10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

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:  000-54685

CNL Healthcare Properties, Inc.

(Exact name of registrant as specified in its charter)

Maryland	27-2876363
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
CNL Center at City Commons 450 South Orange Avenue Orlando, Florida	32801
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒ (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐    No ☒

The number of shares of common stock of the registrant outstanding as of October 31, 2017 was 174,687,796.

CNL HEALTHCARE PROPERTIES, INC.AND SUBSIDIARIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Information (unaudited):
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders’ Equity and Redeemable Noncontrolling Interest	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	45
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	47
Exhibits		48
Signatures		49

Item 1. Financial Statements

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

	September 30,			December 31,
ASSETS	2017			2016
Real estate assets:
Real estate investment properties, net (including VIEs $216,181 and $112,929, respectively)	$	2,496,885		$	2,419,815
Real estate under development, including land (including VIEs $0 and $80,473, respectively)		4,856			97,164
Total real estate assets, net		2,501,741			2,516,979
Intangibles, net (including VIEs $2,129 and $2,891, respectively)		106,752			130,609
Cash (including VIEs $2,660 and $916, respectively)		72,470			58,517
Deferred rent and lease incentives (including VIEs $5,421 and $3,061, respectively)		40,956			31,045
Other assets (including VIEs $2,547 and $1,130, respectively)		23,633			24,470
Assets held for sale, net		52,469			53,351
Restricted cash (including VIEs $56 and $20, respectively)		9,493			12,721
Total assets	$	2,807,514		$	2,827,692
LIABILITIES AND EQUITY
Liabilities:
Mortgages and other notes payable, net (including VIEs $151,785 and $104,890, respectively)	$	1,035,114		$	936,723
Credit facilities		619,835			641,989
Accounts payable and accrued liabilities (including VIEs $3,946 and $16,830, respectively)		48,408			51,752
Other liabilities (including VIEs $1,426 and $976, respectively)		29,160			38,946
Due to related parties (including VIEs $113 and $107, respectively)		4,090			3,465
Total liabilities		1,736,607			1,672,875
Commitments and contingencies (Note 11)
Redeemable noncontrolling interest		399			472
Stockholders' equity:
Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued or outstanding	―			―
Excess shares, $0.01 par value per share, 300,000 shares authorized; none issued or outstanding	―			―
Common stock, $0.01 par value per share, 1,120,000 shares authorized, 183,374 and 180,188 shares issued, and 174,688 and 175,070 shares outstanding, respectively		1,747			1,751
Capital in excess of par value		1,524,804			1,528,435
Accumulated loss		(209,208	)		(182,813	)
Accumulated distributions		(243,954	)		(186,551	)
Accumulated other comprehensive loss		(4,077	)		(7,863	)
Total stockholders' equity		1,069,312			1,152,959
Noncontrolling interest		1,196			1,386
Total equity		1,070,907			1,154,817
Total liabilities and equity	$	2,807,514		$	2,827,692
The abbreviation VIEs above means variable interest entities.

See accompanying notes to condensed consolidated financial statements

2

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Revenues:
Rental income from operating leases	$	32,039		$	31,047		$	97,382		$	92,742
Resident fees and services		64,548			59,271			182,557			174,594
Other revenues		5,100			5,193			15,226			15,176
Total revenues		101,687			95,511			295,165			282,512
Operating expenses:
Property operating expenses		49,978			47,163			142,944			139,637
General and administrative		3,529			2,705			9,811			9,653
Acquisition fees and expenses	―				126		―				277
Asset management fees		7,562			6,240			22,197			18,606
Property management fees		4,832			4,800			14,110			13,965
Financing coordination fees		2,748		―				2,748		―
Contingent purchase price consideration adjustments	―				528			77			(222	)
Loss on lease terminations	―			―			―				785
Depreciation and amortization		26,768			30,289			81,054			94,428
Total operating expenses		95,417			91,851			272,941			277,129
Operating income		6,270			3,660			22,224			5,383
Other income (expense):
Interest and other income (expense)		(450	)		9			(348	)		54
Interest expense and loan cost amortization		(17,059	)		(15,820	)		(48,453	)		(43,857	)
Equity in earnings of unconsolidated entity		98			194			230			108
Total other expense		(17,411	)		(15,617	)		(48,571	)		(43,695	)
Loss before income taxes		(11,141	)		(11,957	)		(26,347	)		(38,312	)
Income tax expense		(90	)		(66	)		(344	)		(241	)
Net loss		(11,231	)		(12,023	)		(26,691	)		(38,553	)
Less: Net loss attributable to noncontrolling interest		(61	)		(31	)		(296	)		(47	)
Net loss attributable to common stockholders	$	(11,170	)	$	(11,992	)	$	(26,395	)	$	(38,506	)
Net loss per share of common stock  (basic and diluted)	$	(0.06	)	$	(0.07	)	$	(0.15	)	$	(0.22	)
Weighted average number of shares of common stock outstanding (basic and diluted)		175,190			175,033			175,229			175,068
Distributions declared per share of common stock	$	0.1164		$	0.1058		$	0.3280		$	0.3174

See accompanying notes to condensed consolidated financial statements.

3

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

(in thousands)

	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net loss	$	(11,231	)	$	(12,023	)	$	(26,691	)	$	(38,553	)
Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments, net		1,183			4,000			3,607			(5,914	)
Reclassification of cash flow hedges upon derecognition		132			―			186			―
Reclassification of cash flow hedges due to ineffectiveness		(7	)		(23	)		(7	)		(1	)
Unrealized loss on derivative financial instruments of equity method investments		―			―			―			(1	)
Total other comprehensive income (loss)		1,308			3,977			3,786			(5,916	)
Comprehensive loss		(9,923	)		(8,046	)		(22,905	)		(44,469	)
Less: Comprehensive loss attributable to noncontrolling interest		(61	)		(31	)		(296	)		(47	)
Comprehensive loss attributable to common stockholders	$	(9,862	)	$	(8,015	)	$	(22,609	)	$	(44,422	)

See accompanying notes to condensed consolidated financial statements.

4

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED)

(in thousands, except per share data)

																			Accumulated
	Redeemable			Common Stock						Capital in									Other			Total			Non-
	Noncontrolling			Number			Par			Excess of			Accumulated			Accumulated			Comprehensive			Stockholders'			controlling			Total
	Interest			of Shares			Value			Par Value			Loss			Distributions			Income (Loss)			Equity			Interest			Equity
Balance at December 31, 2016	$	472			175,070		$	1,751			1,528,435		$	(182,813	)	$	(186,551	)	$	(7,863	)	$	1,152,959		$	1,386		$	1,154,817
Subscriptions received for common stock through reinvestment plan	―				3,186			32			31,957		―			―			―				31,989		―				31,989
Redemptions of common stock	―				(3,568	)		(36	)		(35,588	)	―			―			―				(35,624	)	―				(35,624	)
Net loss		(73	)	―			―			―				(26,395	)	―			―				(26,395	)		(223	)		(26,691	)
Other comprehensive income	―			―			―			―			―			―				3,786			3,786		―				3,786
Distribution to holder of noncontrolling interest	―			―			―			―			―			―			―			―				(27	)		(27	)
Cash distributions declared ($0.3280 per share)	―			―			―			―			―				(57,403	)	―				(57,403	)	―				(57,403	)
Contribution from noncontrolling interests	―			―			―			―			―			―			―			―				60			60
Balance at September 30, 2017	$	399			174,688		$	1,747		$	1,524,804		$	(209,208	)	$	(243,954	)	$	(4,077	)	$	1,069,312		$	1,196		$	1,070,907
Balance at December 31, 2015	$	551			174,430		$	1,744		$	1,528,781		$	(151,146	)	$	(112,543	)	$	(9,747	)	$	1,257,089		$	1,462		$	1,259,102
Subscriptions received for common stock through reinvestment plan	―				3,281			33			31,957		―			―			―				31,990		―				31,990
Redemptions of common stock	―				(2,656	)		(26	)		(25,819	)	―			―			―				(25,845	)	―				(25,845	)
Net income (loss)		(52	)	―			―			―				(38,506	)	―			―				(38,506	)		5			(38,553	)
Other comprehensive loss	―			―			―			―			―			―				(5,916	)		(5,916	)	―				(5,916	)
Distribution to holder of noncontrolling interest	―			―			―			―			―			―			―			―				(29	)		(29	)
Distributions to holders of promoted interest	―			―			―				(6,650	)	―			―			―				(6,650	)	―				(6,650	)
Cash distributions declared ($0.3174 per share)	―			―			―			―			―				(55,488	)	―				(55,488	)	―				(55,488	)
Balance at September 30, 2016	$	499			175,055		$	1,751		$	1,528,269		$	(189,652	)	$	(168,031	)	$	(15,663	)	$	1,156,674		$	1,438		$	1,158,611

See accompanying notes to condensed consolidated financial statements.

5

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Nine Months Ended
	September 30,
	2017			2016
Operating activities:
Net cash flows provided by operating activities	$	56,942		$	58,111
Investing activities:
Acquisition of unimproved land		(1,050	)	―
Development of properties		(46,254	)		(60,820	)
Issuance of note receivable		(443	)	―
Capital expenditures		(7,789	)		(5,825	)
Payment of leasing costs		(1,121	)		(2,423	)
Collection of contingent purchase price consideration		407		―
Deposits on real estate	―				275
Net cash used in investing activities		(56,250	)		(68,793	)
Financing activities:
Payment of stock issuance and offering costs	―				(32	)
Distributions to stockholders, net of distribution reinvestments		(25,415	)		(23,498	)
Distributions to holders of promoted interest		(2,000	)		(4,650	)
Contributions from noncontrolling interest		60		―
Distributions to holder of noncontrolling interest		(27	)		(29	)
Redemptions of common stock		(31,984	)		(20,298	)
Draws under credit facilities		42,000			80,113
Repayments on credit facilities		(64,863	)		(90,250	)
Proceeds from mortgage and other notes payable		164,548			111,309
Principal payments on mortgage and other notes payable		(66,098	)		(48,947	)
Payment of contingent purchase price consideration		(3,645	)		(2,770	)
Purchase of interest rate cap		(59	)		(587	)
Lender deposits	―				(15	)
Payment of loan costs		(2,484	)		(1,615	)
Payment on extinguishment of debt	―				(1,127	)
Net cash flows provided by (used in) financing activities		10,033			(2,396	)
Net increase (decrease) in cash and restricted cash		10,725			(13,078	)
Cash and restricted cash at beginning of period		71,238			79,209
Cash and restricted cash at end of period	$	81,963		$	66,131
Supplemental disclosure of non-cash investing and financing activities:
Amounts incurred but not paid (including amounts due to related parties):
Accrued development costs	$	648		$	21,336
Redemptions payable	$	14,037		$	8,285
Contingent purchase price consideration	$	1,000		$	4,867
Distribution to holder of promoted interest	$	—		$	2,000

See accompanying notes to condensed consolidated financial statements.

6

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

1. Organization

CNL Healthcare Properties, Inc. (“Company”) was incorporated on June 8, 2010 and elected to be taxed as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes beginning with the year ended December 31, 2012.  The Company is externally advised by CNL Healthcare Corp. (“Advisor”) and its property manager is CNL Healthcare Manager Corp. (“Property Manager”), each of which is an affiliate of CNL Financial Group, LLC (“Sponsor”).  The Sponsor is an affiliate of CNL Financial Group, Inc. (“CNL”) and CNL Securities Corp. (“Managing Dealer”), the managing dealer of the Company’s public offerings (“Offerings”).  The Advisor is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company pursuant to an advisory agreement among the Company, the CHP Partners, LP (“Operating Partnership”) and the Advisor.  Substantially all of the Company’s acquisition, operating, administrative and certain property management services are provided by affiliates of the Advisor and the Property Manager.  In addition, third-party sub-property managers have been engaged to provide certain property management services.

The Company contributed the net proceeds from its Offerings to the Operating Partnership in exchange for partnership interests. The Company conducts substantially all of its operations either directly or indirectly through: (1) an operating partnership, CHP Partners, LP, in which the Company is the sole limited partner and its wholly owned subsidiary, CHP GP, LLC, is the sole general partner; (2) a wholly-owned taxable REIT subsidiary (“TRS”), CHP TRS Holding, Inc.; (3) property owner and lender subsidiaries, which are single purpose entities; and (4) investments in joint ventures.

On September 30, 2015, the Company completed its Offerings pursuant to a registration statement on Form S-11 under the Securities Act of 1933 with the Securities and Exchange Commission (“SEC”).  In October 2015, the Company deregistered the unsold shares of its common stock under its previous registration statement on Form S-11, except for 20,000,000 shares that the Company concurrently registered on Form S-3 under the Securities Exchange Act of 1933 with the SEC for the sale of additional shares of common stock through its distribution reinvestment plan (“Reinvestment Plan”).

With the completion of the Offerings and substantial completion of its acquisition phase, the Company’s focus is on actively managing a diversified portfolio of healthcare real estate and real estate-related assets within the seniors housing, medical office, post-acute care and acute care asset classes.  The types of seniors housing that the Company has acquired include independent and assisted living facilities, continuing care retirement communities, and Alzheimer’s / memory care facilities.  The types of medical offices that the Company has acquired include medical office buildings (“MOBs”), specialty medical and diagnostic service facilities, surgery centers, outpatient rehabilitation facilities, and other facilities designed for clinical services.  The types of post-acute care facilities that the Company has acquired include skilled nursing facilities and inpatient rehabilitative hospitals.  The types of acute care facilities that the Company has acquired include specialty surgical hospitals.  The Company views, manages and evaluates its portfolio homogeneously as one collection of healthcare assets with a common goal of maximizing revenues and property income regardless of the asset class or asset type.

The Company has primarily leased its seniors housing properties to wholly owned TRS entities and engaged independent third-party managers under management agreements to operate the properties under the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structures; however, the Company has also leased its properties to third-party tenants under triple-net or similar lease structures, where the tenant bears all or substantially all of the costs (including cost increases for real estate taxes, utilities, insurance and ordinary repairs).  Medical office, post-acute care and acute care properties have been leased on a triple-net, net or modified gross basis to third-party tenants.  In addition, most of the Company’s investments have been wholly owned, although, it has invested through partnerships with other entities where it is believed to be appropriate and beneficial.  The Company has and continues to invest in existing property developments or properties that have not reached full stabilization.

7

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation— The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”).  The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are necessary for the fair statement of the Company’s results for the interim period presented.  Operating results for the quarter and nine months ended September 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017.  Amounts as of December 31, 2016 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (“Annual Report”).

The accompanying unaudited condensed consolidated financial statements include the Company’s accounts, the accounts of wholly owned subsidiaries or subsidiaries for which the Company has a controlling interest, the accounts of variable interest entities (“VIEs”) in which the Company is the primary beneficiary and the accounts of other subsidiaries over which the Company has a controlling financial interest.   All material intercompany accounts and transactions have been eliminated in consolidation.

In accordance with the guidance for the consolidation of VIEs, the Company analyzes its variable interests, including loans, leases, guarantees, and equity investments, to determine if the entity in which it has a variable interest is a VIE.  The Company’s analysis includes both quantitative and qualitative reviews.  The Company bases its quantitative analysis on the forecasted cash flows of the entity, and its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and financial agreements.  The Company also uses its quantitative and qualitative analyses to determine if it is the primary beneficiary of the VIE, and if such determination is made, it includes the accounts of the VIE in its consolidated financial statements.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods and the disclosure of contingent liabilities. For example, significant assumptions are made in the allocation of purchase price, the analysis of real estate impairments, the valuation of contingent assets and liabilities, and the valuation of restricted stock shares issued to the Advisor or Property Manager.  Accordingly, actual results could differ from those estimates.

Adopted Accounting Pronouncements — In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows.  The ASU further clarified how the predominance principle should be applied to cash receipts and payments relating to more than one class of cash flows. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied retrospectively for each period presented.  Subsequently, in November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which modifies the presentation of the statement of cash flows and requires reconciliation to the overall change in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.   As a result, the statement of cash flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents.   The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied retrospectively for each period presented.  

8

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

2. Summary of Significant Accounting Policies (continued)

The Company early adopted both ASU 2016-15 and ASU 2016-18 on January 1, 2017; the adoption of which impacted the Company’s presentation of its statement of cash flows, but did not have a material impact on the Company’s consolidated balance sheet or consolidated results of operations.  Accordingly, the Company has retrospectively adjusted the presentation of its consolidated statement of cash flows for all periods presented.  The following table provides additional details by financial statement line item of the adjusted presentation in the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2016 (in thousands):

	As Filed						Adjusted
	September 30,						September 30,
	2016			Adjustments			2016
Operating activities:
Loss on extinguishment of debt	$	368		$	1,127		$	1,495
Net cash provided by operating activities	$	56,984		$	1,127		$	58,111
Investing activities:
Changes in restricted cash	$	(1,225	)	$	1,225		$	—
Net cash used in investing activities	$	(70,018	)	$	1,225		$	(68,793	)
Financing activities:
Payment on extinguishment of debt	$	—		$	(1,127	)	$	(1,127	)
Net cash used in financing activities	$	(1,269	)	$	(1,127	)	$	(2,396	)
Net decrease in cash and restricted cash	$	(14,303	)	$	1,225		$	(13,078	)
Cash and restricted cash at beginning of period		68,922			10,287			79,209
Cash and restricted cash at end of period	$	54,619		$	11,512		$	66,131

In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810): Interests Held Through Related Parties that are under Common Control,” which requires an entity to consider its indirect interests held by related parties that are under common control on a proportionate basis when evaluating whether the entity is a primary beneficiary of a VIE. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016.  The Company has adopted ASU 2016-17 on January 1, 2017; the adoption of which did not have a material impact to its consolidated financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which clarifies the definition of a business and provides a framework by which to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied prospectively for each period presented.  The Company early adopted ASU 2017-01 on January 1, 2017; the adoption of which did not have a material impact to its consolidated financial position, results of operations or cash flows.

Recent Accounting Pronouncements— In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” as a new ASC topic (Topic 606).  The core principle of this ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The ASU further provides guidance for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, lease contracts).  The FASB subsequently issued ASU 2015-14 to defer the effective date of ASU 2014-09 until annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with earlier adoption permitted.

9

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

2. Summary of Significant Accounting Policies (continued)

In addition, in December 2016, the FASB issued ASU 2016-20, which provides technical corrections and improvements to ASC 606 based on questions that stakeholders have raised while working through the implementation.  ASC 606 can be adopted using one of two retrospective transition methods: (i) retrospectively to each prior reporting period presented or (ii) as a cumulative-effect adjustment as of the date of adoption.   The Company continues to execute on its implementation plan for ASC 606; specifically, as it relates to the allocation of consideration to different revenue streams within a given contract and the impact adoption of ASC 606 could have on the Company’s financial statement disclosures.  The Company expects to use the modified retrospective approach as its transition method once it adopts this ASU and the Company expects the adoption of this ASU will not have a material impact on the amount or timing of its revenue recognition.  

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842): Accounting for Leases,” which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors).  The ASU requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months.  The ASU further modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases.  The ASU will also require qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows arising from leases.  The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted.  The ASU is to be applied using a modified retrospective approach.  The Company continues to execute on its implementation plan for ASC 842 and expects to adopt this ASU on January 1, 2019.  The Company expects that adoption will impact the Company’s consolidated financial statements and related financial statement disclosures; specifically, (1) the Company’s consolidated financial position as it relates to the required presentation for arrangements such as ground and air rights leases in which the Company is the lessee, and (2) the allocation of consideration between lease and non-lease components for arrangements in which the Company is the lessor.  However, the Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated results of operations or cash flows.

In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which amended the hedge accounting model to better reflect an entity’s risk management activities. The ASU expands an entities ability to hedge nonfinancial and financial risk components as well as reduce the complexity related to fair value hedges of interest rate risk. The ASU further eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company expects to early adopt this ASU on January 1, 2018 and does not expect the adoption of this ASU to have a material impact on the Company’s consolidated results of operations or cash flows.

10

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

3. Real Estate Assets, net

The gross carrying amount and accumulated depreciation of the Company’s real estate assets as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
Land and land improvements	$	251,659		$	235,543
Building and building improvements		2,409,656			2,306,071
Furniture, fixtures and equipment		79,933			64,939
Less: accumulated depreciation		(244,363	)		(186,738	)
Real estate investment properties, net		2,496,885			2,419,815
Real estate under development, including land		4,856			97,164
Total real estate assets, net	$	2,501,741		$	2,516,979

Depreciation expense on the Company’s real estate investment properties, net was approximately $19.8 million and $58.6 million for the quarter and nine months ended September 30, 2017, respectively, and approximately $20.2 million and $60.1 million for the quarter and nine months ended September 30, 2016.

The following development properties and expansion projects were completed during the nine months ended September 30, 2017and as such the related asset values are included in real estate investment properties, net in the accompanying condensed consolidated balance sheet as of September 30, 2017:

Property Name	Location	Substantial Completion Date
Development Properties
Welbrook Transitional Care Grand Junction	Grand Junction, CO		March 2017
Waterstone on Augusta	Greenville, SC		March 2017
Wellmore of Lexington	Lexington, SC		June 2017
Dogwood Forest of Grayson	Grayson, GA		June 2017
Expansion Projects
Brookridge Heights Assisted Living & Memory Care	Marquette, MI		June 2017

As of September 30, 2017, one of the Company’s seniors housing communities has a real estate expansion project with a third-party developer as follows (in thousands):

Property Name (and Location)	Developer	Real Estate Development Costs Incurred (1)		Remaining Development Budget (2)
Tranquillity at Fredericktowne (Frederick, MD)	Capital Health Partners	$	4,856	$	2,029

_____________

FOOTNOTES:

(1) This amount represents total capitalized costs for GAAP purposes for the development and construction of the seniors housing community as of September 30, 2017.  Amounts include investment services fees, asset management fees, interest expense and other costs capitalized during the development period.

(2) This amount includes preleasing and marketing costs, which will be expensed as incurred.

The development budgets generally include the cost of the land, construction costs, development fees, financing costs, start-up costs and initial operating deficits of the respective properties.  Generally, the Company has delegated to an affiliate of the developer of the respective community the management and administration of the development and construction.  In most cases, the developer is generally responsible for cost overruns beyond the approved development budget for the applicable project pursuant to a cost overrun guarantee.  

11

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

4. Intangibles, net

The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
In-place lease intangibles	$	223,854		$	223,854
Above-market lease intangibles		13,974			13,974
Below-market ground lease intangibles		12,470			12,470
Less: accumulated amortization		(143,546	)		(119,689	)
Intangible assets, net	$	106,752		$	130,609
Below-market lease intangibles	$	(12,060	)	$	(12,060	)
Above-market ground lease intangibles		(3,488	)		(3,488	)
Less: accumulated amortization		5,362			4,247
Intangible liabilities, net (1)	$	(10,186	)	$	(11,301	)

____________

FOOTNOTE:

(1) Intangible liabilities, net are included in other liabilities in the accompanying condensed consolidated balance sheets.

Amortization on the Company’s intangible assets was approximately $7.4 million and $24.0 million for the quarter and nine months ended September 30, 2017, of which approximately $0.4 million and $1.3 million, respectively, were treated as a reduction of rental income from operating leases, approximately $0.1 million and $0.2 million, respectively, were treated as an increase of property operating expenses and approximately $6.9 million and $22.4 million, respectively, were included in depreciation and amortization.  Amortization on the Company’s intangible assets was approximately $10.7 million and $36.0 million for the quarter and nine months ended September 30, 2016, of which approximately $0.5 million and $1.5 million, respectively, were treated as a reduction of rental income from operating leases, approximately $0.1 million and $0.2 million, respectively, were treated as an increase of property operating expenses and approximately $10.1 million and $34.3 million, respectively, were included in depreciation and amortization.

Amortization on the Company’s intangible liabilities was approximately $0.4 million and $1.1 million for the quarter and nine months ended September 30, 2017, of which approximately $0.3 million and $1.0 million, respectively, were treated as an increase of rental income from operating leases and approximately $0.02 million and $0.07 million, respectively, were treated as a reduction of property operating expenses.  For the quarter and nine months ended September 30, 2016, amortization on the Company’s intangible liabilities was approximately $0.4 million and $1.3 million, of which approximately $0.4 million and $1.2 million, respectively, were treated as an increase of rental income from operating leases and approximately $0.02 million and $0.07 million were treated as a reduction of property operating expenses.

12

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

5. Variable Interest Entities

The aggregate carrying amount and major classifications of the consolidated assets that can be used to settle obligations of the VIEs and liabilities of the consolidated VIEs that are non-recourse to the Company as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
Assets:
Real estate investment properties, net	$	216,181		$	112,929
Real estate under development, including land	$		―	$	80,473
Intangibles, net	$	2,129		$	2,891
Cash	$	2,660		$	916
Deferred rent and lease incentives	$	5,421		$	3,061
Other assets	$	2,547		$	1,130
Restricted cash	$	56		$	20
Liabilities:
Mortgages and other notes payable, net	$	151,785		$	104,890
Accounts payable and accrued liabilities	$	3,197		$	1,461
Accrued development costs	$	749		$	15,369
Other liabilities	$	1,426		$	976
Due to related parties	$	113		$	107

The Company’s maximum exposure to loss as a result of its involvement with these VIEs is limited to its net investment in these entities which totaled approximately $70.0 million as of September 30, 2017. The Company’s exposure is limited because of the non-recourse nature of the borrowings of the VIEs.

As of September 30, 2017 and December 31, 2016, the Company had 10 subsidiaries which are classified as VIEs due to the following factors and circumstances:

• Three of these subsidiaries are single property entities, designed to own and lease their respective properties to multiple tenants, which are subject to either a ground lease or an air rights lease that include buy-out and put options held by either the tenant or landlord under the applicable lease.  

• Four of these subsidiaries are entities with completed developments in which there is insufficient equity at risk due to the development nature of each entity.  

• Two of these subsidiaries are joint ventures with recently completed real estate under development in which there is insufficient equity at risk due to the development nature of each joint venture.

• One of these subsidiaries is a joint venture with equity interest that consists of non-substantive protective voting rights, but not any participating or kick-out rights.

The Company determined it is the primary beneficiary and holds a controlling financial interest in each of the aforementioned property and development entities due to its power to direct the activities that most significantly impact the economic performance of the entities, as well as its obligation to absorb the losses and its right to receive benefits from these entities that could potentially be significant to these entities. As such, the transactions and accounts of these VIEs are included in the accompanying condensed consolidated financial statements.

13

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

6. Contingent Purchase Price Consideration

The following table provides a roll-forward of the fair value of the Company’s aggregate contingent purchase price consideration for the quarter and nine months ended September 30, 2017 and 2016 (in thousands):

	Quarter Ended September 30, 2017
Property	Beginning asset (liability) as of June 30,  2017			Contingent Consideration  Payment			Change in Fair Value		Ending asset (liability) as of September 30, 2017
Superior Residences of Panama City	$	(2,000	)	$	1,000		$	—	$	(1,000	)
Center One		798			(203	)	―			595
	$	(1,202	)	$	797		$	—	$	(405	)

	Quarter Ended September 30, 2016
Property	Beginning asset (liability) as of June 30,  2016			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2016
Superior Residences of Panama City	$	(3,000	)	$	—		$	(1,000	)	$	(4,000	)
Siena Pavilion VI		(3,750	)		2,770			113			(867	)
Center One		843			(99	)		359			1,103
	$	(5,907	)	$	2,671		$	(528	)	$	(3,764	)

	Nine Months Ended September 30, 2017
Property	Beginning asset (liability) as of December 31, 2016			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2017
Superior Residences of Panama City	$	(4,000	)	$	3,000		$	—		$	(1,000	)
Siena Pavilion VI		(645	)		645		―			―
Center One		1,079			(407	)		(77	)		595
	$	(3,566	)	$	3,238		$	(77	)	$	(405	)

	Nine Months Ended September 30, 2016
Property	Beginning asset (liability) as of December 31, 2015			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2016
Superior Residences of Panama City	$	(3,000	)	$	—		$	(1,000	)	$	(4,000	)
The Shores of Lake Phalen		(750	)	―				750		―
Siena Pavilion VI		(3,750	)		2,770			113			(867	)
Center One		1,019			(275	)		359			1,103
	$	(6,481	)	$	2,495		$	222		$	(3,764	)

The fair value of the contingent purchase price consideration is based on a then-current income approach that is primarily determined based on the present value and probability of future cash flows using internal underwriting models.  The income approach further includes estimates of risk-adjusted rate of return, capitalization rates for the respective property and/or lease-up assumptions.  Since these estimates include inputs that are less observable by the public and are not necessarily reflected in active markets, the measurements of the estimated fair value related to the Company’s contingent purchase price consideration are categorized as Level 3 on the three-level fair value hierarchy.  There were no transfers into and out of fair value measurement levels during the quarter and nine months ended September 30, 2017.

14

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

7. Indebtedness

The following table provides details of the Company’s indebtedness as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30,			December 31,
	2017			2016
Mortgages payable and other notes payable:
Fixed rate debt	$	412,159		$	382,129
Variable rate debt (1)(5)		630,294			561,874
Mortgages and other notes payable (2)		1,042,453			944,003
Premium (discount), net (3)		109			(67	)
Loan costs, net		(7,448	)		(7,213	)
Total mortgages and other notes payable, net		1,035,114			936,723
Credit facilities:
Revolving Credit Facility (4) (5)		172,000			194,863
First Term Loan Facility  (1)		175,000			175,000
Second Term Loan Facility (5)		275,000			275,000
Loan costs, net related to Term Loan Facilities		(2,165	)		(2,874	)
Total credit facilities, net		619,835			641,989
Total indebtedness, net	$	1,654,949		$	1,578,712

_____________

FOOTNOTES:

(1) As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate swaps with notional amounts of approximately $515.3 million and $521.5 million, respectively, which settle on a monthly basis. Refer to Note 9. “Derivative Financial Instruments” for additional information.

(2) As of September 30, 2017 and December 31, 2016, the Company’s mortgages and other notes payable are collateralized by 76 and 75 properties, respectively, with total carrying value of approximately $1.6 billion and $1.6 billion, respectively.

(3) Premium (discount), net is reflective of the Company recording mortgage note payables assumed at fair value on the respective acquisition dates.

(4) As of September 30, 2017 and December 31, 2016, the Company had undrawn availability under the senior unsecured revolving line of credit (“Revolving Credit Facility”) of approximately $3.6 million and $11.1 million, respectively, based on the value of the properties in the unencumbered pool of assets supporting the loan.

(5) As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate caps with notional amounts of approximately $527.0 million and $410.0 million, respectively.  Refer to Note 9. “Derivative Financial Instruments” for additional information.

The following is a schedule of future principal payments and maturity for the Company’s total indebtedness for the remainder of 2017, each of the next four years and thereafter, in the aggregate, as of September 30, 2017 (in thousands):

2017	$	203,265
2018		71,859
2019		505,235
2020		424,263
2021		49,556
Thereafter		410,384
	$	1,664,562

In October 2017, the Company exercised a one-year extension option on its Revolving Credit Facility, which was scheduled to mature in December 2017 as presented above.  Refer to Note 13. “Subsequent Events” for additional information.

15

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

7. Indebtedness (continued)

The following table provides details of the Company’s new and refinanced mortgages and other notes payable as of September 30, 2017 (in thousands):

	Interest Rate at
	September 30,		Maturity	September 30,
Property and Loan Type	2017 (1)	Payment Terms	Date (2)	2017
Pacific Northwest Communities; Mortgage Loan (3)	4.30% per annum	Monthly principal and interest payments based on a 25-year amortization schedule	1/5/22	$	210,439
Capital Health Communities; Mortgage Loan (4)	(4)	Monthly principal and interest payments based on a 25-year amortization schedule	1/5/22		63,184
		Total fixed rate debt			273,623
Wellmore of Tega Cay; Mortgage Loan	30-day LIBOR plus 2.65% per annum	Monthly interest only payments for the first 12 months; principal and interest payments thereafter based on a 30-year amortization schedule	3/1/20		28,000
Knoxville Medical Office Properties and Claremont Medical Office; Mortgage Loan (5)	30-day LIBOR plus 2.45% per annum	Monthly principal and interest payments based on a 30-year amortization schedule	5/24/22		57,350
		Total variable rate debt			85,350
		Total debt		$	358,973

_____________

FOOTNOTES:

(1) The 30-day and 90-day LIBOR were approximately 1.24% and 1.34%, respectively, as of September 30, 2017.

(2) Represents the initial maturity date (or, as applicable, the maturity date as extended).  Certain of the Company’s mortgages and other notes payable agreements include extension options held by the Company under which the maturity dates may be extended beyond the date presented, subject to certain lender conditions and/or related fees.

(3) In August 2017, the Company extended the maturity date on the existing loan of approximately $201.9 million from December 2018 to January 2022.  In addition, the Company received approximately $9.5 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022. The supplemental loan further accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.  The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

16

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

7. Indebtedness (continued)

(4) In August 2017, the Company extended the maturity date on the existing loan of approximately $35.4 million from January 2020 to January 2022.  In addition, the Company received approximately $28.0 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022.  The existing loan accrues interest at a fixed rate equal to 4.25% per annum.  The supplemental loan accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity. The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

(5) In May 2017, the Company refinanced the loans related to the Claremont Medical Office property and the Knoxville Medical Office Properties of approximately $12.4 million and $37.2 million, respectively, into a combined loan. The original loans were scheduled to mature January 2018 and July 2018, respectively.

The following table provides details of the fair market value and carrying value of the Company’s indebtedness as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30,				December 31,
	2017				2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgages and other notes payable, net	$	1,041.0	$	1,035.1	$	943.4	$	936.7
Credit facilities	$	622.0	$	619.8	$	644.9	$	642.0

These fair market values are based on current rates and spreads the Company would expect to obtain for similar borrowings.  Since this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage notes payable is categorized as Level 3 on the three-level valuation hierarchy.  The estimated fair value of accounts payable and accrued liabilities approximates the carrying value as of September 30, 2017 and December 31, 2016 because of the relatively short maturities of the obligations.

All of the Company’s mortgage and construction loans contain customary financial covenants; including (but not limited to) the following: debt service coverage ratio, minimum occupancy levels, limitations on incurrence of additional indebtedness, etc.  

The credit facilities contain affirmative, negative, and financial covenants which are customary for loans of this type, including (but not limited to): (i) maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum consolidated net worth, (iv) restrictions on payments of cash distributions except if required by REIT requirements, (v) maximum secured indebtedness, (vi) maximum secured recourse debt, (vii) minimum unsecured interest coverage and (viii) limitations on certain types of investments and with respect to the pool of properties supporting borrowings under the credit facilities, minimum debt service coverage ratio, minimum weighted average occupancy, and remaining lease terms, as well as property type, MSA, operator, and asset value concentration limits.  The limitations on distributions include a limitation on the extent of allowable distributions, which are not to exceed the greater of 95% of adjusted FFO (as defined per the credit facilities) and the minimum amount of distributions required to maintain the Company’s REIT status.

As of September 30, 2017, the Company was in compliance with all financial covenants.

17

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

8. Related Party Arrangements

In February 2017, the Company’s board of directors approved the fourth amended and restated expense support agreements with both the Advisor and Property Manager that were effective January 1, 2017.  These amendments limit the annual expense support amount, in the aggregate, to an annualized four percent of the weighted average of the Board’s most recent determination of estimated net asset value (“NAV”) per share and change the calculation to exclude the impact of completed development properties for a specified period of time after the property is placed into service (as defined in the agreements).  These amendments, along with the original expense support agreements and previous amendments govern the fees and expenses charged by the Advisor and Property Manager to the Company.  Refer to the Company’s Annual Report on Form 10-K for further information related to these previous expense support agreements.  

Under the terms of the expense support agreements, for each quarter within a calendar expense support year, the Company will record a proportional estimate of the cumulative year-to-date period based on an estimate of expense support amounts for the calendar expense support year.  Moreover, in exchange for services rendered and in consideration of the expense support provided under the expense support agreements, the Company will issue, within 90 days following the determination date, a number of shares of forfeitable restricted common stock (“Restricted Stock”) equal to the quotient of the expense support amounts provided by the Advisor and Property Manager for the preceding calendar year divided by the Company’s then-current NAV per share of common stock.  The terms of the expense support agreements automatically renew for consecutive one year periods, subject to the right of the Advisor or Property Manager to terminate their respective agreements upon 30 days’ written notice to the Company.

The following fees have been or are expected to be settled in accordance with the expense support agreements for the quarter and nine months ended September 30, 2017, the quarter and nine months ended September 30, 2016, and cumulatively as of September 30, 2017 (in thousands, except per share data):

	Quarter ended				Nine Months Ended				As of
	September 30,				September 30,				September 30,
	2017		2016		2017		2016		2017
Asset management fees (1)	$	—	$	850	$	—	$	2,550	$	13,565
Then-current offering price or NAV (2)	$	10.04	$	9.75	$	10.04	$	9.75	$	10.04
Restricted Stock shares (3)	―			87	―			262		1,332
Cash distributions on Restricted Stock (4)	$	158	$	112	$	413	$	315	$	1,223

______________

FOOTNOTES:

(1) No other amounts were eligible to be settled in accordance with the expense support agreements for the quarter and nine months ended September 30, 2017.

(2) The number of Restricted Stock shares granted to the Advisor in lieu of payment in cash is determined by dividing the expense support amount for the respective determination date by the then-current NAV per share.  

(3) No fair value has been assigned to the Restricted Stock shares as the shares were valued at zero at issuance, which represents the lowest possible value estimated at vesting. In addition, the Restricted Stock shares were treated as unissued for financial reporting purposes because the vesting criteria had not been met through September 30, 2017.

(4) The cash distributions have been recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations.

18

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

8. Related Party Arrangements (continued)

The expenses and fees incurred by and reimbursable to the Company’s related parties for the quarter and nine months ended September 30, 2017 and 2016, and related amounts unpaid as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	Quarter ended				Nine Months Ended				Unpaid amounts as of (1)
	September 30,				September 30,				September 30,		December 31,
	2017		2016		2017		2016		2017		2016
Reimbursable expenses:
Operating expenses (2)	$	1,396	$	1,043	$	4,326	$	3,533	$	1,015	$	1,072
Acquisition fees and expenses		3		28		6		101	―			3
		1,399		1,071		4,332		3,634		1,015		1,075
Investment services fees (3)		19		194		123		194	―			17
Financing coordination fees (4)		2,748	―			3,601	―		―		―
Property management fees (5)		1,196		1,353		3,660		3,668		423		417
Asset management fees (6)		7,643		7,270		22,711		21,699		2,652		1,956
	$	13,005	$	9,888	$	34,427	$	29,195	$	4,090	$	3,465

________________

FOOTNOTES:

(1) Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets.

(2) Amounts are recorded as general and administrative expenses in the accompanying condensed consolidated statements of operations unless such amounts represent prepaid expenses, which are capitalized in the accompanying condensed consolidated balance sheets.  

(3) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $0.02 million and $0.1 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.02 million and $0.1 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  For the quarter and nine months ended September 30, 2016 the Company incurred approximately $0.2 million and $0.2 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.2 million and $0.2 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. Investment services fees, that are not capitalized, are recorded as acquisition fees and expenses in the accompanying condensed consolidated statements of operations.

(4) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $2.7 and $3.6 million, respectively, in financing coordination fees related to the refinancing of the loans associated with certain operating properties of which approximately $0.0 million and $0.9 million, respectively, in financing coordination fees were capitalized as loan costs and reduced mortgages and other notes payable, net in the accompanying condensed consolidated balance sheets.  There were no financing coordination fees for the quarter and nine months ended September 30, 2016.

(5) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $1.2 million and $3.7 million, respectively, in property and construction management fees payable to the Property Manager of which approximately $0.1 million and $0.3 million, respectively, in construction management fees were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $1.4 million and $3.7 million, respectively, in property and construction management fees payable to the Property Manager of which approximately $0.3 million and $0.6 million, respectively, in construction management fees were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  

19

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

8. Related Party Arrangements (continued)

(6) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $7.6 million and $22.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.1 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheet. No expense support was received for the quarter and nine months ended September 30, 2017. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $7.3 million and $21.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.2 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  In addition, the Company recognized a reduction in asset management fees of approximately $0.9 million and $2.6 million, respectively, for the quarter and nine months ended September 30, 2016 as an estimate of the annual expense support amount expected to be settled in accordance with the terms of the expense support agreements.

9. Derivative Financial Instruments

The following summarizes the terms of the Company’s, or its equity method investments’, derivative financial instruments and the corresponding asset (liability) as of September 30, 2017 and December 31, 2016 (in thousands):

												Fair value asset (liability) as of
Notional						Credit			Trade	Forward	Maturity	September 30,			December 31,
Amount			Strike (1)			Spread (1)			date	date	date	2017			2016
$	11,895	(2)		1.3	%		2.6	%	1/17/2013	1/15/2015	1/16/2018	$	(4	)	$	(44	)
$	36,990	(2)		2.7	%		2.5	%	9/6/2013	8/17/2015	7/10/2018	$	(395	)	$	(878	)
$	25,206	(2)		2.8	%		2.5	%	9/6/2013	8/17/2015	8/29/2018	$	(304	)	$	(667	)
$	47,306	(2)		2.4	%		2.9	%	8/15/2014	6/1/2016	6/2/2019	$	(551	)	$	(949	)
$	81,233	(2)		2.3	%		2.4	%	9/12/2014	8/1/2015	7/15/2019	$	(888	)	$	(1,512	)
$	6,785	(2)		1.2	%		2.3	%	11/12/2014	11/15/2014	10/15/2017	$	—		$	(17	)
$	175,000	(2)		1.6	%		2.0	%	12/23/2014	12/19/2014	2/19/2019	$	(66	)	$	(992	)
$	130,866	(2)		1.7	%		2.0	%	1/9/2015	12/10/2015	12/22/2019	$	(240	)	$	(976	)
$	260,000	(3)		1.5	%		—	%	11/19/2015	11/19/2015	11/30/2018	$	405		$	600
$	150,000	(3)		1.5	%		—	%	3/1/2016	3/1/2016	11/30/2018	$	228		$	346
$	117,000	(3)		2.3	%		—	%	8/29/2017	8/29/2017	9/1/2019	$	60		$	—

_______________

FOOTNOTES:

(1) The all-in rates are equal to the sum of the Strike and Credit Spread detailed above.  

(2) Amounts related to interest rate swaps held by the Company, or its equity method investments, which are recorded at fair value and included in either other assets or other liabilities in the accompanying condensed consolidated balance sheets.

(3) Amounts related to the interest rate caps held by the Company, or its equity method investments, which are recorded at fair value and included in other assets in the accompanying condensed consolidated balance sheets.

Although the Company has determined that the majority of the inputs used to value its derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties.  The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative financial instruments and has determined that the credit valuation adjustments on the overall valuation adjustments are not significant to the overall valuation of its derivative financial instruments. As a result, the Company determined that its derivative financial instruments valuation in its entirety is classified in Level 2 of the fair value hierarchy. Determining fair value requires management to make certain estimates and judgments.  Changes in assumptions could have a positive or negative impact on the estimated fair values of such instruments which could, in turn, impact the Company’s or its joint venture’s results of operations.  

20

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

10. Equity

Stockholders’ Equity:

Distribution Reinvestment Plan — For the nine months ended September 30, 2017 and 2016, the Company received proceeds through its Reinvestment Plan of approximately $32.0 million (3.2 million shares) and $32.0 million (3.3 million shares), respectively.

Distributions — The following table details the Company’s historical estimated NAV per share, including the prices pursuant to the Reinvestment Plan and the Company’s monthly cash distributions per share:

	NAV per		Reinvestment Plan Price		Monthly Cash
Period	Share		per Share		Distributions
February 12, 2016 through February 13, 2017	$	9.75	$	9.75	$	0.0353
February 14, 2017 through June 30, 2017	$	10.04	$	10.04	$	0.0353
July 1, 2017 through September 30, 2017	$	10.04	$	10.04	$	0.0388

During the nine months ended September 30, 2017 and 2016, the Company declared cash distributions of $57.4 million and $55.5 million, respectively, of which $25.4 million and $23.5 million, respectively, were paid in cash to stockholders and $32.0 million and $32.0 million, respectively, were reinvested pursuant to the Reinvestment Plan.  

Redemptions — During the nine months ended September 30, 2017 and 2016, the Company received requests for the redemption of common stock of approximately $35.6 million and $25.8 million, respectively, all of which were approved for redemption at an average price of $9.98 and $9.73, respectively.

Promoted Interest — During the nine months ended September 30, 2016, the Company recorded, as a reduction to capital in excess of par value, approximately $6.7 million in distributions to holders of promoted interest related to the following completed developments (in thousands):

Property	Amount
Dogwood Forest of Acworth	$	(3,850	)
Wellmore of Tega Cay		(2,800	)
	$	(6,650	)

There were no such distributions recorded during the nine months ended September 30, 2017.

21

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

10. Equity (continued)

Other comprehensive income (loss) — The following table reflects the effect of derivative financial instruments held by the Company, or its equity method investments, and included in the condensed consolidated statements of comprehensive loss for the quarter and nine months ended September 30, 2017 and 2016 (in thousands):

Derivative financial instruments	Gain (loss) recognized in other comprehensive loss on derivative financial instruments						Location of gain (loss) reclassified into earnings	Gain (loss) reclassified from accumulated other comprehensive loss into earnings
	Quarter Ended							Quarter Ended
	September 30,							September 30,
	2017			2016				2017			2016
Interest rate swaps	$	888		$	4,033		Interest expense and loan cost amortization	$	(433	)	$	(1,731	)
Interest rate caps		295			(33	)	Interest expense and loan cost amortization		(254	)		(10	)
Reclassification of interest rate    swaps upon derecognition		132		―			Interest expense and loan cost amortization		(132	)	―
Reclassification of interest rate    swaps due to ineffectiveness		(7	)		(23	)	Interest expense and loan cost amortization		7			23
Total	$	1,308		$	3,977			$	(812	)	$	(1,718	)

	Nine Months Ended							Nine Months Ended
	September 30,							September 30,
	2017			2016				2017			2016
Interest rate swaps	$	3,409		$	(3,729	)	Interest expense and loan cost amortization	$	(3,201	)	$	(5,388	)
Interest rate caps		198			(2,185	)	Interest expense and loan cost amortization		(511	)		(10	)
Reclassification of interest rate    swaps upon derecognition		186		―			Interest expense and loan cost amortization		(186	)	―
Reclassification of interest rate    swaps due to ineffectiveness		(7	)		(1	)	Interest expense and loan cost amortization		7			1
Interest rate cap held by    unconsolidated joint venture	―				(1	)	Not applicable	―			―
Total	$	3,786		$	(5,916	)		$	(3,891	)	$	(5,397	)

22

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)

11. Commitments and Contingencies

From time to time, the Company may be a party to legal proceedings in the ordinary course of, or incidental to the normal course of, its business, including proceedings to enforce its contractual or statutory rights.  While the Company cannot predict the outcome of these legal proceedings with certainty, based upon currently available information, the Company does not believe the final outcome of any pending or threatened legal proceeding will have a material adverse effect on its results of operations or financial condition.

Refer to Note 3. “Real Estate Assets, net” for additional information on the remaining development budgets for the Company’s real estate under development.

The Company has seven remaining promoted interest agreements with third-party developers pursuant to which certain operating targets have been established that, upon meeting such targets, result in the developer being entitled to additional payments based on enumerated percentages of the assumed net proceeds of a deemed sale, subject to achievement of an established internal rate of return on the Company’s investment in the development.  However, these performance metrics were not met nor probable of being met as of September 30, 2017.

Refer to Note 6. “Contingent Purchase Price Consideration” for information on potential contingent purchase price considerations related to property acquisitions.

Refer to Note 8. “Related Party Arrangements” for information on contingent restricted stock shares due to the Company’s Advisor and Property Manager in connection with the expense support agreements.

12. Assets Held For Sale, net

In August 2017, the Company committed to a plan to sell the Perennial Communities which are comprised of six skilled nursing facilities located in Arkansas and classified the associated assets as held for sale as of September 30, 2017. The sale of these properties would not cause a strategic shift in the Company nor would it be considered individually significant; therefore, it does not qualify as discontinued operations.

As of September 30, 2017 and December 31, 2016, assets held for sale consisted of the following (in thousands):

	September 30,		December 31,
	2017		2016
Real estate assets, net	$	46,699	$	47,178
Intangibles, net		800		893
Deferred rent and lease incentives		4,970		5,280
Assets held for sale, net	$	52,469	$	53,351

13. Subsequent Events

In October 2017, the Company exercised a one-year extension option on its Revolving Credit Facility, which as of September 30, 2017 had approximately $172.0 million outstanding and was scheduled to mature in December 2017. Pursuant to this extension option, the Company’s Revolving Credit Facility is now scheduled to mature in December 2018.

In November 2017, the Company executed amendments to the credit agreement with KeyBank, as administrative agent, related to the Credit Facilities, which adjusted certain criteria and terms of the borrowing base supporting the Company’s Revolving Credit Facility and increased the availability under the Revolving Credit Facility to approximately $55.1 million based on the borrowing base calculation as of September 30, 2017.

23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Caution Concerning Forward-Looking Statements

Statements contained under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2017 that are not statements of historical or current fact may constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995.  The Company intends that such forward-looking statements be subject to the safe harbor created by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events and circumstances.  Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should,” and “could” and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, projected growth prospects, cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimated per share net asset value of the Company’s common stock, and/or other matters.  The Company’s forward-looking statements are not guarantees of future performance.  While the Company’s management believes its forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances.  As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized.  The Company’s forward-looking statements are based on management’s current expectations and a variety of risks, uncertainties and other factors, many of which are beyond the Company’s ability to control or accurately predict.  Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors.  

Important factors that could cause the Company's actual results to vary materially from those expressed or implied in its forward-looking statements include, but are not limited to, government regulation, economic, strategic, political and social conditions and the following: a worsening economic environment in the U.S. or globally, including financial market fluctuations; risks associated with the Company’s investment strategy, including its concentration in the healthcare sector; the illiquidity of an investment in the Company’s stock; liquidation at less than the subscription price of the Company’s stock; the impact of regulations requiring periodic valuation of the Company on a per share basis, including the uncertainties inherent in such valuations and that the amount that a stockholder would ultimately realize upon liquidation may vary significantly from the Company’s estimated net asset value; risks associated with real estate markets, including declining real estate values; risks associated with reliance on the Advisor and its affiliates, including conflicts of interest; the Company’s failure to obtain, renew or extend necessary financing or to access the debt or equity markets; the use of debt to finance the Company’s business activities, including refinancing and interest rate risk and the Company’s failure to comply with debt covenants; the Company’s inability to identify and close on suitable investments; failure to successfully manage growth or integrate acquired properties and operations; the Company’s inability to make necessary improvements to properties on a timely or cost-efficient basis; risks related to property expansions and renovations; risks related to development projects or acquired property value-add conversions, if applicable, including construction delays, cost overruns, the Company’s inability to obtain necessary permits, and/or public opposition to these activities; competition for properties and/or tenants; defaults on or non-renewal of leases by tenants; failure to lease properties on favorable terms or at all; the impact of current and future environmental, zoning and other governmental regulations affecting the Company’s properties; the impact of changes in accounting rules; inaccuracies of the Company’s accounting estimates; unknown liabilities of acquired properties or liabilities caused by property managers or operators; material adverse actions or omissions by any joint venture partners; consequences of the Company’s net operating losses; increases in operating costs and other expenses; uninsured losses or losses in excess of the Company’s insurance coverage; the impact of outstanding and/or potential litigation; risks associated with the Company’s tax structuring; failure to qualify for and maintain the Company’s qualification as a REIT for federal income tax purposes; and the Company’s inability to protect its intellectual property and the value of its brand.  Given these uncertainties, the Company cautions you not to place undue reliance on forward-looking information.

24

For further information regarding risks and uncertainties associated with the Company’s business, and other important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements, please refer to the factors listed and described in the Company’s  reports filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, the Company’s quarterly reports on Form 10-Q and the Company’s annual reports on Form 10-K, copies of which may be obtained from the Company’s website at www.cnlhealthcareproperties.com.

All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are qualified in their entirety by this cautionary note.  Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to, and expressly disclaims any obligation to, publicly release the results of any revisions to its forward-looking statements to reflect new information, changed assumptions, the occurrence of unanticipated subsequent events or circumstances, or changes to future operating results over time, except as otherwise required by law.

Introduction

The following discussion is based on the condensed consolidated financial statements as of September 30, 2017 (unaudited) and December 31, 2016.  Amounts as of December 31, 2016, included in the unaudited condensed consolidated balance sheets have been derived from the audited consolidated financial statements as of that date. This information should be read in conjunction with the accompanying unaudited condensed consolidated balance sheets and the notes thereto, as well as the audited consolidated financial statements, notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2016.

Overview

CNL Healthcare Properties, Inc. is a Maryland corporation that incorporated on June 8, 2010.  We qualified to be taxed as a REIT for U.S. federal income tax purposes beginning with the year ended December 31, 2012 and our intention is to be organized and operate in a manner that allows us to remain qualified.  The terms “us,” “we,” “our,” “Company” and “CNL Healthcare Properties” include CNL Healthcare Properties, Inc. and each of its subsidiaries.

From July 2011 to September 2015, we raised approximately $1.7 billion through our Offerings. The net proceeds from our Offerings were contributed to CHP Partners, LP, our operating partnership, in exchange for partnership interests.  Substantially all of our assets are held by, and all operations are conducted, either directly or indirectly, through: (1) the Operating Partnership in which we are the sole limited partner and our wholly owned subsidiary, CHP GP, LLC, is the sole general partner; (2) a wholly owned TRS, CHP TRS Holding, Inc.; (3) property owner subsidiaries and lender subsidiaries, which are single purpose entities; and (4) investments in joint ventures.

On September 30, 2015, we completed our Offerings pursuant to a registration statement on Form S-11 under the Securities Act of 1933 with the SEC.  In October 2015, we deregistered the unsold shares of our common stock under our previous registration statement on Form S-11, except for 20,000,000 shares that we concurrently registered on Form S-3 under the Securities Exchange Act of 1933 with the SEC for the sale of additional shares of common stock through our Reinvestment Plan.

Our Advisor is responsible for managing our affairs on a day-to-day basis and for identifying, recommending and executing acquisitions and dispositions on our behalf pursuant to an advisory agreement.  Our Property Manager is responsible for managing and leasing our healthcare real estate investments.  Our Advisor and Property Manager are each wholly owned by affiliates of our Sponsor, which is an affiliate of CNL, a private investment management firm providing global real estate and alternative investments.  As a result, our Advisor and Property Manager each represent related parties and each have received or will receive compensation, fees and expense reimbursements for services related to managing of our business.

25

Portfolio Overview

We believe recent demographic trends and compelling supply and demand indicators present a strong case for an investment focus on healthcare real estate or real estate-related assets. We believe that the healthcare sector will continue to provide attractive opportunities as compared to other asset sectors over the long-term.  Our healthcare investment portfolio is geographically diversified with properties in 34 states. The map below shows our current property allocations across geographic regions as of September 30, 2017:

As of September 30, 2017, our healthcare investment portfolio consisted of interests in 143 properties, including 72 seniors housing communities, 54 MOBs, 12 post-acute care facilities and five acute care hospitals.  Of our properties held at September 30, 2017, one of our 72 seniors housing communities currently has an expansion project, one represents unimproved land and five were owned through an unconsolidated joint venture.  The following table summarizes our healthcare portfolio by asset class and investment structure as of September 30, 2017:

Type of Investment	Number of Investments			Investment Amount (in millions)		Percentage of Total Investments
Consolidated investments:
Seniors housing leased (1)		15		$	311.0		10.2	%
Seniors housing managed (2)		51			1,416.5		46.6	%
Seniors housing expansion projects (3)	―		(4)		4.9		0.2	%
Seniors housing unimproved land		1			1.1		0.0	%
Medical office leased (1)		54			931.4		30.6	%
Post-acute care leased (1)		12			190.8		6.3	%
Acute care leased (1)		5			153.9		5.1	%
Unconsolidated investments:
Seniors housing managed (5)		5			31.1		1.0	%
		143		$	3,040.7		100.0	%

FOOTNOTES:

⁽¹⁾ Properties that are leased to third-party tenants for which we report rental income from operating leases.

⁽²⁾ Properties that are leased to TRS entities and managed pursuant to third-party management contracts (i.e. RIDEA structure) where we report resident fees and services, and the corresponding property operating expenses.

⁽³⁾ Investments herein represent funded and accrued development costs as of September 30, 2017.  

⁽⁴⁾ Investments herein relate to expansion projects whose property counts are included in seniors housing managed.

⁽⁵⁾ Properties that are owned through an unconsolidated joint venture and are leased to TRS entities and managed pursuant to third-party management contracts (i.e. RIDEA structure).  The joint venture is accounted for using the equity method.  

26

Portfolio Evaluation

We monitor the performance of our tenants and third-party operators to stay abreast of any material changes in the operations of the underlying properties by (1) reviewing the current, historical and prospective operating margins (measured by a tenant’s earnings before interest, taxes, depreciation, amortization and facility rent), (2) monitoring trends in the source of our tenants’ revenue, including the relative mix of public payors (including Medicare, Medicaid, etc.) and private payors (including commercial insurance and private pay patients), (3) evaluating the effect of evolving healthcare legislation and other regulations on our tenants’ profitability and liquidity, and (4) reviewing the competition and demographics of the local and surrounding areas in which the tenants operate.

When evaluating the performance of our healthcare portfolio within the seniors housing and post-acute care asset classes, management reviews occupancy levels and monthly revenue per occupied unit, which we define as total revenue divided by average number of occupied units or beds and is considered a performance metric within these asset classes.  Similarly, within the medical office and acute care asset classes, management reviews operating statistics of the underlying properties, including occupancy levels and rent per square foot.  Lastly, when evaluating the performance of our third-party operators or developers, management reviews monthly financial statements, property level operating performance versus budgeted expectations, conducts periodic operational review calls with operators and conducts periodic property inspections or site visits.  We do not consider this information to be a non-GAAP measure that can be reconciled to our GAAP financial statements because it includes the performance of properties that are leased to third-party tenants.  However, all of the aforementioned operating and statistical metrics assist us in determining the ability of our properties or operators to achieve market rental rates, to assess the overall performance of our diversified healthcare portfolio, and to review compliance with leases, debt, licensure, real estate taxes, and other collateral.

Furthermore, we consider the operating stage of the investments within the following stages: development, value-add or stabilizing and stabilized.  Development properties are those in which we or our joint venture have purchased land for the development of new operating properties.  We typically hold rights as the owner or managing member of the development properties while a third-party or our joint venture partner manages the development, construction and certain day-to-day operations of the property subject to our oversight.  Stabilizing properties are either developed properties that have been fully constructed and in lease-up phase (typically 18 months post-construction) or existing (“value-add”) properties in which we expect to make capital investments to upgrade or expand.  A property is considered stabilized upon the earlier of (i) when the property reaches 85% occupancy for a trailing three month period, or (ii) a two year period from acquisition or completion of development.  For those assets that are above an 85% occupancy level and subsequently drop below 85%, they are reclassified to stabilizing until the assets attain the trailing three month 85% occupancy metric.

During the nine months ended September 30, 2017, we continued to fund costs relating to existing development and value-add or stabilizing properties.  During the construction and lease-up phase, these types of investments are expected to generate limited cash flows from operations and may result in near term downward pressure on our results of operations and net asset valuation.  However, we believe that deploying a portion of our capital into these types of properties is beneficial because they are expected to provide a higher yield on cost and higher net asset valuations in the long-term as compared to stabilized acquisitions.  Additionally, these types of assets will result in our portfolio having a lower average age, which we believe will enhance our overall market value over the long-term.

In August 2017, the Company committed to a plan to sell the Perennial Communities and classified the associated assets as held for sale as of September 30, 2017.  Based on preliminary market data, we expect the net sales proceeds will exceed the carrying value of the properties.

27

Significant Tenants and Operators

Our real estate portfolio is operated by a mix of national or regional operators and the following represents the significant tenants and operators that lease or manage 5% or more of our rentable space as of September 30, 2017:

Tenants	Number of Properties		Rentable Square Feet (in thousands)		Percentage of Rentable   Square Feet			Lease Expiration Year
TSMM Management, LLC		13		1,261		22.0	%	2022-2025
Wellmore, LLC		2		366		6.4	%	2026-2027
Novant Medical Group, Inc.		5		297		5.2	%	2017-2025
Other tenants and vacancies (1)		66		3,802		66.4	%	2017-2038
		86		5,726		100.0	%

Operators	Number of Properties		Rentable Square Feet (inthousands)		Percentage of Rentable   Square Feet			Operator Expiration Year
Integrated Senior Living, LLC		7		2,039		32.2	%	2019-2021
Prestige Senior Living, LLC		13		895		14.1	%		2019
MorningStar Senior Management, LLC		4		834		13.2	%	2018-2019
SLH Austin Manager, LLC		3		431		6.8	%	2020-2025
Parc Communities, LLC		2		385		6.1	%		2022
HarborChase Retirement, LLC		4		380		6.0	%	2018-2024
Other operators (1)		18		1,363		21.6	%	2017-2025
		51		6,327		100.0	%

FOOTNOTE:

⁽¹⁾ Comprised of various tenants or operators each of which comprise less than 5% of our rentable square footage.

While we are not directly impacted by the performance of the underlying properties leased to third-party tenants, we believe that the financial and operational performance of our tenants provides an indication about the health of our tenants and their ability to pay rent. To the extent that our tenants, managers or our joint venture partners experience operating difficulties and become unable to generate sufficient cash to make rent payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Our tenants and managers are generally contractually required to provide this information to us in accordance with their respective lease, management and/or joint venture agreement. Therefore, in order to mitigate the aforementioned risk, we monitor our investments through a variety of methods determined by the type of property.

We monitor the credit of our tenants to stay abreast of any material changes in quality. We monitor tenant credit quality by (1) reviewing financial statements that are publicly available or that are required to be delivered to us under the applicable lease, (2) direct interaction with onsite property managers, (3) monitoring news and rating agency reports regarding our tenants (or their parent companies) and their underlying businesses, (4) monitoring the timeliness of rent collections and (5) monitoring lease coverage.

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Tenant Lease Expirations

Our asset management team collaborates with existing tenants to understand their current and anticipated space needs in advance of their lease term renewal date.  We work with and begin lease-related negotiations well in advance of the lease expirations or renewal period options in order for us to maintain a balanced lease rollover schedule and high occupancy levels, as well as to enhance the value of our properties through extended lease terms. Lease extensions are likely to create an obligation to pay lease commissions, lease incentives and/or tenant improvements and may also provide our tenants with some periods of reduced and/or “free rent.” Certain amendments or modifications to the terms of existing leases could require lender approval.

During the nine months ended September 30, 2017, our rental revenues from operating leases represented approximately 33.0% of our total revenues.  As of September 30, 2017, approximately 74.8% of our rental revenues from operating leases were scheduled to expire in 2022 or later.  Based on this, we do not expect lease turnover to have a significant impact on our cash flows from operations in the near term.  

The following table lists, on an aggregate basis, scheduled expirations for the remainder of 2017, each of the next nine years and thereafter on our consolidated healthcare investment portfolio (excludes real estate under development), assuming that none of the tenants exercise any of their renewal options, as of September 30, 2017 (in thousands, except for number of tenants and percentages):

Year of Expiration (1)	Number of Tenants		Expiring Rentable Square Feet		Expiring Annualized Base Rents (2)		Percentage of ExpiringAnnual Base Rents
2017		25		82	$	1,561		1.4	%
2018		98		387		7,865		7.0	%
2019		75		324		6,498		5.8	%
2020		68		372		7,013		6.3	%
2021		53		263		5,371		4.8	%
2022		48		1,096		16,889		15.1	%
2023		90		803		19,767		17.6	%
2024		13		269		6,349		5.7	%
2025		35		628		12,449		11.1	%
2026		7		164		3,475		3.1	%
Thereafter		49		940		24,934		22.1	%
Total		561		5,328	$	112,171		100.0	%
WeightedAverageRemainingLeaseTerm:(3)			7.1 years

FOOTNOTES:

⁽¹⁾ Represents current lease expiration and does not take into consideration lease renewals available under existing leases at the option of the tenants.

⁽²⁾ Represents the current base rent, excluding tenant reimbursements and the impact of future rent escalations included in leases, multiplied by 12 and included in the year of expiration.

⁽³⁾ Weighted average remaining lease term is the average remaining term weighted by annualized current base rents.

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Real Estate Under Development

As of September 30, 2017, we substantially completed all of our ground-up developments and had one property with an expansion project that will provide us with 32 additional units upon completion as follows:

Property Name (and Location)	Developer	Number of Additional Units upon Completion	Development Costs Incurred (in millions) (1)		Remaining Development Budget (in millions) (2)		Estimated Completion Date
Tranquillity at Fredericktowne (Frederick, MD)	Capital Health Partners	32 units	$	4.9	$	2.0	December 2017

FOOTNOTES:

⁽¹⁾ This amount represents total capitalized costs for GAAP purposes for the development and construction of this property as of September 30, 2017.  Amounts include investment services fees, asset management fees, interest expense and other costs capitalized during the development period.

⁽²⁾ This amount represents the remaining development budget as of September 30, 2017 and includes preleasing and marketing costs which will be expensed as incurred.

The development budgets include the cost of the land, construction costs, development fees, financing costs, start-up costs and initial operating deficits of the respective properties.  Generally, we have delegated to an affiliate of the developer of the respective community the management and administration of the development and construction.  Each developer is generally responsible for any cost overruns beyond the approved development budget for the applicable project.

Liquidity and Capital Resources

General

While our Offerings closed on September 30, 2015, we continue to provide existing stockholders the opportunity to designate their cash distributions for reinvestment through our Reinvestment Plan.  Other potential future sources of capital include proceeds from collateralized or uncollateralized financings from banks or other lenders and undistributed operating cash flows, and to a lesser extent, proceeds from the sale of properties or other assets.  If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.  Based on the amendments to our Credit Facilities in November 2017, as discussed in Note 13. “Subsequent Events,” we have approximately $55.1 million of undrawn availability under our Revolving Credit Facility, as discussed below.  

We substantially completed our acquisition phase in 2016 and expect future acquisition activity to be limited.  Prior to completion of our acquisition phase, our principal demand for funds has been for acquisitions or the development of properties, the payment of debt service on our outstanding indebtedness and the payment of distributions.  Generally, we expect to meet short-term working capital needs from our cash flows from operations and proceeds from our Reinvestment Plan.  

Sources of Liquidity and Capital Resources

Reinvestment Plan

For the nine months ended September 30, 2017 and 2016, we received proceeds from our Reinvestment Plan of approximately $32.0 million and $32.0 million, respectively.

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Borrowings

During the nine months ended September 30, 2017 and 2016, we borrowed proceeds of approximately $206.5million and $191.4 million, respectively. We have borrowed and intend to continue borrowing money to fund ongoing real estate development and other enhancements to our portfolio, as well as to cover any periodic shortfall between distributions paid and cash flows from operating activities. While we have substantially completed our acquisition phase, we continue to monitor and evaluate additional acquisition opportunities and may borrow additional money to fund such acquisitions.

In May 2017, we refinanced approximately $57.4 million of borrowings related to our Knoxville Medical Office Properties and our Claremont Medical Office property.  This combined mortgage loan has a term of 60 months, an interest rate equal to 30-day LIBOR plus 2.45% per annum, monthly interest only payments for the first 30 months and monthly principal and interest payments and for the remaining term of the combined loan using a 30-year amortization period with the remaining principal balance payable at maturity.  The previous loan balances totaled approximately $49.6 million collectively, of which approximately $12.4 million was scheduled to mature January 2018 related to our Claremont Medical Office property and approximately $37.2 million was scheduled to mature in July 2018 related to our Knoxville Medical Office Properties.

In August 2017, we extended the terms of our existing mortgage loans on the Pacific Northwest and Capital Health communities to January 2022, which represented an extension of the maturity dates from December 2018 and January 2020, respectively, on approximately $237.3 million of combined borrowings.  In addition, we received approximately $37.5 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022.  The supplemental loan further accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.  These proceeds were used partially to pay down the Revolving Credit Facility.

In August 2017, we also exercised one-year extension options on two of our mortgage loans totaling approximately $24.5 million and, in October 2017, we exercised a one-year extension option on our Revolving Credit Facility of approximately $172.0 million, all of which were scheduled to mature in 2017.  This debt is now scheduled to mature in 2018.  We will continue to make the monthly principal and interest payments as outlined in the respective loan agreements.

We have pledged our properties in connection with our borrowings and may continue to strategically leverage our real estate and use debt financing as a means of providing additional funds for the payment of distributions to stockholders, working capital and for other corporate purposes.  Our ability to increase our diversification through borrowings could be adversely affected by credit market conditions which result in lenders reducing or limiting funds available for loans, including loans collateralized by real estate.  We may also be negatively impacted by rising interest rates on our unhedged variable rate debt or the timing of when we seek to refinance existing debt.  In addition, we will continue to evaluate the need for additional interest rate protection in the form of interest rate swaps or caps on unhedged variable rate debt.

The aggregate amount of long-term financing is not expected to exceed 60% of our total assets on an annual basis.  As of September 30, 2017 and December 31, 2016, we had an aggregate debt leverage ratio of approximately 58.9% and 55.8%, respectively, of the aggregate carrying value of our assets.

Net Cash Provided by Operating Activities

We experienced positive cash flow from operating activities for the nine months ended September 30, 2017 and 2016 of approximately $56.9million and $58.1 million, respectively.  The decrease in cash flows from operating activities for the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily the result of the following:

• an increase in total revenues and net operating income (“NOI”)  for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily as the result of having 137 consolidated operating properties in 2017 as compared with 133 consolidated operating properties in 2016;

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• lower cash flows from operations being used to fund reduced or “free rent” periods for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily reflective of timing of rental payments across periods as two-single tenant properties were under “free rent” periods negotiated at inception of the respective leases during the prior period; and

• an increase in net cash flows from operations resulting from favorable changes in operating assets and liabilities and lower acquisition fees and expenses;

• offset by an increase in asset management fees resulting primarily from lower expense support amounts across periods, the acquisition of Cobalt Rehabilitation Hospital of New Orleans in October 2016 and the completion of seven development properties and one expansion project subsequent to September 30, 2016;

• an increase in lease incentives paid in connection with the build-out of space for certain tenants entering into new leases or extending existing leases at our MOBs during the nine months ended September 30, 2017  as compared to nine months ended September 30, 2016;

• payment of financing coordination fees, legal fees and other third-party costs associated to the refinancing of our Bonaventure and Capital Health mortgage loans which were expensed for the nine months ended September 30, 2017 as the refinancing was determined to be a loan modification for accounting purposes.  There were no similar such expenses recognized in the prior period; and

• an increase in interest expense paid resulting from higher average debt outstanding as well as higher interest rates for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016;

We expect cash flows provided by operating activities to grow as we increase occupancy in our existing properties and lease-up our completed development and expansion properties.  Since we have substantially completed our acquisition phase, we do not expect to incur significant acquisition fees and expenses in future periods and generally expect this to contribute to positive growth in our cash flows from operations in future periods.

Expense Support Agreements

In February 2017, our board of directors approved the fourth amended and restated expense support agreements with both the Advisor and Property Manager that are effective January 1, 2017.  These amendments limit the annual expense support amount, in the aggregate, to an annualized four percent of the weighted average of the Board’s most recent determination of estimated NAV per share and change the calculation to exclude the impact of completed development properties for a specified period of time after the property is placed into service (as defined in the agreements).  These amendments, along with the original agreements and previous amendments govern the fees and expenses charged by the Advisor and Property Manager to the Company.  Refer to our Annual Report on Form 10-K for further information.  

Under the terms of the expense support agreements, for each quarter within a calendar expense support year, we will record a proportional estimate of the cumulative year-to-date period based on an estimate of expense support amounts for the calendar expense support year.  Moreover, in exchange for services rendered and in consideration of the expense support provided under the expense support agreements, we will issue, within 90 days following the determination date, a number of shares of Restricted Stock equal to the quotient of the expense support amounts provided by our Advisor and Property Manager for the preceding calendar year divided by our then-current NAV per share of common stock.  The terms of the expense support agreements automatically renew for consecutive one year periods, subject to the right of our Advisor or Property Manager to terminate their respective agreements upon 30 days’ written notice.  For the quarter and nine months ended September 30, 2016, we recognized approximately $0.9 million and $2.6 million, respectively, as an estimate of the annual expense support amount expected to be settled in accordance with the terms of the expense support agreements.   We did not recognize or estimate annual expense support for the quarter and nine months ended September 30, 2017 as we do not expect any fees to be settled in accordance with the expense support agreements for the year ending December 31, 2017.

Refer to Note 8. “Related Party Arrangements” for additional information.

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Uses of Liquidity and Capital Resources

Lease Incentives

During the nine months ended September 30, 2017 and 2016, we paid approximately $6.9 million and $2.3 million, respectively, of costs on behalf of our tenants as lease incentives in connection with the build-out of space for certain tenants entering into new leases or extending existing leases at our MOBs.  Lease incentives are capitalized as deferred rent and amortized as straight-line rent over the respective lease terms. While we expect the impact of these lease incentives to adversely impact our cash flows from operations in the near term, we anticipate that the new leasing activity will contribute to same-store NOI growth in future periods and that the extension of existing lease terms could increase the value of our properties.

Development Properties

In connection with our seniors housing and post-acute care developments, we funded approximately $46.3 million and $60.8 million in development costs during the nine months ended September 30, 2017 and 2016, respectively.  During the nine months ended September 30, 2017, we completed the construction and placed into service the Welbrook Transitional Care Grand Junction, Waterstone on Augusta, Wellmore of Lexington and Dogwood Forest of Grayson development properties, as well as the Brookridge Heights Assisted Living & Memory Care expansion project.  We expect to fund approximately $4.1 million of additional development, pre-leasing, marketing and other costs as our properties with recently completed development during the nine months ended September 30, 2017 continue through their respective lease-up phases in 2017 and 2018.  On certain of these development properties, we have the ability to fund up to approximately $2.4 million of such additional costs from the related construction loans.

As a result of our completed seniors housing developments continuing to lease-up towards and/or achieving stabilization, we continue to monitor these properties to determine whether the established performance metrics of their respective promoted interest agreements have been met.  During the nine months ended September 30, 2017, we paid an approximate $2.0 million distribution to the holder of a promoted interest related to the Dogwood Forest of Acworth development, which was accrued in the year ended December 31, 2016.  We expect to pay additional amounts in future periods to the respective third-party developers as holders of a promoted interest in these properties to the extent the established performance metrics are met.  However, no other such payments were made nor were any of the performance metrics met or probable of being met during the nine months ended September 30, 2017.

Debt Repayments

During the nine months ended September 30, 2017, we paid approximately $131.0 million of total repayments which were comprised of $64.9 million in repayments on our Revolving Credit Facility, $49.6 million in repayments on our mortgage loans for Knoxville Medical Office Properties and the Claremont Medical Office property prior to their scheduled maturities and $16.5 million of scheduled repayments.  During the nine months ended September 30, 2016, we paid approximately $139.2 million of total repayments which was comprised of $90.3 million in repayments on our Revolving Credit Facility, $34.4 million in repayments on our mortgage loans for the Wellmore of Tega Cay Property and Raider Ranch Community, prior to the scheduled maturities, and $14.5 million of scheduled repayments.

Contingent Purchase Price Consideration

During the nine months ended September 30, 2017, we paid approximately $3.6 million in contingent purchase price consideration, all of which had been accrued as of December 31, 2016.  Refer to Note 6. “Contingent Purchase Price Consideration” for additional information.

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Distributions

In order to qualify as a REIT, we are required to make distributions, other than capital gain distributions, to our stockholders each year in the amount of at least 90% of our taxable income. We may make distributions in the form of cash or other property, including distributions of our own securities.  While we generally expect to pay distributions from cash flows provided by operating activities, we have and may continue to cover periodic shortfalls between distributions paid and cash flows from operating activities from other sources; such as from cash flows provided by financing activities, a component of which could include borrowings, whether collateralized by our assets or unsecured, or proceeds of our Reinvestment Plan (“Other Sources”).

In September 2017, the Company’s board of directors approved an increase in the Company’s quarterly cash distribution, from $0.10581 to $0.11639 per share, effective for the third quarter of 2017.

The following table represents total cash distributions declared, distributions reinvested and cash distributions per share for quarter and nine months ended September 30, 2017 and 2016 (in thousands, except per share data):    

			Distributions Paid  (1)
Periods	Cash Distributions per Share		Total Cash Distributions Declared (2)		Reinvested via Reinvestment Plan		Cash Distributions net of Reinvestment Proceeds		Cash Flows Provided by Operating Activities(3)
2017 Quarters
First	$	0.1058	$	18,525	$	10,412	$	8,113	$	18,667
Second		0.1058		18,515		10,305		8,210		22,815
Third		0.1164		20,363		11,271		9,092		15,460
Total	$	0.3280	$	57,403	$	31,988	$	25,415	$	56,942
2016 Quarters
First	$	0.1058	$	18,454	$	10,725	$	7,729	$	16,008
Second		0.1058		18,538		10,658		7,880		18,741
Third		0.1058		18,496		10,607		7,889		23,362
Total	$	0.3174	$	55,488	$	31,990	$	23,498	$	58,111

FOOTNOTES:

⁽¹⁾ Represents the amount of cash used to fund distributions and the amount of distributions paid which were reinvested in additional shares through our Reinvestment Plan.

⁽²⁾ For the nine months ended September 30, 2017 and 2016, our net loss attributable to common stockholders was approximately $26.4 million and $38.5 million, respectively, while total distributions declared were approximately $57.4 million, and $55.5 million, respectively. For the nine months ended September 30, 2017 and 2016, approximately 91% and 96%, respectively, of total distributions declared to stockholders were considered to be funded with cash provided by operating activities as calculated on a quarterly basis for GAAP purposes and approximately 9% and 4%, respectively, of total distributions declared to stockholders were considered to be funded with Other Sources.

⁽³⁾ Cash flows from operating activities calculated in accordance with GAAP are not necessarily indicative of the amount of cash available to pay distributions and as such our board of directors also uses other measures such as FFO and MFFO in order to evaluate the level of distributions. GAAP requires the payment of certain items (most notably, lease incentives and acquisition fees and costs related to business combinations) to be classified as a use of cash in operating activities in the statement of cash flows, which directly reduces the measure of cash flows from operations. For example, for the nine months ended September 30, 2017 and 2016, we paid approximately $6.9 million and $2.3 million, respectively, of lease incentives. In addition, for the nine months ended September 30, 2017 we paid approximately $3.6 million in financing coordination fees.

Cash provided by operating activities for the nine months ending September 30, 2016 was impacted by the adoption of two ASU’s affecting the presentation of the statement of cash flows, which required a payment on extinguishment of debt in 2016 to be reclassified from cash provided by operating activities to cash used in financing activities. Refer to Note 2. “Summary of Significant Accounting Policies” for additional information.

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Common Stock Redemptions

Our redemption plan allows stockholders who hold shares for at least one year to request that we redeem between 25% and 100% of their shares.  If we have sufficient funds available to do so and if we choose, in our sole discretion, to redeem shares, the number of shares we may redeem in any calendar year and the price at which they are redeemed are subject to conditions and limitations, including:

• If we elect to redeem shares, some or all of the proceeds from the sale of shares under our distribution Reinvestment Plan attributable to any quarter may be used to redeem shares presented for redemption during such quarter;

• No more than 5% of the weighted average number of shares of our common stock outstanding during such 12-month period may be redeemed during such 12-month period; and

• Redemption pricing shall be at the Company’s then-current NAV per share as published from time to time in our Annual Report on Form 10-K, Quarterly Report on Form 10-Q or Current Report on Form 8-K, provided, however, that the price shall not exceed an amount equal to the lesser of (i) the then-current estimated NAV per share of our common stock and (ii) the purchase price paid by the stockholder.

Our board of directors has the ability, in its sole discretion, to amend or suspend the redemption plan or to waive any specific conditions if it is deemed to be in our best interest.  

During the nine months ended September 30, 2017, we paid approximately $32.0 million in redemptions of common stock of which approximately $10.4 million related to prior year redemption requests that were payable as of December 31, 2016.  In addition, subsequent to September 30, 2017, we paid approximately $14.0 million in redemptions of common stock related to requests received for the nine months ended September 30, 2017 and were payable as of September 30, 2017.  During the nine months ended September 30, 2016, we paid approximately $20.3 million in redemptions of common stock of which approximately $2.7 million related to prior year redemption requests that were payable as of December 31, 2015.

During the nine months ended September 30, 2017, we received requests for the redemption of common stock of approximately $35.6 million which exceeded proceeds received from our Reinvestment Plan by approximately $3.6 million.  Our board of directors approved the excess redemptions as there were some unused proceeds from the Reinvestment Plan in the previous year.  The aggregate amount of funds available for redemptions may be less than, or may exceed, the aggregate proceeds received through our Reinvestment Plan for the year ending December 31, 2017.  There is no guarantee that any funds will be set aside under the Reinvestment Plan or otherwise made available for the redemption plan during any period during which redemptions may be requested.  

We are not obligated to redeem shares under our redemption plan.  Our board of directors will continue to evaluate the aggregate amount of funds that will be used to redeem shares pursuant to the redemption plan on a quarterly basis and will determine the amount of shares to be redeemed based on what it believes to be in the best interest of the Company and our stockholders as the redemption of shares dilutes the amount of cash available for other corporate purposes.  The aggregate amount of funds may be less than, or may exceed, the aggregate proceeds received through our Reinvestment Plan.

In the event there are insufficient funds to redeem all of the shares for which redemption requests have been submitted, and we have determined to redeem shares, we will redeem pending requests in the following order:

• pro rata as to redemptions sought upon a stockholder’s death;

• pro rata as to redemptions sought by stockholders with a qualifying disability or by stockholders who have been confined to a long-term care facility;

• pro rata as to redemptions sought by stockholders subject to bankruptcy;

• pro rata as to redemptions that would result in a stockholder owning less than 100 shares; and

• pro rata as to all other redemption requests.

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With respect to a stockholder whose shares are not redeemed due to insufficient funds in that quarter, the redemption request will be retained by us unless it is withdrawn by the stockholder, and such shares will be redeemed in subsequent quarters as funds become available and before any subsequently received redemption requests are honored, subject to the priority for redemption requests listed above.  Until such time as the Company redeems the shares, a stockholder may withdraw its redemption request as to any remaining shares not redeemed.  Redeemed shares are considered retired and will not be reissued.

The following tables present a summary of requests received and shares redeemed pursuant to our redemption plan during the nine months ended September 30, 2017 and 2016 (in thousands, except per share data):

2017 Quarters	First			Second			Third			Total
Redemptions requested		1,088			1,072			1,408			3,568
Shares redeemed		(1,088	)		(1,072	)		(1,408	)		(3,568	)
Pending redemption requests	―			―			―			―
Average price paid per share	$	9.99		$	9.97		$	9.99		$	9.98

2016 Quarters	First			Second			Third			Total
Redemptions requested		277			1,529			850			2,656
Shares redeemed		(277	)		(1,529	)		(850	)		(2,656	)
Pending redemption requests	―			―			―			―
Average price paid per share	$	9.73		$	9.73		$	9.73		$	9.73

We are not aware of any material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from the acquisition and operation of properties, loans and other permitted investments, other than those referred to in the risk factors identified in “Part II, Item 1A” of this report and the “Risk Factors” section of our Annual Report.

Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed  consolidated financial statements and the notes thereto.

Quarter and nine months ended September 30, 2017 as compared to the quarter and nine months ended September 30, 2016

As of September 30, 2017, we owned 137 consolidated operating real estate investment properties, which excludes unconsolidated investments and unimproved land, and our portfolio consisted of 5,874 units operated under management agreements with third-party operators and approximately 5.3 million rentable square feet that was 93.1% leased to third-party tenants.

	Investment count as of
	September 30,
Consolidated operating investment types:	2017		2016
Seniors housing leased		15		16
Seniors housing managed		51		48
Medical office leased		54		54
Post-acute care leased		12		10
Acute care leased		5		5
		137		133

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Rental Income from Operating Leases. Rental income from operating leases was approximately $32.0 million and $97.4 million, respectively, for the quarter and nine months ended September 30, 2017 as compared to approximately $31.0 million and $92.7 million, respectively, for the quarter and nine months ended September 30, 2016.   The increase in rental income from operating leases across periods primarily resulted from: (1) the transition of Wellmore of Tega Cay in August 2016 from being managed pursuant to a third-party management contract under a RIDEA structure to being leased to a third-party operator under a triple-net lease arrangement (“Tega Cay Managed to Lease Transition”); (2) the acquisition of Cobalt Rehabilitation Hospital of New Orleans in October 2016; and (3) the completion of Welbrook Transitional Care Grand Junction development and the commencement of the related lease in March 2017. These were offset by the transition of the Parc Communities in July 2017 from being leased to a third-party operator under a triple-net lease arrangement to being managed pursuant to a third-party management contract under a RIDEA structure (“Parc Communities Leased to Managed Transition”).

Resident Fees and Services. Resident fees and services income was approximately $64.5 million and $182.6 million, respectively, for the quarter and nine months ended September 30, 2017 as compared to approximately $59.3 million and $174.6 million, respectively, for the quarter and nine months ended September 30, 2016. The increase in resident fees and services is primarily a result of year-over-year growth in occupancy rates at our value-add seniors housing properties as well as the completion of our Fieldstone at Pear Orchard, Waterstone on Augusta and Dogwood Forest of Grayson developments subsequent to September 30, 2016, offset by the sale of Dogwood Forest of Acworth in November 2016 and the Tega Cay Managed to Lease Transition.

Property Operating Expenses.Property operating expenses were approximately $50.0 million and $142.9 million, respectively, for the quarter and nine months ended September 30, 2017 as compared to approximately $47.2 million and $139.6 million, respectively, for the quarter and nine months ended September 30, 2016. The increase in property operating expenses is primarily a result of increased property operating expenses at our value-add seniors housing properties due to year-over-year growth in occupancy rates, the Parc Communities Leased to Managed Transition as well as the completion of our Fieldstone at Pear Orchard, Waterstone on Augusta and Dogwood Forest of Grayson developments subsequent to September 30, 2016, offset by the sale of Dogwood Forest of Acworth in November 2016 and the Tega Cay Managed to Lease Transition.

General and Administrative. General and administrative expenses were approximately $3.5 million and $9.8 million, respectively, for the quarter and nine months ended September 30, 2017 as compared to approximately $2.7 million and $9.7 million, respectively, for the quarter and nine months ended September 30, 2016.  General and administrative expenses were comprised primarily of personnel expenses of affiliates of our Advisor, directors’ and officers’ insurance, franchise taxes, accounting and legal fees, and board of director fees.  The increase in general and administrative expenses were primarily attributed to the increase in third-party costs associated with the refinancing of debt associated with some of our properties that were determined to be loan modifications for accounting purposes. 

Asset Management Fees. We incurred asset management fees payable to our Advisor of approximately $7.6 million and $22.7 million, respectively, for the quarter and nine months ended September 30, 2017, as compared to approximately $7.3 million and $21.7 million, respectively, for the quarter and nine months ended September 30, 2016. For the quarter and nine months ended September 30, 2017, approximately $0.1 million and $0.5 million of asset management fees were capitalized as real estate under development. For the quarter and nine months ended September 30, 2016, we recognized a reduction in asset management fees of approximately $0.9 million and $2.6 million, respectively, as an estimate of the annual expense support amount expected to be settled in accordance with the terms of the expense support agreements and approximately $0.2 million and $0.5 million, respectively, were capitalized as real estate under development.  As described in Note 8. “Related Party Arrangements,” there was no expense support estimated during the quarter and nine months ended September 30, 2017 as we do not expect fees to be settled in accordance with the expense support agreements for the year ending December 31, 2017. Monthly asset management fees equal to 0.08334% of invested assets are paid to the Advisor for management of our real estate assets, including our pro rata share of our investments in unconsolidated entities, loans and other permitted investments.

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Financing Coordination Fees. Financing coordination fees payable to the Advisor were approximately $2.7 million and $3.6 million, respectively, for the quarter and nine months ended September 30, 2017 of which approximately $0.0 million and $0.9 million, respectively, were capitalized as loan costs and reduced mortgages and other notes payable, net in the accompanying condensed consolidated balance sheets. Financing coordination fees associated with the refinancing of debt are either expensed or capitalized based on whether such refinancings are determined to represent loan modifications or loan extinguishments, respectively, for accounting purposes.  There were no financing coordination fees for the quarter and nine months ended September 30, 2016.

Depreciation and Amortization. Depreciation and amortization expenses were approximately $26.8 million and $81.1 million, respectively, for the quarter and nine months ended September 30, 2017, as compared to approximately $30.3 million and $94.4 million, respectively, for the quarter and nine months ended September 30, 2016.   Depreciation and amortization expenses are comprised of depreciation and amortization of the buildings, equipment, land improvements and in-place leases related to our real estate portfolio.  The decrease in depreciation and amortization expense across periods resulted from several intangible assets related to our seniors housing investments being fully amortized by the end of 2016.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost amortization were approximately $17.2 million and $50.4 million, respectively, for the quarter and nine months ended September 30, 2017, as compared to approximately $16.5 million and $45.8 million, respectively, for the quarter and nine months ended September 30, 2016. For the quarter and nine months ended September 30, 2017, approximately $0.1 million and $2.0 million, respectively, was capitalized as development costs relating to our real estate under development, as compared to approximately $0.7 million and $1.9 million, respectively, for the quarter and nine months ended September 30, 2016.  The increase in interest expense and loan cost amortization was primarily the result of an increase in our average debt outstanding to approximately $1.7 billion and  $1.6 billion, respectively, for the quarter and nine months ended September 30, 2017, as compared with approximately $1.5 billion for both the quarter and nine months ended September 30, 2016 and the increase in LIBOR for the quarter and nine months ended September 30, 2017 as compared to the quarter and nine months ended September 30, 2016. In addition, during the nine months ended September 30, 2017, we incurred a loss on the extinguishment of debt of approximately $0.2 million related to the refinancing of our mortgage loans on the Knoxville Medical Office Properties and the Claremont Medical Office property.

Equity in Earnings of Unconsolidated Entity. Our unconsolidated entity relating to our investment in the Windsor Manor joint venture generated earnings of approximately $0.1 million and $0.2 million, respectively, for quarter and nine months ended September 30, 2017, as compared to the earnings of approximately $0.2 million and $0.1 million, respectively, for the quarter and nine months ended September 30, 2016.  Equity in earnings of unconsolidated entities is determined using the hypothetical liquidation method book value (“HLBV”) method of accounting, which can create significant variability in earnings or loss from the joint venture while the preferred cash distributions that we anticipate to receive from the joint venture may be more consistent as result of our distribution preferences.  The improved financial results for the nine months ended September 30, 2017 is partially attributable to the decision to transition the property manager in April 2016 at the five properties owned through the Windsor Manor joint venture.

Net Loss Attributable to Noncontrolling Interests.  During the quarter and nine months ended September 30, 2017, net loss attributable to our co-venture partners was approximately $0.1 million and $0.3 million, respectively, as compared to approximately $0.03 million and $0.05 million, respectively, for the quarter and nine months ended September 30, 2016. In accordance with the provisions of each joint venture agreement, we allocate loss from operations to our co-venture partners based on their percentage ownership in each joint venture. These losses are primarily related to our Watercrest at Katy and Fieldstone at Pear Orchard joint ventures, which both completed construction in 2016 and are in the lease-up phase.

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Net Operating Income

We generally expect to meet future cash needs for general and administrative expenses, debt service and distributions from NOI.  We define NOI, a non-GAAP measure, as rental income from operating leases, resident fees and services, and tenant reimbursement income less the property operating expenses and property management fees from managed properties.  We use NOI as a key performance metric for internal monitoring and planning purposes, including the preparation of annual operating budgets and monthly operating reviews, as well as to facilitate analysis of future investment and business decisions.  It does not represent cash flows generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income or loss (determined in accordance with GAAP) as an indication of our operating performance or to be an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity.  We believe the presentation of this non-GAAP measure is important to the understanding of our operating results for the periods presented because it is an indicator of the return on property investment and provides a method of comparing property performance over time.  In addition, we have aggregated NOI on a “same-store” basis only for comparable properties that we have owned during the entirety of all periods presented.  Non-same-store NOI represents aggregated NOI from acquisitions made or developments completed after July 1, 2016 or January 1, 2016, which are excluded as we did not own those properties during the entirety of all periods presented.  In understanding our operating results in the accompanying condensed consolidated financial statements, it is important to understand how the growth in our assets has impacted our results.

The chart below illustrates our net losses, and NOI for the quarter and nine months ended September 30, 2017 and 2016 (in thousands) and the amount invested in properties as of September 30, 2017 and 2016 (in millions):

	Quarter Ended September 30,						Change					Nine Months Ended September 30,						Change
	2017			2016			$		%			2017			2016			$		%
Net loss	$	(11,231	)	$	(12,023	)						$	(26,691	)	$	(38,553	)
Adjusted to exclude:
General and administrative    expenses		3,529			2,705								9,811			9,653
Acquisition fees and    expenses	―				126							―				277
Asset management fees		7,562			6,240								22,197			18,606
Contingent purchase price      consideration adjustment	―				528								77			(222	)
Financing coordination fees		2,748		―									2,748		―
Loss on lease terminations	―			―								―				785
Depreciation and    amortization		26,768			30,289								81,054			94,428
Other expenses, net of other    income		17,411			15,617								48,571			43,695
Income tax expense		90			66								344			241
NOI		46,877			43,548		$	3,329		7.6	%		138,111			128,910		$	9,201		7.1	%
Less: Non-same-store NOI		(3,393	)		(1,322	)							(5,187	)		(3,789	)
Same-store NOI	$	43,485		$	42,226		$	1,258		3.0	%	$	132,924		$	125,121		$	7,803		6.2	%
Invested in operating properties,      end of period (in millions)	$	3,004		$	2,857							$	3,004		$	2,857

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Overall, our NOI for the nine months ended September 30, 2017 increased by approximately $9.2 million as compared to the same period in the prior year.  Our non-same-store NOI of approximately $5.2 million for the nine months ended September 30, 2017 primarily related to the acquisition of Cobalt Rehabilitation Hospital of New Orleans in October 2016, as well as the completion of seven development properties and two expansion projects after January 1, 2016.  Our same-store NOI for the nine months ended September 30, 2017 increased by approximately $7.8 million, or 6.2%, as compared to the same period in the prior year.  The increase in same-store NOI is primarily attributable to year-over-year revenue and occupancy growth within our seniors housing properties and most notably attributable to the following properties:

• The transition of our Wellmore of Tega Cay property in August 2016 from being managed pursuant to a third-party management contract under a RIDEA structure to being leased to a third-party operator under a triple-net lease arrangement;

• The lease-up of additional assisted living units that resulted from our conversion of certain skilled nursing units to assisted living units at our Isle at Cedar Ridge and Isle at Watercrest - Bryan communities, which were completed in the third quarter of 2016; and

• Improved financial results and year-over-year occupancy growth at our Pacific Northwest Communities, which represent value-add properties.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts (“NAREIT”) promulgated a measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT.  The use of FFO is recommended by the REIT industry as a supplemental performance measure.  FFO is not equivalent to net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards approved by the Board of Governors of NAREIT.  NAREIT defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, real estate asset impairment write-downs, plus depreciation and amortization of real estate related assets, and after adjustments for unconsolidated partnerships and joint ventures.  Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value of the property. We believe that, because real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative.  Historical accounting for real estate involves the use of GAAP.  Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP.  Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income or loss. However, FFO and modified funds from operations (“MFFO”), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or loss in its applicability in evaluating operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

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Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses for business combinations from a capitalization/depreciation model) to an expensed-as-incurred model that were put into effect in 2009, and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP and accounted for as operating expenses.  Our management believes these fees and expenses do not affect our overall long-term operating performance.  Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation.  While other start up entities may also experience significant acquisition activity during their initial years, we believe that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases.  Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association (“IPA”), an industry trade group, has standardized a measure known as MFFO which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT.  MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended.  We believe that because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, 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 after the period in which we acquired our properties and once our portfolio is in place.  By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our properties have been acquired.  We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: MFFO, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income or loss: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to remove the impact of GAAP straight-line adjustments from rental revenues); accretion of discounts and amortization of premiums on debt investments,  mark-to-market adjustments included in net income; gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, and unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income or loss. These expenses are paid in cash by us.  All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property.  

Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter.  As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner.  We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors.  For example, acquisition costs are funded from our subscription proceeds and other financing sources and not from operations.  By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties.

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Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different non-listed REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way and as such comparisons with other REITs may not be meaningful.  Furthermore, FFO and MFFO are not necessarily indicative of cash flows available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations 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 make distributions to our stockholders.  FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance.  MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and NAV is disclosed.  FFO and MFFO are not useful measures in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO and MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments we use to calculate FFO or MFFO.  In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.

The following table presents a reconciliation of net loss to FFO and MFFO for the quarter and nine months ended September 30, 2017 and 2016 (in thousands, except per share data):

	Quarter Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net loss attributable to common stockholders	$	(11,170	)	$	(11,992	)	$	(26,395	)	$	(38,506	)
Adjustments:
Depreciation and amortization		26,768			30,289			81,054			94,428
FFO adjustments attributable to noncontrolling    interests		(60	)	―				(60	)	―
FFO adjustments from unconsolidated entities (1)		131			36			452			577
FFO attributable to common stockholders		15,669			18,333			55,051			56,499
Acquisition fees and expenses (2)	―				126		―				277
Straight-line rent adjustments (3)		(1,085	)		(882	)		(2,083	)		(4,870	)
Amortization of above and below market intangibles (4)		135			167			479			572
Unrealized loss from mark-to-market adjustments on    swaps (5)		(50	)		(24	)		5			(1	)
Loss on extinguishment of debt (6)	―				1,495			239			1,495
Loss on lease terminations (7)	―			―			―				785
Contingent purchase price consideration adjustment (8)	―				528			77			(222	)
MFFO adjustments attributable to noncontrolling    interests		(2	)	―				(2	)	―
MFFO attributable to common stockholders	$	14,667		$	19,743		$	53,766		$	54,535
Weighted average number of shares of common    stock outstanding (basic and diluted)		175,190			175,033			175,229			175,068
Net loss per share (basic and diluted)	$	(0.06	)	$	(0.07	)	$	(0.15	)	$	(0.22	)
FFO per share (basic and diluted)	$	0.09		$	0.10		$	0.31		$	0.32
MFFO per share (basic and diluted)	$	0.08		$	0.11		$	0.31		$	0.31

FOOTNOTES:

⁽¹⁾ This amount represents our share of the FFO adjustments allowable under the NAREIT or IPA definitions, respectively, calculated using the HLBV method.

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⁽²⁾ In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment.  By adding back acquisition expenses, management believes MFFO provides useful supplemental information of its operating performance and will also allow comparability between different real estate entities regardless of their level of acquisition activities.  Acquisition expenses include payments to our Advisor or third parties.  Acquisition expenses for business combinations under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP.  All paid or accrued acquisition expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property.  

⁽³⁾ Under GAAP, rental receipts are allocated to periods using various methodologies.  This may result in income recognition that is significantly different than underlying contract terms.  By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, providing insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management’s analysis of operating performance.

⁽⁴⁾ Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and are amortized, similar to depreciation and amortization of other real estate-related assets that are excluded from FFO.  However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges relating to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate.

⁽⁵⁾ Management believes that adjusting for the unrealized gains and losses from mark-to-market adjustments on swaps is appropriate because the adjustments are not reflective of our ongoing operating performance and, as a result, the adjustments better align results with management’s analysis of operating performance.

⁽⁶⁾ Management believes that adjusting for the realized loss on the early extinguishment of debt is appropriate because the adjustments are not reflective of our ongoing operating performance and, as a result, the adjustments better align results with management’s analysis of operating performance.

⁽⁷⁾ Management believes that adjusting for loss on lease terminations is appropriate because the adjustments are not reflective of our ongoing operating performance and, as a result, the adjustments better align results with management’s analysis of operating performance.  

⁽⁸⁾ Management believes that the elimination of contingent purchase price consideration adjustments is appropriate because the adjustments are not reflective of our ongoing operating performance and, as a result, the adjustments better align results with management’s analysis of operating performance.

Off-Balance Sheet Arrangements

As of September 30, 2017, our off-balance sheet and other arrangements were not materially different from the amounts reported for the year ended December 31, 2016.  Refer to our annual report on Form 10-K for the year ended December 31, 2016 for a summary of our off-balance sheet and other arrangements.

Contractual Obligations

The following table presents our contractual obligations by payment period as of September 30, 2017 (in thousands):

	Payments Due by Period
	2017		2018-2019		2020-2021		Thereafter		Total
Mortgage and other notes payable (principal and    interest)	$	43,403	$	463,229	$	217,610	$	418,171	$	1,142,413
Credit facilities (principal and interest) (1)		187,704		199,023		282,308	―			669,035
Development contracts on development properties (2)		4,696	―		―		―			4,696
Ground and air rights leases (3)		499		4,054		4,153		111,468		120,174
	$	236,302	$	666,306	$	504,071	$	529,639	$	1,936,318

FOOTNOTES:

⁽¹⁾ In October 2017, we exercised a one-year extension option on our Revolving Credit Facility of approximately $172 million which extended the maturity from December 2017 to December 2018 and is not reflected in the table above. We are required to continue making interest only payments until the extended maturity date.

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⁽²⁾ These amounts represent our expected timing of such development costs, which include both accrued development costs as of September 30, 2017 of approximately $0.6 million as well as the remaining budgeted development costs not yet incurred, including lease-up costs. The amounts include approximately $3.2 million of contractual obligations with third-party developers and approximately $1.5 million of additional expected lease-up costs that have been included in the respective development budgets.  

⁽³⁾ Ground and air rights leases are operating leases with scheduled payments over the life of the respective leases and with expirations ranging from 2045 to 2082.

Critical Accounting Policies and Estimates

See Item 1. “Financial Statements” and our Annual Report on Form 10-K for the year ended December 31, 2016 for a summary of our critical accounting policies and estimates.

Recent Accounting Pronouncements

See Item 1. “Financial Information” for a summary of the impact of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

We may be exposed to interest rate changes primarily as a result of the long-term debt we used to acquire properties and other permitted investments. Our management objectives related to interest rate risk is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.  To achieve our objectives, we borrow at fixed rates or variable rates with the lowest margins available, and in some cases, with the ability to convert from variable rates to fixed rates. With regard to variable rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

The following is a schedule as of September 30, 2017, of our fixed and variable rate debt maturities for the remainder of 2017, and each of the next four years and thereafter (principal maturities only) (in thousands):

	Expected Maturities
	2017		2018		2019		2020		2021		Thereafter		Total		Fair Value (1)
Fixed rate debt	$	2,539	$	10,868	$	12,009	$	51,070	$	11,970	$	323,812	$	412,268	$	413,000
Weighted average    interest rate on    fixed debt		4.25%		4.24%		4.23%		3.84%		4.28%		4.28%		4.22%
Variable rate debt	$	200,726	$	60,991	$	493,226	$	373,192	$	37,587	$	86,572	$	1,252,294	$	1,250,000
Average interest    rate on variable    rate debt	LIBOR + 2.44%		LIBOR +2.40%		LIBOR + 2.41%		LIBOR + 2.51%		LIBOR +2.87%		LIBOR + 3.13%		LIBOR + 2.51%

FOOTNOTE:

⁽¹⁾ The estimated fair value of our fixed and variable rate debt was determined using discounted cash flows based on market interest rates as of September 30, 2017. We determined market rates through discussions with our existing lenders by pricing our loans with similar terms and current rates and spreads.

Assuming no interest rate protection, management estimates that a one-percentage point increase or decrease in LIBOR in 2017, compared to LIBOR rates as of September 30, 2017, would result in fluctuation of interest expense on our variable rate debt of approximately $12.5 million for the year ending December 31, 2017.  This sensitivity analysis contains certain simplifying assumptions, and although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and actual results will likely vary given that our sensitivity analysis on the effects of changes in LIBOR does not factor in a potential change in variable rate debt levels, any offsetting gains on interest rate swap contracts, or the impact of any LIBOR floors or caps.

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As of September 30, 2017, the Company’s debt is comprised of approximately 24.8% in fixed rate debt, approximately 63.0% in variable rate debt with current interest rate protection and approximately 12.2% of unhedged variable rate debt.  The remaining unhedged variable rate debt primarily relates to our construction loans and the Revolving Credit Facility.  Overall, we believe longer term fixed rate debt could be beneficial in a rising interest rate or rising inflation rate environment and as such we continue to evaluate the need for additional interest rate protection on unhedged variable rate debt.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to provide reasonable assurance that material information required to be included in our periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

Changes in Internal Control over Financial Reporting

During the most recent fiscal quarter, there were no changes in our internal controls over financial reporting (as defined under Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be a party to legal proceedings in the ordinary course of, or incidental to the normal course of, our business, including proceedings to enforce our contractual or statutory rights.  While we cannot predict the outcome of these legal proceedings with certainty, based upon currently available information, we do not believe the final outcome of any pending or threatened legal proceeding will have a material adverse effect on our results of operations or financial condition.

Item 1A. Risk Factors

There have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

During the period covered by this quarterly report, we did not sell any equity securities that were not registered under the Securities Act of 1933, and we did not repurchase any of our securities.

45

Issuer Purchases of Equity Securities

The following table presents details regarding our repurchase of securities under our redemption plan between July 1, 2017 and September 30, 2017 (in thousands, except per share data):  

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased under the plan		Maximum number of shares that may yet be purchased under the plan (1)
July 1, 2017 through July 31, 2017	―		―		―			4,672,990
August 1, 2017 through August 31, 2017	―		―		―			4,671,539
September 1, 2017 through September 30, 2017		1,408	$	9.99		1,408		4,117,392
Total		1,408	$	9.99		1,408

FOOTNOTE:

⁽¹⁾ This represents the maximum number of shares which can be redeemed under the redemption plan and is subject to a five percent limitation in a rolling 12-month period as described above.  However, we are not obligated to redeem such amounts and this does not take into account the amount the board of directors has determined to redeem or whether there are sufficient proceeds under the redemption plan. Under the redemption plan, we can, at our discretion, use the full amount of the proceeds from the sale of shares under our Reinvestment Plan attributable to any month to redeem shares presented for redemption during such month.  Any amount of proceeds from our Reinvestment Plan, which is available for redemptions but which is unused, may be carried over to the next succeeding calendar quarter for use in addition to the amount of proceeds from our Reinvestment Plan that would otherwise be available for redemptions.

During the nine months ended September 30, 2017, our board of directors approved approximately $3.6 million of redemptions that exceeded the proceeds received from our Reinvestment Plan as there were some proceeds available for redemptions from the Reinvestment Plan in the previous year.

We are not obligated to redeem shares under our redemption plan.  Our board of directors will continue to evaluate the aggregate amount of funds that will be used to redeem shares pursuant to the redemption plan on a quarterly basis and will determine the amount of shares to be redeemed based on what it believes to be in the best interest of the Company and our stockholders as the redemption of shares dilutes the amount of cash available for other corporate purposes.  The aggregate amount of funds may be less than, but is not expected to exceed, the aggregate proceeds received through our Reinvestment Plan.

In the event there are insufficient funds to redeem all of the shares for which redemption requests have been submitted, and we have determined to redeem shares, we will redeem pending requests in the following order:

• pro rata as to redemptions sought upon a stockholder’s death;

• pro rata as to redemptions sought by stockholders with a qualifying disability or by stockholders who have been confined to a long-term care facility;

• pro rata as to redemptions sought by stockholders subject to bankruptcy;

• pro rata as to redemptions that would result in a stockholder owning less than 100 shares; and

• pro rata as to all other redemption requests.

With respect to a stockholder whose shares are not redeemed due to insufficient funds in that quarter, the redemption request will be retained by us unless it is withdrawn by the stockholder, and such shares will be redeemed in subsequent quarters as funds become available and before any subsequently received redemption requests are honored, subject to the priority for redemption requests listed above.  Until such time as the Company redeems the shares, a stockholder may withdraw its redemption request as to any remaining shares not redeemed.  Redeemed shares are considered retired and will not be reissued.

46

Item 3. Defaults Upon Senior Securities- None

Item 4. Mine Safety Disclosure –Not Applicable

Item 5. Other Information - None

Item 6. Exhibits

The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this report.

47

EXHIBIT INDEX

Exhibits

The following exhibits are included, or incorporated by reference in this Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2017 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.	Description
31.1	Certification of Chief Executive Officer of CNL Healthcare Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
31.2	Certification of Chief Financial Officer of CNL Healthcare Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.1	Certification of Chief Executive Officer and Chief Financial Officer of CNL Healthcare Properties, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
101	The following materials from CNL Healthcare Properties, Inc. Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2017, formatted in XBRL (Extensible Business Reporting Language); (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statement of Operations, (iii) Condensed Consolidated Statement of Comprehensive Loss, (iv) Condensed Consolidated Statements of Stockholders’ Equity and Redeemable Noncontrolling Interest, (v) Condensed Consolidated Statement of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.

48

SIGNATURES

Pursuant to the requirements 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, on the 8th day of November 2017.

CNL HEALTHCARE PROPERTIES, INC.
By:	/s/ Stephen H. Mauldin
	STEPHEN H. MAULDIN
	Chief Executive Officer and President
	(Principal Executive Officer)
By:	/s/ Kevin R. Maddron
	KEVIN R. MADDRON
	Chief Financial Officer, Chief Operating Officer and Treasurer
	(Principal Financial Officer)

49

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

OF CNL HEALTHCARE PROPERTIES, INC.

PURSUANT TO RULE 13a-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen H. Mauldin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CNL Healthcare Properties, Inc. (the “Registrant”);

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(s) 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(s) 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.

Date:  November 8, 2017	By:	/s/ Stephen H. Mauldin
		STEPHEN H. MAULDIN
		Chief Executive Officer and President
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

OF CNL HEALTHCARE PROPERTIES, INC.

PURSUANT TO RULE 13a-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin R. Maddron, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CNL Healthcare Properties, Inc. (the “Registrant”);

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(s) 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(s) 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.

Date:  November 8, 2017	By:	/s/ Kevin R. Maddron
		KEVIN R. MADDRON
		Chief Financial Officer, Chief Operating Officer and Treasurer
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of CNL Healthcare Properties, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2017, as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen H. Mauldin, Chief Executive Officer and Kevin R. Maddron, Chief Financial Officer, Chief Operating Officer and Treasurer of the Company, each certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 8, 2017	By:	/s/ Stephen H. Mauldin
		Stephen H. Mauldin
		Chief Executive Officer and President
Date:  November 8, 2017	By:	/s/ Kevin R. Maddron
		Kevin R. Maddron
		Chief Financial Officer, Chief Operating Officer and Treasurer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 31, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Entity Registrant Name	CNL Healthcare Properties, Inc.
Entity Central Index Key	0001496454
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		174,687,796

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Real estate assets:
Real estate investment properties, net (including VIEs $216,181 and $112,929, respectively)		$ 2,496,885	$ 2,419,815
Real estate under development, including land (including VIEs $0 and $80,473, respectively)		4,856	97,164
Total real estate assets, net		2,501,741	2,516,979
Intangibles, net (including VIEs $2,129 and $2,891, respectively)		106,752	130,609
Cash (including VIEs $2,660 and $916, respectively)		72,470	58,517
Deferred rent and lease incentives (including VIEs $5,421 and $3,061, respectively)		40,956	31,045
Other assets (including VIEs $2,547 and $1,130, respectively)		23,633	24,470
Assets held for sale, net		52,469	53,351
Restricted cash (including VIEs $56 and $20, respectively)		9,493	12,721
Total assets		2,807,514	2,827,692
Liabilities:
Mortgages and other notes payable, net (including VIEs $151,785 and $104,890, respectively)		1,035,114	936,723
Credit facilities		619,835	641,989
Accounts payable and accrued liabilities (including VIEs $3,946 and $16,830, respectively)		48,408	51,752
Other liabilities (including VIEs $1,426 and $976, respectively)		29,160	38,946
Due to related parties (including VIEs $113 and $107, respectively)	[1]	4,090	3,465
Total liabilities		1,736,607	1,672,875
Commitments and contingencies (Note 11)
Redeemable noncontrolling interest		399	472
Stockholders' equity:
Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued or outstanding
Excess shares, $0.01 par value per share, 300,000 shares authorized; none issued or outstanding
Common stock, $0.01 par value per share, 1,120,000 shares authorized, 183,374 and 180,188 shares issued, and 174,688 and 175,070 shares outstanding, respectively		1,747	1,751
Capital in excess of par value		1,524,804	1,528,435
Accumulated loss		(209,208)	(182,813)
Accumulated distributions		(243,954)	(186,551)
Accumulated other comprehensive loss		(4,077)	(7,863)
Total stockholders' equity		1,069,312	1,152,959
Noncontrolling interest		1,196	1,386
Total equity		1,070,907	1,154,817
Total liabilities and equity		$ 2,807,514	$ 2,827,692

[1] Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Real estate investment properties, net		$ 2,496,885	$ 2,419,815
Real estate under development, including land		4,856	97,164
Intangibles, net		106,752	130,609
Cash		72,470	58,517
Deferred rent and lease incentives		40,956	31,045
Other assets		23,633	24,470
Restricted cash		9,493	12,721
Mortgages and other notes payable, net		1,035,114	936,723
Accounts payable and accrued liabilities		48,408	51,752
Other liabilities		29,160	38,946
Due to related parties	[1]	$ 4,090	$ 3,465
Preferred stock, par value		$ 0.01	$ 0.01
Preferred stock, shares authorized		200,000	200,000
Preferred stock, shares issued		0	0
Preferred stock, shares outstanding		0	0
Excess shares, par value		$ 0.01	$ 0.01
Excess shares, shares authorized		300,000	300,000
Excess shares, shares issued		0	0
Excess shares, shares outstanding		0	0
Common stock, par value		$ 0.01	$ 0.01
Common stock, shares authorized		1,120,000	1,120,000
Common stock, shares issued		183,374	180,188
Common stock, shares outstanding		174,688	175,070
VIEs
Real estate investment properties, net		$ 216,181	$ 112,929
Real estate under development, including land		0	80,473
Intangibles, net		2,129	2,891
Cash		2,660	916
Deferred rent and lease incentives		5,421	3,061
Other assets		2,547	1,130
Restricted cash		56	20
Mortgages and other notes payable, net		151,785	104,890
Accounts payable and accrued liabilities		3,946	16,830
Other liabilities		1,426	976
Due to related parties		$ 113	$ 107

[1] Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets.

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues:
Rental income from operating leases	$ 32,039	$ 31,047	$ 97,382	$ 92,742
Resident fees and services	64,548	59,271	182,557	174,594
Other revenues	5,100	5,193	15,226	15,176
Total revenues	101,687	95,511	295,165	282,512
Operating expenses:
Property operating expenses	49,978	47,163	142,944	139,637
General and administrative	3,529	2,705	9,811	9,653
Acquisition fees and expenses		126		277
Asset management fees	7,562	6,240	22,197	18,606
Property management fees	4,832	4,800	14,110	13,965
Financing coordination fees	2,748		2,748
Contingent purchase price consideration adjustments		528	77	(222)
Loss on lease terminations				785
Depreciation and amortization	26,768	30,289	81,054	94,428
Total operating expenses	95,417	91,851	272,941	277,129
Operating income	6,270	3,660	22,224	5,383
Other income (expense):
Interest and other income (expense)	(450)	9	(348)	54
Interest expense and loan cost amortization	(17,059)	(15,820)	(48,453)	(43,857)
Equity in earnings of unconsolidated entity	98	194	230	108
Total other expense	(17,411)	(15,617)	(48,571)	(43,695)
Loss before income taxes	(11,141)	(11,957)	(26,347)	(38,312)
Income tax expense	(90)	(66)	(344)	(241)
Net loss	(11,231)	(12,023)	(26,691)	(38,553)
Less: Net loss attributable to noncontrolling interest	(61)	(31)	(296)	(47)
Net loss attributable to common stockholders	$ (11,170)	$ (11,992)	$ (26,395)	$ (38,506)
Net loss per share of common stock (basic and diluted)	$ (0.06)	$ (0.07)	$ (0.15)	$ (0.22)
Weighted average number of shares of common stock outstanding (basic and diluted)	175,190	175,033	175,229	175,068
Distributions declared per share of common stock	$ 0.1164	$ 0.1058	$ 0.3280	$ 0.3174

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (11,231)	$ (12,023)	$ (26,691)	$ (38,553)
Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments, net	1,183	4,000	3,607	(5,914)
Reclassification of cash flow hedges upon derecognition	132		186
Reclassification of cash flow hedges due to ineffectiveness	(7)	(23)	(7)	(1)
Unrealized loss on derivative financial instruments of equity method investments				(1)
Total other comprehensive income (loss)	1,308	3,977	3,786	(5,916)
Comprehensive loss	(9,923)	(8,046)	(22,905)	(44,469)
Less: Comprehensive loss attributable to noncontrolling interest	(61)	(31)	(296)	(47)
Comprehensive loss attributable to common stockholders	$ (9,862)	$ (8,015)	$ (22,609)	$ (44,422)

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND REDEEMABLE NONCONTROLLING INTEREST (Unaudited) - USD ($)	Total	Redeemable Noncontrolling Interest	Common Stock	Capital in Excess of Par Value	Accumulated Loss	Accumulated Distributions	Accumulated Other Comprehensive Income (Loss)	Total Stockholders' Equity	Non- controlling Interest
Beginning Balance at Dec. 31, 2015	$ 1,259,102,000	$ 551,000	$ 1,744,000	$ 1,528,781,000	$ (151,146,000)	$ (112,543,000)	$ (9,747,000)	$ 1,257,089,000	$ 1,462,000
Beginning Balance (in shares) at Dec. 31, 2015			174,430,000
Subscriptions received for common stock through reinvestment plan	$ 31,990,000		$ 33,000	31,957,000				31,990,000
Subscriptions received for common stock through reinvestment plan (in shares)	3,300,000		3,281,000
Redemptions of common stock	$ (25,845,000)		$ (26,000)	(25,819,000)				(25,845,000)
Redemption of common stock, shares			(2,656,000)
Net income (loss)	(38,553,000)	(52,000)			(38,506,000)			(38,506,000)	5,000
Other comprehensive income (loss)	(5,916,000)						(5,916,000)	(5,916,000)
Distribution to holder of noncontrolling interest	(29,000)								(29,000)
Distribution to holder of promoted interest	(6,650,000)			(6,650,000)				(6,650,000)
Cash distributions declared	(55,488,000)					(55,488,000)		(55,488,000)
Ending Balance at Sep. 30, 2016	1,158,611,000	499,000	$ 1,751,000	1,528,269,000	(189,652,000)	(168,031,000)	(15,663,000)	1,156,674,000	1,438,000
Ending Balance (in shares) at Sep. 30, 2016			175,055,000
Beginning Balance at Dec. 31, 2016	$ 1,154,817,000	472,000	$ 1,751,000	1,528,435,000	(182,813,000)	(186,551,000)	(7,863,000)	1,152,959,000	1,386,000
Beginning Balance (in shares) at Dec. 31, 2016	175,070		175,070,000
Subscriptions received for common stock through reinvestment plan	$ 31,989,000		$ 32,000	31,957,000				31,989,000
Subscriptions received for common stock through reinvestment plan (in shares)	3,200,000		3,186,000
Redemptions of common stock	$ (35,624,000)		$ (36,000)	(35,588,000)				(35,624,000)
Redemption of common stock, shares			(3,568,000)
Net income (loss)	(26,691,000)	(73,000)			(26,395,000)			(26,395,000)	(223,000)
Other comprehensive income (loss)	3,786,000						3,786,000	3,786,000
Distribution to holder of noncontrolling interest	(27,000)								(27,000)
Distribution to holder of promoted interest	0
Cash distributions declared	(57,403,000)					(57,403,000)		(57,403,000)
Contribution from noncontrolling interests	60,000								60,000
Ending Balance at Sep. 30, 2017	$ 1,070,907,000	$ 399,000	$ 1,747,000	$ 1,524,804,000	$ (209,208,000)	$ (243,954,000)	$ (4,077,000)	$ 1,069,312,000	$ 1,196,000
Ending Balance (in shares) at Sep. 30, 2017	174,688		174,688,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND REDEEMABLE NONCONTROLLING INTEREST (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement Of Stockholders Equity [Abstract]
Cash distributions, declared per share	$ 0.1164	$ 0.1058	$ 0.3280	$ 0.3174

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operating activities:
Net cash flows provided by operating activities	$ 56,942	$ 58,111
Investing activities:
Acquisition of unimproved land	(1,050)
Development of properties	(46,254)	(60,820)
Issuance of note receivable	(443)
Capital expenditures	(7,789)	(5,825)
Payment of leasing costs	(1,121)	(2,423)
Collection of contingent purchase price consideration	407
Deposits on real estate		275
Net cash used in investing activities	(56,250)	(68,793)
Financing activities:
Payment of stock issuance and offering costs		(32)
Distributions to stockholders, net of distribution reinvestments	(25,415)	(23,498)
Distributions to holders of promoted interest	(2,000)	(4,650)
Contributions from noncontrolling interest	60
Distributions to holder of noncontrolling interest	(27)	(29)
Redemptions of common stock	(31,984)	(20,298)
Draws under credit facilities	42,000	80,113
Repayments on credit facilities	(64,863)	(90,250)
Proceeds from mortgage and other notes payable	164,548	111,309
Principal payments on mortgage and other notes payable	(66,098)	(48,947)
Payment of contingent purchase price consideration	(3,645)	(2,770)
Purchase of interest rate cap	(59)	(587)
Lender deposits		(15)
Payment of loan costs	(2,484)	(1,615)
Payment on extinguishment of debt		(1,127)
Net cash flows provided by (used in) financing activities	10,033	(2,396)
Net increase (decrease) in cash and restricted cash	10,725	(13,078)
Cash and restricted cash at beginning of period	71,238	79,209
Cash and restricted cash at end of period	81,963	66,131
Amounts incurred but not paid (including amounts due to related parties):
Accrued development costs	648	21,336
Redemptions payable	14,037	8,285
Contingent purchase price consideration	$ 1,000	4,867
Distribution to holder of promoted interest		$ 2,000

XML

Organization

9 Months Ended

Sep. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization

1. Organization

CNL Healthcare Properties, Inc. (“Company”) was incorporated on June 8, 2010 and elected to be taxed as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes beginning with the year ended December 31, 2012.  The Company is externally advised by CNL Healthcare Corp. (“Advisor”) and its property manager is CNL Healthcare Manager Corp. (“Property Manager”), each of which is an affiliate of CNL Financial Group, LLC (“Sponsor”).  The Sponsor is an affiliate of CNL Financial Group, Inc. (“CNL”) and CNL Securities Corp. (“Managing Dealer”), the managing dealer of the Company’s public offerings (“Offerings”).  The Advisor is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company pursuant to an advisory agreement among the Company, the CHP Partners, LP (“Operating Partnership”) and the Advisor.  Substantially all of the Company’s acquisition, operating, administrative and certain property management services are provided by affiliates of the Advisor and the Property Manager.  In addition, third-party sub-property managers have been engaged to provide certain property management services.

The Company contributed the net proceeds from its Offerings to the Operating Partnership in exchange for partnership interests. The Company conducts substantially all of its operations either directly or indirectly through: (1) an operating partnership, CHP Partners, LP, in which the Company is the sole limited partner and its wholly owned subsidiary, CHP GP, LLC, is the sole general partner; (2) a wholly-owned taxable REIT subsidiary (“TRS”), CHP TRS Holding, Inc.; (3) property owner and lender subsidiaries, which are single purpose entities; and (4) investments in joint ventures.

On September 30, 2015, the Company completed its Offerings pursuant to a registration statement on Form S-11 under the Securities Act of 1933 with the Securities and Exchange Commission (“SEC”).  In October 2015, the Company deregistered the unsold shares of its common stock under its previous registration statement on Form S-11, except for 20,000,000 shares that the Company concurrently registered on Form S-3 under the Securities Exchange Act of 1933 with the SEC for the sale of additional shares of common stock through its distribution reinvestment plan (“Reinvestment Plan”).

With the completion of the Offerings and substantial completion of its acquisition phase, the Company’s focus is on actively managing a diversified portfolio of healthcare real estate and real estate-related assets within the seniors housing, medical office, post-acute care and acute care asset classes.  The types of seniors housing that the Company has acquired include independent and assisted living facilities, continuing care retirement communities, and Alzheimer’s / memory care facilities.  The types of medical offices that the Company has acquired include medical office buildings (“MOBs”), specialty medical and diagnostic service facilities, surgery centers, outpatient rehabilitation facilities, and other facilities designed for clinical services.  The types of post-acute care facilities that the Company has acquired include skilled nursing facilities and inpatient rehabilitative hospitals.  The types of acute care facilities that the Company has acquired include specialty surgical hospitals.  The Company views, manages and evaluates its portfolio homogeneously as one collection of healthcare assets with a common goal of maximizing revenues and property income regardless of the asset class or asset type.

The Company has primarily leased its seniors housing properties to wholly owned TRS entities and engaged independent third-party managers under management agreements to operate the properties under the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structures; however, the Company has also leased its properties to third-party tenants under triple-net or similar lease structures, where the tenant bears all or substantially all of the costs (including cost increases for real estate taxes, utilities, insurance and ordinary repairs).  Medical office, post-acute care and acute care properties have been leased on a triple-net, net or modified gross basis to third-party tenants.  In addition, most of the Company’s investments have been wholly owned, although, it has invested through partnerships with other entities where it is believed to be appropriate and beneficial.  The Company has and continues to invest in existing property developments or properties that have not reached full stabilization.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation— The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”).  The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are necessary for the fair statement of the Company’s results for the interim period presented.  Operating results for the quarter and nine months ended September 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017.  Amounts as of December 31, 2016 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (“Annual Report”).

The accompanying unaudited condensed consolidated financial statements include the Company’s accounts, the accounts of wholly owned subsidiaries or subsidiaries for which the Company has a controlling interest, the accounts of variable interest entities (“VIEs”) in which the Company is the primary beneficiary and the accounts of other subsidiaries over which the Company has a controlling financial interest.   All material intercompany accounts and transactions have been eliminated in consolidation.

In accordance with the guidance for the consolidation of VIEs, the Company analyzes its variable interests, including loans, leases, guarantees, and equity investments, to determine if the entity in which it has a variable interest is a VIE.  The Company’s analysis includes both quantitative and qualitative reviews.  The Company bases its quantitative analysis on the forecasted cash flows of the entity, and its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and financial agreements.  The Company also uses its quantitative and qualitative analyses to determine if it is the primary beneficiary of the VIE, and if such determination is made, it includes the accounts of the VIE in its consolidated financial statements.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods and the disclosure of contingent liabilities. For example, significant assumptions are made in the allocation of purchase price, the analysis of real estate impairments, the valuation of contingent assets and liabilities, and the valuation of restricted stock shares issued to the Advisor or Property Manager.  Accordingly, actual results could differ from those estimates.

Adopted Accounting Pronouncements — In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows.  The ASU further clarified how the predominance principle should be applied to cash receipts and payments relating to more than one class of cash flows. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied retrospectively for each period presented.  Subsequently, in November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which modifies the presentation of the statement of cash flows and requires reconciliation to the overall change in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.   As a result, the statement of cash flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents.   The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied retrospectively for each period presented.  

2. Summary of Significant Accounting Policies (continued)

The Company early adopted both ASU 2016-15 and ASU 2016-18 on January 1, 2017; the adoption of which impacted the Company’s presentation of its statement of cash flows, but did not have a material impact on the Company’s consolidated balance sheet or consolidated results of operations.  Accordingly, the Company has retrospectively adjusted the presentation of its consolidated statement of cash flows for all periods presented.  The following table provides additional details by financial statement line item of the adjusted presentation in the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2016 (in thousands):

	As Filed						Adjusted
	September 30,						September 30,
	2016			Adjustments			2016
Operating activities:
Loss on extinguishment of debt	$	368		$	1,127		$	1,495
Net cash provided by operating activities	$	56,984		$	1,127		$	58,111
Investing activities:
Changes in restricted cash	$	(1,225	)	$	1,225		$	—
Net cash used in investing activities	$	(70,018	)	$	1,225		$	(68,793	)
Financing activities:
Payment on extinguishment of debt	$	—		$	(1,127	)	$	(1,127	)
Net cash used in financing activities	$	(1,269	)	$	(1,127	)	$	(2,396	)
Net decrease in cash and restricted cash	$	(14,303	)	$	1,225		$	(13,078	)
Cash and restricted cash at beginning of period		68,922			10,287			79,209
Cash and restricted cash at end of period	$	54,619		$	11,512		$	66,131

In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810): Interests Held Through Related Parties that are under Common Control,” which requires an entity to consider its indirect interests held by related parties that are under common control on a proportionate basis when evaluating whether the entity is a primary beneficiary of a VIE. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016.  The Company has adopted ASU 2016-17 on January 1, 2017; the adoption of which did not have a material impact to its consolidated financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which clarifies the definition of a business and provides a framework by which to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied prospectively for each period presented.  The Company early adopted ASU 2017-01 on January 1, 2017; the adoption of which did not have a material impact to its consolidated financial position, results of operations or cash flows.

Recent Accounting Pronouncements— In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” as a new ASC topic (Topic 606).  The core principle of this ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The ASU further provides guidance for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, lease contracts).  The FASB subsequently issued ASU 2015-14 to defer the effective date of ASU 2014-09 until annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with earlier adoption permitted.

2. Summary of Significant Accounting Policies (continued)

In addition, in December 2016, the FASB issued ASU 2016-20, which provides technical corrections and improvements to ASC 606 based on questions that stakeholders have raised while working through the implementation.  ASC 606 can be adopted using one of two retrospective transition methods: (i) retrospectively to each prior reporting period presented or (ii) as a cumulative-effect adjustment as of the date of adoption.   The Company continues to execute on its implementation plan for ASC 606; specifically, as it relates to the allocation of consideration to different revenue streams within a given contract and the impact adoption of ASC 606 could have on the Company’s financial statement disclosures.  The Company expects to use the modified retrospective approach as its transition method once it adopts this ASU and the Company expects the adoption of this ASU will not have a material impact on the amount or timing of its revenue recognition.  

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842): Accounting for Leases,” which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors).  The ASU requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months.  The ASU further modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases.  The ASU will also require qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows arising from leases.  The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted.  The ASU is to be applied using a modified retrospective approach.  The Company continues to execute on its implementation plan for ASC 842 and expects to adopt this ASU on January 1, 2019.  The Company expects that adoption will impact the Company’s consolidated financial statements and related financial statement disclosures; specifically, (1) the Company’s consolidated financial position as it relates to the required presentation for arrangements such as ground and air rights leases in which the Company is the lessee, and (2) the allocation of consideration between lease and non-lease components for arrangements in which the Company is the lessor.  However, the Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated results of operations or cash flows.

In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which amended the hedge accounting model to better reflect an entity’s risk management activities. The ASU expands an entities ability to hedge nonfinancial and financial risk components as well as reduce the complexity related to fair value hedges of interest rate risk. The ASU further eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company expects to early adopt this ASU on January 1, 2018 and does not expect the adoption of this ASU to have a material impact on the Company’s consolidated results of operations or cash flows.

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Real Estate Assets, net

9 Months Ended

Sep. 30, 2017

Real Estate [Abstract]

Real Estate Assets, net

3. Real Estate Assets, net

The gross carrying amount and accumulated depreciation of the Company’s real estate assets as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
Land and land improvements	$	251,659		$	235,543
Building and building improvements		2,409,656			2,306,071
Furniture, fixtures and equipment		79,933			64,939
Less: accumulated depreciation		(244,363	)		(186,738	)
Real estate investment properties, net		2,496,885			2,419,815
Real estate under development, including land		4,856			97,164
Total real estate assets, net	$	2,501,741		$	2,516,979

Depreciation expense on the Company’s real estate investment properties, net was approximately $19.8 million and $58.6 million for the quarter and nine months ended September 30, 2017, respectively, and approximately $20.2 million and $60.1 million for the quarter and nine months ended September 30, 2016.

The following development properties and expansion projects were completed during the nine months ended September 30, 2017and as such the related asset values are included in real estate investment properties, net in the accompanying condensed consolidated balance sheet as of September 30, 2017:

Property Name	Location	Substantial Completion Date
Development Properties
Welbrook Transitional Care Grand Junction	Grand Junction, CO		March 2017
Waterstone on Augusta	Greenville, SC		March 2017
Wellmore of Lexington	Lexington, SC		June 2017
Dogwood Forest of Grayson	Grayson, GA		June 2017
Expansion Projects
Brookridge Heights Assisted Living & Memory Care	Marquette, MI		June 2017

As of September 30, 2017, one of the Company’s seniors housing communities has a real estate expansion project with a third-party developer as follows (in thousands):

Property Name (and Location)	Developer	Real Estate Development Costs Incurred (1)		Remaining Development Budget (2)
Tranquillity at Fredericktowne (Frederick, MD)	Capital Health Partners	$	4,856	$	2,029

_____________

FOOTNOTES:

(1) This amount represents total capitalized costs for GAAP purposes for the development and construction of the seniors housing community as of September 30, 2017.  Amounts include investment services fees, asset management fees, interest expense and other costs capitalized during the development period.

(2) This amount includes preleasing and marketing costs, which will be expensed as incurred.

The development budgets generally include the cost of the land, construction costs, development fees, financing costs, start-up costs and initial operating deficits of the respective properties.  Generally, the Company has delegated to an affiliate of the developer of the respective community the management and administration of the development and construction.  In most cases, the developer is generally responsible for cost overruns beyond the approved development budget for the applicable project pursuant to a cost overrun guarantee.  

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Intangibles, net

9 Months Ended

Sep. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Intangibles, net

4. Intangibles, net

The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
In-place lease intangibles	$	223,854		$	223,854
Above-market lease intangibles		13,974			13,974
Below-market ground lease intangibles		12,470			12,470
Less: accumulated amortization		(143,546	)		(119,689	)
Intangible assets, net	$	106,752		$	130,609
Below-market lease intangibles	$	(12,060	)	$	(12,060	)
Above-market ground lease intangibles		(3,488	)		(3,488	)
Less: accumulated amortization		5,362			4,247
Intangible liabilities, net (1)	$	(10,186	)	$	(11,301	)

____________

FOOTNOTE:

(1) Intangible liabilities, net are included in other liabilities in the accompanying condensed consolidated balance sheets.

Amortization on the Company’s intangible assets was approximately $7.4 million and $24.0 million for the quarter and nine months ended September 30, 2017, of which approximately $0.4 million and $1.3 million, respectively, were treated as a reduction of rental income from operating leases, approximately $0.1 million and $0.2 million, respectively, were treated as an increase of property operating expenses and approximately $6.9 million and $22.4 million, respectively, were included in depreciation and amortization.  Amortization on the Company’s intangible assets was approximately $10.7 million and $36.0 million for the quarter and nine months ended September 30, 2016, of which approximately $0.5 million and $1.5 million, respectively, were treated as a reduction of rental income from operating leases, approximately $0.1 million and $0.2 million, respectively, were treated as an increase of property operating expenses and approximately $10.1 million and $34.3 million, respectively, were included in depreciation and amortization.

Amortization on the Company’s intangible liabilities was approximately $0.4 million and $1.1 million for the quarter and nine months ended September 30, 2017, of which approximately $0.3 million and $1.0 million, respectively, were treated as an increase of rental income from operating leases and approximately $0.02 million and $0.07 million, respectively, were treated as a reduction of property operating expenses.  For the quarter and nine months ended September 30, 2016, amortization on the Company’s intangible liabilities was approximately $0.4 million and $1.3 million, of which approximately $0.4 million and $1.2 million, respectively, were treated as an increase of rental income from operating leases and approximately $0.02 million and $0.07 million were treated as a reduction of property operating expenses.

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Variable Interest Entities

9 Months Ended

Sep. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Variable Interest Entities

5. Variable Interest Entities

The aggregate carrying amount and major classifications of the consolidated assets that can be used to settle obligations of the VIEs and liabilities of the consolidated VIEs that are non-recourse to the Company as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
Assets:
Real estate investment properties, net	$	216,181		$	112,929
Real estate under development, including land	$		―	$	80,473
Intangibles, net	$	2,129		$	2,891
Cash	$	2,660		$	916
Deferred rent and lease incentives	$	5,421		$	3,061
Other assets	$	2,547		$	1,130
Restricted cash	$	56		$	20
Liabilities:
Mortgages and other notes payable, net	$	151,785		$	104,890
Accounts payable and accrued liabilities	$	3,197		$	1,461
Accrued development costs	$	749		$	15,369
Other liabilities	$	1,426		$	976
Due to related parties	$	113		$	107

The Company’s maximum exposure to loss as a result of its involvement with these VIEs is limited to its net investment in these entities which totaled approximately $70.0 million as of September 30, 2017. The Company’s exposure is limited because of the non-recourse nature of the borrowings of the VIEs.

As of September 30, 2017 and December 31, 2016, the Company had 10 subsidiaries which are classified as VIEs due to the following factors and circumstances:

• Three of these subsidiaries are single property entities, designed to own and lease their respective properties to multiple tenants, which are subject to either a ground lease or an air rights lease that include buy-out and put options held by either the tenant or landlord under the applicable lease.  

• Four of these subsidiaries are entities with completed developments in which there is insufficient equity at risk due to the development nature of each entity.  

• Two of these subsidiaries are joint ventures with recently completed real estate under development in which there is insufficient equity at risk due to the development nature of each joint venture.

• One of these subsidiaries is a joint venture with equity interest that consists of non-substantive protective voting rights, but not any participating or kick-out rights.

The Company determined it is the primary beneficiary and holds a controlling financial interest in each of the aforementioned property and development entities due to its power to direct the activities that most significantly impact the economic performance of the entities, as well as its obligation to absorb the losses and its right to receive benefits from these entities that could potentially be significant to these entities. As such, the transactions and accounts of these VIEs are included in the accompanying condensed consolidated financial statements.

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Contingent Purchase Price Consideration

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Contingent Purchase Price Consideration

6. Contingent Purchase Price Consideration

The following table provides a roll-forward of the fair value of the Company’s aggregate contingent purchase price consideration for the quarter and nine months ended September 30, 2017 and 2016 (in thousands):

	Quarter Ended September 30, 2017
Property	Beginning asset (liability) as of June 30,  2017			Contingent Consideration  Payment			Change in Fair Value		Ending asset (liability) as of September 30, 2017
Superior Residences of Panama City	$	(2,000	)	$	1,000		$	—	$	(1,000	)
Center One		798			(203	)	―			595
	$	(1,202	)	$	797		$	—	$	(405	)

	Quarter Ended September 30, 2016
Property	Beginning asset (liability) as of June 30,  2016			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2016
Superior Residences of Panama City	$	(3,000	)	$	—		$	(1,000	)	$	(4,000	)
Siena Pavilion VI		(3,750	)		2,770			113			(867	)
Center One		843			(99	)		359			1,103
	$	(5,907	)	$	2,671		$	(528	)	$	(3,764	)

	Nine Months Ended September 30, 2017
Property	Beginning asset (liability) as of December 31, 2016			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2017
Superior Residences of Panama City	$	(4,000	)	$	3,000		$	—		$	(1,000	)
Siena Pavilion VI		(645	)		645		―			―
Center One		1,079			(407	)		(77	)		595
	$	(3,566	)	$	3,238		$	(77	)	$	(405	)

	Nine Months Ended September 30, 2016
Property	Beginning asset (liability) as of December 31, 2015			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2016
Superior Residences of Panama City	$	(3,000	)	$	—		$	(1,000	)	$	(4,000	)
The Shores of Lake Phalen		(750	)	―				750		―
Siena Pavilion VI		(3,750	)		2,770			113			(867	)
Center One		1,019			(275	)		359			1,103
	$	(6,481	)	$	2,495		$	222		$	(3,764	)

The fair value of the contingent purchase price consideration is based on a then-current income approach that is primarily determined based on the present value and probability of future cash flows using internal underwriting models.  The income approach further includes estimates of risk-adjusted rate of return, capitalization rates for the respective property and/or lease-up assumptions.  Since these estimates include inputs that are less observable by the public and are not necessarily reflected in active markets, the measurements of the estimated fair value related to the Company’s contingent purchase price consideration are categorized as Level 3 on the three-level fair value hierarchy.  There were no transfers into and out of fair value measurement levels during the quarter and nine months ended September 30, 2017.

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Indebtedness

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Indebtedness

7. Indebtedness

The following table provides details of the Company’s indebtedness as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30,			December 31,
	2017			2016
Mortgages payable and other notes payable:
Fixed rate debt	$	412,159		$	382,129
Variable rate debt (1)(5)		630,294			561,874
Mortgages and other notes payable (2)		1,042,453			944,003
Premium (discount), net (3)		109			(67	)
Loan costs, net		(7,448	)		(7,213	)
Total mortgages and other notes payable, net		1,035,114			936,723
Credit facilities:
Revolving Credit Facility (4) (5)		172,000			194,863
First Term Loan Facility  (1)		175,000			175,000
Second Term Loan Facility (5)		275,000			275,000
Loan costs, net related to Term Loan Facilities		(2,165	)		(2,874	)
Total credit facilities, net		619,835			641,989
Total indebtedness, net	$	1,654,949		$	1,578,712

_____________

FOOTNOTES:

(1) As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate swaps with notional amounts of approximately $515.3 million and $521.5 million, respectively, which settle on a monthly basis. Refer to Note 9. “Derivative Financial Instruments” for additional information.

(2) As of September 30, 2017 and December 31, 2016, the Company’s mortgages and other notes payable are collateralized by 76 and 75 properties, respectively, with total carrying value of approximately $1.6 billion and $1.6 billion, respectively.

(3) Premium (discount), net is reflective of the Company recording mortgage note payables assumed at fair value on the respective acquisition dates.

(4) As of September 30, 2017 and December 31, 2016, the Company had undrawn availability under the senior unsecured revolving line of credit (“Revolving Credit Facility”) of approximately $3.6 million and $11.1 million, respectively, based on the value of the properties in the unencumbered pool of assets supporting the loan.

(5) As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate caps with notional amounts of approximately $527.0 million and $410.0 million, respectively.  Refer to Note 9. “Derivative Financial Instruments” for additional information.

The following is a schedule of future principal payments and maturity for the Company’s total indebtedness for the remainder of 2017, each of the next four years and thereafter, in the aggregate, as of September 30, 2017 (in thousands):

2017	$	203,265
2018		71,859
2019		505,235
2020		424,263
2021		49,556
Thereafter		410,384
	$	1,664,562

In October 2017, the Company exercised a one-year extension option on its Revolving Credit Facility, which was scheduled to mature in December 2017 as presented above.  Refer to Note 13. “Subsequent Events” for additional information.

7. Indebtedness (continued)

The following table provides details of the Company’s new and refinanced mortgages and other notes payable as of September 30, 2017 (in thousands):

	Interest Rate at
	September 30,		Maturity	September 30,
Property and Loan Type	2017 (1)	Payment Terms	Date (2)	2017
Pacific Northwest Communities; Mortgage Loan (3)	4.30% per annum	Monthly principal and interest payments based on a 25-year amortization schedule	1/5/22	$	210,439
Capital Health Communities; Mortgage Loan (4)	(4)	Monthly principal and interest payments based on a 25-year amortization schedule	1/5/22		63,184
		Total fixed rate debt			273,623
Wellmore of Tega Cay; Mortgage Loan	30-day LIBOR plus 2.65% per annum	Monthly interest only payments for the first 12 months; principal and interest payments thereafter based on a 30-year amortization schedule	3/1/20		28,000
Knoxville Medical Office Properties and Claremont Medical Office; Mortgage Loan (5)	30-day LIBOR plus 2.45% per annum	Monthly principal and interest payments based on a 30-year amortization schedule	5/24/22		57,350
		Total variable rate debt			85,350
		Total debt		$	358,973

_____________

FOOTNOTES:

(1) The 30-day and 90-day LIBOR were approximately 1.24% and 1.34%, respectively, as of September 30, 2017.

(2) Represents the initial maturity date (or, as applicable, the maturity date as extended).  Certain of the Company’s mortgages and other notes payable agreements include extension options held by the Company under which the maturity dates may be extended beyond the date presented, subject to certain lender conditions and/or related fees.

(3) In August 2017, the Company extended the maturity date on the existing loan of approximately $201.9 million from December 2018 to January 2022.  In addition, the Company received approximately $9.5 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022. The supplemental loan further accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.  The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

7. Indebtedness (continued)

(4) In August 2017, the Company extended the maturity date on the existing loan of approximately $35.4 million from January 2020 to January 2022.  In addition, the Company received approximately $28.0 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022.  The existing loan accrues interest at a fixed rate equal to 4.25% per annum.  The supplemental loan accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity. The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

(5) In May 2017, the Company refinanced the loans related to the Claremont Medical Office property and the Knoxville Medical Office Properties of approximately $12.4 million and $37.2 million, respectively, into a combined loan. The original loans were scheduled to mature January 2018 and July 2018, respectively.

The following table provides details of the fair market value and carrying value of the Company’s indebtedness as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30,				December 31,
	2017				2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgages and other notes payable, net	$	1,041.0	$	1,035.1	$	943.4	$	936.7
Credit facilities	$	622.0	$	619.8	$	644.9	$	642.0

These fair market values are based on current rates and spreads the Company would expect to obtain for similar borrowings.  Since this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage notes payable is categorized as Level 3 on the three-level valuation hierarchy.  The estimated fair value of accounts payable and accrued liabilities approximates the carrying value as of September 30, 2017 and December 31, 2016 because of the relatively short maturities of the obligations.

All of the Company’s mortgage and construction loans contain customary financial covenants; including (but not limited to) the following: debt service coverage ratio, minimum occupancy levels, limitations on incurrence of additional indebtedness, etc.  

The credit facilities contain affirmative, negative, and financial covenants which are customary for loans of this type, including (but not limited to): (i) maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum consolidated net worth, (iv) restrictions on payments of cash distributions except if required by REIT requirements, (v) maximum secured indebtedness, (vi) maximum secured recourse debt, (vii) minimum unsecured interest coverage and (viii) limitations on certain types of investments and with respect to the pool of properties supporting borrowings under the credit facilities, minimum debt service coverage ratio, minimum weighted average occupancy, and remaining lease terms, as well as property type, MSA, operator, and asset value concentration limits.  The limitations on distributions include a limitation on the extent of allowable distributions, which are not to exceed the greater of 95% of adjusted FFO (as defined per the credit facilities) and the minimum amount of distributions required to maintain the Company’s REIT status.

As of September 30, 2017, the Company was in compliance with all financial covenants.

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Related Party Arrangements

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Arrangements

8. Related Party Arrangements

In February 2017, the Company’s board of directors approved the fourth amended and restated expense support agreements with both the Advisor and Property Manager that were effective January 1, 2017.  These amendments limit the annual expense support amount, in the aggregate, to an annualized four percent of the weighted average of the Board’s most recent determination of estimated net asset value (“NAV”) per share and change the calculation to exclude the impact of completed development properties for a specified period of time after the property is placed into service (as defined in the agreements).  These amendments, along with the original expense support agreements and previous amendments govern the fees and expenses charged by the Advisor and Property Manager to the Company.  Refer to the Company’s Annual Report on Form 10-K for further information related to these previous expense support agreements.  

Under the terms of the expense support agreements, for each quarter within a calendar expense support year, the Company will record a proportional estimate of the cumulative year-to-date period based on an estimate of expense support amounts for the calendar expense support year.  Moreover, in exchange for services rendered and in consideration of the expense support provided under the expense support agreements, the Company will issue, within 90 days following the determination date, a number of shares of forfeitable restricted common stock (“Restricted Stock”) equal to the quotient of the expense support amounts provided by the Advisor and Property Manager for the preceding calendar year divided by the Company’s then-current NAV per share of common stock.  The terms of the expense support agreements automatically renew for consecutive one year periods, subject to the right of the Advisor or Property Manager to terminate their respective agreements upon 30 days’ written notice to the Company.

The following fees have been or are expected to be settled in accordance with the expense support agreements for the quarter and nine months ended September 30, 2017, the quarter and nine months ended September 30, 2016, and cumulatively as of September 30, 2017 (in thousands, except per share data):

	Quarter ended				Nine Months Ended				As of
	September 30,				September 30,				September 30,
	2017		2016		2017		2016		2017
Asset management fees (1)	$	—	$	850	$	—	$	2,550	$	13,565
Then-current offering price or NAV (2)	$	10.04	$	9.75	$	10.04	$	9.75	$	10.04
Restricted Stock shares (3)	―			87	―			262		1,332
Cash distributions on Restricted Stock (4)	$	158	$	112	$	413	$	315	$	1,223

______________

FOOTNOTES:

(1) No other amounts were eligible to be settled in accordance with the expense support agreements for the quarter and nine months ended September 30, 2017.

(2) The number of Restricted Stock shares granted to the Advisor in lieu of payment in cash is determined by dividing the expense support amount for the respective determination date by the then-current NAV per share.  

(3) No fair value has been assigned to the Restricted Stock shares as the shares were valued at zero at issuance, which represents the lowest possible value estimated at vesting. In addition, the Restricted Stock shares were treated as unissued for financial reporting purposes because the vesting criteria had not been met through September 30, 2017.

(4) The cash distributions have been recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations.

8. Related Party Arrangements (continued)

The expenses and fees incurred by and reimbursable to the Company’s related parties for the quarter and nine months ended September 30, 2017 and 2016, and related amounts unpaid as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	Quarter ended				Nine Months Ended				Unpaid amounts as of (1)
	September 30,				September 30,				September 30,		December 31,
	2017		2016		2017		2016		2017		2016
Reimbursable expenses:
Operating expenses (2)	$	1,396	$	1,043	$	4,326	$	3,533	$	1,015	$	1,072
Acquisition fees and expenses		3		28		6		101	―			3
		1,399		1,071		4,332		3,634		1,015		1,075
Investment services fees (3)		19		194		123		194	―			17
Financing coordination fees (4)		2,748	―			3,601	―		―		―
Property management fees (5)		1,196		1,353		3,660		3,668		423		417
Asset management fees (6)		7,643		7,270		22,711		21,699		2,652		1,956
	$	13,005	$	9,888	$	34,427	$	29,195	$	4,090	$	3,465

________________

FOOTNOTES:

(1) Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets.

(2) Amounts are recorded as general and administrative expenses in the accompanying condensed consolidated statements of operations unless such amounts represent prepaid expenses, which are capitalized in the accompanying condensed consolidated balance sheets.  

(3) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $0.02 million and $0.1 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.02 million and $0.1 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  For the quarter and nine months ended September 30, 2016 the Company incurred approximately $0.2 million and $0.2 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.2 million and $0.2 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. Investment services fees, that are not capitalized, are recorded as acquisition fees and expenses in the accompanying condensed consolidated statements of operations.

(4) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $2.7 and $3.6 million, respectively, in financing coordination fees related to the refinancing of the loans associated with certain operating properties of which approximately $0.0 million and $0.9 million, respectively, in financing coordination fees were capitalized as loan costs and reduced mortgages and other notes payable, net in the accompanying condensed consolidated balance sheets.  There were no financing coordination fees for the quarter and nine months ended September 30, 2016.

(5) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $1.2 million and $3.7 million, respectively, in property and construction management fees payable to the Property Manager of which approximately $0.1 million and $0.3 million, respectively, in construction management fees were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $1.4 million and $3.7 million, respectively, in property and construction management fees payable to the Property Manager of which approximately $0.3 million and $0.6 million, respectively, in construction management fees were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  

8. Related Party Arrangements (continued)

(6) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $7.6 million and $22.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.1 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheet. No expense support was received for the quarter and nine months ended September 30, 2017. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $7.3 million and $21.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.2 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  In addition, the Company recognized a reduction in asset management fees of approximately $0.9 million and $2.6 million, respectively, for the quarter and nine months ended September 30, 2016 as an estimate of the annual expense support amount expected to be settled in accordance with the terms of the expense support agreements.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

9. Derivative Financial Instruments

The following summarizes the terms of the Company’s, or its equity method investments’, derivative financial instruments and the corresponding asset (liability) as of September 30, 2017 and December 31, 2016 (in thousands):

												Fair value asset (liability) as of
Notional						Credit			Trade	Forward	Maturity	September 30,			December 31,
Amount			Strike (1)			Spread (1)			date	date	date	2017			2016
$	11,895	(2)		1.3	%		2.6	%	1/17/2013	1/15/2015	1/16/2018	$	(4	)	$	(44	)
$	36,990	(2)		2.7	%		2.5	%	9/6/2013	8/17/2015	7/10/2018	$	(395	)	$	(878	)
$	25,206	(2)		2.8	%		2.5	%	9/6/2013	8/17/2015	8/29/2018	$	(304	)	$	(667	)
$	47,306	(2)		2.4	%		2.9	%	8/15/2014	6/1/2016	6/2/2019	$	(551	)	$	(949	)
$	81,233	(2)		2.3	%		2.4	%	9/12/2014	8/1/2015	7/15/2019	$	(888	)	$	(1,512	)
$	6,785	(2)		1.2	%		2.3	%	11/12/2014	11/15/2014	10/15/2017	$	—		$	(17	)
$	175,000	(2)		1.6	%		2.0	%	12/23/2014	12/19/2014	2/19/2019	$	(66	)	$	(992	)
$	130,866	(2)		1.7	%		2.0	%	1/9/2015	12/10/2015	12/22/2019	$	(240	)	$	(976	)
$	260,000	(3)		1.5	%		—	%	11/19/2015	11/19/2015	11/30/2018	$	405		$	600
$	150,000	(3)		1.5	%		—	%	3/1/2016	3/1/2016	11/30/2018	$	228		$	346
$	117,000	(3)		2.3	%		—	%	8/29/2017	8/29/2017	9/1/2019	$	60		$	—

_______________

FOOTNOTES:

(1) The all-in rates are equal to the sum of the Strike and Credit Spread detailed above.  

(2) Amounts related to interest rate swaps held by the Company, or its equity method investments, which are recorded at fair value and included in either other assets or other liabilities in the accompanying condensed consolidated balance sheets.

(3) Amounts related to the interest rate caps held by the Company, or its equity method investments, which are recorded at fair value and included in other assets in the accompanying condensed consolidated balance sheets.

Although the Company has determined that the majority of the inputs used to value its derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties.  The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative financial instruments and has determined that the credit valuation adjustments on the overall valuation adjustments are not significant to the overall valuation of its derivative financial instruments. As a result, the Company determined that its derivative financial instruments valuation in its entirety is classified in Level 2 of the fair value hierarchy. Determining fair value requires management to make certain estimates and judgments.  Changes in assumptions could have a positive or negative impact on the estimated fair values of such instruments which could, in turn, impact the Company’s or its joint venture’s results of operations.  

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Equity

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Equity

10. Equity

Stockholders’ Equity:

Distribution Reinvestment Plan — For the nine months ended September 30, 2017 and 2016, the Company received proceeds through its Reinvestment Plan of approximately $32.0 million (3.2 million shares) and $32.0 million (3.3 million shares), respectively.

Distributions — The following table details the Company’s historical estimated NAV per share, including the prices pursuant to the Reinvestment Plan and the Company’s monthly cash distributions per share:

	NAV per		Reinvestment Plan Price		Monthly Cash
Period	Share		per Share		Distributions
February 12, 2016 through February 13, 2017	$	9.75	$	9.75	$	0.0353
February 14, 2017 through June 30, 2017	$	10.04	$	10.04	$	0.0353
July 1, 2017 through September 30, 2017	$	10.04	$	10.04	$	0.0388

During the nine months ended September 30, 2017 and 2016, the Company declared cash distributions of $57.4 million and $55.5 million, respectively, of which $25.4 million and $23.5 million, respectively, were paid in cash to stockholders and $32.0 million and $32.0 million, respectively, were reinvested pursuant to the Reinvestment Plan.  

Redemptions — During the nine months ended September 30, 2017 and 2016, the Company received requests for the redemption of common stock of approximately $35.6 million and $25.8 million, respectively, all of which were approved for redemption at an average price of $9.98 and $9.73, respectively.

Promoted Interest — During the nine months ended September 30, 2016, the Company recorded, as a reduction to capital in excess of par value, approximately $6.7 million in distributions to holders of promoted interest related to the following completed developments (in thousands):

Property	Amount
Dogwood Forest of Acworth	$	(3,850	)
Wellmore of Tega Cay		(2,800	)
	$	(6,650	)

There were no such distributions recorded during the nine months ended September 30, 2017.

10. Equity (continued)

Other comprehensive income (loss) — The following table reflects the effect of derivative financial instruments held by the Company, or its equity method investments, and included in the condensed consolidated statements of comprehensive loss for the quarter and nine months ended September 30, 2017 and 2016 (in thousands):

Derivative financial instruments	Gain (loss) recognized in other comprehensive loss on derivative financial instruments						Location of gain (loss) reclassified into earnings	Gain (loss) reclassified from accumulated other comprehensive loss into earnings
	Quarter Ended							Quarter Ended
	September 30,							September 30,
	2017			2016				2017			2016
Interest rate swaps	$	888		$	4,033		Interest expense and loan cost amortization	$	(433	)	$	(1,731	)
Interest rate caps		295			(33	)	Interest expense and loan cost amortization		(254	)		(10	)
Reclassification of interest rate    swaps upon derecognition		132		―			Interest expense and loan cost amortization		(132	)	―
Reclassification of interest rate    swaps due to ineffectiveness		(7	)		(23	)	Interest expense and loan cost amortization		7			23
Total	$	1,308		$	3,977			$	(812	)	$	(1,718	)

	Nine Months Ended							Nine Months Ended
	September 30,							September 30,
	2017			2016				2017			2016
Interest rate swaps	$	3,409		$	(3,729	)	Interest expense and loan cost amortization	$	(3,201	)	$	(5,388	)
Interest rate caps		198			(2,185	)	Interest expense and loan cost amortization		(511	)		(10	)
Reclassification of interest rate    swaps upon derecognition		186		―			Interest expense and loan cost amortization		(186	)	―
Reclassification of interest rate    swaps due to ineffectiveness		(7	)		(1	)	Interest expense and loan cost amortization		7			1
Interest rate cap held by    unconsolidated joint venture	―				(1	)	Not applicable	―			―
Total	$	3,786		$	(5,916	)		$	(3,891	)	$	(5,397	)

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. Commitments and Contingencies

From time to time, the Company may be a party to legal proceedings in the ordinary course of, or incidental to the normal course of, its business, including proceedings to enforce its contractual or statutory rights.  While the Company cannot predict the outcome of these legal proceedings with certainty, based upon currently available information, the Company does not believe the final outcome of any pending or threatened legal proceeding will have a material adverse effect on its results of operations or financial condition.

Refer to Note 3. “Real Estate Assets, net” for additional information on the remaining development budgets for the Company’s real estate under development.

The Company has seven remaining promoted interest agreements with third-party developers pursuant to which certain operating targets have been established that, upon meeting such targets, result in the developer being entitled to additional payments based on enumerated percentages of the assumed net proceeds of a deemed sale, subject to achievement of an established internal rate of return on the Company’s investment in the development.  However, these performance metrics were not met nor probable of being met as of September 30, 2017.

Refer to Note 6. “Contingent Purchase Price Consideration” for information on potential contingent purchase price considerations related to property acquisitions.

Refer to Note 8. “Related Party Arrangements” for information on contingent restricted stock shares due to the Company’s Advisor and Property Manager in connection with the expense support agreements.

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Assets Held For Sale, net

9 Months Ended

Sep. 30, 2017

Property Plant And Equipment [Abstract]

Assets Held For Sale, net

12. Assets Held For Sale, net

In August 2017, the Company committed to a plan to sell the Perennial Communities which are comprised of six skilled nursing facilities located in Arkansas and classified the associated assets as held for sale as of September 30, 2017. The sale of these properties would not cause a strategic shift in the Company nor would it be considered individually significant; therefore, it does not qualify as discontinued operations.

As of September 30, 2017 and December 31, 2016, assets held for sale consisted of the following (in thousands):

	September 30,		December 31,
	2017		2016
Real estate assets, net	$	46,699	$	47,178
Intangibles, net		800		893
Deferred rent and lease incentives		4,970		5,280
Assets held for sale, net	$	52,469	$	53,351

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

In October 2017, the Company exercised a one-year extension option on its Revolving Credit Facility, which as of September 30, 2017 had approximately $172.0 million outstanding and was scheduled to mature in December 2017. Pursuant to this extension option, the Company’s Revolving Credit Facility is now scheduled to mature in December 2018.

In November 2017, the Company executed amendments to the credit agreement with KeyBank, as administrative agent, related to the Credit Facilities, which adjusted certain criteria and terms of the borrowing base supporting the Company’s Revolving Credit Facility and increased the availability under the Revolving Credit Facility to approximately $55.1 million based on the borrowing base calculation as of September 30, 2017.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation— The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”).  The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are necessary for the fair statement of the Company’s results for the interim period presented.  Operating results for the quarter and nine months ended September 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017.  Amounts as of December 31, 2016 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (“Annual Report”).

The accompanying unaudited condensed consolidated financial statements include the Company’s accounts, the accounts of wholly owned subsidiaries or subsidiaries for which the Company has a controlling interest, the accounts of variable interest entities (“VIEs”) in which the Company is the primary beneficiary and the accounts of other subsidiaries over which the Company has a controlling financial interest.   All material intercompany accounts and transactions have been eliminated in consolidation.

In accordance with the guidance for the consolidation of VIEs, the Company analyzes its variable interests, including loans, leases, guarantees, and equity investments, to determine if the entity in which it has a variable interest is a VIE.  The Company’s analysis includes both quantitative and qualitative reviews.  The Company bases its quantitative analysis on the forecasted cash flows of the entity, and its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and financial agreements.  The Company also uses its quantitative and qualitative analyses to determine if it is the primary beneficiary of the VIE, and if such determination is made, it includes the accounts of the VIE in its consolidated financial statements.

Use of Estimates

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods and the disclosure of contingent liabilities. For example, significant assumptions are made in the allocation of purchase price, the analysis of real estate impairments, the valuation of contingent assets and liabilities, and the valuation of restricted stock shares issued to the Advisor or Property Manager.  Accordingly, actual results could differ from those estimates.

Adopted Accounting Pronouncements

Adopted Accounting Pronouncements — In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows.  The ASU further clarified how the predominance principle should be applied to cash receipts and payments relating to more than one class of cash flows. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied retrospectively for each period presented.  Subsequently, in November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which modifies the presentation of the statement of cash flows and requires reconciliation to the overall change in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.   As a result, the statement of cash flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents.   The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied retrospectively for each period presented.  

2. Summary of Significant Accounting Policies (continued)

The Company early adopted both ASU 2016-15 and ASU 2016-18 on January 1, 2017; the adoption of which impacted the Company’s presentation of its statement of cash flows, but did not have a material impact on the Company’s consolidated balance sheet or consolidated results of operations.  Accordingly, the Company has retrospectively adjusted the presentation of its consolidated statement of cash flows for all periods presented.  The following table provides additional details by financial statement line item of the adjusted presentation in the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2016 (in thousands):

	As Filed						Adjusted
	September 30,						September 30,
	2016			Adjustments			2016
Operating activities:
Loss on extinguishment of debt	$	368		$	1,127		$	1,495
Net cash provided by operating activities	$	56,984		$	1,127		$	58,111
Investing activities:
Changes in restricted cash	$	(1,225	)	$	1,225		$	—
Net cash used in investing activities	$	(70,018	)	$	1,225		$	(68,793	)
Financing activities:
Payment on extinguishment of debt	$	—		$	(1,127	)	$	(1,127	)
Net cash used in financing activities	$	(1,269	)	$	(1,127	)	$	(2,396	)
Net decrease in cash and restricted cash	$	(14,303	)	$	1,225		$	(13,078	)
Cash and restricted cash at beginning of period		68,922			10,287			79,209
Cash and restricted cash at end of period	$	54,619		$	11,512		$	66,131

In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810): Interests Held Through Related Parties that are under Common Control,” which requires an entity to consider its indirect interests held by related parties that are under common control on a proportionate basis when evaluating whether the entity is a primary beneficiary of a VIE. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016.  The Company has adopted ASU 2016-17 on January 1, 2017; the adoption of which did not have a material impact to its consolidated financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which clarifies the definition of a business and provides a framework by which to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017.  The ASU is to be applied prospectively for each period presented.  The Company early adopted ASU 2017-01 on January 1, 2017; the adoption of which did not have a material impact to its consolidated financial position, results of operations or cash flows.

Recent Accounting Pronouncements

Recent Accounting Pronouncements— In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” as a new ASC topic (Topic 606).  The core principle of this ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The ASU further provides guidance for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, lease contracts).  The FASB subsequently issued ASU 2015-14 to defer the effective date of ASU 2014-09 until annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with earlier adoption permitted.

2. Summary of Significant Accounting Policies (continued)

In addition, in December 2016, the FASB issued ASU 2016-20, which provides technical corrections and improvements to ASC 606 based on questions that stakeholders have raised while working through the implementation.  ASC 606 can be adopted using one of two retrospective transition methods: (i) retrospectively to each prior reporting period presented or (ii) as a cumulative-effect adjustment as of the date of adoption.   The Company continues to execute on its implementation plan for ASC 606; specifically, as it relates to the allocation of consideration to different revenue streams within a given contract and the impact adoption of ASC 606 could have on the Company’s financial statement disclosures.  The Company expects to use the modified retrospective approach as its transition method once it adopts this ASU and the Company expects the adoption of this ASU will not have a material impact on the amount or timing of its revenue recognition.  

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842): Accounting for Leases,” which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors).  The ASU requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months.  The ASU further modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases.  The ASU will also require qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows arising from leases.  The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted.  The ASU is to be applied using a modified retrospective approach.  The Company continues to execute on its implementation plan for ASC 842 and expects to adopt this ASU on January 1, 2019.  The Company expects that adoption will impact the Company’s consolidated financial statements and related financial statement disclosures; specifically, (1) the Company’s consolidated financial position as it relates to the required presentation for arrangements such as ground and air rights leases in which the Company is the lessee, and (2) the allocation of consideration between lease and non-lease components for arrangements in which the Company is the lessor.  However, the Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated results of operations or cash flows.

In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which amended the hedge accounting model to better reflect an entity’s risk management activities. The ASU expands an entities ability to hedge nonfinancial and financial risk components as well as reduce the complexity related to fair value hedges of interest rate risk. The ASU further eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company expects to early adopt this ASU on January 1, 2018 and does not expect the adoption of this ASU to have a material impact on the Company’s consolidated results of operations or cash flows.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Schedule of Adjusted Consolidated Statement of Cash Flows

The following table provides additional details by financial statement line item of the adjusted presentation in the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2016 (in thousands):

	As Filed						Adjusted
	September 30,						September 30,
	2016			Adjustments			2016
Operating activities:
Loss on extinguishment of debt	$	368		$	1,127		$	1,495
Net cash provided by operating activities	$	56,984		$	1,127		$	58,111
Investing activities:
Changes in restricted cash	$	(1,225	)	$	1,225		$	—
Net cash used in investing activities	$	(70,018	)	$	1,225		$	(68,793	)
Financing activities:
Payment on extinguishment of debt	$	—		$	(1,127	)	$	(1,127	)
Net cash used in financing activities	$	(1,269	)	$	(1,127	)	$	(2,396	)
Net decrease in cash and restricted cash	$	(14,303	)	$	1,225		$	(13,078	)
Cash and restricted cash at beginning of period		68,922			10,287			79,209
Cash and restricted cash at end of period	$	54,619		$	11,512		$	66,131

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Real Estate Assets, net (Tables)

9 Months Ended

Sep. 30, 2017

Real Estate Properties [Line Items]

Schedule of Real Estate Investment Properties

The gross carrying amount and accumulated depreciation of the Company’s real estate assets as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
Land and land improvements	$	251,659		$	235,543
Building and building improvements		2,409,656			2,306,071
Furniture, fixtures and equipment		79,933			64,939
Less: accumulated depreciation		(244,363	)		(186,738	)
Real estate investment properties, net		2,496,885			2,419,815
Real estate under development, including land		4,856			97,164
Total real estate assets, net	$	2,501,741		$	2,516,979

Under Development with Third-Party Developers

Real Estate Properties [Line Items]

Schedule of Real Estate Investment Properties

The following development properties and expansion projects were completed during the nine months ended September 30, 2017and as such the related asset values are included in real estate investment properties, net in the accompanying condensed consolidated balance sheet as of September 30, 2017:

Property Name	Location	Substantial Completion Date
Development Properties
Welbrook Transitional Care Grand Junction	Grand Junction, CO		March 2017
Waterstone on Augusta	Greenville, SC		March 2017
Wellmore of Lexington	Lexington, SC		June 2017
Dogwood Forest of Grayson	Grayson, GA		June 2017
Expansion Projects
Brookridge Heights Assisted Living & Memory Care	Marquette, MI		June 2017

As of September 30, 2017, one of the Company’s seniors housing communities has a real estate expansion project with a third-party developer as follows (in thousands):

Property Name (and Location)	Developer	Real Estate Development Costs Incurred (1)		Remaining Development Budget (2)
Tranquillity at Fredericktowne (Frederick, MD)	Capital Health Partners	$	4,856	$	2,029

_____________

FOOTNOTES:

(1) This amount represents total capitalized costs for GAAP purposes for the development and construction of the seniors housing community as of September 30, 2017.  Amounts include investment services fees, asset management fees, interest expense and other costs capitalized during the development period.

(2) This amount includes preleasing and marketing costs, which will be expensed as incurred.

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Intangibles, net (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Net Book Value of Intangibles

The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
In-place lease intangibles	$	223,854		$	223,854
Above-market lease intangibles		13,974			13,974
Below-market ground lease intangibles		12,470			12,470
Less: accumulated amortization		(143,546	)		(119,689	)
Intangible assets, net	$	106,752		$	130,609
Below-market lease intangibles	$	(12,060	)	$	(12,060	)
Above-market ground lease intangibles		(3,488	)		(3,488	)
Less: accumulated amortization		5,362			4,247
Intangible liabilities, net (1)	$	(10,186	)	$	(11,301	)

____________

FOOTNOTE:

(1) Intangible liabilities, net are included in other liabilities in the accompanying condensed consolidated balance sheets.

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Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Aggregate Carrying Amount and Major Classifications of Consolidated Assets

The aggregate carrying amount and major classifications of the consolidated assets that can be used to settle obligations of the VIEs and liabilities of the consolidated VIEs that are non-recourse to the Company as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	September 30,			December 31,
	2017			2016
Assets:
Real estate investment properties, net	$	216,181		$	112,929
Real estate under development, including land	$		―	$	80,473
Intangibles, net	$	2,129		$	2,891
Cash	$	2,660		$	916
Deferred rent and lease incentives	$	5,421		$	3,061
Other assets	$	2,547		$	1,130
Restricted cash	$	56		$	20
Liabilities:
Mortgages and other notes payable, net	$	151,785		$	104,890
Accounts payable and accrued liabilities	$	3,197		$	1,461
Accrued development costs	$	749		$	15,369
Other liabilities	$	1,426		$	976
Due to related parties	$	113		$	107

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Contingent Purchase Price Consideration (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value of Contingent Purchase Price Consideration

The following table provides a roll-forward of the fair value of the Company’s aggregate contingent purchase price consideration for the quarter and nine months ended September 30, 2017 and 2016 (in thousands):

	Quarter Ended September 30, 2017
Property	Beginning asset (liability) as of June 30,  2017			Contingent Consideration  Payment			Change in Fair Value		Ending asset (liability) as of September 30, 2017
Superior Residences of Panama City	$	(2,000	)	$	1,000		$	—	$	(1,000	)
Center One		798			(203	)	―			595
	$	(1,202	)	$	797		$	—	$	(405	)

	Quarter Ended September 30, 2016
Property	Beginning asset (liability) as of June 30,  2016			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2016
Superior Residences of Panama City	$	(3,000	)	$	—		$	(1,000	)	$	(4,000	)
Siena Pavilion VI		(3,750	)		2,770			113			(867	)
Center One		843			(99	)		359			1,103
	$	(5,907	)	$	2,671		$	(528	)	$	(3,764	)

	Nine Months Ended September 30, 2017
Property	Beginning asset (liability) as of December 31, 2016			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2017
Superior Residences of Panama City	$	(4,000	)	$	3,000		$	—		$	(1,000	)
Siena Pavilion VI		(645	)		645		―			―
Center One		1,079			(407	)		(77	)		595
	$	(3,566	)	$	3,238		$	(77	)	$	(405	)

	Nine Months Ended September 30, 2016
Property	Beginning asset (liability) as of December 31, 2015			Contingent Consideration Payment			Change in Fair Value			Ending asset (liability) as of September 30, 2016
Superior Residences of Panama City	$	(3,000	)	$	—		$	(1,000	)	$	(4,000	)
The Shores of Lake Phalen		(750	)	―				750		―
Siena Pavilion VI		(3,750	)		2,770			113			(867	)
Center One		1,019			(275	)		359			1,103
	$	(6,481	)	$	2,495		$	222		$	(3,764	)

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Indebtedness (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Details of Indebtedness

The following table provides details of the Company’s indebtedness as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30,			December 31,
	2017			2016
Mortgages payable and other notes payable:
Fixed rate debt	$	412,159		$	382,129
Variable rate debt (1)(5)		630,294			561,874
Mortgages and other notes payable (2)		1,042,453			944,003
Premium (discount), net (3)		109			(67	)
Loan costs, net		(7,448	)		(7,213	)
Total mortgages and other notes payable, net		1,035,114			936,723
Credit facilities:
Revolving Credit Facility (4) (5)		172,000			194,863
First Term Loan Facility  (1)		175,000			175,000
Second Term Loan Facility (5)		275,000			275,000
Loan costs, net related to Term Loan Facilities		(2,165	)		(2,874	)
Total credit facilities, net		619,835			641,989
Total indebtedness, net	$	1,654,949		$	1,578,712

_____________

FOOTNOTES:

(1) As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate swaps with notional amounts of approximately $515.3 million and $521.5 million, respectively, which settle on a monthly basis. Refer to Note 9. “Derivative Financial Instruments” for additional information.

(2) As of September 30, 2017 and December 31, 2016, the Company’s mortgages and other notes payable are collateralized by 76 and 75 properties, respectively, with total carrying value of approximately $1.6 billion and $1.6 billion, respectively.

(3) Premium (discount), net is reflective of the Company recording mortgage note payables assumed at fair value on the respective acquisition dates.

(4) As of September 30, 2017 and December 31, 2016, the Company had undrawn availability under the senior unsecured revolving line of credit (“Revolving Credit Facility”) of approximately $3.6 million and $11.1 million, respectively, based on the value of the properties in the unencumbered pool of assets supporting the loan.

(5) As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate caps with notional amounts of approximately $527.0 million and $410.0 million, respectively.  Refer to Note 9. “Derivative Financial Instruments” for additional information.

Schedule of Maturities of Indebtedness

The following is a schedule of future principal payments and maturity for the Company’s total indebtedness for the remainder of 2017, each of the next four years and thereafter, in the aggregate, as of September 30, 2017 (in thousands):

2017	$	203,265
2018		71,859
2019		505,235
2020		424,263
2021		49,556
Thereafter		410,384
	$	1,664,562

Schedule of Indebtedness

The following table provides details of the Company’s new and refinanced mortgages and other notes payable as of September 30, 2017 (in thousands):

	Interest Rate at
	September 30,		Maturity	September 30,
Property and Loan Type	2017 (1)	Payment Terms	Date (2)	2017
Pacific Northwest Communities; Mortgage Loan (3)	4.30% per annum	Monthly principal and interest payments based on a 25-year amortization schedule	1/5/22	$	210,439
Capital Health Communities; Mortgage Loan (4)	(4)	Monthly principal and interest payments based on a 25-year amortization schedule	1/5/22		63,184
		Total fixed rate debt			273,623
Wellmore of Tega Cay; Mortgage Loan	30-day LIBOR plus 2.65% per annum	Monthly interest only payments for the first 12 months; principal and interest payments thereafter based on a 30-year amortization schedule	3/1/20		28,000
Knoxville Medical Office Properties and Claremont Medical Office; Mortgage Loan (5)	30-day LIBOR plus 2.45% per annum	Monthly principal and interest payments based on a 30-year amortization schedule	5/24/22		57,350
		Total variable rate debt			85,350
		Total debt		$	358,973

_____________

FOOTNOTES:

(1) The 30-day and 90-day LIBOR were approximately 1.24% and 1.34%, respectively, as of September 30, 2017.

(2) Represents the initial maturity date (or, as applicable, the maturity date as extended).  Certain of the Company’s mortgages and other notes payable agreements include extension options held by the Company under which the maturity dates may be extended beyond the date presented, subject to certain lender conditions and/or related fees.

(3) In August 2017, the Company extended the maturity date on the existing loan of approximately $201.9 million from December 2018 to January 2022.  In addition, the Company received approximately $9.5 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022. The supplemental loan further accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.  The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

7. Indebtedness (continued)

(4) In August 2017, the Company extended the maturity date on the existing loan of approximately $35.4 million from January 2020 to January 2022.  In addition, the Company received approximately $28.0 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022.  The existing loan accrues interest at a fixed rate equal to 4.25% per annum.  The supplemental loan accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity. The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

(5) In May 2017, the Company refinanced the loans related to the Claremont Medical Office property and the Knoxville Medical Office Properties of approximately $12.4 million and $37.2 million, respectively, into a combined loan. The original loans were scheduled to mature January 2018 and July 2018, respectively.

Schedule of Fair Market Value and Carrying Value of Indebtedness

The following table provides details of the fair market value and carrying value of the Company’s indebtedness as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30,				December 31,
	2017				2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgages and other notes payable, net	$	1,041.0	$	1,035.1	$	943.4	$	936.7
Credit facilities	$	622.0	$	619.8	$	644.9	$	642.0

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Related Party Arrangements (Tables)

9 Months Ended

Sep. 30, 2017

Related Party Arrangement, Fees and Expenses Incurred By, Reimbursable, Settled and Paid

The expenses and fees incurred by and reimbursable to the Company’s related parties for the quarter and nine months ended September 30, 2017 and 2016, and related amounts unpaid as of September 30, 2017 and December 31, 2016 are as follows (in thousands):

	Quarter ended				Nine Months Ended				Unpaid amounts as of (1)
	September 30,				September 30,				September 30,		December 31,
	2017		2016		2017		2016		2017		2016
Reimbursable expenses:
Operating expenses (2)	$	1,396	$	1,043	$	4,326	$	3,533	$	1,015	$	1,072
Acquisition fees and expenses		3		28		6		101	―			3
		1,399		1,071		4,332		3,634		1,015		1,075
Investment services fees (3)		19		194		123		194	―			17
Financing coordination fees (4)		2,748	―			3,601	―		―		―
Property management fees (5)		1,196		1,353		3,660		3,668		423		417
Asset management fees (6)		7,643		7,270		22,711		21,699		2,652		1,956
	$	13,005	$	9,888	$	34,427	$	29,195	$	4,090	$	3,465

________________

FOOTNOTES:

(1) Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets.

(2) Amounts are recorded as general and administrative expenses in the accompanying condensed consolidated statements of operations unless such amounts represent prepaid expenses, which are capitalized in the accompanying condensed consolidated balance sheets.  

(3) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $0.02 million and $0.1 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.02 million and $0.1 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  For the quarter and nine months ended September 30, 2016 the Company incurred approximately $0.2 million and $0.2 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.2 million and $0.2 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. Investment services fees, that are not capitalized, are recorded as acquisition fees and expenses in the accompanying condensed consolidated statements of operations.

(4) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $2.7 and $3.6 million, respectively, in financing coordination fees related to the refinancing of the loans associated with certain operating properties of which approximately $0.0 million and $0.9 million, respectively, in financing coordination fees were capitalized as loan costs and reduced mortgages and other notes payable, net in the accompanying condensed consolidated balance sheets.  There were no financing coordination fees for the quarter and nine months ended September 30, 2016.

(5) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $1.2 million and $3.7 million, respectively, in property and construction management fees payable to the Property Manager of which approximately $0.1 million and $0.3 million, respectively, in construction management fees were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $1.4 million and $3.7 million, respectively, in property and construction management fees payable to the Property Manager of which approximately $0.3 million and $0.6 million, respectively, in construction management fees were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  

8. Related Party Arrangements (continued)

(6) For the quarter and nine months ended September 30, 2017, the Company incurred approximately $7.6 million and $22.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.1 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheet. No expense support was received for the quarter and nine months ended September 30, 2017. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $7.3 million and $21.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.2 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  In addition, the Company recognized a reduction in asset management fees of approximately $0.9 million and $2.6 million, respectively, for the quarter and nine months ended September 30, 2016 as an estimate of the annual expense support amount expected to be settled in accordance with the terms of the expense support agreements.

Expense Support Agreements

Related Party Arrangement, Fees and Expenses Incurred By, Reimbursable, Settled and Paid

The following fees have been or are expected to be settled in accordance with the expense support agreements for the quarter and nine months ended September 30, 2017, the quarter and nine months ended September 30, 2016, and cumulatively as of September 30, 2017 (in thousands, except per share data):

	Quarter ended				Nine Months Ended				As of
	September 30,				September 30,				September 30,
	2017		2016		2017		2016		2017
Asset management fees (1)	$	—	$	850	$	—	$	2,550	$	13,565
Then-current offering price or NAV (2)	$	10.04	$	9.75	$	10.04	$	9.75	$	10.04
Restricted Stock shares (3)	―			87	―			262		1,332
Cash distributions on Restricted Stock (4)	$	158	$	112	$	413	$	315	$	1,223

______________

FOOTNOTES:

(1) No other amounts were eligible to be settled in accordance with the expense support agreements for the quarter and nine months ended September 30, 2017.

(2) The number of Restricted Stock shares granted to the Advisor in lieu of payment in cash is determined by dividing the expense support amount for the respective determination date by the then-current NAV per share.  

(3) No fair value has been assigned to the Restricted Stock shares as the shares were valued at zero at issuance, which represents the lowest possible value estimated at vesting. In addition, the Restricted Stock shares were treated as unissued for financial reporting purposes because the vesting criteria had not been met through September 30, 2017.

(4) The cash distributions have been recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations.

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Summary of Gross and Net Amounts of Derivative Financial Instruments Presented in Condensed Consolidated Balance Sheet

The following summarizes the terms of the Company’s, or its equity method investments’, derivative financial instruments and the corresponding asset (liability) as of September 30, 2017 and December 31, 2016 (in thousands):

												Fair value asset (liability) as of
Notional						Credit			Trade	Forward	Maturity	September 30,			December 31,
Amount			Strike (1)			Spread (1)			date	date	date	2017			2016
$	11,895	(2)		1.3	%		2.6	%	1/17/2013	1/15/2015	1/16/2018	$	(4	)	$	(44	)
$	36,990	(2)		2.7	%		2.5	%	9/6/2013	8/17/2015	7/10/2018	$	(395	)	$	(878	)
$	25,206	(2)		2.8	%		2.5	%	9/6/2013	8/17/2015	8/29/2018	$	(304	)	$	(667	)
$	47,306	(2)		2.4	%		2.9	%	8/15/2014	6/1/2016	6/2/2019	$	(551	)	$	(949	)
$	81,233	(2)		2.3	%		2.4	%	9/12/2014	8/1/2015	7/15/2019	$	(888	)	$	(1,512	)
$	6,785	(2)		1.2	%		2.3	%	11/12/2014	11/15/2014	10/15/2017	$	—		$	(17	)
$	175,000	(2)		1.6	%		2.0	%	12/23/2014	12/19/2014	2/19/2019	$	(66	)	$	(992	)
$	130,866	(2)		1.7	%		2.0	%	1/9/2015	12/10/2015	12/22/2019	$	(240	)	$	(976	)
$	260,000	(3)		1.5	%		—	%	11/19/2015	11/19/2015	11/30/2018	$	405		$	600
$	150,000	(3)		1.5	%		—	%	3/1/2016	3/1/2016	11/30/2018	$	228		$	346
$	117,000	(3)		2.3	%		—	%	8/29/2017	8/29/2017	9/1/2019	$	60		$	—

_______________

FOOTNOTES:

(1) The all-in rates are equal to the sum of the Strike and Credit Spread detailed above.  

(2) Amounts related to interest rate swaps held by the Company, or its equity method investments, which are recorded at fair value and included in either other assets or other liabilities in the accompanying condensed consolidated balance sheets.

(3) Amounts related to the interest rate caps held by the Company, or its equity method investments, which are recorded at fair value and included in other assets in the accompanying condensed consolidated balance sheets.

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Equity (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Historical Estimated NAV Per Share, Including the Prices Pursuant to the Reinvestment Plan and the Company's Monthly Cash Distributions per Share

Distributions — The following table details the Company’s historical estimated NAV per share, including the prices pursuant to the Reinvestment Plan and the Company’s monthly cash distributions per share:

	NAV per		Reinvestment Plan Price		Monthly Cash
Period	Share		per Share		Distributions
February 12, 2016 through February 13, 2017	$	9.75	$	9.75	$	0.0353
February 14, 2017 through June 30, 2017	$	10.04	$	10.04	$	0.0353
July 1, 2017 through September 30, 2017	$	10.04	$	10.04	$	0.0388

Distribution of Promoted Interest to Share Holder

Promoted Interest — During the nine months ended September 30, 2016, the Company recorded, as a reduction to capital in excess of par value, approximately $6.7 million in distributions to holders of promoted interest related to the following completed developments (in thousands):

Property	Amount
Dogwood Forest of Acworth	$	(3,850	)
Wellmore of Tega Cay		(2,800	)
	$	(6,650	)

Effect of Derivative Financial Instruments

Other comprehensive income (loss) — The following table reflects the effect of derivative financial instruments held by the Company, or its equity method investments, and included in the condensed consolidated statements of comprehensive loss for the quarter and nine months ended September 30, 2017 and 2016 (in thousands):

Derivative financial instruments	Gain (loss) recognized in other comprehensive loss on derivative financial instruments						Location of gain (loss) reclassified into earnings	Gain (loss) reclassified from accumulated other comprehensive loss into earnings
	Quarter Ended							Quarter Ended
	September 30,							September 30,
	2017			2016				2017			2016
Interest rate swaps	$	888		$	4,033		Interest expense and loan cost amortization	$	(433	)	$	(1,731	)
Interest rate caps		295			(33	)	Interest expense and loan cost amortization		(254	)		(10	)
Reclassification of interest rate    swaps upon derecognition		132		―			Interest expense and loan cost amortization		(132	)	―
Reclassification of interest rate    swaps due to ineffectiveness		(7	)		(23	)	Interest expense and loan cost amortization		7			23
Total	$	1,308		$	3,977			$	(812	)	$	(1,718	)

	Nine Months Ended							Nine Months Ended
	September 30,							September 30,
	2017			2016				2017			2016
Interest rate swaps	$	3,409		$	(3,729	)	Interest expense and loan cost amortization	$	(3,201	)	$	(5,388	)
Interest rate caps		198			(2,185	)	Interest expense and loan cost amortization		(511	)		(10	)
Reclassification of interest rate    swaps upon derecognition		186		―			Interest expense and loan cost amortization		(186	)	―
Reclassification of interest rate    swaps due to ineffectiveness		(7	)		(1	)	Interest expense and loan cost amortization		7			1
Interest rate cap held by    unconsolidated joint venture	―				(1	)	Not applicable	―			―
Total	$	3,786		$	(5,916	)		$	(3,891	)	$	(5,397	)

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Assets Held For Sale, net (Tables)

9 Months Ended

Sep. 30, 2017

Property Plant And Equipment [Abstract]

Schedule of Assets Held for Sale, Net

As of September 30, 2017 and December 31, 2016, assets held for sale consisted of the following (in thousands):

	September 30,		December 31,
	2017		2016
Real estate assets, net	$	46,699	$	47,178
Intangibles, net		800		893
Deferred rent and lease incentives		4,970		5,280
Assets held for sale, net	$	52,469	$	53,351

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Organization - Additional Information (Detail) - shares	9 Months Ended
	Sep. 30, 2017	Oct. 31, 2015
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Entity incorporation, date of incorporation	Jun. 08, 2010
Sale of additional share of common stock		20,000,000

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Summary of Significant Accounting Policies - Schedule of Adjusted Consolidated Statement of Cash Flows (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operating activities:
Loss on extinguishment of debt		$ 1,495
Net cash flows provided by operating activities	$ 56,942	58,111
Investing activities:
Net cash used in investing activities	(56,250)	(68,793)
Financing activities:
Payment on extinguishment of debt		(1,127)
Net cash used in financing activities	10,033	(2,396)
Net decrease in cash and restricted cash	10,725	(13,078)
Cash and restricted cash at beginning of period	71,238	79,209
Cash and restricted cash at end of period	$ 81,963	66,131
Previously Reported
Operating activities:
Loss on extinguishment of debt		368
Net cash flows provided by operating activities		56,984
Investing activities:
Changes in restricted cash		(1,225)
Net cash used in investing activities		(70,018)
Financing activities:
Net cash used in financing activities		(1,269)
Net decrease in cash and restricted cash		(14,303)
Cash and restricted cash at beginning of period		68,922
Cash and restricted cash at end of period		54,619
Adjustments
Operating activities:
Loss on extinguishment of debt		1,127
Net cash flows provided by operating activities		1,127
Investing activities:
Changes in restricted cash		1,225
Net cash used in investing activities		1,225
Financing activities:
Payment on extinguishment of debt		(1,127)
Net cash used in financing activities		(1,127)
Net decrease in cash and restricted cash		1,225
Cash and restricted cash at beginning of period		10,287
Cash and restricted cash at end of period		$ 11,512

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Schedule of Real Estate Investment Properties (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Real Estate [Abstract]
Land and land improvements	$ 251,659	$ 235,543
Building and building improvements	2,409,656	2,306,071
Furniture, fixtures and equipment	79,933	64,939
Less: accumulated depreciation	(244,363)	(186,738)
Real estate investment properties, net	2,496,885	2,419,815
Real estate under development, including land	4,856	97,164
Total real estate assets, net	$ 2,501,741	$ 2,516,979

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Real Estate Assets, Net - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Real Estate Investment Properties
Real Estate Properties [Line Items]
Depreciation expense	$ 19.8	$ 20.2	$ 58.6	$ 60.1

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Real Estate Development Properties and Expansion Projects Completed (Detail)	9 Months Ended
	Sep. 30, 2017
Welbrook Transitional Care Grand Junction (Grand Junction, CO)
Real Estate Properties [Line Items]
Completion Date	2017-03
Waterstone on Augusta (Greenville, SC)
Real Estate Properties [Line Items]
Completion Date	2017-03
Wellmore of Lexington (Lexington, SC)
Real Estate Properties [Line Items]
Completion Date	2017-06
Dogwood Forest of Grayson (Grayson, GA)
Real Estate Properties [Line Items]
Completion Date	2017-06
Brookridge Heights Assisted Living & Memory Care (Marquette, MI)
Real Estate Properties [Line Items]
Completion Date	2017-06

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Real Estate under Development with Third-Party Developers (Detail) - Tranquillity at Fredericktowne (Frederick, MD) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Real Estate Properties [Line Items]
Developer	Capital Health Partners
Real Estate Development Costs Incurred	$ 4,856
Remaining Development Budget	$ 2,029

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Schedule of Net Book Value of Intangibles (Detail) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets And Liabilities [Line Items]
Less: accumulated amortization, assets		$ (143,546)	$ (119,689)
Intangible assets, net		106,752	130,609
Less: accumulated amortization, liabilities		5,362	4,247
In-place lease intangibles
Finite-Lived Intangible Assets And Liabilities [Line Items]
Gross carrying amount, assets		223,854	223,854
Above-market lease intangibles
Finite-Lived Intangible Assets And Liabilities [Line Items]
Gross carrying amount, assets		13,974	13,974
Gross carrying amount, liabilities		(3,488)	(3,488)
Below-market ground lease intangibles
Finite-Lived Intangible Assets And Liabilities [Line Items]
Gross carrying amount, assets		12,470	12,470
Gross carrying amount, liabilities		(12,060)	(12,060)
Other liabilities
Finite-Lived Intangible Assets And Liabilities [Line Items]
Intangible liabilities, net	[1]	$ (10,186)	$ (11,301)

[1] Intangible liabilities, net are included in other liabilities in the accompanying condensed consolidated balance sheets.

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Intangibles net - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Finite-Lived Intangible Assets And Liabilities [Line Items]
Amortization expense on intangible assets	$ 7,400	$ 10,700	$ 24,000	$ 36,000
Amortization expense on intangible liabilities	400	400	1,100	1,300
Rental Income from Operating Leases
Finite-Lived Intangible Assets And Liabilities [Line Items]
Amortization expense on intangible assets	400	500	1,300	1,500
Amortization expense on intangible liabilities	300	400	1,000	1,200
Property Operating Expenses
Finite-Lived Intangible Assets And Liabilities [Line Items]
Amortization expense on intangible assets	100	100	200	200
Amortization expense on intangible liabilities	20	20	70	70
Depreciation And Amortization
Finite-Lived Intangible Assets And Liabilities [Line Items]
Amortization expense on intangible assets	$ 6,900	$ 10,100	$ 22,400	$ 34,300

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Aggregate Carrying Amount and Major Classifications of Consolidated Assets and Liabilities (Detail) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Variable Interest Entity [Line Items]
Real estate investment properties, net		$ 2,496,885	$ 2,419,815
Real estate under development, including land		4,856	97,164
Intangibles, net		106,752	130,609
Cash		72,470	58,517
Deferred rent and lease incentives		40,956	31,045
Other assets		23,633	24,470
Restricted cash		9,493	12,721
Mortgages and other notes payable, net		1,035,114	936,723
Other liabilities		29,160	38,946
Due to related parties	[1]	4,090	3,465
VIEs
Variable Interest Entity [Line Items]
Real estate investment properties, net		216,181	112,929
Real estate under development, including land		0	80,473
Intangibles, net		2,129	2,891
Cash		2,660	916
Deferred rent and lease incentives		5,421	3,061
Other assets		2,547	1,130
Restricted cash		56	20
Mortgages and other notes payable, net		151,785	104,890
Accounts payable and accrued liabilities		3,197	1,461
Accrued development costs		749	15,369
Other liabilities		1,426	976
Due to related parties		$ 113	$ 107

[1] Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets.

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Variable Interest Entities (VIEs) - Additional Information (Detail) $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($)
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Maximum exposure to loss VIEs limits	$ 70.0
Variable interest entity, description	As of September 30, 2017 and December 31, 2016, the Company had 10 subsidiaries which are classified as VIEs due to the following factors and circumstances: Three of these subsidiaries are single property entities, designed to own and lease their respective properties to multiple tenants, which are subject to either a ground lease or an air rights lease that include buy-out and put options held by either the tenant or landlord under the applicable lease. Four of these subsidiaries are entities with completed developments in which there is insufficient equity at risk due to the development nature of each entity. Two of these subsidiaries are joint ventures with recently completed real estate under development in which there is insufficient equity at risk due to the development nature of each joint venture. One of these subsidiaries is a joint venture with equity interest that consists of non-substantive protective voting rights, but not any participating or kick-out rights.

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Fair Value of Contingent Purchase Price Consideration (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance	$ (1,202)	$ (5,907)	$ (3,566)	$ (6,481)
Contingent consideration payment	797	2,671	3,238	2,495
Change in fair value		(528)	(77)	222
Ending balance	(405)	(3,764)	(405)	(3,764)
Superior Residences of Panama City
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance	(2,000)	(3,000)	(4,000)	(3,000)
Contingent consideration payment	1,000		3,000
Change in fair value		(1,000)		(1,000)
Ending balance	(1,000)	(4,000)	(1,000)	(4,000)
The Shores Of Lake Phalen
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance				(750)
Change in fair value				750
Siena Pavilion VI
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance		(3,750)	(645)	(3,750)
Contingent consideration payment		2,770	645	2,770
Change in fair value		113		113
Ending balance		(867)		(867)
Center One
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Change in fair value		359	(77)	359
Beginning balance	798	843	1,079	1,019
Contingent consideration payment	(203)	(99)	(407)	(275)
Ending balance	$ 595	$ 1,103	$ 595	$ 1,103

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Details of Indebtedness (Detail) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Premium (discount), net		$ 109	$ (67)
Loan costs, net	[1]	(7,448)	(7,213)
Total mortgages and other notes payable, net		1,035,114	936,723
Credit facilities		619,835	641,989
Total indebtedness, net		1,654,949	1,578,712
Revolving Credit Facility
Debt Instrument [Line Items]
Credit facilities	[2],[3]	172,000	194,863
First Term Loan Facility
Debt Instrument [Line Items]
Credit facilities	[4]	175,000	175,000
Second Term Loan Facility
Debt Instrument [Line Items]
Credit facilities	[2]	275,000	275,000
Term Loan Facility
Debt Instrument [Line Items]
Loan costs, net		(2,165)	(2,874)
Mortgages payable and other notes payable
Debt Instrument [Line Items]
Mortgages payable and other notes payable	[5]	1,042,453	944,003
Fixed rate debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable		412,159	382,129
Variable Rate Debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable	[2],[4]	$ 630,294	$ 561,874

[1] Premium (discount), net is reflective of the Company recording mortgage note payables assumed at fair value on the respective acquisition dates.

[2] As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate caps with notional amounts of approximately $527.0 million and $410.0 million, respectively. Refer to Note 9. “Derivative Financial Instruments” for additional information.

[3] As of September 30, 2017 and December 31, 2016, the Company had undrawn availability under the senior unsecured revolving line of credit (“Revolving Credit Facility”) of approximately $3.6 million and $11.1 million, respectively, based on the value of the properties in the unencumbered pool of assets supporting the loan.

[4] As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate swaps with notional amounts of approximately $515.3 million and $521.5 million, respectively, which settle on a monthly basis. Refer to Note 9. “Derivative Financial Instruments” for additional information.

[5] As of September 30, 2017 and December 31, 2016, the Company’s mortgages and other notes payable are collateralized by 76 and 75 properties, respectively, with total carrying value of approximately $1.6 billion and $1.6 billion, respectively.

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Details of Indebtedness (Parenthetical) (Detail) $ in Millions	Sep. 30, 2017 USD ($) Property	Dec. 31, 2016 USD ($) Property
Revolving Credit Facility
Debt Instrument [Line Items]
Debt Instrument, Current borrowing capacity	$ 3.6	$ 11.1
Secured Mortgages and Other Notes Payable
Debt Instrument [Line Items]
Number of collateralized properties owned | Property	76	75
Mortgages and other notes payable carrying value of collateral	$ 1,600.0	$ 1,600.0
Interest Rate Swap
Debt Instrument [Line Items]
Notional amounts of derivative contract	515.3	521.5
Interest Rate Cap
Debt Instrument [Line Items]
Notional amounts of derivative contract	$ 527.0	$ 410.0

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Schedule of Maturities of Indebtedness (Detail) $ in Thousands	Sep. 30, 2017 USD ($)
Net Balance
2017	$ 203,265
2018	71,859
2019	505,235
2020	424,263
2021	49,556
Thereafter	410,384
Total borrowings	$ 1,664,562

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Schedule of Indebtedness (Detail) - USD ($) $ in Thousands		1 Months Ended		9 Months Ended
		Aug. 31, 2017	Jun. 30, 2017	Sep. 30, 2017		Dec. 31, 2016
Debt Instrument [Line Items]
Carrying Value				$ 1,664,562
Fixed rate debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable				412,159		$ 382,129
Variable Rate Debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable	[1],[2]			630,294		$ 561,874
Mortgage Loans
Debt Instrument [Line Items]
Carrying Value				358,973
Mortgage Loans | Fixed rate debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable				273,623
Mortgage Loans | Variable Rate Debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable				$ 85,350
Mortgage Loans | Pacific Northwest II Communities
Debt Instrument [Line Items]
Interest on Loan accrues - Fixed rate	[3],[4]			4.30%
Payment Terms	[3]			Monthly principal and interest payments based on a 25-year amortization schedule
Principal and interest payments amortizable period	[3]			25 years
Maturity Date		Jan. 31, 2022	Dec. 31, 2018	Jan. 05, 2022	[3],[5]
Mortgages payable and other notes payable				$ 201,900
Mortgage Loans | Pacific Northwest II Communities | Fixed rate debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable	[3]			$ 210,439
Mortgage Loans | Capital Health Communities
Debt Instrument [Line Items]
Interest on Loan accrues - Fixed rate				4.25%
Payment Terms	[6]			Monthly principal and interest payments based on a 25-year amortization schedule
Principal and interest payments amortizable period	[6]			25 years
Maturity Date		Jan. 31, 2022	Jan. 31, 2020	Jan. 05, 2022	[5],[6]
Mortgages payable and other notes payable				$ 35,400
Mortgage Loans | Capital Health Communities | Fixed rate debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable	[6]			$ 63,184
Mortgage Loans | Wellmore of Tega Cay
Debt Instrument [Line Items]
Payment Terms				Monthly interest only payments for the first 12 months; principal and interest payments thereafter based on a 30-year amortization schedule
Principal and interest payments amortizable period				30 years
Maturity Date	[5]			Mar. 01, 2020
Mortgage Loans | Wellmore of Tega Cay | Variable Rate Debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable				$ 28,000
Mortgage Loans | Knoxville Medical Office Properties and Claremont Medical Office
Debt Instrument [Line Items]
Payment Terms	[7]			Monthly principal and interest payments based on a 30-year amortization schedule
Principal and interest payments amortizable period	[7]			30 years
Maturity Date	[5],[7]			May 24, 2022
Mortgage Loans | Knoxville Medical Office Properties and Claremont Medical Office | Variable Rate Debt
Debt Instrument [Line Items]
Mortgages payable and other notes payable	[7]			$ 57,350
30-day LIBOR | Mortgage Loans | Wellmore of Tega Cay
Debt Instrument [Line Items]
Interest accrues on loan in addition to LIBOR	[4]			2.65%
30-day LIBOR | Mortgage Loans | Knoxville Medical Office Properties and Claremont Medical Office
Debt Instrument [Line Items]
Interest accrues on loan in addition to LIBOR	[4],[7]			2.45%

[1] As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate caps with notional amounts of approximately $527.0 million and $410.0 million, respectively. Refer to Note 9. “Derivative Financial Instruments” for additional information.

[2] As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate swaps with notional amounts of approximately $515.3 million and $521.5 million, respectively, which settle on a monthly basis. Refer to Note 9. “Derivative Financial Instruments” for additional information.

[3] In August 2017, the Company extended the maturity date on the existing loan of approximately $201.9 million from December 2018 to January 2022.  In addition, the Company received approximately $9.5 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022. The supplemental loan further accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.  The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

[4] The 30-day and 90-day LIBOR were approximately 1.24% and 1.34%, respectively, as of September 30, 2017.

[5] Represents the initial maturity date (or, as applicable, the maturity date as extended). Certain of the Company’s mortgages and other notes payable agreements include extension options held by the Company under which the maturity dates may be extended beyond the date presented, subject to certain lender conditions and/or related fees.

[6] In August 2017, the Company extended the maturity date on the existing loan of approximately $35.4 million from January 2020 to January 2022.  In addition, the Company received approximately $28.0 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022.  The existing loan accrues interest at a fixed rate equal to 4.25% per annum. The supplemental loan accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity. The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

[7] In May 2017, the Company refinanced the loans related to the Claremont Medical Office property and the Knoxville Medical Office Properties of approximately $12.4 million and $37.2 million, respectively, into a combined loan. The original loans were scheduled to mature January 2018 and July 2018, respectively.

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Schedule of Indebtedness (Parenthetical) (Detail) - USD ($) $ in Millions		1 Months Ended			9 Months Ended
		Aug. 31, 2017	Jun. 30, 2017	May 31, 2017	Sep. 30, 2017
Claremont Medical Office
Debt Instrument [Line Items]
Maturity Date				Jan. 31, 2018
Debt, refinanced amount				$ 12.4
Knoxville MOBs
Debt Instrument [Line Items]
Maturity Date				Jul. 31, 2018
Debt, refinanced amount				$ 37.2
Mortgage Loans | Pacific Northwest II Communities
Debt Instrument [Line Items]
Debt, Carrying amount					$ 201.9
Maturity Date		Jan. 31, 2022	Dec. 31, 2018		Jan. 05, 2022	[1],[2]
Interest on Loan accrues - Fixed rate	[1],[3]				4.30%
Payment Terms	[1]				Monthly principal and interest payments based on a 25-year amortization schedule
Mortgage Loans | Capital Health Communities
Debt Instrument [Line Items]
Debt, Carrying amount					$ 35.4
Maturity Date		Jan. 31, 2022	Jan. 31, 2020		Jan. 05, 2022	[2],[4]
Interest on Loan accrues - Fixed rate					4.25%
Payment Terms	[4]				Monthly principal and interest payments based on a 25-year amortization schedule
Mortgage, Supplemental Loan | Pacific Northwest II Communities
Debt Instrument [Line Items]
Maturity Date		Jan. 31, 2022
Debt, Carrying amount		$ 9.5
Interest on Loan accrues - Fixed rate		4.30%
Payment Terms					monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.
Mortgage, Supplemental Loan | Pacific Northwest II Communities | Minimum
Debt Instrument [Line Items]
Percentage of prepayment penalty on principal repaid					1.00%
Mortgage, Supplemental Loan | Capital Health Communities
Debt Instrument [Line Items]
Maturity Date		Jan. 31, 2022
Debt, Carrying amount		$ 28.0
Interest on Loan accrues - Fixed rate		4.30%
Payment Terms					monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.
Mortgage, Supplemental Loan | Capital Health Communities | Minimum
Debt Instrument [Line Items]
Percentage of prepayment penalty on principal repaid					1.00%
30-day LIBOR
Debt Instrument [Line Items]
Interest accrues on loan, LIBOR					1.24%
Ninety Days London Interbank Offered Rate
Debt Instrument [Line Items]
Interest accrues on loan, LIBOR					1.34%

[1] In August 2017, the Company extended the maturity date on the existing loan of approximately $201.9 million from December 2018 to January 2022.  In addition, the Company received approximately $9.5 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022. The supplemental loan further accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity.  The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

[2] Represents the initial maturity date (or, as applicable, the maturity date as extended). Certain of the Company’s mortgages and other notes payable agreements include extension options held by the Company under which the maturity dates may be extended beyond the date presented, subject to certain lender conditions and/or related fees.

[3] The 30-day and 90-day LIBOR were approximately 1.24% and 1.34%, respectively, as of September 30, 2017.

[4] In August 2017, the Company extended the maturity date on the existing loan of approximately $35.4 million from January 2020 to January 2022.  In addition, the Company received approximately $28.0 million of additional borrowings through a supplemental loan with the same lender, which is co-terminus with the existing mortgage loans, collateralized by the communities and matures in January 2022.  The existing loan accrues interest at a fixed rate equal to 4.25% per annum. The supplemental loan accrues interest at a fixed rate equal to 4.3% per annum and includes monthly interest only payments for the first 12 months followed by monthly principal and interest payments for the remaining term of the loan using a 30-year amortization period with the remaining principal balance payable at maturity. The loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

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Schedule of Fair Market Value and Carrying Value of Indebtedness (Detail) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Carrying Value	$ 1,664,562,000
Mortgages and other notes payable, net
Debt Instrument [Line Items]
Fair Value	1,041,000	$ 943,400
Carrying Value	1,035,100	936,700
Credit facilities
Debt Instrument [Line Items]
Fair Value	622,000	644,900
Carrying Value	$ 619,800	$ 642,000

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Indebtedness - Additional Information (Detail) - Credit facilities	9 Months Ended
	Sep. 30, 2017
Debt Instrument [Line Items]
Description of covenants	The credit facilities contain affirmative, negative, and financial covenants which are customary for loans of this type, including (but not limited to): (i) maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum consolidated net worth, (iv) restrictions on payments of cash distributions except if required by REIT requirements, (v) maximum secured indebtedness, (vi) maximum secured recourse debt, (vii) minimum unsecured interest coverage and (viii) limitations on certain types of investments and with respect to the pool of properties supporting borrowings under the credit facilities, minimum debt service coverage ratio, minimum weighted average occupancy, and remaining lease terms, as well as property type, MSA, operator, and asset value concentration limits. The limitations on distributions include a limitation on the extent of allowable distributions, which are not to exceed the greater of 95% of adjusted FFO (as defined per the credit facilities) and the minimum amount of distributions required to maintain the Company’s REIT status.
Maximum allowable distributions as a percentage of adjusted FFO	95.00%

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Related Party Arrangement, Fees and Expenses Incurred (Detail) - USD ($) $ / shares in Units, shares in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	Feb. 13, 2017
Related Party Transaction [Line Items]
Asset management fees		$ 7,562,000	$ 6,240,000	$ 22,197,000	$ 18,606,000
Then-current offering price or NAV		$ 10.04		$ 10.04		$ 10.04	$ 9.75
Cash distributions on Restricted Stock				$ 25,415,000	23,498,000
Expense Support Agreements
Related Party Transaction [Line Items]
Asset management fees	[1]		$ 850,000		$ 2,550,000
Then-current offering price or NAV	[2]	$ 10.04	$ 9.75	$ 10.04	$ 9.75
Restricted Stock shares	[3]		87		262
Asset management fees	[1]	$ 13,565		$ 13,565
Then-current offering price or NAV	[2]	$ 10.04		$ 10.04
Expense Support Agreements | Restricted Stock
Related Party Transaction [Line Items]
Cash distributions on Restricted Stock	[4]	$ 158,000	$ 112,000	$ 413,000	$ 315,000
Restricted Stock shares	[3]	1,332		1,332
Cash distributions on Restricted Stock	[4]	$ 1,223,000		$ 1,223,000

[1] No other amounts were eligible to be settled in accordance with the expense support agreements for the quarter and nine months ended September 30, 2017.

[2] The number of Restricted Stock shares granted to the Advisor in lieu of payment in cash is determined by dividing the expense support amount for the respective determination date by the then-current NAV per share.

[3] No fair value has been assigned to the Restricted Stock shares as the shares were valued at zero at issuance, which represents the lowest possible value estimated at vesting. In addition, the Restricted Stock shares were treated as unissued for financial reporting purposes because the vesting criteria had not been met through September 30, 2017.

[4] The cash distributions have been recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations.

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Related Party Arrangement, Fees and Expenses Incurred (Parenthetical) (Detail)	9 Months Ended
	Sep. 30, 2017 USD ($)
Related Party Transactions [Abstract]
Restricted stock fair value	$ 0

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Schedule of Fees, Reimbursable Expenses and Related Amounts Unpaid to Related Parties (Detail) - USD ($) $ in Thousands		3 Months Ended			9 Months Ended
		Sep. 30, 2017		Sep. 30, 2016	Sep. 30, 2017		Sep. 30, 2016	Dec. 31, 2016
Related Party Transaction [Line Items]
Operating expenses	[1]	$ 1,396		$ 1,043	$ 4,326		$ 3,533
Acquisition fees and expenses				126			277
Total reimbursable expenses		1,399		1,071	4,332		3,634
Investment services fees	[2]	19		194	123		194
Financing coordination fees		2,748	[3]	0	3,601	[3]	0
Property management fees		4,832		4,800	14,110		13,965
Asset management fees		7,562		6,240	22,197		18,606
Total reimbursable expenses, net		13,005		9,888	34,427		29,195
Operating expenses, unpaid	[1],[4]	1,015			1,015			$ 1,072
Acquisition fees and expenses, unpaid	[4]							3
Total reimbursable expenses due	[4]	1,015			1,015			1,075
Investment services fees, unpaid	[2],[4]							17
Property management fees, unpaid	[4],[5]	423			423			417
Asset management fees, unpaid	[4],[6]	2,652			2,652			1,956
Total related amount unpaid	[4]	4,090			4,090			$ 3,465
Reimbursable expense
Related Party Transaction [Line Items]
Property management fees	[5]	1,196		1,353	3,660		3,668
Asset management fees	[6]	7,643		7,270	22,711		21,699
Property Manager
Related Party Transaction [Line Items]
Acquisition fees and expenses		$ 3		$ 28	$ 6		$ 101

[1] Amounts are recorded as general and administrative expenses in the accompanying condensed consolidated statements of operations unless such amounts represent prepaid expenses, which are capitalized in the accompanying condensed consolidated balance sheets.

[2] For the quarter and nine months ended September 30, 2017, the Company incurred approximately $0.02 million and $0.1 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.02 million and $0.1 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  For the quarter and nine months ended September 30, 2016 the Company incurred approximately $0.2 million and $0.2 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.2 million and $0.2 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. Investment services fees, that are not capitalized, are recorded as acquisition fees and expenses in the accompanying condensed consolidated statements of operations.

[3] For the quarter and nine months ended September 30, 2017, the Company incurred approximately $2.7 and $3.6 million, respectively, in financing coordination fees related to the refinancing of the loans associated with certain operating properties of which approximately $0.0 million and $0.9 million, respectively, in financing coordination fees were capitalized as loan costs and reduced mortgages and other notes payable, net in the accompanying condensed consolidated balance sheets. There were no financing coordination fees for the quarter and nine months ended September 30, 2016.

[4] Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets.

[5] For the quarter and nine months ended September 30, 2017, the Company incurred approximately $1.2 million and $3.7 million, respectively, in property and construction management fees payable to the Property Manager of which approximately $0.1 million and $0.3 million, respectively, in construction management fees were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $1.4 million and $3.7 million, respectively, in property and construction management fees payable to the Property Manager of which approximately $0.3 million and $0.6 million, respectively, in construction management fees were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.

[6] For the quarter and nine months ended September 30, 2017, the Company incurred approximately $7.6 million and $22.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.1 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheet. No expense support was received for the quarter and nine months ended September 30, 2017. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $7.3 million and $21.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.2 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. In addition, the Company recognized a reduction in asset management fees of approximately $0.9 million and $2.6 million, respectively, for the quarter and nine months ended September 30, 2016 as an estimate of the annual expense support amount expected to be settled in accordance with the terms of the expense support agreements.

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Schedule of Fees, Reimbursable Expenses and Related Amounts Unpaid to Related Parties (Parenthetical) (Detail) - USD ($) $ in Thousands		3 Months Ended			9 Months Ended
		Sep. 30, 2017		Sep. 30, 2016	Sep. 30, 2017		Sep. 30, 2016
Related Party Transaction [Line Items]
Investment services fees	[1]	$ 19		$ 194	$ 123		$ 194
Investment service fees capitalized		20		200	100		200
Financing coordination fees		2,748	[2]	0	3,601	[2]	0
Loan costs capitalized		0			900
Construction management fees capitalized		100		300	300		600
Asset management fees		7,562		6,240	22,197		18,606
Asset management fees capitalized		100		200	500		500
Expense under Support Agreement		0		900	0		2,600
Reimbursable expense
Related Party Transaction [Line Items]
Property and construction management fees payable		1,200		1,400	3,700		3,700
Asset management fees	[3]	7,643		7,270	22,711		21,699
Investment Services Fees
Related Party Transaction [Line Items]
Investment services fees		$ 20		$ 200	$ 100		$ 200

[1] For the quarter and nine months ended September 30, 2017, the Company incurred approximately $0.02 million and $0.1 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.02 million and $0.1 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets.  For the quarter and nine months ended September 30, 2016 the Company incurred approximately $0.2 million and $0.2 million, respectively, in investment service fees related to the Company’s completed developments, of which approximately $0.2 million and $0.2 million, respectively, were capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. Investment services fees, that are not capitalized, are recorded as acquisition fees and expenses in the accompanying condensed consolidated statements of operations.

[2] For the quarter and nine months ended September 30, 2017, the Company incurred approximately $2.7 and $3.6 million, respectively, in financing coordination fees related to the refinancing of the loans associated with certain operating properties of which approximately $0.0 million and $0.9 million, respectively, in financing coordination fees were capitalized as loan costs and reduced mortgages and other notes payable, net in the accompanying condensed consolidated balance sheets. There were no financing coordination fees for the quarter and nine months ended September 30, 2016.

[3] For the quarter and nine months ended September 30, 2017, the Company incurred approximately $7.6 million and $22.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.1 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheet. No expense support was received for the quarter and nine months ended September 30, 2017. For the quarter and nine months ended September 30, 2016, the Company incurred approximately $7.3 million and $21.7 million, respectively, in asset management fees payable to the Advisor of which approximately $0.2 million and $0.5 million, respectively, was capitalized and included in real estate under development in the accompanying condensed consolidated balance sheets. In addition, the Company recognized a reduction in asset management fees of approximately $0.9 million and $2.6 million, respectively, for the quarter and nine months ended September 30, 2016 as an estimate of the annual expense support amount expected to be settled in accordance with the terms of the expense support agreements.

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Amounts Related to Derivative Financial Instruments Included in Unconsolidated Entities in Condensed Consolidated Balance Sheet (Detail) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2017	Dec. 31, 2016
Derivative Financial Instruments One
Derivative [Line Items]
Notional amount of derivative contract	[1]	$ 11,895
Strike	[2]	1.30%
Credit Spread	[2]	2.60%
Trade date		Jan. 17, 2013
Forward date		Jan. 15, 2015
Maturity date		Jan. 16, 2018
Fair value asset (liability)		$ (4)	$ (44)
Derivative Financial Instruments Two
Derivative [Line Items]
Notional amount of derivative contract	[1]	$ 36,990
Strike	[2]	2.70%
Credit Spread	[2]	2.50%
Trade date		Sep. 06, 2013
Forward date		Aug. 17, 2015
Maturity date		Jul. 10, 2018
Fair value asset (liability)		$ (395)	(878)
Derivative Financial Instruments Three
Derivative [Line Items]
Notional amount of derivative contract	[1]	$ 25,206
Strike	[2]	2.80%
Credit Spread	[2]	2.50%
Trade date		Sep. 06, 2013
Forward date		Aug. 17, 2015
Maturity date		Aug. 29, 2018
Fair value asset (liability)		$ (304)	(667)
Derivative Financial Instruments Four
Derivative [Line Items]
Notional amount of derivative contract	[1]	$ 47,306
Strike	[2]	2.40%
Credit Spread	[2]	2.90%
Trade date		Aug. 15, 2014
Forward date		Jun. 01, 2016
Maturity date		Jun. 02, 2019
Fair value asset (liability)		$ (551)	(949)
Derivative Financial Instruments Five
Derivative [Line Items]
Notional amount of derivative contract	[1]	$ 81,233
Strike	[2]	2.30%
Credit Spread	[2]	2.40%
Trade date		Sep. 12, 2014
Forward date		Aug. 01, 2015
Maturity date		Jul. 15, 2019
Fair value asset (liability)		$ (888)	(1,512)
Derivative Financial Instruments Six
Derivative [Line Items]
Notional amount of derivative contract	[1]	$ 6,785
Strike	[2]	1.20%
Credit Spread	[2]	2.30%
Trade date		Nov. 12, 2014
Forward date		Nov. 15, 2014
Maturity date		Oct. 15, 2017
Fair value asset (liability)			(17)
Derivative Financial Instruments Seven
Derivative [Line Items]
Notional amount of derivative contract	[1]	$ 175,000
Strike	[2]	1.60%
Credit Spread	[2]	2.00%
Trade date		Dec. 23, 2014
Forward date		Dec. 19, 2014
Maturity date		Feb. 19, 2019
Fair value asset (liability)		$ (66)	(992)
Derivative Financial Instruments Eight
Derivative [Line Items]
Notional amount of derivative contract	[1]	$ 130,866
Strike	[2]	1.70%
Credit Spread	[2]	2.00%
Trade date		Jan. 09, 2015
Forward date		Dec. 10, 2015
Maturity date		Dec. 22, 2019
Fair value asset (liability)		$ (240)	(976)
Derivative Financial Instruments Nine
Derivative [Line Items]
Notional amount of derivative contract	[3]	$ 260,000
Strike	[2]	1.50%
Trade date		Nov. 19, 2015
Forward date		Nov. 19, 2015
Maturity date		Nov. 30, 2018
Fair value asset (liability)		$ 405	600
Derivative Financial Instruments Ten
Derivative [Line Items]
Notional amount of derivative contract	[3]	$ 150,000
Strike	[2]	1.50%
Trade date		Mar. 01, 2016
Forward date		Mar. 01, 2016
Maturity date		Nov. 30, 2018
Fair value asset (liability)		$ 228	$ 346
Derivative Financial Instruments Eleven
Derivative [Line Items]
Notional amount of derivative contract	[3]	$ 117,000
Strike	[2]	2.30%
Trade date		Aug. 29, 2017
Forward date		Aug. 29, 2017
Maturity date		Sep. 01, 2019
Fair value asset (liability)		$ 60

[1] Amounts related to interest rate swaps held by the Company, or its equity method investments, which are recorded at fair value and included in either other assets or other liabilities in the accompanying condensed consolidated balance sheets.

[2] The all-in rates are equal to the sum of the Strike and Credit Spread detailed above.

[3] Amounts related to the interest rate caps held by the Company, or its equity method investments, which are recorded at fair value and included in other assets in the accompanying condensed consolidated balance sheets.

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Equity - Additional Information (Detail) - USD ($) $ / shares in Units, shares in Millions	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Class Of Stock [Line Items]
Aggregate proceeds received from offering	$ 31,989,000	$ 31,990,000
Subscriptions received for common stock through public offering and reinvestment plan (in shares)	3.2	3.3
Cash distribution declared	$ 57,403,000	$ 55,488,000
Cash paid to stockholders	25,415,000	23,498,000
Redemptions of common stock	$ 35,624,000	$ 25,845,000
Redemption of common stock, per share	$ 9.98	$ 9.73
Distribution to promoted interest owed	$ 0	$ 6,650,000
Reinvestment Plan
Class Of Stock [Line Items]
Cash distribution declared	$ 32,000,000	$ 32,000,000

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Historical Estimated NAV Per Share, Including the Prices Pursuant to the Reinvestment Plan and the Company's Monthly Cash Distributions per Share (Detail) - $ / shares	Sep. 30, 2017	Jun. 30, 2017	Feb. 13, 2017
Dividends Payable [Line Items]
NAV per Share	$ 10.04	$ 10.04	$ 9.75
Monthly Cash Distributions	0.0388	0.0353	0.0353
Reinvestment Plan
Dividends Payable [Line Items]
Reinvestment Plan Price per Share	$ 10.04	$ 10.04	$ 9.75

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Distributions of promoted interest to share holders (Detail) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Dividends Payable [Line Items]
Distributions to holders of promoted interest	$ 0	$ (6,650,000)
Dogwood Forest of Acworth
Dividends Payable [Line Items]
Distributions to holders of promoted interest		(3,850,000)
Wellmore of Tega Cay
Dividends Payable [Line Items]
Distributions to holders of promoted interest		$ (2,800,000)

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Effect of Derivative Financial Instruments (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments, Gain (loss) recognized in other comprehensive loss	$ 1,308	$ 3,977	$ 3,786	$ (5,916)
Interest Expense and Loan Cost Amortization
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	(812)	(1,718)	(3,891)	(5,397)
Interest Rate Swap
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments, Gain (loss) recognized in other comprehensive loss	888	4,033	3,409	(3,729)
Interest Rate Swap | Interest Expense and Loan Cost Amortization
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	(433)	(1,731)	(3,201)	(5,388)
Interest Rate Cap
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments, Gain (loss) recognized in other comprehensive loss	295	(33)	198	(2,185)
Interest Rate Cap | Unconsolidated Joint Venture
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments, Gain (loss) recognized in other comprehensive loss				(1)
Interest Rate Cap | Interest Expense and Loan Cost Amortization
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	(254)	(10)	(511)	(10)
Reclassification of Interest Rate Swaps Upon Derecognition
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments, Gain (loss) recognized in other comprehensive loss	132		186
Reclassification of Interest Rate Swaps Upon Derecognition | Interest Expense and Loan Cost Amortization
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	(132)		(186)
Reclassification of Interest Rate Swaps Due to Ineffectiveness
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments, Gain (loss) recognized in other comprehensive loss	(7)	(23)	(7)	(1)
Reclassification of Interest Rate Swaps Due to Ineffectiveness | Interest Expense and Loan Cost Amortization
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	$ 7	$ 23	$ 7	$ 1

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Assets Held for Sale, Net - Additional Information (Detail)	1 Months Ended
	Aug. 31, 2017 Facility
Arkansas
Long Lived Assets Held For Sale [Line Items]
Number of skilled nursing facilities	6

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Assets Held for Sale, Net - Schedule of Assets Held for Sale (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Long Lived Assets Held For Sale [Line Items]
Deferred rent and lease incentives	$ 40,956	$ 31,045
Assets held for sale, net	52,469	53,351
Perennial Communities
Long Lived Assets Held For Sale [Line Items]
Real estate assets, net	46,699	47,178
Intangibles, net	800	893
Deferred rent and lease incentives	4,970	5,280
Assets held for sale, net	$ 52,469	$ 53,351

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Subsequent Events - Additional Information (Detail) - USD ($) $ in Thousands		Nov. 08, 2017	Oct. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Subsequent Event [Line Items]
Revolving credit facility outstanding				$ 619,835	$ 641,989
Revolving Credit Facility
Subsequent Event [Line Items]
Revolving credit facility outstanding	[1],[2]			$ 172,000	$ 194,863
Subsequent Event | Revolving Credit Facility
Subsequent Event [Line Items]
Revolving credit facility outstanding			$ 172,000
Increase in borrowing under the revolving credit facility		$ 55,100
Line of credit maturity date		2018-12

[1] As of September 30, 2017 and December 31, 2016, the Company had entered into interest rate caps with notional amounts of approximately $527.0 million and $410.0 million, respectively. Refer to Note 9. “Derivative Financial Instruments” for additional information.

[2] As of September 30, 2017 and December 31, 2016, the Company had undrawn availability under the senior unsecured revolving line of credit (“Revolving Credit Facility”) of approximately $3.6 million and $11.1 million, respectively, based on the value of the properties in the unencumbered pool of assets supporting the loan.