably acceptable to Lender; provided, that so long as no Event of Default is then continuing, Borrower shall not be required to deliver such certificates more frequently than one (1) time in any calendar year (except that prior to a Securitization of the entire Loan, Borrower will use such efforts to deliver up to two (2) estoppel certificates in any calendar year).
1.1.16Loan Proceeds. Borrower shall use the proceeds of the Loan received by it on the Closing Date only for the purposes set forth in Section 2.1.4 hereof.
1.1.17O&M Program. Borrower covenants and agrees to implement and follow the terms and conditions of the O&M Program for the Property during the term of the Loan, including any extension or renewal thereof.  Lender’s requirement that Borrower comply with the O&M Program shall not be deemed to constitute a waiver or modification of any of Borrower’s covenants and agreements with respect to Hazardous Materials or Environmental Laws.
1.1.18Confirmation of Representations. Borrower shall deliver, in connection with any Securitization, (a) one (1) or more Officer’s Certificates certifying as to the accuracy of all representations made by Borrower in the Loan Documents (as the same may be updated by Borrower provided that such updates do not violate any of the covenants set forth in this Article V) as of the date of the closing of such Securitization in all relevant jurisdictions, and (b) certificates of the relevant Governmental Authorities in all relevant jurisdictions indicating the good standing and qualification of Borrower and Guarantor as of the date of the Securitization; provided that Borrower shall not be required to deliver such Officer’s Certificates or good standing and qualification certificates more frequently than two (2) times in any calendar year unless an Event of Default has occurred and is continuing.
1.1.19Environmental Covenants.
(a)Borrower covenants and agrees that: (i) all uses and operations on or of the Property (or any portion thereof), by Borrower shall be in material compliance with all Environmental Laws and permits issued pursuant thereto and Borrower shall use commercially reasonable efforts to cause all uses and operations on or of the Property by any other Person to be
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in material compliance with all Environmental Laws and permits issued pursuant thereto; (ii) there shall be no Releases of Hazardous Substances in, on, under or from any Individual Property in violation of Environmental Law; (iii) there shall be no Hazardous Substances in, on, or under any Individual Property, except those that are (A) in material compliance with all Environmental Laws and with permits issued pursuant thereto (to the extent such permits are required by Environmental Law), or (B) de-minimis amounts necessary to operate the applicable Individual Property for the purposes set forth in this Agreement and which are otherwise permitted under and used in compliance with Environmental Law; (iv) Borrower shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Borrower or any other Person (the “Environmental Liens”); (v) Borrower shall, at its sole cost and expense, cooperate in all activities required pursuant to subsection (b) below, including providing all relevant information and making knowledgeable persons available for interviews; (vi) Borrower shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Property, pursuant to any reasonable written request of Lender made in the event that Lender has reason to believe that an environmental hazard in violation of Environmental Laws exists on the Property (including but not limited to sampling, testing and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas), and share with Lender the reports and other results thereof, and Lender and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; (vii) Borrower shall, at its sole cost and expense, comply with all reasonable written requests of Lender made if Lender has a reasonable basis to believe that an environmental hazard in violation of Environmental Law exists on any Individual Property in order to: (A) reasonably effectuate Remediation of any environmental condition (including a Release of a Hazardous Substance) in, on, under or from any Individual Property in violation of Environmental Law; (B) comply with any Environmental Law; (C) comply with any directive from any Governmental Authority with jurisdiction with respect to the environmental condition of the Property; provided, however, that nothing herein shall preclude Borrower from the right to defend against or challenge, using all legal means, the imposition of any governmental directives or requirements or the imposition of any liability by any Governmental Authority or other Person; and (D) take any other reasonable action necessary or appropriate for protection of human health or the environment with respect to the Property, to the extent required pursuant to Environmental Law; (viii) Borrower shall not do any act, and Borrower shall use commercially reasonable efforts to cause all Tenants or other users of the Property to not do any act, in connection with the Property, that materially increases the harm to human health or the environment, poses an unreasonable risk of harm to any Person from a Release of any Hazardous Substances on, at, under, or from the Property (or any portion thereof), impairs or is reasonably likely to impair the value of the Property (or any portion thereof) due to the presence of Hazardous Substances, is contrary to any requirement of any insurer, constitutes a public or private nuisance, or violates any covenant, condition, agreement or easement applicable to the environmental condition of the Property (or any portion thereof); (ix) after obtaining knowledge thereof, Borrower shall promptly notify Lender in writing of (A) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating onto any Individual Property which would require the same to be reported to Governmental Authorities or otherwise remediated pursuant to Environmental Laws; (B) any material non-compliance with any Environmental Laws related in any way to any Individual Property; (C) any actual or reasonably likely Environmental Lien on any Individual Property; (D) any required Remediation of environmental conditions relating to any Individual Property; and (E) any written notice or other written communication of which Borrower becomes aware from any source whatsoever (including a Governmental Authority) relating in any way to the release or potential release of Hazardous Substances on, at, under or from any Individual Property or the Remediation thereof, likely to result in liability of any Person in connection with any Individual Property pursuant to any Environmental Law, other environmental conditions in connection with any Individual Property, or any actual or potential administrative or judicial proceedings in connection therewith; (x) Borrower shall not install, use, generate, manufacture, store, treat,
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release or dispose of, nor permit the installation, use, generation, storage, treatment, release or disposal of, any Hazardous Substances (except de-minimis amounts necessary to operate the Property (or any portion thereof) for the purposes set forth in this Agreement and which are otherwise permitted under and used in compliance with Environmental Law) on, under or about the Property (or any portion thereof); (xi) Borrower shall not make any change in the use or condition of any Individual Property which (A) would reasonably be expected to lead to the presence on, under or about the applicable Individual Property of any Hazardous Substances which is not in accordance with any applicable Environmental Law, or (B) would require, under any applicable Environmental Law, notice to be given to or approval to be obtained from any Governmental Authority in the event of a transfer of ownership or control of the applicable Individual Property, in each case without the prior written consent of Lender; (xii) Borrower shall not allow any Institutional Control to be imposed on any Individual Property; and (xiii) Borrower shall take all acts necessary to preserve its status, if applicable, as an “innocent landowner,” “contiguous property owner,” or “prospective purchaser” as to the Property (or any portion thereof) as those terms are defined in CERCLA; provided, however, that this covenant does not limit or modify any of Borrower’s other duties or obligations under this Agreement.
(b)If Lender has a reasonable basis to believe that an environmental condition in violation of Environmental Law exists on any Individual Property, upon reasonable written notice from Lender, Borrower shall, at Borrower’s expense, promptly cause an engineer or consultant reasonably satisfactory to Lender to conduct an environmental assessment or audit (the scope of which shall be determined in Lender’s reasonable discretion) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing at such Individual Property as reasonably requested by Lender and promptly deliver the results of any such assessment, audit, sampling or other testing; provided, however, if such results are not delivered to Lender within a reasonable period or if Lender has a reasonable basis to believe that an environmental hazard exists on the Property that, in Lender’s reasonable judgment, endangers the health of any Tenant or other occupant of the Property or their guests or the general public or is reasonably likely to materially and adversely affect the value of the applicable Individual Property, upon reasonable written notice to Borrower, Lender and any other Person designated by Lender, including any receiver, any representative of a Governmental Authority with jurisdiction over the matter, and any environmental consultant, shall have the right, subject to the rights of the occupants of the Individual Property, but not the obligation, to enter upon the applicable Individual Property at all reasonable times to assess the environmental hazard on the applicable Individual Property, including conducting any environmental assessment or audit (the scope of which shall be determined in Lender’s reasonable discretion) and taking samples of soil, groundwater or other water, air, or building materials, and conducting other invasive testing, in each case, to the extent reasonably determined to be warranted in connection with such suspected environmental hazard. Borrower shall cooperate with and provide Lender and any such Person designated by Lender with access to the applicable Individual Property. Unless an Event of Default exists, Borrower shall not be required to perform an environmental site assessment or audit hereunder with respect to any Individual Property more often than once per twelve (12) month period. Lender and any person designated by Lender shall use commercially reasonable efforts to minimize interference with or impact on Tenants and other occupants or visitors of the Property.
(c)[Intentionally omitted].
(d)[Intentionally omitted].
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(e)Subject to the rights of Tenants, Borrower shall promptly perform (or cause Tenants to perform) all necessary remedial work in response to the presence of any Hazardous Substances on any Individual Property in violation of any Environmental Laws, or any claims or requirements made by any Governmental Authority with jurisdiction regarding the environmental condition of such Individual Property; provided, however, that nothing herein shall preclude Borrower from the right to defend against or challenge using all lawful means, the imposition of any governmental directives or requirements or the imposition of any liability by any governmental entity or other Person. All such work shall be conducted by licensed and reputable contractors pursuant to written plans approved by the agency or authority in question (if applicable), under proper permits and licenses (if applicable) with such insurance coverage as is customarily maintained by prudent property owners in similar situations. If the cost of the work exceeds $1,000,000, then Lender shall have the right of prior approval over the environmental contractor and plans, which shall not be unreasonably withheld or delayed. All costs and expenses of the remedial work shall be promptly paid by Borrower. In the event Borrower fails to undertake the remedial work, or fails to complete the same within a reasonable time period after the same is undertaken, and if Lender is of the good faith opinion that Lender’s security in the applicable Individual Property is jeopardized thereby, then Lender shall have the right to undertake or complete the remedial work itself. In such event all reasonable out-of-pocket costs of Lender in doing so, including all reasonable out-of-pocket fees and expenses of environmental consultants, engineers, attorneys, accountants and other professional advisors, shall become a part of the Loan and shall be due and payable from Borrower upon demand. Such amount shall be secured by the Loan Documents, and failure to pay the same shall be an Event of Default under the Loan Documents. In the event any Hazardous Substances are removed from the Property, either by Borrower or Lender, the number assigned by the United States Environmental Protection Agency to such Hazardous Substances shall be solely in the name of Borrower, and Borrower shall have any and all liability for such removed Hazardous Substances.
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1.1.20Leasing Matters. Any Major Leases executed after the date hereof, as well as any amendments or modifications of existing Major Leases, shall be subject to the prior written approval of Lender, which approval shall not be unreasonably withheld, conditioned or delayed (provided that any renewal or extension of a Major Lease that is executed pursuant to the Tenant’s rights under such Major Lease or that results in the extension of the term of such Major Lease upon the same material terms set forth in the Major Lease prior to such renewal or extension shall not be subject to approval by Lender). Upon written request by Lender, Borrower shall furnish Lender with executed copies of all Major Leases not previously delivered to Lender. Borrower shall not be required to obtain Lender’s prior written approval for, nor provide Lender notice or copies of, any Leases (or any alterations, modifications, changes, extensions, terminations, expansions, renewals or supplements thereof) that are not Major Leases. All renewals of existing Leases and all proposed new Leases shall provide for rental rates (to the extent not already set forth in the Lease) comparable to existing local market rates. All proposed Leases shall be on commercially reasonable terms. All new Leases executed after the date hereof shall provide that they are subordinate to any loan documents encumbering the Individual Property subject to such Lease(s). Borrower (i) shall observe and perform the obligations imposed upon the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce and may amend or terminate the terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed in a commercially reasonable manner and in a manner not to impair the value of the Property (or any portion thereof) involved; (iii) shall not collect any of the rents more than one (1) month in advance (other than security deposits or first month’s Rent in connection with a new Lease); (iv) shall not execute any other assignment of lessor’s interest in the Leases or the Rents (except as contemplated by the Loan Documents); (v) shall not alter, modify or change the terms of the Leases in a manner inconsistent with the provisions of the Loan Documents; provided, however that (notwithstanding anything to the contrary in the Loan Documents) Borrower shall not be required to obtain Lender’s prior written approval for, nor provide Lender notice or copies of, any Lease, or any alterations, modifications, changes, extensions, terminations, expansions, renewals or supplements of or to any Lease, in each case, that is not a Major Lease; and (vi) shall execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Leases as Lender shall from time to time reasonably require, provided that same do not increase Borrower’s obligations or decrease Borrower’s rights under such Leases or the Loan Documents. Notwithstanding anything to the contrary contained herein, all new Leases and all amendments, modifications, extensions, and renewals of existing Leases with Tenants that are Affiliates of Borrower shall be subject to the prior written consent of Lender. Notwithstanding anything to the contrary contained herein, Borrower shall not be permitted to terminate or accept a surrender any Major Lease without the prior written consent of Lender. Lender agrees to enter into a subordination, non-disturbance agreement with tenants with respect to any Lease in a form substantially similar to the subordination, non-disturbance agreements entered into in connection with the closing of the Loan. Borrower shall deliver to Lender written notice of (i) any Tenant event of default (after expiration of any notice and cure periods) under a Major Lease promptly following Borrower obtaining actual knowledge of the same and (ii) the occurrence of any CPC Bankruptcy Trigger Event or CPC Goes Dark Trigger Event promptly following Borrower obtaining actual knowledge of the same.
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Notwithstanding anything to the contrary contained herein, to the extent Lender’s prior approval is required for any Major Lease (or any modification or other matter with respect to such Major Lease requiring Lender’s approval under this Section 5.1.20), such approval shall be deemed given if the first correspondence from Borrower to Lender requesting such approval contains a conspicuous legend at the top of the first page thereof stating that “THIS IS A REQUEST FOR APPROVAL OF A MAJOR LEASE. IF YOU FAIL TO APPROVE OR DISAPPROVE SUCH MAJOR LEASE IN WRITING WITHIN SEVEN (7) BUSINESS DAYS, BORROWER MAY DELIVER A DEEMED APPROVAL NOTICE”, and any customary information and documents in Borrower’s possession reasonably requested by Lender in writing prior to the expiration of such seven (7) Business Day period in order to adequately review the same has been delivered to Lender and, if Lender fails to approve or disapprove such Major Lease within the seven (7) Business Day period, a second notice is delivered to Lender from Borrower in an envelope marked “PRIORITY” requesting approval containing a conspicuous legend at the top of the first page thereof stating that “THIS IS A REQUEST FOR APPROVAL OF A MAJOR LEASE. IF YOU FAIL TO APPROVE OR DISAPPROVE SUCH MAJOR LEASE IN WRITING WITHIN THREE (3) BUSINESS DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN” and Lender fails to approve or disapprove such Major Lease within the three (3) Business Day period.
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1.1.21Alterations.
Borrower shall obtain Lender’s prior written consent to any alterations to any Improvements, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Lender’s consent shall not be required in connection with any alterations that will not have a material adverse effect on Borrower’s financial condition, Borrower’s ability to perform its obligations under the Loan Documents or the value of any Individual Property, provided that such alterations are made in connection with (a) tenant improvement work performed pursuant to the terms of any Lease executed on or before the date hereof (or, after the date hereof, which are approved or deemed approved or which do not require Lender approval hereunder), (b) tenant improvement work performed pursuant to the terms and provisions of a Lease and not materially and adversely affecting any structural component of any Improvements, any utility or HVAC system contained in any Improvements or the exterior of any building constituting a part of any Improvements (unless the Tenant is obligated to maintain or repair any structural components of any Improvements pursuant to its Lease), (c) alterations performed in connection with the Restoration of any Individual Property after the occurrence of a Casualty or Condemnation in accordance with the terms and provisions of this Agreement, (d) alterations required to comply with Legal Requirements or the terms of the Loan Documents or (e) alterations that are reasonably expected to cost less than the Threshold Amount, in the aggregate (provided that, for the avoidance of doubt, the cost of purchasing and installing equipment shall not be included in the calculation of such aggregate cost). If the total unpaid amounts due and payable with respect to alterations to the Improvements with respect to an Individual Property or any portion thereof (other than such amounts to be paid or reimbursed by Tenants under the Leases or paid with insurance or condemnation proceeds or reserves established pursuant to the Loan Documents) shall at any time exceed the Threshold Amount, Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrower’s obligations under the Loan Documents any of the following: (A) cash, (B) U.S. Obligations, (C) other securities having a rating reasonably acceptable to Lender and that, at Lender’s option (if a Securitization has occurred), the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned to any Securities or any class thereof in connection with any Securitization or (D) a completion and performance bond or an irrevocable Letter of Credit (payable on sight draft only) issued by a financial institution having a rating by S&P of not less than “A-1+” if the term of such bond or Letter of Credit is no longer than three (3) months or, if such term is in excess of three (3) months, issued by a financial institution having a rating that is reasonably acceptable to Lender and that, at Lender’s option (if a Securitization has occurred), the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned to any Securities or class thereof in connection with any Securitization. Such security shall be in an amount equal to the excess of the total unpaid amounts with respect to alterations to the Improvements on the Property (or any portion thereof) (other than such amounts to be paid or reimbursed by Tenants under the Leases) over the Threshold Amount and Lender may apply such security from time to time at the option of Lender to pay for such alterations. Lender shall return such security to Borrower when the remaining cost for the applicable alteration triggering the security is reduced below the Threshold.
1.1.22Operation of Property.
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(a)Borrower shall cause each Individual Property to be operated, in all material respects, in accordance with the applicable Management Agreement (or Replacement Management Agreement) as applicable. If the applicable Management Agreement expires or is terminated (without limiting any obligation of Borrower to obtain Lender’s consent to any termination or modification of the Management Agreement in accordance with the terms and provisions of this Agreement), Borrower shall promptly enter into a Replacement Management Agreement with Manager or another Qualified Manager, as applicable.
(b)Borrower shall: (i) promptly perform or observe, in all material respects, all of the covenants and agreements required to be performed and observed by it under each Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any material default (after the expiration of notice and cure periods) under each Management Agreement of which it has knowledge; (iii) upon request of Lender, promptly deliver to Lender a copy of each business plan and capital expenditures plan received by it under a Management Agreement (to the extent such information is not duplicative of materials provided by Borrower to Lender under other provisions of the Loan Documents); and (iv) enforce the performance and observance of all of the covenants and agreements required to be performed or observed by the applicable Manager under the related Management Agreement, in a commercially reasonable manner.
1.1.23Embargoed Person. Borrower has instituted procedures to insure that at all times throughout the term of the Loan, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a) to Borrower’s actual knowledge, none of the funds or other assets of Borrower and Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any Embargoed Person; (b) to Borrower’s actual knowledge, no Embargoed Person has any interest of any nature whatsoever in Borrower or Guarantor, as applicable, with the result that the investment in Borrower or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) to Borrower’s actual knowledge, none of the funds of Borrower or Guarantor, as applicable, have been derived from, or are the proceeds of, any unlawful activity, including money laundering, terrorism or terrorism activities, with the result that the investment in Borrower or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law, or may cause the Property to be subject to forfeiture or seizure.
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1.1.24Property Document Covenants. Borrower shall, at its sole cost and expense, (a) promptly and timely perform and observe (within all applicable notice and cure periods under the Property Documents) in all material respects all of the terms, covenants and conditions required to be performed and observed by Borrower under the Property Documents and shall do all things necessary to preserve and to keep unimpaired its material rights thereunder; (b) promptly notify Lender of any material default under the Property Documents of which it is actually aware; (c) promptly deliver to Lender upon reasonable request a copy of any notice of default received by it under any Property Document; (d) enforce the performance and observance in all material respects of all of the covenants and agreements required to be performed and/or observed under the Property Documents in a commercially reasonable manner; (e) cause the applicable Property to be operated, in all material respects, in accordance with the Property Documents encumbering the Property; and (f) not, without the prior written consent of Lender (such consent not to be unreasonably withheld, conditioned or delayed), (i) surrender, terminate or cancel the Property Documents, (ii) modify, change, supplement, alter, amend, or waive any of the terms or conditions of the Property Documents in a manner that would reasonably be expected to have or does have a material adverse effect on the value, current use or operation of the Property, the business, operations or condition (financial or otherwise) of the Borrower or Guarantor, (iii) following the occurrence and during the continuance of an Event of Default, modify, change, supplement, alter, amend, or waive any of the terms or conditions of the Property Documents, (iv) enter into any new Property Document unless the same would be a Permitted Transfer that would otherwise not require Lender’s consent, or (v) following the occurrence and during the continuance of an Event of Default, exercise any rights, make any decisions, grant any approvals or otherwise take any action under the Property Documents. Notwithstanding anything to the contrary contained herein, to the extent Lender’s prior approval is required in connection with a Property Document as set forth in this Section 5.1.24, such approval shall be deemed given if the first correspondence from Borrower to Lender requesting such approval contains a conspicuous legend at the top of the first page thereof stating that “THIS IS A REQUEST FOR APPROVAL OF A PROPERTY DOCUMENT. IF YOU FAIL TO APPROVE OR DISAPPROVE SUCH ANNUAL BUDGET IN WRITING WITHIN SEVEN (7) BUSINESS DAYS, BORROWER MAY DELIVER A DEEMED APPROVAL NOTICE”, and any customary information and documents in Borrower’s possession reasonably requested by Lender in writing prior to the expiration of such seven (7) Business Day period in order to adequately review the same has been delivered to Lender and, if Lender fails to approve or disapprove in writing within the seven (7) Business Day period, a second notice is delivered to Lender from Borrower in an envelope marked “PRIORITY” requesting approval containing a conspicuous legend at the top of the first page thereof stating that “THIS IS A REQUEST FOR APPROVAL OF PROPERTY DOCUMENT. IF YOU FAIL TO APPROVE OR DISAPPROVE SUCH PROPERTY DOCUMENT IN WRITING WITHIN THREE (3) BUSINESS DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN” and Lender fails to approve or disapprove within the three (3) Business Day period.
Section 1.2Negative Covenants. From the date hereof until payment and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of the Security Instrument and any other collateral in accordance with the terms of this Agreement and the other Loan Documents, Borrower (as to itself and not as to all Borrowers, as the context may require) covenants and agrees with Lender that it shall not do, directly or indirectly, any of the following:
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1.1.1Operation of Property.
(a)Borrower shall not, without Lender’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned): (i) surrender, terminate, cancel, amend or modify the Management Agreement; provided, that Borrower may, without Lender’s consent, terminate the Management Agreement and replace the Manager so long as the replacement manager is a Qualified Manager pursuant to a Replacement Management Agreement; (ii) increase or consent to the increase of the amount of any “Management Fee” (as defined in the applicable Management Agreement) with respect to any Individual Property so that such “Management Fee” would be in excess of the underwritten management fee for such Property set forth on Schedule V hereof, or (iii) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect.
(b)Following the occurrence and during the continuance of an Event of Default, Borrower shall not exercise any rights, make any decisions, grant any approvals or otherwise take any action with respect to Manager under the Management Agreement without the prior written consent of Lender, which consent may be granted, conditioned or withheld in Lender’s discretion.
1.1.2Liens. Without Lender’s consent, Borrower shall not create, incur, assume or suffer to exist any Lien on any portion of the Property or knowingly permit any such action to be taken, except for Permitted Encumbrances.
1.1.3Dissolution. Borrower shall not (a) engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (b) engage in any business activity not related to the ownership and operation of each Individual Property, (c) transfer, lease or sell, in one transaction or any combination of transactions, the assets or all or substantially all of the properties or assets of Borrower except to the extent permitted by the Loan Documents, (d) modify, amend, waive or terminate its organizational documents or its qualification and good standing in any jurisdiction, or (e) divide into two (2) or more limited liability companies or other legal entities pursuant to Section 18-217 of the Act or otherwise, in each case, without obtaining the prior written consent of Lender, not to be unreasonably withheld, delayed or conditioned.
1.1.4Change In Business. Borrower shall not enter into any line of business other than the ownership and operation of each Individual Property (and activities incidental thereto), or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business (and activities incidental thereto). Nothing contained in this Section 5.2.4 is intended to expand the rights of Borrower contained in Section 5.2.10(d) hereof.
1.1.5Debt Cancellation. Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower’s business.
1.1.6Zoning. Borrower shall not initiate or consent to any zoning reclassification of any portion of any Individual Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of any Individual Property in any manner that could reasonably be expected to result in such use becoming a nonconforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed.
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1.1.7No Joint Assessment. Borrower shall not suffer, permit or initiate the joint assessment of any Individual Property (a) with any other real property constituting a tax lot separate from the applicable Individual Property, and (b) which constitutes real property with any portion of the applicable Individual Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such real property portion of the Individual Property.
1.1.8Intentionally Omitted.
1.1.9ERISA.
(a)Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA, to the extent that no portion of the assets used by Lender in connection with the transaction contemplated under this Agreement and the other Loan Documents constitutes “plan assets” of one or more Plans within the meaning of 29 C.F.R. §2510.3-101, as modified by Section 3(42) of ERISA.
(b)Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of the Loan, as requested by Lender in its discretion, that (A) Borrower is not and does not maintain an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA; (B) Borrower is not subject to any state statute regulating investment of, or fiduciary obligations with respect to governmental plans and (C) one or more of the following circumstances is true:
(i)Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);
(ii)Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or
(iii)Borrower qualifies as an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).
1.1.10Transfers.
(a)Borrower acknowledges that Lender has examined and relied on the experience of Borrower and its stockholders, general partners, members, principals and (if Borrower is a trust) beneficial owners in owning and operating properties such as the Property in agreeing to make the Loan, and will continue to rely on Borrower’s ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and the performance of the Other Obligations. Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so as to ensure that, should Borrower default in the repayment of the Debt or the performance of the Other Obligations, Lender can recover the Debt by a sale of the Property.
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(b)Without the prior written consent of Lender, not to be unreasonably withheld, delayed or conditioned, and except to the extent otherwise set forth in this Section 5.2.10, Borrower shall not, and shall not permit any Restricted Party to do any of the following (collectively, a “Transfer”): (i) sell, convey, mortgage, grant, bargain, encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) the Property or any part thereof (except in connection with any Condemnation) or any legal or beneficial interest therein or any interest of Borrower in the Loan or (ii) permit a Sale or Pledge of an interest in any Restricted Party, other than (A) pursuant to Leases of space in the Improvements to Tenants in accordance with the provisions of Section 5.1.20 hereof and (B) Permitted Transfers. For the avoidance of doubt, in no event shall the Transfers described in clauses (a), (b), (c), (d), (g), (h) or (j) of the definition of “Permitted Transfers” set forth in Section 1.1 hereof require consent by Lender or, except as otherwise expressly required hereunder, notice to Lender.
(c)A Transfer shall include (i) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments; (ii) an agreement by Borrower leasing all or a substantial part of any Individual Property for other than actual occupancy by a space Tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rents or any Property Documents; (iii) if a Restricted Party is a corporation, any merger, consolidation division into two (2) or more legal entities or Sale or Pledge of such corporation’s stock or the creation or issuance of new stock; (iv) if a Restricted Party is a limited or general partnership or joint venture, any merger or consolidation, division into two (2) or more legal entities or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership interest of any general partner or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interest or the creation or issuance of new limited partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation, division into two (2) or more legal entities or the change, removal, resignation or addition of a managing member or nonmember manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the Sale or Pledge of nonmanaging membership interests or the creation or issuance of new nonmanaging membership interests; (vi) if a Restricted Party is a trust or nominee trust, any merger, consolidation, division into two (2) or more legal entities or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests; (vii) the removal or the resignation of the Manager (including an Affiliated Manager) other than in accordance with Section 5.1.22 hereof; or (viii) Borrower entering into or affirmatively consenting to any PACE Lien.
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(d)Notwithstanding the provisions of this Section 5.2.10, Lender’s consent shall not be required in connection with one or a series of Transfers, of not more than forty-nine percent (49%) of the direct or indirect ownership interests in a Restricted Party; provided, however, no such Transfer shall result in the change of Control in Borrower or Guarantor, and as a condition to each such Transfer that results in the transferee owning ten percent (10%) or more of the direct or indirect ownership interests in a Borrower (which such transferee did not own 10% or more of the direct or indirect ownership interests in a Borrower prior to such Transfer), (i) Borrower shall provide to Lender, not less than ten (10) days prior to such transfer, the name and identity of each proposed transferee, together with the names of its controlling principals, the social security number (if applicable) or employee identification number (if applicable) of such transferee and controlling principals (if applicable), and such transferee’s and, if applicable, controlling principal’s home address or principal place of business, and home or business telephone number (if applicable) and (ii) Lender shall have received Satisfactory Search Results with respect to the proposed transferee and such controlling principals, if applicable; provided, further, however, the foregoing clause (i) and (ii) shall not be applicable in connection with any transfer (or pledging) of stock or membership interests in any publicly-held corporation or other publicly-held entity (in each case) which is listed on the New York Stock Exchange, the NASDAQ Global Select Market or another nationally-recognized stock exchange, or transfer or issuance of securities of the REIT provided that such securities are listed on the New York Stock Exchange, the NASDAQ Global Select Market or another nationally recognized stock exchange. Borrower shall pay any and all reasonable out-of-pocket costs and expenses incurred in connection with such Transfers (including Lender’s counsel fees and disbursements and any fees and expenses of the Rating Agencies). In addition, at all times (other than in connection with a Mezzanine Control Event), Guarantor (or a Qualified Equity Holder) must continue to Control Borrower, and own, directly or indirectly, at least a 51% legal and beneficial interest in Borrower.
(e)Notwithstanding anything to the contrary contained in this Section 5.2.10, Lender shall not unreasonably withhold its consent to a sale, assignment, or other transfer of the Property (or such Property remaining after any releases of Individual Properties pursuant to Section 2.5.2 hereof) and the assumption of the Loan by the applicable Transferee provided that (i) Lender receives prior written notice of such transfer, (ii) no Event of Default has occurred and is continuing both at the time such notice is given and as of the closing date of such transaction, (iii) no such sale, assignment or other transfer of the Property shall occur on or prior to the Permitted Prepayment Date (or prior to the date that is ninety (90) days following the Permitted Prepayment Date, if Lender delivers a written notice to Borrower on or prior to the Permitted Prepayment Date stating that a Securitization is imminently pending), and (iv) the following conditions precedent are satisfied (or waived in writing by Lender or Servicer):
(i)Borrower shall pay Lender a transfer fee equal to one percent (1.0%) of the Outstanding Principal Balance of the Loan for each such Transfer resulting in the assumption of the Loan;
(ii)Borrower shall pay any and all reasonable out-of-pocket costs incurred in connection with such Transfer (including Lender’s outside counsel reasonable fees and disbursements and all recording fees, title insurance premiums and mortgage and intangible taxes and the fees and expenses of the Rating Agencies pursuant to clause (x) below);
(iii)The proposed transferee (the “Transferee”) or Transferee’s Principals (directly or indirectly) must have demonstrated expertise in owning and operating properties similar in location, size, class and operation to each Individual Property (or deliver evidence that they will engage a Qualified Manager to manage each Individual Property), which expertise shall be reasonably determined by Lender;
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(iv)Transferee and Transferee’s Principals shall, as of the date of such transfer, have an aggregate net worth and liquidity reasonably acceptable to Lender; with the understanding that if Transferee and Transferee’s Principals would otherwise satisfy the Qualified Replacement Guarantor or Qualified Equity Holder Thresholds, as the case may be, then this clause (iv) shall be deemed satisfied;
(v)Transferee, Transferee’s Principals and all other entities which may be owned or Controlled directly or indirectly by Transferee’s Principals (“Related Entities”) must not have been party to any bankruptcy proceedings, voluntary or involuntary, made an assignment for the benefit of creditors or taken advantage of any insolvency act, or any act for the benefit of debtors within seven (7) years prior to the date of the proposed Transfer;
(vi)Transferee shall assume all of the obligations of Borrower under the Loan Documents in a manner reasonably satisfactory to Lender in all respects, including by entering into an assumption agreement in form and substance reasonably satisfactory to Lender;
(vii)There shall be no material litigation or regulatory action pending or threatened in writing against Transferee, Transferee’s Principals or Related Entities which is not acceptable to Lender in its reasonable discretion and Lender shall have performed searches and/or received other diligence such that Lender is in compliance with Lender’s then current “know your customer” requirements and shall have received Satisfactory Search Results for any owner of Transferee which will own a 10% or greater equity interest (directly or indirectly) in Borrower after giving effect to such transfer;
(viii)Transferee, Transferee’s Principals and Related Entities shall not have defaulted under its or their obligations with respect to any other Indebtedness in a manner which is not acceptable to Lender in its reasonable discretion;
(ix)Transferee and Transferee’s Principals must be able to satisfy all the representations and covenants set forth in Sections 4.1.30, 4.1.35, 5.1.23 and 5.2.9 of this Agreement, no Event of Default shall otherwise occur as a result of such Transfer, and Transferee and Transferee’s Principals shall deliver (A) all organizational documentation reasonably requested by Lender, which shall be reasonably satisfactory to Lender and (B) all certificates, agreements, covenants and legal opinions reasonably required by Lender;
(x)If required by Lender (and if a Securitization has occurred), Transferee shall be approved by the Rating Agencies selected by Lender, which approval, if required by Lender, shall take the form of a confirmation in writing from such Rating Agencies to the effect that such Transfer will not result in a requalification, reduction, downgrade or withdrawal of the ratings in effect immediately prior to such assumption or transfer for the Securities or any class thereof issued in connection with a Securitization which are then outstanding;
(xi)Prior to any release of Guarantor, one (1) or more substitute guarantors reasonably acceptable to Lender shall have assumed all of the liabilities and obligations of Guarantor under the Guaranty and Environmental Indemnity executed by Guarantor or execute a replacement guaranty and environmental indemnity reasonably satisfactory to Lender; with the understanding that a substitute guarantor that qualifies as a Qualified Replacement Guarantor will be acceptable to Lender.
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(xii)Borrower shall deliver, at its sole cost and expense, an endorsement (or equivalent) to each Title Insurance Policy insuring the Security Instruments, as modified by the assumption agreement, as valid first liens on each Individual Property and naming the Transferee as owner of each Individual Property, which endorsement shall insure that each Individual Property shall not be subject to any additional exceptions or liens other than those contained in the Title Policies issued on the date hereof and the Permitted Encumbrances; and
(xiii)Each Individual Property shall be managed by Qualified Manager pursuant to a Replacement Management Agreement.
(f)Notwithstanding any provision in this Section 5.2.10 to the contrary, direct or indirect limited partnership, membership or other equity interests, as applicable, in a Restricted Party may be transferred without Lender’s consent and without application of the fee set forth in Section 5.2.10(e)(i): (i) among direct or indirect limited partners or members or other equity owners, as applicable, of a Restricted Party who are direct or indirect limited partners or members or other equity owners, as applicable, of a Restricted Party as of the date of this Agreement (each a “Current Owner”), and (ii) to immediate family members (which shall be limited to a spouse, parent, child and grandchild (each, an “Immediate Family Member”)), of any Current Owner or to trusts formed for the benefit of Immediate Family Members of such Current Owner for bona fide estate planning purposes (each, an “Additional Permitted Transfer”), provided each of the following conditions is satisfied: (A) no Event of Default has occurred and is continuing; (B) Lender has received Borrower’s notice of the Additional Permitted Transfer no less than 30 days prior to the commencement of such transfer, if required by clause (J) below; (C) no Guarantor shall be released from any guaranty or indemnity agreement by virtue of the Additional Permitted Transfer; (D) Borrower shall be responsible for the costs and expenses of documenting the Additional Permitted Transfer; (E) Borrower shall reimburse Lender for all actual costs and expenses incurred by Lender in connection with the Additional Permitted Transfer, whether or not consummated; (F) the Additional Permitted Transfer will not result in a change of Control of Borrower; (G) upon Lender’s request, Borrower shall furnish Lender copies of any documentation executed in connection with the Additional Permitted Transfer promptly after execution thereof; (H) the Additional Permitted Transfer shall not cause Borrower to violate any of the provisions of Section 4.1.30 hereof and, upon Lender’s request, Borrower shall deliver a written certification of such compliance to Lender; (I) intentionally omitted; and (J) in connection with any Additional Permitted Transfer that results in the transferee owning ten percent (10%) of the direct or indirect ownership interests in a Borrower (which such transferee did not own 10% or more of the direct or indirect ownership interests in a Borrower prior to such Transfer), (i) Borrower shall provide to Lender, not less than thirty (30) days prior to such transfer, the name and identity of each proposed transferee, together with the names of its controlling principals, the social security number or employee identification number of such transferee and controlling principals, and such transferee’s and controlling principal’s home address or principal place of business, and home or business telephone number and (ii) Lender shall have received Satisfactory Search Results with respect to the proposed transferee and such controlling principals.
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(g)A Transfer (a “Qualified Equityholder Transfer”) of direct or indirect ownership interests in Borrower to a Qualified Equityholder resulting in a change in Control of Borrower may occur at any time and from time-to-time without Lender’s consent, so long as no Event of Default has occurred and is continuing and the following conditions are satisfied (or waived in writing by Lender or Servicer): (i) Following the consummation of such Qualified Equityholder Transfer, such Qualified Equityholder shall Control Borrower (and shall Control Qualified Replacement Guarantor, if the Qualified Equityholder is not also the Qualified Replacement Guarantor), and such Qualified Replacement Guarantor must own not less than fifty-one percent (51%) of Borrower; (ii) a Qualified Replacement Guarantor shall deliver to Lender a replacement guaranty and a replacement environmental indemnity agreement each in form and substance substantially identical to the Guaranty and Environmental Indemnity executed by Guarantor as of the closing of the Loan; (iii) such Qualified Replacement Guarantor shall have furnished to Lender all appropriate documentation evidencing such Person’s organization and good standing, and the qualification of the signers to execute the applicable documents on its behalf, which documentation shall include certified copies of all relevant documents relating to the organization and formation of such Qualified Replacement Guarantor and of the entities, if any, which are partners or members of the Qualified Replacement Guarantor; (iv) Lender must receive at least thirty (30) days prior written notice thereof; (v) Borrower shall furnish to Lender such legal opinions reasonably required by Lender; (vi) Borrower shall furnish one or more Officer’s Certificates representing and warranting that, following such Qualified Equityholder Transfer, each Borrower continues to comply with the provisions of Section 4.1.30 hereof; (vii) Borrower shall pay to Lender, concurrently with the closing of such Qualified Equityholder Transfer all reasonable out-of-pocket costs and expenses, including reasonable out-of-pocket attorneys’ fees, incurred by Lender in connection therewith; and (viii) Borrower shall furnish Lender copies of any documentation executed in connection with the Qualified Equityholder Transfer promptly after execution thereof.
(h)Intentionally Omitted.
(i)Without Lender’s prior written consent thereto, in its sole discretion, any Transfer or Permitted Transfer resulting in any direct or indirect ownership interests in Borrower or the Property being held in any Prohibited Entity/Ownership Structure is prohibited, even if the same would be otherwise allowed pursuant to this Section 5.2.10, the definition of a Permitted Transfer or any other provision of any Loan Document.
(j)Other than in connection with a Transfer pursuant to Section 5.2.10(e) hereof, Borrower’s obligation to reimburse Lender for any costs and expenses incurred by Lender in connection with a Permitted Transfer pursuant to this Section 5.2.10 shall not exceed $25,000.00.
(k)Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon Borrower’s Transfer without Lender’s consent, to the extent such consent is required pursuant to this Agreement. This provision shall apply to every Transfer regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer.
(l)Upon satisfaction of all the applicable conditions under Section 5.2.10(e) or Section 5.2.10(g) hereof, as applicable, and the consummation of the Transfer contemplated thereby, Lender shall release Guarantor and (unless Borrower continues to own the Property after such Transfer) Borrower from liability under the Loan Documents for acts, events, conditions, or circumstances first occurring or arising after the date of such Transfer.
ARTICLE VI. INSURANCE; CASUALTY; CONDEMNATION
Section 1.1Insurance.
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(a)Each Borrower shall obtain and maintain, or cause to be maintained, insurance for each Borrower and each Individual Property (including but not limited to, honoring all safeguards and warranties required by insuring company or companies) providing at least the following coverages:
(i)comprehensive “all risk” or “special form” insurance, including the perils of wind/hail and named storm on the Improvements and the Personal Property, (A) in an amount equal to one hundred percent (100%) of the “Full Replacement Cost,” which for purposes of this Agreement means actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation; (B) to be written on a no coinsurance form or containing an agreed amount endorsement waiving all co-insurance provisions with respect to the Improvements and Personal Property ; (C) providing for no deductible in excess of One Hundred Thousand and No/100 Dollars ($100,000) per occurrence; except for wind/hail, named storm, and earthquake, which shall provide for no deductible in excess of 5% of the total insurable value of the Property (collectively, the “Required Deductible”); provided that Lender agrees Borrower may utilize an Aggregate Retention Amount in addition to the Required Deductible, so long as (1) the Aggregate Retention Amount remains fully prefunded at each policy inception during the loan term, and (2) Borrower shall have submitted evidence satisfactory to Lender and any applicable Rating Agencies of the structure, operations, and full sum of the prefunded Aggregate Retention Amount (the “Aggregate Retention Amount”); otherwise, Borrower shall promptly secure alternate coverage meeting the Required Deductible set forth herein; and (D) providing “Ordinance or Law” coverage for loss to the undamaged portion of the Improvements, demolition and debris removal, and increased cost of construction in amounts acceptable to Lender, if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses. The Full Replacement Cost shall be redetermined from time to time (but not more frequently than once in any twenty-four (24) calendar months) at the request of Lender by an appraiser or contractor designated and paid by Borrower and approved by Lender, or by an engineer or appraiser in the regular employ of the insurer. After the first appraisal, additional appraisals may be based on construction cost indices customarily employed in the trade. No omission on the part of Lender to request any such ascertainment shall relieve Borrower of any of its obligations under this subsection; if any portion of the Improvements or Personal Property is at any time located in an area identified in the Federal Register by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards (“SFHA”) pursuant to the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973, the National Flood Insurance Reform Act of 1994, the Flood Insurance Reform Act of 2004, or the Biggert-Waters Flood Insurance Reform Act of 2012, as each may be amended, or any successor law (the “Flood Insurance Acts”), flood hazard insurance for all such Improvements and/or Personal Property located in the SFHA in an amount equal to (1) the maximum limit of building and/or contents coverage available under the Flood Insurance Acts, plus (2) additional limits in an amount equal to the “Full Replacement Cost” or such other amount agreed to by Lender, plus (3) loss of rents and/or business interruption in an amount agreed to by Lender, with deductibles reasonably acceptable to Lender; if required by lender, earthquake (if property is located in seismic zone 3 or 4, with a PML SEL of 20% or greater), sinkhole and mine subsidence insurance in amounts equal to two times (2x) the probable maximum loss of the Property as determined by Lender in its sole discretion and in form and substance satisfactory to Lender. Notwithstanding the foregoing or anything to the contrary in this Agreement, Lender and Borrower acknowledge that (i) in order to comply with the provisions of this Section 6.1(a)(i), Borrower or the Association would need to purchase additional “all-risk” or “special form” insurance for the LaPorte Property that would cause the aggregate amount of such insurance coverage to equal no less than (a) on or prior to the date that is one (1) year following the Closing Date, the lesser of (1) $1,610,000.00 and (2) such other amount based on an alternate valuation report as approved by Lender, and (b) after the date that is one (1) year following the Closing Date, the then-current Full Replacement Cost of the Improvements and Personal
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Property with respect to the LaPorte Property based on the most recent appraisal obtained by Lender (in either such case, whether determined pursuant to clause (a) or (b), the “Additional Association Insurance”), (ii) following the Closing Date, Borrower shall use commercially reasonable efforts to purchase (or cause the Association to purchase) the Additional Association Insurance and deliver Evidence of Commercial Property Insurance (ACORD 28) evidencing the same to Lender, and (iii) without limiting the provisions of Section 9.3(b)(xxi)), Borrower shall not be in default hereunder due to the lack of Additional Association Insurance;
(ii)business income or rental loss insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsections 6.1(a) (i), (iii), and (iv) herein; (C) in an amount equal to one hundred percent (100%) of the projected gross revenues from the operation of the applicable Individual Property (on an actual loss sustained basis) for a period of twelve (12) months from the date of casualty; and (D) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of 180 days from the date that the applicable Individual Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period. The amount of such business income or rental loss insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrower’s reasonable estimate of the gross revenues from the applicable Individual Property for the succeeding twelve (12) month period. Notwithstanding the provisions of Section 2.6.1 hereof, all proceeds payable to Lender pursuant to this subsection shall be held by Lender as additional reserves hereunder pursuant to Section 7.6 hereof and, in the event that the proceeds of such business income or rental loss insurance are paid in a lump sum in advance, in the absence of an Event of Default, Lender shall disburse a portion thereof (calculated based upon aggregate amount of such proceeds divided by the number of Payment Dates occurring during the time period reasonably determined by Lender to be required to restore the damage caused by the related casualty) on each Payment Date to the Clearing Account; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in this Agreement and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance;
(iii)at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the applicable Individual Property property and liability coverage form does not otherwise apply, (A) commercial general liability and umbrella/excess liability insurance, covering claims related to the structural construction, repairs or alterations being made at such Individual Property which are not covered by or under the terms or provisions of the above mentioned commercial general liability and umbrella/excess liability insurance policies and (B) the insurance provided for in subsections (i) and (ii) above written in a so-called builder’s risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to subsection (i) above, (3) including permission to occupy the applicable Individual Property and (4) with no coinsurance or an agreed amount endorsement waiving co-insurance provisions;
(iv)comprehensive boiler and machinery insurance (also known as “equipment breakdown” insurance), if steam boilers, other pressure-fixed vessels, large air conditioning systems, elevators or other large machinery are in operation, in amounts as shall be reasonably required by Lender on terms consistent with the commercial property insurance policy required under subsections (i) and (ii) above;
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(v)commercial general liability insurance against claims for personal injury, bodily injury, death, contractual damage or property damage occurring upon, in or about the applicable Individual Property, such insurance (A) to be on the so-called “occurrence” form with a combined limit of not less than $2,000,000.00 in the aggregate and $1,000,000.00 per occurrence, per location with deductible acceptable to Lender (and, if on a blanket policy, containing an “Aggregate Per Location” endorsement subject to an annual aggregate cap of no less than $25,000,000.00); (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations on an “if any” basis; (3) independent contractors; (4) blanket contractual liability for all insured contracts and (5) contractual liability covering the indemnities contained in Article 9 of the Security Instrument to the extent the same is available;
(vi)if Borrower owns any motor vehicles or has any direct employees, commercial automobile liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of $1,000,000.00;
(vii)to the extent Borrower has any direct employees, worker’s compensation subject to the statutory limits of the state in which the Property is located, and employer’s liability insurance with a limit of at least $1,000,000.00 per accident and per disease per employee, and $1,000,000.00 for disease aggregate in respect of any work or operations on or about the Property, or in connection with the Property or its operation (if applicable);
(viii)umbrella and excess liability insurance in a combined amount not less than $5,000,000 per occurrence, on terms consistent with the commercial general liability insurance policy required under subsection (v) hereof. Provided, however, so long as the underlying commercial general liability policy is subject to an annual aggregate cap shared by other locations, umbrella liability insurance in an amount not less than Twenty-Five Million and No/100 Dollars ($25,000,000.00) per occurrence on terms consistent with the commercial general liability insurance policy required under subsection (v) hereof;
(ix)intentionally omitted;
(x)Borrower will be required to maintain insurance against terrorism with amounts, terms and coverage consistent with those required under Sections 6.1(a)(i), (ii), (iii), (v) and (viii) hereof. For so long as the Terrorism Risk Insurance Program Reauthorization Act of 2015, as extended by the Terrorism Risk Insurance Program Reauthorization Act of 2019 or subsequent statute, extension or reauthorization thereof (“TRIPRA”) is in effect and continues to cover both foreign and domestic acts of terrorism, Lender shall accept terrorism insurance with coverage against acts which are “certified” within the meaning of TRIPRA; provided, however, Borrower shall not be required to spend on terrorism insurance coverage more than two (2) times the amount of the Insurance Premiums that are payable in respect of the property and rental loss and/or business income insurance required hereunder (without giving effect to the cost of terrorism, earthquake components and catastrophic premium surcharges of such property and rental loss and/or business income insurance) on the date of this Agreement, and if the cost of terrorism insurance exceeds such amount, Borrower shall purchase the maximum amount of terrorism insurance available with funds equal to such amount; and
(xi)upon sixty (60) days written notice, such other insurance, including without limitation sinkhole or land subsidence insurance, and in such amounts as Lender from time to time may request against such other insurable hazards which at the time are commonly insured against for property similar to the applicable Individual Property located in or around the region in which the Property is located.
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(b)All insurance provided for in Section 6.1(a) hereof, shall be obtained under valid and enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and shall be subject to the approval of Lender as to form and substance including without limitation insurance companies, amounts, deductibles, loss payees and insureds. The Policies shall be issued by financially sound and responsible insurance companies approved to do business in the State and having a rating of “A-:VIII” or better in the current Best’s Insurance Reports and a claims paying ability rating of “A-” or better by S&P. The Policies described in Section 6.1 (a) (i), (ii), (v), and (viii) hereof shall provide a waiver of subrogation in favor of Lender. Borrower shall supply an original or certified copy of the original Policies within ten (10) days of request by Lender, provided that the policy is available. Prior to the expiration dates of the Policies theretofore furnished to Lender, certificates of insurance evidencing the Policies (followed by evidence satisfactory to Lender of payment of the premiums due thereunder (the “Insurance Premiums”) promptly following such payment), shall be delivered by Borrower to Lender. Borrower shall forward to Lender a copy of each written notice received by Borrower of any proposed or actual modification, reduction or cancellation of any of the Policies or of any of the coverages afforded under any of the Policies pursuant to Section 6.1(e) hereof.
(c)Any blanket insurance Policy shall be subject to Lender’s approval and shall provide the same protection as would a separate Policy insuring only the applicable Individual Property in compliance with the provisions of Section 6.1(a) hereof (any such blanket policy, an “Acceptable Blanket Policy”). To the extent that the Policies are maintained pursuant to an Acceptable Blanket Policy that covers more than one location within a one thousand foot radius of the Property (the “Radius”), the limits of such Acceptable Blanket Policy must be sufficient to maintain coverage as set forth in Section 6.1(a) for the Property and any and all other locations combined within the Radius that are covered by such blanket policy calculated on a total insured value basis. Lender shall determine based on a review of the schedule of locations and values that the amount of such coverage is sufficient in light of the other risks and properties insured under the blanket policy. In addition, prior to Policy renewal, and on an annual basis thereafter, Borrower shall provide a summary of locations and values, portfolio PML reports for all Properties applicable to any limit and/or sublimit for the peril of wind/hail (including named storm and storm surge, as applicable) in form and substance as requested by Lender. Further, any such material changes to (i) the limits under the Policy as of the Closing Date or, (ii) an aggregation of the insured values covered under the blanket policy, including the reduction or erosion of flood and windstorm/named storm limits, or (iii) the addition of locations that are subject to the perils of flood and windstorm/named storm, shall be subject to Lender’s reasonable approval and confirmation from the applicable Rating Agencies.
(d)Except for the insurance policies held by the Association pursuant to the Condominium Documents, all Policies provided for or contemplated by Section 6.1(a) hereof, shall name Borrower as a named insured, and with respect to liability policies, except for the Policies referenced in Section 6.1(a)(vi) and (vii) of this Agreement and the insurance policies held by the Association pursuant to the Condominium Documents, Lender as the additional insured, as its interests may appear, and in the case of property policies, including without limitation terrorism, boiler and machinery, loss of rents/business income, wind/hail, named storm, flood and earthquake insurance, shall contain a standard non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender.
(e)All Policies provided for in Section 6.1(a) shall contain clauses or endorsements to the effect that:
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(i)With respect to the Policies of property insurance, contain clauses or endorsements to the effect that no act or negligence of Borrower, or anyone acting for Borrower, or of any Tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, or foreclosure or similar action, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned;
(ii)with respect to the Policies of property insurance, the Policies shall not be canceled without at least thirty (30) days written notice to Lender, except at least ten (10) days written notice to Lender for non-payment of premiums; with respect to the Policies of liability insurance, the Policies shall not be cancelled without at least thirty (30) days’ written notice to Lender, except for ten (10) days’ written notice for cancellation due to non-payment of premium, unless the liability issuers cannot or will not provide notice, in which case the Borrower shall be obligated to provide such notice;
(iii)the issuers thereof shall give written notice to Lender if the issuers elect not to renew the Policy prior to its expiration. If the issuers cannot or will not provide notice, the Borrower shall be obligated to provide such notice; and
(iv)Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder.
(f)If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right to take such action as Lender deems reasonably necessary to protect its interest in the applicable Individual Property, including the obtaining of such insurance coverage as Lender in its reasonable discretion deems appropriate after five (5) Business Days’ notice to Borrower if prior to the date upon which any such coverage will lapse or at any time Lender reasonably deems necessary (regardless of prior notice to Borrower) to avoid the lapse of any such coverage. All premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, shall be secured by the Security Instrument and shall bear interest at the Default Rate.
Section 1.2Casualty. If any Individual Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give prompt written notice of such damage to Lender as soon as reasonably practicable after Borrower becomes aware of such Casualty and shall promptly commence or cause to be commenced and diligently prosecute the completion of the Restoration of the applicable Individual Property pursuant to Section 6.4 hereof as nearly as possible to the condition the applicable Individual Property was in immediately prior to such Casualty, with such alterations as may be reasonably approved by Lender and otherwise in accordance with Section 6.4 hereof. Borrower shall pay or cause to be paid all costs of such Restoration whether or not such costs are covered by insurance. Lender may, but shall not be obligated to make proof of loss if not made promptly by Borrower. In addition, Lender may participate in any settlement discussions with any insurance companies (and shall approve the final settlement, which approval shall not be unreasonably withheld or delayed) with respect to any Casualty in which the Net Proceeds or the costs of completing the Restoration are equal to or greater than the Availability Threshold and Borrower shall deliver to Lender all instruments reasonably required by Lender to permit such participation.
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Section 1.3Condemnation. Borrower shall promptly give Lender notice of the commencement of any proceeding for the Condemnation of any Individual Property (or any portion thereof) as reasonably practicable after Borrower becomes aware of such Condemnation and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender may participate in any such proceedings, and Borrower shall from time to time deliver to Lender all instruments requested by it to permit such participation. Borrower shall, at its expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings. Notwithstanding any taking by any public or quasi-public authority through Condemnation or otherwise (including any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until any Award shall have been actually received and applied by Lender, after the deduction of expenses of collection, to the reduction or discharge of the Debt. Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note. If any portion of any Individual Property is taken by a condemning authority, Borrower shall promptly commence and diligently prosecute the Restoration of the Property pursuant to Section 6.4 hereof and otherwise comply with the provisions of Section 6.4 hereof. If the applicable Individual Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt.
Section 1.4Restoration. The following provisions shall apply in connection with the Restoration of any Individual Property:
(a)If the Net Proceeds shall be less than $100,000, Lender shall permit such amount to be paid directly to Borrower and shall waive the requirement for Lender to be named as “loss payee” with respect to such payment. If the Net Proceeds shall be $100,000 or greater, but less than the Availability Threshold and the costs of completing the Restoration shall be less than the Availability Threshold, the Net Proceeds shall be disbursed by Lender to Borrower upon receipt, provided that all of the conditions set forth in Sections 6.4(b)(i)(A), (C), (D), (E), (F), (G), (H), and (I) hereof are met and Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of this Agreement.
(b)If the Net Proceeds are equal to or greater than the Availability Threshold or the costs of completing the Restoration are equal to or greater than the Availability Threshold, and provided that such Restoration is permitted under applicable Legal Requirements, Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 6.4. The term “Net Proceeds” for purposes of this Section 6.4 means: (i) the net amount of all insurance proceeds received by Lender pursuant to Section 6.1 (a)(i), (iv), (ix) (excluding in the case of such item (ix), any such insurance proceeds payable to third parties for liability or tort claims) and (x) as a result of such damage or destruction, after deduction of its reasonable out-of-pocket costs and expenses (including reasonable out-of-pocket counsel fees), if any, in collecting same (“Insurance Proceeds”), or (ii) the net amount of the Award, after deduction of its reasonable out-of-pocket costs and expenses (including reasonable out-of-pocket counsel fees), if any, in collecting same (“Condemnation Proceeds”), whichever the case may be.
(i)The Net Proceeds shall be made available to Borrower for Restoration provided that each of the following conditions are met (or waived in writing by Lender or Servicer):
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(A)no Event of Default shall have occurred and be continuing;
(B)(1) in the event the Net Proceeds are Insurance Proceeds, less than forty percent (40%) of the total floor area of the Improvements on the applicable Individual Property has been damaged, destroyed or rendered unusable as a result of such Casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less than fifteen percent (15%) of the land constituting the applicable Individual Property is taken, and such land is located along the perimeter or periphery of the applicable Individual Property, and no portion of the Improvements is located on such land;
(C)Borrower and/or Tenant, as applicable under the respective Lease, shall make all necessary repairs and restorations thereto (utilizing the Net Proceeds and any applicable Net Proceeds Deficiency), and (1) Leases demising in the aggregate a percentage amount equal to or greater than the Rentable Space Percentage of the total rentable space in the applicable Individual Property which has been demised under executed and delivered Leases in effect as of the date of the occurrence of such Casualty or Condemnation, whichever the case may be, shall remain in full force and effect during and after the completion of the Restoration, notwithstanding the occurrence of any such Casualty or Condemnation; provided, however, this clause shall not apply if any Leases were naturally expiring by their terms during the period of Restoration, (2) Lender is satisfied in its reasonable judgment that the net operating income for the Individual Property will be equal to or greater than that which exists prior to the Casualty or Condemnation, as applicable, prior to the expiration of the insurance coverage referred to in Section 6.1(a)(ii), or (3) the Debt Service Coverage Ratio is reasonably expected to be 1.89:1.0 or greater after the Restoration; provided, however, that Borrower shall have the right to satisfy the foregoing test in this Section 6.4(b)(i)(C) by prepaying, in accordance with the requirements of Section 2.3.1 hereof, a portion of the outstanding principal balance of the Loan in an amount sufficient to cause such Debt Service Coverage Ratio test to be satisfied. The term “Rentable Space Percentage” means (1) in the event the Net Proceeds are Insurance Proceeds, a percentage amount equal to eighty percent (80%) and (2) in the event the Net Proceeds are Condemnation Proceeds, a percentage amount equal to eighty percent (80%);
(D)Borrower shall commence the Restoration as soon as reasonably practicable but in no event later than one hundred twenty (120) days after such Casualty or Condemnation, whichever the case may be, occurs and shall diligently pursue the same to satisfactory completion (for the purposes of this clause the filing of an application for a building permit in accordance with all Legal Requirements shall be deemed to be commencement of the Restoration provided Borrower diligently pursues obtaining such permit and promptly commences the physical Restoration following the issuance of the building permit);
(E)Lender shall be satisfied that any operating deficits, including all scheduled Monthly Debt Service Payment Amounts, which will be incurred with respect to the Property as a result of the occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Section 6.1(a)(ii) hereof, if applicable, or (3) by other funds of Borrower;
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(F)Lender shall be satisfied that the Restoration will be completed on or before the earliest to occur of (1) six (6) months prior to the Maturity Date, (2) the earliest date required for such completion under the terms of any Lease or Property Document related to the Individual Property which suffered the Casualty or Condemnation, (3) such time as may be required under all applicable Legal Requirements in order to repair and restore the applicable Individual Property to the condition it was in immediately prior to such Casualty or to as nearly as possible the condition it was in immediately prior to such Condemnation, as applicable, or (4) the expiration of the insurance coverage referred to in Section 6.1(a)(ii) hereof;
(G)the Restoration is permitted under all applicable Legal Requirements and the Property and the use thereof after the Restoration will be in compliance with and permitted under all applicable Legal Requirements and Property Documents, subject to any existing non-conforming status that is not prohibited in relation to the Restoration;
(H)the Restoration shall be done and completed by Borrower in compliance with all applicable Legal Requirements;
(I)such Casualty or Condemnation, as applicable, does not result in the permanent loss of access to the applicable Individual Property or the Improvements;
(J)the Property Documents will remain in full force and effect during and after the Restoration and a Property Document Event shall not occur as a result of the applicable Casualty, Condemnation and/or Restoration;
(K)Borrower shall deliver, or cause to be delivered, to Lender a signed detailed budget approved in writing by Borrower’s architect or engineer stating the entire cost of completing the Restoration, which budget shall be subject to Lender’s approval;
(L)the Net Proceeds together with any cash or cash equivalent (including any Letter of Credit) deposited by Borrower with Lender are sufficient in Lender’s reasonable discretion to cover the cost of the Restoration; and
(M)the Regime is not terminated as a result of such Casualty or Condemnation.
(ii)The Net Proceeds shall be held by Lender in an Eligible Account and, until disbursed in accordance with the provisions of this Section 6.4(b), shall constitute additional security for the Debt and Other Obligations under the Loan Documents. The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower from time to time during the course of the Restoration, upon receipt of evidence reasonably satisfactory to Lender that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (B) there exist no notices of pendency, stop orders, mechanic’s or materialman’s liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the applicable Individual Property which have not either been fully bonded to the reasonable satisfaction of Lender and discharged of record or in the alternative fully insured to the reasonable satisfaction of Lender by the title company issuing the applicable Title Insurance Policy.
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(iii)All plans and specifications required in connection with the Restoration shall be subject to prior review and acceptance, not to be unreasonably withheld, delayed or conditioned, in all respects by Lender and by an independent consulting engineer selected by Lender (the “Casualty Consultant”). Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration. The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to prior review and approval by Lender and the Casualty Consultant, not to be unreasonably withheld, delayed or conditioned. All costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration including reasonable outside counsel fees and disbursements and the Casualty Consultant’s fees, shall be paid by Borrower.
(iv)In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, minus the Casualty Retainage. The term “Casualty Retainage” means an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed until the Restoration is fifty percent (50%) complete and five percent (5%) thereafter. The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 6.4(b), be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration. The Casualty Retainage shall not be released until the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b) and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental and quasi-governmental authorities, and Lender receives evidence reasonably satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; provided, however, that Lender shall release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Lender that the contractor, subcontractor or materialman has completed all work and has supplied all materials in accordance with the provisions of the contractor’s, subcontractor’s or materialman’s contract, the contractor, subcontractor or materialman delivers the lien waivers and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title company issuing the Title Insurance Policy, and Lender receives evidence reasonably acceptable to Lender evidencing that the applicable Title Insurance Policy continues to insure the priority of the lien of the applicable Security Instrument over any mechanic’s or materialmen’s lien related to the Restoration. If required by Lender, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman.
(v)Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.
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(vi)If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the reasonable opinion of Lender in consultation with the Casualty Consultant, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (the “Net Proceeds Deficiency”) with Lender before any further disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 6.4(b) shall constitute additional security for the Debt and Other Obligations under the Loan Documents.
(vii)Provided no continuing Event of Default shall then exist, after the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b), and the receipt by Lender of evidence satisfactory to Lender in its reasonable discretion that all costs incurred in connection with the Restoration have been paid in full, the excess, if any, of the Net Proceeds (and the remaining balance, if any, of the Net Proceeds Deficiency) deposited with Lender shall be (1) if a Cash Sweep Period then exists, deposited in the Cash Management Account to be disbursed in accordance with this Agreement, and (2) if no Cash Sweep Period then exists, disbursed to Borrower.
(c)All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section 6.4(b)(vii) hereof may be retained and applied by Lender toward the payment of the Debt in accordance with Section 2.3.2 hereof, whether or not then due and payable in such order, priority and proportions as Lender in its reasonable discretion shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender shall approve, in its reasonable discretion.
(d)In the event of foreclosure of the Security Instrument, or other transfer of title to the Property (or any portion thereof) in extinguishment in whole or in part of the Debt all right, title and interest of Borrower in and to the Policies that are not blanket Policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other transferee in the event of such other transfer of title.
(e)Notwithstanding anything contained herein or in any other Loan Document, if Lender applies any Net Proceeds to the repayment of the Debt and such Net Proceeds are not sufficient to obtain the release of the Individual Property subject to the Casualty or Condemnation, Borrower may, in its sole discretion, repay a portion of the Loan in an amount equal to the difference between the applicable Adjusted Release Amount and the Net Proceeds applied to repay the Loan, and satisfy all of the other conditions for Partial Release contained in Section 2.5.2 of this Agreement, Lender shall release the lien of the Security Instrument from the applicable Individual Property, and no Yield Maintenance Premium or similar sum shall be due in connection therewith.
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(f)Notwithstanding anything to the contrary set forth in this Agreement, with respect to a Casualty or a Condemnation, for so long as the Loan or any portion thereof is included in a Securitization, if the loan to value ratio (such value to be determined by the Lender in its sole discretion based on a commercially reasonable valuation method using only the portion of the Property which constitutes acceptable real estate collateral under the Code for a REMIC Trust) immediately after such Condemnation or Casualty, as the case may be, and prior to any Restoration (but taking into account any planned Restoration of the Property as if such planned Restoration were completed) is more than one hundred and twenty-five percent (125%), the principal balance of the Loan must be paid down by “qualified amount” as that term is defined in the IRS Revenue Procedure 2010-30, as the same may be amended, modified or supplemented from time to time (and no Yield Maintenance Premium or any other prepayment premium or fee shall be due in connection therewith), in order to meet the foregoing loan to value ratio unless Borrower delivers to Lender an opinion of counsel, acceptable to Lender in its reasonable discretion, that if such amount is not paid, such Securitization will not fail to meet applicable federal income tax qualification requirements or subject such Securitization to tax; provided, however, that if the immediately preceding provisions are no longer applicable under legal requirements relating to a REMIC Trust, Borrower shall comply with all legal requirements relating to a Casualty or Condemnation then in effect.
(g)Anything contained in this Section 6.4 to the contrary notwithstanding, to the extent there is a Casualty or Condemnation at the LaPorte Property, the applicable terms and conditions of the Condominium Documents, as supplemented by the Associations’ agreements (if any) contained in that certain Condominium Estoppel Certificate and Agreement dated as of February 7, 2024, shall control the holding and disbursement of Net Proceeds with respect to the LaPorte Property in the event of any inconsistencies with the terms and conditions set forth in this Section 6.4.
ARTICLE VII. RESERVE FUNDS
Section 1.1Required Repairs.
1.1.1Deposits. Borrower shall perform, or cause to be performed, the repairs at the Property, as more particularly set forth on Schedule II hereto (such repairs hereinafter referred to as “Required Repairs”). Borrower shall complete the Required Repairs on or before the required deadline for each repair as set forth on Schedule II, each as extended as a result of Force Majeure. Upon the occurrence and during the continuance of an Event of Default, Lender, at its option, may withdraw all Required Repair Funds from the Required Repair Account and Lender may apply such funds either to completion of the Required Repairs at the Property or toward payment of the Debt in such order, proportion and priority as Lender may determine in its discretion. Lender’s right to withdraw and apply Required Repair Funds shall be in addition to all other rights and remedies provided to Lender under this Agreement and the other Loan Documents; provided, however, any unapplied portions of the Required Repair Funds after the cessation of such Event of Default shall promptly be returned by Lender to Borrower or into the Required Repair Account, as the case may be. On the Closing Date, Borrower shall deposit with Lender the amount for the Property set forth on such Schedule II hereto to perform the Required Repairs for the Property. Amounts so deposited with Lender shall be held by Lender in accordance with Section 7.6 hereof. Amounts so deposited shall hereinafter be referred to as Borrower’s “Required Repair Fund” and the account in which such amounts are held shall hereinafter be referred to as Borrower’s “Required Repair Account.” Anything contained herein to the contrary notwithstanding, with respect to any Required Repairs that a Tenant is obligated to perform pursuant to its Lease, Borrower’s obligation under this Section 7.1 shall be limited to using commercially reasonable efforts to cause such Tenant to perform the applicable Required Repair, and the failure to make the Required Repairs shall not, on its own, result in an Event of Default.
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1.1.2Release of Required Repair Funds. Lender shall disburse to Borrower the Required Repair Funds from the Required Repair Account from time to time upon satisfaction by Borrower of each of the following conditions: (a) Borrower shall submit a written request for payment to Lender at least twenty (20) days prior to the date on which Borrower requests such payment be made and specifies the Required Repairs (or the completed portion thereof) to be paid, (b) on the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured, (c) Lender shall have received an Officers’ Certificate (i) stating that all Required Repairs (or the completed portion thereof) to be funded by the requested disbursement have been completed in good and workmanlike manner and in accordance with all applicable federal, state and local laws, rules and regulations, such certificate to be accompanied by a copy of any license, permit or other approval by any Governmental Authority required to commence or complete such Required Repairs (or the completed portion thereof), (ii) identifying each Person that supplied materials or labor in connection with the Required Repairs (or the completed portion thereof) to be funded by the requested disbursement, and (iii) stating that each such Person has been paid in full or will be paid in full upon such disbursement and (d) if the requested disbursement is for a sum in excess of $100,000 for any applicable Individual Property, at Lender’s option (and following delivery of Lender’s written request therefor), Lender shall have received a title search for the applicable Individual Property indicating that the applicable Individual Property is free from all liens, claims and other encumbrances not previously approved by Lender. Lender shall not be required to make disbursements from the Required Repair Account with respect to the Property (i) more than once a month and (ii) unless such requested disbursement is in an amount greater than $25,000.00 (or a lesser amount if the total amount in the Required Repair Account is less than $25,000.00 in which case only one disbursement of the amount remaining in the account shall be made) and such disbursement shall be made only upon satisfaction of each condition contained in this Section 7.1.2. At Borrower’s election, Borrower may either (x) pay all invoices in connection with the Required Repairs with respect to each request for disbursement prior to submitting such request for disbursement from the Required Repair Account or, (y) request Lender to issue joint checks, payable to Borrower and the contractor, supplier, materialman, mechanic, subcontractor or other party to whom payment is due in connection with Required Repair work.
Section 1.2Tax and Insurance Escrow Fund.
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(a)Subject to the terms of Section 7.2(b) and (c) hereof, Borrower shall pay to Lender (A) on the Closing Date an initial deposit and (B) on each Payment Date thereafter (i) one-twelfth (1/12) of the Taxes and Other Charges that Lender reasonably estimates will be payable during the next ensuing twelve (12) months in order to accumulate with Lender sufficient funds to pay all such Taxes and Other Charges at least thirty (30) days prior to their respective due dates, and (ii) one-twelfth (1/12) of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration of the Policies (said amounts in (A) and (B) above hereinafter called the “Tax and Insurance Escrow Fund” and the account in which such sums are held shall hereinafter be referred to as the “Tax and Insurance Escrow Account”). Lender shall apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to be made by Borrower pursuant to Section 5.1.2 hereof and under the Security Instrument. In making any payment relating to the Tax and Insurance Escrow Fund, Lender may do so according to any bill, statement or estimate procured from the appropriate public office (with respect to Taxes) or insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes, Other Charges and Insurance Premiums pursuant to Section 5.1.2 hereof, Lender shall, in its discretion, return any excess to Borrower or credit such excess against future payments to be made to the Tax and Insurance Escrow Fund. If at any time Lender reasonably determines that the Tax and Insurance Escrow Fund is not or will not be sufficient to pay Taxes, Other Charges and, if Borrower is required to deposit sums in the Tax and Insurance Escrow Fund with respect to Insurance Premium, Insurance Premiums by the date set forth in clause (B) above, Lender shall notify Borrower in writing of such determination and Borrower shall increase its monthly payments to Lender by the amount that Lender reasonably estimates is sufficient to make up the deficiency at least thirty (30) days prior to the due date of the Taxes and Other Charges or, if applicable, thirty (30) days prior to expiration of the Policies, as the case may be. Notwithstanding the foregoing, in the event of a completed Partial Release, upon Borrower’s written request, Lender shall recalculate the monthly deposit required pursuant to (B) above taking into account the Individual Properties securing the Loan following such completed Partial Release and the Taxes and Other Charges that Lender reasonably estimates will be payable during the next ensuing twelve (12) months with respect to such Individual Properties.
(b)Notwithstanding the foregoing or anything to the contrary in this Agreement, Lender shall waive the requirement set forth herein for Borrower to make deposits for the payment of Insurance Premiums for an Individual Property into the Tax and Insurance Escrow Fund so long as:
(i)Borrower maintains blanket policies of insurance in accordance with Section 6.1 hereof, unless Lender elects to apply such provisions following (1) the issuance by any insurer or its agent of any notice of cancellation, termination, or lapse of any insurance coverage required under Section 6.1 hereof, (2) any cancellation, termination, or lapse of any insurance coverage required under Section 6.1 hereof whether or not any notice is issued, (3) Lender having not received from Borrower evidence of insurance coverages as required by and in accordance with the terms of Section 6.1 hereof, or (4) the occurrence of any Event of Default; or
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(ii)all of the following conditions remain satisfied: (i) no Event of Default has occurred and is continuing, (ii) such Individual Property is leased to a single Tenant, (iii) the Tenant at such Individual Property is required pursuant to the applicable Lease to maintain, and is in fact maintaining, insurance for the Individual Property that complies with the requirements set forth in Section 6.1 hereof, (iv) Borrower provides to Lender satisfactory evidence on an ongoing basis that all Insurance Premiums with regard to the insurance required to be maintained pursuant to this Agreement have been paid for the relevant period with respect to such Individual Property no later than thirty (30) days prior to the expiration date of such insurance, (v) the Lease at such Individual Property is in full force and effect and there is no default thereunder and (vi) no Cash Sweep Period is in effect. If any condition in the preceding sentence has not been satisfied, Borrower shall be required to commence making monthly deposits with respect solely to the applicable Individual Property for Insurance Premiums in accordance with the first sentence of this Section 7.2.
(c)Notwithstanding the foregoing or anything to the contrary in this Agreement, Lender shall waive the requirement set forth herein for Borrower to make deposits for the payment of Taxes and Other Charges for an Individual Property into the Tax and Insurance Escrow Fund so long as (i) no Event of Default has occurred and is continuing, (ii) such Individual Property is leased to a single Tenant, (iii) the Tenant at such Individual Property occupies one or more entire tax parcel(s) and is required pursuant to the applicable Lease to pay all Taxes and Other Charges due with respect to the Individual Property directly to the applicable taxing authorities and actually does pay such Taxes and Other Charges directly, (iv) Borrower provides to Lender satisfactory evidence on an ongoing basis of payment of Taxes and Other Charges with respect to such Individual Property prior to the date such Taxes and Other Charges become delinquent, (v) the Lease at such Individual Property is in full force and effect and there is no default thereunder and (vi) no Cash Sweep Period is in effect. If any condition in the preceding sentence has not been satisfied, Borrower shall be required to commence making monthly deposits with respect solely to the applicable Individual Property for Taxes and Other Charges in accordance with the first sentence of this Section 7.2.
Section 1.3Replacements and Replacement Reserve.
1.1.1Replacement Reserve Fund. On each Payment Date during the continuance of a Cash Sweep Period, Borrower shall deposit with Lender (subject to Section 2.6.3 hereof) an amount equal to (a) $0.20 multiplied by the total number of rentable square feet of the Improvements located at the Property at the time of such Cash Sweep Period, (b) divided by twelve (12) (the “Replacement Reserve Monthly Deposit”), to be used by Borrower for replacements and repairs made to any Individual Property in accordance with this Agreement (collectively, the “Replacements”). In the event of a Partial Release, the Replacement Reserve Monthly Deposit shall be reduced by an amount equal to (i) $0.20 multiplied by the total number of square feet of the Improvements located at the Individual Property that is the subject of such Partial Release, (ii) divided by twelve. Amounts so deposited shall hereinafter be referred to as Borrower’s “Replacement Reserve Fund” and the account in which such amounts are held shall hereinafter be referred to as Borrower’s “Replacement Reserve Account.”
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1.1.2Disbursements from Replacement Reserve Account. Lender shall make disbursements from the Replacement Reserve Account to pay Borrower only for the costs of the Replacements. Lender shall not be obligated to make disbursements from the Replacement Reserve Account to reimburse, or pay, Borrower for the costs of routine maintenance to the Property (which does not include Extraordinary Expenses), replacements of inventory or for costs which are to be reimbursed from Rollover Reserve Funds or Required Repair Funds. Lender shall disburse Replacement Reserve Funds from the Replacement Reserve Account from time to time upon satisfaction by Borrower (or waiver in writing by Lender or Servicer) of each of the following conditions: (a) Borrower shall submit a written request for payment to Lender at least twenty (20) days prior to the date on which Borrower requests such payment be made (other than in connection with any emergency Replacements, for which the minimum notice period shall be waived), (b) on the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured, (c) Lender shall have received a Disbursement Certification and Schedule for the requested disbursement, and (d) with respect to any requested disbursement in excess of $100,000, (i) Lender shall have received: (A) copies of appropriate lien waivers or conditional lien waivers (conditioned only on payment) reasonably satisfactory to Lender with respect to any contractor, subcontractor and/or materialman whose proposed payment (or Borrower reimbursement, if applicable) is in excess of $100,000, and (B) if required by Lender (following delivery of Lender’s written request therefor), a title search for the applicable Individual Property indicating that such Individual Property is free from all Liens, claims and other encumbrances not previously approved by Lender (other than Permitted Encumbrances), and (ii) Lender may require an inspection of the applicable Individual Property, at Borrower’s reasonable expense, by an appropriate independent qualified professional selected by Lender prior to making such disbursement in order to verify completion of the Replacements (or the completed portion thereof) for which reimbursement is sought. Lender shall not be required to make disbursements from the Replacement Reserve Account (i) more than once a month and (ii) unless such requested disbursement is in an amount greater than $25,000.00 (or a lesser amount if the total amount in the Replacement Reserve Account is less than $25,000.00), in which case only one disbursement of the amount remaining in the account shall be made and such disbursement shall be made only upon satisfaction (or waiver in writing by Lender or Servicer) of each condition contained in this Section 7.3.2. At Borrower’s election, Borrower shall either (x) pay all invoices in connection with the Replacements work with respect to each request for disbursement prior to submitting such request for disbursement from the Replacement Reserve Account or, (y) request Lender to issues joint checks, payable to Borrower and the contractor, supplier, materialman, mechanic, subcontractor or other party to whom payment is due in connection with the Replacements work.
1.1.3Performance of Replacements. Borrower shall make, or shall cause to be made, Replacements when required in order to keep each Individual Property in condition and repair consistent with other comparable properties in the same market segment in the metropolitan area in which the applicable Individual Property is located, and to keep each Individual Property or any portion thereof from deteriorating. Borrower shall complete all Replacements in a good and workmanlike manner as soon as practicable following the commencement of making each such Replacement.
1.1.4Failure to Make Replacements.
(a)Upon the occurrence and during the continuance of an Event of Default, Lender may use the Replacement Reserve Fund (or any portion thereof) for any purpose, including completion of the Replacements as provided in Section 7.3.3, or for any other repair or replacement to the Property or toward payment of the Debt in such order, proportion and priority as Lender may determine in its discretion. Lender’s right to withdraw and apply the Replacement Reserve Fund shall be in addition to all other rights and remedies provided to Lender under this Agreement and the other Loan Documents.
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(b)Nothing in this Agreement shall obligate Lender to apply all or any portion of the Replacement Reserve Fund on account of an Event of Default to payment of the Debt or in any specific order or priority.
1.1.5Balance in the Replacement Reserve Account. The insufficiency of any balance in the Replacement Reserve Account shall not relieve Borrower from its obligation to fulfill all preservation and maintenance covenants in the Loan Documents.
Section 1.4Rollover Reserve.
1.1.1Deposits to Rollover Reserve Fund. On each Payment Date during the continuance of a Cash Sweep Period, Borrower shall deposit with Lender (subject to Section 2.6.3 hereof) an amount equal to (a) $1.00 multiplied by the total number of rentable square feet of the Improvements located at the Property at the time of such Cash Sweep Period, (b) divided by twelve (12) (the “Rollover Reserve Monthly Deposit”), which amounts shall be deposited with and held by Lender for tenant improvement and leasing commission obligations incurred following the date hereof in connection with Leases entered into in accordance with the terms hereof (the “TILC Obligations”). In the event of a Partial Release, the Rollover Reserve Monthly Deposit shall be reduced by an amount equal to (i) $1.00 multiplied by the total number of rentable square feet of the Improvements located at the Individual Property that is the subject of such Partial Release, (ii) divided by twelve. At Borrower’s election, in its sole discretion, Borrower may deposit into the Rollover Reserve Account an amount equal to all or any portion of any outstanding TILC Obligations due from Borrower in connection with satisfying a CPC Bankruptcy Trigger Event Cure or a CPC Goes Dark Trigger Event. Amounts so deposited shall hereinafter be referred to as the “Rollover Reserve Fund” and the account to which such amounts are held shall hereinafter be referred to as the “Rollover Reserve Account.” Upon the occurrence and during the continuance of a Cash Sweep Period, Borrower shall also pay to Lender, for deposit into the Rollover Reserve Account, all fees and other like payments (but not amounts that would be considered Rents) made to Borrower in connection with or relating to the rejection, buy-out, termination, surrender or cancellation of any Lease.
1.1.2Disbursements from Rollover Reserve Account.
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(a)Lender shall make disbursements from the Rollover Reserve Account to pay Borrower only for the costs of TILC Obligations. Subject to Section 7.4.2(b), Lender shall disburse Rollover Reserve Funds from the Rollover Reserve Account from time to time upon satisfaction by Borrower (or waiver in writing by Lender or Servicer) of each of the following conditions: (a) Borrower shall submit a written request for payment to Lender at least twenty (20) days prior to the date on which Borrower requests such payment be made, (b) on the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured, (c) Lender shall have received a Disbursement Certification and Schedule for the requested disbursement, and (d) with respect to any requested disbursement in excess of $100,000, (i) Lender shall have received: (A) copies of appropriate lien waivers or conditional lien waivers (conditioned only on payment) reasonably satisfactory to Lender with respect to any contractor, subcontractor and/or materialman whose proposed payment (or Borrower reimbursement, if applicable) is in excess of $100,000, and (B) if reasonably required by Lender (following delivery of Lender’s written request therefor), a title search for the applicable Individual Property indicating that such Individual Property is free from all Liens, claims and other encumbrances not previously approved by Lender (other than Permitted Encumbrances), and (ii) Lender may require an inspection of the applicable Individual Property, at Borrower’s reasonable expense, by an appropriate independent qualified professional selected by Lender prior to making such disbursement in order to verify completion of the TILC Obligations (or the completed portion thereof) for which reimbursement is sought. At Borrower’s election, Borrower shall either (x) pay all invoices in connection with the TILC Obligations with respect to each request for disbursement prior to submitting such request for disbursement from the Rollover Reserve Account or, (y) request Lender to issue joint checks, payable to Borrower and the contractor, supplier, materialman, mechanic, subcontractor or other party to whom payment is due in connection with TILC Obligations. Lender shall not be required to make disbursements from the Rollover Reserve Account with respect to the Property (i) more than once a month and (ii) unless such requested disbursement is in an amount greater than $25,000.00 (or a lesser amount if the total amount in the Rollover Reserve Account is less than $25,000.00 in which case only one disbursement of the amount remaining in the account shall be made) and such disbursement shall be made only upon satisfaction of each condition contained in this Section 7.4.2(a) or Section 7.4.2(b) below.
(b)Anything contained in Section 7.4.2(a) above notwithstanding, with respect to TILC Obligations for which the applicable Tenant (rather than Borrower) is obligated to perform the work, at Borrower’s election, Borrower shall either (x) pay all invoices in connection with such TILC Obligations, or pay the amount of such TILC Obligations directly to the applicable tenant (in accordance with what the applicable Lease requires), prior to submitting a request for disbursement from the Rollover Reserve Account or, (y) request Lender to issue joint checks, payable to Borrower and the contractor, supplier, materialman, mechanic, subcontractor, tenant or other party to whom payment is due in connection with TILC obligations. Lender shall disburse Rollover Reserve Funds from the Rollover Reserve Account with respect to TILC Obligations for which the applicable Tenant (rather than Borrower) is obligated to perform the work from time to time upon satisfaction by Borrower (or waiver by Lender or Servicer) of each of the following conditions: (a) Borrower shall submit a written request for payment to Lender at least twenty (20) days prior to the date on which Borrower requests such payment be made and specifies the aggregate amount requested and the TILC Obligations (or the completed portion thereof) to be reimbursed and (b) on the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured.
Section 1.5Excess Cash Flow Reserve Fund.
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1.1.1Deposits to Excess Cash Flow Reserve Account. During a Cash Sweep Period, subject to Section 7.5.2 hereof, all Excess Cash Flow shall be deposited with and held by Lender as additional security for the Loan. Amounts so held shall be hereinafter referred to as the “Excess Cash Flow Reserve Fund” and the account to which such amounts are held shall hereinafter be referred to as the “Excess Cash Flow Reserve Account.”
1.1.2Release of Excess Cash Flow Reserve Funds and Other Trapped Reserve Funds.
(a)Upon the occurrence of a Cash Sweep Event Cure, so long as no Event of Default or other uncured Cash Sweep Event then exists, all Excess Cash Flow Reserve Funds, Tax and Insurance Escrow Funds, Replacement Reserve Funds, Rollover Reserve Funds and other Reserve Funds that would have otherwise not been collected had a Cash Sweep Period not been in effect (the “Trapped Reserve Funds”) shall be disbursed to Borrower, subject to Sections 7.5.2(b) and (c) below. Any Excess Cash Flow Reserve Funds (and all other Reserve Funds and all other funds in the Accounts) remaining after the Debt has been paid in full shall be paid to Borrower.
(b)Notwithstanding the terms of Section 7.5.2(a), if the Cash Sweep Event Cure is caused by a Debt Yield Reserve Funds Cap Cure, then Lender shall not make such disbursements of Trapped Reserve Funds to the extent it would cause the aggregate amount of Trapped Reserve Funds to fall below the Debt Yield Reserve Funds Cap, provided that (i) subject to Borrower’s satisfaction of the applicable disbursement conditions under Section 7.4.2 hereof, Lender will make the portion of the Trapped Reserve Funds on deposit in the Excess Cash Flow Reserve Fund and the Rollover Reserve Fund available to Borrower for TILC Obligations and (ii) Lender will disburse all remaining Trapped Reserve Funds to Borrower after the applicable Cash Sweep Period expires due to the occurrence of another Cash Sweep Event Cure (or, if earlier, after the Debt has been paid in full).
(c)Notwithstanding the foregoing terms of Section 7.5.2(a), in connection with a CPC Bankruptcy Trigger Event or a CPC Goes Dark Trigger Event, (i) amounts held in the Excess Cash Flow Reserve Account shall be made available to Borrower to satisfy any requirements set forth in the definitions of “CPC Replacement Lease Criteria”, “CPC Bankruptcy Trigger Event Cure”, or “CPC Goes Dark Trigger Event Cure” for depositing amounts into the Free Rent Reserve Account or the Rollover Reserve Account and (ii) Lender shall return any remaining funds in the Excess Cash Flow Reserve Account to Borrower after Borrower has satisfied all conditions of a CPC Bankruptcy Trigger Event Cure or a CPC Goes Dark Trigger Event Cure, as applicable.
Section 1.6Reserve Funds, Generally.
(a)Borrower grants to Lender a first-priority perfected security interest in the Reserve Funds and each of the Accounts in which the Reserve Funds are held as additional security for payment of the Debt. Until expended or applied in accordance herewith, the Reserve Funds shall constitute additional security for the Debt.
(b)Subject to the terms of this Agreement, upon the occurrence and during the continuance of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any or all of the Reserve Funds to the payment of the Debt in any order in its discretion.
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(c)The Reserve Funds shall not constitute trust funds and may be commingled with other monies held by Lender. The Reserve Funds shall be held in an Eligible Account in Permitted Investments as directed by Lender or Lender’s Servicer. Unless expressly provided for in this Article VII, all interest on a Reserve Fund shall not be added to or become a part thereof and shall be the sole property of and shall be paid to Lender. Borrower shall be responsible for payment of any federal, state or local income or other tax applicable to the interest earned on the Reserve Funds credited or paid to Borrower.
(d)Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in any Reserve Fund or the monies deposited in any Accounts holding such Reserve Funds or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto.
(e)Lender and Servicer shall not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds. Borrower shall indemnify Lender and Servicer and hold Lender and Servicer harmless from and against any and all actions, suits, claims and demands and actual out-of-pocket liabilities, losses, damages (excluding consequential, punitive, special, exemplary and indirect damages), obligations and costs and expenses (including litigation costs and reasonable out-of-pocket attorneys’ fees and expenses) arising from or in any way connected with the Reserve Funds or the performance of the obligations for which the Reserve Funds were established, except to the extent arising from the gross negligence or willful misconduct of Lender or Service. Borrower shall assign to Lender all rights and claims Borrower may have against all persons or entities supplying labor, materials or other services which are to be paid from or secured by the Reserve Funds; provided, however, that Lender may not pursue any such right or claim unless an Event of Default has occurred and remains uncured.
(f)The required monthly Reserve Fund deposits and the Monthly Debt Service Payment Amount shall be added together and shall be paid as an aggregate sum by Borrower to Lender.
(g)Any amount remaining in the Reserve Funds after the Debt has been paid in full shall be promptly returned to Borrower.
Section 1.7Condominium Assessments Reserve.
1.1.1Deposits to Condominium Assessment Reserve Fund. Borrower shall pay to Lender (a) on the Closing Date an initial deposit of $2,700.00 (it being agreed that such amount, as of the date hereof, represents two (2) months of condominium assessments due from Borrower to the Association) and (b) on each Payment Date thereafter an amount such that the balance in the Condominium Assessments Reserve Account shall at all times equal at least the aggregate amount of condominium assessments due from Borrower to the Association with respect to the Unit for the next ensuing two (2) month period as determined by Lender based on the most recent annual budget of the Association provided to Lender in accordance with Section 5.1.11(g) hereof. Amounts so deposited shall hereinafter be referred to as the “Condominium Assessments Reserve Fund” and the account in which such amounts are held shall hereinafter be referred to as the “Condominium Assessments Reserve Account”. Lender may reassess its estimate of the amount necessary for the Condominium Assessments Reserve Fund from time to time, and may increase the monthly amounts required to be deposited into the Condominium Assessments Reserve Fund upon thirty (30) days’ notice to Borrower if Lender determines in its reasonable discretion that an increase is necessary. The Condominium Assessments Reserve Fund shall be held as additional collateral for the Loan and shall only be released to Borrower after the Debt has been paid in full.
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Section 1.8Free Rent Reserve.
1.1.1Deposits to Free Rent Reserve Fund. At Borrower’s election, in its sole discretion, Borrower may deposit into an Eligible Account held by Lender or Servicer (the “Free Rent Reserve Account”) an amount equal to all or any portion of any free or gap rent in connection with satisfying a CPC Bankruptcy Trigger Event Cure or a CPC Goes Dark Trigger Event Cure. Amounts so deposited shall hereinafter be referred to as the “Free Rent Reserve Fund”.
1.1.2Disbursement of Free Rent Reserve Funds. Provided no Event of Default is then continuing, Lender shall disburse to Borrower the amounts on deposit in the Free Rent Reserve Account in connection with satisfying a CPC Bankruptcy Trigger Event Cure or a CPC Goes Dark Trigger Event Cure, on each Payment Date for each month of free or gap rent deposited based on the corresponding month to which such free or gap rent applies.
Section 1.9Intentionally Omitted.
Section 1.10Letters of Credit.
(a)Other than in connection with any Letter of Credit delivered in connection with the closing of the Loan, to the extent Borrower is expressly permitted to deliver a Letter of Credit to Lender pursuant to the terms of any Loan Document, Borrower shall give Lender no less than five (5) days’ written notice of Borrower’s election to deliver a Letter of Credit together with a draft of the proposed Letter of Credit and Borrower shall pay to Lender all of Lender’s reasonable out of pocket costs and expenses (including reasonable attorneys’ fees and disbursements) in connection therewith. No party other than Lender shall be entitled to draw on any such Letter of Credit.
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(b)Each Letter of Credit delivered hereunder shall be additional security for the payment of the Debt. Upon the occurrence and during the continuance of an Event of Default, Lender shall have the right, at its option, to draw on any Letter of Credit and to apply all or any part thereof to the payment of the items for which such Letter of Credit was established or to apply such Letter of Credit to payment of the Debt in such order, proportion or priority as Lender may determine in its sole discretion. Any such application to the Debt shall be subject to the terms and conditions hereof relating to application of sums to the Debt. Lender shall have the additional rights to draw in full any Letter of Credit: (i) if Lender has received a notice from the issuing bank that the Letter of Credit will not be renewed and a substitute Letter of Credit is not provided at least thirty (30) days prior to the date on which the outstanding Letter of Credit is scheduled to expire; (ii) if Lender has not received a notice from the issuing bank that it has renewed the Letter of Credit at least thirty (30) days prior to the date on which such Letter of Credit is scheduled to expire and a substitute Letter of Credit is not provided to Lender at least thirty (30) days prior to the date on which the outstanding Letter of Credit is scheduled to expire; (iii) upon receipt of notice from the issuing bank that the Letter of Credit will be terminated (except if the termination of such Letter of Credit is permitted pursuant to the terms and conditions hereof or a substitute Letter of Credit is provided to Lender by no later than thirty (30) days prior to such termination); (iv) if the issuing bank shall cease to be an Eligible Institution and a substitute Letter of Credit from an Eligible Institution is not delivered to Lender within fifteen (15) days after notice is delivered to Borrower that the issuing bank is no longer an Eligible Institution; and/or (v) if the issuing bank shall fail to issue a replacement Letter of Credit in the event the original Letter of Credit has been lost, mutilated, stolen and/or destroyed. If Lender draws upon a Letter of Credit pursuant to the terms and conditions of this Agreement, provided no Event of Default exists, Lender shall apply all or any part thereof for the specific purposes for which such Letter of Credit was established. Notwithstanding anything to the contrary contained in the above, Lender is not obligated to draw upon any Letter of Credit upon the happening of an event specified in (i), (ii), (iii), (iv) or (v) above and shall not be liable for any losses sustained by Borrower due to the insolvency of the issuing bank if Lender has not drawn upon the Letter of Credit.
(c)Intentionally Omitted.
(d)The applicant under each Letter of Credit shall be required, until such time the Debt has been paid in full, to waive, release and abrogate any and all rights it may have under any agreement, at law or in equity (including, without limitation, any law subrogating the applicant to the rights of Lender), to assert any claim against or seek contribution, indemnification or any other form of reimbursement from Borrower or any other party liable for payment of the amounts which the Letter of Credit is intended to cover for any draw made on any such Letter of Credit or otherwise.
ARTICLE VIII. DEFAULTS
Section 1.1Event of Default. (a) Each of the following events shall constitute an event of default hereunder (an “Event of Default”):
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(i)if (A) any Monthly Debt Service Payment Amount is not paid when due by Borrower under the Loan Documents, (B) the payment due on the Maturity Date is not paid when due by Borrower under the Loan Documents, (C) any deposit to any of the Accounts required hereunder or under the other Loan Documents is not paid when due by Borrower, or (D) any other portion of the Debt is not paid when due by Borrower under the Loan Documents; provided, however, that (1) with respect to clauses (A) and (C) only, one (1) time each calendar year Borrower shall have a five (5) day grace period before a failure to pay a Monthly Debt Service Payment Amount or a deposit into any of the Accounts required under the Loan Documents shall constitute an Event of Default, but only so long as the failure to make such payment was not in Borrower’s reasonable control and provided that Lender shall not be required to deliver notice to Borrower of any such delinquent payments, and (2) with respect to clause (D) only, such non-payment continues for five (5) days following notice to Borrower that the same is due and payable;
(ii)if any of the Taxes or Other Charges are not paid prior to the date when the same become delinquent; provided, however, so long as Borrower is in compliance with the terms of Section 7.2 hereof (including having on deposit in the Tax and Insurance Escrow Fund sums sufficient to pay such Taxes or Other Charges and allocated by Lender to pay such Taxes or Other Charges when the same become due and payable) and no other Event of Default has occurred and is continuing, Lender’s failure to pay such Taxes or Other Charges from the Tax and Insurance Escrow Fund when the same are due and payable shall not constitute an Event of Default;
(iii)if the Policies are not kept in full force and effect, or if evidence of the Policies is not delivered to Lender upon request; provided, however, so long as Borrower is in compliance with the terms of Section 7.2 hereof (including having on deposit in the Tax and Insurance Escrow Fund sums sufficient to pay the Insurance Premiums and allocated for the payment of such Insurance Premiums when the same become due and payable) and Lender’s access to such sums is not restricted or constrained in any manner as a result of any act of omission of Borrower or any Affiliate of Borrower, and no other Event of Default has occurred and is continuing, a failure to keep the Policies in full force and effect shall not constitute an Event of Default if Lender’s failure to pay the Insurance Premiums when the same are due and payable is the sole reason the Policies are not in full force and effect;
(iv)if Borrower Transfers or otherwise encumbers any portion of the Property without Lender’s prior written consent in violation of the provisions of this Agreement (it being agreed that Transfers (including encumbering any portion of the Property) which are Permitted Transfers shall not constitute an Event of Default if made in accordance with the terms and conditions of this Agreement);
(v)if any representation or warranty made by Borrower herein or in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender shall have been false or misleading in any material respect as of the date the representation or warranty was made; provided, however, that if such representation or warranty which was false or misleading in any material respect is, by its nature, curable, and such representation or warranty was not, to Borrower’s knowledge, false or misleading in any material respect when made, then the same shall not constitute an Event of Default unless Borrower has not cured the same within ten (10) Business Days after receipt by Borrower of notice from Lender in writing of such breach;
(vi)if Borrower or Guarantor, or any other guarantor or indemnitor under any guarantee issued in connection with the Loan, shall make an assignment for the benefit of creditors;
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(vii)if a receiver, liquidator or trustee shall be appointed for Borrower, Guarantor or any other guarantor or indemnitor under any guarantee or indemnity, respectively issued in connection with the Loan or if Borrower, Guarantor or such other guarantor or indemnitor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to the Bankruptcy Code, or any similar federal or State law, shall be filed by or against, consented to, or acquiesced in by, Borrower, Guarantor or such other guarantor or indemnitor, or if any proceeding for the division, dissolution or liquidation of Borrower, Guarantor or such other guarantor or indemnitor shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, Guarantor or such other guarantor or indemnitor, upon the same not being discharged, stayed or dismissed within one hundred twenty (120) days; provided further, however, that with respect to Guarantor it shall not be an Event of Default under this Section 8.1(a)(vii) if, within thirty (30) days of the occurrence of such Default, a Qualified Replacement Guarantor shall, subject to the conditions of Section 5.2.10(g) hereof, have assumed all of the liabilities and obligations of Guarantor under the Loan Documents executed by Guarantor or executed a replacement guaranty substantially similar to the Guaranty and a replacement environmental indemnity substantially similar to the Environmental Indemnity;
(viii)subject to the provisions of Section 5.2.10 hereof, if Borrower attempts to assign its rights under this Agreement or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents;
(ix)if Borrower (A) breaches any covenant contained in Section 4.1.30 (provided, however, that if such breach pursuant to this subsection (A) (1) is inadvertent, immaterial and non-recurring and (2) is susceptible of cure, such breach shall not be an Event of Default hereunder if within thirty (30) days of notice from Lender to Borrower, Borrower (x) cures such breach and (y) provides Lender with written evidence acceptable to Lender of such cure), (B) breaches any covenant contained in Section 5.1.24 hereof or (C) breaches any negative covenants contained in Sections 5.2.2, 5.2.3, 5.2.4, 5.2.9 or 5.2.10 hereof;
(x)subject to Borrower’s right to contest as provided in Section 3.6 of the applicable Security Instrument, if the Property becomes subject to any mechanic’s or materialman’s Lien, and the Lien shall remain undischarged of record (by payment, bonding or otherwise) for a period of thirty (30) days after Borrower receives written notice or obtains actual knowledge of the same;
(xi)intentionally omitted;
(xii)if Borrower fails to exercise commercially reasonable efforts to deliver any document or to take any other reasonable action Borrower is obligated to take hereunder with respect to any Securitization for a period of five (5) Business Days after such notice by Lender, it being understood that Borrower shall not be obligated to deliver any document or take any action that would increase its obligations or decrease its rights under the Loan Documents, other than to a de minimis extent;
(xiii)if Borrower shall fail to comply with Section 9.1 hereof, or fails to cooperate with Lender in connection with a Securitization pursuant to the provisions of Section 9.1 hereof, for five (5) Business Days after written notice to Borrower from Lender;
(xiv)if there shall be a default under any Security Instrument or any of the other Loan Documents beyond any applicable notice and cure periods contained in such documents, whether as to Borrower or the Property, or if any other such event shall occur or condition shall exist, if the effect of such event or condition is to accelerate the maturity of any portion of the Debt or to permit Lender to accelerate the maturity of all or any portion of the Debt;
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(xv)subject to Borrower’s right to contest pursuant to this Agreement, if any federal tax lien or state or local income tax lien is filed against Borrower, Guarantor or the Property and same is not discharged of record within thirty (30) days after same is filed;
(xvi)[intentionally omitted];
(xvii)[intentionally omitted];
(xviii)(A) if Guarantor fails at any time to comply with any of the representations, warranties or covenants set forth in the Guaranty or Environmental Indemnity, or (B) if Guarantor fails at any time to maintain the Net Worth Threshold or the Liquid Assets Threshold and does not, within thirty (30) days after notice from Lender of such failure, provide evidence reasonably satisfactory to Lender that such deficiency has been cured;
(xix)if Borrower shall continue to be in Default under any of the other terms, covenants or conditions of this Agreement not specified in subsections (i) to (xviii) above, for ten (10) days after written notice to Borrower from Lender, in the case of any Default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other Default; provided, however, that if such nonmonetary Default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and provided further that Borrower shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed one hundred twenty (120) days; or
(xx)if (A) Borrower shall fail to perform in any material respect any of Borrower’s obligations with respect to the Condominium Documents after (1) the expiration of any notice and/or cure period thereunder and (2) an additional period of twenty (20) days after written notice to Borrower from Lender, or (B) Borrower votes for or approves the withdrawal of the LaPorte Property from condominium ownership pursuant to and in accordance with the Declaration.
(a)Upon the occurrence of an Event of Default (other than an Event of Default described in clauses (vi), (vii) or (viii) above) and at any time thereafter, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, Lender may take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and the Property, including declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and any or all of the Property, including all rights or remedies available at law or in equity; and upon any Event of Default described in clauses (vi), (vii) or (viii) above, the Debt and Other Obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding.
Section 1.2Remedies.
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(a)Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any part of the Property. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singularly, successively, together or otherwise, at such time and in such order as Lender may determine in its discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing, subject to applicable law, (i) Lender is not subject to any “one action” or “election of remedies” law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Property and the Security Instruments have been foreclosed, sold or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full.
(b)With respect to Borrower and the Property, nothing contained herein or in any other Loan Document shall be construed as requiring Lender to resort to any Individual Property for the satisfaction of any of the Debt in any preference or priority to any other Individual Property, and Lender may seek satisfaction out of all of the Properties, or any part thereof, in its discretion in respect of the Debt. In addition, Lender shall have the right from time to time to partially foreclose the Security Instruments in any manner and for any amounts secured by the Security Instruments then due and payable as determined by Lender in its discretion including the following circumstances: (i) in the event Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose one or more of the Security Instruments to recover such delinquent payments or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose one or more of the Security Instruments to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by one or more of the Security Instruments as Lender may elect. Notwithstanding one or more partial foreclosures, the Properties shall remain subject to the Security Instruments to secure payment of sums secured by the Security Instruments and not previously recovered.
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(c)If an Event of Default exists, Lender shall have the right to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents (the “Severed Loan Documents”) in such denominations as Lender shall determine in its discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. Borrower shall execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement and such other documents as Lender shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender; provided, subject to the provisions of Section 9.1, that Borrower shall not be required to execute and deliver Severed Loan Documents which increase Borrower’s obligations and/or liabilities under the Loan Documents or decrease Borrower’s rights under the Loan Documents or Severed Loan Documents, other than to a de minimum extent. Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead, after the occurrence and during the continuance of an Event of Default, to make and execute all documents necessary or desirable to effect the aforesaid severance, Borrower ratifying all that its said attorney shall do by virtue thereof; provided, however, Lender shall not make or execute any such documents under such power until three (3) Business Days after notice has been given to Borrower by Lender of Lender’s intent to exercise its rights under such power. Borrower shall be obligated to pay any costs or expenses incurred in connection with the preparation, execution, recording or filing of the Severed Loan Documents and the Severed Loan Documents shall not contain any representations, warranties or covenants not contained in the Loan Documents and any such representations and warranties contained in the Severed Loan Documents will be given by Borrower only as of the Closing Date and no Severed Loan Documents shall increase in any manner Borrower’s obligations, decrease Borrower’s rights or modify in a manner adverse to Borrower any financial obligations of Borrower.
(d)As used in this Section 8.2, a “foreclosure” shall include, without limitation, any sale by power of sale.
Section 1.3Remedies Cumulative; Waivers. The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon.
ARTICLE IX. SPECIAL PROVISIONS
Section 1.1Securitization.
1.1.1Sale of Notes and Securitization.
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(a)Lender shall have the right (i) to sell or otherwise transfer the Loan (or any portion thereof and/or interest therein), (ii) to sell participation interests in the Loan (or any portion thereof and/or interest therein) or (iii) to securitize the Loan (or any portion thereof and/or interest therein) in a single asset securitization or a pooled asset securitization. The transactions referred to in clauses (i), (ii) and (iii) above shall hereinafter be referred to collectively as a “Securitization”. Any certificates, notes or other securities issued in connection with a Securitization are hereinafter referred to as “Securities”.
(b)If requested by Lender, Borrower shall assist Lender in satisfying the market standards to which Lender customarily adheres or which may be reasonably required in the marketplace or by the Rating Agencies in connection with any Securitizations, including, without limitation, to:
(i)provide (A) updated financial and other information with respect to the Property, the business operated at the Property, Borrower, Guarantor, and Manager, (B) updated budgets relating to the Property, and (C) updated appraisals, market studies, environmental reviews (Phase I’s and, if appropriate, Phase II’s), property condition reports and other due diligence investigations of the Property (the “Updated Information”), together, if customary, with appropriate verification of the Updated Information through letters of auditors or opinions of counsel acceptable to Lender and the Rating Agencies (provided, however, to the extent such updated information relates to a Tenant, Borrower’s obligation shall be limited to enforcing Borrower’s rights under the applicable Leases and using commercially reasonable efforts to obtain such information in connection therewith);
(ii)provide new and/or updated opinions of counsel, which may be relied upon by Lender, the Rating Agencies and their respective counsel, agents and representatives, as required by the Rating Agencies with respect to the Property, Borrower and Borrower’s Affiliates, which counsel and opinions shall be reasonably satisfactory in form and substance to Lender and satisfactory to the Rating Agencies;
(iii)provide updated, as of the closing date of the Securitization, representations and warranties made in the Loan Documents and such additional representations and warranties as the Rating Agencies may require; and
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(iv)execute such amendments to the Loan Documents and Borrower’s organizational documents as may be reasonably requested by Lender or requested by the Rating Agencies or otherwise to effect any Securitization, including, without limitation, (A) intentionally omitted, (B) bifurcating the Loan into two or more components and/or additional separate notes and/or creating additional senior/subordinate note structure(s) (any of the foregoing, a “Loan Bifurcation”; the Mezzanine Option is separate from a Loan Bifurcation) and (C) to modify all operative dates (including but not limited to payment dates, interest period start dates and end dates, etc.) under the Loan Documents, by up to ten (10) days; provided, however, that Borrower shall not be required to so modify or amend any Loan Document if such modification or amendment would change the interest rate, the stated maturity (except as provided in subclause (C) above) or the amortization of principal set forth herein, except in connection with a Loan Bifurcation which may result in varying fixed interest rates, principal balances and amortization schedules on the components/notes, but which components shall have the same weighted average interest rate as the original Note prior to the Loan Bifurcation as well as the same aggregate principal balance and weighted amortization schedule except following an Event of Default or following any prepayment (whether resulting from the application of Net Proceeds after a Casualty or Condemnation or otherwise) of any portion of the principal amount of the Loan; provided, further, however, that Borrower shall not be required to so modify or amend any Loan Document or Borrower organizational documents if any such changes shall increase Borrower’s or Guarantor’s or their Affiliates’ obligations or decrease Borrower’s or Guarantor’s or their Affiliates’ rights under the Loan Documents or organizational documents (in each case, other than to a de minimis extent).

(c)Upon request, Borrower shall furnish to Lender from time to time such financial data and financial statements as Lender determines to be necessary, advisable or appropriate for complying with any applicable legal requirements (including those applicable to Lender or any Servicer (including, without limitation and to the extent applicable, Regulation AB)) within the timeframes necessary, advisable or appropriate in order to comply with such legal requirements. Without limiting the generality of the foregoing, and notwithstanding anything to the contrary contained herein, if the Loan is included in a Securitization that is subject to the disclosure requirements of Regulation AB, Lender shall provide Borrower prompt written notification thereof and thereafter Borrower shall furnish, or cause to be furnished, via email or regular mail deposited with the US Postal Service, to Lender: (i) on or before the day that is forty-five (45) calendar days after the end of the first, second and third calendar quarters, the estimated Net Operating Income for the Property for the most recent calendar quarter; and (ii) on or before the day that is seventy-five (75) calendar days after the end of each Fiscal Year, the estimated Net Operating Income for the Property for the most recent Fiscal Year.
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(d)Notwithstanding anything to the contrary in this Agreement or the other Loan Documents, following the Closing Date (i) all costs and expenses incurred by Lender, its successors, assigns or Affiliates in connection with this Section 9.1 and Sections 5.1.18, 9.2(c), 9.7 and 10.29, including in connection with any Securitization and any exercise of a Mezzanine Option (collectively, the “Securitization/Loan Component Provisions”) shall be paid by Lender, its successors, assigns or Affiliates, and (ii) all reasonable third-party costs and expenses (including legal fees and expenses) and any taxes (such as transfer taxes or controlling interest taxes resulting from the creation of additional ownership entities within the organizational structure of Borrower pursuant to the terms of Section 9.7 hereof) incurred by Borrower or Guarantor in connection with Borrower’s or Guarantor’s compliance with their obligations, or requests made by Lender, under the Securitization/Loan Component Provisions shall be paid by Lender; provided, however, Borrower shall be responsible for Borrower’s and Guarantor’s legal fees and expenses incurred in connection with such compliance up to the amount of $15,000 (in the aggregate between the Closing Date and Maturity Date), and Lender shall reimburse Borrower for any legal fees and expenses in excess of that amount. Nothing in the preceding sentence, however, shall limit Borrower’s obligations to pay any costs and expenses (or be deemed to require Lender to pay or reimburse Borrower for any costs and expenses) which are otherwise the responsibility of Borrower pursuant to the terms of the Loan Documents (other than the Securitization/Loan Component Provisions). Anything contained herein to the contrary notwithstanding, the $15,000 cap described above shall not be applicable to, and Borrower shall be obligated to pay (1) all costs and expenses of Lender and its successors, assigns or Affiliates described in clause (i) above, solely to the extent the same were incurred prior to the Closing Date and are set forth on the closing/settlement statement (approved by Borrower and Lender on or prior to the Closing Date) as a Borrower obligation, and (2) any costs and expenses of Borrower or Guarantor under clause (ii) above to the extent incurred prior to the Closing Date.
Section 1.2Disclosure.
(a)Borrower (on its own behalf and on behalf of each other Borrower Party) understands that information provided to Lender by Borrower, any other Borrower Party and/or their respective agents, counsel and representatives may be (i) included in (A) the Disclosure Documents and (B) filings under the Securities Act and/or the Exchange Act and (ii) made available to Investors, the Rating Agencies and service providers, in each case, in connection with any Securitization.
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(b)Subject to Section 9.3 hereof, Borrower shall indemnify Lender and its officers, directors, partners, employees, representatives, agents and affiliates against any losses, claims, damages or liabilities (collectively, the “Liabilities”) to which Lender and/or its officers, directors, partners, employees, representatives, agents and/or affiliates may become subject in connection with (x) any Disclosure Document and/or any Covered Rating Agency Information, in each case, insofar as such Liabilities arise out of or are based upon any untrue statement of any material fact in the Provided Information and/or arise out of or are based upon the omission to state a material fact in the Provided Information required to be stated therein or necessary in order to make the statements in the applicable Disclosure Document and/or Covered Rating Agency Information, in light of the circumstances under which they were made, not misleading (provided that such indemnification obligation does not specifically relate to a comment made with respect to any applicable Disclosure Document and/or Covered Rating Agency Information which Lender failed to accept in substance) and (y) after a Securitization, any indemnity obligations incurred by Lender or Servicer in connection with any required confirmation from the applicable Rating Agencies. Borrower and Guarantor agree to provide in connection with each of (i) a preliminary and a final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable, an agreement (A) certifying that Borrower has examined such Disclosure Documents specified by Lender and that each such Disclosure Document, as it relates to Borrower, Borrower Affiliates, the Property, Manager, Guarantor and all other aspects of the Loan, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, (B) indemnifying Lender (and for purposes of this Section 9.2, Lender hereunder shall include its officers and directors), the Affiliate of Lender (“Lender Affiliate”) that has filed the registration statement relating to the Securitization (the “Registration Statement”), each of its respective directors, each of its respective officers who have signed the Registration Statement and each Person that controls the Lender Affiliate within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Lender Group”), and Lender Affiliate, and any other placement agent or underwriter with respect to the Securitization, each of their respective directors and each Person who controls Lender Affiliate or any other placement agent or underwriter within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act (collectively, the “Underwriter Group”) for any Liabilities to which Lender, the Lender Group or the Underwriter Group may become subject insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such sections or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such sections or necessary in order to make the statements in such sections, in light of the circumstances under which they were made, not misleading (provided that such indemnification obligation does not specifically relate to a comment made with respect to any applicable Disclosure Document and/or Covered Rating Agency Information which Lender failed to accept in substance) and (C) agreeing to reimburse Lender, the Lender Group and/or the Underwriter Group for any legal or other expenses reasonably incurred by Lender, the Lender Group and the Underwriter Group in connection with investigating or defending the Liabilities. The indemnification provided for in clauses (B) and (C) above shall be effective whether or not the indemnification agreement described above is provided. The aforesaid indemnity will be in addition to (but not in duplication of) any liability which Borrower may otherwise have.
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(c)In connection with filings under Exchange Act and/or the Securities Act, Borrower, and Guarantor agree to (i) indemnify Lender, the Lender Group and the Underwriter Group for Liabilities to which Lender, the Lender Group or the Underwriter Group may become subject insofar as the Liabilities arise out of or are based upon the omission or alleged omission to state in the Disclosure Document a material fact required to be stated in the Disclosure Document in order to make the statements in the Disclosure Document, in light of the circumstances under which they were made, not misleading (provided that such indemnification obligation does not specifically relate to a comment made with respect to any applicable Disclosure Document and/or Covered Rating Agency Information which Lender failed to accept in substance) and (ii) reimburse Lender, the Lender Group or the Underwriter Group for any legal or other expenses reasonably incurred by Lender, the Lender Group or the Underwriter Group in connection with defending or investigating the Liabilities.
(d)Promptly after receipt by an indemnified party under this Section 9.2 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 9.2, notify the indemnifying party in writing of the commencement thereof (but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability which the indemnifying party may have to any indemnified party hereunder except to the extent that failure to notify causes prejudice to the indemnifying party). In the event that any action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled, jointly with any other indemnifying party, to participate therein and, to the extent that it (or they) may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party. After notice from the indemnifying party to such indemnified party under this Section 9.2, such indemnifying party shall pay for any legal or other expenses subsequently incurred by such indemnifying party in connection with the defense thereof; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there are any legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party at the cost of the indemnifying party.
(e)The liabilities and obligations of Borrower, Guarantor and Lender under this Section 9.2 shall survive the termination of this Agreement and the satisfaction and discharge of the Debt. Failure by Borrower and/or any Borrower Party to comply with the provisions of Section 9.1 and/or Section 9.2 within the timeframes specified therein and/or as otherwise required by Lender shall, at Lender’s option, constitute a breach of the terms thereof and/or an Event of Default. Borrower (on its own behalf and on behalf of each Borrower Party) hereby expressly authorizes and appoints Lender its attorney-in-fact to take any actions required of any Borrower Party under Sections 9.1, 9.2 and/or 9.7 in the event any Borrower Party fails to do the same, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest. Notwithstanding anything to the contrary contained herein, (i) except as may otherwise expressly provided to the contrary in this Article 9, each Borrower Party shall bear its own cost of compliance with this Article (including, without limitation, the costs of any ongoing financial reporting or similar provisions contained herein) and (ii) to the extent that the timeframes for compliance with such ongoing financial reporting and similar provisions are shorter than the timeframes allowed for comparable reporting obligations under Section 5.1.11 hereof (if any), the timeframes under this Article 9 shall control.
Section 1.3Exculpation.
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(a)Subject to the qualifications below, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Note, this Agreement, the Security Instrument or the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower or any officer, director, shareholder, partner, member, principal, employee of Borrower or any direct or indirect owner of Borrower (provided that the foregoing shall not limit in any manner, the liability of any Guarantor), except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Security Instrument and the other Loan Documents, or in the Property (or any portion thereof), the Rents, or any other collateral given to Lender pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Property, in the Rents and in any other collateral given to Lender, and Lender, by accepting the Note, this Agreement, the Security Instrument and the other Loan Documents, agrees that it shall not sue for, seek or demand any deficiency judgment against Borrower in any such action or proceeding under or by reason of or under or in connection with the Note, this Agreement, the Security Instrument or the other Loan Documents. The provisions of this Section 9.3 shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (ii) impair the right of Lender to name Borrower as a party defendant in any action or suit for foreclosure and sale under the Security Instrument; (iii) affect the validity or enforceability of any guaranty, indemnity or similar agreement or undertaking made in connection with the Loan or any of the rights and remedies of Lender thereunder; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of any assignment of leases contained in the Security Instrument and any other Loan Documents; or (vi) constitute a prohibition against Lender to seek a deficiency judgment against Borrower in order to fully realize the security granted by the Security Instrument (if required by applicable law and provided such deficiency judgment is not enforced personally against Borrower or any officer, director, shareholder, partner, member, principal, employee of Borrower or any direct or indirect owner of Borrower (excluding Guarantor under the Guaranty and Environmental Indemnity, as applicable)) or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against the Property (or any portion thereof).
(b)Nothing contained herein shall in any manner or way release, affect or impair the right of Lender to recover from Borrower, and Borrower shall be fully and personally liable and subject to legal action, for any actual out-of-pocket loss, cost, expense, damage, claim or other obligation (including reasonable out-of-pocket attorneys’ fees and expenses and other collection and litigation expenses, but excluding consequential, punitive, special, indirect and exemplary damages or diminutions in value) incurred or suffered by Lender arising out of or in connection with the following:
(i)fraud or intentional misrepresentation by Borrower or Guarantor in connection with the Loan;
(ii)the gross negligence or willful misconduct of Borrower or Guarantor;
(iii)arson or any intentional material physical waste of the Property, provided, however, that if Borrower does not have sufficient cash flow on a current basis to prevent waste, any waste shall not be deemed intentional and Borrower shall have no liability under this clause (iii);
(iv)the removal or disposal of any portion of the Property by Borrower during the continuance of an Event of Default, unless such removed or disposed portion of the Property is subsequently replaced with property of equal or greater utility or value;
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(v)the misappropriation, misapplication or conversion by Borrower or Guarantor, or any Affiliate of the foregoing, of (A) any Insurance Proceeds paid by reason of any loss, damage or destruction to the Property, (B) any Awards received in connection with a Condemnation of all or a portion of the Property during the continuance of an Event of Default, (C) any Rents or other Property income or collateral proceeds, or (D) any Rents paid more than one month in advance (including security deposits) during the continuance of an Event of Default;
(vi)following the occurrence and during the continuance of an Event of Default, the failure to either apply rents or other Property income, collected after such Event of Default, to the ordinary, customary, and necessary expenses of operating the Property or, upon demand, to deliver such rents or other Property income to Lender (or otherwise to the Clearing Account or Cash Management Account, as required by this Agreement);
(vii)failure to maintain insurance or to pay taxes and assessments, or to pay charges for labor or materials or other charges or judgments that can create Liens on any portion of the Property (unless Lender is escrowing funds therefor and fails to make such payments or has taken possession of the Property following an Event of Default, has received all Rents from the Property applicable to the period for which such insurance, taxes or other items are due, and thereafter fails to make such payments), it being acknowledged that if Borrower does not have sufficient cash flow on a current basis to maintain insurance or to pay taxes and assessments or to pay charges for labor or materials or other charges or judgments (unless such charges were incurred following the occurrence and during the continuance of an Event of Default) that create Liens on any portion of the Property, Borrower shall have no liability under this clause (vii);
(viii)any security deposits, advance deposits or any other deposits collected with respect to the Property which are not delivered to Lender upon a foreclosure of the Property or action in lieu thereof, except to the extent any such security deposits were (A) applied or returned to Tenants in accordance with the terms and conditions of any of the Leases prior to the occurrence of the Event of Default that gave rise to such foreclosure or action in lieu thereof or (B) previously delivered to Lender to be applied to repay the Loan;
(ix)any voluntary Liens, other than Permitted Encumbrances and Liens described in Sections 9.3(b)(vii) or 9.3(c)(B) hereof;
(x)any failure by Borrower to comply with any of the representations, warranties or covenants set forth in Sections 4.1.37 or 5.1.19 hereof;
(xi)[intentionally omitted];
(xii)[intentionally omitted];
(xiii)any failure by Borrower to comply with any representation, warranty or covenant set forth in Section 4.1.30 hereof to the extent such failure is not expressly covered by the full recourse event set forth in Section 9.3(c)(D) below;
(xiv)Borrower fails to obtain Lender’s prior written consent to any Transfer that is not a Full Recourse Transfer, to the extent required pursuant to the terms of the Loan Documents;
(xv)[intentionally omitted];
(xvi)Borrower’s failure to comply with the provisions of Sections 5.1.9 hereof;
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(xvii)criminal acts of Borrower or Guarantor, or executives of Borrower or Guarantor, resulting in the seizure, forfeiture or loss of the Property;
(xviii)Borrower, acting in bad faith, fails to cooperate in transferring any licenses or permits requested by Lender in connection with any foreclosure of the Property, deed in lieu or other transfer of the Property to Lender or Lender’s designee;
(xix)if Guarantor, Borrower or any Affiliate of any of the foregoing, in connection with any enforcement action or exercise or assertion of any right or remedy by or on behalf of Lender under or in connection with the Note, the Security Instruments or any other Loan Document, (a) seeks a defense, judicial intervention or injunctive or other equitable relief of any kind or asserts in a pleading filed in connection with a judicial proceeding any defense against Lender or any right in connection with any security for the Loan and (b) the court in any such action or proceeding determines that Guarantor’s, Borrower’s or such Affiliate’s defense or request for judicial intervention (1) was made by Guarantor, Borrower or such Affiliate with the intent to hinder, delay or otherwise interfere with Lender’s exercise of its remedies (whether at law or granted under the Loan Documents), or (2) was made in bad faith by Guarantor, Borrower or such Affiliate;
(xx)if there shall be any (A) termination of the Condominium Documents without Lender’s prior written consent, or (B) amendment or modification to the Condominium Documents without Lender’s prior written consent that materially and adversely affects Borrower’s ability to perform its obligations under the Loan Documents or Lender’s security and rights hereunder; or
(xxi)Borrower’s failure to purchase (or cause the Association to purchase) the Additional Association Insurance.  Notwithstanding the foregoing, there shall be no liability under this clause (xxi) (and this clause (xxi) shall be deemed to have been intentionally omitted) following Borrower’s (or the Association’s) purchase of the Additional Association Insurance and the delivery of Evidence of Commercial Property Insurance (ACORD 28) evidencing the same to Lender.
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(c)Notwithstanding anything to the contrary in this Agreement, the Note or any of the other Loan Documents, Borrower shall be personally liable for the Debt if (A) Borrower fails to obtain Lender’s prior written consent (to the extent such consent is required pursuant to the terms of the Loan Documents) to any Transfer (other than a Transfer approved by Lender or a Transfer in connection with Lender’s enforcement of its rights and remedies) (1) that results in a change in Control over Borrower or (2) of any of the Property by deed, bill of sale, installment sales agreement or ground lease (excluding any lease to a Tenant in the ordinary course of business) (a “Full Recourse Transfer”); (B) except for any Permitted Encumbrances and Permitted Indebtedness, Borrower fails to obtain Lender’s prior written consent to any Indebtedness or voluntary mortgage, deed of trust, collateral assignment or similar voluntary Lien (including a PACE Lien) encumbering the Property; provided, however, in no event shall a mechanic’s or materialman’s Lien encumbering the Property apply to this clause (B); (C) Borrower shall at any time hereafter make an assignment for the benefit of its creditors; (D) Borrower fails to comply with any representation, warranty or covenant set forth in Section 4.1.30 hereof, which failure is cited as a factor in the substantive consolidation of Borrower with any other entity in connection with any proceeding under the Bankruptcy Code; (E) Borrower admits, in any legal proceeding (other than Borrower admitting or making any truthful statement that it has been advised by counsel is required to be admitted or made under applicable laws, regulations or court orders), its insolvency or inability to pay its debts as they become due, provided that neither Borrower nor Guarantor shall have liability under this clause (E) in connection with the delivery of financial statements or any other filing required to be delivered pursuant to a subpoena or any order entered in a bankruptcy proceeding or required under applicable law in connection with any such petition made by any Person which is not an Affiliate of Borrower; or (F) Borrower files, or consents in writing to, or acquiesces in, a petition for bankruptcy, insolvency, dissolution or liquidation under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or there is a filing of an involuntary petition against Borrower under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law in which Borrower or Guarantor colludes with, or otherwise assists any party in connection with such filing, or solicits or causes to be solicited petitioning creditors for any involuntary petition against Borrower from any party (provided, however, that the failure to defend such an involuntary petition where no meritorious defense exists shall not be deemed “assisting” for purposes hereof).
(d)Nothing herein shall be deemed to constitute a waiver by Lender of any right Lender may have under Sections 506(a), 506(b), 1111(b) or any other provision of the Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Debt.
(e)Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, Borrower shall not have any liability pursuant to this Section 9.3 if a court of competent jurisdiction issues a final non-appealable judgement that any acts or omissions creating liability hereunder were caused by the fraud, bad faith, willful misconduct or gross negligence of Lender or Servicer.
(f)Notwithstanding anything to the contrary contained in the Loan Documents, other than with respect to the Guarantor under the Guaranty and the Environmental Indemnity, neither Guarantor, nor any officer, director, shareholder, partner, member, principal, employee of, shall have any personal liability for, nor be joined as a party to, any action with respect to (i) the payment of any sum which is or may be payable under this Agreement or the Loan Documents, or (ii) the performance or discharge of any covenants, obligations or undertakings of Borrower. In addition to the foregoing, in no event will the assets of any officer, director, shareholder, partner, member, principal, employee of Borrower or Guarantor be available to satisfy any obligation of Guarantor thereunder.
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(g)Notwithstanding the foregoing provisions of this Section 9.3 or anything to the contrary in this Agreement or the other Loan Documents, (i) Guarantor shall have no liability under Sections 9.3(b)(ix), (xiii), or (xiv) or Section 9.3(c) for Permitted Equipment Financing or Permitted Trade Payables that constituted Permitted Equipment Financing or Permitted Trade Payables when incurred but, due to insufficient cash flow at the Property, subsequently breaches the definition of Permitted Equipment Financing or Permitted Trade Payables by being outstanding for longer than any time period specified in such definitions, or by exceeding the one percent (1%) or two percent (2%) cap, as applicable, specified in such definitions, and (ii) Guarantor shall have no liability under any of the Loan Documents with respect to liabilities or obligations arising from events, acts, omissions, facts or circumstances first occurring from and after the date that Lender (or any Affiliate, designee, agent, nominee, successor to or assignee of Lender) takes title to the Property or the ownership interests in Borrower pursuant to a foreclosure, deed-in-lieu of foreclosure, assignment-in-lieu of foreclosure, other exercise of remedies under the Loan Documents or any other means, and which do not arise as a result of the acts of Guarantor or any Affiliate thereof; provided, however, that Guarantor’s liability shall be automatically reinstated upon any such foreclosure or conveyance being set aside, rescinded or invalidated.
Section 1.4Matters Concerning Manager. If (a) an Event of Default hereunder has occurred and remains uncured, (b) Manager shall become subject to a Bankruptcy Action, or (c) a material default by Manager occurs under the Management Agreement and remains uncured beyond all applicable notice and cure periods, Borrower shall, at the request of Lender, terminate the Management Agreement and replace the Manager with a Qualified Manager pursuant to a Replacement Management Agreement.
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Section 1.5Servicer. At the option of Lender, the Loan may be serviced by a servicer/trustee (the “Servicer”) selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to the Servicer pursuant to a servicing agreement (the “Servicing Agreement”) between Lender and Servicer. Upon the appointment of a Servicer, to the extent of the delegation to such Servicer, the term “Lender” shall be deemed to include the “Servicer”. Borrower shall be responsible for any set-up fees, or any other initial costs relating to the appointment of any Servicer, in each case, of up to $500.00, provided, however, that Borrower shall not be responsible for payment of the monthly servicer fee due to Servicer. In addition and notwithstanding the foregoing, Borrower shall be responsible for any fees and expenses of Lender or any securitization trust, servicer, special servicer, trust advisor, trustee, certificate administrator and any third party fees and expenses, including, without limitation, reasonable attorneys’ fees and disbursements, incurred or arising as a result of or following a request by Borrower, an Event of Default, a failure to pay sums when due as and when required under the Loan Documents, the Loan being transferred to a special servicer and while the Loan is a specially serviced loan, including, without limitation, (a) interest on advances made by the servicer, special servicer, trustee or certificate administrator; (b) special servicer fees, workout fees, liquidation fees, as well as other compensation payable to the special servicer as a result of the Property becoming a foreclosed property; (c) indemnification obligations to any such persons and any of their respective directors, officers, members, managers, partners, employees, agents, Affiliates or other “controlling persons” within the meaning of the Securities Act of 1933; and (d) taxes payable from the assets of a securitization trust and tax related expenses, but only to the extent Borrower is otherwise required to pay the same under the Loan Documents or by law. Notwithstanding the foregoing, all of such costs and expenses set forth in clauses (a) through (d) of the preceding sentence shall exclude (i) the regular monthly fee due to the servicer, the trustee and the certificate administrator, (ii) those costs and expenses which are identified pursuant to the servicing agreement with respect to such securitization trust as expenses to be borne by the servicer, special servicer, trust advisor, trustee or certificate administrator without reimbursement as an advance or otherwise from the related securitization trust (including without limitation such person’s ordinary overhead expenses and the expenses of such person associated with maintaining a fidelity bond or errors and omissions insurance with respect to itself, preparing annual compliance statements with respect to its own performance and preparing and filing and maintaining ordinary tax information reports and returns for such securitization trust) and (iii) those costs and expenses incurred as a result of the gross negligence, fraud, bad faith or willful misconduct of the servicer, special servicer, trustee or certificate administrator.
Section 1.6Lender/Servicer Loan Administration. From and after the date hereof, the owner and holder of the Note shall be deemed the agent of the holder(s) of the Note in connection with all matters related to the administration, servicing and payment of the Loan, and such owner and holder of the Note shall be Borrower’s point of contact in connection with all such matters. Notwithstanding the forgoing, following the transfer of the Note to a Securitization, the Servicer for such Securitization to which the Note is transferred shall be deemed the agent of the holder(s) of the Note, and such Servicer shall be Borrower’s point of contact in connection with all matters related to the administration, servicing and payment of the Loan.
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Section 1.7Mezzanine Financing. Lender shall have the right at any time to divide the Loan into two or more parts (the “Mezzanine Option”): a mortgage loan (the “Mortgage Loan”) and one or more mezzanine loans (the “Mezzanine Loan(s)”). The principal amount of the Mortgage Loan plus the principal amount of the Mezzanine Loan(s) shall equal the outstanding principal balance of the Loan immediately prior to the creation of the Mortgage Loan and the Mezzanine Loan(s). In effectuating the foregoing, the Mezzanine Lender will make a loan to the Mezzanine Borrower(s); Mezzanine Borrower(s) will contribute the amount of the Mezzanine Loan(s) to Borrower and Borrower will apply the contribution to pay down the Mortgage Loan. The Mortgage Loan and the Mezzanine Loan(s) will be on the same terms and subject to the same conditions set forth in this Agreement, the Note, the Security Instrument and the other Loan Documents except as follows:
(a)Lender shall have the right to establish different interest rates and debt service payments for the Mortgage Loan(s) and the Mezzanine Loan and to require the payment of the Mortgage Loan and the Mezzanine Loan(s) in such order of priority as may be designated by Lender; provided, that (i) the total loan amounts for the Mortgage Loan and the Mezzanine Loan(s) shall equal the amount of the Loan immediately prior to the creation of the Mortgage Loan and the Mezzanine Loan(s), (ii) the initial weighted average interest rate of the Mortgage Loan and the Mezzanine Loan(s) shall initially on the date created equal the interest rate which was applicable to the Loan immediately prior to creation of the Mortgage Loan and the Mezzanine Loan(s) and (iii) the initial debt service payments on the Mortgage Loan note and the Mezzanine Loan note(s) shall initially on the date created equal the debt service payment which was due under the Loan immediately prior to creation of the Mortgage Loan and the Mezzanine Loan(s). The Mezzanine Loan(s) will be made pursuant to Lender’s standard mezzanine loan documents (as such documents may be revised as a result of reasonable negotiation). The Mezzanine Loan(s) will be subordinate to the Mortgage Loan and will be governed by the terms of an intercreditor agreement between the holders of the Mortgage Loan and the Mezzanine Loan(s).
(b)The borrower(s) under the Mezzanine Loan(s) (“Mezzanine Borrower(s)”) shall be a special purpose, bankruptcy remote entity pursuant to applicable Rating Agency criteria and otherwise acceptable to Lender that shall own directly or indirectly one hundred percent (100%) of Borrower. The direct equity holder(s) of Mezzanine Borrower(s) (such holder(s) the “Second Level SPE”) shall be a special purpose, bankruptcy remote entity pursuant to applicable Rating Agency criteria and shall own directly or indirectly one hundred percent (100%) of Mezzanine Borrower. The security for the Mezzanine Loan shall be a pledge of one hundred percent (100%) of the direct and indirect ownership interests in Borrower and Mezzanine Borrower.
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(c)Mezzanine Borrower, Second Level SPE and Borrower shall cooperate with all reasonable requests of Lender in order to divide the Loan into a Mortgage Loan and one or more Mezzanine Loan(s) and shall execute and deliver such documents as shall reasonably be required by Lender and any Rating Agency in connection therewith, including, without limitation, (i) [intentionally omitted]; (ii) the modification of organizational documents and Loan Documents, provided that Borrower shall not be required to so modify or amend any Loan Document or organizational documents if any such changes shall increase Borrower’s or Guarantor’s or their Affiliates’ obligations or decrease Borrower’s or Guarantor’s or their Affiliates’ rights under the Loan Documents or organizational documents (in each case, other than to a de minimis extent); (iii) authorize Lender to file any UCC-1 Financing Statements reasonably required by Lender to perfect its security interest in the collateral pledged as security for the Mezzanine Loan(s); (iv) execute such other documents reasonably required by Lender in connection with the creation of the Mezzanine Loan(s), including, without limitation, a guaranty substantially similar in form and substance to the Guaranty delivered on the date hereof in connection with the Loan, an environmental indemnity substantially similar in form and substance to the Environmental Indemnity delivered on the date hereof in connection with the Loan and a conditional assignment of management agreement substantially similar in form and substance to the Assignment of Management Agreement delivered on the date hereof in connection with the Loan; (v) deliver appropriate authorization, execution and enforceability opinions with respect to the Mezzanine Loan(s) and amendments to the Mortgage Loan; (v) intentionally omitted, and (vii) deliver a “UCC-9”, “Eagle 9” or equivalent UCC title insurance policy, satisfactory to Lender, insuring the perfection and priority of the lien on the collateral pledged as security for the Mezzanine Loan. For the avoidance of doubt, in no event shall the Mezzanine Loan have any features of “preferred equity.”
(d)All costs and expenses incurred by Lender, Borrower or Guarantor in connection with this Section 9.7 shall be paid in accordance with Section 9.1.1(d) hereof.
Section 1.8Condominium Provisions.
1.1.1Compliance with Condominium Act and Condominium Documents .
(a)    LaPorte Borrower shall strictly observe and perform all of LaPorte Borrower’s obligations under all Condominium Documents, including, without limitation, the obligation to pay, when due, all dues, common expenses, and other charges and assessments imposed pursuant to all Condominium Documents and, to the extent applicable, the Condominium Act. LaPorte Borrower shall not, except after notice to Lender and with Lender’s prior written consent, partition or subdivide any portion of the Property, or vote for or consent to: (i) the abandonment or termination of the Property as a condominium under the Condominium Act, except for abandonment or termination required by law in the case of substantial destruction by fire or other casualty or in the case of a substantial taking by condemnation or eminent domain or (ii) any amendment to (or waiver of) any material provision of any Condominium Documents (including provisions regarding the ownership, encumbering, selling, releasing, alienating or transferring of common areas, methods of levying condominium dues and assessments, or using hazard proceeds for purposes other than repair of improvements), in each case, if such amendment or waiver would reasonably be expected to materially and adversely affect Borrower’s position as the fee owner of the Unit, Borrower’s ability to perform its obligations under the Loan Documents or Lender’s security and rights hereunder.
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(b)    Upon the occurrence and continuation of an Event of Default, Lender shall have all the rights and privileges which the owner of the Unit has by virtue of the Condominium Act and the Condominium Documents as though Lender were in fact the Unit owner, as defined by the Condominium Act and Condominium Documents, including, without limiting the generality of the foregoing, all voting rights accruing to LaPorte Borrower under the terms of the Condominium Documents, it being understood that upon the occurrence of an Event of Default, and, for so long as any Event of Default shall continue, Lender may vote in the place and stead of LaPorte Borrower. Upon the occurrence and during the continuation of an Event of Default, Lender may exercise any and all of said rights hereinabove referred to, and Borrower hereby irrevocably nominates and appoints Lender (and coupled with an interest), for so long as the Security Instrument remains in effect and any such Event of Default shall continue, as LaPorte Borrower’s proxy to vote and as LaPorte Borrower’s agent to act with respect to all of said rights. Written notice of an Event of Default from Lender to the Condominium Board or any successor thereto, shall be deemed conclusive as to the existence of such Event of Default and as to Lender’s rights and privileges under this Section 9.8.1, including all voting rights accruing to Borrower under the terms of the Condominium Documents and the Condominium Act. The provisions of this Section shall in no event render Lender liable for any general or special common charges or other common charges or assessments required by the Condominium Documents or the Condominium Act, nor shall they cause, in and of themselves, Lender to be deemed a declarant under the Condominium Act. Borrower shall promptly provide Lender with copies of any notices of default by any person or entity under any Condominium Document which are received by Borrower.
1.1.2[Intentionally Omitted].
1.1.3Additional Condominium Provisions
(a)    [Intentionally Omitted.]
(b)    LaPorte Borrower shall comply with all terms, conditions and covenants of the Declaration, the bylaws of the Regime (the “Bylaws”) and all rules and regulations promulgated or otherwise existing with respect to the Regime (collectively, the “Condominium Rules”) as those are in force and effect.
(c)    Borrower shall promptly deliver to Lender a true and full copy of each and every notice of default by Borrower received by Borrower with respect to any obligation of LaPorte Borrower under the provisions of the Condominium Documents or the Condominium Rules.
(d)    In each and every case in which, under the provisions of the Declaration or the Condominium Rules, the consent or the vote of the owners of a unit is required, Borrower shall not vote or give such consent if doing so would materially and adversely impair the lien of the Security Instrument or the security therefor without, in each and every case, the prior written consent of Lender.
(e)    LaPorte Borrower shall promptly pay, as the same become due and payable, all common charges or other payments for maintenance and reserve funds and all assessments as required by the Condominium Documents or the Condominium Rules or any resolutions adopted pursuant thereto, and shall promptly upon demand exhibit to Lender receipts for all such payments. In the event that LaPorte Borrower fails to make such payments as the same become due and payable, Lender may from time to time at its option, but without any obligation to do so and following ten (10) days’ notice to or demand upon Borrower, make such payments, and the same shall be added to the debt secured hereby, and shall bear interest until repaid at the Default Rate.
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(f)    In the event of the failure of LaPorte Borrower to perform any of its material obligations relating to the LaPorte Property under the Condominium Documents or Condominium Rules within a period of thirty (30) days (or longer or shorter period to the extent dictated by the Condominium Documents) after written notice from the Condominium Board or from Lender, if LaPorte Borrower fails to proceed promptly after such time period to cure or remedy the same with due diligence, then in any such case, Lender may from time to time at its option, but without any obligation so to do, upon ten (10) days’ notice to Borrower, cure or remedy any such default of Borrower (Borrower hereby authorizing Lender to enter upon the LaPorte Property as may be necessary for such purposes), and all sums expended by Lender for such purposes, including reasonable counsel fees, shall be added to the Debt, shall become due and payable and shall bear interest until repaid at the Default Rate.
(g)    Upon the occurrence and during the continuance of an Event of Default hereunder, Lender may upon written notice to Borrower require the resignation of any of LaPorte Borrower’s designees as members of the Condominium Board and appoint, in lieu thereof, Lender’s designees as members of the Condominium Board that may be appurtenant to the Property.

ARTICLE X. MISCELLANEOUS
Section 1.1Survival. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All covenants, promises and agreements in this Agreement, by or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and assigns of Lender. Any representations, warranties or covenants made by Borrower hereunder are being made by the applicable Borrower as to itself only and not on behalf of any other Borrower.
Section 1.2Intentionally Omitted .
Section 1.3Governing Law.
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(a)LENDER HAS OFFICES IN THE STATE OF NEW YORK AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK (“GOVERNING STATE”), WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIEN AND SECURITY INTEREST CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(b)ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS (“ACTION”) MAY AT LENDER’S OPTION BE INSTITUTED IN (AND IF ANY ACTION IS ORIGINALLY BROUGHT IN ANOTHER VENUE, THE ACTION SHALL AT THE ELECTION OF LENDER BE TRANSFERRED TO) ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND EACH OF LENDER AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE OR FORUM NON CONVENIENS OF ANY SUCH ACTION. BORROWER DOES HEREBY DESIGNATE AND APPOINT:
THE CORPORATION SERVICE COMPANY
251 LITTLE FALLS DRIVE,
WILMINGTON, DELAWARE 19808

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AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN THE STATE OF NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

Section 1.4Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.
Section 1.5Delay Not a Waiver. Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.
Section 1.6Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (c) by email and with a second copy to be sent to the intended recipient by any other means permitted under this Section, addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section):
If to Lender:    Bank of Montreal
                        c/o BMO Capital Markets Corp.
                        151 West 42nd Street
                        New York, New York 10036
                        Attention: Mike Birajiclian
                        Email: Michael.Birajiclian@bmo.com

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        And:                Bank of Montreal
                        c/o BMO Capital Markets Corp.
                        151 West 42nd Street
                        New York, New York 10036
                        Attention: Legal Department
                        Email: BMOCMBSNotices@bmo.com

With a copy to:    Frost Brown Todd LLP
400 West Market Street, Suite 3200
Louisville, Kentucky 40202
Attention: Barry A. Hines, Esq.
Email: bhines@fbtlaw.com

If to Borrower:    c/o AR Global
    97 John Clarke Road, Suite 2
    Middletown, RI 02842
    Attention: Michael Anderson
    Email: MAnderson@ar-global.com

with a copy to:    Arnold & Porter
    601 Massachusetts Ave., NW
    Washington, D.C. 20001
    Attention: Jon Boswell
Email: Jon.Boswell@arnoldporter.com

A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery, upon the first attempted delivery on a Business Day. Notice for any party may be given by its respective counsel. Additionally, Notice from Lender may also be given by Servicer and Lender hereby acknowledges and agrees that Borrower shall be entitled to rely on any Notice given by Servicer as if it had been sent by Lender.
Section 1.7Trial by Jury. TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER AND BORROWER ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
Section 1.8Headings. The Article or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
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Section 1.9Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
Section 1.10Preferences. Except as otherwise expressly set forth herein or in any of the other Loan Documents, Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder. To the extent Borrower makes a payment or payments to Lender, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.
Section 1.11Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrower.
Section 1.12Remedies of Borrower. If a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary damages, and Borrower’s sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. Notwithstanding the foregoing, the terms of this Section 10.12 shall not apply with respect to the gross negligence, illegal acts, bad faith, willful misconduct or fraud of Lender, Servicer or its agents.
Section 1.13Expenses; Indemnity.
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(a)Subject to the terms of Section 9.1.1(d) and any other provisions of this Agreement or the other Loan Documents that expressly provide otherwise, Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of written notice from Lender for all reasonable out-of-pocket costs and expenses (including reasonable out-of-pocket attorneys’ fees and expenses) incurred by Lender in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower (including any opinions requested prior to the Closing Date by Lender as to any legal matters arising under this Agreement or the other Loan Documents with respect to the Property or any portion thereof); (ii) Borrower’s ongoing performance of and compliance with Borrower’s respective agreements and covenants contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date, including confirming compliance with environmental and insurance requirements; (iii) Lender’s ongoing performance and compliance with all agreements and conditions contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date; (iv) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters requested by Lender; (v) securing Borrower’s compliance with any requests made pursuant to the provisions of this Agreement; (vi) the filing and recording fees and expenses, title insurance and fees and expenses of counsel for providing to Lender all reasonably required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in favor of Lender pursuant to this Agreement and the other Loan Documents, each with respect to the Property; (vii) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents, the Property (or any portion thereof), or any other security given for the Loan; and (viii) enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to the Property or any portion thereof (including any fees actually and reasonable incurred by Servicer in connection with the transfer of the Loan to a special servicer prior to an Event of Default) or in connection with any restructuring of the credit arrangements provided under this Agreement in the nature of a “work out” or of any insolvency or bankruptcy proceedings; provided, however, that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the bad faith, gross negligence, illegal acts, fraud or willful misconduct of Lender (or Servicer). Any actual, reasonable cost and expenses due and payable to Lender may be paid from any amounts in the Clearing Account or Cash Management Account, as applicable.
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(b)Subject to Section 9.3, Borrower shall indemnify, defend and hold harmless the Indemnified Parties from and against any and all other actual out-of-pocket liabilities, obligations, losses, damages (excluding consequential, punitive, special, exemplary and indirect damages), penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable out-of-pocket fees and disbursements of counsel in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not an Indemnified Party shall be designated a party thereto), that are imposed on, incurred by, or asserted against any Indemnified Party in any manner relating to or arising out of (i) any breach by Borrower of its obligations under, or any material misrepresentation by Borrower contained in, this Agreement or the other Loan Documents, or (ii) the use or intended use of the proceeds of the Loan (collectively, the “Indemnified Liabilities”); provided, however, that Borrower shall not have any obligation to any Indemnified Party hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of such Indemnified Party, or any liability for any Indemnified Liabilities specifically relating to the condition of any Individual Property to the extent arising from events first occurring from and after Lender (or its designee or transferee) takes title to the Property by foreclosure, deed-in-lieu thereof or otherwise. To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnified Parties.
(c)Separate from the Securitization costs specifically set forth in Section 9.1.1(d) hereof, Borrower covenants and agrees to pay for or, if Borrower fails to pay, to reimburse Lender for, any fees and expenses incurred by any Rating Agency in connection with any Rating Agency review of the Loan, the Loan Documents or any transaction contemplated thereby or any consent, approval, waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of this Agreement or any other Loan Document that results from an action or request of Borrower and Lender shall be entitled to require payment of such fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver or confirmation.
Section 1.14Schedules Incorporated. The Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.
Section 1.15Offsets, Counterclaims and Defenses. Any assignee of Lender’s interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.
Section 1.16No Joint Venture or Partnership; No Third Party Beneficiaries.
(a)Borrower and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to create a joint venture, partnership, tenancy in common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Property (or any portion thereof) other than that of mortgagee, beneficiary or lender.
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(b)This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein. All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender’s discretion, Lender deems it advisable or desirable to do so.
Section 1.17Publicity. All news releases, publicity or advertising by Borrower or its Affiliates other than releases required by law or regulation through any media intended to reach the general public which refers to the Loan Documents or the financing evidenced by the Loan Documents, to Lender or any of their Affiliates shall be subject to the prior written approval of Lender in their reasonable discretion.
Section 1.18Waiver of Marshalling of Assets. To the fullest extent permitted by law, Borrower, for itself and its successors and assigns, waives all rights to a marshalling of the assets of Borrower, Borrower’s partners and others with interests in Borrower, and of the Property, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Property (or any portion thereof) for the collection of the Debt without any prior or different resort for collection or of the right of Lender to the payment of the Debt out of the net proceeds of the Property (or any portion thereof) in preference to every other claimant whatsoever.
Section 1.19Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.
Section 1.20Conflict; Construction of Documents; Reliance. In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by counsel in connection with the negotiation, drafting and execution of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same. Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Lender or any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Loan Documents or any other agreements or instruments which govern the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to Lender’s exercise of any such rights or remedies. Borrower acknowledges that Lender engages in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of Borrower or its Affiliates.
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Section 1.21Prior Agreements. This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, between Borrower and Lender are superseded by the terms of this Agreement and the other Loan Documents.
Section 1.22Liability. If Borrower consists of more than one (1) Person the obligations and liabilities of each Person shall be joint and several. Under no circumstances whatsoever shall Lender have any liability for punitive, special, consequential or incidental damages in connection with, arising out of, or in any way related to or under this Loan Agreement or any other Loan Document or in any way related to the transactions contemplated or any relationship established by this Agreement or any other Loan Document or any act, omission or event occurring in connection herewith or therewith, and, to the extent not expressly prohibited by applicable laws, Borrower for itself and its Guarantor and indemnitors waives all claims for punitive, special, consequential or incidental damages. Lender shall have no duties or responsibilities except those expressly set forth in this Agreement, the Security Instrument and the other Loan Documents. Neither Lender nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by them as such hereunder or in connection herewith, unless caused by their fraud, bad faith, gross negligence or willful misconduct. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. Under no circumstances whatsoever shall Borrower have any liability for punitive, special, consequential or incidental damages in connection with, arising out of, or in any way related to or under this Loan Agreement or any other Loan Document or in any way related to the transactions contemplated or any relationship established by this Agreement or any other Loan Document and, to the extent not expressly prohibited by applicable laws, Lender waives all claims for punitive, special, consequential or incidental damages.
Section 1.23Certain Additional Rights of Lender (VCOC). Solely to the extent that Lender or any direct or indirect holder of an interest in the Loan must qualify as a “venture capital operating company” (as defined in Department of Labor Regulation 29 C.F.R. § 2510.3 101), Lender shall have the right to consult with and advise Borrower regarding significant business activities and business and financial developments of Borrower, provided that any such advice or consultation or the result thereof shall be completely nonbinding on Borrower.
Section 1.24OFAC. Borrower hereby represents, warrants and covenants that neither Borrower nor any Guarantor is (or will be) a person with whom Lender is restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury of the United States of America (including, those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not knowingly engage in any dealings or transactions or otherwise be knowingly associated with such persons. In addition, Borrower hereby covenants to provide Lender with any additional information that Lender deems necessary from time to time in order to ensure compliance with all applicable laws concerning money laundering and similar activities.
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Section 1.25Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterpart shall be deemed an original instrument and all of which together shall constitute a single Agreement. The failure of any party hereto to execute this Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder.
Section 1.26Confidentiality. Notwithstanding anything to the contrary in this Agreement, Lender agrees that any reports, statements or other information required to be delivered or provided under this Agreement or any of the other Loan Documents and furnished at any time and from time to time by Borrower or Guarantor (“Furnished Information”), which is provided to Lender by or on behalf of Borrower or Guarantor, shall be kept confidential. Any Furnished Information may also be disclosed to any Rating Agency, underwriter or nationally recognized statistical rating organization (“NRSRO”); provided (i) each Rating Agency or underwriter to which such information is disclosed has executed its usual and customary confidentiality agreement and (ii) any NRSRO desiring access to any secured website containing such information shall, as a condition to its access to, have either furnished to the Securities and Exchange Commission the certification required under Rule 17g-5(e) of the Exchange Act or be required to agree to (or “click through”) such website’s confidentiality provisions. Nothing herein shall preclude Lender from disclosing any Furnished Information (A) as required by any applicable Legal Requirement, (B) which is already publicly available as a result of disclosure by any other party, (C) in response to any order of any court or other Governmental Authority, or (D) if Lender is required to do so in connection with any litigation or similar proceeding; provided that in the case of clause (A), (C) or (D), Lender shall exercise reasonable efforts to give prior written notice of such requirement to Borrower or Guarantor, as applicable, (to the extent it is lawful to do so) in order to permit Borrower or Guarantor, as applicable, to, and shall reasonably cooperate, provided such cooperation shall be at no cost or expense to Lender, with Borrower or Guarantor, as applicable, in its efforts to, seek a protective order. This Section 10.26 shall survive the repayment of the Loan and the termination of this Agreement.
Section 1.27Acknowledgement and Consent to Bail-In of EEA Financial Institutions.
(a)Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among the respective parties thereto, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(i)the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(ii)the effects of any Bail-in Action on any such liability, including, if applicable:
(A)a reduction in full or in part or cancellation of any such liability;
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(B)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(C)the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
(b)As used in this Section 10.27 the following terms have the following meanings ascribed thereto: (i) “Affected Financial Institution” means (I) any EEA Financial Institution or (II) any UK Financial Institution, (ii) “Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution; (iii) “Bail-In Legislation” means, (I) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EEA Bail-In Legislation Schedule and (II) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings); (iv) “EEA Bail-In Legislation Schedule” means the EU Bail In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time, (v) “EEA Financial Institution” means (x) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority; (y) any entity established in an EEA Member Country which is a parent of an institution described in clause (x) of this definition, or (x) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (x) or (y) of this definition and is subject to consolidated supervision with its parent; (vi) “EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway; (vii) “EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution; (viii) “UK Financial Institution” means the BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms; (ix) “UK Resolution Authority” means The Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution; and (x) “Write-Down and Conversion Powers” means, (I) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EEA Bail-In Legislation Schedule and (II) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
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Section 1.28Lender’s Right to Unwind Cross-Collateralization/Cross-Default. Lender shall have the right, at any time and from time to time or in connection with a repurchase by Lender of any portion of the Loan in connection with a Securitization, to unilaterally require the release of any Individual Property or Borrower from the cross-defaulting and the cross-collateralization provisions effected pursuant to the grant of the Security Instrument from each Borrower and secured by the lien of the applicable Security Instrument. Borrower shall cooperate with Lender in executing all documents as may be required in connection with splitting the Loan into two or more loans which shall not be cross-collateralized or cross-defaulted with each other. Borrower shall promptly deliver or cause to be delivered to Lender or its designee any replacement or substitute loan agreements, promissory notes, security instruments and other loan documents, title, hazard and liability insurance policies, opinions of counsel and other documents and instruments as Lender may reasonably request in order to effectuate the foregoing.
Section 1.29Contributions and Waivers.
(a)As a result of the transactions contemplated by the Loan Documents, each individual Borrower will benefit, directly and indirectly, from each individual Borrower’s obligation to pay the Debt and in consideration therefor each individual Borrower shall allocate such benefits among themselves and fairly and equitably make contributions among each individual Borrower in the event any payment is made by an individual Borrower hereunder to Lender which is in excess of the amount attributable to that individual Borrower or its portion of its Individual Property (such payment being referred to herein as a “Contribution,” and for purposes of this Section 10.30, includes any exercise of recourse by Lender against any collateral of an individual Borrower and application of proceeds of such collateral in satisfaction of such individual Borrower’s obligations to Lender under the Loan Documents).
(b)Each individual Borrower shall be liable hereunder with respect to the Debt only for such total maximum amount (if any) that would not render its obligations hereunder or under any of the Loan Documents subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any State law.
(c)In order to provide for a fair and equitable contribution among each individual Borrower in the event that any Contribution is made by an individual Borrower (a “Funding Borrower”), such Funding Borrower shall be entitled to a reimbursement Contribution (“Reimbursement Contribution”) from all other individual Borrowers for all payments, damages and expenses incurred by that Funding Borrower in discharging any of the Debt, in the manner and to the extent set forth in this Section 10.30.
(d)For purposes hereof, the “Benefit Amount” of an individual Borrower as of any date of determination shall be the net value of the benefits to such individual Borrower and its affiliates from extensions of credit made by Lender to (a) such individual Borrower and (b) to the other individual Borrowers hereunder and the Loan Documents to the extent such other individual Borrowers have guaranteed or mortgaged their interest in one or more of the Properties to secure the Debt of such individual Borrower to Lender.
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(e)Each individual Borrower shall be liable to a Funding Borrower in an amount equal to the greater of (A) the (i) ratio of the Benefit Amount of such individual Borrower to the total amount of Debt, multiplied by (ii) the amount of Debt paid by such Funding Borrower, or (B) ninety-five percent (95%) of the excess of the fair saleable value of the Individual Property of such individual Borrower over the total liabilities of such individual Borrower (including the maximum amount reasonably expected to become due in respect of contingent liabilities) determined as of the date on which the payment made by a Funding Borrower is deemed made for purposes hereof (giving effect to all payments made by other Funding Borrowers as of such date in a manner to maximize the amount of such Contributions).
(f)In the event that at any time there exists more than one Funding Borrower with respect to any Contribution (in any such case, the “Applicable Contribution”), then Reimbursement Contributions from other Borrowers pursuant hereto shall be allocated among such Funding Borrowers in proportion to the total amount of the Contribution made for or on account of the other individual Borrowers by each such Funding Borrower pursuant to the Applicable Contribution. In the event that at any time any individual Borrower pays an amount hereunder in excess of the amount calculated pursuant to this Section 10.30 above, that individual Borrower shall be deemed to be a Funding Borrower to the extent of such excess and shall be entitled to a Reimbursement Contribution from the other individual Borrowers in accordance with the provisions of this Section.
(g)Each individual Borrower acknowledges that the right to Reimbursement Contribution hereunder shall constitute an asset in favor of such individual Borrower to which such Reimbursement Contribution is owing.
(h)No Reimbursement Contribution payments payable by an individual Borrower pursuant to the terms of this Section 10.30 shall be paid until all amounts then due and payable by all of the individual Borrowers to Lender, pursuant to the terms of the Loan Documents, are paid in full in cash. Nothing contained in this Section 10.30 shall limit or affect in any way the obligations of any individual Borrower to Lender under the Note or any other Loan Documents.
(i)Each individual Borrower waives:
(i)any right to require Lender to proceed against any other individual Borrower or any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender’s power before proceeding against such individual Borrower;
(ii)any defense based upon any legal disability or other defense of any other individual Borrower, any guarantor of any other person or by reason of the cessation or limitation of the liability of any other individual Borrower or any guarantor from any cause other than full payment of all sums payable under the Note and any of the other Loan Documents;
(iii)any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of any other individual Borrower or any principal of any other individual Borrower or any defect in the formation of any other individual Borrower or any principal of any other individual Borrower;
(iv)any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal;
(v)any defense based upon any failure by Lender to obtain collateral for the indebtedness or failure by Lender to perfect a lien on any collateral;
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(vi)presentment, demand, protest and notice of any kind except as set forth in the Loan Documents;
(vii)any defense based upon any failure of Lender to give notice of sale or other disposition any collateral to any other individual Borrower or to any other person or entity or any defect in any notice that may be given in connection with any sale or disposition of any collateral;
(viii)any defense based upon any failure of Lender to comply with applicable laws in connection with the sale or other disposition of any collateral, including, without limitation, any failure of Lender to conduct a commercially reasonable sale or other disposition of any collateral;
(ix)any defense based upon any election by Lender, in any bankruptcy proceeding, of the application or non-application of Section 1111(6)(2) of the Bankruptcy Code or any successor statute;
(x)any defense based upon any use of cash collateral under Section 363 of the Bankruptcy Code;
(xi)any defense based upon any agreement or stipulation entered into by Lender with respect to the provision of adequate protection in any bankruptcy proceeding;
(xii)any defense based upon any borrowing or any grant of a security interest under Section 364 of the Bankruptcy Code;
(xiii)any defense based upon the avoidance of any security interest in favor of Lender for any reason;
(xiv)any defense based upon any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding, including any discharge of, or bar or stay against collecting, all or any of the obligations evidenced by the Note or owing under any of the Loan Documents; and
(xv)any defense or benefit based upon an individual Borrower’s, or any other party’s, resignation of the portion of any obligation secured by the applicable Security Instrument to be satisfied by any payment from any other individual Borrower or any such party.
(j)Each individual Borrower waives:
(i)all rights and defenses arising out of an election of remedies by Lender even though the election of remedies, such as nonjudicial foreclosure with respect to security for the Loan or any other amounts owing under the Loan Documents, has destroyed such individual Borrower’s rights of subrogation and reimbursement against any other individual Borrower;
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(ii)all rights and defenses that such individual Borrower may have because any of the Debt is secured by real property. This means, among other things: (i) Lender may, subject to Section 9.3 hereof, collect from such individual Borrower without first foreclosing on any real or personal property collateral pledged by any other individual Borrower, (ii) if Lender forecloses on any real property collateral pledged by any other individual Borrower, (a) except as provided by applicable law, the amount of the Debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, (b) Lender may, subject to Section 9.3 hereof, collect from such individual Borrower even if any other individual Borrower, by foreclosing on the real property collateral, has destroyed any right such individual Borrower may have to collect from any other individual Borrower. This is an unconditional and irrevocable waiver of any rights and defenses such individual Borrower may have because any of the Debt is secured by real property; and
(iii)any claim or other right which individual Borrower might now have or hereafter acquire against any other individual Borrower or any other person that arises from the existence or performance of any obligations under the Note, the Security Instruments or the other Loan Documents, including, without limitation, any of the following: (i) any right of subrogation, reimbursement, exoneration, contribution, or indemnification; or (ii) any right to participate in any claim or remedy of Lender against any other individual Borrower or any collateral security therefor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

BORROWER:

AHRC CPCLPIN01, LLC
AHRC CPCVPIN01, LLC
AHRC CPCHBIN01, LLC
AHRC CPCMRIN01, LLC, each a Delaware limited liability company


By: /s/ Michael R. Anderson___________________
Name: Michael R. Anderson
Title: Authorized Signatory for each entity
listed above




[Signatures continue on the following page]

Loan Agreement

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

LENDER:

BANK OF MONTREAL, a Canadian Chartered bank acting through its Chicago Branch


By: /s/ Michael Birajiclian___________________
Name: Michael Birajiclian
Title: Authorized Signatory



Loan Agreement
Exhibit 21.1
Subsidiaries of Healthcare Trust, Inc.
NameJurisdiction of Formation/Incorporation
Healthcare Trust Operating Partnership, L.P.Delaware
Advantage Senior Care, LLCDelaware
ARHC AAEKHWI01, LLCDelaware
ARHC ACRICKY01 TRS, LLCDelaware
ARHC ACRICKY01, LLCDelaware
ARHC AHGBYWI01, LLCDelaware
ARHC AHGVLWI01, LLCDelaware
ARHC AHHFDCA01, LLCDelaware
ARHC AHJACOH01, LLCDelaware
ARHC AHKIEWI01, LLCDelaware
ARHC AHMLWWI01, LLCDelaware
ARHC AHPLYWI01, LLCDelaware
ARHC AHWTFWI01, LLCDelaware
ARHC AHWTMWI01, LLCDelaware
ARHC ALALPGA01 TRS, LLCDelaware
ARHC ALALPGA01, LLCDelaware
ARHC ALCFBTX01, LLCDelaware
ARHC ALCLKTX01, LLCDelaware
ARHC ALELIKY01 TRS, LLCDelaware
ARHC ALELIKY01, LLCDelaware
ARHC ALJUPFL01 TRS, LLCDelaware
ARHC ALJUPFL01, LLCDelaware
ARHC ALMEYTX01, LLCDelaware
ARHC ALSPGFL01 TRS, LLCDelaware
ARHC ALSPGFL01, LLCDelaware
ARHC ALSTUFL01 TRS, LLCDelaware
ARHC ALSTUFL01, LLCDelaware
ARHC ALTSPFL01 TRS, LLCDelaware
ARHC ALTSPFL01, LLCDelaware
ARHC ALWOOTX01, LLCDelaware
ARHC AMGLNAZ01, LLCDelaware
ARHC AMGLNAZ02, LLCDelaware
ARHC AORMDVA01, LLCDelaware
ARHC APNVLMI01 TRS, LLCDelaware
ARHC APNVLMI01, LLCDelaware
ARHC ARCLRMI01 TRS, LLCDelaware
ARHC ARCLRMI01, LLCDelaware
ARHC ATROCIL01 TRS, LLCDelaware
ARHC ATROCIL01, LLCDelaware
ARHC AVBURWI01 TRS, LLCDelaware
ARHC AVBURWI01, LLCDelaware
ARHC BCKNGNY01, LLCDelaware
ARHC BGBOWMD01, LLCDelaware
ARHC BLHBGPA01, LLCDelaware
ARHC BMBUCMI01, LLC (f/k/a ARHC CO Borrower 5, LLC)Delaware
ARHC BMBWNIL01, LLCDelaware


ARHC BMLKWCO01, LLCDelaware
ARHC BMWRNMI01, LLCDelaware
ARHC BPBUFMO01, LLCDelaware
ARHC BRHBGPA01, LLCDelaware
ARHC BSHUMMO01, LLCDelaware
ARHC BSNPLFL01 TRS, LLCDelaware
ARHC BSNPLFL01, LLCDelaware
ARHC BWBRUGA01 TRS, LLCDelaware
ARHC BWBRUGA01, LLCDelaware
ARHC CALEWMO01, LLCDelaware
ARHC CAROCMI01, LLCDelaware
ARHC CAROCMI02, LLCDelaware
ARHC CCCGRMO01, LLCDelaware
ARHC CCGBGIL01, LLCDelaware
ARHC CCSCNNY01, LLCDelaware
ARHC CFGREOR01 TRS, LLCDelaware
ARHC CFGREOR01, LLCDelaware
ARHC CHCASMO01, LLCDelaware
ARHC CHCOLIL01 TRS, LLCDelaware
ARHC CHCOLIL01, LLCDelaware
ARHC CHEVLIL01 TRS, LLCDelaware
ARHC CHEVLIL01, LLCDelaware
ARHC CHHBGPA01, LLCDelaware
ARHC CHPTNIL01, LLCDelaware
ARHC CHSGDIL01, LLCDelaware
ARHC CHSLOIL01 TRS, LLCDelaware
ARHC CHSLOIL01, LLCDelaware
ARHC CHSLOIL02, LLCDelaware
ARHC CHSPTIL01 TRS, LLCDelaware
ARHC CHSPTIL01, LLCDelaware
ARHC CMCNRTX01, LLCDelaware
ARHC CMLITCO01, LLCDelaware
ARHC CMSHTMI001, LLCDelaware
ARHC CMWTSMI001, LLCDelaware
ARHC CO BORROWER 11, LLCDelaware
ARHC CO BORROWER 12, LLCDelaware
ARHC CO BORROWER 13, LLCDelaware
ARHC CO BORROWER 14, LLCDelaware
ARHC CO BORROWER 15, LLCDelaware
ARHC CO SPE Member, LLCDelaware
ARHC CPCIROH01, LLCDelaware
ARHC CPHAMVA01, LLCDelaware
ARHC CSCLWFL01, LLCDelaware
ARHC CSDOUGA01, LLCDelaware
ARHC CSKENMI01, LLCDelaware
ARHC CWEVAGA01 TRS, LLCDelaware
ARHC CWEVAGA01, LLC (f/k/a ARHC CO Borrower 6, LLC)Delaware
ARHC DBDUBGA01 TRS, LLCDelaware
ARHC DBDUBGA01, LLCDelaware


ARHC DDHUDFL01, LLCDelaware
ARHC DDLARFL01, LLCDelaware
ARHC DELVSNV01, LLCDelaware
ARHC DELVSNV02, LLCDelaware
ARHC DFDYRIN01, LLCDelaware
ARHC DMDCRGA01, LLCDelaware
ARHC DVMERID01 TRS, LLCDelaware
ARHC DVMERID01, LLCDelaware
ARHC ECCPTNC01, LLCDelaware
ARHC ECGVLSC01, LLCDelaware
ARHC ECMCYNC01, LLCDelaware
ARHC EMRAYMO01, LLCDelaware
ARHC ESMEMTN01, LLCDelaware
ARHC FMMUNIN01, LLCDelaware
ARHC FMMUNIN02, LLCDelaware
ARHC FMMUNIN03, LLCDelaware
ARHC FMWEDAL01, LLCDelaware
ARHC FOMBGPA01, LLCDelaware
ARHC FOMBGPA01, LLCDelaware
ARHC Fox Ridge MT, LLCDelaware
ARHC FRBRYAR01 TRS, LLCDelaware
ARHC FRBRYAR01, LLCDelaware
ARHC FRLTRAR01 TRS, LLCDelaware
ARHC FRLTRAR01, LLCDelaware
ARHC FRNLRAR01 TRS, LLCDelaware
ARHC FRNLRAR01, LLCDelaware
ARHC FVECOCA01 Trs, LLCDelaware
ARHC FVECOCA01, LLCDelaware
ARHC GDFMHMI01, LLCDelaware
ARHC GFGBTAZ01, LLCDelaware
ARHC GGPOTMO01, LLCDelaware
ARHC GHGVLSC01, LLCDelaware
ARHC GMCLKTN01, LLCDelaware
ARHC GOFENMI01, LLCDelaware
ARHC GYHSVMO01, LLCDelaware
ARHC HBTPAFL01 TRS, LLCDelaware
ARHC HBTPAFL01, LLCDelaware
ARHC HCTMPFL01, LLCDelaware
ARHC HDLANCA01, LLCDelaware
ARHC HHPEOIL01, LLCDelaware
ARHC HRHAMVA01, LLCDelaware
ARHC JCCRKGA01 TRS, LLCDelaware
ARHC JCCRKGA01, LLCDelaware
ARHC KB BORROWER 1, LLCDelaware
ARHC KB BORROWER 10, LLCDelaware
ARHC KB BORROWER 11, LLCDelaware
ARHC KB BORROWER 12, LLCDelaware
ARHC KB BORROWER 13, LLCDelaware
ARHC KB BORROWER 14, LLCDelaware


ARHC KB BORROWER 15, LLCDelaware
ARHC KB BORROWER 2, LLCDelaware
ARHC KB BORROWER 3, LLCDelaware
ARHC KB BORROWER 4, LLCDelaware
ARHC KB BORROWER 5, LLCDelaware
ARHC KB BORROWER 6, LLCDelaware
ARHC KB BORROWER 7, LLCDelaware
ARHC KB BORROWER 8, LLCDelaware
ARHC KB BORROWER 9, LLCDelaware
ARHC KB SPE Member, LLCDelaware
ARHC KEKWDTX01, LLCDelaware
ARHC LCDIXIL01 TRS, LLCDelaware
ARHC LCDIXIL01, LLCDelaware
ARHC LDSPGFL01, LLCDelaware
ARHC LHPTVPA01, LLCDelaware
ARHC LMFMYFL01, LLCDelaware
ARHC LMHBGPA01, LLCDelaware
ARHC LMLANPA01, LLCDelaware
ARHC LMPLNTX01, LLCDelaware
ARHC LPELKCA01, LLCDelaware
ARHC LSSMTMO01 TRS, LLCDelaware
ARHC LSSMTMO01, LLCDelaware
ARHC LVHLDMI01, LLC (f/k/a ARHC CO Borrower 7, LLC)Delaware
ARHC MBAGHCA01 TRS, LLCDelaware
ARHC MBAGHCA01, LLCDelaware
ARHC MCMSHMO01, LLCDelaware
ARHC MCNWDNY01, LLCDelaware
ARHC MHCLVOH01, LLCDelaware
ARHC MMJLTIL01, LLCDelaware
ARHC MMTCTTX01, LLCDelaware
ARHC MRMRWGA01, LLCDelaware
ARHC MSHBGPA01, LLCDelaware
ARHC MTMTNIL01, LLCDelaware
ARHC MVMTNIL01, LLCDelaware
ARHC MVMVNWA01, LLCDelaware
ARHC NHCANGA01, LLCDelaware
ARHC NVJUPFL01 TRS, LLCDelaware
ARHC NVJUPFL01, LLCDelaware
ARHC NVLTZFL01 TRS, LLCDelaware
ARHC NVLTZFL01, LLCDelaware
ARHC NVWELFL01 TRS, LLCDelaware
ARHC NVWELFL01, LLCDelaware
ARHC OCWMNLA01, LLCDelaware
ARHC OLOLNIL01, LLCDelaware
ARHC OOHLDOH001, LLCDelaware
ARHC OPBROOR01 TRS, LLCDelaware
ARHC OPBROOR01, LLCDelaware
ARHC PCCHEMI01, LLCDelaware
ARHC PCLMYPA01, LLCDelaware


ARHC PCPLSMI01, LLCDelaware
ARHC PCSHVMS01, LLCDelaware
ARHC PHCRPIA01 TRS, LLCDelaware
ARHC PHCRPIA01, LLCDelaware
ARHC PHCTNIA01 TRS, LLCDelaware
ARHC PHCTNIA01, LLC (f/k/a ARHC CO Borrower 8, LLC)Delaware
ARHC PHDESIA01 TRS, LLCDelaware
ARHC PHDESIA01, LLC (f/k/a ARHC CO BORROWER 2, LLC)Delaware
ARHC PHNLXIL01, LLCDelaware
ARHC PHOTTIA01 TRS, LLCDelaware
ARHC PHOTTIA01, LLCDelaware
ARHC PHTIPIA01 TRS, LLCDelaware
ARHC PHTIPIA01, LLCDelaware
ARHC Plaza Del Rio Medical Office Campus Member 1, LLCDelaware
ARHC Plaza Del Rio Medical Office Campus Member 2, LLCDelaware
ARHC PMCPKNY01, LLCDelaware
ARHC PMPEOAZ01, LLCDelaware
ARHC PPCLRMI01, LLCDelaware
ARHC PPDWTMI01 TRS, LLCDelaware
ARHC PPDWTMI01, LLCDelaware
ARHC PPDWTMI01, LLCDelaware
ARHC PPGBLMI01, LLCDelaware
ARHC PPHRNTN01, LLCDelaware
ARHC PPLVLGA01, LLCDelaware
ARHC PRPEOAZ01, LLCDelaware
ARHC PRPEOAZ02, LLCDelaware
ARHC PRPEOAZ03, LLCDelaware
ARHC PRPEOAZ04, LLCDelaware
ARHC PRPEOAZ05 TRS, LLCDelaware
ARHC PSINDIA01 TRS, LLCDelaware
ARHC PSINDIA01, LLCDelaware
ARHC PSNHTMA01, LLCDelaware
ARHC PSSGDMA01, LLCDelaware
ARHC PSWSGMA01, LLCDelaware
ARHC PVGYRAZ01, LLCDelaware
ARHC PVPHXAZ01, LLCDelaware
ARHC PVVLGKS01 TRS, LLCDelaware
ARHC PVVLGKS01, LLCDelaware
ARHC PWHLTMI01, LLCDelaware
ARHC Quad Cities Portfolio Member, LLCDelaware
ARHC RACLWFL01, LLCDelaware
ARHC RHMARIL01, LLCDelaware
ARHC RHMESAZ01, LLCDelaware
ARHC RHSUNAZ01, LLCDelaware
ARHC RMRWLTX01, LLCDelaware
ARHC RPATLGA01 TRS, LLCDelaware
ARHC RPATLGA01, LLC (f/k/a ARHC CO BORROWER 3, LLC)Delaware
ARHC RWCUDWI01 TRS, LLCDelaware
ARHC RWCUDWI01, LLCDelaware


ARHC RWROSGA01 TRS, LLCDelaware
ARHC RWROSGA01, LLCDelaware
ARHC SARCOIL01, LLCDelaware
ARHC SAVENFL01, LLCDelaware
ARHC SBBURIA01 TRS, LLCDelaware
ARHC SBBURIA01, LLC (f/k/a ARHC CO BORROWER 1, LLC)Delaware
ARHC SCBTHNY01, LLCDelaware
ARHC SCBTHNY02, LLCDelaware
ARHC SCCRLIA01 TRS, LLCDelaware
ARHC SCCRLIA01, LLC (f/k/a ARHC CO Borrower 9, LLC)Delaware
ARHC SCKCYMO01 TRS, LLCDelaware
ARHC SCKCYMO01, LLCDelaware
ARHC SCTEMTX01, LLCDelaware
ARHC SCVSTCA01, LLCDelaware
ARHC SFFLDIA01 TRS, LLCDelaware
ARHC SFFLDIA01, LLCDelaware
ARHC SFSCHIN01, LLCDelaware
ARHC SFSTOGA01, LLCDelaware
ARHC SLKLAOR01, LLCDelaware
ARHC SMERIPA01, LLCDelaware
ARHC SMMDSIA01 TRS, LLCDelaware
ARHC SMMDSIA01, LLCDelaware
ARHC SMMTEIA01 TRS, LLCDelaware
ARHC SMMTEIA01, LLC (f/k/a ARHC CO Borrower 10, LLC)Delaware
ARHC SPPLSIA01 TRS, LLCDelaware
ARHC SPPLSIA01, LLCDelaware
ARHC SSTMPFL01, LLCDelaware
ARHC TCHOUTX01, LLCDelaware
ARHC TPTMPFL01, LLCDelaware
ARHC TRS HOLDCO II, LLCDelaware
ARHC TVTITFL01 TRS, LLCDelaware
ARHC TVTITFL01, LLC (f/k/a ARHC CO BORROWER 4, LLC)Delaware
ARHC UCELKCA01, LLCDelaware
ARHC UPHBGPA01, LLCDelaware
ARHC UPHBGPA02, LLCDelaware
ARHC UPMOLIL01, LLCDelaware
ARHC UPMUSIA01, LLCDelaware
ARHC VAGBGIL01, LLCDelaware
ARHC VCSTOGA01, LLCDelaware
ARHC VSMCKTX01, LLCDelaware
ARHC VSTALFL01, LLCDelaware
ARHC WCWCHFL01, LLCDelaware
ARHC WGWCHIL01, LLCDelaware
ARHC WHWCHPA01 TRS, LLCDelaware
ARHC WHWCHPA01, LLCDelaware
ARHC WHYRKPA01, LLCDelaware
ARHC WIGNFWI01, LLCDelaware
ARHC WISMLWI01, LLCDelaware
ARHC WISTFWI01, LLCDelaware


ARHC WLWBYMN01, LLCDelaware
ARHC WMBRPMI01, LLCDelaware
ARHC WWGDRMI01, LLCDelaware
ARHC WWWYGMI01, LLCDelaware
LEISURE LIVING MANAGEMENT OF BUCHANAN, LLCMichigan
LEISURE LIVING MANAGEMENT OF GRAND RAPIDS, INC.Michigan
LEISURE LIVING MANAGEMENT OF HOLLAND, INC.Michigan
LEISURE LIVING MANAGEMENT OF LANSING, INC.Michigan
LIFEHOUSE - CRYSTAL MANOR OPERATIONS, LLCMichigan
LIFEHOUSE - GOLDEN ACRES OPERATIONS, LLCMichigan
LIFEHOUSE - WALDON WOODS OPERATIONS, LLCMichigan
LIFEHOUSE CLARE OPERATIONS, LLCMichigan
LIFEHOUSE GRAND BLANC OPERATIONS, LLCMichigan
LIFEHOUSE MT. PLEASANT OPERATIONS, LLCMichigan
LIFEHOUSE PRESTIGE COMMONS OPERATIONS, LLCMichigan
LIFEHOUSE PRESTIGE WAY OPERATIONS, LLCMichigan
NuVista Living at Jupiter, LLCFlorida
ARHC PNPENFL01, LLCDelaware
ARHC SDGMDWOK01, LLCDelaware
ARHC OPFWNIN01, LLCDelaware
ARHC OPFWNIN02, LLCDelaware
ARHC SPABYNY01, LLCDelaware
ARHC SPABYNY02, LLCDelaware
ARHC SPABYNY03, LLCDelaware
ARHC SPTRYNY01, LLCDelaware
ARHC HPOKCOK01, LLCDelaware
ARHC SLESTPA01, LLCDelaware
ARHC MESCSMI01, LLCDelaware
ARHC NCODSTX01, LLCDelaware
ARHC BPBLPOH01, LLCDelaware
ARHC FMTPAFL01, LLCDelaware
ARHC ADERLCO01, LLCDelaware
ARHC HO4PSLB01, LLC Delaware
ARHC OSFWAIL01, LLCDelaware
ARHC OSFGDIL01, LLCDelaware
AHRC CPCLPIN01, LLCDelaware
AHRC CPCVPIN01, LLCDelaware
AHRC CPCHBIN01, LLCDelaware
AHRC CPCMRIN01, LLCDelaware

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We hereby consent to the incorporation by reference in the Registration Statement on Form S-3D (No. 333-197802) of Healthcare Trust, Inc. of our report dated March 15, 2024 relating to the financial statements and financial statement schedule, which appears in this Form 10‑K.

/s/ PricewaterhouseCoopers LLP
New York, New York
March 15, 2024
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Michael Anderson, certify that:
1.I have reviewed this Annual Report on Form 10-K 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 15th day of March, 2024/s/ Michael Anderson
Michael Anderson
Chief Executive Officer
(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, Scott M. Lappetito, certify that:
1.I have reviewed this Annual Report on Form 10-K 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 15th day of March, 2024/s/ Scott M. Lappetito
Scott M. Lappetito
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 Annual Report on Form 10-K 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 annual report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated this 15th day of March, 2024
/s/ Michael Anderson
Michael Anderson
Chief Executive Officer
(Principal Executive Officer)
/s/ Scott M. Lappetito
Scott M. Lappetito
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)

EXHIBIT 97

HEALTHCARE TRUST, INC.
DODD-FRANK CLAWBACK POLICY

Introduction

The Board of Directors (the “Board”) of Healthcare Trust, Inc. (the “Company”), believes it to be in the best interests of the Company and its stockholders to create and maintain a culture that emphasizes integrity and accountability, reinforces the Company’s pay-for-performance compensation philosophy and complies with the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) and Nasdaq Listing Rule 5608 (the “Listing Standards”).

Definitions

For purposes of this Policy, the following terms shall have the following meanings:

“Applicable Period” means the three completed fiscal years of the Company immediately preceding the earlier of: (i) the date the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes (or reasonably should have concluded) that the Company is required to prepare a Restatement; or (ii) the date a court, regulator, or other legally authorized entity directs the Company to prepare a Restatement, in each case, regardless of if or when the Restatement is actually filed. The “Applicable Period” also includes any transition period (that results from a change in the Company’s fiscal year) within or immediately following the three completed fiscal years identified in the preceding sentence (except that a transition period that comprises a period of at least nine months shall count as a completed fiscal year).

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Nominating and Corporate Governance Committee of the Board.

“Covered Executives” means each Executive Officer of the Company including current and former Executive Officers, as determined by the Board in accordance with the definition of “executive officer” pursuant to Dodd-Frank and the Listing Standards.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder.



“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company. Executive officers of the Company’s parent(s) or subsidiaries are deemed Executive Officers of the Company if they perform such policy-making functions for the Company. Policy-making function is not intended to include policy-making functions that are not significant. For purposes of this Policy, “Executive Officer” shall also include each person determined to be an “executive officer” for purposes of 17 CFR 229.401(b).

“Financial Reporting Measure” means a measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements (including “non-GAAP” financial measures, such as those appearing in the Company’s earnings releases or Management’s Discussion and Analysis), and any measures that are derived wholly or in part from such measures (including stock price and total shareholder return). Examples of Financial Reporting Measures include, without limitation, measures based on: revenues, net income, operating income, financial ratios, EBITDA, funds from operations and adjusted funds from operations, liquidity measures, return measures (such as return on assets), earnings measures (e.g., earnings per share), profitability of one or more segments, cost per employee where cost is subject to a Restatement, any of such financial measures relative to a peer group where the Financial Reporting Measure is subject to a Restatement, and tax basis income. A Financial Reporting Measure need not be presented within the financial statements or included in a filing with the SEC.

“Impracticable” means that the Committee has determined in good faith that recovery of Recoverable Compensation would be “Impracticable” because: (i) pursuing such recovery would violate any home country law where that law was adopted prior to November 28, 2022, and the Company provides an opinion of home country counsel acceptable to Nasdaq that recovery would result in such a violation, and such opinion is provided to Nasdaq; (ii) the direct expense paid to a third party to assist in enforcing this Policy would exceed the Recoverable Compensation and the Company has (A) made a reasonable attempt to recover such amounts and (B) provided documentation of such attempts to recover to Nasdaq; or (iii) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of the Code in each case, in accordance with Dodd-Frank and the Listing Standards.

“Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure. Incentive-Based Compensation does not include any base salaries (except with respect to any salary increases earned wholly or in part based on the attainment of a Financial Reporting Measure performance goal); bonuses paid solely at the discretion of the Committee or the Board that are not paid from a “bonus pool” that is determined by satisfying a Financial Reporting Measure performance goal; bonuses paid solely upon satisfying one or more subjective standards and/or completion of a specified employment period; non-equity incentive plan awards earned solely upon satisfying one or more measures that is not a Financial Reporting Measure; and equity awards that vest solely based on the passage of time and/or attaining one or more measures that is not a Financial Reporting Measure.



“Received” For purposes of this Policy, Incentive-Based Compensation is “Received” in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment, vesting or settlement of the Incentive-Based Compensation occurs after the end of such period.

“Recoverable Compensation” means the gross (i.e., pre-tax) amount of any Incentive-Based Compensation that is Received by a Covered Executive: (i) after beginning services as a Covered Executive; (ii) if such person served as a Covered Executive at any time during the performance period applicable to such Incentive-Based Compensation; (iii) while the Company had a listed class of securities on a national securities exchange; and (iv) during the Applicable Period that is in excess of the amount that otherwise would have been Received if the calculation were based on the Restatement. For the avoidance of doubt, Recoverable Compensation may include Incentive-Based Compensation Received by a Covered Executive if such person previously served as a Covered Executive and then left the Company, retired, and/or transitioned to a role that is not a Covered Executive role. For the avoidance of doubt, if the subject Incentive-Based Compensation (calculated on a pre-tax basis) was based on stock price or total shareholder return, where the Recoverable Compensation is not subject to mathematical recalculation directly from the information in a Restatement, the Recoverable Compensation must be based on a reasonable estimate of the effect of the Restatement on the stock price or total shareholder return based upon which the Incentive-Based Compensation was Received, and documentation of such reasonable estimate must be provided to Nasdaq. The amount of Recoverable Compensation shall be determined by the Board in its sole and absolute discretion and in accordance with the applicable laws, including Dodd-Frank and the Listing Standards.

“Restatement” means an accounting restatement of any of the Company’s financial statements filed with the SEC under the Exchange Act, or the Securities Act of 1933, as amended, due to the Company’s material noncompliance with any financial reporting requirement under U.S. securities laws. “Restatement” includes any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements (commonly referred to as “Big R” restatements), or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (commonly referred to as “little r” restatements).

“Policy” means this Dodd-Frank Clawback Policy.

“SEC” means the Securities and Exchange Commission.

Administration



This Policy shall be administered by the Board, except that the Board may delegate its authority to administer all or any portion of this Policy to the Committee. Notwithstanding any delegation, nothing herein shall be construed as limiting any authority of the Board. References herein to the Board shall be deemed references to the Committee, if applicable. The Board shall interpret and construe this Policy and shall take such actions and prescribe such rules and regulations in connection with the operation of this Policy as it determines to be necessary, appropriate, or advisable for the administration of this Policy, and may rescind and amend its regulations from time to time, in each case, consistent with this Policy. Any determinations made by the Board shall be final, conclusive and binding upon the Company and all persons affected hereunder and need not be uniform with respect to each Covered Executive. Subject to any limitation under applicable law, the Board may authorize and empower any officer or employee of the Company or any of its affiliates to take any and all actions necessary or appropriate to carry out the purpose and intent of this Policy (other than with respect to any recovery under this Policy involving such officer).

Recoupment

If the Company is required to prepare a Restatement, then the Company shall recover, reasonably promptly, all Recoverable Compensation from any Covered Executive during the Applicable Period (including those Covered Executives who are not Executive Officers at the time of the Restatement). Such recovery shall be made without regard to any individual knowledge or responsibility related to the Restatement or the Recoverable Compensation, and regardless of whether the Company’s or a Covered Executive’s misconduct or other action or omission was the cause for such Restatement. Further, if the achievement of one or more Financial Reporting Measures was considered in determining the Incentive-Based Compensation Received by a Covered Executive, but the Incentive-Based Compensation was not paid or awarded on a formulaic basis, the Board will in its good faith discretion determine the amount of any Recoverable Compensation that must be recouped with respect thereto. Notwithstanding the above provision, the Board can decide to refrain from recovering the Recoverable Compensation if the Committee determines that such recovery would be Impracticable.

Method of Recoupment of Incentive-Based Compensation

Upon any recoupment determination by the Board, the Board shall notify the Covered Executive in writing of the Board’s determination. The Board will determine, in its sole discretion, the method for the recoupment of the Incentive-Based Compensation. Methods of recoupment may include, without limitation, one or more of the following:

a.requiring repayment of any cash Incentive-Based Compensation or other cash-based compensation previously paid;

a.cancelling outstanding vested or unvested equity or equity-linked awards, including without limitation, awards constituting Incentive-Based Compensation;

a.forfeiture of deferred compensation, subject to compliance with Section 409A (as defined below);



a.seeking recovery of any gain realized from the vesting, exercise, settlement, sale, transfer or other disposition of any equity or equity-linked awards, including without limitation, awards constituting Incentive-Based Compensation;

a.offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive;

a.cancelling or offsetting against any planned future cash or equity-based awards; and

a.taking any other remedial or recovery action permitted by law and the Listing Standards, as determined by the Board in its sole discretion.

To the extent that a Covered Executive is required to repay any Incentive-Based Compensation, or to take any other action required or appropriate to effectuate recoupment in accordance with this Policy, then the Covered Executive shall promptly repay such Incentive-Based Compensation and shall promptly take all such other actions, upon the Company’s demand or within a specified time period (and with or without interest), as determined by the Board in its sole discretion.

Disclosure

It is intended that the Company shall make such disclosures with respect to Incentive-Based Compensation subject to this Policy, and any actions taken or omitted to be taken hereunder, with the SEC and Nasdaq, in each case, as may be required under any applicable requirements, rules or standards thereof.

Interpretation

The Board and the Committee, as applicable, are authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy. This Policy will be interpreted and enforced in accordance with Dodd-Frank and the Listing Standards. Any term or provision that is inconsistent with the requirements of Dodd-Frank or the Listing Standards in the view of counsel to the Board or to the Company shall be null and void and of no effect.

No Indemnification or Reimbursement

Notwithstanding the terms of any other policy, program, agreement or arrangement, in no event will the Company or any of its affiliates indemnify or reimburse any Covered Executive for the loss of any Recoverable Compensation that is required to be repaid or that is otherwise subject to recoupment under this Policy. Further, in no event shall the Company or any of its affiliates pay or reimburse any Covered Executive for premiums on any insurance policy that would cover a Covered Executive’s potential obligations with respect to Recoverable Compensation under this Policy.

Effective Date; Retroactive Application



This Policy is effective as of October 2, 2023 (the “Effective Date”), and shall apply to Incentive-Based Compensation that is Received by Covered Executives on or after the Effective Date, even if such Incentive-Based Compensation was approved, awarded, granted or paid to the Covered Executive prior to the Effective Date and prior to the adoption of this Policy. Without limiting the generality of the provisions of this Policy concerning the method of recoupment of Incentive-Based Compensation, and subject to applicable law, the Board may affect recovery under this Policy from any amount of compensation approved, awarded, granted, payable or paid to the Covered Executive prior to, on or after the Effective Date.

Governing Law

This Policy shall be governed by the laws of the State of Maryland (including the Maryland General Corporation Law), excluding any conflict or choice of law or principle that might otherwise refer construction or interpretation of this Policy to the substantive law of another jurisdiction.

Amendment; Termination

The Board may amend or terminate this Policy at any time in its sole discretion.

Company Indemnification

Any members of the Board and any other employees of the Company or its affiliates who assist in the administration of this Policy shall not be personally liable for any action, determination or interpretation made with respect to this Policy and shall be fully indemnified by the Company to the fullest extent permitted under applicable law, Company policy or the Company’s organizational documents with respect to any such action, determination or interpretation. The foregoing sentence shall not limit any other rights to indemnification of the members of the Board under applicable law, Company policy, or the Company’s organizational documents.

Other Recoupment Rights



The Board may require that any equity award agreement or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights that may be available to the Company pursuant to the terms of any policy or in any employment agreement, equity award agreement, or similar agreement, plan or program, and shall not limit any other right, remedy or enforcement mechanism available to the Company under any local, state or federal law, regulation, agreement or other authority to reduce, eliminate or recover Incentive-Based Compensation or other compensation from any current, former or future Covered Executive, including, without limitation: (i) termination of employment for any reason; (ii) adjusting the Covered Executive’s future compensation; (iii) instituting civil or criminal proceedings, or any actions that may be imposed by law enforcement agencies, regulators, administrative bodies or other authorities; or (iv) taking such other action as the Company may deem appropriate. Nothing herein shall limit the authority of the Board or Committee to impose additional requirements or conditions that may give rise to the Company’s right to forfeit or recoup any compensation. To the extent that applicable law (including, without limitation, Dodd-Frank), the Listing Standards, court order or court-approved settlement requires recovery of Recoverable Compensation in additional circumstances beyond those specified in this Policy, nothing in this Policy shall be deemed to limit or restrict the right or obligation of the Company to recover Recoverable Compensation or other compensation to the fullest extent required by applicable law or the Listing Standards.

Section 409A

Although the Company does not guarantee any particular tax treatment to any Covered Executive, in the event of recoupment of any Recoverable Compensation from any Covered Executive pursuant to this Policy by offset from or reduction of any amount that is payable or to be provided to the Covered Executive and that is considered “non-qualified deferred compensation” under Section 409A of the Code, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”), to the extent determined by the Board or the Committee, it is intended that such offset or reduction shall be implemented in a manner intended to avoid imposition of penalties under Section 409A.

Successors

This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.