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, 2022

or

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

Commission File Number: 000-55190

NORTHSTAR HEALTHCARE INCOME, INC.

(Exact Name of Registrant as Specified in its Charter)

Maryland	27-3663988
(State or Other Jurisdiction of	(IRS Employer
Incorporation or Organization)	Identification No.)

16 East 34th Street, 18th Floor, New York, NY 10016

(Address of Principal Executive Offices, Including Zip Code)

(929) 777-3135

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	None	None

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 ý   No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý   No o

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

Large accelerated filer	¨	Accelerated filer	¨	Non-accelerated filer	ý	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. o

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

The Company has one class of common stock, $0.01 par value per share, 195,287,174 shares outstanding as of November 9, 2022.

NORTHSTAR HEALTHCARE INCOME, INC.

FORM 10-Q

TABLE OF CONTENTS

Index		Page
Part I.	Financial Information	4
Item 1.	Financial Statements	4
	Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	4
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2022 and 2021	5
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2022 and 2021	6
	Consolidated Statements of Equity (unaudited) for the three and nine months ended September 30, 2022 and 2021	7
	Consolidated Statements of Cash Flow (unaudited) for the nine months ended September 30, 2022 and 2021	9
	Notes to Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Control and Procedures	61
Part II.	Other Information	62
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	70
Signatures		71

2

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue,” “future” or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Such statements include, but are not limited to, those relating to our ability to make distributions to our stockholders, successfully manage the transition to self-management and to retain our senior executives; our ability to realize substantial efficiencies as well as anticipated strategic and financial benefits of the internalization of our management function as operating costs and business disruption may be greater than expected; the operating performance of our investments, our financing needs, the effects of our current strategies and investment activities and our ability to effectively deploy capital. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and you should not unduly rely on these statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward-looking statements.

All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date hereof and we are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.

Factors that could have a material adverse effect on our operations and future prospects are set forth in our filings with the U.S. Securities and Exchange Commission, or the SEC, including Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in Part II, Item 1A of this Quarterly Report on Form 10-Q under the heading “Risk Factors.” The risk factors set forth in our filings with the SEC could cause our actual results to differ significantly from those contained in any forward-looking statement contained in this report.

3

PART I—Financial Information

Item 1. Financial Statements

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Data)

	September 30, 2022 (Unaudited)		December 31, 2021
Assets
Cash and cash equivalents	$	95,145	$	200,473
Restricted cash	12,537		10,465
Operating real estate, net	932,730		972,599
Investments in unconsolidated ventures	205,207		212,309
Receivables, net	3,454		3,666
Intangible assets, net	2,337		2,590
Other assets	7,829		10,771
Total assets(1)	$	1,259,239	$	1,412,873
Liabilities
Mortgage and other notes payable, net	$	915,964	$	929,811
Due to related party	3,347		7,338
Escrow deposits payable	1,427		1,171
Accounts payable and accrued expenses	19,052		24,671
Other liabilities	2,392		3,064
Total liabilities(1)	942,182		966,055
Commitments and contingencies (Note 12)
Equity
NorthStar Healthcare Income, Inc. Stockholders’ Equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021	—		—
Common stock, $0.01 par value, 400,000,000 shares authorized, 195,078,539 and 193,120,940 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	1,951		1,930
Additional paid-in capital	1,728,383		1,720,719
Retained earnings (accumulated deficit)	(1,410,309)		(1,277,688)
Accumulated other comprehensive income (loss)	(5,088)		(486)
Total NorthStar Healthcare Income, Inc. stockholders’ equity	314,937		444,475
Non-controlling interests	2,120		2,343
Total equity	317,057		446,818
Total liabilities and equity	$	1,259,239	$	1,412,873

_______________________________________

(1)Represents the consolidated assets and liabilities of NorthStar Healthcare Income Operating Partnership, LP (the “Operating Partnership”). The Operating Partnership is a consolidated variable interest entity (“VIE”), of which NorthStar Healthcare Income, Inc. (together with its consolidated subsidiaries, the “Company”) is the sole general partner and owns approximately 99.99%. As of September 30, 2022, the Operating Partnership includes $224.2 million and $178.8 million of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. Refer to Note 2, “Summary of Significant Accounting Policies.”

Refer to accompanying notes to consolidated financial statements (unaudited).

4

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Property and other revenues
Resident fee income	$	11,274	$	27,370	$	32,987	$	83,906
Rental income	36,165		37,006		103,001		101,669
Other revenue	300		38		457		80
Total property and other revenues	47,739		64,414		136,445		185,655
Interest income
Interest income on debt investments	—		1,067		—		4,667
Expenses
Property operating expenses	35,134		45,784		101,258		136,503
Interest expense	11,014		15,780		31,877		47,767
Transaction costs	857		—		857		54
Asset management fees - related party	2,428		2,769		7,532		8,307
General and administrative expenses	2,859		2,432		10,300		8,544
Depreciation and amortization	9,642		13,828		29,105		44,772
Impairment loss	18,500		4,600		31,502		5,386
Total expenses	80,434		85,193		212,431		251,333
Other income (loss)
Other income, net	—		—		77		6,892
Realized gain (loss) on investments and other	325		75		660		7,479
Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax expense	(32,370)		(19,637)		(75,249)		(46,640)
Equity in earnings (losses) of unconsolidated ventures	2,872		7,943		39,427		17,819
Income tax expense	(15)		(59)		(45)		(85)
Net income (loss)	(29,513)		(11,753)		(35,867)		(28,906)
Net (income) loss attributable to non-controlling interests	73		100		298		(73)
Net income (loss) attributable to NorthStar Healthcare Income, Inc. common stockholders	$	(29,440)	$	(11,653)	$	(35,569)	$	(28,979)
Net income (loss) per share of common stock, basic/diluted(1)	$	(0.15)	$	(0.06)	$	(0.18)	$	(0.15)
Weighted average number of shares of common stock outstanding, basic/diluted(1)	194,670,948		191,937,161		194,032,819		191,285,186
Distributions declared per share of common stock	$	—	$	—	$	0.50	$	—

_______________________________________

(1)     The Company issued 49,872 and 66,840 restricted stock units during the nine months ended September 30, 2022 and 2021, respectively. The impact of the restricted stock units on the diluted earnings per share calculation is de minimis for the three and nine months ended September 30, 2022 and 2021.

Refer to accompanying notes to consolidated financial statements (unaudited).

5

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	(29,513)	$	(11,753)	$	(35,867)	$	(28,906)
Other comprehensive income (loss)
Foreign currency translation adjustments related to investment in unconsolidated venture	(1,664)		(671)		(4,602)		(1,253)
Total other comprehensive income (loss)	(1,664)		(671)		(4,602)		(1,253)
Comprehensive income (loss)	(31,177)		(12,424)		(40,469)		(30,159)
Comprehensive (income) loss attributable to non-controlling interests	73		100		298		(73)
Comprehensive income (loss) attributable to NorthStar Healthcare Income, Inc. common stockholders	$	(31,104)	$	(12,324)	$	(40,171)	$	(30,232)

Refer to accompanying notes to consolidated financial statements (unaudited).

6

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars and Shares in Thousands)

	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Company’s Stockholders’ Equity		Non-controlling Interests		Total Equity
	Shares	Amount
Balance as of December 31, 2020	190,409	$	1,904	$	1,710,023	$	(1,302,755)	$	467	$	409,639	$	2,423	$	412,062
Share-based payment of advisor asset management fees	643	6		2,494		—		—		2,500		—		2,500
Amortization of equity-based compensation	—	—		46		—		—		46		—		46
Non-controlling interests - contributions	—	—		—		—		—		—		240		240
Non-controlling interests - distributions	—	—		—		—		—		—		(350)		(350)
Other comprehensive income (loss)	—	—		—		—		(474)		(474)		—		(474)
Net income (loss)	—	—		—		(10,463)		—		(10,463)		308		(10,155)
Balance as of March 31, 2021 (Unaudited)	191,052	$	1,910	$	1,712,563	$	(1,313,218)	$	(7)	$	401,248	$	2,621	$	403,869
Share-based payment of advisor asset management fees	643	6		2,494		—		—		2,500		—		2,500
Amortization of equity-based compensation	—	—		73		—		—		73		—		73
Non-controlling interests - contributions	—	—		—		—		—		—		146		146
Non-controlling interests - distributions	—	—		—		—		—		—		(33)		(33)
Other comprehensive income (loss)	—	—		—		—		(108)		(108)		—		(108)
Net income (loss)	—	—		—		(6,863)		—		(6,863)		(135)		(6,998)
Balance as of June 30, 2021 (Unaudited)	191,695	$	1,916	$	1,715,130	$	(1,320,081)	$	(115)	$	396,850	$	2,599	$	399,449
Share-based payment of advisor asset management fees	712	7		2,762		—		—		2,769		—		2,769
Amortization of equity-based compensation	—	—		23		—		—		23		—		23
Non-controlling interests - contributions	—	—		—		—		—		—		259		259
Non-controlling interests - distributions	—	—		—		—		—		—		(45)		(45)
Other comprehensive income (loss)	—	—		—		—		(671)		(671)		—		(671)
Net income (loss)	—	—		—		(11,653)		—		(11,653)		(100)		(11,753)
Balance as of September 30, 2021 (Unaudited)	192,407	$	1,923	$	1,717,915	$	(1,331,734)	$	(786)	$	387,318	$	2,713	$	390,031

Refer to accompanying notes to consolidated financial statements (unaudited).

7

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars and Shares in Thousands)

	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Company’s Stockholders’ Equity		Non-controlling Interests		Total Equity
	Shares	Amount
Balance as of December 31, 2021	193,121	$	1,930	$	1,720,719	$	(1,277,688)	$	(486)	$	444,475	$	2,343	$	446,818
Share-based payment of advisor asset management fees	698	7		2,722		—		—		2,729		—		2,729
Amortization of equity-based compensation	—	—		15		—		—		15		—		15
Non-controlling interests - contributions	—	—		—		—		—		—		64		64
Non-controlling interests - distributions	—	—		—		—		—		—		(53)		(53)
Other comprehensive income (loss)	—	—		—		—		(568)		(568)		—		(568)
Net income (loss)	—	—		—		(12,936)		—		(12,936)		(45)		(12,981)
Balance as of March 31, 2022 (Unaudited)	193,819	$	1,937	$	1,723,456	$	(1,290,624)	$	(1,054)	$	433,715	$	2,309	$	436,024
Share-based payment of advisor asset management fees	637	8		2,507		—		—		2,515		—		2,515
Amortization of equity-based compensation	—	—		13		—		—		13		—		13
Non-controlling interests - contributions	—	—		—		—		—		—		113		113
Non-controlling interests - distributions	—	—		—		—		—		—		(61)		(61)
Distributions declared	—	—		—		(97,052)		—		(97,052)		—		(97,052)
Other comprehensive income (loss)	—	—		—		—		(2,370)		(2,370)		—		(2,370)
Net income (loss)	—	—		—		6,807		—		6,807		(180)		6,627
Balance as of June 30, 2022 (Unaudited)	194,456	$	1,945	$	1,725,976	$	(1,380,869)	$	(3,424)	$	343,628	$	2,181	$	345,809
Share-based payment of advisor asset management fees	623	6		2,407		—		—		2,413		—		2,413
Non-controlling interests - contributions	—	—		—		—		—		—		86		86
Non-controlling interests - distributions	—	—		—		—		—		—		(74)		(74)
Other comprehensive income (loss)	—	—		—		—		(1,664)		(1,664)		—		(1,664)
Net income (loss)	—	—		—		(29,440)		—		(29,440)		(73)		(29,513)
Balance as of September 30, 2022 (Unaudited)	195,079	$	1,951	$	1,728,383	$	(1,410,309)	$	(5,088)	$	314,937	$	2,120	$	317,057

Refer to accompanying notes to consolidated financial statements (unaudited).

8

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	(35,867)	$	(28,906)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Equity in (earnings) losses of unconsolidated ventures	(39,427)		(17,819)
Depreciation and amortization	29,105		44,772
Impairment loss	31,502		5,386
Amortization of below market debt	2,428		2,369
Straight-line rental (income) loss, net	—		7,432
Amortization of discount/accretion of premium on investments	—		(697)
Amortization of deferred financing costs	475		1,354
Amortization of equity-based compensation	150		142
Paid-in-kind interest on real estate debt investment	—		(194)
Realized (gain) loss on investments and other	(660)		(7,479)
Change in allowance for uncollectible accounts	326		108
Issuance of common stock as payment for asset management fees	7,532		7,769
Changes in assets and liabilities:
Receivables	(114)		1,191
Other assets	3,583		(7,560)
Due to related party	(3,868)		(5,421)
Escrow deposits payable	256		1,758
Accounts payable and accrued expenses	(8,727)		(8,866)
Other liabilities	(298)		306
Net cash (used in) provided by operating activities	(13,604)		(4,355)
Cash flows from investing activities:
Capital expenditures for operating real estate	(17,924)		(17,344)
Sales of operating real estate	—		28,078
Repayment of real estate debt investment	—		74,376
Investments in unconsolidated ventures	—		(400)
Distributions from unconsolidated ventures	42,173		6,971
Real estate debt investment modification fee	—		686
Net cash provided by (used in) investing activities	24,249		92,367
Cash flows from financing activities:
Borrowings from mortgage notes	—		26,000
Repayments of mortgage notes	(16,514)		(61,121)
Repayment of borrowings from line of credit - related party	—		(35,000)
Payment of deferred financing costs	(36)		(708)
Payments under finance leases	(408)		(446)
Distributions paid on common stock	(97,018)		—
Contributions from non-controlling interests	263		645
Distributions to non-controlling interests	(188)		(428)
Net cash (used in) provided by financing activities	(113,901)		(71,058)
Net increase (decrease) in cash, cash equivalents and restricted cash	(103,256)		16,954
Cash, cash equivalents and restricted cash-beginning of period	210,938		93,570
Cash, cash equivalents and restricted cash-end of period	$	107,682	$	110,524

Refer to accompanying notes to consolidated financial statements (unaudited).

9

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in Thousands)

	Nine Months Ended September 30,
	2022		2021
Supplemental disclosure of cash flow information:
Cash paid for interest	$	28,625	$	50,277
Cash paid for income taxes	41		45
Supplemental disclosure of non-cash investing and financing activities:
Accrued capital expenditures	$	2,561	$	1,391
Assets acquired under finance leases	—		144
Assets acquired under operating leases	—		100
Reclassification of assets held for sale	—		488,241

Refer to accompanying notes to consolidated financial statements (unaudited).

10

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Business and Organization

NorthStar Healthcare Income, Inc., together with its consolidated subsidiaries (the “Company”), manages a diversified portfolio of investments in healthcare real estate, owned directly or through joint ventures, with a focus on the seniors housing sector, which the Company defines as assisted living (“ALF”), memory care (“MCF”), skilled nursing (“SNF”), independent living facilities (“ILF”) and continuing care retirement communities (“CCRC”), which have ILF, ALF, SNF, and MCF available on one campus. The Company is also invested in other healthcare property types, including medical office buildings (“MOB”), hospitals, rehabilitation facilities and ancillary healthcare services businesses. The Company’s investments are predominantly in the United States, but through a joint venture it also has international investments in the United Kingdom.

The Company was formed in October 2010 as a Maryland corporation and commenced operations in February 2013. The Company elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2013. The Company has conducted its operations, and intends to do so in the future, so as to continue to qualify as a REIT for U.S. federal income tax purposes.

Substantially all of the Company’s business is conducted through NorthStar Healthcare Income Operating Partnership, LP (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership. The limited partners of the Operating Partnership are NorthStar Healthcare Income Advisor, LLC and NorthStar Healthcare Income OP Holdings, LLC (the “Special Unit Holder”). NorthStar Healthcare Income Advisor, LLC invested $1,000 in the Operating Partnership in exchange for common units and the Special Unit Holder invested $1,000 in the Operating Partnership and was issued a separate class of limited partnership units (the “Special Units”), which are collectively recorded as non-controlling interests on the accompanying consolidated balance sheets as of September 30, 2022 and December 31, 2021. As the Company issued shares, it contributed substantially all of the proceeds from its continuous, public offerings to the Operating Partnership as a capital contribution. As of September 30, 2022, the Company’s limited partnership interest in the Operating Partnership was 99.99%.

The Company’s charter authorizes the issuance of up to 400.0 million shares of common stock with a par value of $0.01 per share and up to 50.0 million shares of preferred stock with a par value of $0.01 per share. The board of directors of the Company is authorized to amend its charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue.

Since inception through October 21, 2022, the Company was externally managed by CNI NSHC Advisors, LLC or its predecessor (the “Advisor”), an affiliate of NRF Holdco, LLC (the “Sponsor”). The Advisor was responsible for managing the Company’s operations, subject to the supervision of the Company’s board of directors, pursuant to an advisory agreement. On October 21, 2022, the Company completed the internalization of the Company’s management function (the “Internalization”). In connection with the Internalization, the Company agreed with the Advisor to terminate the advisory agreement and arranged for the Advisor to continue to provide certain services for a transition period. Going forward, the Company will be self-managed under the leadership of Kendall Young, who was appointed by the board of directors as Chief Executive Officer and President concurrent with the Internalization. Refer to Note 13, “Subsequent Events” for further discussion.

From inception through September 30, 2022, the Company raised $2.0 billion in total gross proceeds from the sale of shares of common stock in its continuous, public offerings (the “Offering”), including $232.6 million pursuant to its distribution reinvestment plan (the “DRP”).

Impact of COVID-19

The Company's healthcare real estate business and investments have been challenged by suboptimal occupancy levels, lower labor force participation rates, which has driven increased labor costs, and inflationary pressures on other operating expenses.

These lasting effects from the response to the coronavirus 2019 (“COVID-19”) pandemic will continue to impact Company’s operational and financial performance. An extended recovery period increases the risk of a prolonged negative impact on the Company’s financial condition and results of operations. While the Company has the ability to meet its near term liquidity needs, general market concerns over credit and liquidity continue, and the effects of COVID-19 may also lead to heightened risk of litigation, with an ensuing increase in litigation and related costs.

11

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

At this time, the progression of the global economic recovery remains difficult for the Company to assess and estimate the future impact on the Company's results of operations. Accordingly, any estimates as reflected or discussed in these financial statements are based upon the Company's best estimates using information known to the Company as of the date of this Quarterly Report on Form 10-Q, and such estimates may change, the effects of which could be material. The Company will continue to monitor the progression of the economic recovery and reassess its effects on the Company’s results of operations and recoverability of value across its assets as conditions change.

2. Summary of Significant Accounting Policies

Basis of Accounting

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission on March 18, 2022.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. The Company consolidates entities in which it has a controlling financial interest by first considering if an entity meets the definition of a variable interest entity (“VIE”) for which the Company is deemed to be the primary beneficiary or if the Company has the power to control an entity through majority voting interest or other arrangements. All significant intercompany balances are eliminated in consolidation.

Variable Interest Entities

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents, has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.

The Company evaluates its investments and financings, including investments in unconsolidated ventures and securitization financing transactions to determine whether each investment or financing is a VIE. The Company analyzes new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of September 30, 2022, the Company has identified certain consolidated and unconsolidated VIEs. Assets of each of the VIEs, other than the Operating Partnership, may only be used to settle obligations of the respective VIE. Creditors of each of the VIEs have no recourse to the general credit of the Company.

Consolidated VIEs

The most significant consolidated VIEs are the Operating Partnership and certain properties that have non-controlling interests. These entities are VIEs because the non-controlling interests do not have substantive kick-out or participating rights. The Operating Partnership consolidates certain properties that have non-controlling interests. Included in operating real estate, net on the Company’s consolidated balance sheet as of September 30, 2022 is $214.2 million related to such consolidated VIEs. Included in mortgage and other notes payable, net on the Company’s consolidated balance sheet as of September 30, 2022 is $173.8 million, collateralized by the real estate assets of the related consolidated VIEs.

Unconsolidated VIEs

As of September 30, 2022, the Company identified unconsolidated VIEs related to its real estate equity investments with a carrying value of $205.2 million. The Company’s maximum exposure to loss as of September 30, 2022 would not exceed the carrying value of its investment in the VIEs. Based on management’s analysis, the Company determined that it is not the primary beneficiary of these VIEs and, accordingly, they are not consolidated in the Company’s financial statements as of September 30, 2022. The Company did not provide financial support to its unconsolidated VIEs during the nine months ended September 30, 2022. As of September 30, 2022, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to its unconsolidated VIEs.

Voting Interest Entities

A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote.

The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.

Investments in Unconsolidated Ventures

A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method or the Company may elect the fair value option.

The Company will account for an investment under the equity method of accounting if it has the ability to exercise significant influence over the operating and financial policies of an entity, but does not have a controlling financial interest. Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of preferred returns and allocation formulas, if any, as described in such governing documents. Equity method investments are recognized using a cost accumulation model, in which the investment is recognized based on the cost to the investor, which includes acquisition fees. The Company records as an expense certain acquisition costs and fees associated with consolidated investments deemed to be business combinations and capitalizes these costs for investments deemed to be acquisitions of an asset, including an equity method investment.

Non-controlling Interests

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and comprehensive income (loss) attributable to controlling and non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions. Any estimates of the effects of COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions as reflected and/or discussed in these financial statements are based upon the Company's best estimates using information known to the Company as of the date of this Quarterly Report on Form 10-Q. Such estimates may change and the impact of which could be material.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly-liquid investments with an original maturity date of three months or less to be cash equivalents. Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250,000 per institution. The Company mitigates credit risk by placing cash and cash equivalents with major financial institutions. To date, the Company has not experienced any losses on cash and cash equivalents.

Restricted cash consists of amounts related to operating real estate (escrows for taxes, insurance, capital expenditures, security deposits received from residents and payments required under certain lease agreements) and other escrows required by lenders of the Company’s borrowings.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as reported on the consolidated balance sheets to the total of such amounts as reported on the consolidated statements of cash flows (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
Cash and cash equivalents	$	95,145	$	200,473
Restricted cash	12,537		10,465
Total cash, cash equivalents and restricted cash	$	107,682	$	210,938

Operating Real Estate

Operating real estate is carried at historical cost less accumulated depreciation. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their useful life. Ordinary repairs and maintenance are expensed as incurred. Operating real estate is depreciated using the straight-line method over the estimated useful life of the assets, summarized as follows:

Category:	Term:
Building	30 to 50 years
Building improvements	Lesser of the useful life or remaining life of the building
Land improvements	9 to 15 years
Tenant improvements	Lesser of the useful life or remaining term of the lease
Furniture, fixtures and equipment	5 to 14 years

Construction costs incurred in connection with the Company’s investments are capitalized and included in operating real estate, net on the consolidated balance sheets. Construction in progress is not depreciated until the asset is available for its intended use.

Lessee Accounting

A leasing arrangement, a right to control the use of an identified asset for a period of time in exchange for consideration, is classified by the lessee either as a finance lease, which represents a financed purchase of the leased asset, or as an operating lease. For leases with terms greater than 12 months, a lease asset and a lease liability are recognized on the balance sheet at commencement date based on the present value of lease payments over the lease term.

Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the option to extend would be exercised or the option to terminate would not be exercised. As the implicit rate in most leases are not readily determinable, the Company’s incremental borrowing rate for each lease at commencement date is used to determine the present value of lease payments. Consideration is given to the Company’s recent debt financing transactions, as well as publicly

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating incremental borrowing rates.

Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases.

Right of Use (“ROU”) - Finance Assets

The Company has entered into finance leases for equipment which are included in operating real estate, net on the Company’s consolidated balance sheets. As of September 30, 2022, furniture, fixtures and equipment under finance leases totaled $2.5 million. The leased equipment is amortized on a straight-line basis. Payments for finance leases totaled $0.4 million and $0.5 million for the nine months ended September 30, 2022 and 2021, respectively, including assets that were disposed of through portfolio sales.

The following table presents the future minimum lease payments under finance leases and the present value of the minimum lease payments, which are included in other liabilities on the Company’s consolidated balance sheets (dollars in thousands):

October 1 through December 31, 2022	$	69
Years Ending December 31:
2023	93
2024	60
2025	29
2026	24
Thereafter	28
Total minimum lease payments	$	303
Less: Amount representing interest	(29)
Present value of minimum lease payments	$	274

The weighted average interest rate related to the finance lease obligations is 7.2% with a weighted average lease term of 3.4 years.

As of September 30, 2022, there were no leases that had yet to commence which would create significant rights and obligations to the Company as lessee.

Intangible Assets and Deferred Costs

Deferred Costs

Deferred costs primarily include deferred financing costs and deferred leasing costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. These costs are recorded against the carrying value of such financing and are amortized to interest expense over the term of the financing using the effective interest method. Unamortized deferred financing costs are expensed to realized gain (loss) on investments and other, when the associated borrowing is repaid before maturity. Costs incurred in seeking financing transactions which do not close are expensed in the period in which it is determined that the financing will not occur. Deferred lease costs consist of fees incurred to initiate and renew operating leases, which are amortized on a straight-line basis over the remaining lease term and are recorded to depreciation and amortization in the consolidated statements of operations.

Identified Intangibles

The Company records acquired identified intangibles, such as the value of in-place leases and other intangibles, based on estimated fair value at the acquisition date. The value allocated to the identified intangibles is amortized over the remaining lease term. In-place leases are amortized into depreciation and amortization expense.

Impairment analysis for identified intangible assets is performed in connection with the impairment assessment of the related operating real estate. An impairment establishes a new basis for the identified intangible asset and any impairment loss recognized is not subject to subsequent reversal. Refer to “—Impairment on Operating Real Estate and Investments in Unconsolidated Ventures” for additional information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Identified intangible assets are recorded in intangible assets, net on the consolidated balance sheets. Intangible assets relate to the Company’s in-place lease values for the Company’s four net lease properties. The following table presents intangible assets, net (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
In-place lease value	$	120,149	$	120,149
Less: Accumulated amortization	(117,812)		(117,559)
Intangible assets, net	$	2,337	$	2,590

The Company recorded $0.1 million and $0.3 million of amortization expense for in-place leases for the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2021, amortization expense for in-place leases and deferred costs was $0.3 million and $1.3 million, respectively.

The following table presents future amortization of in-place lease value (dollars in thousands):

October 1 through December 31, 2022	$	84
Years Ending December 31:
2023	337
2024	337
2025	337
2026	337
Thereafter	905
Total	$	2,337

Revenue Recognition

Operating Real Estate

Rental income from operating real estate is derived from leasing of space to healthcare operators, including rent received from the Company’s net lease properties and rent, ancillary service fees and other related revenue earned from ILF residents. Rental income recognition commences when the operator takes legal possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for rentals and expense reimbursements to be paid in monthly installments. Rental income from leases, which includes community and move-in fees, is recognized over the term of the respective leases. ILF resident agreements are generally short-term in nature and may allow for termination with 30 days’ notice.

The Company also generates revenue from operating healthcare properties. Revenue related to operating healthcare properties includes resident room and care charges, ancillary fees and other resident service charges. Rent is charged and revenue is recognized when such services are provided, generally defined per the resident agreement as of the date upon which a resident occupies a room or uses the services. Resident agreements are generally short-term in nature and may allow for termination with 30 days’ notice. Revenue derived from our ALFs, MCFs and CCRCs is recorded in resident fee income in the consolidated statements of operations.

Revenue from operators and residents is recognized at lease commencement only to the extent collection is expected to be probable. This assessment is based on several qualitative and quantitative factors, including and as appropriate, the payment history, ability to satisfy its lease obligations, the value of the underlying collateral or deposit, if any, and current economic conditions. If collection is assessed to not be probable thereafter, lease income recognized is limited to amounts collected, with the reversal of any revenue recognized to date in excess of amounts received. If collection is subsequently reassessed to be probable, revenue is adjusted to reflect the amount that would have been recognized had collection always been assessed as probable.

The operator of the Company’s remaining four net lease properties failed to remit contractual monthly rent obligations and the Company deemed it not probable that these obligations will be satisfied in the foreseeable future. For the nine months ended September 30, 2022, the Company recorded rental income to the extent rental payments were received.

For the three months ended September 30, 2022 and 2021, total property and other revenues includes variable lease revenue of $2.1 million and $3.5 million, respectively. For the nine months ended September 30, 2022 and 2021, total property and other

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

revenue includes variable lease revenue of $9.2 million and $10.1 million, respectively. Variable lease revenue includes ancillary services provided to operator/residents, as well as non-recurring services and fees at the Company’s operating facilities.

The Company did not receive or recognize any grant income from the Provider Relief Fund administered by the U.S. Department of Health and Human Services during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, the Company recognized $7.4 million of grant income. The grant income is classified as other income, net in the consolidated statements of operations. These grants are intended to mitigate the negative financial impact of the COVID-19 pandemic as reimbursements for expenses incurred to prevent, prepare for and respond to COVID-19 and lost revenues attributable to COVID-19. Provided that the Company attests to and complies with certain terms and conditions of the grants, the Company will not be required to repay these grants in the future.

Real Estate Debt Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale. The Company had one debt investment, which was repaid in full in August 2021.

Impairment on Operating Real Estate and Investments in Unconsolidated Ventures

At this time, it is difficult for the Company to assess and estimate the future economic effects of the COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions with any meaningful precision. The future economic effects will depend on many factors beyond the Company’s control and knowledge. The resulting effect on impairment of the Company's real estate held for investment and held for sale and investments in unconsolidated ventures may materially differ from the Company's current expectations and further impairment charges may be recorded in future periods.

Operating Real Estate

The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow generated by the property is less than the carrying value. In conducting this review, the Company considers U.S. macroeconomic factors, real estate and healthcare sector conditions, together with asset specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value and recorded in impairment loss in the consolidated statements of operations.

Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal cost, with any write-down to disposal cost recorded as an impairment loss. For any increase in fair value less disposal cost subsequent to classification as held for sale, the impairment may be reversed, but only up to the amount of cumulative loss previously recognized.

The Company considered the potential impact of the lasting effects of the COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions on the future net operating income of its healthcare real estate held for investment as an indicator of impairment. Fair values were estimated based upon the income capitalization approach, using net operating income for each property and applying indicative capitalization rates.

During the nine months ended September 30, 2022, the Company recorded impairment losses on its operating real estate totaling $31.5 million. The Company recorded impairment losses of $18.5 million, $8.5 million and $3.9 million for facilities in its Arbors, Winterfell and Rochester portfolios, respectively, as a result of declining operating margins and lower projected future cash flows. In addition, the Company recorded impairment losses totaling $0.6 million for property damage sustained by facilities in its Winterfell portfolio. During the nine months ended September 30, 2021, the Company recorded impairment losses totaling $5.4 million, consisting of $4.6 million recognized for one independent living facility within its Winterfell portfolio and $0.8 million for its Smyrna net lease property, which was sold in May 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Investments in Unconsolidated Ventures

The Company reviews its investments in unconsolidated ventures for which the Company did not elect the fair value option on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value may be impaired or that its carrying value may not be recoverable. An investment is considered impaired if the projected net recoverable amount over the expected holding period is less than the carrying value. In conducting this review, the Company considers global macroeconomic factors, including real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred and is considered to be other than temporary, the loss is measured as the excess of the carrying value of the investment over the estimated fair value and recorded in equity in earnings (losses) of unconsolidated ventures in the consolidated statements of operations.

During the nine months ended September 30, 2022, the Company did not impair any of its investments in unconsolidated ventures, however, the underlying joint ventures recorded impairments and reserves on properties in their respective portfolios, which the Company recognized through equity in earnings (losses), of which the Company’s proportionate share was de minimis. During the nine months ended September 30, 2021, the Company did not impair any of its investments in unconsolidated ventures, nor did the underlying joint ventures record any impairments or reserves on properties in their respective portfolios.

Credit Losses on Receivables

The current expected credit loss model, in estimating expected credit losses over the life of a financial instrument at the time of origination or acquisition, considers historical loss experiences, current conditions and the effects of reasonable and supportable expectations of changes in future macroeconomic conditions. The Company assesses the estimate of expected credit losses on a quarterly basis or more frequently as necessary. The Company considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The Company measures expected credit losses of receivables on a collective basis when similar risk characteristics exist. If the Company determines that a particular receivable does not share risk characteristics with its other receivables, the Company evaluates the receivable for expected credit losses on an individual basis.

When developing an estimate of expected credit losses on receivables, the Company considers available information relevant to assessing the collectability of cash flows. This information may include internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. The Company considers relevant qualitative and quantitative factors that relate to the environment in which the Company operates and are specific to the borrower.

Further, the fair value of the collateral, less estimated costs to sell, may be used when determining the allowance for credit losses for a receivable for which the repayment is expected to be provided substantially through the sale of the collateral when the borrower is experiencing financial difficulty.

As of September 30, 2022, the Company has not recorded an allowance for credit losses on its receivables.

Acquisition Fees and Expenses

The total of all acquisition fees and expenses for an investment, including acquisition fees to the Advisor, cannot exceed, in the aggregate, 6.0% of the contract purchase price of such investment unless such excess is approved by a majority of the Company’s directors, including a majority of its independent directors. The Company records as an expense for certain acquisition costs and fees associated with transactions deemed to be business combinations in which it consolidates the asset and capitalizes these costs for transactions deemed to be acquisitions of an asset, including an equity investment. Effective January 1, 2018, the Advisor no longer receives an acquisition fee in connection with the Company’s acquisitions of real estate properties or debt investments. On October 21, 2022, the advisory agreement was terminated. Refer to Note 13, “Subsequent Events” for further discussion.

Equity-Based Compensation

The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award at the time of grant. All fixed equity-based awards to directors, which have no vesting conditions other than time of service, are amortized to compensation expense over the awards’ vesting period on a straight-line basis. Equity-based compensation is classified within general and administrative expenses in the consolidated statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Income Taxes

The Company elected to be taxed as a REIT and to comply with the related provisions of the Internal Revenue Code beginning in its taxable year ended December 31, 2013. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders as long as certain asset, gross income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute dividends equal to at least 90.0% of its REIT taxable income (with certain adjustments) to its stockholders and meet certain other requirements. The Company believes that all of the criteria to maintain the Company’s REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax and potential interest and penalties, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. The Company’s accounting policy with respect to interest and penalties is to classify these amounts as a component of income tax expense, where applicable. The Company has assessed its tax positions for all open tax years, which include 2018 to 2021, and concluded there were no material uncertainties to be recognized.

The Company may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income.

The Company made a joint election to treat certain subsidiaries as taxable REIT subsidiaries (“TRS”) which may be subject to U.S. federal, state and local income taxes. In general, a TRS of the Company may perform services for managers/operators/residents of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate related business.

Certain subsidiaries of the Company are subject to taxation by federal and state authorities for the periods presented. Income taxes are accounted for by the asset/liability approach in accordance with U.S. GAAP. Deferred taxes, if any, represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. Such amounts arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates in the period which such changes are enacted. A provision for income tax represents the total of income taxes paid or payable for the current period, plus the change in deferred taxes. Current and deferred taxes are provided on the portion of earnings (losses) recognized by the Company with respect to its interest in the TRS. Deferred income tax assets and liabilities are calculated based on temporary differences between the Company’s U.S. GAAP consolidated financial statements and the federal and state income tax basis of assets and liabilities as of the consolidated balance sheet date. The Company evaluates the realizability of its deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if any, are included in provision for income tax benefit (expense) in the consolidated statements of operations. The Company has a deferred tax asset, which as of September 30, 2022 totaled $14.5 million and continues to have a full valuation allowance recognized, as there are no changes in the facts and circumstances to indicate that the Company should release the valuation allowance.

The Company recorded an income tax expense of approximately $15,000 and $45,000 for the three and nine months ended September 30, 2022, respectively. The Company recorded an income tax expense of approximately $59,000 and $85,000 for the three and nine months ended September 30, 2021, respectively.

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and other comprehensive income (loss) (“OCI”). The only component of OCI for the Company is foreign currency translation adjustments related to its investment in an unconsolidated venture.

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment is recorded as a component of accumulated OCI in the consolidated statements of equity.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period.

As of September 30, 2022 and December 31, 2021, the Company had exposure to foreign currency through an investment in an unconsolidated venture, the effects of which are reflected as a component of accumulated OCI in the consolidated statements of equity and in equity in earnings (losses) in the consolidated statements of operations.

Recent Accounting Pronouncements

Accounting Standards Adopted in 2022

Disclosures by Business Entities about Government Assistance—In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10: Disclosures by Business Entities about Government Assistance. The guidance requires expanded disclosure for transactions involving the receipt of government assistance. Required disclosures include a description of the nature of transactions with government entities, accounting policies for such transactions and their impact to the Company’s consolidated financial statements. The Company adopted ASU No. 2021-10 on January 1, 2022, with no transitional impact upon adoption.

Certain Leases with Variable Lease Payments—In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The guidance in ASU No. 2021-05 amends the lease classification requirements for the lessors under certain leases containing variable payments to align with practice under ASC 840. Under the guidance, the lessor should classify and account for a lease with variable lease payments that does not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in ASC No. 842-10-25-2 through 25-3; and 2) the lessor would have otherwise recognized a day-one loss. The amendments in ASU No. 2021-05 are effective for fiscal years beginning after December 15, 2021. The Company adopted ASU No. 2021-05 on January 1, 2022, with no transitional impact upon adoption.

Future Application of Accounting Standards

Reference Rate Reform—In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance in ASU No. 2020-04 is optional, the election of which provides temporary relief for the accounting effects on contracts, hedging relationships and other transactions impacted by the transition from interbank offered rates (such as London Interbank Offered Rate (“LIBOR”)) to alternative reference rates (such as Secured Overnight Financing Rate). Modification of contractual terms to effect the reference rate reform transition on debt, leases, derivatives and other contracts is eligible for relief from modification accounting and accounted for as a continuation of the existing contract. ASU No. 2020-04 is effective upon issuance through December 31, 2022, and may be applied retrospectively to January 1, 2020. The Company may elect practical expedients or exceptions as applicable over time as reference rate reform activities occur.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The guidance amends the scope of the recent reference rate reform guidance issued in ASU No. 2020-04. New optional expedients allow derivative instruments impacted by changes in the interest rate used for margining, discounting, or contract price alignment to qualify for certain optional relief. The guidance was effective immediately and may be applied retrospectively to January 1, 2020. The Company may elect practical expedients or exceptions as applicable over time as reference rate reform activities occur.

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NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

3. Operating Real Estate

The following table presents operating real estate, net (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
Land	$	121,518	$	121,518
Land improvements	18,453		17,798
Buildings and improvements	945,526		965,630
Tenant improvements	322		—
Construction in progress	12,154		8,141
Furniture, fixtures and equipment	88,910		84,813
Subtotal	$	1,186,883	$	1,197,900
Less: Accumulated depreciation	(254,153)		(225,301)
Operating real estate, net	$	932,730	$	972,599

For the three and nine months ended September 30, 2022, depreciation expense was $9.6 million and $28.9 million, respectively. For the three and nine months ended September 30, 2021, depreciation expense was $13.5 million and $43.5 million, respectively.

Within the table above, buildings and improvements have been reduced by accumulated impairment losses of $181.2 million and $149.7 million as of September 30, 2022 and December 31, 2021, respectively. Impairment loss, as presented on the consolidated statements of operations, totaled $31.5 million and $5.4 million for the nine months ended September 30, 2022 and 2021, respectively. Refer to Note 2, “Summary of Significant Accounting Policies” for further discussion.

4. Investments in Unconsolidated Ventures

All investments in unconsolidated ventures are accounted for under the equity method. The following table presents the Company’s investments in unconsolidated ventures (dollars in thousands):

				Carrying Value(1)
Portfolio	Acquisition Date	Ownership		September 30, 2022 (Unaudited)		December 31, 2021
Trilogy	Dec-2015	23.2	%	$	130,224	$	126,366
Diversified US/UK	Dec-2014	14.3	%	69,815		80,766
Eclipse	May-2014	5.6	%	3,295		4,856
Espresso(2)	Jul-2015	36.7	%	1,593		—
Subtotal				$	204,927	$	211,988
Solstice(3)	Jul-2017	20.0	%	280		321
Total				$	205,207	$	212,309

_______________________________________

(1)Includes $1.3 million, $13.4 million and $9.8 million of capitalized acquisition costs for the Company’s investments in the Eclipse, Diversified US/UK, and Trilogy joint ventures, respectively.

(2)As a result of impairments and other non-cash reserves recorded by the joint venture, the Company’s carrying value of its investment in Espresso was reduced to zero in the fourth quarter of 2018. The Company recognized its proportionate share of earnings and losses of the Espresso joint venture through the carrying value of its mezzanine loan debt investment, which was originated to a subsidiary of the Espresso joint venture, through the time of its repayment in August 2021. During the nine months ended September 30, 2022, the Espresso joint venture recognized gains on sub-portfolio sales, which increased the Company’s carrying value in its investment as of September 30, 2022.

(3)Represents investment in Solstice Senior Living, LLC (“Solstice”), the manager of the Winterfell portfolio. Solstice is a joint venture between affiliates of Integral Senior Living, LLC (“ISL”), a management company of ILF, ALF and MCF founded in 2000, which owns 80.0%, and the Company, which owns 20.0%.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the results of the Company’s investment in unconsolidated ventures (dollars in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Portfolio	Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution
Trilogy	$	6,052	$	2,300	$	763	$	—	$	10,757	$	6,900	$	(2,839)	$	—
Diversified US/UK	(2,611)		358		(330)		966		(4,060)		2,290		(2,387)		3,256
Eclipse	(344)		—		(194)		2,898		(940)		620		3,739		2,898
Espresso(1)	(242)		1,375		7,693		—		33,711		32,363		18,636		—
Envoy	—		—		—		78		—		—		740		817
Subtotal	$	2,855	$	4,033	$	7,932	$	3,942	$	39,468	$	42,173	$	17,889	$	6,971
Solstice	17		—		11		—		(41)		—		(70)		—
Total	$	2,872	$	4,033	$	7,943	$	3,942	$	39,427	$	42,173	$	17,819	$	6,971

_______________________________________

(1)During the nine months ended September 30, 2022, the Espresso joint venture recognized net gains related to sub-portfolio sales, of which the Company’s proportionate share totaled $32.0 million. The Company was distributed its proportionate share of the net proceeds generated from the sales totaling $27.4 million.

Summarized Financial Data

The following table presents the Trilogy unconsolidated venture’s balance sheets as of September 30, 2022 and December 31, 2021 and statements of operations for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021			Three Months Ended September 30,				Nine Months Ended September 30,
						2022		2021		2022		2021
Assets
Operating real estate, net	$	1,364,535	$	1,271,376	Total revenues	$	328,072	$	264,848	$	895,722	$	753,056
Other assets	755,164		575,573		Net income (loss)	$	26,081	$	3,298	$	46,361	$	(12,199)
Total assets	$	2,119,699	$	1,846,949
Liabilities and equity
Total liabilities	$	1,583,870	$	1,327,531
Equity	535,829		519,418
Total liabilities and equity	$	2,119,699	$	1,846,949

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. Borrowings

The following table presents the Company’s mortgage and other notes payable (dollars in thousands):

				September 30, 2022 (Unaudited)				December 31, 2021
	Recourse vs. Non-Recourse	Initial Maturity	Contractual Interest Rate(1)	Principal Amount(2)		Carrying Value(2)		Principal Amount(2)		Carrying Value(2)
Mortgage notes payable, net
Watermark Aqua Portfolio
Frisco, TX(3)	Non-recourse	Feb 2026	3.0%	$	26,000	$	25,527	$	26,000	$	25,431
Milford, OH	Non-recourse	Sep 2026	LIBOR + 2.68%	18,394		18,169		18,661		18,388
Rochester Portfolio
Rochester, NY	Non-recourse	Feb 2025	4.25%	18,385		18,338		18,911		18,853
Rochester, NY(4)	Non-recourse	Aug 2027	LIBOR + 2.34%	101,081		100,443		101,224		100,495
Rochester, NY	Non-recourse	Aug 2023	LIBOR + 2.90%	11,383		11,354		11,732		11,716
Arbors Portfolio(5)
Various locations	Non-recourse	Feb 2025	3.99%	83,919		83,498		85,369		84,799
Winterfell Portfolio(6)
Various locations	Non-recourse	Jun 2025	4.17%	599,574		590,652		608,810		597,460
Avamere Portfolio(7)
Various locations	Non-recourse	Feb 2027	4.66%	68,314		67,983		69,144		68,755
Subtotal mortgage notes payable, net				$	927,050	$	915,964	$	939,851	$	925,897
Other notes payable
Oak Cottage
Santa Barbara, CA(8)	Non-recourse	Repaid	6.00%	$	—	$	—	$	3,914	$	3,914
Subtotal other notes payable, net				$	—	$	—	$	3,914	$	3,914
Total mortgage and other notes payable, net				$	927,050	$	915,964	$	943,765	$	929,811

_______________________________________

(1)Floating-rate borrowings total $130.9 million of principal outstanding and reference one-month LIBOR.

(2)The difference between principal amount and carrying value of mortgage notes payable is attributable to deferred financing costs, net for all borrowings, other than the Winterfell portfolio which is attributable to below market debt intangibles.

(3)The mortgage note carries a fixed interest rate of 3.0% through February 2024, followed by the greater of the fixed rate or one-month LIBOR plus 2.80% through the initial maturity date of February 2026.

(4)Composed of seven individual mortgage notes payable secured by seven healthcare real estate properties, cross-collateralized and subject to cross-default.

(5)Composed of four individual mortgage notes payable secured by four healthcare real estate properties, cross-collateralized and subject to cross-default.

(6)Composed of 32 individual mortgage notes payable secured by 32 healthcare real estate properties, cross-collateralized and subject to cross-default.

(7)Composed of five individual mortgage notes payable secured by five healthcare real estate properties, cross-collateralized and subject to cross-default.

(8)In June 2022, the Company repaid the outstanding financing on the Oak Cottage portfolio at discounted payoff of $3.7 million.

The following table presents future scheduled principal payments on mortgage and other notes payable based on initial maturity (dollars in thousands):

October 1 through December 31, 2022	$	4,948
Years Ending December 31:
2023	31,032
2024	20,406
2025	670,302
2026	46,964
Thereafter	153,398
Total	$	927,050

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of September 30, 2022, the operator for the Arbors portfolio failed to remit contractual rent and comply with other contractual terms of its lease agreements, which resulted in defaults under the operator’s leases, which in turn, resulted in a non-monetary default under the mortgage notes collateralized by the properties. During the nine months ended September 30, 2022, the Company remitted contractual debt service and is in compliance with the other contractual terms under the mortgage notes collateralized by the properties.

The financial covenant requirements under a mortgage note secured by a property in the Rochester portfolio have been waived by the lender through December 31, 2022. During the nine months ended September 30, 2022, the Company remitted contractual debt service and is in compliance with the other contractual terms under the mortgage note. As of September 30, 2022, the mortgage note payable had an outstanding principal balance of $18.4 million, which matures in February 2025. The mortgage note payable is not cross collateralized by the other properties in the Rochester portfolio.

Line of Credit - Related Party

In October 2017, the Company obtained a revolving line of credit from an affiliate of the Sponsor (the “Sponsor Line”). As of September 30, 2022, the Sponsor Line had a borrowing capacity of $35.0 million at an interest rate of 3.5% plus LIBOR and had a maturity date of February 2024. As of September 30, 2022 and December 31, 2021, the Company had no outstanding borrowings under the Sponsor Line. The Sponsor Line was terminated on October 21, 2022 in connection with the termination of the advisory agreement. No amounts were outstanding under the Sponsor Line at the time of termination. Refer to Note 13, “Subsequent Events” for further discussion.

6. Related Party Arrangements

Advisor

Prior to the Internalization, the Advisor was responsible for managing the Company’s affairs on a day-to-day basis and for identifying, acquiring, originating and asset managing investments on behalf of the Company. For such services, to the extent permitted by law and regulations, the Advisor received fees and reimbursements from the Company. Pursuant to the advisory agreement, the Advisor could defer or waive fees in its discretion.

In connection with the Internalization, the advisory agreement was terminated on October 21, 2022. Refer to Note 13, “Subsequent Events” for further discussion.

Fees to Advisor

Asset Management Fee

Prior to the termination of the advisory agreement, the Advisor received a monthly asset management fee equal to one-twelfth of 1.5% of the Company’s most recently published aggregate estimated net asset value, as may be subsequently adjusted for any special distribution declared by the board of directors in connection with a sale, transfer or other disposition of a substantial portion of the Company’s assets. From January 1, 2022 through the October 21, 2022 termination of the advisory agreement, the fee was reduced if the Company’s corporate cash balance exceeded $75.0 million, subject to the terms and conditions set forth in the advisory agreement.

Effective July 1, 2021, the asset management fee was paid entirely in shares of the Company’s common stock at a price per share equal to the most recently published net asset value per share.

Acquisition Fee

Effective January 1, 2018, the Advisor no longer received an acquisition fee in connection with the Company’s acquisitions of real estate properties or debt investments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Disposition Fee

Effective June 30, 2020, the Advisor no longer had the potential to receive a disposition fee in connection with the sale of real estate properties or debt investments.

Reimbursements to Advisor

Operating Costs

Prior to the termination of the advisory agreement, the Advisor was entitled to receive reimbursement for direct and indirect operating costs incurred by the Advisor in connection with administrative services provided to the Company. The Advisor allocated, in good faith, indirect costs to the Company related to the Advisor’s and its affiliates’ employees, occupancy and other general and administrative costs and expenses in accordance with the terms of, and subject to the limitations contained in, the advisory agreement with the Advisor. The indirect costs included the Company’s allocable share of the Advisor’s compensation and benefit costs associated with dedicated or partially dedicated personnel who spent all or a portion of their time managing the Company’s affairs, based upon the percentage of time devoted by such personnel to the Company’s affairs. The indirect costs also included rental and occupancy, technology, office supplies and other general and administrative costs and expenses. However, there was no reimbursement for personnel costs related to executive officers (although reimbursement for certain executive officers of the Advisor was permissible) and other personnel involved in activities for which the Advisor received an acquisition fee or a disposition fee. The Advisor allocated these costs to the Company relative to its and its affiliates’ other managed companies in good faith and reviewed the allocation with the Company’s board of directors, including its independent directors. The Advisor updated the board of directors on a quarterly basis of any material changes to the expense allocation and provided a detailed review to the board of directors, at least annually, and as otherwise requested by the board of directors.

The Company reimbursed the Advisor quarterly for operating costs (including the asset management fee) based on a calculation for the four preceding fiscal quarters not to exceed the greater of: (i) 2.0% of its average invested assets; or (ii) 25.0% of its net income determined without reduction for any additions to reserves for depreciation, loan losses or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Notwithstanding the above, the Company could reimburse the Advisor for expenses in excess of this limitation if a majority of the Company’s independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. The Company had calculated the expense reimbursement quarterly based upon the trailing twelve-month period. As of September 30, 2022, the Advisor did not have any unreimbursed operating costs which remained eligible to be allocated to the Company.

As of September 30, 2022, the outstanding operating costs reimbursable to the Advisor totaled $2.5 million and were reimbursed by the Company during the fourth quarter of 2022. The Advisor continued to incur direct and indirect operating costs on behalf of the Company through the termination of the advisory agreement on October 21, 2022. In addition, the Company will pay the Advisor’s costs for certain services for a transition period. Refer to Note 13, “Subsequent Events” for further discussion.

Summary of Fees and Reimbursements

The following table presents the fees and reimbursements incurred and paid to the Advisor (dollars in thousands):

Type of Fee or Reimbursement		Due to Related Party as of December 31, 2021		Nine months Ended September 30, 2022				Due to Related Party as of September 30, 2022 (Unaudited)
	Financial Statement Location			Incurred		Paid
Fees to Advisor Entities
Asset management	Asset management fees-related party	$	937	$	7,532	$	(7,657)	$	812
Reimbursements to Advisor Entities
Operating costs	General and administrative expenses	6,401		8,789		(12,655)		2,535
Total		$	7,338	$	16,321	$	(20,312)	$	3,347

Pursuant to the advisory agreement, for the nine months ended September 30, 2022, the Company issued 2.0 million shares totaling $7.7 million, based on the estimated value per share on the date of each issuance, to an affiliate of the Advisor as part of its asset management fee. The Company will issue shares to satisfy outstanding asset management fees incurred and payable through the termination of the advisory agreement on October 21, 2022. As of September 30, 2022, the Advisor, the Sponsor and their affiliates owned a total of 9.4 million shares, or $36.6 million of the Company’s common stock based on the Company’s most recent estimated value per share. As of September 30, 2022, the Advisor, the Sponsor and their affiliates owned 4.8% of the total outstanding shares of the Company’s common stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Incentive Fee

The Special Unit Holder, an affiliate of the Advisor, is entitled to receive distributions equal to 15.0% of net cash flows of the Company, whether from continuing operations, repayment of loans, disposition of assets or otherwise, but only after stockholders have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.75% cumulative, non-compounded annual pre-tax return on such invested capital. From inception through September 30, 2022, the Special Unit Holder has not received any incentive fees from the Company.

Investments in Joint Ventures

Solstice, the manager of the Winterfell portfolio, is a joint venture between affiliates of ISL, which owns 80.0%, and the Company, which owns 20.0%. For the nine months ended September 30, 2022, the Company recognized property management fee expense of $4.1 million paid to Solstice related to the Winterfell portfolio.

The below table indicates the Company’s investments for which the Sponsor is also an equity partner in the joint venture. Each investment was approved by the Company’s board of directors, including all of its independent directors. Refer to Note 4, “Investments in Unconsolidated Ventures” for further discussion of these investments:

Portfolio	Partner(s)	Acquisition Date	Ownership
Eclipse	NRF and Partner/ Formation Capital, LLC	May 2014	5.6%
Diversified US/UK	NRF and Partner	December 2014	14.3%

Line of Credit - Related Party

The Company had a Sponsor Line, which provided up to $35.0 million at an interest rate of 3.5% plus LIBOR. The Sponsor Line was terminated on October 21, 2022 in connection with the termination of the advisory agreement. Refer to Note 13, “Subsequent Events” for further discussion.

7. Equity-Based Compensation

The Company adopted a long-term incentive plan, as amended (the “Plan”), which it may use to attract and retain qualified officers, directors, employees and consultants, as well as an independent directors compensation plan, which is a component of the Plan. Under the Plan, 2.0 million shares of restricted common stock were eligible to be issued for any equity-based awards granted under the Plan.

Pursuant to the Plan, as of September 30, 2022, the Company’s independent directors were granted a total of 159,932 shares of restricted common stock and 116,712 restricted stock units totaling $1.3 million and $0.5 million, respectively, based on the share price on the date of each grant.

The restricted common stock and restricted stock units granted generally vest quarterly over two years in equal installments and will become fully vested on the earlier occurrence of: (i) the termination of the independent director’s service as a director due to his or her death or disability; or (ii) a change in control of the Company. The restricted stock units are convertible, on a one-for-one basis, into shares of the Company’s common stock upon the earlier occurrence of: (i) the termination of the independent director’s service as a director; or (ii) a change in control of the Company.

The Company recognized equity-based compensation expense of $56,875 and $55,625 for the three months ended September 30, 2022 and 2021, respectively, and $150,042 and $174,458 for the nine months ended September 30, 2022 and 2021, respectively. Equity-based compensation expense is recorded in general and administrative expenses in the consolidated statements of operations.

Unrecognized expense related to unvested restricted common stock and restricted stock units totaled $268,125 and $223,167 as of September 30, 2022 and December 31, 2021, respectively. The Company had 4,800 shares of restricted common stock that were unvested as of December 31, 2021 and have fully vested as of September 30, 2022. Unvested restricted stock units totaled 68,703 and 50,130 as of September 30, 2022 and December 31, 2021, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8. Stockholders’ Equity

Common Stock

The Company stopped accepting subscriptions for its Offering on December 17, 2015 and all of the shares initially registered for its Offering were issued on or before January 19, 2016. The Company issued 173.4 million shares of common stock generating gross proceeds of $1.7 billion, excluding proceeds from the DRP.

Distribution Reinvestment Plan

The Company adopted the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price under the Company’s initial DRP was $9.50. In connection with its determination of the offering price for shares of the Company’s common stock in the follow-on offering, the board of directors determined that distributions may be reinvested in shares of the Company’s common stock at a price of $9.69 per share, which was approximately 95% of the offering price of $10.20 per share established for purposes of the follow-on offering. In April 2016, the board of directors determined that distributions may be reinvested in shares of the Company’s common stock at a price equal to the most recent estimated value per share of common stock. The following table presents the estimated value per share of common stock based on when the value became effective:

Effective Date	Estimated Value per Share		Valuation Date
April 2016	$	8.63	12/31/2015
December 2016	9.10		6/30/2016
December 2017	8.50		6/30/2017
December 2018	7.10		6/30/2018
December 2019	6.25		6/30/2019
December 2020	3.89		6/30/2020
November 2021	3.91		6/30/2021

Refer to Part II, Item 5. “Other Items” for additional details on the Company’s most recent published estimated value per share of common stock.

No selling commissions or dealer manager fees were paid on shares issued pursuant to the DRP. The board of directors of the Company may amend, suspend or terminate the DRP for any reason upon ten-days’ notice to participants, except that the Company may not amend the DRP to eliminate a participant’s ability to withdraw from the DRP. In April 2022, the Company’s board of directors elected to suspend the DRP, effective April 30, 2022. As a result, all future distributions, if any, will be paid in cash.

Since inception, the Company issued 25.7 million shares of common stock, generating gross offering proceeds of $232.6 million pursuant to the DRP. For the nine months ended September 30, 2022, the Company has not issued shares of common stock pursuant to the DRP.

Distributions

Effective February 1, 2019, the Company’s board of directors determined to suspend recurring distributions in order to preserve capital and liquidity.

On April 20, 2022, the Company’s board of directors declared a special distribution of $0.50 per share (the “Special Distribution”) for each stockholder of record on May 2, 2022 totaling $97.1 million. On or around May 5, 2022, $97.0 million of the Special Distribution was paid in cash and an outstanding distribution payable as of September 30, 2022 is attributable to restricted stock units and will be paid upon the conversion of the units to shares of the Company’s common stock. The outstanding distribution payable of $33,419 is recorded as other liabilities on the accompanying consolidated balance sheets as of September 30, 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In order to continue to qualify as a REIT, the Company must distribute annually dividends equal to at least 90% of its REIT taxable income (with certain adjustments). The Company did not have REIT taxable income for its taxable year ending December 31, 2021, therefore, it was not required to make distributions to its stockholders in 2021 to qualify as a REIT. The Company’s most recently filed tax return is for the year ended December 31, 2021 and includes a net operating loss carry-forward of $226.5 million.

Share Repurchase Program

The Company adopted the share repurchase program (the “Share Repurchase Program”) that enabled stockholders to sell their shares to the Company in limited circumstances. The Company is not obligated to repurchase shares under the Share Repurchase Program. The Company may amend, suspend or terminate the Share Repurchase Program at its discretion at any time, subject to certain notice requirements.

In April 2020, the Company’s board of directors determined to suspend all repurchases under the Share Repurchase Program effective April 30, 2020 in order to preserve capital and liquidity and has not repurchased any shares during the nine months ended September 30, 2022.

The Company previously funded repurchase requests with cash on hand, borrowings or other available capital.

9. Non-controlling Interests

Operating Partnership

Non-controlling interests include the aggregate limited partnership interests in the Operating Partnership held by limited partners, other than the Company. Income (loss) attributable to the non-controlling interests is based on the limited partners’ ownership percentage of the Operating Partnership. Income (loss) allocated to the Operating Partnership non-controlling interests for the three and nine months ended September 30, 2022 and 2021 was de minimis.

Other

Other non-controlling interests represent third-party equity interests in ventures that are consolidated with the Company’s financial statements. Net loss attributable to the other non-controlling interests was $0.1 million and $0.3 million for the three and nine months ended September 30, 2022, respectively. Net loss attributable to the other non-controlling interests was $0.1 million for the three months ended September 30, 2021 and net income attributable to the other non-controlling interests was $0.1 million for the nine months ended September 30, 2021.

10.    Fair Value

Fair Value Measurement

The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1.Quoted prices for identical assets or liabilities in an active market.

Level 2.Financial assets and liabilities whose values are based on the following:

a)Quoted prices for similar assets or liabilities in active markets.

b)Quoted prices for identical or similar assets or liabilities in non-active markets.

c)Pricing models whose inputs are observable for substantially the full term of the asset or liability.

d)Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

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(Unaudited)

Level 3.Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

Fair Value of Financial Instruments

U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value.

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities (dollars in thousands):

	September 30, 2022 (Unaudited)						December 31, 2021
	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Financial liabilities:(1)
Mortgage and other notes payable, net	$	927,050	$	915,964	$	883,040	$	943,765	$	929,811	$	889,485

_______________________________________

(1)The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of the reporting date. Although management is not aware of any factors that would significantly affect fair value, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Mortgage and Other Notes Payable

The Company primarily uses rates currently available with similar terms and remaining maturities to estimate fair value. These measurements are determined using comparable U.S. Treasury and LIBOR rates as of the end of the reporting period. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Derivative Instruments

For certain mortgage notes payable, the Company has interest rate caps with fair values that are de minimis as of September 30, 2022.

Nonrecurring Fair Values

The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for sale or otherwise, write-down of asset values due to impairment.

The following table summarizes the fair value, measured at the time of impairment, of Level 3 assets which have been measured at fair value on a nonrecurring basis during the periods presented and the associated impairment losses (dollars in thousands):

	September 30, 2022 (Unaudited)				December 31, 2021
	Fair Value		Impairment Losses		Fair Value		Impairment Losses
Operating real estate, net(1)	$	80,931	$	30,900	$	11,793	$	5,386

_______________________________________

(1)During the nine months ended September 30, 2022, the Company recorded impairment losses totaling $0.6 million for property damage sustained by facilities in its Winterfell portfolio. The fair value and impairment losses of these facilities are excluded from the table as of September 30, 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Operating Real Estate, Net

Operating real estate that is impaired is carried at fair value at the time of impairment. Impairment was driven by various factors that impacted undiscounted future net cash flows, including declines in operating performance, market growth assumptions, and expected margins to be generated by the properties. Fair value of impaired operating real estate was estimated based upon various approaches including discounted cash flow analysis using terminal capitalization rates ranging from 6.0% to 8.0% and discount rates ranging from 8.5% to 10.5%, third party appraisals and offer prices.

Assets Held For Sale

Assets held for sale are carried at the lower of amortized cost or fair value. Assets held for sale that were written down to fair value were generally valued using either broker opinions of value, or a combination of market information, including third-party appraisals and indicative sale prices, adjusted as deemed appropriate by management to account for the inherent risk associated with specific properties. In all cases, fair value of real estate held for sale is reduced for estimated selling costs. As of September 30, 2022 and December 31, 2021, the Company did not have any assets classified as held for sale.

11. Segment Reporting

The Company conducts its business through the following five segments, which are based on how management reviews and manages its business.

•Direct Investments - Operating - Healthcare properties operated pursuant to management agreements with healthcare managers.

•Direct Investments - Net Lease - Healthcare properties operated under net leases with an operator.

•Unconsolidated Investments - Healthcare joint ventures, including properties operated under net leases with operators or pursuant to management agreements with healthcare managers, in which the Company owns a minority interest.

•Debt Investments - Mortgage loans or mezzanine loans to owners of healthcare real estate. The Company’s remaining mezzanine loan was repaid in August 2021.

•Corporate - The corporate segment includes corporate level asset management fees - related party and general and administrative expenses.

The Company primarily generates rental and resident fee income from its direct investments. Additionally, the Company reports its proportionate interest of revenues and expenses from unconsolidated investments through equity in earnings (losses) of unconsolidated ventures. During the three and nine months ended September 30, 2021, the Company generated interest income on its real estate debt investment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present segment reporting (dollars in thousands):

	Direct Investments
Three Months Ended September 30, 2022	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	724	$	46,715	$	—	$	—	$	300	$	47,739
Interest income on debt investments	—		—		—		—		—		—
Property operating expenses	—		(35,134)		—		—		—		(35,134)
Interest expense	(907)		(10,107)		—		—		—		(11,014)
Transaction costs	—		—		—		—		(857)		(857)
Asset management fees - related party	—		—		—		—		(2,428)		(2,428)
General and administrative expenses	—		(8)		—		—		(2,851)		(2,859)
Depreciation and amortization	(870)		(8,772)		—		—		—		(9,642)
Impairment loss	(18,500)		—		—		—		—		(18,500)
Other income, net	—		—		—		—		—		—
Realized gain (loss) on investments and other	—		325		—		—		—		325
Equity in earnings (losses) of unconsolidated ventures	—		—		2,872		—		—		2,872
Income tax expense	—		(15)		—		—		—		(15)
Net income (loss)	$	(19,553)	$	(6,996)	$	2,872	$	—	$	(5,836)	$	(29,513)

_______________________________________

(1)Includes unallocated asset management fee-related party and general and administrative expenses.

	Direct Investments
Three Months Ended September 30, 2021	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	6,012	$	58,364	$	—	$	—	$	38	$	64,414
Interest income on debt investments	—		—		—		1,067		—		1,067
Real estate properties - operating expenses	—		(45,784)		—		—		—		(45,784)
Interest expense	(2,907)		(12,768)		—		—		(105)		(15,780)
Transaction costs	—		—		—		—		—		—
Asset management fees - related party	—		—		—		—		(2,769)		(2,769)
General and administrative expenses	(64)		(111)		—		—		(2,257)		(2,432)
Depreciation and amortization	(3,027)		(10,801)		—		—		—		(13,828)
Impairment loss	—		(4,600)		—		—		—		(4,600)
Other income, net	—		—		—		—		—		—
Realized gain (loss) on investments and other	—		—		75		—		—		75
Equity in earnings (losses) of unconsolidated ventures	—		—		7,943		—		—		7,943
Income tax benefit (expense)	—		(59)		—		—		—		(59)
Net income (loss)	$	14	$	(15,759)	$	8,018	$	1,067	$	(5,093)	$	(11,753)

_______________________________________

(1)Includes unallocated asset management fee-related party and general and administrative expenses.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Direct Investments
Nine Months Ended September 30, 2022	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	1,220	$	134,768	$	—	$	—	$	457	$	136,445
Interest income on debt investments	—		—		—		—		—		—
Property operating expenses	(35)		(101,223)		—		—		—		(101,258)
Interest expense	(2,708)		(29,169)		—		—		—		(31,877)
Transaction costs	—		—		—		—		(857)		(857)
Asset management fees - related party	—		—		—		—		(7,532)		(7,532)
General and administrative expenses	—		(24)		—		—		(10,276)		(10,300)
Depreciation and amortization	(2,601)		(26,504)		—		—		—		(29,105)
Impairment loss	(18,500)		(13,002)		—		—		—		(31,502)
Other income, net	—		77		—		—		—		77
Realized gain (loss) on investments and other	(206)		620		246		—		—		660
Equity in earnings (losses) of unconsolidated ventures	—		—		39,427		—		—		39,427
Income tax expense	—		(45)		—		—		—		(45)
Net income (loss)	$	(22,830)	$	(34,502)	$	39,673	$	—	$	(18,208)	$	(35,867)

_______________________________________

(1)Includes unallocated asset management fee-related party and general and administrative expenses.

	Direct Investments
Nine Months Ended September 30, 2021	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	10,942	$	174,633	$	—	$	—	$	80	$	185,655
Interest income on debt investments	—		—		—		4,667		—		4,667
Property operating expenses	(25)		(136,478)		—		—		—		(136,503)
Interest expense	(8,670)		(38,355)		—		—		(742)		(47,767)
Transaction costs	—		(54)		—		—		—		(54)
Asset management fees - related party	—		—		—		—		(8,307)		(8,307)
General and administrative expenses	(171)		(225)		—		—		(8,148)		(8,544)
Depreciation and amortization	(10,887)		(33,885)		—		—		—		(44,772)
Impairment loss	(786)		(4,600)		—		—		—		(5,386)
Other income, net	—		6,892		—		—		—		6,892
Realized gain (loss) on investments and other	(159)		7,563		75		—		—		7,479
Equity in earnings (losses) of unconsolidated ventures	—		—		17,819		—		—		17,819
Income tax benefit (expense)	—		(85)		—		—		—		(85)
Net income (loss)	$	(9,756)	$	(24,594)	$	17,894	$	4,667	$	(17,117)	$	(28,906)

_______________________________________

(1)Includes unallocated asset management fee-related party and general and administrative expenses.

The following table presents total assets by segment (dollars in thousands):

	Direct Investments
Total Assets:	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
September 30, 2022 (Unaudited)	$	84,668	$	891,283	$	205,207	$	—	$	78,081	$	1,259,239
December 31, 2021	104,809		908,517		212,309		—		187,238		1,412,873

______________________________________

(1)Represents primarily corporate cash and cash equivalents balances.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the operators and managers of the Company’s properties, excluding properties owned through unconsolidated joint ventures (dollars in thousands):

	As of September 30, 2022		Nine Months Ended September 30, 2022
Operator / Manager	Properties Under Management	Units Under Management(1)	Property and Other Revenues(2)		% of Total Property and Other Revenues
Solstice Senior Living(3)	32	4,000	$	82,607	60.5	%
Watermark Retirement Communities	14	1,753	33,770		24.8	%
Avamere Health Services	5	453	14,764		10.8	%
Integral Senior Living	1	44	3,628		2.7	%
Arcadia Management(4)	4	572	1,220		0.9	%
Other(5)	—	—	456		0.3	%
Total	56	6,822	$	136,445	100.0	%

______________________________________

(1)Represents rooms for ALFs and ILFs and beds for MCFs and SNFs, based on predominant type.

(2)Includes rental income received from the Company’s net lease properties as well as rental income, ancillary service fees and other related revenue earned from ILF residents and resident fee income derived from the Company’s ALFs and MCFs, which includes resident room and care charges, ancillary fees and other resident service charges.

(3)Solstice is a joint venture of which affiliates of ISL own 80%.

(4)During the nine months ended September 30, 2022, the Company recorded rental income to the extent payments were received.

(5)Consists primarily of interest income earned on corporate-level cash accounts.

12. Commitments and Contingencies

As of September 30, 2022, the Company believes there are no material contingencies that would affect its results of operations, cash flows or financial position.

Litigation and Claims

The Company may be involved in various litigation matters arising in the ordinary course of its business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, any current legal proceedings are not expected to have a material adverse effect on its financial position or results of operations.

The Company’s tenants, operators and managers may be involved in various litigation matters arising in the ordinary course of their business. The unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect such tenants’, operators’ or managers’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to the Company, which, in turn, could have a material adverse effect on the Company. The effects of COVID-19 may also lead to heightened risk of litigation, with an ensuing increase in litigation-related costs.

Environmental Matters

The Company follows a policy of monitoring its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at its properties, the Company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its consolidated financial position, results of operations or cash flows. Further, the Company is not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that it believes would require additional disclosure or the recording of a loss contingency.

General Uninsured Losses

The Company obtains various types of insurance to mitigate the impact of professional liability, property, business interruption, liability, flood, windstorm, earthquake, environmental and terrorism related losses. The Company attempts to obtain appropriate policy terms, conditions, limits and deductibles considering the relative risk of loss, the cost of such coverage and current industry practice. There are, however, certain types of extraordinary losses, such as those due to acts of war or other events, including those that are related to the COVID-19 pandemic, that may be either uninsurable or not economically insurable.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Other

Other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business, as well as commitments to fund capital expenditures for certain net lease properties. These commitments do not have a required minimum funding and are limited by agreed upon maximum annual funding amounts.

13.    Subsequent Events

The following is a discussion of material events which have occurred subsequent to September 30, 2022 through the issuance of the consolidated financial statements.

Internalization

On October 21, 2022, the Company completed the Internalization. In connection with the Internalization, on October 21, 2022, the Company entered into a Termination Agreement with the Advisor, the Sponsor and the Operating Partnership, which provides for the immediate termination of the advisory agreement, as well as the final settlement of any amounts owing under the advisory agreement and the transition of certain employees from the Advisor to the Company (including our assumption of certain related employment liabilities). In addition, the Advisor agreed to vote its shares of the Company’s common stock in favor of the director nominees recommended by the board of directors and say-on-pay at the first annual meeting following the Internalization, provided the Advisor retains a minimum share ownership. No termination fee will be paid by the Company to the Advisor in connection with the Internalization.

Sponsor Line of Credit

In connection with the termination of the advisory agreement, the Company’s Sponsor Line was terminated on October 21, 2022. No amounts were outstanding under the Sponsor Line at the time of termination.

Transition Services Agreement

In connection with the Internalization, on October 21, 2022, the Company, the Operating Partnership and the Advisor entered into a Transition Services Agreement (the “TSA”) to facilitate an orderly transition of the Company’s management of its operations. The TSA provides for, among other things, the Advisor to provide certain services for a transition period of up to six months following the Internalization, with the Operating Partnership having the option to extend the initial term once for up to three months. Treasury and accounts payable services will be provided for 12 months and will continue until either party provides at least six months’ notice of termination. The services primarily include technology, insurance, legal, treasury and accounts payable services. The Company will reimburse the Advisor for costs to provide the services, including the allocated cost of employee wages and compensation and incurred out-of-pocket expenses.

Distribution from Unconsolidated Venture

In October 2022, the Espresso joint venture completed the sale of 17 properties. As result of the sale, the Company received a distribution totaling $22.3 million in November 2022.

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

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included in Part I, Item 1. “Financial Statements” and the risk factors in Part II, Item 1A. “Risk Factors.” References to “we,” “us,” “our,” or “NorthStar Healthcare” refer to NorthStar Healthcare Income, Inc. and its subsidiaries unless the context specifically requires otherwise.

Overview

We manage a diversified portfolio of investments in healthcare real estate, owned directly or through joint ventures, with a focus on the seniors housing sector, which we define as assisted living, or ALF, memory care, or MCF, skilled nursing, or SNF, and independent living facilities, or ILF, and continuing care retirement communities, or CCRC, which have ILF, ALF, SNF, and MCF available on one campus. We are also invested in other healthcare property types, including medical office buildings, or MOB, hospitals, rehabilitation facilities and ancillary healthcare services businesses. Our investments are predominantly in the United States, but we have international investments through a joint venture.

We were formed in October 2010 as a Maryland corporation and commenced operations in February 2013. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, commencing with the taxable year ended December 31, 2013. We conduct our operations so as to continue to qualify as a REIT for U.S. federal income tax purposes.

Since inception through October 21, 2022, we were externally managed by CNI NSHC Advisors, LLC or its predecessor, or the Advisor, an affiliate of NRF Holdco, LLC, or the Sponsor. The Advisor was responsible for managing our operations, subject to the supervision of our board of directors, pursuant to an advisory agreement. On October 21, 2022, we completed the internalization of our management function, or the Internalization. In connection with the Internalization, we agreed with the Advisor to terminate the advisory agreement and arranged for the Advisor to continue to provide certain services for a transition period. Going forward, we will be self-managed under the leadership of Kendall Young, who was appointed by the board of directors as Chief Executive Officer and President concurrent with the Internalization. Refer to “—Recent Developments” for further discussion.

From inception through September 30, 2022, we raised $2.0 billion in total gross proceeds from the sale of shares of our common stock in our continuous, public offerings, including $232.6 million pursuant to our distribution reinvestment plan, or our DRP, collectively referred to as our Offering.

Significant Developments

Operating Performance

The following is a summary of the performance of our investment segments for the three months ended September 30, 2022 as compared to the three months ended June 30, 2022. Our healthcare real estate business and investments have been challenged by suboptimal occupancy levels, lower labor force participation rates, which have driven increased labor costs, and inflationary pressures on other operating expenses. We continue to monitor the progression of the economic recovery from the coronavirus 2019, or COVID-19, pandemic and its effects on our results of operations and assess recoverability of value across our assets as conditions change. For additional information on financial results, refer to “—Results of Operations.”

Direct Investments - Operating

During the three months ended September 30, 2022, our direct operating investments continued to attract new residents and improve occupancy. While the pace of resident move-ins at our direct operating investments slowed by 13.4%, resident move-outs declined by 4.6% as compared to the three months ended June 30, 2022. A summary of average occupancy of our direct operating investments by property manager is as follows:

	Average Monthly Occupancy						Average Quarterly Occupancy
Operator / Manager	September 2022		June 2022		Variance		Q3 2022		Q2 2022		Variance
Solstice Senior Living	84.6	%	82.4	%	2.2	%	84.0	%	81.4	%	2.6	%
Watermark Retirement Communities	78.0	%	77.0	%	1.0	%	77.7	%	76.9	%	0.8	%
Avamere Health Services	91.4	%	88.5	%	2.9	%	90.4	%	87.7	%	2.7	%
Integral Senior Living	97.5	%	97.5	%	—	%	95.8	%	99.2	%	(3.4)	%
Direct Investments - Operating	83.3	%	81.4	%	1.9	%	82.8	%	80.7	%	2.1	%

35

Rental and resident fee income of our direct operating investments increased to $46.7 million for the three months ended September 30, 2022 as compared to $45.0 million for the three months ended June 30, 2022 as a result of improved occupancy.

Property operating expenses of our direct operating investments increased to $34.9 million for the three months ended September 30, 2022 as compared to $33.1 million for the three months ended June 30, 2022. The increase was attributable to inflationary pressures on operating costs, higher utility costs due to seasonality, and staffing challenges, which in turn have resulted in additional overtime hours, use of agency and contract labor and increased salaries and wages expense.

Overall, rental and resident fee income, net of property operating expenses, of our direct operating investments decreased to $11.8 million for the three months ended September 30, 2022 as compared to $11.9 million for the three months ended June 30, 2022.

Direct Investments - Net Lease

The operator of our Arbors portfolio continues to make partial contractual rental payments based on availability of cash and liquidity and has not satisfied full contractual rent obligations. We have recorded rental income to the extent rental payments were received during the three months ended September 30, 2022. The Arbors portfolio recognized rental income of $0.7 million for the three months ended September 30, 2022, as compared to $0.2 million for the three months ended June 30, 2022.

Unconsolidated Investments

Equity in earnings recognized from our unconsolidated investments, totaled $2.9 million for the three months ended September 30, 2022 as compared to $34.1 million for the three months ended June 30, 2022. The decrease was primarily a result of net gains recognized from sub-portfolio sales within the Espresso joint venture during the three months ended June 30, 2022, of which our proportionate share totaled $31.2 million.

During the three months ended September 30, 2022, we received distributions from our unconsolidated investments, which totaled $4.0 million as compared to $31.1 million for the three months ended June 30, 2022. Higher distributions during the three months ended June 30, 2022 were a result of proceeds from sales transactions in the Espresso joint venture. Distributions continued to be limited by reinvestment and development in the Trilogy joint venture and operational challenges in the Diversified US/UK and Eclipse joint ventures.

The following is a summary of operations and performance for the Trilogy, Diversified US/UK, and Espresso joint ventures for the three months ended September 30, 2022:

•Trilogy: The joint venture's facilities experienced improvements to resident occupancy and revenues, however, its operating margin continues to be impacted by the effects of labor shortages and inflationary pressures. Additionally, the joint venture recognized federal and state COVID-19 provider relief grants as income.

•Diversified US/UK: The joint venture classified the 106 properties within the MOB portfolio and two hospitals as held for sale during the three months ended September 30, 2022. The operators of the joint venture’s net lease portfolios, including its portfolio in the United Kingdom, continue to face occupancy and expense pressures, which impacted certain operator’s ability to pay contractual rent during the quarter and may require lease restructurings. CCRC, SNF and ALF operating portfolios continue to sustain suboptimal occupancy levels, and experienced staffing challenges. These factors, along with rising interest rates have reduced the joint venture’s net cash flows and subjected it to cash flow sweeps.

•Espresso: The joint venture received full contractual rent from its net lease operators. During the three months ended September 30, 2022, the joint venture distributed excess cash flows from operations, of which our proportionate share totaled $1.4 million. Rental income collected has declined as a result of the sub-portfolio sales and the joint venture continues to pursue dispositions of its remaining properties as of September 30, 2022. Refer to “—Recent Developments” for additional information on distributions from portfolio sales.

Investments, Financings and Disposition Activities

•During the nine months ended September 30, 2022, the Espresso joint venture distributed proceeds from sub-portfolio sales, of which our proportionate share totaled $27.4 million.

•In June 2022, we repaid the outstanding financing on the Oak Cottage portfolio at a discounted payoff of $3.7 million.

•In July 2022, we exercised our option to extend the maturity date of a mortgage note payable collateralized by a property within the Rochester portfolio from August 2022 to August 2023, which required a $0.2 million principal repayment toward the outstanding principal balance.

36

•We recorded impairment losses totaling $31.5 million for facilities within the Arbors, Winterfell and Rochester portfolios during the nine months ended September 30, 2022.

Special Distribution

•On April 20, 2022, our board of directors declared a special distribution, or the Special Distribution, of $0.50 per share for each stockholder of record on May 2, 2022 totaling $97.1 million. On or around May 5, 2022, $97.0 million of the Special Distribution was paid in cash.

Recent Developments

The following is a discussion of material events which have occurred subsequent to September 30, 2022 through November 9, 2022.

Internalization

On October 21, 2022, we completed the Internalization. In connection with the Internalization, on October 21, 2022, we entered into a Termination Agreement with the Advisor, the Sponsor and the Operating Partnership, which provides for the immediate termination of the advisory agreement, as well as the final settlement of any amounts owing under the advisory agreement and the transition of certain employees from the Advisor to us (including our assumption of certain related employment liabilities). In addition, the Advisor agreed to vote its shares of our common stock in favor of the director nominees recommended by our board of directors and say-on-pay at the first annual meeting following the Internalization, provided the Advisor retains a minimum share ownership. No termination fee will be paid by us to the Advisor in connection with the Internalization.

Sponsor Line of Credit

In connection with the termination of the advisory agreement, our revolving line of credit from an affiliate of the Sponsor, or the Sponsor Line, was terminated on October 21, 2022. No amounts were outstanding under the Sponsor Line at the time of termination.

Transition Service Agreement

In connection with the Internalization, on October 21, 2022, we, the Operating Partnership and the Advisor entered into a Transition Services Agreement, or TSA, to facilitate an orderly transition of the management of our operations. The TSA provides for, among other things, the Advisor to provide certain services for a transition period of up to six months following the Internalization, with the Operating Partnership having the option to extend the initial term once for up to three months. Treasury and accounts payable services will be provided for 12 months and will continue until either party provides at least six months’ notice of termination. The services primarily include technology, insurance, legal, treasury and accounts payable services. We will reimburse the Advisor for costs to provide the services, including the allocated cost of employee wages and compensation and actually incurred out-of-pocket expenses.

Resignation and Appointment of Officers

Effective upon on the Internalization, on October 21, 2022, Ann B. Harrington, Paul V. Varisano and Douglas W. Bath provided notice of their respective resignations as Interim Chief Executive Officer, President, General Counsel and Secretary, Chief Financial Officer and Treasurer and Chief Investment Officer. Their resignations are a result of the termination of the advisory agreement, and not due to any disagreement with us on any matter relating to our operations, policies or practices.

On October 21, 2022, our board of directors appointed Kendall K. Young as our Chief Executive Officer and President and as a member of our board of directors to fill an existing vacancy. In addition, our board of directors appointed Nicholas R. Balzo as our Chief Financial Officer, Treasurer and Secretary.

Distribution from Unconsolidated Venture

In October 2022, the Espresso joint venture completed the sale of 17 properties. As result of the sale, we received a distribution totaling $22.3 million in November 2022.

Estimated Net Asset Value

On November 10, 2022, upon the recommendation of the audit committee, or the Audit Committee, of the Board, the Board, including all of its independent directors, approved and established an estimated value per share of our common stock of $2.93. Refer to Part II, Item 5. “Other Items” for additional information.

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Our Investments

Our investments are categorized as follows:

•Direct Investments - Operating - Healthcare properties operated pursuant to management agreements with healthcare managers.

•Direct Investments - Net Lease - Healthcare properties operated under net leases with an operator.

•Unconsolidated Investments - Healthcare joint ventures, including properties operated under net leases with an operator or pursuant to management agreements with healthcare managers, in which we own a minority interest.

We generate revenues from resident fees and rental income. Resident fee income is recorded by our ALFs and MCFs when services are rendered and includes resident room and care charges and other resident charges. Rental income is generated from net leases to healthcare operators and tenants as well by our ILFs. Additionally, we report our proportionate interest of revenues and expenses from unconsolidated joint ventures, which own healthcare real estate, through equity in earnings (losses) of unconsolidated ventures on our consolidated statements of operations.

For financial information regarding our reportable segments, refer to Note 11, “Segment Reporting” in our accompanying consolidated financial statements included in Part I, Item 1. “Financial Statements.”

The following table presents a summary of investments as of September 30, 2022 (dollars in thousands):

			Properties(1)(2)
Investment Type / Portfolio	Amount(2)(3)		Seniors Housing	MOB	SNF	Hospitals	Total	Primary Locations	Ownership Interest
Direct Investments - Operating
Winterfell	$	904,985	32	—	—	—	32	Various	100.0%
Rochester	219,518		10	—	—	—	10	Northeast	97.0%
Watermark Aqua	77,521		4	—	—	—	4	Southwest/Midwest	97.0%
Avamere	99,438		5	—	—	—	5	Northwest	100.0%
Oak Cottage	19,427		1	—	—	—	1	West	100.0%
Other(4)	2,030		—	—	—	—	—	West	97.0%
Subtotal	$	1,322,919	52	—	—	—	52
Direct Investments - Net Lease
Arbors	$	126,825	4	—	—	—	4	Northeast	100.0%
Unconsolidated Investments
Trilogy(5)	$	440,942	23	—	75	—	98	Southwest/Midwest	23.2%
Diversified US/UK(6)	261,186		92	—	39	7	138	Various	14.3%
Eclipse	37,291		42	—	9	—	51	Various	5.6%
Espresso(7)	—		—	—	—	—	—	Midwest	36.7%
Solstice(8)	—		—	—	—	—	—		20.0%
Subtotal	$	739,419	157	—	123	7	287
Total Investments	$	2,189,163	213	—	123	7	343

_______________________________________

(1)Classification based on predominant services provided, but may include other services.

(2)Excludes properties held for sale.

(3)Based on cost for real estate equity investments, which includes purchase price allocations related to net intangibles, deferred costs, other assets, if any, and adjusted for subsequent capital expenditures. For real estate equity investments, includes cost associated with purchased land parcels that are not included in the count.

(4)Represents seven condominium units for which we hold future interests.

(5)Includes institutional pharmacy, therapy businesses and lease purchase buy-out options in connection with the Trilogy investment, which are not subject to property count.

(6)The joint venture classified the 106 properties within the MOB portfolio and two hospitals as held for sale as of September 30, 2022.

(7)As a result of the joint venture pursuing dispositions of its various sub-portfolios, the remaining 62 properties are excluded from the table as of September 30, 2022. Refer to “—Recent Developments” for additional information on portfolio sales.

(8)Represents our investment in Solstice Senior Living, LLC, or Solstice, the manager of the Winterfell portfolio. Solstice is a joint venture between affiliates of Integral Senior Living, LLC, or ISL, a management company of ILF, ALF and MCF founded in 2000, which owns 80.0%, and us, who owns 20.0%.

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The following presents our real estate equity portfolio diversity across property type and geographic location based on cost as of September 30, 2022:

Real Estate Equity by Property Type(1)	Real Estate Equity by Geographic Location

_______________________________________

(1)Classification based on predominant services provided, but may include other services.

Our investments include the following types of healthcare facilities as of September 30, 2022:

•Seniors Housing Facilities. We define seniors housing facilities to include ILFs, ALFs, MCFs and CCRCs, as described in further detail below. Revenues generated by seniors housing facilities typically come from private pay sources, including private insurance, and to a much lesser extent government reimbursement programs, such as Medicare and Medicaid.

◦Independent living facilities. ILFs are properties with central dining facilities that provide services that include security, housekeeping, nutrition and limited laundry services. ILFs are designed specifically for independent seniors who are able to live on their own, but desire the security and conveniences of community living. ILFs typically offer several services covered under a regular monthly fee.

◦Assisted living facilities. ALFs provide services that include minimal assistance for activities in daily living and permit residents to maintain some of their privacy and independence as they do not require constant supervision and assistance. Services bundled within one regular monthly fee usually include three meals per day in a central dining room, daily housekeeping, laundry, medical reminders and 24-hour availability of assistance with the activities of daily living, such as eating, dressing and bathing. Professional nursing and healthcare services are usually available at the facility on call or at regularly scheduled times. ALFs typically are comprised of one and two bedroom suites equipped with private bathrooms and efficiency kitchens.

◦Memory care facilities. MCFs offer specialized options for seniors with Alzheimer’s disease and other forms of dementia. These facilities offer dedicated care and specialized programming for various conditions relating to memory loss in a secured environment. Residents require a higher level of care and more assistance with activities of daily living than in ALFs. Therefore, these facilities have staff available 24 hours a day to respond to the unique needs of their residents.

◦Continuing care retirement community. CCRCs provide, as a continuum of care, the services described for ILFs, ALFs and SNFs in an integrated campus. CCRCs can be structured to offer services covered under a regular monthly rental fee or under a one-time upfront entrance fee, which is partially refundable in certain circumstances.

•Skilled Nursing Facilities. SNFs provide services that include daily nursing, therapeutic rehabilitation, social services, housekeeping, nutrition and administrative services for individuals requiring certain assistance for activities in daily living. A typical SNF includes mostly one and two bed units, each equipped with a private or shared bathroom and community dining facilities. Revenues generated from SNFs typically come from government reimbursement programs, including Medicare and Medicaid, as well as private pay sources, including private insurance.

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•Medical Office Buildings. MOBs are typically either single-tenant properties associated with a specialty group or multi-tenant properties leased to several unrelated medical practices. Tenants include physicians, dentists, psychologists, therapists and other healthcare providers, who require space devoted to patient examination and treatment, diagnostic imaging, outpatient surgery and other outpatient services. MOBs are similar to commercial office buildings, although they require greater plumbing, electrical and mechanical systems to accommodate physicians’ requirements such as sinks in every room, brighter lights and specialized medical equipment.

•Hospitals. Services provided by operators and tenants in hospitals are paid for by private sources, third-party payers (e.g., insurance and Health Maintenance Organizations), or through the Medicare and Medicaid programs. Our hospital properties typically will include acute care, long-term acute care, specialty and rehabilitation hospitals and generally are leased to operators under triple-net lease structures.

Direct Investments - Operating

For our operating properties, we enter into management agreements that generally provide for the payment of a fee to a manager, typically 4-5% of gross revenues with the potential for certain incentive compensation, and have direct exposure to the revenues and operating expenses of a property. As a result, our operating properties allow us to participate in the risks and rewards of the operations of healthcare facilities.

Direct Investments - Net Lease

For our net lease properties, we enter into net leases that generally provide for fixed rental payments, subject to periodic increases based on certain percentages or the consumer price index, and obligate the operator to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures.

Our remaining four net lease properties are leased and operated by Arcadia Management with a lease term that expires in August 2029. However, the operator has failed to remit contractual rent and comply with other contractual terms of its lease agreements, which resulted in defaults under the operator’s leases as of September 30, 2022.

Operators and Managers

The following table presents the operators and managers of our direct investments (dollars in thousands):

	As of September 30, 2022		Nine Months Ended September 30, 2022
Operator / Manager	Properties Under Management	Units Under Management(1)	Property and Other Revenues(2)		% of Total Property and Other Revenues
Solstice Senior Living(3)	32	4,000	$	82,607	60.5	%
Watermark Retirement Communities	14	1,753	33,770		24.8	%
Avamere Health Services	5	453	14,764		10.8	%
Integral Senior Living	1	44	3,628		2.7	%
Arcadia Management(4)	4	572	1,220		0.9	%
Other(5)	—	—	456		0.3	%
Total	56	6,822	$	136,445	100.0	%

_______________________________________

(1)Represents rooms for ALFs and ILFs and beds for MCFs and SNFs, based on predominant type.

(2)Includes rental income received from our net lease properties as well as rental income, ancillary service fees and other related revenue earned from ILF residents and resident fee income derived from our ALFs and MCFs, which includes resident room and care charges, ancillary fees and other resident service charges.

(3)Solstice is a joint venture of which affiliates of ISL own 80%.

(4)During the nine months ended September 30, 2022, we recorded rental income to the extent rental payments were received.

(5)Consists primarily of interest income earned on corporate-level cash accounts.

Watermark Retirement Communities and Solstice, together with their affiliates, manage substantially all of our operating properties. As a result, we are dependent upon their personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our properties efficiently and effectively. Through our 20.0% ownership of Solstice, we are entitled to certain rights and minority protections. As Solstice is a joint venture formed exclusively to operate the Winterfell portfolio, Solstice has generated, and may continue to generate, operating losses if declines in occupancy and operating revenues at our Winterfell portfolio continue.

Unconsolidated Investments

The following table presents our unconsolidated investments (dollars in thousands):

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									Properties as of September 30, 2022(1)
Portfolio	Partner	Acquisition Date	Ownership		AUM(2)		Equity Investment(3)		Seniors Housing Facilities	MOB	SNF	Hospitals	Total
Trilogy	American Healthcare REIT / Management Team of Trilogy Investors, LLC	Dec-2015	23.2	%	$	440,942	189,032		23	—	75	—	98
Diversified US/UK (4)	NRF and Partner	Dec-2014	14.3	%	261,186		$	243,544	92	—	39	7	138
Eclipse	NRF and Partner/ Formation Capital, LLC	May-2014	5.6	%	37,291		23,400		42	—	9	—	51
Espresso(5)	Formation Capital, LLC/Safanad Management Limited	Jul-2015	36.7	%	—		55,146		—	—	—	—	—
Subtotal					$	739,419	$	511,122	157	—	123	7	287
Solstice		Jul-2017	20.0	%	—		402		—	—	—	—	—
Total					$	739,419	$	511,524	157	—	123	7	287

_______________________________________

(1)Excludes properties classified as held for sale.

(2)Represents our proportionate share of assets under management based on cost, which includes purchase price allocations related to net intangibles, deferred costs, other assets, if any, and adjusted for subsequent capital expenditures. Does not include cost of properties held for sale.

(3)Represents initial and subsequent contributions to the underlying joint venture through September 30, 2022.

(4)The joint venture classified the 106 properties within the MOB portfolio and two hospitals as held for sale as of September 30, 2022.

(5)As a result of the joint venture pursuing dispositions of its various sub-portfolios, the remaining 62 properties are excluded from the table as of September 30, 2022. Refer to “—Recent Developments” for additional information on distributions from portfolio sales.

•Diversified US/UK. Portfolio of SNFs, ALFs, CCRCs and hospitals across the United States and care homes in the United Kingdom. The Sponsor and other minority partners own the remaining 85.7% of this portfolio.

•Trilogy. Portfolio of predominantly SNFs located in the Midwest and operated pursuant to management agreements with Trilogy Health Services, as well as ancillary services businesses, including a therapy business and a pharmacy business. American Healthcare REIT, Inc., or AHR, and management of Trilogy own the remaining 76.8% of this portfolio.

•Eclipse. Portfolio of SNFs and ALFs leased to, or managed by, a variety of different operators/managers across the United States. The Sponsor and other minority partners and Formation Capital, LLC, or Formation, own 86.4% and 8.0% of this portfolio, respectively.

•Espresso. Portfolio of predominantly SNFs located in the Midwest and organized in sub-portfolios under net leases. An affiliate of Formation acts as the general partner and manager of this investment. Formation and Safanad Management Limited own the remaining 63.3% of this portfolio.

•Solstice. Operator platform joint venture established to manage the operations of the Winterfell portfolio. An affiliate of ISL owns the remaining 80.0%.

Our Strategy

Our primary objective is to maximize value and generate liquidity for shareholders. Although our short-term strategy may continue to be impacted by inflation, rising interest rates and other economic industry conditions, the key elements of our strategy include:

•Grow the Operating Income Generated by Our Portfolio. Through active portfolio management, we will continue to review and implement operating strategies and initiatives in order to enhance the performance of our existing investment portfolio.

•Deploy Strategic Capital Expenditures. We will continue to invest capital into our operating portfolio in order to maintain market position, functional and operating standards, and provide an optimal mix of services and enhance the overall value of our assets.

•Pursue Dispositions and Opportunities for Asset Repositioning and Other Strategic Initiatives to Maximize Value. We will actively pursue dispositions of assets and portfolios where we believe the disposition will achieve a desired return and generate value for shareholders. Additionally, we will continue to assess the need for strategic repositioning or sale

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of assets, joint ventures, operators and markets to position our portfolio for optimal performance. We will also opportunistically explore other strategic initiatives to create value for shareholders.

Portfolio Management

Since our inception through October 21, 2022, we were externally managed by the Advisor, with the Advisor responsible for managing our operations, subject to the supervision of our board of directors, pursuant to an advisory agreement. On October 21, 2022, we completed the Internalization and became a self-managed REIT, with an internal asset management team. The portfolio management process for our investments includes oversight by our asset management team, regular management meetings and an operating results review process. These processes are designed to evaluate and proactively identify asset-specific issues and trends on a portfolio-wide, sub-portfolio or asset type basis.

Our asset management team are experienced and use many methods to actively manage our investments to enhance or preserve our income, value and capital and mitigate risk. Our asset management team seeks to identify opportunities for our investments that may involve replacing, converting or renovating facilities in our portfolio which, in turn, would allow us to provide optimal mix of services and enhance the overall value of our assets. To manage risk, our asset management team engages in frequent review and dialogue with operators/managers/borrowers/third party advisors and periodic inspections of our owned properties and collateral. In addition, our asset management team considers the impact of regulatory changes on the performance of our portfolio.

Our asset management team will continue to monitor the performance of, and actively manage, all of our investments. However, there can be no assurance that our investments will continue to perform in accordance with the contractual terms of the governing documents or underwriting and we may, in the future, record impairment, as appropriate, if required.

Outlook and Recent Trends

The healthcare industry, which includes ILFs, ALFs, MCFs, CCRCs, SNFs, MOBs and hospitals, continues to be impacted by inflation, rising interest rates and other economic market conditions. While the healthcare industry continues to experience occupancy recovery, operating margins will continue to be impacted by cost inflation, labor pressures, additional staffing needs and related cost burdens. The healthcare industry’s operational and financial recovery will depend on a variety of factors, which may differ considerably across regions, fluctuate over time and are highly uncertain.

As a result of overall increase in resident demand, improving consumer sentiment and easing restrictions on visitation and admissions, the seniors housing industry occupancy average rose to 82.2% during the third quarter of 2022 from 81.4% in the second quarter of 2022. In addition, annual inventory growth decreased to 1.4% during the third quarter of 2022, while construction versus inventory ratio of 5.0% remained elevated in the third quarter of 2022 (source: The National Investment Centers for Seniors Housing & Care, or NIC).

Seniors Housing

Supply growth, which has outpaced demand over the past several years, has challenged the seniors housing industry. New inventory, coupled with the average move-in age of seniors housing residents increasing over time, has resulted in declining occupancy for the industry on average. Further, to remain competitive with the new supply, owners and operators of older facilities have increased capital expenditure spending, which in turn has negatively affected cash flow. While off its peak of 7.7% in the fourth quarter of 2017, seniors housing under construction as a share of inventory was 5.0% in the third quarter of 2022 (source: NIC). It is expected that, as demographics and demand continue to increase long-term, supply growth will follow.

While increased supply has resulted in competitive pressures that have limited rent growth over the past several years for the senior housing industry, during the third quarter of 2022, market rent growth averaged 4.4% (source: NIC) as a result of increased demand. However, a tight labor market and competition to attract quality staff has resulted in increased wages and personnel costs, resulting in lower margins. The COVID-19 pandemic has further exacerbated operating expense growth, with increased staffing needs and personal protective equipment requirements and wage and benefits increases may continue to impact the industry’s margins in the future, as labor represents approximately 60% of the seniors housing industry’s operating expenses (source: Green Street).

Skilled Nursing

While generally impacted by the same conditions as the seniors housing industry, SNF operators are currently facing various operational, reimbursement, legal and regulatory challenges. Increased wages and labor costs, narrowing of referral networks, shorter lengths of stay, staffing shortages, expenses associated with inspections, enforcement proceedings and legal actions related to professional and general liability claims have contributed to compressed margins and declines in cash flow.

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SNF operators receive a majority of their revenues from governmental payors, primarily Medicare and Medicaid. With a dependence on government reimbursement as the primary source of their revenues, SNF operators are also subject to intensified efforts to impose pricing pressures and more stringent cost controls, through value-based payments, managed care and similar programs, which could result in lower daily reimbursement rates, lower lease coverage, decreased occupancy and declining operating margins, liquidity and financial conditions.

Regulatory initiatives announced in 2022 and aimed at improving safety and quality of nursing home care could further increase the cost burdens for our SNF operators and expose them to financial penalties. The Biden Administration announced its focus on establishing a minimum nursing home staffing requirement, reducing resident room crowding and reinforcing safeguards against unnecessary medications and treatments. These reforms might result in increased government inspections, financial penalties and other enforcement sanctions against facilities not meeting the set standards.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. 

Certain accounting policies are considered to be critical accounting policies. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s subjective and complex judgments, and for which the impact of changes in estimates and assumptions could have a material effect on our financial statements. We believe that all of the decisions and assessments upon which our financial statements are based were reasonable at the time made, based upon information available to us at that time.

For a summary of our accounting policies, refer to Note 2, “Summary of Significant Accounting Policies” in our accompanying consolidated financial statements included in Part I, Item 1. “Financial Statements.”

We believe impairment to be a critical accounting estimate based on the nature of our operations and/or require significant management judgment and assumptions. Our investments are reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of our investments may be impaired or that carrying value may not be recoverable. In conducting these reviews, we consider macroeconomic factors, including healthcare sector conditions, together with asset and market specific circumstance, among other factors. To the extent an impairment has occurred, the loss will be measured as compared to the carrying amount of the investment. Fair values can be estimated based upon the income capitalization approach, using net operating income for each property and applying indicative capitalization and discount rates or sales comparison approach, using what other purchasers and sellers in the market have agreed to as price for comparable properties.

Impairment

During the nine months ended September 30, 2022, we recorded impairment losses on our operating real estate totaling $31.5 million. We recorded impairment losses of $18.5 million, $8.5 million and $3.9 million for facilities in our Arbors, Winterfell and Rochester portfolios, respectively, as a result of declining operating margins and lower projected future cash flows. In addition, we recorded impairment losses totaling $0.6 million for property damage sustained by facilities in our Winterfell portfolio.

Accumulated impairment losses for operating real estate that we continue to hold as of September 30, 2022 totaled $181.2 million. Refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for additional information regarding impairment recorded in prior years.

During the nine months ended September 30, 2022, we did not impair any of our investments in unconsolidated ventures, however, our unconsolidated ventures have recorded impairments and reserves on properties in their respective portfolios, which have been recognized through our equity in earnings (losses), of which our proportionate share was de minimis.

At this time, it is difficult to assess and estimate the continuing impact of the COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions with any meaningful precision. As the future impact will depend on many factors beyond our control and knowledge, the resulting effect on impairment of our operating real estate and investments in unconsolidated ventures may materially differ from our current expectations and further impairment charges may be recorded in the future.

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Results of Operations

Comparison of the Three Months Ended September 30, 2022 to September 30, 2021 (dollars in thousands)

	Three Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Property and other revenues
Resident fee income	$	11,274	$	27,370	$	(16,096)	(58.8)	%
Rental income	36,165		37,006		(841)		(2.3)	%
Other revenue	300		38		262		689.5	%
Total property and other revenues	47,739		64,414		(16,675)		(25.9)	%
Interest income
Interest income on debt investments	—		1,067		(1,067)		(100.0)	%
Expenses
Property operating expenses	35,134		45,784		(10,650)		(23.3)	%
Interest expense	11,014		15,780		(4,766)		(30.2)	%
Transaction costs	857		—		857		NA
Asset management fees - related party	2,428		2,769		(341)		(12.3)	%
General and administrative expenses	2,859		2,432		427		17.6	%
Depreciation and amortization	9,642		13,828		(4,186)		(30.3)	%
Impairment loss	18,500		4,600		13,900		302.2	%
Total expenses	80,434		85,193		(4,759)		(5.6)	%
Other income, net	—		—		—		NA
Realized gain (loss) on investments and other	325		75		250		333.3	%
Equity in earnings (losses) of unconsolidated ventures	2,872		7,943		(5,071)		(63.8)	%
Income tax expense	(15)		(59)		44		(74.6)	%
Net income (loss)	$	(29,513)	$	(11,753)	$	(17,760)	151.1	%

Resident Fee Income

The following table presents resident fee income generated by our direct investments (dollars in thousands):

	Three Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store ALF/MCF properties (excludes properties sold)	$	11,274	$	10,302	$	972	9.4	%
Properties sold	—		17,068		(17,068)		(100.0)	%
Total resident fee income	$	11,274	$	27,370	$	(16,096)	(59)	%

Resident fee income decreased $16.1 million as a result of property sales during 2021. The Watermark Fountains portfolio sold in December 2021, the Kansas City portfolio in June 2021 and a property within the Aqua portfolio sold in March 2021.

Excluding properties sold, resident fee income increased by $1.0 million primarily as a result of increases in average occupancy rates at our ALFs.

Rental Income

The following table presents rental income generated by our direct investments (dollars in thousands):

	Three Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store ILF properties (excludes properties sold)	$	35,441	$	30,994	$	4,447	14.3	%
Same store net lease properties (excludes properties sold)
Rental payments	724		1,122		(398)		(35.5)	%
Properties sold	—		4,890		(4,890)		(100.0)	%
Total rental income	$	36,165	$	37,006	$	(841)	(2.3)	%

Rental income decreased by $0.8 million primarily as a result of the sale of the Fountains net lease portfolio in December 2021.

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On a same store basis, rental income at our ILFs increased by $4.4 million as a result of improved occupancy, while rental payments from our net lease properties decreased due to the operator of our Arbors net lease portfolio remitting less contractual rent as compared to the three months ended September 30, 2021.

Interest Income on Debt Investments

There was no interest income on debt investments recognized during the three months ended September 30, 2022 as a result of receiving the full repayment of outstanding principal on our mezzanine loan debt investment in August 2021.

Property Operating Expenses

The following table presents property operating expenses incurred by our direct investments (dollars in thousands):

	Three Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store (excludes properties sold and COVID-19 related expenses)
ALF/MCF properties	$	9,459	$	7,718	$	1,741	22.6	%
ILF properties	25,360		23,528		1,832		7.8	%
COVID-19 related expenses	107		359		(252)		(70.2)	%
Properties sold	208		14,179		(13,971)		(98.5)	%
Total property operating expenses	$	35,134	$	45,784	$	(10,650)	(23.3)	%

Overall, total operating expenses decreased $10.7 million primarily as a result of property sales during the year ended December 31, 2021.

Excluding properties sold, operating expenses increased $3.3 million primarily as a result of our operators experiencing staffing challenges, which has increased salaries and wages due to additional overtime hours and use of agency and contract labor to fill open positions. In addition, higher occupancy and inflationary pressures drove an increase in overall operating costs, specifically utilities and food and beverage costs.

Interest Expense

The following table presents interest expense incurred on our borrowings (dollars in thousands):

	Three Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store (excludes properties sold)
ALF/MCF properties	$	1,526	$	1,400	$	126	9.0	%
ILF properties	8,581		8,279		302		3.6	%
Net lease properties	907		930		(23)		(2.5)	%
Properties sold	—		5,066		(5,066)		(100.0)	%
Corporate	—		105		(105)		(100.0)	%
Total interest expense	$	11,014	$	15,780	$	(4,766)	(30.2)	%

Interest expense decreased $4.8 million primarily as a result of the repayment of mortgage notes payable which were collateralized by properties sold during the year ended December 31, 2021 and the repayment of the Sponsor Line, in July 2021.

On a same store basis, while average mortgage notes principal balances have decreased as compared to September 30, 2021 due to continued principal amortization, interest expense on our floating rate debt has increased as a result of a higher London Interbank Offered Rate, or LIBOR.

Transaction Costs

Transaction costs for the three months ended September 30, 2022 consisted of legal and professional fees incurred to complete the Internalization. Refer to “—Recent Developments” for additional information on the Internalization.

Asset Management Fees - Related Party

Prior to the termination of the advisory agreement, the Advisor received a monthly asset management fee equal to one-twelfth of 1.5% of our most recently published aggregate estimated net asset value, adjusted for any special distribution declared by our board of directors and adjusted for corporate cash balances in excess of $75.0 million. Asset management fees decreased by $0.3 million due to the Special Distribution paid in May 2022 and adjustments for excess corporate cash balances.

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General and Administrative Expenses

General and administrative expenses increased $0.4 million primarily as a result of amortizing our directors’ and officers’ insurance premium incurred and reimbursed to the Advisor over the term of the policy, beginning in December 2021.

Depreciation and Amortization

The following table presents depreciation and amortization recognized on our direct investments (dollars in thousands):

	Three Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store (excludes properties sold)
ALF/MCF properties	$	1,770	$	1,749	$	21	1.2	%
ILF properties	7,002		7,356		(354)		(4.8)	%
Net lease properties	870		861		9		1.0	%
Properties sold	—		3,862		(3,862)		(100.0)	%
Total depreciation and amortization	$	9,642	$	13,828	$	(4,186)	(30.3)	%

Depreciation and amortization expense decreased $4.2 million primarily as a result of properties sold during the year ended December 31, 2021.

Impairment Loss

During the three months ended September 30, 2022, impairment losses on operating real estate totaled $18.5 million for facilities within the Arbors net lease portfolio.

During the three months ended September 30, 2021, impairment losses on operating real estate totaled $4.6 million for one independent living facility within the Winterfell portfolio.

Realized Gain (Loss) on Investments and Other

During the three months ended September 30, 2022, we recorded gains on the change in value of our mortgage note payable interest rate caps totaling $0.3 million.

During the three months ended September 30, 2021, we realized gains of $0.1 million for distributions received from the Envoy joint venture that exceeded our carrying value in the investment.

Equity in Earnings (Losses) of Unconsolidated Ventures

The following table presents the results of our unconsolidated ventures (dollars in thousands):

	Three Months Ended September 30,																Three Months Ended September 30,
	2022		2021		2022		2021		2022		2021						2022		2021
Portfolio	Equity in Earnings (Losses)				FFO and MFFO adjustments(1)				Equity in Earnings, after FFO and MFFO adjustments				Increase (Decrease)				Cash Distributions
Eclipse	$	(344)	$	(194)	$	309	$	273	$	(35)	$	79	$	(114)	(144.3)	%	$	—	$	2,898
Envoy	—		—		—		—		—		—		—		—	%	—		78
Diversified US/UK	(2,611)		(330)		3,125		3,724		514		3,394		(2,880)		(84.9)	%	358		966
Espresso	(242)		7,693		1,617		(5,370)		1,375		2,323		(948)		(40.8)	%	1,375		—
Trilogy	6,052		763		(753)		3,663		5,299		4,426		873		19.7	%	2,300		—
Subtotal	$	2,855	$	7,932	$	4,298	$	2,290	$	7,153	$	10,222	$	(3,069)	(30.0)	%	$	4,033	$	3,942
Solstice	17		11		—		1		17		12		5		41.7	%	—		—
Total	$	2,872	$	7,943	$	4,298	$	2,291	$	7,170	$	10,234	$	(3,064)	(29.9)	%	$	4,033	$	3,942

_______________________________________

(1)Represents our proportionate share of revenues and expenses excluded from the calculation of FFO and MFFO for unconsolidated investments. Refer to “—Non-GAAP Financial Measures” for additional discussion.

Our equity in earnings generated by our unconsolidated investments decreased by $5.1 million primarily due to gains recognized on property sales in the Espresso joint venture during the three months ended September 30, 2021. The decrease was partially offset by the Trilogy joint venture recognizing a gain upon acquiring the remaining ownership interest of an investment portfolio during the three months ended September 30, 2022.

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Equity in earnings, after FFO and MFFO adjustments, decreased by $3.1 million as a result of lower rental income recognized by the Diversified US/UK and Espresso joint ventures during the three months ended September 30, 2022.

Comparison of the Nine Months Ended September 30, 2022 to September 30, 2021 (dollars in thousands)

	Nine Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Property and other revenues
Resident fee income	$	32,987	$	83,906	$	(50,919)	(60.7)	%
Rental income	103,001		101,669		1,332		1.3	%
Other revenue	457		80		377		471.3	%
Total property and other revenues	136,445		185,655		(49,210)		(26.5)	%
Interest income
Interest income on debt investments	—		4,667		(4,667)		(100.0)	%
Expenses
Property operating expenses	101,258		136,503		(35,245)		(25.8)	%
Interest expense	31,877		47,767		(15,890)		(33.3)	%
Transaction costs	857		54		803		1,487.0	%
Asset management fees - related party	7,532		8,307		(775)		(9.3)	%
General and administrative expenses	10,300		8,544		1,756		20.6	%
Depreciation and amortization	29,105		44,772		(15,667)		(35.0)	%
Impairment loss	31,502		5,386		26,116		484.9	%
Total expenses	212,431		251,333		(38,902)		(15.5)	%
Other income, net	77		6,892		(6,815)		(98.9)	%
Realized gain (loss) on investments and other	660		7,479		(6,819)		(91.2)	%
Equity in earnings (losses) of unconsolidated ventures	39,427		17,819		21,608		121.3	%
Income tax expense	(45)		(85)		40		(47.1)	%
Net income (loss)	$	(35,867)	$	(28,906)	$	(6,961)	24.1	%

Resident Fee Income

The following table presents resident fee income generated by our direct investments (dollars in thousands):

	Nine Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store ALF/MCF properties (excludes properties sold)	$	32,987	$	30,212	$	2,775	9.2	%
Properties sold	—		53,694		(53,694)		(100.0)	%
Total resident fee income	$	32,987	$	83,906	$	(50,919)	(61)	%

Resident fee income decreased $50.9 million as a result of property sales during 2021. The Watermark Fountains portfolio sold in December 2021, the Kansas City portfolio in June 2021 and a property within the Aqua portfolio sold in March 2021.

Excluding properties sold, resident fee income increased by $2.8 million primarily as a result of increases in average occupancy and rates at our ALFs.

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Rental Income

The following table presents rental income generated by our direct investments (dollars in thousands):

	Nine Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store ILF properties (excludes properties sold)	$	101,781	$	90,727	$	11,054	12.2	%
Same store net lease properties (excludes properties sold)
Rental payments	1,220		2,951		(1,731)		(58.7)	%
Straight-line rental income (loss)	—		(7,350)		7,350		(100.0)	%
Properties sold	—		15,341		(15,341)		(100.0)	%
Total rental income	$	103,001	$	101,669	$	1,332	1.3	%

Overall, rental income increased by $1.3 million as compared to nine months ended September 30, 2021. The increase was partially offset by the loss of revenues from properties sold in 2021.

Excluding properties sold, rental income increased by $16.7 million primarily as a result of improved occupancy at our ILFs during the nine months ended September 30, 2022 and the write-off of straight-line rent receivables at our Arbors portfolio during 2021.

Interest Income on Debt Investments

There was no interest income on debt investments recognized during the nine months ended September 30, 2022 as a result of receiving the full repayment of outstanding principal on our mezzanine loan debt investment in August 2021.

Property Operating Expenses

The following table presents property operating expenses incurred by our direct investments (dollars in thousands):

	Nine Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store (excludes properties sold and COVID-19 related expenses)
ALF/MCF properties	$	26,525	$	22,121	$	4,404	19.9	%
ILF properties	74,036		66,763		7,273		10.9	%
Net lease properties	35		25		10		40.0	%
COVID-19 related expenses	366		1,920		(1,554)		(80.9)	%
Properties sold	296		45,674		(45,378)		(99.4)	%
Total Property operating expenses	$	101,258	$	136,503	$	(35,245)	(25.8)	%

Overall, total operating expenses decreased $35.2 million primarily as a result of property sales during the year ended December 31, 2021.

Excluding properties sold, operating expenses increased $10.1 million, primarily as a result of our operators experiencing staffing challenges, which has increased salaries and wages due to additional overtime hours and use of agency and contract labor to fill open positions. In addition, higher occupancy and inflationary pressures drove an increase in overall operating costs, specifically utilities and food and beverage costs.

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Interest Expense

The following table presents interest expense incurred on our borrowings (dollars in thousands):

	Nine Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store (excludes properties sold)
ALF/MCF properties	$	4,339	$	4,169	$	170	4.1	%
ILF properties	24,830		24,809		21		0.1	%
Net lease properties	2,708		2,775		(67)		(2.4)	%
Properties sold	—		15,273		(15,273)		(100.0)	%
Corporate	—		741		(741)		(100.0)	%
Total interest expense	$	31,877	$	47,767	$	(15,890)	(33.3)	%

Interest expense decreased $15.9 million primarily as a result of the repayment of mortgage notes payable which were collateralized by properties sold during the year ended December 31, 2021. Corporate interest expense represents interest resulting from the borrowings under the Sponsor Line, which was repaid in full in July 2021.

On a same store basis, while average mortgage notes principal balances have decreased as compared to September 30, 2021 due to continued principal amortization, interest expense on our floating rate debt has increased due to higher LIBOR.

Transaction Costs

Transaction costs for the nine months ended September 30, 2022 consisted of legal and professional fees incurred to complete the Internalization. Refer to “—Recent Developments” for additional information on the Internalization.

Asset Management Fees - Related Party

Prior to the termination of the advisory agreement, the Advisor received a monthly asset management fee equal to one-twelfth of 1.5% of our most recently published aggregate estimated net asset value, adjusted for any special distribution declared by our board of directors and adjusted for corporate cash balances in excess of $75.0 million. Asset management fees decreased by $0.8 million due to the Special Distribution paid in May 2022 and adjustments for excess corporate cash balances.

General and Administrative Expenses

General and administrative expenses increased $1.8 million primarily as a result of amortizing our directors’ and officers’ insurance premium incurred and reimbursed to the Advisor over the term of the policy, beginning in December 2021.

Depreciation and Amortization

The following table presents depreciation and amortization recognized on our direct investments (dollars in thousands):

	Nine Months Ended September 30,				Increase (Decrease)
	2022		2021		Amount		%
Same store (excludes properties sold)
ALF/MCF properties	$	5,397	$	5,207	$	190	3.6	%
ILF properties	21,107		21,891		(784)		(3.6)	%
Net lease properties	2,601		2,583		18		0.7	%
Properties sold	—		15,091		(15,091)		(100.0)	%
Total depreciation and amortization	$	29,105	$	44,772	$	(15,667)	(35.0)	%

Depreciation and amortization expense decreased $15.7 million, primarily as a result of properties sold during the year ended December 31, 2021.

Impairment Loss

During the nine months ended September 30, 2022, impairment losses on operating real estate totaled $31.5 million. Refer to “—Impairment” for additional discussion.

During the nine months ended September 30, 2021, impairment losses on operating real estate totaled $5.4 million, consisting of $4.6 million recognized for one independent living facility within our Winterfell portfolio and $0.8 million for our Smyrna net lease property, which was sold in May 2021.

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Other Income, Net

Other income, net for the nine months ended September 30, 2022 consisted of $0.1 million in COVID-19 testing reimbursements received and recognized at our Avamere portfolio. For the nine months ended September 30, 2021, other income, net consisted of $7.4 million in federal COVID-19 provider relief grants from DHHS, partially offset by a $0.5 million non-operating loss recognized at a property within the Watermark Fountains.

Realized Gain (Loss) on Investments and Other

During the nine months ended September 30, 2022, we recognized gains on mortgage interest rate caps, a discounted financing payoff and a distribution that exceeded our carrying value for an unconsolidated investment. Gains were partially offset by losses recognized on investment activity.

During the nine months ended September 30, 2021, we recognized gains on the sale of four properties totaling $7.4 million. In addition, we recognized gains on distributions that exceeded our carrying value for our investment in the Envoy joint venture.

Equity in Earnings (Losses) of Unconsolidated Ventures

The following table presents the results of our unconsolidated ventures (dollars in thousands):

	Nine Months Ended September 30,																Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021						2022		2021
Portfolio	Equity in Earnings (Losses)				FFO and MFFO adjustments(1)				Equity in Earnings, after FFO and MFFO adjustments				Increase (Decrease)				Cash Distributions
Eclipse	$	(940)	$	3,739	$	876	$	(3,319)	$	(64)	$	420	$	(484)	(115.2)	%	$	620	$	2,898
Envoy	—		740		—		(744)		—		(4)		4		(100.0)	%	—		817
Diversified US/UK	(4,060)		(2,387)		8,503		13,713		4,443		11,326		(6,883)		(60.8)	%	2,290		3,256
Espresso	33,711		18,636		(28,121)		(11,087)		5,590		7,549		(1,959)		(26.0)	%	32,363		—
Trilogy	10,757		(2,839)		7,415		11,265		18,172		8,426		9,746		115.7	%	6,900		—
Subtotal	$	39,468	$	17,889	$	(11,327)	$	9,828	$	28,141	$	27,717	$	424	1.5	%	$	42,173	$	6,971
Solstice	(41)		(70)		—		2		(41)		(68)		27		(39.7)	%	—		—
Total	$	39,427	$	17,819	$	(11,327)	$	9,830	$	28,100	$	27,649	$	451	1.6	%	$	42,173	$	6,971

_______________________________________

(1)Represents our proportionate share of revenues and expenses excluded from the calculation of FFO and MFFO for unconsolidated investments. Refer to “—Non-GAAP Financial Measures” for additional discussion.

Our equity in earnings generated by our unconsolidated investments increased by $21.6 million primarily due to gains recognized on property sales in the Espresso joint venture and gains recognized by the Trilogy joint venture upon acquiring the remaining ownership interest of an investment portfolio. Gains recognized during the nine months ended September 30, 2022 exceeded the gains recognized on property sales in the Espresso and Eclipse joint ventures during the nine months ended September 30, 2021.

Equity in earnings, after FFO and MFFO adjustments, increased by $0.5 million as a result of improvements in the Trilogy joint venture, partially offset by lower rental income recognized in the Diversified US/UK and Espresso joint ventures during the nine months ended September 30, 2022.

Non-GAAP Financial Measures

Funds from Operations and Modified Funds from Operations

We believe that Funds from Operations, or FFO, and Modified Funds from Operations, or MFFO, are additional appropriate measures of the operating performance of a REIT and of us in particular. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income (loss) (computed in accordance with U.S. GAAP), excluding gains (losses) from sales of depreciable property, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, impairment on depreciable property owned directly or indirectly and after adjustments for unconsolidated ventures.

Changes in the accounting and reporting rules under U.S. GAAP that have been put into effect since the establishment of NAREIT’s definition of FFO have prompted an increase in the non-cash and non-operating items included in FFO. For instance, the accounting treatment for acquisition fees related to business combinations has changed from being capitalized to being

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expensed. Additionally, publicly registered, non-traded REITs are typically different from traded REITs because they generally have a limited life followed by a liquidity event or other targeted exit strategy. Non-traded REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation as compared to later years when the proceeds from their initial public offering have been fully invested and when they may seek to implement a liquidity event or other exit strategy. However, it is likely that we will make investments past the acquisition and development stage, albeit at a substantially lower pace.

Acquisition fees paid to the Advisor in connection with the origination and acquisition of debt investments have been amortized over the life of the investment as an adjustment to interest income, while fees paid to the Advisor in connection with the acquisition of equity investments were generally expensed under U.S. GAAP. In both situations, the fees were included in the computation of net income (loss) and income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense), both of which are performance measures under U.S. GAAP. We adjusted MFFO for the amortization of acquisition fees in the period when such amortization was recognized under U.S. GAAP or in the period in which the acquisition fees were expensed. Acquisition fees were paid in cash that would otherwise have been available to distribute to our stockholders. Such fees and expenses will not be reimbursed by the Advisor or its affiliates and third parties. However, in general, we earned origination fees for debt investments from our borrowers in an amount equal to the acquisition fees paid to the Advisor. Effective January 1, 2018, the Advisor no longer receives an acquisition fee in connection with our acquisition of real estate properties or debt investments.

Due to certain of the unique features of publicly-registered, non-traded REITs, the Institute for Portfolio Alternatives, or IPA, an industry trade group, standardized a performance measure known as MFFO and recommends the use of MFFO for such REITs. Management believes MFFO is a useful performance measure to evaluate our business and further believes it is important to disclose MFFO in order to be consistent with the IPA recommendation and other non-traded REITs. MFFO adjustments for items such as acquisition fees would only be comparable to non-traded REITs that have completed the majority of their acquisition activity and have other similar operating characteristics as us. Neither the U.S. Securities and Exchange Commission, or SEC, nor any other regulatory body has approved the acceptability of the adjustments that we use to calculate MFFO. In the future, the SEC or another regulatory body may decide to standardize permitted adjustments across the non-listed REIT industry and we may need to adjust our calculation and characterization of MFFO.

MFFO is a metric used by management to evaluate our future operating performance once our organization and offering and acquisition and development stages are complete and is not intended to be used as a liquidity measure. Although management uses the MFFO metric to evaluate future operating performance, this metric excludes certain key operating items and other adjustments that may affect our overall operating performance. MFFO is not equivalent to net income (loss) as determined under U.S. GAAP. In addition, MFFO is not a useful measure in evaluating net asset value, since impairment is taken into account in determining net asset value but not in determining MFFO.

We define MFFO in accordance with the concepts established by the IPA, and adjust for certain items, such as accretion of a discount and amortization of a premium on borrowings and related deferred financing costs, as such adjustments are comparable to adjustments for debt investments and will be helpful in assessing our operating performance. Similarly, we adjust for the non-cash effect of unrealized gains or losses on unconsolidated ventures. Our computation of MFFO may not be comparable to other REITs that do not calculate MFFO using the same method MFFO is calculated using FFO. FFO, as defined by NAREIT, is a computation made by analysts and investors to measure a real estate company’s operating performance. The IPA’s definition of MFFO excludes from FFO the following items:

•acquisition fees and expenses;

•non-cash amounts related to straight-line rent and the amortization of above or below market and in-place intangible lease assets and liabilities (which are adjusted in order to reflect such payments from an accrual basis of accounting under U.S. GAAP to a cash basis of accounting);

•amortization of a premium and accretion of a discount on debt investments;

•non-recurring impairment of real estate-related investments that meet the specified criteria identified in the rules and regulations of the SEC;

•realized gains (losses) from the early extinguishment of debt;

•realized gains (losses) on the extinguishment or sales of hedges, foreign exchange, securities and other derivative holdings except where the trading of such instruments is a fundamental attribute of our business;

•unrealized gains (losses) from fair value adjustments on real estate securities, including CMBS and other securities, interest rate swaps and other derivatives not deemed hedges and foreign exchange holdings;

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•unrealized gains (losses) from the consolidation from, or deconsolidation to, equity accounting;

•adjustments related to contingent purchase price obligations; and

•adjustments for consolidated and unconsolidated partnerships and joint ventures calculated to reflect MFFO on the same basis as above.

Certain of the above adjustments are also made to reconcile net income (loss) to net cash provided by (used in) operating activities, such as for the amortization of a premium and accretion of a discount on debt and securities investments, amortization of fees, any unrealized gains (losses) on derivatives, securities or other investments, as well as other adjustments.

MFFO excludes non-recurring impairment of real estate-related investments. We assess the credit quality of our investments and adequacy of reserves/impairment on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. With respect to debt investments, we consider the estimated net recoverable value of the loan as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive situation of the region where the borrower does business. Fair value is typically estimated based on discounting expected future cash flow of the underlying collateral taking into consideration the discount rate, capitalization rate, occupancy, creditworthiness of major tenants and many other factors. This requires significant judgment and because it is based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the consolidated balance sheet date. If the estimated fair value of the underlying collateral for the debt investment is less than its net carrying value, a loan loss reserve is recorded with a corresponding charge to provision for loan losses. With respect to a real estate investment, a property’s value is considered impaired if a triggering event is identified and our estimate of the aggregate future undiscounted cash flow to be generated by the property is less than the carrying value of the property. The value of our investments may be impaired and their carrying values may not be recoverable due to our limited life. Investors should note that while impairment charges are excluded from the calculation of MFFO, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flow and the relatively limited term of a non-traded REIT’s anticipated operations, it could be difficult to recover any impairment charges through operational net revenues or cash flow prior to any liquidity event.

We believe that MFFO is a useful non-GAAP measure for non-traded REITs. It is helpful to management and stockholders in assessing our future operating performance once our organization and offering, and acquisition and development stages are complete. However, MFFO may not be a useful measure of our operating performance or as a comparable measure to other typical non-traded REITs if we do not continue to operate in a similar manner to other non-traded REITs, including if we were to extend our acquisition and development stage or if we determined not to pursue an exit strategy.

However, MFFO does have certain limitations. For instance, the effect of any amortization or accretion on debt investments originated or acquired at a premium or discount, respectively, is not reported in MFFO. In addition, realized gains (losses) from acquisitions and dispositions and other adjustments listed above are not reported in MFFO, even though such realized gains (losses) and other adjustments could affect our operating performance and cash available for distribution. Any mark-to-market or fair value adjustments may be based on many factors, including current operational or individual property issues or general market or overall industry conditions.

Neither FFO nor MFFO is equivalent to net income (loss) or cash flow provided by operating activities determined in accordance with U.S. GAAP and should not be construed to be more relevant or accurate than the U.S. GAAP methodology in evaluating our operating performance. Neither FFO nor MFFO is necessarily indicative of cash flow available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Furthermore, neither FFO nor MFFO should be considered as an alternative to net income (loss) as an indicator of our operating performance.

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The following table presents a reconciliation of net income (loss) attributable to common stockholders to FFO and MFFO attributable to common stockholders (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Funds from operations:
Net income (loss) attributable to NorthStar Healthcare Income, Inc. common stockholders	$	(29,440)	$	(11,653)	$	(35,569)	$	(28,979)
Adjustments:
Depreciation and amortization	9,642		13,828		29,105		44,772
Depreciation and amortization related to non-controlling interests	(71)		(120)		(215)		(409)
Depreciation and amortization related to unconsolidated ventures	7,290		7,609		21,386		23,009
Realized (gain) loss from sales of property	—		—		425		(7,417)
Realized gain (loss) from sales of property related to non-controlling interests	—		—		(6)		226
Realized (gain) loss from sales of property related to unconsolidated ventures	(505)		(9,898)		(44,407)		(31,277)
Impairment losses of depreciable real estate	18,500		4,600		31,502		5,386
Impairment loss on real estate related to non-controlling interests	—		—		(117)		—
Impairment losses of depreciable real estate held by unconsolidated ventures	38		—		58		(327)
Funds from operations attributable to NorthStar Healthcare Income, Inc. common stockholders	$	5,454	$	4,366	$	2,162	$	4,984
Modified funds from operations:
Funds from operations attributable to NorthStar Healthcare Income, Inc. common stockholders	$	5,454	$	4,366	$	2,162	$	4,984
Adjustments:
Transaction costs	857		—		857		54
Straight-line rental (income) loss	—		347		—		7,432
Amortization of premiums, discounts and fees on investments and borrowings	983		778		2,927		3,081
Realized (gain) loss on investments and other	(325)		(75)		(1,085)		(62)
Adjustments related to unconsolidated ventures(1)	(2,525)		4,580		11,636		18,425
Adjustments related to non-controlling interests	7		(10)		11		(50)
Modified funds from operations attributable to NorthStar Healthcare Income, Inc. common stockholders	$	4,451	$	9,986	$	16,508	$	33,864

_______________________________________

(1)Primarily represents our proportionate share of liability extinguishment gains, loan loss reserves, transaction costs and amortization of above/below market debt adjustments, straight-line rent adjustments, debt extinguishment losses and deferred financing costs, incurred through our investments in unconsolidated ventures.

Liquidity and Capital Resources

Our current principal liquidity needs are to fund: (i) operating expenses, including corporate general and administrative expenses; (ii) principal and interest payments on our borrowings and other commitments; and (iii) capital expenditures, including capital calls in connection with our unconsolidated joint venture investments.

Our current primary sources of liquidity include the following: (i) cash on hand; (ii) proceeds from full or partial realization of investments; (iii) cash flow generated by our investments, both from our operating activities and distributions from our unconsolidated joint ventures; and (iv) secured or unsecured financings from banks and other lenders.

We generated significant liquidity in 2021 from proceeds from asset sales and other realization events. As a result, on April 20, 2022, our board of directors declared the Special Distribution of $0.50 per share for each stockholder of record on May 2, 2022. The Special Distribution paid in cash on or around May 5, 2022 totaled $97.0 million. While we do not anticipate recurring dividends in the near future, in light of the cash flow generated by our investments as compared to our capital expenditure needs and debt service obligations, our management and board of directors will evaluate special distributions in connection with asset sales and other realizations of our investments on a case-by-case basis based on, among other factors, current and projected liquidity needs, opportunities for investment in our assets (such as capital expenditure and de-levering opportunities) and other strategic initiatives.

As of November 9, 2022, we had approximately $114.9 million of unrestricted cash and currently believe that our capital resources are sufficient to meet our capital needs for the following 12 months.

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Cash From Operations

We primarily generate cash flow from operations through net operating income from our operating properties and rental income from our net lease properties. In addition, we received distributions from our investments in unconsolidated ventures, which are classified as cash flows from investing activities on our consolidated statements of cash flows. Net cash used in operating activities was $13.6 million for the nine months ended September 30, 2022. During the nine months ended September 30, 2022, debt service payments, which include principal amortization, on our borrowings exceeded our cash flow from operations. We have utilized cash reserves generated from asset realizations to fund debt service payments, which is expected to continue until the operating margins of our direct investments improve from current levels.

A substantial majority of our direct investments are operating properties whereby we are directly exposed to various operational risks. While our direct operating investments have not experienced any significant issues collecting rents or other fees from residents, cash flow has continued to be negatively impacted by suboptimal occupancy levels, rate pressures, cost inflation, rising interest rates and other economic market conditions. We expect that these factors will continue to materially impact our revenues, expenses and cash flow generated by the communities of our direct operating investments.

The operator of our Arbors net lease portfolio has been impacted by the same factors discussed above, which has and will continue to affect its ability and willingness to pay rent. The operator continues to make partial contractual rental payments based on availability of cash and liquidity and has not satisfied full contractual rent obligations. The operator has applied for and benefited from federal relief assistance, however, the operator’s ability to pay rent in the future is currently unknown.

We have significant joint ventures and will not be able to control the timing of distributions, if any, from these investments. As of September 30, 2022, our unconsolidated joint ventures and consolidated joint ventures represented 33.8% and 13.7%, respectively, of our total real estate equity investments, based on cost. Our unconsolidated joint ventures, which have been similarly impacted as our direct investments by the COVID-19 pandemic, inflation, rising interest rates and other economic market conditions, may continue to limit distributions to preserve liquidity.

Borrowings

We use asset-level financing as part of our investment strategy to leverage our investments while managing refinancing and interest rate risk. We typically finance our investments with medium to long-term, non-recourse mortgage loans, though our borrowing levels and terms vary depending upon the nature of the assets and the related financing.

We are required to make recurring principal and interest payments on our borrowings. As of September 30, 2022, we had $927.1 million of consolidated asset-level borrowings outstanding and paid $41.5 million in recurring principal and interest payments on borrowings during the nine months ended September 30, 2022. Our unconsolidated joint ventures also have significant asset level borrowings, which may restrict cash distributions from the joint ventures if certain lender requirements are not met and may require capital to be funded if favorable refinancing is not obtained.

The operator for the Arbors portfolio has failed to remit contractual rent and satisfy other conditions under its leases, which resulted in defaults under the operator’s leases, and in turn, resulted in a non-monetary default under the mortgage notes collateralized by the properties as of September 30, 2022. We have remitted contractual debt service and are in compliance with the other contractual terms under the mortgage notes collateralized by the properties.

As the impact of the inflation, rising interest rates, risk of recession and other economic market conditions continue to influence our investments’ performance, which may have a negative impact on our ability to service or refinance our borrowings and we may experience defaults in the future.

Our charter limits us from incurring borrowings that would exceed 300.0% of our net assets. We cannot exceed this limit unless any excess in borrowing over such level is approved by a majority of our independent directors. We would need to disclose any such approval to our stockholders in our next quarterly report along with the justification for such excess. An approximation of this leverage limitation, excluding indirect leverage held through our unconsolidated joint venture investments and any securitized mortgage obligations to third parties, is 75.0% of our assets, other than intangibles, before deducting loan loss reserves, other non-cash reserves and depreciation. As of September 30, 2022, our leverage was 55.6% of our assets, other than intangibles, before deducting loan loss reserves, other non-cash reserves and depreciation. As of September 30, 2022, indirect leverage on assets, other than intangibles, before deducting loan loss reserves, other non-cash reserves and depreciation, held through our unconsolidated joint ventures was 57.9%.

For additional information regarding our borrowings, including principal repayments, timing of maturities and loans currently in default, refer to Note 5, “Borrowings” in our accompanying consolidated financial statements included in Part I, Item 1. “Financial Statements.”

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Capital Expenditures Activities

We are responsible for capital expenditures for our operating properties and, from time to time, may also fund capital expenditures for certain net lease properties. We continue to invest capital into our operating portfolio in order to maintain market position, functional and operating standards, increase operating income, achieve property stabilization and enhance the overall value of our assets. However, there can be no assurance that these initiatives will achieve these intended results.

We are also party to certain joint venture agreements that contemplate development of healthcare properties funded by us and our joint venture partners. Although we may not be obligated to fund such capital contributions or capital projects, we may be subject to adverse consequences under our joint venture governing documents for any such failure to fund.

Realization and Disposition of Investments

We will actively pursue dispositions of assets and portfolios where we believe the disposition will achieve a desired return, improve our liquidity position and generate value for shareholders. As the impact of inflation, rising interest rates, risk of recession and other economic market conditions continue to influence the properties’ performance, it may have a negative impact on our ability to generate desired returns on dispositions.

We have made significant investments through both consolidated and unconsolidated joint ventures with third parties. Decision-making authorities for these joint ventures could prevent us from selling properties or our interest in the joint venture. During the nine months ended September 30, 2022, our Espresso joint venture distributed the net proceeds generated from sub-portfolios sales, of which our proportionate share totaled $27.4 million. Refer to “—Recent Developments” for additional information on distributions from portfolio sales.

Distributions

To continue to qualify as a REIT, we are required to distribute annually dividends equal to at least 90% of our taxable income, subject to certain adjustments, to stockholders. We have generated net operating losses for tax purposes and, accordingly, are currently not required to make distributions to our stockholders to qualify as a REIT. Refer to “—Distributions Declared and Paid” for further information regarding our distributions.

Repurchases

We adopted a share repurchase program, or the Share Repurchase Program, effective August 7, 2012, which enabled stockholders to sell their shares to us in limited circumstances. Our board of directors may amend, suspend or terminate our Share Repurchase Program at any time, subject to certain notice requirements. In October 2018, our board of directors approved an amended and restated Share Repurchase Program, under which we only repurchased shares in connection with the death or qualifying disability of a stockholder. On April 7, 2020, our board of directors suspended all repurchases under our existing Share Repurchase Program effective April 30, 2020 in order to preserve capital and liquidity.

Other Commitments

On October 21, 2022, we terminated the advisory agreement and completed the Internalization. Prior to the termination of the advisory agreement, we reimbursed the Advisor for direct and indirect operating costs in connection with services provided to us. Under our new internalized structure, we will directly incur and pay all general and administrative costs.

In connection with the Internalization, we entered into the TSA, to facilitate an orderly transition of the management of our operations. The TSA provides for, among other things, the Advisor to provide certain services, which primarily include technology, insurance, legal, treasury and accounts payable services. We will reimburse the Advisor for costs to provide such services. Refer to “—Recent Developments” for further information.

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Cash Flows

The following presents a summary of our consolidated statements of cash flows (dollars in thousands):

	Nine Months Ended September 30,
Cash flows provided by (used in):	2022		2021		2022 vs. 2021 Change
Operating activities	$	(13,604)	$	(4,355)	$	(9,249)
Investing activities	24,249		92,367		(68,118)
Financing activities	(113,901)		(71,058)		(42,843)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(103,256)	$	16,954	$	(120,210)

Operating Activities

Net cash used in operating activities totaled $13.6 million for the nine months ended September 30, 2022, as compared to $4.4 million for the nine months ended September 30, 2021. The change in cash flow from operating activities was a result of receiving $7.4 million in federal COVID-19 provider relief grants from HHS during the nine months ended September 30, 2021 as well as generating lower rental and resident fee income, net of property operating expenses during the nine months ended September 30, 2022 as a result of portfolio sales during the year ended December 31, 2021.

Investing Activities

Our cash flows from investing activities are primarily proceeds from investment dispositions, net of any capital expenditures. Net cash provided by investing activities was $24.2 million for the nine months ended September 30, 2022 as compared to $92.4 million for the nine months ended September 30, 2021. Cash flows provided by investing activities for the nine months ended September 30, 2022 were from distributions received from our unconsolidated investments. Cash inflows were used to fund recurring capital expenditures and operating shortfalls for existing investments and to pay corporate general and administrative expenses. Cash flows provided by investing activities for the nine months ended September 30, 2021 were from collections of outstanding principal on our real estate debt investment and proceeds from property sales.

On a same store basis, capital expenditures increased during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The resumption of normalized business operations has allowed our managers to commence additional improvement projects as we continue to invest capital into our operating portfolios in order to maintain market position and enhance overall asset value.

The following table presents cash used for capital expenditures, excluding our unconsolidated ventures (dollars in thousands):

	Nine Months Ended September 30,
	2022		2021		2022 vs. 2021 Change
Same store (excludes properties sold)
ALF/MCF properties	$	1,993	$	1,552	$	441
ILF properties	15,609		9,700		5,909
Net lease properties	322		—		322
Properties sold	—		6,092		(6,092)
Total capital expenditures	$	17,924	$	17,344	$	580

Financing Activities

Cash flows used in financing activities were $113.9 million for the nine months ended September 30, 2022 compared to $71.1 million for the nine months ended September 30, 2021. For the nine months ended September 30, 2022, net cash flows used in financing activities were primarily attributable to the payment of the Special Distribution to stockholders, repayment of the financing on the Oak Cottage portfolio and continued principal amortization on our mortgage notes. Cash flows used in financing activities during the nine months ended September 30, 2021 were primarily the repayment of the $35.0 million borrowed under the Sponsor Line and principal amortization and repayments on our mortgage notes payable. Cash outflows were partially offset by the refinancing of a mortgage note for a property within our Aqua portfolio, which generated $6.5 million in net proceeds.

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Off-Balance Sheet Arrangements

As of September 30, 2022, we are not dependent on the use of any off-balance sheet financing arrangements for liquidity. We have made investments in unconsolidated ventures. Refer to Note 4, “Investments in Unconsolidated Ventures” in Part I. Item 1. “Financial Statements” for a discussion of such unconsolidated ventures in our consolidated financial statements. In each case, our exposure to loss is limited to the carrying value of our investment.

Inflation

Macroeconomic trends such as increases in inflation and rising interest rates can have a substantial impact on our business and financial results. Many of our costs are subject to inflationary pressures. These include labor, repairs and maintenance, food costs, utilities, insurance and other operating costs. Our managers’ ability to offset increased costs by increasing the rates charged to residents may be limited, therefore, cost inflation may substantially affect the net operating income of our operating properties as well as the ability of our net lease operator to make payments to us.

Distributions Declared and Paid

Since inception of our first investment, through September 30, 2022, we declared $530.9 million in distributions, inclusive of the recent Special Distribution, and generated cumulative FFO of $134.0 million. From the date of our first investment on April 5, 2013 through December 31, 2017, we declared an annualized distribution amount of $0.675 per share of our common stock. From January 1, 2018 through January 31, 2019, we declared an annualized distribution amount of $0.3375 per share of our common stock. Effective February 1, 2019, our board of directors suspended recurring distributions in order to preserve capital and liquidity. On April 20, 2022, our board of directors declared the Special Distribution of $0.50 per share for each stockholder of record on May 2, 2022 totaling $97.1 million. On or around May 5, 2022, $97.0 million of the Special Distribution was paid in cash from sources other than our cash flow provided by operations, including cash proceeds generated from asset sales and realizations during the year ended December 31, 2021. While we do not anticipate recurring dividends in the near future, in light of the cash flow generated by our investments as compared to our capital expenditure needs and debt service obligations, our management and board of directors will evaluate special distributions in connection with asset sales and other realizations of our investments on a case-by-case basis based on, among other factors, current and projected liquidity needs, opportunities for investment in our assets (such as capital expenditure and de-levering opportunities) and other strategic initiatives.

To the extent distributions are paid from sources other than FFO, the ownership interest of our public stockholders may be diluted. Future distributions declared and paid may exceed FFO and cash flow provided by operations. FFO, as defined, may not reflect actual cash available for distributions.

Related Party Arrangements

Advisor

Prior to the Internalization, the Advisor was responsible for managing our affairs on a day-to-day basis and for identifying, acquiring, originating and asset managing investments on our behalf. For such services, to the extent permitted by law and regulations, the Advisor received fees and reimbursements from us. Pursuant to the advisory agreement, the Advisor could defer or waive fees in its discretion.

In connection with the Internalization, the advisory agreement was terminated on October 21, 2022. Refer to “—Recent Developments” for further information.

Fees to Advisor

Asset Management Fee

Prior to the termination of the advisory agreement, the Advisor received a monthly asset management fee equal to one-twelfth of 1.5% of our most recently published aggregate estimated net asset value, as may be subsequently adjusted for any special distribution declared by our board of directors in connection with a sale, transfer or other disposition of a substantial portion of our assets. From January 1, 2022 through the October 21, 2022 termination of the advisory agreement, the fee was reduced if our corporate cash balances exceeded $75.0 million, subject to the terms and conditions set forth in the advisory agreement.

Effective July 1, 2021, the asset management fee was paid entirely in shares of our common stock at a price per share equal to the most recently published net asset value per share.

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Acquisition Fee

Effective January 1, 2018, the Advisor no longer received an acquisition fee in connection with our acquisitions of real estate properties or debt investments.

Disposition Fee

Effective June 30, 2020, the Advisor no longer had the potential to receive a disposition fee in connection with the sale of real estate properties or debt investments.

Reimbursements to Advisor

Operating Costs

Prior to the termination of the advisory agreement, the Advisor was entitled to receive reimbursement for direct and indirect operating costs incurred by the Advisor in connection with administrative services provided to us. The Advisor allocated, in good faith, indirect costs to us related to the Advisor’s and its affiliates’ employees, occupancy and other general and administrative costs and expenses in accordance with the terms of, and subject to the limitations contained in, the advisory agreement with the Advisor. The indirect costs included our allocable share of the Advisor’s compensation and benefit costs associated with dedicated or partially dedicated personnel who spent all or a portion of their time managing our affairs, based upon the percentage of time devoted by such personnel to our affairs. The indirect costs also included rental and occupancy, technology, office supplies and other general and administrative costs and expenses. However, there was no reimbursement for personnel costs related to our executive officers (although reimbursement for certain executive officers of the Advisor was permissible) and other personnel involved in activities for which the Advisor received an acquisition fee or a disposition fee. The Advisor allocated these costs to us relative to its and its affiliates’ other managed companies in good faith and reviewed the allocation with our board of directors, including our independent directors. The Advisor updated our board of directors on a quarterly basis of any material changes to the expense allocation and provided a detailed review to the board of directors, at least annually, and as otherwise requested by the board of directors.

We reimbursed the Advisor quarterly for operating costs (including the asset management fee) based on a calculation, or the 2%/25% Guidelines, for the four preceding fiscal quarters not to exceed the greater of: (i) 2.0% of our average invested assets; or (ii) 25.0% of our net income determined without reduction for any additions to reserves for depreciation, loan losses or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Notwithstanding the above, we could reimburse the Advisor for expenses in excess of this limitation if a majority of our independent directors determined that such excess expenses are justified based on unusual and non-recurring factors. We have calculated the expense reimbursement quarterly based upon the trailing twelve-month period. As of September 30, 2022, the Advisor did not have any unreimbursed operating costs which remained eligible to be allocated to us.

As of September 30, 2022, the outstanding operating costs reimbursable to the Advisor totaled $2.5 million and were reimbursed during the fourth quarter of 2022. The Advisor continued to incur direct and indirect operating costs on our behalf through the termination of the advisory agreement on October 21, 2022. In addition, we will pay the Advisor’s costs for certain services for a transition period. Refer to “—Recent Developments” for further discussion.

Summary of Fees and Reimbursements

The following table presents the fees and reimbursements incurred and paid to the Advisor (dollars in thousands):

Type of Fee or Reimbursement		Due to Related Party as of December 31, 2021		Nine Months Ended September 30, 2022				Due to Related Party as of September 30, 2022 (Unaudited)
	Financial Statement Location			Incurred		Paid
Fees to Advisor Entities
Asset management	Asset management fees-related party	$	937	$	7,532	$	(7,657)	$	812
Reimbursements to Advisor Entities
Operating costs	General and administrative expenses	6,401		8,789		(12,655)		2,535
Total		$	7,338	$	16,321	$	(20,312)	$	3,347

Pursuant to the advisory agreement, for the nine months ended September 30, 2022, we issued 2.0 million shares totaling $7.7 million based on the estimated value per share on the date of each issuance, to an affiliate of the Advisor as part of its asset management fee. We will issue shares to satisfy outstanding asset management fees incurred and payable through the termination of the advisory agreement on October 21, 2022. As of September 30, 2022, the Advisor, the Sponsor and their affiliates owned a total of 9.4 million shares, or $36.6 million of our common stock based on our most recent estimated value per

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share. As of September 30, 2022, the Advisor, the Sponsor and their affiliates owned 4.8% of the total outstanding shares of our common stock.

Incentive Fee

NorthStar Healthcare Income OP Holdings, LLC, an affiliate of the Advisor, or the Special Unit Holder, is entitled to receive distributions equal to 15.0% of our net cash flows, whether from continuing operations, repayment of loans, disposition of assets or otherwise, but only after stockholders have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.75% cumulative, non-compounded annual pre-tax return on such invested capital. From inception through September 30, 2022, the Special Unit Holder has not received any incentive fees.

Investments in Joint Ventures

Solstice, the manager of the Winterfell portfolio, is a joint venture between affiliates of ISL, who owns 80.0%, and us, who owns 20.0%. For the nine months ended September 30, 2022, we recognized property management fee expense of $4.1 million paid to Solstice related to the Winterfell portfolio.

The below table indicates our investments for which the Sponsor is also an equity partner in the joint venture. Each investment was approved by our board of directors, including all of its independent directors. Refer to Note 4, “Investments in Unconsolidated Ventures” of Part I, Item 1. “Financial Statements” for further discussion of these investments:

Portfolio	Partner(s)	Acquisition Date	Ownership
Eclipse	NRF and Partner/ Formation Capital, LLC	May 2014	5.6%
Diversified US/UK	NRF and Partner	December 2014	14.3%

Line of Credit - Related Party

In October 2017, we obtained the Sponsor Line, which was approved by our board of directors, including all of our independent directors. In April 2020, we borrowed $35.0 million under the Sponsor Line to improve our liquidity position in response to the COVID-19 pandemic. In July 2021, we repaid, in full, the $35.0 million outstanding borrowing and as of September 30, 2022, we had no outstanding borrowings under the Sponsor Line. The Sponsor Line had a borrowing capacity of $35.0 million at an interest rate of 3.5% plus LIBOR and had a maturity date of February 2024. On October 21, 2022, the Sponsor Line was terminated in connection with the termination of the advisory agreement. No amounts were outstanding under the Sponsor Line at the time of termination. Refer to “—Recent Developments” for additional information on the internalization.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The principal market risks affecting us are interest rate risk, inflation risk, and credit risk. These risks are dependent on various factors beyond our control, including monetary and fiscal policies, domestic and international economic conditions and political considerations. Our market risk sensitive assets, liabilities and related derivative positions (if any) are held for investment and not for trading purposes.

Interest Rate Risk

Changes in interest rates may affect our net income as a result of changes in interest expense incurred in connection with floating-rate borrowings used to finance our equity investments. As of September 30, 2022, 14.1% of our total borrowings were floating-rate liabilities, which are related to mortgage notes payable of our direct operating investments.

Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs by borrowing primarily at fixed rates. When borrowing at variable rates, we seek the lowest margins available and evaluate hedging opportunities. For our floating-rate borrowings we have entered into interest rate caps that involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

For longer duration, relatively stable real estate cash flows, such as those derived from net lease assets, we seek to use fixed rate financing. For real estate cash flows with greater growth potential, such as operating properties, we may use floating-rate financing which provides prepayment flexibility and may provide a better match between underlying cash flow projections and potential increases in interest rates.

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The interest rate on our floating-rate liabilities is a fixed spread over an index such as LIBOR and typically reprices every 30 days based on LIBOR in effect at the time. As of September 30, 2022, a hypothetical 100 basis point increase in interest rates would increase net interest expense by $1.0 million annually.

In July 2017, the Chief Executive of the U.K. Financial Conduct Authority, or FCA, announced that the FCA intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021. The FCA subsequently announced on March 5, 2021 that the publication of LIBOR will cease for the one-week and two-month USD LIBOR settings immediately after December 31, 2021, and the remaining USD LIBOR settings immediately after June 30, 2023. Based on undertakings received from the panel banks, the FCA does not expect that any LIBOR settings will become unrepresentative before these dates. Nevertheless, the U.S. Federal Reserve System, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation have issued guidance encouraging market participants to adopt alternatives to LIBOR in new contracts as soon as practicable.

The discontinuation of a benchmark rate or other financial metric, changes in a benchmark rate or other financial metric, or changes in market perceptions of the acceptability of a benchmark rate or other financial metric, including LIBOR, could, among other things result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions. In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, adverse tax or accounting effects, increased compliance, legal and operational costs, and risks associated with contract negotiations.

Inflation Risk

Many of our costs are subject to inflationary pressures. These include labor, repairs and maintenance, food costs, utilities, insurance and other operating costs. Higher rates of inflation affecting the economy may substantially affect the operating margins of our investments. While our managers have an ability to partially offset cost inflation by increasing the rates charged to residents, this ability is often limited by competitive conditions and timing may lag behind cost volatility. Therefore, there can be no assurance that cost increases can be offset by increased rates charged to residents in real time or that increased rates will not result in occupancy declines.

Credit Risk

We are subject to the credit risk of the operators of our healthcare properties. The operator of our four net lease properties failed to remit contractual monthly rent obligations and it is not probable that these obligations will be satisfied in the foreseeable future.

Risk Concentration

The following table presents the operators and managers of our properties, excluding properties owned through unconsolidated joint ventures (dollars in thousands):

	As of September 30, 2022		Nine Months Ended September 30, 2022
Operator / Manager	Properties Under Management	Units Under Management(1)	Property and Other Revenues(2)		% of Total Property and Other Revenues
Solstice Senior Living(3)	32	4,000	$	82,607	60.5	%
Watermark Retirement Communities	14	1,753	33,770		24.8	%
Avamere Health Services	5	453	14,764		10.8	%
Integral Senior Living	1	44	3,628		2.7	%
Arcadia Management(4)	4	572	1,220		0.9	%
Other(5)	—	—	456		0.3	%
Total	56	6,822	$	136,445	100.0	%

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(1)Represents rooms for ALFs and ILFs and beds for MCFs and SNFs, based on predominant type.

(2)Includes rental income received from our net lease properties, as well as rental income, ancillary service fees and other related revenue earned from ILF residents and resident fee income derived from our ALFs and MCFs, which includes resident room and care charges, ancillary fees and other resident service charges.

(3)Solstice is a joint venture of which affiliates of ISL own 80%.

(4)During the nine months ended September 30, 2022, we recorded rental income to the extent rental payments were received.

(5)Consists primarily of interest income earned on corporate-level cash accounts.

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Watermark Retirement Communities and Solstice, together with their affiliates, manage substantially all of our operating properties. As a result, we are dependent upon their personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our properties efficiently and effectively. Through our 20.0% ownership of Solstice, we are entitled to certain rights and minority protections. As Solstice is a joint venture formed exclusively to operate the Winterfell portfolio, Solstice has generated, and may continue to generate, operating losses if declines in occupancy and operating revenues at our Winterfell portfolio continue.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management established and maintains disclosure controls and procedures that are designed to ensure that material information relating to us and our subsidiaries required to be disclosed in reports that are filed or submitted under the Securities Exchange Act of 1934, as amended, or Exchange Act, are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

As of the end of the period covered by this report, management conducted an evaluation as required under Rules 13a-15(b) and 15d-15(b) under the Exchange Act, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Our internal control framework, which includes controls over financial reporting and disclosure, continues to operate effectively. Considering the COVID-19 pandemic, we have supplemented our framework by instituting certain entity level procedures and controls that ensure communication amongst our team that enhances our ability to prevent and detect material errors and omissions.

Internal Control over Financial Reporting

Changes in Internal Control over Financial Reporting.

There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II—Other Information

Item 1. Legal Proceedings

We may be involved in various litigation matters arising in the ordinary course of our business. The effects of COVID-19 may also lead to heightened risk of litigation, with an ensuing increase in litigation-related costs. Although we are unable to predict with certainty the eventual outcome of any litigation, in the opinion of management, any current legal proceedings are not expected to have a material adverse effect on our financial position or results of operations.

Item 1A. Risk Factors

There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on March 18, 2022, except as noted below.

If we pay distributions from sources other than our cash flow provided by operations, we will have less cash available for investments and your overall return may be reduced.

Our organizational documents permit us to pay distributions from any source, including offering proceeds, borrowings, the Advisor’s agreement to defer, reduce or waive fees (or accept, in lieu of cash, shares of our common stock) or sales of assets or we may make distributions in the form of taxable stock dividends. We have not established a limit on the amount of proceeds we may use to fund distributions. We have funded distributions in excess of our cash flow from operations. From February 2019 through April 2022 and from June 2022 through September 2022, we did not declare any distributions.

We may not have sufficient cash available to pay distributions at the rate we had paid during preceding periods or at all. If we pay distributions from sources other than our cash flow provided by operations, our book value may be negatively impacted and stockholders’ overall return may be reduced. In May 2022, we paid the Special Distribution, which totaled $97.0 million, from sources other than our cash flow provided by operations.

As a result of the Internalization, we are newly self-managed.

As a result of the Internalization, we are a self-managed REIT. We no longer bear the costs of the various fees and expense reimbursements previously paid to the Advisor and its affiliates; however, we are now directly responsible for our expenses, including the compensation and benefits of our officers, employees and consultants, overhead and other general and administrative expenses previously paid by the Advisor and its affiliates. We are also now subject to potential liabilities that are commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes, and other employee-related liabilities and grievances, and we bear the cost of the establishment and maintenance of any employee compensation plans. We may encounter unforeseen costs, expenses, and difficulties managing these costs on a standalone basis. If we incur unexpected expenses as a result of our self-management, our results of operations could be lower than they otherwise would have been.

We may not realize some or all of the targeted benefits of the Internalization.

In connection with the Internalization, we entered into the TSA, pursuant to which the Advisor agreed to provide certain services for a transition period. The failure to effectively complete the transition of these services to a fully internal basis, efficiently manage the transition with the Advisor or find adequate internal replacements for these services, could impede our ability to achieve the targeted cost savings of the Internalization and adversely affect our operations. In addition, we anticipate operating on a smaller scale going forward, with fewer resources than have historically been available to us through our Adviser’s organization, which may adversely impact our ability to achieve our investment objectives. In addition, complexities arising from the Internalization could increase our overhead costs and detract from management’s ability to focus on operating our business. There can be no assurance we will be able to realize the expected cost savings or strategic benefits of the Internalization.

We are reliant on certain transition services provided by the Advisor under the TSA, and may not find a suitable provider for these transition services if the Advisor no longer provides the transition services to which we are entitled under the TSA.

We remain reliant on the Advisor during the period of the TSA, and the loss of these transition services could adversely affect our operations. We are subject to the risk that the Advisor will default on its obligation to provide the transition services to which we are entitled under the TSA, or that we or the Advisor will terminate the TSA pursuant to its termination provisions, and that we will not be able to find a suitable replacement for the transition services provided under the TSA in a timely manner, at a reasonable cost or at all. In addition, the Advisor’s liability to us if it defaults on its obligation to provide transition services to us during the transition period is limited by the terms of the TSA, and we may not recover the full cost of any losses related to such a default.

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

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We adopted our Share Repurchase Program effective August 7, 2012 which enabled stockholders to sell their shares to us in limited circumstances. On April 7, 2020, our board of directors determined to suspend all repurchases under our Share Repurchase Program effective April 30, 2020 in order to preserve capital and liquidity.

We are not obligated to repurchase shares under our Share Repurchase Program when our Share Repurchase Program is in effect. Our board of directors may, in its sole discretion, amend, suspend or terminate our Share Repurchase Program at any time provided that any amendment that adversely affects the rights or obligations of a participant (as determined in the sole discretion of our board of directors) will only take effect upon ten days’ prior written notice except that changes in the number of shares that can be repurchased during any calendar year will take effect only upon ten business days’ prior written notice. In addition, our Share Repurchase Program will terminate in the event a secondary market develops for our shares or if our shares are listed on a national exchange or included for quotation in a national securities market.

For the nine months ended September 30, 2022, we have not repurchased any shares of our common stock.

Unregistered Sales of Equity Securities

On July 31, 2022, August 31, 2022 and September 30, 2022 we issued 204,700, 205,472 and 206,886 shares of common stock at $3.91 per share, respectively, to the Advisor as part of its asset management fee, pursuant to the advisory agreement. These shares were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act for transactions not involving a public offering.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Determination of Estimated Value Per Share

Overview

On November 10, 2022, upon the recommendation of the Audit Committee of the Board of NorthStar Healthcare Income, Inc., the Board, including all of its independent directors, approved and established an estimated value per share of NorthStar Healthcare’s common stock of $2.93. The estimated value per share is based upon the estimated value of NorthStar Healthcare’s assets less the estimated value of NorthStar Healthcare’s liabilities as of June 30, 2022, divided by the number of shares of NorthStar Healthcare’s common stock outstanding as of June 30, 2022. The information used to generate the estimated value per share, including market information, investment- and property-level data and other information provided by third parties, was the most recent information practically available as of June 30, 2022.

Process

The estimated value per share was calculated with the assistance of NorthStar Healthcare’s management team, or Management, and Kroll, LLC, or Kroll, an experienced third-party independent valuation and consulting firm engaged by NorthStar Healthcare to assist with the valuation of its assets and liabilities. The engagement of Kroll was approved by the Board, including all of its independent directors. Kroll has extensive experience in conducting asset valuations, including appraisals of healthcare properties similar to those owned by NorthStar Healthcare. While NorthStar Healthcare has engaged or may engage Kroll in the future for services of various kinds, NorthStar Healthcare believes that there are no material conflicts of interest with respect to its engagement of Kroll.

The Audit Committee recommended and the Board established the estimated value per share based upon the analyses and reports provided by Kroll and Management, including an evaluation of NorthStar Healthcare’s assets and liabilities as of June 30, 2022. In arriving at its recommendation, the Audit Committee relied in part on valuation methodologies that Kroll and Management believe are standard and acceptable in the real estate and non-listed REIT industries for the types of assets and liabilities held by

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NorthStar Healthcare. The process for estimating the value of NorthStar Healthcare’s assets and liabilities was performed in accordance with the provisions of the Institute for Portfolio Alternatives Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs. NorthStar Healthcare believes that the valuation was developed in a manner reasonably designed to ensure its reliability.

On November 10, 2022, Kroll delivered its report related to the valuation of NorthStar Healthcare’s assets and liabilities as of June 30, 2022, reflecting the estimated range of values for NorthStar Healthcare’s 56 healthcare real estate properties, 6 of which have excess land and two undeveloped land parcels, or collectively, the Healthcare Properties, four healthcare real estate investments and one healthcare real estate property management platform held through unconsolidated joint ventures, or the Joint Venture Investments, and 52 healthcare real estate liabilities, or the Healthcare Borrowings.

The Board currently expects that NorthStar Healthcare’s next estimated value per share will be based upon its assets and liabilities as of June 30, 2023, and that such value will be included in a report filed with the SEC. NorthStar Healthcare intends to publish estimated values per share annually, although NorthStar Healthcare may determine to publish such revised values more frequently.

Valuation Methodology

Valuation of Healthcare Properties

To estimate the range of value of the Healthcare Properties, Kroll conducted an appraisal for the Healthcare Properties performed in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and with an effective valuation date of June 30, 2022. In determining the value of each Healthcare Property, Kroll utilized all information that they deemed relevant, including information from Management, and its own data sources, including trends in capitalization rates, leasing rates and other economic factors. In conducting its appraisals of the Healthcare Properties, other than for the undeveloped land parcels and any excess land associated with the Healthcare Properties, Kroll utilized both the direct capitalization approach and discounted cash flow, or the DCF, approach to value the Healthcare Properties.

In the direct capitalization approach, a market overall capitalization rate is applied to the estimated forward-year annual stabilized net operating income. In the DCF approach, a market terminal capitalization and discount rate is utilized to derive a value indication from the estimated forward multi-year annual net operating income. Kroll placed primary emphasis on the direct capitalization approach for the operating Healthcare Properties and for the net leased Healthcare Properties with stable and long-term income streams. The DCF was completed as a secondary, confirmatory approach. Kroll placed primary emphasis on the DCF approach for the net leased Healthcare Properties with fluctuating cash flows or near-term lease expirations. Kroll believes the two methodologies are the most appropriate for valuing healthcare assets similar to those owned by NorthStar Healthcare. In selecting each capitalization rate range, Kroll took into account, among other factors, prevailing capitalization rates in the healthcare property sector, the property’s location, age and condition, the property’s operating trends and lease coverage ratios, if applicable, and other unique property factors. As applicable, Kroll adjusted the capitalized value range of each Healthcare Property it appraised for any excess land, deferred maintenance or other anticipated property capital expenditures, lease-up costs and other adjustments as appropriate to estimate the “as-is” value range of each of the Healthcare Properties it appraised. For the Healthcare Properties with excess land and undeveloped land parcels, Kroll valued the land by utilizing a comparable sales analysis, where land sales or listings in the market were analyzed and a market-based value indication per square foot or acre was derived and applied to the land parcel to determine the parcel’s estimated market value. Kroll adjusted the “as-is” property values as of June 30, 2022, as appropriate, for NorthStar Healthcare’s allocable ownership interest in the Healthcare Properties to account for the interests of any third-party investment partners, including any priority distributions. Kroll’ appraisals were certified by an appraiser licensed in the state in which the Healthcare Properties were located.

As of June 30, 2022, the estimated value of the Healthcare Properties underlying the $2.93 estimated per share value was $1.00 billion, compared with an aggregate cost, including purchase price, deferred costs, and other assets of $1.45 billion, or the Property Purchase Price. The following summarizes the key assumptions that were used in the DCF and direct capitalization analyses to arrive at the value of the Healthcare Properties:

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	Range				Weighted Average
	Minimum		Maximum
Net Leased Senior Housing Properties(1)
Discount Rate	10.00	%	10.00	%	10.00	%
Terminal Capitalization Rate	8.00	%	8.00	%	8.00	%
Operating Senior Housing Properties
Direct Capitalization Rate	6.00	%	7.00	%	6.35	%

_______________________________________

(1)Consists of four facilities in the Arbors net lease investments valued using the same terminal capitalization and discount rates.

Valuation of Joint Venture Investments

The healthcare real estate portfolios held through the four healthcare real estate Joint Venture Investments were valued similarly to the process described above in “Valuation of Healthcare Properties.” For each healthcare real estate Joint Venture Investment, Kroll estimated the aggregate value range of the underlying healthcare properties and added or subtracted, as appropriate, outstanding borrowings, after factoring in any adjustments for above- or below-market in-place financing, as deemed applicable based on information provided on such borrowings, and other joint venture balance sheet assets and liabilities to derive an estimated equity value range of the healthcare real estate Joint Venture Investments. Kroll then applied the terms of the applicable joint venture agreement, including any distribution priorities, to its equity value estimate to establish NorthStar Healthcare’s allocable share of these healthcare real estate Joint Venture Investments.

The one healthcare real estate property management platform held through a Joint Venture Investment, or the Solstice Joint Venture, is a property management venture that as of June 30, 2022 manages solely NorthStar Healthcare’s 32-property independent living portfolio, or the Winterfell Portfolio. To estimate the value of the Solstice Joint Venture, Kroll reviewed the joint venture agreements, historical revenues and earnings before interest, taxes, depreciation and amortization, or EBITDA, for the Solstice Joint Venture, historical and budgeted property operating revenues for the Winterfell Portfolio, the estimated property revenue utilized in the appraisal for the Winterfell Portfolio, and revenue and EBITDA valuation metrics associated with real estate management companies. Based on the above, Kroll determined an appropriate range of revenue and EBITDA multiples for the Solstice Joint Venture to determine a value range for the Solstice Joint Venture. Kroll then applied the terms of the Solstice Joint Venture agreements, including any distribution priorities and considering transfer rights associated with the joint venture interest, to its Solstice Joint Venture value estimate to establish the value range of NorthStar Healthcare’s interest in the Solstice Joint Venture.

As of June 30, 2022, the estimated value of the Joint Venture Investments underlying the $2.93 estimated per share value was $355.4 million, compared with an aggregate equity contribution, net of distributions in connection with asset sales, of $434.1 million, or the Joint Venture Equity Contribution. The following summarizes the key assumptions that were used in the DCF, direct capitalization, and Revenue and EBITDA valuation multiple analyses to arrive at the value of the Joint Venture Investments:

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	Range				Weighted Average
	Minimum		Maximum
Net Leased Senior Housing & Skilled Nursing Properties
Discount Rate	8.50	%	15.50	%	11.43	%
Terminal Capitalization Rate	7.00	%	12.50	%	10.44	%
Direct Capitalization Rate	6.50	%	15.75	%	9.61	%
Operating Senior Housing & Skilled Nursing Properties
Direct Capitalization Rate	6.25	%	9.25	%	7.76	%
Medical Office Buildings
Direct Capitalization Rate	5.75	%	8.25	%	6.36	%
Net Leased Hospitals
Discount Rate	8.75	%	8.75	%	8.75	%
Terminal Capitalization Rate	7.50	%	7.50	%	7.50	%
Direct Capitalization Rate	7.00	%	7.50	%	7.29	%
Property Management & Ancillary Businesses
Revenue Valuation Multiple	1.1x		1.2x		1.3x

Valuation of Healthcare Borrowings

Kroll estimated the fair value range of NorthStar Healthcare’s long-term liabilities by discounting the stream of expected interest and principal payments for each liability by an interest rate range that Kroll estimated a current market participant would require for instruments with similar collateral and duration assuming an orderly market environment, taking into account factors such as remaining loan term, loan-to-value ratio, collateral type, debt service coverage, security position and other factors deemed relevant. As of June 30, 2022, the gross estimated value of the Healthcare Borrowings underlying the $2.93 estimated per share value was $885.1 million, compared with an aggregate gross outstanding principal amount of $931.6 million. The discount rates used by Kroll to estimate the value of the Healthcare Borrowings ranged from approximately 4.50% to 7.50% with a weighted average of approximately 6.28%.

Cash, Other Tangible Assets and Other Liabilities

The fair value of NorthStar Healthcare’s cash, other tangible assets and liabilities, was estimated by Management to approximate carrying value as of June 30, 2022 and Kroll relied upon and utilized such amounts in its determination of the estimated value range per share.

Estimated Value Per Share

Based on the above valuations and estimates and subject to the assumptions and limiting conditions contained in its report, Kroll estimated the net asset value range per fully diluted common share outstanding of NorthStar Healthcare as of June 30, 2022 from $2.54 to $3.31 per share. Based on its review of the Kroll report and the analysis of Management, the Audit Committee recommended and the Board approved an estimated value per share of $2.93 as of June 30, 2022.

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The table below illustrates a breakdown of NorthStar Healthcare’s estimated value per share as of June 30, 2022 ($ in thousands, except per share values):

	Estimated Value		Estimated Value Per Share
Healthcare Properties	$	1,000,650	$	5.14
Joint Venture Investments	355,408		1.83
Investments Subtotal:	1,356,058		6.97
Cash and other tangible assets	126,004		0.65
Healthcare Borrowings	(885,126)		(4.55)
Other Liabilities	(24,776)		(0.13)
Non Controlling Interests	(2,126)		(0.01)
Estimated net asset value as of June 30, 2022	$	570,034	$	2.93
Estimated enterprise value per share			None assumed
Shares outstanding (in thousands)	194,666

In the aggregate, the estimated value of NorthStar Healthcare’s Healthcare Properties and Joint Venture Investments total approximately $1.36 billion as compared to the aggregate cost of $1.88 billion for the Healthcare Properties, the Joint Venture Equity Contribution and the Principal Amount. The decline in gross value results in a corresponding decline of approximately 55% of the net equity value, based on original cost, which totaled $952.3 million as of June 30, 2022.

As previously described, the estimated value per share recommended by the Audit Committee and approved by the Board does not reflect NorthStar Healthcare’s “enterprise value,” which may include a premium or discount for:

•the characteristics of NorthStar Healthcare’s working capital, leverage and other financial structures where some buyers may ascribe different values;

•investments through joint ventures, where NorthStar Healthcare owns a non-controlling interest and may have limited decision making authority, as some buyers may pay less for these types of investments;

•disposition and other expenses that would be necessary to realize the value;

•the cost to secure the services of Management on a long-term basis; or

•the potential difference in per share value if NorthStar Healthcare were to list its shares of common stock on a national securities exchange.

On November 10, 2022, Kroll delivered its valuation report to the Audit Committee. The Audit Committee was given an opportunity to confer with Kroll and Management regarding the methodologies and assumptions used therein, and determined to recommend to the Board the estimated value per share of NorthStar Healthcare’s common stock.

The Board is ultimately and solely responsible for the establishment of the estimated value per share of NorthStar Healthcare’s common stock. In arriving at its determination of the estimated value per share, the Board considered all information provided in light of its own familiarity with NorthStar Healthcare’s assets and unanimously approved the estimated value recommended by the Audit Committee.

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Sensitivity Analysis

Changes to the key assumptions used to arrive at the estimated value per share, including the capitalization rates and discount rates used to value the Healthcare Properties, Joint Venture Investments and Healthcare Borrowings, would have a significant impact on the underlying value of NorthStar Healthcare’s assets. The following table presents the impact on the estimated value per share of NorthStar Healthcare’s common stock resulting from a 5.0% increase and decrease to (1) the capitalization and discount rates used to value the Healthcare Properties, (2) the capitalization and discount rates used to value the Joint Venture Investments (and the discount rates used in the determination of the debt fair market values within the Joint Venture Investments) and (3) the discount rates used to value the Healthcare Borrowings:

	Range of Value
	Low	Estimated Value	High
Estimated Net Asset Value Per Share	$2.54	$2.93	$3.31
Healthcare Properties:
Weighted Average Capitalization Rate	6.66%	6.35%	6.03%
Weighted Average Discount Rate	8.50%	8.10%	7.69%
Joint Venture Investments:
Weighted Average Capitalization Rate(1)	8.40%	7.99%	7.59%
Weighted Average Discount Rate	12.12%	11.35%	10.98%
Healthcare Borrowings:
Weighted Average Discount Rate	5.96%	6.28%	6.59%

___________________

(1)    Includes the effective revenue and EBITDA capitalization rate applied to the Solstice Joint Venture.

The following table presents the impact on the estimated value per share of NorthStar Healthcare’s common stock resulting from a 5.0% increase and decrease to (1) the capitalization and discount rates used to value the Healthcare Properties, (2) the capitalization and discount rates used to value the Joint Venture Investments (and the discount rates used in the determination of the debt fair market values within the Joint Venture Investments) and (3) the discount rates used to value the Healthcare Borrowings, with the impact of each asset or liability class within NorthStar Healthcare’s portfolio shown in isolation:

	Range of Value
	Low	Estimated Value	High
Healthcare Properties (Capitalization & Discount Rates)	$2.63	$2.93	$3.18
Joint Venture Investments (Capitalization & Discount Rates)(1)	$2.73	$2.93	$3.28
Healthcare Borrowings (Discount Rates)	$2.92	$2.93	$2.94

_______________

(1)    Includes the impact of 5% increase and decrease to the interest rates used in the determination of the debt fair market values within the Joint Venture Investments.

The above sensitivity analysis differs from the methodology employed by Kroll to generate the range of estimated per share values in its report. The sensitivity analysis above assumes a 5.0% increase and decrease to the underlying valuation assumptions, which generally differs from the adjustments to the valuation assumptions employed by Kroll in its valuation report.

Limitations and Risks

As with any valuation methodology, the methodologies used to determine the estimated value per share are based upon a number of estimates and assumptions that may prove later to be inaccurate or incomplete. Further, different market participants using different assumptions and estimates could derive different estimated values.

Although the Board relied on estimated value ranges of NorthStar Healthcare’s assets and liabilities in establishing the estimated value per share, the estimated value per share may bear no relationship to NorthStar Healthcare’s book or asset value. In addition, the estimated value per share may not represent the price at which the shares of NorthStar Healthcare’s common stock would trade on a national securities exchange, the amount realized in a sale, merger or liquidation of NorthStar Healthcare or the amount a stockholder would realize in a private sale of shares.

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The estimated value of NorthStar Healthcare’s assets and liabilities is as of a specific date and such value is expected to fluctuate over time in response to future events, including but not limited to, the lasting effects of the COVID-19 pandemic, inflationary pressures on operating expenses, changes to commercial real estate values, particularly healthcare-related commercial real estate, developments related to individual assets, changes in market interest rates for commercial real estate debt and its impact on transaction executions, including, in particular, the current rising interest rate environment, changes in capitalization rates, rental and growth rates, changes in laws or regulations impacting the healthcare industry, demographic changes, returns on competing investments, changes in administrative expenses and other costs, the amount of distributions on NorthStar Healthcare’s common stock, repurchases of NorthStar Healthcare’s common stock, changes in the number of shares of NorthStar Healthcare’s common stock outstanding, the proceeds obtained for any common stock transactions, local and national economic factors and the factors specified in Part I, Item 1A. of NorthStar Healthcare’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Part II, Item IA. of NorthStar Healthcare's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 under the heading "Risk Factors". There is no assurance that the methodologies used to establish the estimated value per share would be acceptable to the Financial Industry Regulatory Authority, Inc. or in compliance with guidelines pursuant to the Employee Retirement Income Security Act of 1974 with respect to their reporting requirements.

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EXHIBIT INDEX

Exhibit Number	Description of Exhibit
3.1	Articles of Amendment and Restatement of NorthStar Healthcare Income, Inc. (filed as Exhibit 3.1 to Pre-Effective Amendment No. 7 to the Company’s Registration Statement on Form S-11 (File No. 333-170802) and incorporated herein by reference)
3.2	Certificate of Correction of the Articles of Amendment and Restatement of NorthStar Healthcare Income, Inc. (filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 and incorporated herein by reference)
3.3	Fourth Amended and Restated Bylaws of NorthStar Healthcare Income, Inc. (filed as Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 and incorporated herein by reference)
4.1	Amended and Restated Distribution Reinvestment Plan (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 8, 2016 and incorporated herein by reference)
31.1*	Certification by the Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2**	Certification by the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification by the Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification by the Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

    

______________________________________________________

*    Filed herewith

**    Furnished herewith

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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. 

		NorthStar Healthcare Income, Inc.
Date:	November 10, 2022	By:	/s/ KENDALL K. YOUNG
			Name:	Kendall K. Young
			Title:	Chief Executive Officer, President and Vice Chairman
		By:	/s/ NICHOLAS R. BALZO
			Name:	Nicholas R. Balzo
			Title:	Chief Financial Officer, Treasurer and Secretary

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EX-31.1

Exhibit 31.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kendall K. Young, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NorthStar Healthcare Income, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(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.

By:	/s/ KENDALL K. YOUNG
	Name:	Kendall K. Young
	Title:	Chief Executive Officer, President and Vice Chairman
	Date:	November 10, 2022

EX-31.2

Exhibit 31.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nicholas R. Balzo, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NorthStar Healthcare Income, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(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.

By:	/s/ NICHOLAS R. BALZO
	Name:	Nicholas R. Balzo
	Title:	Chief Financial Officer, Treasurer and Secretary
	Date:	November 10, 2022

EX-32.1

Exhibit 32.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER 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 on Form 10-Q of NorthStar Healthcare Income, Inc. (the “Company”) for the three months ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Kendall K. Young, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

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

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

By:	/s/ KENDALL K. YOUNG
	Kendall K. Young
	Chief Executive Officer, President and Vice Chairman
Date:	November 10, 2022

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER 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 on Form 10-Q of NorthStar Healthcare Income, Inc. (the “Company”) for the three months ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Nicholas R. Balzo, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

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

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

By:	/s/ NICHOLAS R. BALZO
	Nicholas R. Balzo
	Chief Financial Officer, Treasurer and Secretary
Date:	November 10, 2022

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Cover Page - shares	9 Months Ended
	Sep. 30, 2022	Nov. 09, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	000-55190
Entity Registrant Name	NORTHSTAR HEALTHCARE INCOME, INC.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	27-3663988
Entity Address, Address Line One	16 East 34th Street
Entity Address, Address Line Two	18th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10016
City Area Code	929
Local Phone Number	777-3135
Title of 12(b) Security	Common stock, par value $0.01 per share
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		195,287,174
Entity Central Index Key	0001503707
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Sep. 30, 2022	Dec. 31, 2021
Assets
Cash and cash equivalents		$ 95,145	$ 200,473
Restricted cash		12,537	10,465
Operating real estate, net		932,730	972,599
Investments in unconsolidated ventures		205,207	212,309
Receivables, net		3,454	3,666
Intangible assets, net		2,337	2,590
Other assets		7,829	10,771
Total assets	[1]	1,259,239	1,412,873
Liabilities
Mortgage and other notes payable, net		915,964	929,811
Due to related party		3,347	7,338
Escrow deposits payable		1,427	1,171
Accounts payable and accrued expenses		19,052	24,671
Other liabilities		2,392	3,064
Total liabilities	[1]	942,182	966,055
Commitments and contingencies (Note 12)
NorthStar Healthcare Income, Inc. Stockholders’ Equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021		0	0
Common stock, $0.01 par value, 400,000,000 shares authorized, 195,078,539 and 193,120,940 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		1,951	1,930
Additional paid-in capital		1,728,383	1,720,719
Retained earnings (accumulated deficit)		(1,410,309)	(1,277,688)
Accumulated other comprehensive income (loss)		(5,088)	(486)
Total NorthStar Healthcare Income, Inc. stockholders’ equity		314,937	444,475
Non-controlling interests		2,120	2,343
Total equity		317,057	446,818
Total liabilities and equity		$ 1,259,239	$ 1,412,873

[1] Represents the consolidated assets and liabilities of NorthStar Healthcare Income Operating Partnership, LP (the “Operating Partnership”). The Operating Partnership is a consolidated variable interest entity (“VIE”), of which NorthStar Healthcare Income, Inc. (together with its consolidated subsidiaries, the “Company”) is the sole general partner and owns approximately 99.99%. As of September 30, 2022, the Operating Partnership includes $224.2 million and $178.8 million of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. Refer to Note 2, “Summary of Significant Accounting Policies.”

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CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2022	Dec. 31, 2021
Preferred stock, par value (in dollars per share)		$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)		50,000,000	50,000,000
Preferred stock, shares issued (in shares)		0	0
Preferred stock, shares outstanding (in shares)		0	0
Common stock, par value (in dollars per share)		$ 0.01	$ 0.01
Common stock, shares authorized (in shares)		400,000,000	400,000,000
Common stock, shares issued (in shares)		195,078,539	195,078,539
Common stock, shares outstanding (in shares)		193,120,940	193,120,940
Assets	[1]	$ 1,259,239	$ 1,412,873
Liabilities	[1]	$ 942,182	$ 966,055
Primary Beneficiary
Ownership interest in operating partnership		99.99%
Primary Beneficiary | Northstar Healthcare Income Operating Partnership, LP
Ownership interest in operating partnership		99.99%
Northstar Healthcare Income Operating Partnership, LP | Primary Beneficiary
Assets		$ 224,200
Liabilities		$ 178,800

[1] Represents the consolidated assets and liabilities of NorthStar Healthcare Income Operating Partnership, LP (the “Operating Partnership”). The Operating Partnership is a consolidated variable interest entity (“VIE”), of which NorthStar Healthcare Income, Inc. (together with its consolidated subsidiaries, the “Company”) is the sole general partner and owns approximately 99.99%. As of September 30, 2022, the Operating Partnership includes $224.2 million and $178.8 million of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. Refer to Note 2, “Summary of Significant Accounting Policies.”

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Property and other revenues
Resident fee income		$ 11,274,000	$ 27,370,000	$ 32,987,000	$ 83,906,000
Rental income		36,165,000	37,006,000	103,001,000	101,669,000
Other revenue		300,000	38,000	457,000	80,000
Total property and other revenues		47,739,000	64,414,000	136,445,000	185,655,000
Interest income
Interest income on debt investments		0	1,067,000	0	4,667,000
Expenses
Property operating expenses		35,134,000	45,784,000	101,258,000	136,503,000
Interest expense		11,014,000	15,780,000	31,877,000	47,767,000
Transaction costs		857,000	0	857,000	54,000
Asset management fees - related party		2,428,000	2,769,000	7,532,000	8,307,000
General and administrative expenses		2,859,000	2,432,000	10,300,000	8,544,000
Depreciation and amortization		9,642,000	13,828,000	29,105,000	44,772,000
Impairment loss		18,500,000	4,600,000	31,502,000	5,386,000
Total expenses		80,434,000	85,193,000	212,431,000	251,333,000
Other income (loss)
Other income, net		0	0	77,000	6,892,000
Realized gain (loss) on investments and other		325,000	75,000	660,000	7,479,000
Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax expense		(32,370,000)	(19,637,000)	(75,249,000)	(46,640,000)
Equity in earnings (losses) of unconsolidated ventures		2,872,000	7,943,000	39,427,000	17,819,000
Income tax expense		(15,000)	(59,000)	(45,000)	(85,000)
Net income (loss)		(29,513,000)	(11,753,000)	(35,867,000)	(28,906,000)
Net (income) loss attributable to non-controlling interests		73,000	100,000	298,000	(73,000)
Net income (loss) attributable to NorthStar Healthcare Income, Inc. common stockholders		(29,440,000)	(11,653,000)	(35,569,000)	(28,979,000)
Net income (loss) attributable to NorthStar Healthcare Income, Inc. common stockholders		$ (29,440,000)	$ (11,653,000)	$ (35,569,000)	$ (28,979,000)
Net income (loss) per share of common stock, basic (in dollars per share)	[1]	$ (0.15)	$ (0.06)	$ (0.18)	$ (0.15)
Net income (loss) per share of common stock, diluted (in dollars per share)	[1]	$ (0.15)	$ (0.06)	$ (0.18)	$ (0.15)
Weighted average number of shares of common stock outstanding, basic (in shares)	[1]	194,670,948	191,937,161	194,032,819	191,285,186
Weighted average number of shares of common stock outstanding, diluted (in shares)	[1]	194,670,948	191,937,161	194,032,819	191,285,186
Distributions declared per share of common stock (in dollars per share)		$ 0	$ 0	$ 0.50	$ 0

[1] The Company issued 49,872 and 66,840 restricted stock units during the nine months ended September 30, 2022 and 2021, respectively. The impact of the restricted stock units on the diluted earnings per share calculation is de minimis for the three and nine months ended September 30, 2022 and 2021.

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CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Number of shares granted to independent directors (in shares)	49,872	66,840

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (29,513)	$ (11,753)	$ (35,867)	$ (28,906)
Other comprehensive income (loss)
Foreign currency translation adjustments related to investment in unconsolidated venture	(1,664)	(671)	(4,602)	(1,253)
Total other comprehensive income (loss)	(1,664)	(671)	(4,602)	(1,253)
Comprehensive income (loss)	(31,177)	(12,424)	(40,469)	(30,159)
Comprehensive (income) loss attributable to non-controlling interests	73	100	298	(73)
Comprehensive income (loss) attributable to NorthStar Healthcare Income, Inc. common stockholders	$ (31,104)	$ (12,324)	$ (40,171)	$ (30,232)

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CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Total	Total Company’s Stockholders’ Equity	Common Stock	Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive Income (Loss)	Non-controlling Interests
Beginning Balance (in shares) at Dec. 31, 2020			190,409,000
Beginning Balance at Dec. 31, 2020	$ 412,062	$ 409,639	$ 1,904	$ 1,710,023	$ (1,302,755)	$ 467	$ 2,423
Increase (Decrease) in Stockholder's Equity
Share-based payment of advisor assets management fees (in shares)			643,000
Share-based payment of advisor asset management fees	2,500	2,500	$ 6	2,494
Amortization of equity-based compensation	46	46		46
Non-controlling interests - contributions	240						240
Non-controlling interests - distributions	(350)						(350)
Other comprehensive income (loss)	(474)	(474)				(474)
Net income (loss)	(10,155)	(10,463)			(10,463)		308
Ending Balance (in shares) at Mar. 31, 2021			191,052,000
Ending Balance at Mar. 31, 2021	403,869	401,248	$ 1,910	1,712,563	(1,313,218)	(7)	2,621
Beginning Balance (in shares) at Dec. 31, 2020			190,409,000
Beginning Balance at Dec. 31, 2020	412,062	409,639	$ 1,904	1,710,023	(1,302,755)	467	2,423
Increase (Decrease) in Stockholder's Equity
Other comprehensive income (loss)	(1,253)
Net income (loss)	(28,906)
Ending Balance (in shares) at Sep. 30, 2021			192,407,000
Ending Balance at Sep. 30, 2021	390,031	387,318	$ 1,923	1,717,915	(1,331,734)	(786)	2,713
Beginning Balance (in shares) at Mar. 31, 2021			191,052,000
Beginning Balance at Mar. 31, 2021	403,869	401,248	$ 1,910	1,712,563	(1,313,218)	(7)	2,621
Increase (Decrease) in Stockholder's Equity
Share-based payment of advisor assets management fees (in shares)			643,000
Share-based payment of advisor asset management fees	2,500	2,500	$ 6	2,494
Amortization of equity-based compensation	73	73		73
Non-controlling interests - contributions	146						146
Non-controlling interests - distributions	(33)						(33)
Other comprehensive income (loss)	(108)	(108)				(108)
Net income (loss)	(6,998)	(6,863)			(6,863)		(135)
Ending Balance (in shares) at Jun. 30, 2021			191,695,000
Ending Balance at Jun. 30, 2021	399,449	396,850	$ 1,916	1,715,130	(1,320,081)	(115)	2,599
Increase (Decrease) in Stockholder's Equity
Share-based payment of advisor assets management fees (in shares)			712,000
Share-based payment of advisor asset management fees	2,769	2,769	$ 7	2,762
Amortization of equity-based compensation	23	23		23
Non-controlling interests - contributions	259						259
Non-controlling interests - distributions	(45)						(45)
Other comprehensive income (loss)	(671)	(671)				(671)
Net income (loss)	(11,753)	(11,653)			(11,653)		(100)
Ending Balance (in shares) at Sep. 30, 2021			192,407,000
Ending Balance at Sep. 30, 2021	$ 390,031	387,318	$ 1,923	1,717,915	(1,331,734)	(786)	2,713
Beginning Balance (in shares) at Dec. 31, 2021	195,078,539		193,121,000
Beginning Balance at Dec. 31, 2021	$ 446,818	444,475	$ 1,930	1,720,719	(1,277,688)	(486)	2,343
Increase (Decrease) in Stockholder's Equity
Share-based payment of advisor assets management fees (in shares)			698,000
Share-based payment of advisor asset management fees	2,729	2,729	$ 7	2,722
Amortization of equity-based compensation	15	15		15
Non-controlling interests - contributions	64						64
Non-controlling interests - distributions	(53)						(53)
Other comprehensive income (loss)	(568)	(568)				(568)
Net income (loss)	(12,981)	(12,936)			(12,936)		(45)
Ending Balance (in shares) at Mar. 31, 2022			193,819,000
Ending Balance at Mar. 31, 2022	$ 436,024	433,715	$ 1,937	1,723,456	(1,290,624)	(1,054)	2,309
Beginning Balance (in shares) at Dec. 31, 2021	195,078,539		193,121,000
Beginning Balance at Dec. 31, 2021	$ 446,818	444,475	$ 1,930	1,720,719	(1,277,688)	(486)	2,343
Increase (Decrease) in Stockholder's Equity
Share-based payment of advisor assets management fees (in shares)	2,000,000
Other comprehensive income (loss)	$ (4,602)
Net income (loss)	$ (35,867)
Ending Balance (in shares) at Sep. 30, 2022	195,078,539		195,079,000
Ending Balance at Sep. 30, 2022	$ 317,057	314,937	$ 1,951	1,728,383	(1,410,309)	(5,088)	2,120
Beginning Balance (in shares) at Mar. 31, 2022			193,819,000
Beginning Balance at Mar. 31, 2022	436,024	433,715	$ 1,937	1,723,456	(1,290,624)	(1,054)	2,309
Increase (Decrease) in Stockholder's Equity
Share-based payment of advisor assets management fees (in shares)			637,000
Share-based payment of advisor asset management fees	2,515	2,515	$ 8	2,507
Amortization of equity-based compensation	13	13		13
Non-controlling interests - contributions	113						113
Non-controlling interests - distributions	(61)						(61)
Dividends	(97,052)	(97,052)			(97,052)
Other comprehensive income (loss)	(2,370)	(2,370)				(2,370)
Net income (loss)	6,627	6,807			6,807		(180)
Ending Balance (in shares) at Jun. 30, 2022			194,456,000
Ending Balance at Jun. 30, 2022	345,809	343,628	$ 1,945	1,725,976	(1,380,869)	(3,424)	2,181
Increase (Decrease) in Stockholder's Equity
Share-based payment of advisor assets management fees (in shares)			623,000
Share-based payment of advisor asset management fees	2,413	2,413	$ 6	2,407
Non-controlling interests - contributions	86						86
Non-controlling interests - distributions	(74)						(74)
Other comprehensive income (loss)	(1,664)	(1,664)				(1,664)
Net income (loss)	$ (29,513)	(29,440)			(29,440)		(73)
Ending Balance (in shares) at Sep. 30, 2022	195,078,539		195,079,000
Ending Balance at Sep. 30, 2022	$ 317,057	$ 314,937	$ 1,951	$ 1,728,383	$ (1,410,309)	$ (5,088)	$ 2,120

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net income (loss)	$ (35,867)	$ (28,906)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Equity in (earnings) losses of unconsolidated ventures	(39,427)	(17,819)
Depreciation and amortization	29,105	44,772
Impairment loss	31,502	5,386
Amortization of below market debt	2,428	2,369
Straight-line rental (income) loss, net	0	7,432
Amortization of discount/accretion of premium on investments	0	(697)
Amortization of deferred financing costs	475	1,354
Amortization of equity-based compensation	150	142
Paid-in-kind interest on real estate debt investment	0	(194)
Realized (gain) loss on investments and other	(660)	(7,479)
Change in allowance for uncollectible accounts	326	108
Issuance of common stock as payment for asset management fees	7,532	7,769
Changes in assets and liabilities:
Receivables	(114)	1,191
Other assets	3,583	(7,560)
Due to related party	(3,868)	(5,421)
Escrow deposits payable	256	1,758
Accounts payable and accrued expenses	(8,727)	(8,866)
Other liabilities	(298)	306
Net cash (used in) provided by operating activities	(13,604)	(4,355)
Cash flows from investing activities:
Capital expenditures for operating real estate	(17,924)	(17,344)
Sales of operating real estate	0	28,078
Repayment of real estate debt investment	0	74,376
Investments in unconsolidated ventures	0	(400)
Distributions from unconsolidated ventures	42,173	6,971
Real estate debt investment modification fee	0	686
Net cash provided by (used in) investing activities	24,249	92,367
Cash flows from financing activities:
Borrowings from mortgage notes	0	26,000
Repayments of mortgage notes	(16,514)	(61,121)
Repayment of borrowings from line of credit - related party	0	(35,000)
Payment of deferred financing costs	(36)	(708)
Payments under finance leases	(408)	(446)
Distributions paid on common stock	(97,018)	0
Contributions from non-controlling interests	263	645
Distributions to non-controlling interests	(188)	(428)
Net cash (used in) provided by financing activities	(113,901)	(71,058)
Net increase (decrease) in cash, cash equivalents and restricted cash	(103,256)	16,954
Cash, cash equivalents and restricted cash-beginning of period	210,938	93,570
Cash, cash equivalents and restricted cash-end of period	107,682	110,524
Supplemental disclosure of cash flow information:
Cash paid for interest	28,625	50,277
Cash paid for income taxes	41	45
Supplemental disclosure of non-cash investing and financing activities:
Accrued capital expenditures	2,561	1,391
Assets acquired under finance leases	0	144
Assets acquired under operating leases	0	100
Reclassification of assets held for sale	$ 0	$ 488,241

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Business and Organization

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and Organization

Business and Organization

NorthStar Healthcare Income, Inc., together with its consolidated subsidiaries (the “Company”), manages a diversified portfolio of investments in healthcare real estate, owned directly or through joint ventures, with a focus on the seniors housing sector, which the Company defines as assisted living (“ALF”), memory care (“MCF”), skilled nursing (“SNF”), independent living facilities (“ILF”) and continuing care retirement communities (“CCRC”), which have ILF, ALF, SNF, and MCF available on one campus. The Company is also invested in other healthcare property types, including medical office buildings (“MOB”), hospitals, rehabilitation facilities and ancillary healthcare services businesses. The Company’s investments are predominantly in the United States, but through a joint venture it also has international investments in the United Kingdom.

The Company was formed in October 2010 as a Maryland corporation and commenced operations in February 2013. The Company elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2013. The Company has conducted its operations, and intends to do so in the future, so as to continue to qualify as a REIT for U.S. federal income tax purposes.

Substantially all of the Company’s business is conducted through NorthStar Healthcare Income Operating Partnership, LP (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership. The limited partners of the Operating Partnership are NorthStar Healthcare Income Advisor, LLC and NorthStar Healthcare Income OP Holdings, LLC (the “Special Unit Holder”). NorthStar Healthcare Income Advisor, LLC invested $1,000 in the Operating Partnership in exchange for common units and the Special Unit Holder invested $1,000 in the Operating Partnership and was issued a separate class of limited partnership units (the “Special Units”), which are collectively recorded as non-controlling interests on the accompanying consolidated balance sheets as of September 30, 2022 and December 31, 2021. As the Company issued shares, it contributed substantially all of the proceeds from its continuous, public offerings to the Operating Partnership as a capital contribution. As of September 30, 2022, the Company’s limited partnership interest in the Operating Partnership was 99.99%.

The Company’s charter authorizes the issuance of up to 400.0 million shares of common stock with a par value of $0.01 per share and up to 50.0 million shares of preferred stock with a par value of $0.01 per share. The board of directors of the Company is authorized to amend its charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue.

Since inception through October 21, 2022, the Company was externally managed by CNI NSHC Advisors, LLC or its predecessor (the “Advisor”), an affiliate of NRF Holdco, LLC (the “Sponsor”). The Advisor was responsible for managing the Company’s operations, subject to the supervision of the Company’s board of directors, pursuant to an advisory agreement. On October 21, 2022, the Company completed the internalization of the Company’s management function (the “Internalization”). In connection with the Internalization, the Company agreed with the Advisor to terminate the advisory agreement and arranged for the Advisor to continue to provide certain services for a transition period. Going forward, the Company will be self-managed under the leadership of Kendall Young, who was appointed by the board of directors as Chief Executive Officer and President concurrent with the Internalization. Refer to Note 13, “Subsequent Events” for further discussion.

From inception through September 30, 2022, the Company raised $2.0 billion in total gross proceeds from the sale of shares of common stock in its continuous, public offerings (the “Offering”), including $232.6 million pursuant to its distribution reinvestment plan (the “DRP”).

Impact of COVID-19

The Company's healthcare real estate business and investments have been challenged by suboptimal occupancy levels, lower labor force participation rates, which has driven increased labor costs, and inflationary pressures on other operating expenses.

These lasting effects from the response to the coronavirus 2019 (“COVID-19”) pandemic will continue to impact Company’s operational and financial performance. An extended recovery period increases the risk of a prolonged negative impact on the Company’s financial condition and results of operations. While the Company has the ability to meet its near term liquidity needs, general market concerns over credit and liquidity continue, and the effects of COVID-19 may also lead to heightened risk of litigation, with an ensuing increase in litigation and related costs.

At this time, the progression of the global economic recovery remains difficult for the Company to assess and estimate the future impact on the Company's results of operations. Accordingly, any estimates as reflected or discussed in these financial statements are based upon the Company's best estimates using information known to the Company as of the date of this Quarterly Report on Form 10-Q, and such estimates may change, the effects of which could be material. The Company will continue to monitor the progression of the economic recovery and reassess its effects on the Company’s results of operations and recoverability of value across its assets as conditions change.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Accounting

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission on March 18, 2022.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. The Company consolidates entities in which it has a controlling financial interest by first considering if an entity meets the definition of a variable interest entity (“VIE”) for which the Company is deemed to be the primary beneficiary or if the Company has the power to control an entity through majority voting interest or other arrangements. All significant intercompany balances are eliminated in consolidation.

Variable Interest Entities

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents, has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.

The Company evaluates its investments and financings, including investments in unconsolidated ventures and securitization financing transactions to determine whether each investment or financing is a VIE. The Company analyzes new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing.

As of September 30, 2022, the Company has identified certain consolidated and unconsolidated VIEs. Assets of each of the VIEs, other than the Operating Partnership, may only be used to settle obligations of the respective VIE. Creditors of each of the VIEs have no recourse to the general credit of the Company.

Consolidated VIEs

The most significant consolidated VIEs are the Operating Partnership and certain properties that have non-controlling interests. These entities are VIEs because the non-controlling interests do not have substantive kick-out or participating rights. The Operating Partnership consolidates certain properties that have non-controlling interests. Included in operating real estate, net on the Company’s consolidated balance sheet as of September 30, 2022 is $214.2 million related to such consolidated VIEs. Included in mortgage and other notes payable, net on the Company’s consolidated balance sheet as of September 30, 2022 is $173.8 million, collateralized by the real estate assets of the related consolidated VIEs.

Unconsolidated VIEs

As of September 30, 2022, the Company identified unconsolidated VIEs related to its real estate equity investments with a carrying value of $205.2 million. The Company’s maximum exposure to loss as of September 30, 2022 would not exceed the carrying value of its investment in the VIEs. Based on management’s analysis, the Company determined that it is not the primary beneficiary of these VIEs and, accordingly, they are not consolidated in the Company’s financial statements as of September 30, 2022. The Company did not provide financial support to its unconsolidated VIEs during the nine months ended September 30, 2022. As of September 30, 2022, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to its unconsolidated VIEs.

Voting Interest Entities

A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote.

The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.

Investments in Unconsolidated Ventures

A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method or the Company may elect the fair value option.

The Company will account for an investment under the equity method of accounting if it has the ability to exercise significant influence over the operating and financial policies of an entity, but does not have a controlling financial interest. Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of preferred returns and allocation formulas, if any, as described in such governing documents. Equity method investments are recognized using a cost accumulation model, in which the investment is recognized based on the cost to the investor, which includes acquisition fees. The Company records as an expense certain acquisition costs and fees associated with consolidated investments deemed to be business combinations and capitalizes these costs for investments deemed to be acquisitions of an asset, including an equity method investment.

Non-controlling Interests

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and comprehensive income (loss) attributable to controlling and non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents.

Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions. Any estimates of the effects of COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions as reflected and/or discussed in these financial statements are based upon the Company's best estimates using information known to the Company as of the date of this Quarterly Report on Form 10-Q. Such estimates may change and the impact of which could be material.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly-liquid investments with an original maturity date of three months or less to be cash equivalents. Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250,000 per institution. The Company mitigates credit risk by placing cash and cash equivalents with major financial institutions. To date, the Company has not experienced any losses on cash and cash equivalents.

Restricted cash consists of amounts related to operating real estate (escrows for taxes, insurance, capital expenditures, security deposits received from residents and payments required under certain lease agreements) and other escrows required by lenders of the Company’s borrowings.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as reported on the consolidated balance sheets to the total of such amounts as reported on the consolidated statements of cash flows (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
Cash and cash equivalents	$	95,145	$	200,473
Restricted cash	12,537		10,465
Total cash, cash equivalents and restricted cash	$	107,682	$	210,938

Operating Real Estate

Operating real estate is carried at historical cost less accumulated depreciation. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their useful life. Ordinary repairs and maintenance are expensed as incurred. Operating real estate is depreciated using the straight-line method over the estimated useful life of the assets, summarized as follows:

Category:	Term:
Building	30 to 50 years
Building improvements	Lesser of the useful life or remaining life of the building
Land improvements	9 to 15 years
Tenant improvements	Lesser of the useful life or remaining term of the lease
Furniture, fixtures and equipment	5 to 14 years

Construction costs incurred in connection with the Company’s investments are capitalized and included in operating real estate, net on the consolidated balance sheets. Construction in progress is not depreciated until the asset is available for its intended use.

Lessee Accounting

A leasing arrangement, a right to control the use of an identified asset for a period of time in exchange for consideration, is classified by the lessee either as a finance lease, which represents a financed purchase of the leased asset, or as an operating lease. For leases with terms greater than 12 months, a lease asset and a lease liability are recognized on the balance sheet at commencement date based on the present value of lease payments over the lease term.

Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the option to extend would be exercised or the option to terminate would not be exercised. As the implicit rate in most leases are not readily determinable, the Company’s incremental borrowing rate for each lease at commencement date is used to determine the present value of lease payments. Consideration is given to the Company’s recent debt financing transactions, as well as publicly

available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating incremental borrowing rates.

Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases.

Right of Use (“ROU”) - Finance Assets

The Company has entered into finance leases for equipment which are included in operating real estate, net on the Company’s consolidated balance sheets. As of September 30, 2022, furniture, fixtures and equipment under finance leases totaled $2.5 million. The leased equipment is amortized on a straight-line basis. Payments for finance leases totaled $0.4 million and $0.5 million for the nine months ended September 30, 2022 and 2021, respectively, including assets that were disposed of through portfolio sales.

The following table presents the future minimum lease payments under finance leases and the present value of the minimum lease payments, which are included in other liabilities on the Company’s consolidated balance sheets (dollars in thousands):

October 1 through December 31, 2022	$	69
Years Ending December 31:
2023	93
2024	60
2025	29
2026	24
Thereafter	28
Total minimum lease payments	$	303
Less: Amount representing interest	(29)
Present value of minimum lease payments	$	274

The weighted average interest rate related to the finance lease obligations is 7.2% with a weighted average lease term of 3.4 years.

As of September 30, 2022, there were no leases that had yet to commence which would create significant rights and obligations to the Company as lessee.

Intangible Assets and Deferred Costs

Deferred Costs

Deferred costs primarily include deferred financing costs and deferred leasing costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. These costs are recorded against the carrying value of such financing and are amortized to interest expense over the term of the financing using the effective interest method. Unamortized deferred financing costs are expensed to realized gain (loss) on investments and other, when the associated borrowing is repaid before maturity. Costs incurred in seeking financing transactions which do not close are expensed in the period in which it is determined that the financing will not occur. Deferred lease costs consist of fees incurred to initiate and renew operating leases, which are amortized on a straight-line basis over the remaining lease term and are recorded to depreciation and amortization in the consolidated statements of operations.

Identified Intangibles

The Company records acquired identified intangibles, such as the value of in-place leases and other intangibles, based on estimated fair value at the acquisition date. The value allocated to the identified intangibles is amortized over the remaining lease term. In-place leases are amortized into depreciation and amortization expense.

Impairment analysis for identified intangible assets is performed in connection with the impairment assessment of the related operating real estate. An impairment establishes a new basis for the identified intangible asset and any impairment loss recognized is not subject to subsequent reversal. Refer to “—Impairment on Operating Real Estate and Investments in Unconsolidated Ventures” for additional information.

Identified intangible assets are recorded in intangible assets, net on the consolidated balance sheets. Intangible assets relate to the Company’s in-place lease values for the Company’s four net lease properties. The following table presents intangible assets, net (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
In-place lease value	$	120,149	$	120,149
Less: Accumulated amortization	(117,812)		(117,559)
Intangible assets, net	$	2,337	$	2,590

The Company recorded $0.1 million and $0.3 million of amortization expense for in-place leases for the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2021, amortization expense for in-place leases and deferred costs was $0.3 million and $1.3 million, respectively.

The following table presents future amortization of in-place lease value (dollars in thousands):

October 1 through December 31, 2022	$	84
Years Ending December 31:
2023	337
2024	337
2025	337
2026	337
Thereafter	905
Total	$	2,337

Revenue Recognition

Operating Real Estate

Rental income from operating real estate is derived from leasing of space to healthcare operators, including rent received from the Company’s net lease properties and rent, ancillary service fees and other related revenue earned from ILF residents. Rental income recognition commences when the operator takes legal possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for rentals and expense reimbursements to be paid in monthly installments. Rental income from leases, which includes community and move-in fees, is recognized over the term of the respective leases. ILF resident agreements are generally short-term in nature and may allow for termination with 30 days’ notice.

The Company also generates revenue from operating healthcare properties. Revenue related to operating healthcare properties includes resident room and care charges, ancillary fees and other resident service charges. Rent is charged and revenue is recognized when such services are provided, generally defined per the resident agreement as of the date upon which a resident occupies a room or uses the services. Resident agreements are generally short-term in nature and may allow for termination with 30 days’ notice. Revenue derived from our ALFs, MCFs and CCRCs is recorded in resident fee income in the consolidated statements of operations.

Revenue from operators and residents is recognized at lease commencement only to the extent collection is expected to be probable. This assessment is based on several qualitative and quantitative factors, including and as appropriate, the payment history, ability to satisfy its lease obligations, the value of the underlying collateral or deposit, if any, and current economic conditions. If collection is assessed to not be probable thereafter, lease income recognized is limited to amounts collected, with the reversal of any revenue recognized to date in excess of amounts received. If collection is subsequently reassessed to be probable, revenue is adjusted to reflect the amount that would have been recognized had collection always been assessed as probable.

The operator of the Company’s remaining four net lease properties failed to remit contractual monthly rent obligations and the Company deemed it not probable that these obligations will be satisfied in the foreseeable future. For the nine months ended September 30, 2022, the Company recorded rental income to the extent rental payments were received.

For the three months ended September 30, 2022 and 2021, total property and other revenues includes variable lease revenue of $2.1 million and $3.5 million, respectively. For the nine months ended September 30, 2022 and 2021, total property and other

revenue includes variable lease revenue of $9.2 million and $10.1 million, respectively. Variable lease revenue includes ancillary services provided to operator/residents, as well as non-recurring services and fees at the Company’s operating facilities.

The Company did not receive or recognize any grant income from the Provider Relief Fund administered by the U.S. Department of Health and Human Services during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, the Company recognized $7.4 million of grant income. The grant income is classified as other income, net in the consolidated statements of operations. These grants are intended to mitigate the negative financial impact of the COVID-19 pandemic as reimbursements for expenses incurred to prevent, prepare for and respond to COVID-19 and lost revenues attributable to COVID-19. Provided that the Company attests to and complies with certain terms and conditions of the grants, the Company will not be required to repay these grants in the future.

Real Estate Debt Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale. The Company had one debt investment, which was repaid in full in August 2021.

Impairment on Operating Real Estate and Investments in Unconsolidated Ventures

At this time, it is difficult for the Company to assess and estimate the future economic effects of the COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions with any meaningful precision. The future economic effects will depend on many factors beyond the Company’s control and knowledge. The resulting effect on impairment of the Company's real estate held for investment and held for sale and investments in unconsolidated ventures may materially differ from the Company's current expectations and further impairment charges may be recorded in future periods.

Operating Real Estate

The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow generated by the property is less than the carrying value. In conducting this review, the Company considers U.S. macroeconomic factors, real estate and healthcare sector conditions, together with asset specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value and recorded in impairment loss in the consolidated statements of operations.

Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal cost, with any write-down to disposal cost recorded as an impairment loss. For any increase in fair value less disposal cost subsequent to classification as held for sale, the impairment may be reversed, but only up to the amount of cumulative loss previously recognized.

The Company considered the potential impact of the lasting effects of the COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions on the future net operating income of its healthcare real estate held for investment as an indicator of impairment. Fair values were estimated based upon the income capitalization approach, using net operating income for each property and applying indicative capitalization rates.

During the nine months ended September 30, 2022, the Company recorded impairment losses on its operating real estate totaling $31.5 million. The Company recorded impairment losses of $18.5 million, $8.5 million and $3.9 million for facilities in its Arbors, Winterfell and Rochester portfolios, respectively, as a result of declining operating margins and lower projected future cash flows. In addition, the Company recorded impairment losses totaling $0.6 million for property damage sustained by facilities in its Winterfell portfolio. During the nine months ended September 30, 2021, the Company recorded impairment losses totaling $5.4 million, consisting of $4.6 million recognized for one independent living facility within its Winterfell portfolio and $0.8 million for its Smyrna net lease property, which was sold in May 2021.

Investments in Unconsolidated Ventures

The Company reviews its investments in unconsolidated ventures for which the Company did not elect the fair value option on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value may be impaired or that its carrying value may not be recoverable. An investment is considered impaired if the projected net recoverable amount over the expected holding period is less than the carrying value. In conducting this review, the Company considers global macroeconomic factors, including real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred and is considered to be other than temporary, the loss is measured as the excess of the carrying value of the investment over the estimated fair value and recorded in equity in earnings (losses) of unconsolidated ventures in the consolidated statements of operations.

During the nine months ended September 30, 2022, the Company did not impair any of its investments in unconsolidated ventures, however, the underlying joint ventures recorded impairments and reserves on properties in their respective portfolios, which the Company recognized through equity in earnings (losses), of which the Company’s proportionate share was de minimis. During the nine months ended September 30, 2021, the Company did not impair any of its investments in unconsolidated ventures, nor did the underlying joint ventures record any impairments or reserves on properties in their respective portfolios.

Credit Losses on Receivables

The current expected credit loss model, in estimating expected credit losses over the life of a financial instrument at the time of origination or acquisition, considers historical loss experiences, current conditions and the effects of reasonable and supportable expectations of changes in future macroeconomic conditions. The Company assesses the estimate of expected credit losses on a quarterly basis or more frequently as necessary. The Company considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The Company measures expected credit losses of receivables on a collective basis when similar risk characteristics exist. If the Company determines that a particular receivable does not share risk characteristics with its other receivables, the Company evaluates the receivable for expected credit losses on an individual basis.

When developing an estimate of expected credit losses on receivables, the Company considers available information relevant to assessing the collectability of cash flows. This information may include internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. The Company considers relevant qualitative and quantitative factors that relate to the environment in which the Company operates and are specific to the borrower.

Further, the fair value of the collateral, less estimated costs to sell, may be used when determining the allowance for credit losses for a receivable for which the repayment is expected to be provided substantially through the sale of the collateral when the borrower is experiencing financial difficulty.

As of September 30, 2022, the Company has not recorded an allowance for credit losses on its receivables.

Acquisition Fees and Expenses

The total of all acquisition fees and expenses for an investment, including acquisition fees to the Advisor, cannot exceed, in the aggregate, 6.0% of the contract purchase price of such investment unless such excess is approved by a majority of the Company’s directors, including a majority of its independent directors. The Company records as an expense for certain acquisition costs and fees associated with transactions deemed to be business combinations in which it consolidates the asset and capitalizes these costs for transactions deemed to be acquisitions of an asset, including an equity investment. Effective January 1, 2018, the Advisor no longer receives an acquisition fee in connection with the Company’s acquisitions of real estate properties or debt investments. On October 21, 2022, the advisory agreement was terminated. Refer to Note 13, “Subsequent Events” for further discussion.

Equity-Based Compensation

The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award at the time of grant. All fixed equity-based awards to directors, which have no vesting conditions other than time of service, are amortized to compensation expense over the awards’ vesting period on a straight-line basis. Equity-based compensation is classified within general and administrative expenses in the consolidated statements of operations.

Income Taxes

The Company elected to be taxed as a REIT and to comply with the related provisions of the Internal Revenue Code beginning in its taxable year ended December 31, 2013. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders as long as certain asset, gross income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute dividends equal to at least 90.0% of its REIT taxable income (with certain adjustments) to its stockholders and meet certain other requirements. The Company believes that all of the criteria to maintain the Company’s REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax and potential interest and penalties, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. The Company’s accounting policy with respect to interest and penalties is to classify these amounts as a component of income tax expense, where applicable. The Company has assessed its tax positions for all open tax years, which include 2018 to 2021, and concluded there were no material uncertainties to be recognized.

The Company may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income.

The Company made a joint election to treat certain subsidiaries as taxable REIT subsidiaries (“TRS”) which may be subject to U.S. federal, state and local income taxes. In general, a TRS of the Company may perform services for managers/operators/residents of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate related business.

Certain subsidiaries of the Company are subject to taxation by federal and state authorities for the periods presented. Income taxes are accounted for by the asset/liability approach in accordance with U.S. GAAP. Deferred taxes, if any, represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. Such amounts arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates in the period which such changes are enacted. A provision for income tax represents the total of income taxes paid or payable for the current period, plus the change in deferred taxes. Current and deferred taxes are provided on the portion of earnings (losses) recognized by the Company with respect to its interest in the TRS. Deferred income tax assets and liabilities are calculated based on temporary differences between the Company’s U.S. GAAP consolidated financial statements and the federal and state income tax basis of assets and liabilities as of the consolidated balance sheet date. The Company evaluates the realizability of its deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if any, are included in provision for income tax benefit (expense) in the consolidated statements of operations. The Company has a deferred tax asset, which as of September 30, 2022 totaled $14.5 million and continues to have a full valuation allowance recognized, as there are no changes in the facts and circumstances to indicate that the Company should release the valuation allowance.

The Company recorded an income tax expense of approximately $15,000 and $45,000 for the three and nine months ended September 30, 2022, respectively. The Company recorded an income tax expense of approximately $59,000 and $85,000 for the three and nine months ended September 30, 2021, respectively.

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and other comprehensive income (loss) (“OCI”). The only component of OCI for the Company is foreign currency translation adjustments related to its investment in an unconsolidated venture.

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment is recorded as a component of accumulated OCI in the consolidated statements of equity.

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period.

As of September 30, 2022 and December 31, 2021, the Company had exposure to foreign currency through an investment in an unconsolidated venture, the effects of which are reflected as a component of accumulated OCI in the consolidated statements of equity and in equity in earnings (losses) in the consolidated statements of operations.

Recent Accounting Pronouncements

Accounting Standards Adopted in 2022

Disclosures by Business Entities about Government Assistance—In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10: Disclosures by Business Entities about Government Assistance. The guidance requires expanded disclosure for transactions involving the receipt of government assistance. Required disclosures include a description of the nature of transactions with government entities, accounting policies for such transactions and their impact to the Company’s consolidated financial statements. The Company adopted ASU No. 2021-10 on January 1, 2022, with no transitional impact upon adoption.

Certain Leases with Variable Lease Payments—In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The guidance in ASU No. 2021-05 amends the lease classification requirements for the lessors under certain leases containing variable payments to align with practice under ASC 840. Under the guidance, the lessor should classify and account for a lease with variable lease payments that does not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in ASC No. 842-10-25-2 through 25-3; and 2) the lessor would have otherwise recognized a day-one loss. The amendments in ASU No. 2021-05 are effective for fiscal years beginning after December 15, 2021. The Company adopted ASU No. 2021-05 on January 1, 2022, with no transitional impact upon adoption.

Future Application of Accounting Standards

Reference Rate Reform—In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance in ASU No. 2020-04 is optional, the election of which provides temporary relief for the accounting effects on contracts, hedging relationships and other transactions impacted by the transition from interbank offered rates (such as London Interbank Offered Rate (“LIBOR”)) to alternative reference rates (such as Secured Overnight Financing Rate). Modification of contractual terms to effect the reference rate reform transition on debt, leases, derivatives and other contracts is eligible for relief from modification accounting and accounted for as a continuation of the existing contract. ASU No. 2020-04 is effective upon issuance through December 31, 2022, and may be applied retrospectively to January 1, 2020. The Company may elect practical expedients or exceptions as applicable over time as reference rate reform activities occur.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The guidance amends the scope of the recent reference rate reform guidance issued in ASU No. 2020-04. New optional expedients allow derivative instruments impacted by changes in the interest rate used for margining, discounting, or contract price alignment to qualify for certain optional relief. The guidance was effective immediately and may be applied retrospectively to January 1, 2020. The Company may elect practical expedients or exceptions as applicable over time as reference rate reform activities occur.

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Operating Real Estate

9 Months Ended

Sep. 30, 2022

Real Estate [Abstract]

Operating Real Estate

Operating Real Estate

The following table presents operating real estate, net (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
Land	$	121,518	$	121,518
Land improvements	18,453		17,798
Buildings and improvements	945,526		965,630
Tenant improvements	322		—
Construction in progress	12,154		8,141
Furniture, fixtures and equipment	88,910		84,813
Subtotal	$	1,186,883	$	1,197,900
Less: Accumulated depreciation	(254,153)		(225,301)
Operating real estate, net	$	932,730	$	972,599

For the three and nine months ended September 30, 2022, depreciation expense was $9.6 million and $28.9 million, respectively. For the three and nine months ended September 30, 2021, depreciation expense was $13.5 million and $43.5 million, respectively.

Within the table above, buildings and improvements have been reduced by accumulated impairment losses of $181.2 million and $149.7 million as of September 30, 2022 and December 31, 2021, respectively. Impairment loss, as presented on the consolidated statements of operations, totaled $31.5 million and $5.4 million for the nine months ended September 30, 2022 and 2021, respectively. Refer to Note 2, “Summary of Significant Accounting Policies” for further discussion.

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Investments in Unconsolidated Ventures

9 Months Ended

Sep. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Ventures

Investments in Unconsolidated Ventures

All investments in unconsolidated ventures are accounted for under the equity method. The following table presents the Company’s investments in unconsolidated ventures (dollars in thousands):

				Carrying Value(1)
Portfolio	Acquisition Date	Ownership		September 30, 2022 (Unaudited)		December 31, 2021
Trilogy	Dec-2015	23.2	%	$	130,224	$	126,366
Diversified US/UK	Dec-2014	14.3	%	69,815		80,766
Eclipse	May-2014	5.6	%	3,295		4,856
Espresso(2)	Jul-2015	36.7	%	1,593		—
Subtotal				$	204,927	$	211,988
Solstice(3)	Jul-2017	20.0	%	280		321
Total				$	205,207	$	212,309

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(1)Includes $1.3 million, $13.4 million and $9.8 million of capitalized acquisition costs for the Company’s investments in the Eclipse, Diversified US/UK, and Trilogy joint ventures, respectively.

(2)As a result of impairments and other non-cash reserves recorded by the joint venture, the Company’s carrying value of its investment in Espresso was reduced to zero in the fourth quarter of 2018. The Company recognized its proportionate share of earnings and losses of the Espresso joint venture through the carrying value of its mezzanine loan debt investment, which was originated to a subsidiary of the Espresso joint venture, through the time of its repayment in August 2021. During the nine months ended September 30, 2022, the Espresso joint venture recognized gains on sub-portfolio sales, which increased the Company’s carrying value in its investment as of September 30, 2022.

(3)Represents investment in Solstice Senior Living, LLC (“Solstice”), the manager of the Winterfell portfolio. Solstice is a joint venture between affiliates of Integral Senior Living, LLC (“ISL”), a management company of ILF, ALF and MCF founded in 2000, which owns 80.0%, and the Company, which owns 20.0%.

The following table presents the results of the Company’s investment in unconsolidated ventures (dollars in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Portfolio	Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution
Trilogy	$	6,052	$	2,300	$	763	$	—	$	10,757	$	6,900	$	(2,839)	$	—
Diversified US/UK	(2,611)		358		(330)		966		(4,060)		2,290		(2,387)		3,256
Eclipse	(344)		—		(194)		2,898		(940)		620		3,739		2,898
Espresso(1)	(242)		1,375		7,693		—		33,711		32,363		18,636		—
Envoy	—		—		—		78		—		—		740		817
Subtotal	$	2,855	$	4,033	$	7,932	$	3,942	$	39,468	$	42,173	$	17,889	$	6,971
Solstice	17		—		11		—		(41)		—		(70)		—
Total	$	2,872	$	4,033	$	7,943	$	3,942	$	39,427	$	42,173	$	17,819	$	6,971

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(1)During the nine months ended September 30, 2022, the Espresso joint venture recognized net gains related to sub-portfolio sales, of which the Company’s proportionate share totaled $32.0 million. The Company was distributed its proportionate share of the net proceeds generated from the sales totaling $27.4 million.

Summarized Financial Data

The following table presents the Trilogy unconsolidated venture’s balance sheets as of September 30, 2022 and December 31, 2021 and statements of operations for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021			Three Months Ended September 30,				Nine Months Ended September 30,
						2022		2021		2022		2021
Assets
Operating real estate, net	$	1,364,535	$	1,271,376	Total revenues	$	328,072	$	264,848	$	895,722	$	753,056
Other assets	755,164		575,573		Net income (loss)	$	26,081	$	3,298	$	46,361	$	(12,199)
Total assets	$	2,119,699	$	1,846,949
Liabilities and equity
Total liabilities	$	1,583,870	$	1,327,531
Equity	535,829		519,418
Total liabilities and equity	$	2,119,699	$	1,846,949

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Borrowings

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Borrowings

Borrowings

The following table presents the Company’s mortgage and other notes payable (dollars in thousands):

				September 30, 2022 (Unaudited)				December 31, 2021
	Recourse vs. Non-Recourse	Initial Maturity	Contractual Interest Rate(1)	Principal Amount(2)		Carrying Value(2)		Principal Amount(2)		Carrying Value(2)
Mortgage notes payable, net
Watermark Aqua Portfolio
Frisco, TX(3)	Non-recourse	Feb 2026	3.0%	$	26,000	$	25,527	$	26,000	$	25,431
Milford, OH	Non-recourse	Sep 2026	LIBOR + 2.68%	18,394		18,169		18,661		18,388
Rochester Portfolio
Rochester, NY	Non-recourse	Feb 2025	4.25%	18,385		18,338		18,911		18,853
Rochester, NY(4)	Non-recourse	Aug 2027	LIBOR + 2.34%	101,081		100,443		101,224		100,495
Rochester, NY	Non-recourse	Aug 2023	LIBOR + 2.90%	11,383		11,354		11,732		11,716
Arbors Portfolio(5)
Various locations	Non-recourse	Feb 2025	3.99%	83,919		83,498		85,369		84,799
Winterfell Portfolio(6)
Various locations	Non-recourse	Jun 2025	4.17%	599,574		590,652		608,810		597,460
Avamere Portfolio(7)
Various locations	Non-recourse	Feb 2027	4.66%	68,314		67,983		69,144		68,755
Subtotal mortgage notes payable, net				$	927,050	$	915,964	$	939,851	$	925,897
Other notes payable
Oak Cottage
Santa Barbara, CA(8)	Non-recourse	Repaid	6.00%	$	—	$	—	$	3,914	$	3,914
Subtotal other notes payable, net				$	—	$	—	$	3,914	$	3,914
Total mortgage and other notes payable, net				$	927,050	$	915,964	$	943,765	$	929,811

_______________________________________

(1)Floating-rate borrowings total $130.9 million of principal outstanding and reference one-month LIBOR.

(2)The difference between principal amount and carrying value of mortgage notes payable is attributable to deferred financing costs, net for all borrowings, other than the Winterfell portfolio which is attributable to below market debt intangibles.

(3)The mortgage note carries a fixed interest rate of 3.0% through February 2024, followed by the greater of the fixed rate or one-month LIBOR plus 2.80% through the initial maturity date of February 2026.

(4)Composed of seven individual mortgage notes payable secured by seven healthcare real estate properties, cross-collateralized and subject to cross-default.

(5)Composed of four individual mortgage notes payable secured by four healthcare real estate properties, cross-collateralized and subject to cross-default.

(6)Composed of 32 individual mortgage notes payable secured by 32 healthcare real estate properties, cross-collateralized and subject to cross-default.

(7)Composed of five individual mortgage notes payable secured by five healthcare real estate properties, cross-collateralized and subject to cross-default.

(8)In June 2022, the Company repaid the outstanding financing on the Oak Cottage portfolio at discounted payoff of $3.7 million.

The following table presents future scheduled principal payments on mortgage and other notes payable based on initial maturity (dollars in thousands):

October 1 through December 31, 2022	$	4,948
Years Ending December 31:
2023	31,032
2024	20,406
2025	670,302
2026	46,964
Thereafter	153,398
Total	$	927,050

As of September 30, 2022, the operator for the Arbors portfolio failed to remit contractual rent and comply with other contractual terms of its lease agreements, which resulted in defaults under the operator’s leases, which in turn, resulted in a non-monetary default under the mortgage notes collateralized by the properties. During the nine months ended September 30, 2022, the Company remitted contractual debt service and is in compliance with the other contractual terms under the mortgage notes collateralized by the properties.

The financial covenant requirements under a mortgage note secured by a property in the Rochester portfolio have been waived by the lender through December 31, 2022. During the nine months ended September 30, 2022, the Company remitted contractual debt service and is in compliance with the other contractual terms under the mortgage note. As of September 30, 2022, the mortgage note payable had an outstanding principal balance of $18.4 million, which matures in February 2025. The mortgage note payable is not cross collateralized by the other properties in the Rochester portfolio.

Line of Credit - Related Party

In October 2017, the Company obtained a revolving line of credit from an affiliate of the Sponsor (the “Sponsor Line”). As of September 30, 2022, the Sponsor Line had a borrowing capacity of $35.0 million at an interest rate of 3.5% plus LIBOR and had a maturity date of February 2024. As of September 30, 2022 and December 31, 2021, the Company had no outstanding borrowings under the Sponsor Line. The Sponsor Line was terminated on October 21, 2022 in connection with the termination of the advisory agreement. No amounts were outstanding under the Sponsor Line at the time of termination. Refer to Note 13, “Subsequent Events” for further discussion.

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Related Party Arrangements

9 Months Ended

Sep. 30, 2022

Related Party Transactions [Abstract]

Related Party Arrangements

Related Party Arrangements

Advisor

Prior to the Internalization, the Advisor was responsible for managing the Company’s affairs on a day-to-day basis and for identifying, acquiring, originating and asset managing investments on behalf of the Company. For such services, to the extent permitted by law and regulations, the Advisor received fees and reimbursements from the Company. Pursuant to the advisory agreement, the Advisor could defer or waive fees in its discretion.

In connection with the Internalization, the advisory agreement was terminated on October 21, 2022. Refer to Note 13, “Subsequent Events” for further discussion.

Fees to Advisor

Asset Management Fee

Prior to the termination of the advisory agreement, the Advisor received a monthly asset management fee equal to one-twelfth of 1.5% of the Company’s most recently published aggregate estimated net asset value, as may be subsequently adjusted for any special distribution declared by the board of directors in connection with a sale, transfer or other disposition of a substantial portion of the Company’s assets. From January 1, 2022 through the October 21, 2022 termination of the advisory agreement, the fee was reduced if the Company’s corporate cash balance exceeded $75.0 million, subject to the terms and conditions set forth in the advisory agreement.

Effective July 1, 2021, the asset management fee was paid entirely in shares of the Company’s common stock at a price per share equal to the most recently published net asset value per share.

Acquisition Fee

Effective January 1, 2018, the Advisor no longer received an acquisition fee in connection with the Company’s acquisitions of real estate properties or debt investments.

Disposition Fee

Effective June 30, 2020, the Advisor no longer had the potential to receive a disposition fee in connection with the sale of real estate properties or debt investments.

Reimbursements to Advisor

Operating Costs

Prior to the termination of the advisory agreement, the Advisor was entitled to receive reimbursement for direct and indirect operating costs incurred by the Advisor in connection with administrative services provided to the Company. The Advisor allocated, in good faith, indirect costs to the Company related to the Advisor’s and its affiliates’ employees, occupancy and other general and administrative costs and expenses in accordance with the terms of, and subject to the limitations contained in, the advisory agreement with the Advisor. The indirect costs included the Company’s allocable share of the Advisor’s compensation and benefit costs associated with dedicated or partially dedicated personnel who spent all or a portion of their time managing the Company’s affairs, based upon the percentage of time devoted by such personnel to the Company’s affairs. The indirect costs also included rental and occupancy, technology, office supplies and other general and administrative costs and expenses. However, there was no reimbursement for personnel costs related to executive officers (although reimbursement for certain executive officers of the Advisor was permissible) and other personnel involved in activities for which the Advisor received an acquisition fee or a disposition fee. The Advisor allocated these costs to the Company relative to its and its affiliates’ other managed companies in good faith and reviewed the allocation with the Company’s board of directors, including its independent directors. The Advisor updated the board of directors on a quarterly basis of any material changes to the expense allocation and provided a detailed review to the board of directors, at least annually, and as otherwise requested by the board of directors.

The Company reimbursed the Advisor quarterly for operating costs (including the asset management fee) based on a calculation for the four preceding fiscal quarters not to exceed the greater of: (i) 2.0% of its average invested assets; or (ii) 25.0% of its net income determined without reduction for any additions to reserves for depreciation, loan losses or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Notwithstanding the above, the Company could reimburse the Advisor for expenses in excess of this limitation if a majority of the Company’s independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. The Company had calculated the expense reimbursement quarterly based upon the trailing twelve-month period. As of September 30, 2022, the Advisor did not have any unreimbursed operating costs which remained eligible to be allocated to the Company.

As of September 30, 2022, the outstanding operating costs reimbursable to the Advisor totaled $2.5 million and were reimbursed by the Company during the fourth quarter of 2022. The Advisor continued to incur direct and indirect operating costs on behalf of the Company through the termination of the advisory agreement on October 21, 2022. In addition, the Company will pay the Advisor’s costs for certain services for a transition period. Refer to Note 13, “Subsequent Events” for further discussion.

Summary of Fees and Reimbursements

The following table presents the fees and reimbursements incurred and paid to the Advisor (dollars in thousands):

Type of Fee or Reimbursement		Due to Related Party as of December 31, 2021		Nine months Ended September 30, 2022				Due to Related Party as of September 30, 2022 (Unaudited)
	Financial Statement Location			Incurred		Paid
Fees to Advisor Entities
Asset management	Asset management fees-related party	$	937	$	7,532	$	(7,657)	$	812
Reimbursements to Advisor Entities
Operating costs	General and administrative expenses	6,401		8,789		(12,655)		2,535
Total		$	7,338	$	16,321	$	(20,312)	$	3,347

Pursuant to the advisory agreement, for the nine months ended September 30, 2022, the Company issued 2.0 million shares totaling $7.7 million, based on the estimated value per share on the date of each issuance, to an affiliate of the Advisor as part of its asset management fee. The Company will issue shares to satisfy outstanding asset management fees incurred and payable through the termination of the advisory agreement on October 21, 2022. As of September 30, 2022, the Advisor, the Sponsor and their affiliates owned a total of 9.4 million shares, or $36.6 million of the Company’s common stock based on the Company’s most recent estimated value per share. As of September 30, 2022, the Advisor, the Sponsor and their affiliates owned 4.8% of the total outstanding shares of the Company’s common stock.

Incentive Fee

The Special Unit Holder, an affiliate of the Advisor, is entitled to receive distributions equal to 15.0% of net cash flows of the Company, whether from continuing operations, repayment of loans, disposition of assets or otherwise, but only after stockholders have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.75% cumulative, non-compounded annual pre-tax return on such invested capital. From inception through September 30, 2022, the Special Unit Holder has not received any incentive fees from the Company.

Investments in Joint Ventures

Solstice, the manager of the Winterfell portfolio, is a joint venture between affiliates of ISL, which owns 80.0%, and the Company, which owns 20.0%. For the nine months ended September 30, 2022, the Company recognized property management fee expense of $4.1 million paid to Solstice related to the Winterfell portfolio.

The below table indicates the Company’s investments for which the Sponsor is also an equity partner in the joint venture. Each investment was approved by the Company’s board of directors, including all of its independent directors. Refer to Note 4, “Investments in Unconsolidated Ventures” for further discussion of these investments:

Portfolio	Partner(s)	Acquisition Date	Ownership
Eclipse	NRF and Partner/ Formation Capital, LLC	May 2014	5.6%
Diversified US/UK	NRF and Partner	December 2014	14.3%

Line of Credit - Related Party

The Company had a Sponsor Line, which provided up to $35.0 million at an interest rate of 3.5% plus LIBOR. The Sponsor Line was terminated on October 21, 2022 in connection with the termination of the advisory agreement. Refer to Note 13, “Subsequent Events” for further discussion.

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Equity-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Equity-Based Compensation

Equity-Based Compensation

The Company adopted a long-term incentive plan, as amended (the “Plan”), which it may use to attract and retain qualified officers, directors, employees and consultants, as well as an independent directors compensation plan, which is a component of the Plan. Under the Plan, 2.0 million shares of restricted common stock were eligible to be issued for any equity-based awards granted under the Plan.

Pursuant to the Plan, as of September 30, 2022, the Company’s independent directors were granted a total of 159,932 shares of restricted common stock and 116,712 restricted stock units totaling $1.3 million and $0.5 million, respectively, based on the share price on the date of each grant.

The restricted common stock and restricted stock units granted generally vest quarterly over two years in equal installments and will become fully vested on the earlier occurrence of: (i) the termination of the independent director’s service as a director due to his or her death or disability; or (ii) a change in control of the Company. The restricted stock units are convertible, on a one-for-one basis, into shares of the Company’s common stock upon the earlier occurrence of: (i) the termination of the independent director’s service as a director; or (ii) a change in control of the Company.

The Company recognized equity-based compensation expense of $56,875 and $55,625 for the three months ended September 30, 2022 and 2021, respectively, and $150,042 and $174,458 for the nine months ended September 30, 2022 and 2021, respectively. Equity-based compensation expense is recorded in general and administrative expenses in the consolidated statements of operations.

Unrecognized expense related to unvested restricted common stock and restricted stock units totaled $268,125 and $223,167 as of September 30, 2022 and December 31, 2021, respectively. The Company had 4,800 shares of restricted common stock that were unvested as of December 31, 2021 and have fully vested as of September 30, 2022. Unvested restricted stock units totaled 68,703 and 50,130 as of September 30, 2022 and December 31, 2021, respectively.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Common Stock

The Company stopped accepting subscriptions for its Offering on December 17, 2015 and all of the shares initially registered for its Offering were issued on or before January 19, 2016. The Company issued 173.4 million shares of common stock generating gross proceeds of $1.7 billion, excluding proceeds from the DRP.

Distribution Reinvestment Plan

The Company adopted the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price under the Company’s initial DRP was $9.50. In connection with its determination of the offering price for shares of the Company’s common stock in the follow-on offering, the board of directors determined that distributions may be reinvested in shares of the Company’s common stock at a price of $9.69 per share, which was approximately 95% of the offering price of $10.20 per share established for purposes of the follow-on offering. In April 2016, the board of directors determined that distributions may be reinvested in shares of the Company’s common stock at a price equal to the most recent estimated value per share of common stock. The following table presents the estimated value per share of common stock based on when the value became effective:

Effective Date	Estimated Value per Share		Valuation Date
April 2016	$	8.63	12/31/2015
December 2016	9.10		6/30/2016
December 2017	8.50		6/30/2017
December 2018	7.10		6/30/2018
December 2019	6.25		6/30/2019
December 2020	3.89		6/30/2020
November 2021	3.91		6/30/2021

Refer to Part II, Item 5. “Other Items” for additional details on the Company’s most recent published estimated value per share of common stock.

No selling commissions or dealer manager fees were paid on shares issued pursuant to the DRP. The board of directors of the Company may amend, suspend or terminate the DRP for any reason upon ten-days’ notice to participants, except that the Company may not amend the DRP to eliminate a participant’s ability to withdraw from the DRP. In April 2022, the Company’s board of directors elected to suspend the DRP, effective April 30, 2022. As a result, all future distributions, if any, will be paid in cash.

Since inception, the Company issued 25.7 million shares of common stock, generating gross offering proceeds of $232.6 million pursuant to the DRP. For the nine months ended September 30, 2022, the Company has not issued shares of common stock pursuant to the DRP.

Distributions

Effective February 1, 2019, the Company’s board of directors determined to suspend recurring distributions in order to preserve capital and liquidity.

On April 20, 2022, the Company’s board of directors declared a special distribution of $0.50 per share (the “Special Distribution”) for each stockholder of record on May 2, 2022 totaling $97.1 million. On or around May 5, 2022, $97.0 million of the Special Distribution was paid in cash and an outstanding distribution payable as of September 30, 2022 is attributable to restricted stock units and will be paid upon the conversion of the units to shares of the Company’s common stock. The outstanding distribution payable of $33,419 is recorded as other liabilities on the accompanying consolidated balance sheets as of September 30, 2022.

In order to continue to qualify as a REIT, the Company must distribute annually dividends equal to at least 90% of its REIT taxable income (with certain adjustments). The Company did not have REIT taxable income for its taxable year ending December 31, 2021, therefore, it was not required to make distributions to its stockholders in 2021 to qualify as a REIT. The Company’s most recently filed tax return is for the year ended December 31, 2021 and includes a net operating loss carry-forward of $226.5 million.

Share Repurchase Program

The Company adopted the share repurchase program (the “Share Repurchase Program”) that enabled stockholders to sell their shares to the Company in limited circumstances. The Company is not obligated to repurchase shares under the Share Repurchase Program. The Company may amend, suspend or terminate the Share Repurchase Program at its discretion at any time, subject to certain notice requirements.

In April 2020, the Company’s board of directors determined to suspend all repurchases under the Share Repurchase Program effective April 30, 2020 in order to preserve capital and liquidity and has not repurchased any shares during the nine months ended September 30, 2022.

The Company previously funded repurchase requests with cash on hand, borrowings or other available capital.

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Non-controlling Interests

9 Months Ended

Sep. 30, 2022

Noncontrolling Interest [Abstract]

Non-controlling Interests

Non-controlling Interests

Operating Partnership

Non-controlling interests include the aggregate limited partnership interests in the Operating Partnership held by limited partners, other than the Company. Income (loss) attributable to the non-controlling interests is based on the limited partners’ ownership percentage of the Operating Partnership. Income (loss) allocated to the Operating Partnership non-controlling interests for the three and nine months ended September 30, 2022 and 2021 was de minimis.

Other

Other non-controlling interests represent third-party equity interests in ventures that are consolidated with the Company’s financial statements. Net loss attributable to the other non-controlling interests was $0.1 million and $0.3 million for the three and nine months ended September 30, 2022, respectively. Net loss attributable to the other non-controlling interests was $0.1 million for the three months ended September 30, 2021 and net income attributable to the other non-controlling interests was $0.1 million for the nine months ended September 30, 2021.

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Fair Value

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

Fair Value Measurement

The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1.Quoted prices for identical assets or liabilities in an active market.

Level 2.Financial assets and liabilities whose values are based on the following:

a)Quoted prices for similar assets or liabilities in active markets.

b)Quoted prices for identical or similar assets or liabilities in non-active markets.

c)Pricing models whose inputs are observable for substantially the full term of the asset or liability.

d)Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3.Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

Fair Value of Financial Instruments

U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value.

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities (dollars in thousands):

	September 30, 2022 (Unaudited)						December 31, 2021
	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Financial liabilities:(1)
Mortgage and other notes payable, net	$	927,050	$	915,964	$	883,040	$	943,765	$	929,811	$	889,485

_______________________________________

(1)The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of the reporting date. Although management is not aware of any factors that would significantly affect fair value, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Mortgage and Other Notes Payable

The Company primarily uses rates currently available with similar terms and remaining maturities to estimate fair value. These measurements are determined using comparable U.S. Treasury and LIBOR rates as of the end of the reporting period. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Derivative Instruments

For certain mortgage notes payable, the Company has interest rate caps with fair values that are de minimis as of September 30, 2022.

Nonrecurring Fair Values

The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for sale or otherwise, write-down of asset values due to impairment.

The following table summarizes the fair value, measured at the time of impairment, of Level 3 assets which have been measured at fair value on a nonrecurring basis during the periods presented and the associated impairment losses (dollars in thousands):

	September 30, 2022 (Unaudited)				December 31, 2021
	Fair Value		Impairment Losses		Fair Value		Impairment Losses
Operating real estate, net(1)	$	80,931	$	30,900	$	11,793	$	5,386

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(1)During the nine months ended September 30, 2022, the Company recorded impairment losses totaling $0.6 million for property damage sustained by facilities in its Winterfell portfolio. The fair value and impairment losses of these facilities are excluded from the table as of September 30, 2022.

Operating Real Estate, Net

Operating real estate that is impaired is carried at fair value at the time of impairment. Impairment was driven by various factors that impacted undiscounted future net cash flows, including declines in operating performance, market growth assumptions, and expected margins to be generated by the properties. Fair value of impaired operating real estate was estimated based upon various approaches including discounted cash flow analysis using terminal capitalization rates ranging from 6.0% to 8.0% and discount rates ranging from 8.5% to 10.5%, third party appraisals and offer prices.

Assets Held For Sale

Assets held for sale are carried at the lower of amortized cost or fair value. Assets held for sale that were written down to fair value were generally valued using either broker opinions of value, or a combination of market information, including third-party appraisals and indicative sale prices, adjusted as deemed appropriate by management to account for the inherent risk associated with specific properties. In all cases, fair value of real estate held for sale is reduced for estimated selling costs. As of September 30, 2022 and December 31, 2021, the Company did not have any assets classified as held for sale.

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Segment Reporting

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company conducts its business through the following five segments, which are based on how management reviews and manages its business.

•Direct Investments - Operating - Healthcare properties operated pursuant to management agreements with healthcare managers.

•Direct Investments - Net Lease - Healthcare properties operated under net leases with an operator.

•Unconsolidated Investments - Healthcare joint ventures, including properties operated under net leases with operators or pursuant to management agreements with healthcare managers, in which the Company owns a minority interest.

•Debt Investments - Mortgage loans or mezzanine loans to owners of healthcare real estate. The Company’s remaining mezzanine loan was repaid in August 2021.

•Corporate - The corporate segment includes corporate level asset management fees - related party and general and administrative expenses.

The Company primarily generates rental and resident fee income from its direct investments. Additionally, the Company reports its proportionate interest of revenues and expenses from unconsolidated investments through equity in earnings (losses) of unconsolidated ventures. During the three and nine months ended September 30, 2021, the Company generated interest income on its real estate debt investment.

The following tables present segment reporting (dollars in thousands):

	Direct Investments
Three Months Ended September 30, 2022	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	724	$	46,715	$	—	$	—	$	300	$	47,739
Interest income on debt investments	—		—		—		—		—		—
Property operating expenses	—		(35,134)		—		—		—		(35,134)
Interest expense	(907)		(10,107)		—		—		—		(11,014)
Transaction costs	—		—		—		—		(857)		(857)
Asset management fees - related party	—		—		—		—		(2,428)		(2,428)
General and administrative expenses	—		(8)		—		—		(2,851)		(2,859)
Depreciation and amortization	(870)		(8,772)		—		—		—		(9,642)
Impairment loss	(18,500)		—		—		—		—		(18,500)
Other income, net	—		—		—		—		—		—
Realized gain (loss) on investments and other	—		325		—		—		—		325
Equity in earnings (losses) of unconsolidated ventures	—		—		2,872		—		—		2,872
Income tax expense	—		(15)		—		—		—		(15)
Net income (loss)	$	(19,553)	$	(6,996)	$	2,872	$	—	$	(5,836)	$	(29,513)

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(1)Includes unallocated asset management fee-related party and general and administrative expenses.

	Direct Investments
Three Months Ended September 30, 2021	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	6,012	$	58,364	$	—	$	—	$	38	$	64,414
Interest income on debt investments	—		—		—		1,067		—		1,067
Real estate properties - operating expenses	—		(45,784)		—		—		—		(45,784)
Interest expense	(2,907)		(12,768)		—		—		(105)		(15,780)
Transaction costs	—		—		—		—		—		—
Asset management fees - related party	—		—		—		—		(2,769)		(2,769)
General and administrative expenses	(64)		(111)		—		—		(2,257)		(2,432)
Depreciation and amortization	(3,027)		(10,801)		—		—		—		(13,828)
Impairment loss	—		(4,600)		—		—		—		(4,600)
Other income, net	—		—		—		—		—		—
Realized gain (loss) on investments and other	—		—		75		—		—		75
Equity in earnings (losses) of unconsolidated ventures	—		—		7,943		—		—		7,943
Income tax benefit (expense)	—		(59)		—		—		—		(59)
Net income (loss)	$	14	$	(15,759)	$	8,018	$	1,067	$	(5,093)	$	(11,753)

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(1)Includes unallocated asset management fee-related party and general and administrative expenses.

	Direct Investments
Nine Months Ended September 30, 2022	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	1,220	$	134,768	$	—	$	—	$	457	$	136,445
Interest income on debt investments	—		—		—		—		—		—
Property operating expenses	(35)		(101,223)		—		—		—		(101,258)
Interest expense	(2,708)		(29,169)		—		—		—		(31,877)
Transaction costs	—		—		—		—		(857)		(857)
Asset management fees - related party	—		—		—		—		(7,532)		(7,532)
General and administrative expenses	—		(24)		—		—		(10,276)		(10,300)
Depreciation and amortization	(2,601)		(26,504)		—		—		—		(29,105)
Impairment loss	(18,500)		(13,002)		—		—		—		(31,502)
Other income, net	—		77		—		—		—		77
Realized gain (loss) on investments and other	(206)		620		246		—		—		660
Equity in earnings (losses) of unconsolidated ventures	—		—		39,427		—		—		39,427
Income tax expense	—		(45)		—		—		—		(45)
Net income (loss)	$	(22,830)	$	(34,502)	$	39,673	$	—	$	(18,208)	$	(35,867)

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(1)Includes unallocated asset management fee-related party and general and administrative expenses.

	Direct Investments
Nine Months Ended September 30, 2021	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	10,942	$	174,633	$	—	$	—	$	80	$	185,655
Interest income on debt investments	—		—		—		4,667		—		4,667
Property operating expenses	(25)		(136,478)		—		—		—		(136,503)
Interest expense	(8,670)		(38,355)		—		—		(742)		(47,767)
Transaction costs	—		(54)		—		—		—		(54)
Asset management fees - related party	—		—		—		—		(8,307)		(8,307)
General and administrative expenses	(171)		(225)		—		—		(8,148)		(8,544)
Depreciation and amortization	(10,887)		(33,885)		—		—		—		(44,772)
Impairment loss	(786)		(4,600)		—		—		—		(5,386)
Other income, net	—		6,892		—		—		—		6,892
Realized gain (loss) on investments and other	(159)		7,563		75		—		—		7,479
Equity in earnings (losses) of unconsolidated ventures	—		—		17,819		—		—		17,819
Income tax benefit (expense)	—		(85)		—		—		—		(85)
Net income (loss)	$	(9,756)	$	(24,594)	$	17,894	$	4,667	$	(17,117)	$	(28,906)

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(1)Includes unallocated asset management fee-related party and general and administrative expenses.

The following table presents total assets by segment (dollars in thousands):

	Direct Investments
Total Assets:	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
September 30, 2022 (Unaudited)	$	84,668	$	891,283	$	205,207	$	—	$	78,081	$	1,259,239
December 31, 2021	104,809		908,517		212,309		—		187,238		1,412,873

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(1)Represents primarily corporate cash and cash equivalents balances.

The following table presents the operators and managers of the Company’s properties, excluding properties owned through unconsolidated joint ventures (dollars in thousands):

	As of September 30, 2022		Nine Months Ended September 30, 2022
Operator / Manager	Properties Under Management	Units Under Management(1)	Property and Other Revenues(2)		% of Total Property and Other Revenues
Solstice Senior Living(3)	32	4,000	$	82,607	60.5	%
Watermark Retirement Communities	14	1,753	33,770		24.8	%
Avamere Health Services	5	453	14,764		10.8	%
Integral Senior Living	1	44	3,628		2.7	%
Arcadia Management(4)	4	572	1,220		0.9	%
Other(5)	—	—	456		0.3	%
Total	56	6,822	$	136,445	100.0	%

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(1)Represents rooms for ALFs and ILFs and beds for MCFs and SNFs, based on predominant type.

(2)Includes rental income received from the Company’s net lease properties as well as rental income, ancillary service fees and other related revenue earned from ILF residents and resident fee income derived from the Company’s ALFs and MCFs, which includes resident room and care charges, ancillary fees and other resident service charges.

(3)Solstice is a joint venture of which affiliates of ISL own 80%.

(4)During the nine months ended September 30, 2022, the Company recorded rental income to the extent payments were received.

(5)Consists primarily of interest income earned on corporate-level cash accounts.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

As of September 30, 2022, the Company believes there are no material contingencies that would affect its results of operations, cash flows or financial position.

Litigation and Claims

The Company may be involved in various litigation matters arising in the ordinary course of its business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, any current legal proceedings are not expected to have a material adverse effect on its financial position or results of operations.

The Company’s tenants, operators and managers may be involved in various litigation matters arising in the ordinary course of their business. The unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect such tenants’, operators’ or managers’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to the Company, which, in turn, could have a material adverse effect on the Company. The effects of COVID-19 may also lead to heightened risk of litigation, with an ensuing increase in litigation-related costs.

Environmental Matters

The Company follows a policy of monitoring its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at its properties, the Company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its consolidated financial position, results of operations or cash flows. Further, the Company is not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that it believes would require additional disclosure or the recording of a loss contingency.

General Uninsured Losses

The Company obtains various types of insurance to mitigate the impact of professional liability, property, business interruption, liability, flood, windstorm, earthquake, environmental and terrorism related losses. The Company attempts to obtain appropriate policy terms, conditions, limits and deductibles considering the relative risk of loss, the cost of such coverage and current industry practice. There are, however, certain types of extraordinary losses, such as those due to acts of war or other events, including those that are related to the COVID-19 pandemic, that may be either uninsurable or not economically insurable.

Other Other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business, as well as commitments to fund capital expenditures for certain net lease properties. These commitments do not have a required minimum funding and are limited by agreed upon maximum annual funding amounts.

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Subsequent Events

9 Months Ended

Sep. 30, 2022

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The following is a discussion of material events which have occurred subsequent to September 30, 2022 through the issuance of the consolidated financial statements.

Internalization

On October 21, 2022, the Company completed the Internalization. In connection with the Internalization, on October 21, 2022, the Company entered into a Termination Agreement with the Advisor, the Sponsor and the Operating Partnership, which provides for the immediate termination of the advisory agreement, as well as the final settlement of any amounts owing under the advisory agreement and the transition of certain employees from the Advisor to the Company (including our assumption of certain related employment liabilities). In addition, the Advisor agreed to vote its shares of the Company’s common stock in favor of the director nominees recommended by the board of directors and say-on-pay at the first annual meeting following the Internalization, provided the Advisor retains a minimum share ownership. No termination fee will be paid by the Company to the Advisor in connection with the Internalization.

Sponsor Line of Credit

In connection with the termination of the advisory agreement, the Company’s Sponsor Line was terminated on October 21, 2022. No amounts were outstanding under the Sponsor Line at the time of termination.

Transition Services Agreement

In connection with the Internalization, on October 21, 2022, the Company, the Operating Partnership and the Advisor entered into a Transition Services Agreement (the “TSA”) to facilitate an orderly transition of the Company’s management of its operations. The TSA provides for, among other things, the Advisor to provide certain services for a transition period of up to six months following the Internalization, with the Operating Partnership having the option to extend the initial term once for up to three months. Treasury and accounts payable services will be provided for 12 months and will continue until either party provides at least six months’ notice of termination. The services primarily include technology, insurance, legal, treasury and accounts payable services. The Company will reimburse the Advisor for costs to provide the services, including the allocated cost of employee wages and compensation and incurred out-of-pocket expenses.

Distribution from Unconsolidated Venture

In October 2022, the Espresso joint venture completed the sale of 17 properties. As result of the sale, the Company received a distribution totaling $22.3 million in November 2022.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Accounting

Basis of Accounting

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission on March 18, 2022.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. The Company consolidates entities in which it has a controlling financial interest by first considering if an entity meets the definition of a variable interest entity (“VIE”) for which the Company is deemed to be the primary beneficiary or if the Company has the power to control an entity through majority voting interest or other arrangements. All significant intercompany balances are eliminated in consolidation.

Variable Interest Entities

Variable Interest Entities

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents, has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.

The Company evaluates its investments and financings, including investments in unconsolidated ventures and securitization financing transactions to determine whether each investment or financing is a VIE. The Company analyzes new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing.

As of September 30, 2022, the Company has identified certain consolidated and unconsolidated VIEs. Assets of each of the VIEs, other than the Operating Partnership, may only be used to settle obligations of the respective VIE. Creditors of each of the VIEs have no recourse to the general credit of the Company.

Consolidated VIEs

The most significant consolidated VIEs are the Operating Partnership and certain properties that have non-controlling interests. These entities are VIEs because the non-controlling interests do not have substantive kick-out or participating rights. The Operating Partnership consolidates certain properties that have non-controlling interests. Included in operating real estate, net on the Company’s consolidated balance sheet as of September 30, 2022 is $214.2 million related to such consolidated VIEs. Included in mortgage and other notes payable, net on the Company’s consolidated balance sheet as of September 30, 2022 is $173.8 million, collateralized by the real estate assets of the related consolidated VIEs.

Unconsolidated VIEs

As of September 30, 2022, the Company identified unconsolidated VIEs related to its real estate equity investments with a carrying value of $205.2 million. The Company’s maximum exposure to loss as of September 30, 2022 would not exceed the carrying value of its investment in the VIEs. Based on management’s analysis, the Company determined that it is not the primary beneficiary of these VIEs and, accordingly, they are not consolidated in the Company’s financial statements as of September 30, 2022. The Company did not provide financial support to its unconsolidated VIEs during the nine months ended September 30, 2022. As of September 30, 2022, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to its unconsolidated VIEs.

Voting Interest Entities

Voting Interest Entities

A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote.

The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.

Investments in Unconsolidated Ventures

Investments in Unconsolidated Ventures

A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method or the Company may elect the fair value option.

The Company will account for an investment under the equity method of accounting if it has the ability to exercise significant influence over the operating and financial policies of an entity, but does not have a controlling financial interest. Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of preferred returns and allocation formulas, if any, as described in such governing documents. Equity method investments are recognized using a cost accumulation model, in which the investment is recognized based on the cost to the investor, which includes acquisition fees. The Company records as an expense certain acquisition costs and fees associated with consolidated investments deemed to be business combinations and capitalizes these costs for investments deemed to be acquisitions of an asset, including an equity method investment.

Non-controlling Interests

Non-controlling Interests

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and comprehensive income (loss) attributable to controlling and non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents.

Estimates

Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions. Any estimates of the effects of COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions as reflected and/or discussed in these financial statements are based upon the Company's best estimates using information known to the Company as of the date of this Quarterly Report on Form 10-Q. Such estimates may change and the impact of which could be material.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly-liquid investments with an original maturity date of three months or less to be cash equivalents. Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250,000 per institution. The Company mitigates credit risk by placing cash and cash equivalents with major financial institutions. To date, the Company has not experienced any losses on cash and cash equivalents.

Restricted cash consists of amounts related to operating real estate (escrows for taxes, insurance, capital expenditures, security deposits received from residents and payments required under certain lease agreements) and other escrows required by lenders of the Company’s borrowings.

Operating Real Estate

Operating Real Estate

Operating real estate is carried at historical cost less accumulated depreciation. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their useful life. Ordinary repairs and maintenance are expensed as incurred. Operating real estate is depreciated using the straight-line method over the estimated useful life of the assets, summarized as follows:

Category:	Term:
Building	30 to 50 years
Building improvements	Lesser of the useful life or remaining life of the building
Land improvements	9 to 15 years
Tenant improvements	Lesser of the useful life or remaining term of the lease
Furniture, fixtures and equipment	5 to 14 years

Construction costs incurred in connection with the Company’s investments are capitalized and included in operating real estate, net on the consolidated balance sheets. Construction in progress is not depreciated until the asset is available for its intended use.

Lessee Accounting

Lessee Accounting

A leasing arrangement, a right to control the use of an identified asset for a period of time in exchange for consideration, is classified by the lessee either as a finance lease, which represents a financed purchase of the leased asset, or as an operating lease. For leases with terms greater than 12 months, a lease asset and a lease liability are recognized on the balance sheet at commencement date based on the present value of lease payments over the lease term.

Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the option to extend would be exercised or the option to terminate would not be exercised. As the implicit rate in most leases are not readily determinable, the Company’s incremental borrowing rate for each lease at commencement date is used to determine the present value of lease payments. Consideration is given to the Company’s recent debt financing transactions, as well as publicly

available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating incremental borrowing rates.

Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases.

Right of Use (“ROU”) - Finance Assets

The Company has entered into finance leases for equipment which are included in operating real estate, net on the Company’s consolidated balance sheets. As of September 30, 2022, furniture, fixtures and equipment under finance leases totaled $2.5 million. The leased equipment is amortized on a straight-line basis.

Deferred Costs

Deferred Costs

Deferred costs primarily include deferred financing costs and deferred leasing costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. These costs are recorded against the carrying value of such financing and are amortized to interest expense over the term of the financing using the effective interest method. Unamortized deferred financing costs are expensed to realized gain (loss) on investments and other, when the associated borrowing is repaid before maturity. Costs incurred in seeking financing transactions which do not close are expensed in the period in which it is determined that the financing will not occur. Deferred lease costs consist of fees incurred to initiate and renew operating leases, which are amortized on a straight-line basis over the remaining lease term and are recorded to depreciation and amortization in the consolidated statements of operations.

Identified Intangibles

Identified Intangibles

The Company records acquired identified intangibles, such as the value of in-place leases and other intangibles, based on estimated fair value at the acquisition date. The value allocated to the identified intangibles is amortized over the remaining lease term. In-place leases are amortized into depreciation and amortization expense.

Impairment analysis for identified intangible assets is performed in connection with the impairment assessment of the related operating real estate. An impairment establishes a new basis for the identified intangible asset and any impairment loss recognized is not subject to subsequent reversal. Refer to “—Impairment on Operating Real Estate and Investments in Unconsolidated Ventures” for additional information.

Identified intangible assets are recorded in intangible assets, net on the consolidated balance sheets.

Revenue Recognition

Revenue Recognition

Operating Real Estate

Rental income from operating real estate is derived from leasing of space to healthcare operators, including rent received from the Company’s net lease properties and rent, ancillary service fees and other related revenue earned from ILF residents. Rental income recognition commences when the operator takes legal possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for rentals and expense reimbursements to be paid in monthly installments. Rental income from leases, which includes community and move-in fees, is recognized over the term of the respective leases. ILF resident agreements are generally short-term in nature and may allow for termination with 30 days’ notice.

The Company also generates revenue from operating healthcare properties. Revenue related to operating healthcare properties includes resident room and care charges, ancillary fees and other resident service charges. Rent is charged and revenue is recognized when such services are provided, generally defined per the resident agreement as of the date upon which a resident occupies a room or uses the services. Resident agreements are generally short-term in nature and may allow for termination with 30 days’ notice. Revenue derived from our ALFs, MCFs and CCRCs is recorded in resident fee income in the consolidated statements of operations.

Revenue from operators and residents is recognized at lease commencement only to the extent collection is expected to be probable. This assessment is based on several qualitative and quantitative factors, including and as appropriate, the payment history, ability to satisfy its lease obligations, the value of the underlying collateral or deposit, if any, and current economic conditions. If collection is assessed to not be probable thereafter, lease income recognized is limited to amounts collected, with the reversal of any revenue recognized to date in excess of amounts received. If collection is subsequently reassessed to be probable, revenue is adjusted to reflect the amount that would have been recognized had collection always been assessed as probable.

The operator of the Company’s remaining four net lease properties failed to remit contractual monthly rent obligations and the Company deemed it not probable that these obligations will be satisfied in the foreseeable future. For the nine months ended September 30, 2022, the Company recorded rental income to the extent rental payments were received.

For the three months ended September 30, 2022 and 2021, total property and other revenues includes variable lease revenue of $2.1 million and $3.5 million, respectively. For the nine months ended September 30, 2022 and 2021, total property and other

revenue includes variable lease revenue of $9.2 million and $10.1 million, respectively. Variable lease revenue includes ancillary services provided to operator/residents, as well as non-recurring services and fees at the Company’s operating facilities.

The Company did not receive or recognize any grant income from the Provider Relief Fund administered by the U.S. Department of Health and Human Services during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, the Company recognized $7.4 million of grant income. The grant income is classified as other income, net in the consolidated statements of operations. These grants are intended to mitigate the negative financial impact of the COVID-19 pandemic as reimbursements for expenses incurred to prevent, prepare for and respond to COVID-19 and lost revenues attributable to COVID-19. Provided that the Company attests to and complies with certain terms and conditions of the grants, the Company will not be required to repay these grants in the future.

Real Estate Debt Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale. The Company had one debt investment, which was repaid in full in August 2021.

Impairment on Operating Real Estate and Investments in Unconsolidated Ventures

Impairment on Operating Real Estate and Investments in Unconsolidated Ventures

At this time, it is difficult for the Company to assess and estimate the future economic effects of the COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions with any meaningful precision. The future economic effects will depend on many factors beyond the Company’s control and knowledge. The resulting effect on impairment of the Company's real estate held for investment and held for sale and investments in unconsolidated ventures may materially differ from the Company's current expectations and further impairment charges may be recorded in future periods.

Operating Real Estate

The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow generated by the property is less than the carrying value. In conducting this review, the Company considers U.S. macroeconomic factors, real estate and healthcare sector conditions, together with asset specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value and recorded in impairment loss in the consolidated statements of operations.

Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal cost, with any write-down to disposal cost recorded as an impairment loss. For any increase in fair value less disposal cost subsequent to classification as held for sale, the impairment may be reversed, but only up to the amount of cumulative loss previously recognized.

The Company considered the potential impact of the lasting effects of the COVID-19 pandemic, inflation, rising interest rates, risk of recession and other economic conditions on the future net operating income of its healthcare real estate held for investment as an indicator of impairment. Fair values were estimated based upon the income capitalization approach, using net operating income for each property and applying indicative capitalization rates.

Investments in Unconsolidated Ventures

The Company reviews its investments in unconsolidated ventures for which the Company did not elect the fair value option on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value may be impaired or that its carrying value may not be recoverable. An investment is considered impaired if the projected net recoverable amount over the expected holding period is less than the carrying value. In conducting this review, the Company considers global macroeconomic factors, including real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred and is considered to be other than temporary, the loss is measured as the excess of the carrying value of the investment over the estimated fair value and recorded in equity in earnings (losses) of unconsolidated ventures in the consolidated statements of operations.

During the nine months ended September 30, 2022, the Company did not impair any of its investments in unconsolidated ventures, however, the underlying joint ventures recorded impairments and reserves on properties in their respective portfolios, which the Company recognized through equity in earnings (losses), of which the Company’s proportionate share was de minimis. During the nine months ended September 30, 2021, the Company did not impair any of its investments in unconsolidated ventures, nor did the underlying joint ventures record any impairments or reserves on properties in their respective portfolios.

Credit Losses on Receivables

Credit Losses on Receivables

The current expected credit loss model, in estimating expected credit losses over the life of a financial instrument at the time of origination or acquisition, considers historical loss experiences, current conditions and the effects of reasonable and supportable expectations of changes in future macroeconomic conditions. The Company assesses the estimate of expected credit losses on a quarterly basis or more frequently as necessary. The Company considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The Company measures expected credit losses of receivables on a collective basis when similar risk characteristics exist. If the Company determines that a particular receivable does not share risk characteristics with its other receivables, the Company evaluates the receivable for expected credit losses on an individual basis.

When developing an estimate of expected credit losses on receivables, the Company considers available information relevant to assessing the collectability of cash flows. This information may include internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. The Company considers relevant qualitative and quantitative factors that relate to the environment in which the Company operates and are specific to the borrower.

Further, the fair value of the collateral, less estimated costs to sell, may be used when determining the allowance for credit losses for a receivable for which the repayment is expected to be provided substantially through the sale of the collateral when the borrower is experiencing financial difficulty.

Acquisition Fees and Expenses

Acquisition Fees and ExpensesThe total of all acquisition fees and expenses for an investment, including acquisition fees to the Advisor, cannot exceed, in the aggregate, 6.0% of the contract purchase price of such investment unless such excess is approved by a majority of the Company’s directors, including a majority of its independent directors. The Company records as an expense for certain acquisition costs and fees associated with transactions deemed to be business combinations in which it consolidates the asset and capitalizes these costs for transactions deemed to be acquisitions of an asset, including an equity investment. Effective January 1, 2018, the Advisor no longer receives an acquisition fee in connection with the Company’s acquisitions of real estate properties or debt investments. On October 21, 2022, the advisory agreement was terminated. Refer to Note 13, “Subsequent Events” for further discussion.

Equity-Based Compensation

Equity-Based Compensation

The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award at the time of grant. All fixed equity-based awards to directors, which have no vesting conditions other than time of service, are amortized to compensation expense over the awards’ vesting period on a straight-line basis. Equity-based compensation is classified within general and administrative expenses in the consolidated statements of operations.

Income Taxes

Income Taxes

The Company elected to be taxed as a REIT and to comply with the related provisions of the Internal Revenue Code beginning in its taxable year ended December 31, 2013. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders as long as certain asset, gross income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute dividends equal to at least 90.0% of its REIT taxable income (with certain adjustments) to its stockholders and meet certain other requirements. The Company believes that all of the criteria to maintain the Company’s REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax and potential interest and penalties, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. The Company’s accounting policy with respect to interest and penalties is to classify these amounts as a component of income tax expense, where applicable. The Company has assessed its tax positions for all open tax years, which include 2018 to 2021, and concluded there were no material uncertainties to be recognized.

The Company may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income.

The Company made a joint election to treat certain subsidiaries as taxable REIT subsidiaries (“TRS”) which may be subject to U.S. federal, state and local income taxes. In general, a TRS of the Company may perform services for managers/operators/residents of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate related business.

Certain subsidiaries of the Company are subject to taxation by federal and state authorities for the periods presented. Income taxes are accounted for by the asset/liability approach in accordance with U.S. GAAP. Deferred taxes, if any, represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. Such amounts arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates in the period which such changes are enacted. A provision for income tax represents the total of income taxes paid or payable for the current period, plus the change in deferred taxes. Current and deferred taxes are provided on the portion of earnings (losses) recognized by the Company with respect to its interest in the TRS. Deferred income tax assets and liabilities are calculated based on temporary differences between the Company’s U.S. GAAP consolidated financial statements and the federal and state income tax basis of assets and liabilities as of the consolidated balance sheet date. The Company evaluates the realizability of its deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if any, are included in provision for income tax benefit (expense) in the consolidated statements of operations.

Comprehensive Income (Loss)

Comprehensive Income (Loss) The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and other comprehensive income (loss) (“OCI”). The only component of OCI for the Company is foreign currency translation adjustments related to its investment in an unconsolidated venture.

Foreign Currency

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment is recorded as a component of accumulated OCI in the consolidated statements of equity.

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period.

As of September 30, 2022 and December 31, 2021, the Company had exposure to foreign currency through an investment in an unconsolidated venture, the effects of which are reflected as a component of accumulated OCI in the consolidated statements of equity and in equity in earnings (losses) in the consolidated statements of operations.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Accounting Standards Adopted in 2022

Disclosures by Business Entities about Government Assistance—In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10: Disclosures by Business Entities about Government Assistance. The guidance requires expanded disclosure for transactions involving the receipt of government assistance. Required disclosures include a description of the nature of transactions with government entities, accounting policies for such transactions and their impact to the Company’s consolidated financial statements. The Company adopted ASU No. 2021-10 on January 1, 2022, with no transitional impact upon adoption.

Certain Leases with Variable Lease Payments—In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The guidance in ASU No. 2021-05 amends the lease classification requirements for the lessors under certain leases containing variable payments to align with practice under ASC 840. Under the guidance, the lessor should classify and account for a lease with variable lease payments that does not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in ASC No. 842-10-25-2 through 25-3; and 2) the lessor would have otherwise recognized a day-one loss. The amendments in ASU No. 2021-05 are effective for fiscal years beginning after December 15, 2021. The Company adopted ASU No. 2021-05 on January 1, 2022, with no transitional impact upon adoption.

Future Application of Accounting Standards

Reference Rate Reform—In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance in ASU No. 2020-04 is optional, the election of which provides temporary relief for the accounting effects on contracts, hedging relationships and other transactions impacted by the transition from interbank offered rates (such as London Interbank Offered Rate (“LIBOR”)) to alternative reference rates (such as Secured Overnight Financing Rate). Modification of contractual terms to effect the reference rate reform transition on debt, leases, derivatives and other contracts is eligible for relief from modification accounting and accounted for as a continuation of the existing contract. ASU No. 2020-04 is effective upon issuance through December 31, 2022, and may be applied retrospectively to January 1, 2020. The Company may elect practical expedients or exceptions as applicable over time as reference rate reform activities occur.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The guidance amends the scope of the recent reference rate reform guidance issued in ASU No. 2020-04. New optional expedients allow derivative instruments impacted by changes in the interest rate used for margining, discounting, or contract price alignment to qualify for certain optional relief. The guidance was effective immediately and may be applied retrospectively to January 1, 2020. The Company may elect practical expedients or exceptions as applicable over time as reference rate reform activities occur.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Reconciliation of Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as reported on the consolidated balance sheets to the total of such amounts as reported on the consolidated statements of cash flows (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
Cash and cash equivalents	$	95,145	$	200,473
Restricted cash	12,537		10,465
Total cash, cash equivalents and restricted cash	$	107,682	$	210,938

Reconciliation of Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as reported on the consolidated balance sheets to the total of such amounts as reported on the consolidated statements of cash flows (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
Cash and cash equivalents	$	95,145	$	200,473
Restricted cash	12,537		10,465
Total cash, cash equivalents and restricted cash	$	107,682	$	210,938

Schedule of Operating Real Estate Estimated Useful Life

Operating real estate is depreciated using the straight-line method over the estimated useful life of the assets, summarized as follows:

Category:	Term:
Building	30 to 50 years
Building improvements	Lesser of the useful life or remaining life of the building
Land improvements	9 to 15 years
Tenant improvements	Lesser of the useful life or remaining term of the lease
Furniture, fixtures and equipment	5 to 14 years

Schedule of Future Minimum Lease Payments for Capital Leases

The following table presents the future minimum lease payments under finance leases and the present value of the minimum lease payments, which are included in other liabilities on the Company’s consolidated balance sheets (dollars in thousands):

October 1 through December 31, 2022	$	69
Years Ending December 31:
2023	93
2024	60
2025	29
2026	24
Thereafter	28
Total minimum lease payments	$	303
Less: Amount representing interest	(29)
Present value of minimum lease payments	$	274

Schedule of Intangible Assets, Net

The following table presents intangible assets, net (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
In-place lease value	$	120,149	$	120,149
Less: Accumulated amortization	(117,812)		(117,559)
Intangible assets, net	$	2,337	$	2,590

Schedule of Deferred Costs and Intangible Assets, Future Amortization Expense

The following table presents future amortization of in-place lease value (dollars in thousands):

October 1 through December 31, 2022	$	84
Years Ending December 31:
2023	337
2024	337
2025	337
2026	337
Thereafter	905
Total	$	2,337

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Operating Real Estate (Tables)

9 Months Ended

Sep. 30, 2022

Real Estate [Abstract]

Schedule of Operating Real Estate

The following table presents operating real estate, net (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021
Land	$	121,518	$	121,518
Land improvements	18,453		17,798
Buildings and improvements	945,526		965,630
Tenant improvements	322		—
Construction in progress	12,154		8,141
Furniture, fixtures and equipment	88,910		84,813
Subtotal	$	1,186,883	$	1,197,900
Less: Accumulated depreciation	(254,153)		(225,301)
Operating real estate, net	$	932,730	$	972,599

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Investments in Unconsolidated Ventures (Tables)

9 Months Ended

Sep. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

All investments in unconsolidated ventures are accounted for under the equity method. The following table presents the Company’s investments in unconsolidated ventures (dollars in thousands):

				Carrying Value(1)
Portfolio	Acquisition Date	Ownership		September 30, 2022 (Unaudited)		December 31, 2021
Trilogy	Dec-2015	23.2	%	$	130,224	$	126,366
Diversified US/UK	Dec-2014	14.3	%	69,815		80,766
Eclipse	May-2014	5.6	%	3,295		4,856
Espresso(2)	Jul-2015	36.7	%	1,593		—
Subtotal				$	204,927	$	211,988
Solstice(3)	Jul-2017	20.0	%	280		321
Total				$	205,207	$	212,309

_______________________________________

(1)Includes $1.3 million, $13.4 million and $9.8 million of capitalized acquisition costs for the Company’s investments in the Eclipse, Diversified US/UK, and Trilogy joint ventures, respectively.

(2)As a result of impairments and other non-cash reserves recorded by the joint venture, the Company’s carrying value of its investment in Espresso was reduced to zero in the fourth quarter of 2018. The Company recognized its proportionate share of earnings and losses of the Espresso joint venture through the carrying value of its mezzanine loan debt investment, which was originated to a subsidiary of the Espresso joint venture, through the time of its repayment in August 2021. During the nine months ended September 30, 2022, the Espresso joint venture recognized gains on sub-portfolio sales, which increased the Company’s carrying value in its investment as of September 30, 2022.

(3)Represents investment in Solstice Senior Living, LLC (“Solstice”), the manager of the Winterfell portfolio. Solstice is a joint venture between affiliates of Integral Senior Living, LLC (“ISL”), a management company of ILF, ALF and MCF founded in 2000, which owns 80.0%, and the Company, which owns 20.0%.

The following table presents the results of the Company’s investment in unconsolidated ventures (dollars in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Portfolio	Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution		Equity in Earnings (Losses)		Cash Distribution
Trilogy	$	6,052	$	2,300	$	763	$	—	$	10,757	$	6,900	$	(2,839)	$	—
Diversified US/UK	(2,611)		358		(330)		966		(4,060)		2,290		(2,387)		3,256
Eclipse	(344)		—		(194)		2,898		(940)		620		3,739		2,898
Espresso(1)	(242)		1,375		7,693		—		33,711		32,363		18,636		—
Envoy	—		—		—		78		—		—		740		817
Subtotal	$	2,855	$	4,033	$	7,932	$	3,942	$	39,468	$	42,173	$	17,889	$	6,971
Solstice	17		—		11		—		(41)		—		(70)		—
Total	$	2,872	$	4,033	$	7,943	$	3,942	$	39,427	$	42,173	$	17,819	$	6,971

_______________________________________

(1)During the nine months ended September 30, 2022, the Espresso joint venture recognized net gains related to sub-portfolio sales, of which the Company’s proportionate share totaled $32.0 million. The Company was distributed its proportionate share of the net proceeds generated from the sales totaling $27.4 million.

Summarized Financial Data

The following table presents the Trilogy unconsolidated venture’s balance sheets as of September 30, 2022 and December 31, 2021 and statements of operations for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):

	September 30, 2022 (Unaudited)		December 31, 2021			Three Months Ended September 30,				Nine Months Ended September 30,
						2022		2021		2022		2021
Assets
Operating real estate, net	$	1,364,535	$	1,271,376	Total revenues	$	328,072	$	264,848	$	895,722	$	753,056
Other assets	755,164		575,573		Net income (loss)	$	26,081	$	3,298	$	46,361	$	(12,199)
Total assets	$	2,119,699	$	1,846,949
Liabilities and equity
Total liabilities	$	1,583,870	$	1,327,531
Equity	535,829		519,418
Total liabilities and equity	$	2,119,699	$	1,846,949

The below table indicates the Company’s investments for which the Sponsor is also an equity partner in the joint venture. Each investment was approved by the Company’s board of directors, including all of its independent directors. Refer to Note 4, “Investments in Unconsolidated Ventures” for further discussion of these investments:

Portfolio	Partner(s)	Acquisition Date	Ownership
Eclipse	NRF and Partner/ Formation Capital, LLC	May 2014	5.6%
Diversified US/UK	NRF and Partner	December 2014	14.3%

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Summary of Borrowings

The following table presents the Company’s mortgage and other notes payable (dollars in thousands):

				September 30, 2022 (Unaudited)				December 31, 2021
	Recourse vs. Non-Recourse	Initial Maturity	Contractual Interest Rate(1)	Principal Amount(2)		Carrying Value(2)		Principal Amount(2)		Carrying Value(2)
Mortgage notes payable, net
Watermark Aqua Portfolio
Frisco, TX(3)	Non-recourse	Feb 2026	3.0%	$	26,000	$	25,527	$	26,000	$	25,431
Milford, OH	Non-recourse	Sep 2026	LIBOR + 2.68%	18,394		18,169		18,661		18,388
Rochester Portfolio
Rochester, NY	Non-recourse	Feb 2025	4.25%	18,385		18,338		18,911		18,853
Rochester, NY(4)	Non-recourse	Aug 2027	LIBOR + 2.34%	101,081		100,443		101,224		100,495
Rochester, NY	Non-recourse	Aug 2023	LIBOR + 2.90%	11,383		11,354		11,732		11,716
Arbors Portfolio(5)
Various locations	Non-recourse	Feb 2025	3.99%	83,919		83,498		85,369		84,799
Winterfell Portfolio(6)
Various locations	Non-recourse	Jun 2025	4.17%	599,574		590,652		608,810		597,460
Avamere Portfolio(7)
Various locations	Non-recourse	Feb 2027	4.66%	68,314		67,983		69,144		68,755
Subtotal mortgage notes payable, net				$	927,050	$	915,964	$	939,851	$	925,897
Other notes payable
Oak Cottage
Santa Barbara, CA(8)	Non-recourse	Repaid	6.00%	$	—	$	—	$	3,914	$	3,914
Subtotal other notes payable, net				$	—	$	—	$	3,914	$	3,914
Total mortgage and other notes payable, net				$	927,050	$	915,964	$	943,765	$	929,811

_______________________________________

(1)Floating-rate borrowings total $130.9 million of principal outstanding and reference one-month LIBOR.

(2)The difference between principal amount and carrying value of mortgage notes payable is attributable to deferred financing costs, net for all borrowings, other than the Winterfell portfolio which is attributable to below market debt intangibles.

(3)The mortgage note carries a fixed interest rate of 3.0% through February 2024, followed by the greater of the fixed rate or one-month LIBOR plus 2.80% through the initial maturity date of February 2026.

(4)Composed of seven individual mortgage notes payable secured by seven healthcare real estate properties, cross-collateralized and subject to cross-default.

(5)Composed of four individual mortgage notes payable secured by four healthcare real estate properties, cross-collateralized and subject to cross-default.

(6)Composed of 32 individual mortgage notes payable secured by 32 healthcare real estate properties, cross-collateralized and subject to cross-default.

(7)Composed of five individual mortgage notes payable secured by five healthcare real estate properties, cross-collateralized and subject to cross-default.

(8)In June 2022, the Company repaid the outstanding financing on the Oak Cottage portfolio at discounted payoff of $3.7 million.

Schedule of Principal on Borrowings based on Final Maturity

The following table presents future scheduled principal payments on mortgage and other notes payable based on initial maturity (dollars in thousands):

October 1 through December 31, 2022	$	4,948
Years Ending December 31:
2023	31,032
2024	20,406
2025	670,302
2026	46,964
Thereafter	153,398
Total	$	927,050

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Related Party Arrangements (Tables)

9 Months Ended

Sep. 30, 2022

Related Party Transactions [Abstract]

Schedule of the Fees and Reimbursements Incurred to the Advisor and Dealer Manager

The following table presents the fees and reimbursements incurred and paid to the Advisor (dollars in thousands):

Type of Fee or Reimbursement		Due to Related Party as of December 31, 2021		Nine months Ended September 30, 2022				Due to Related Party as of September 30, 2022 (Unaudited)
	Financial Statement Location			Incurred		Paid
Fees to Advisor Entities
Asset management	Asset management fees-related party	$	937	$	7,532	$	(7,657)	$	812
Reimbursements to Advisor Entities
Operating costs	General and administrative expenses	6,401		8,789		(12,655)		2,535
Total		$	7,338	$	16,321	$	(20,312)	$	3,347

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Schedule of Dividend Investment Estimated Value per Share

The following table presents the estimated value per share of common stock based on when the value became effective:

Effective Date	Estimated Value per Share		Valuation Date
April 2016	$	8.63	12/31/2015
December 2016	9.10		6/30/2016
December 2017	8.50		6/30/2017
December 2018	7.10		6/30/2018
December 2019	6.25		6/30/2019
December 2020	3.89		6/30/2020
November 2021	3.91		6/30/2021

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of the Principal Amount, Carrying Value and Fair Value of Certain Financial Assets and Liabilities

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities (dollars in thousands):

	September 30, 2022 (Unaudited)						December 31, 2021
	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Financial liabilities:(1)
Mortgage and other notes payable, net	$	927,050	$	915,964	$	883,040	$	943,765	$	929,811	$	889,485

_______________________________________

(1)The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.

The following table summarizes the fair value, measured at the time of impairment, of Level 3 assets which have been measured at fair value on a nonrecurring basis during the periods presented and the associated impairment losses (dollars in thousands):

	September 30, 2022 (Unaudited)				December 31, 2021
	Fair Value		Impairment Losses		Fair Value		Impairment Losses
Operating real estate, net(1)	$	80,931	$	30,900	$	11,793	$	5,386

_______________________________________

(1)During the nine months ended September 30, 2022, the Company recorded impairment losses totaling $0.6 million for property damage sustained by facilities in its Winterfell portfolio. The fair value and impairment losses of these facilities are excluded from the table as of September 30, 2022.

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Summary of Segment Reporting

The following tables present segment reporting (dollars in thousands):

	Direct Investments
Three Months Ended September 30, 2022	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	724	$	46,715	$	—	$	—	$	300	$	47,739
Interest income on debt investments	—		—		—		—		—		—
Property operating expenses	—		(35,134)		—		—		—		(35,134)
Interest expense	(907)		(10,107)		—		—		—		(11,014)
Transaction costs	—		—		—		—		(857)		(857)
Asset management fees - related party	—		—		—		—		(2,428)		(2,428)
General and administrative expenses	—		(8)		—		—		(2,851)		(2,859)
Depreciation and amortization	(870)		(8,772)		—		—		—		(9,642)
Impairment loss	(18,500)		—		—		—		—		(18,500)
Other income, net	—		—		—		—		—		—
Realized gain (loss) on investments and other	—		325		—		—		—		325
Equity in earnings (losses) of unconsolidated ventures	—		—		2,872		—		—		2,872
Income tax expense	—		(15)		—		—		—		(15)
Net income (loss)	$	(19,553)	$	(6,996)	$	2,872	$	—	$	(5,836)	$	(29,513)

_______________________________________

(1)Includes unallocated asset management fee-related party and general and administrative expenses.

	Direct Investments
Three Months Ended September 30, 2021	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	6,012	$	58,364	$	—	$	—	$	38	$	64,414
Interest income on debt investments	—		—		—		1,067		—		1,067
Real estate properties - operating expenses	—		(45,784)		—		—		—		(45,784)
Interest expense	(2,907)		(12,768)		—		—		(105)		(15,780)
Transaction costs	—		—		—		—		—		—
Asset management fees - related party	—		—		—		—		(2,769)		(2,769)
General and administrative expenses	(64)		(111)		—		—		(2,257)		(2,432)
Depreciation and amortization	(3,027)		(10,801)		—		—		—		(13,828)
Impairment loss	—		(4,600)		—		—		—		(4,600)
Other income, net	—		—		—		—		—		—
Realized gain (loss) on investments and other	—		—		75		—		—		75
Equity in earnings (losses) of unconsolidated ventures	—		—		7,943		—		—		7,943
Income tax benefit (expense)	—		(59)		—		—		—		(59)
Net income (loss)	$	14	$	(15,759)	$	8,018	$	1,067	$	(5,093)	$	(11,753)

_______________________________________

(1)Includes unallocated asset management fee-related party and general and administrative expenses.

	Direct Investments
Nine Months Ended September 30, 2022	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	1,220	$	134,768	$	—	$	—	$	457	$	136,445
Interest income on debt investments	—		—		—		—		—		—
Property operating expenses	(35)		(101,223)		—		—		—		(101,258)
Interest expense	(2,708)		(29,169)		—		—		—		(31,877)
Transaction costs	—		—		—		—		(857)		(857)
Asset management fees - related party	—		—		—		—		(7,532)		(7,532)
General and administrative expenses	—		(24)		—		—		(10,276)		(10,300)
Depreciation and amortization	(2,601)		(26,504)		—		—		—		(29,105)
Impairment loss	(18,500)		(13,002)		—		—		—		(31,502)
Other income, net	—		77		—		—		—		77
Realized gain (loss) on investments and other	(206)		620		246		—		—		660
Equity in earnings (losses) of unconsolidated ventures	—		—		39,427		—		—		39,427
Income tax expense	—		(45)		—		—		—		(45)
Net income (loss)	$	(22,830)	$	(34,502)	$	39,673	$	—	$	(18,208)	$	(35,867)

_______________________________________

(1)Includes unallocated asset management fee-related party and general and administrative expenses.

	Direct Investments
Nine Months Ended September 30, 2021	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
Property and other revenues	$	10,942	$	174,633	$	—	$	—	$	80	$	185,655
Interest income on debt investments	—		—		—		4,667		—		4,667
Property operating expenses	(25)		(136,478)		—		—		—		(136,503)
Interest expense	(8,670)		(38,355)		—		—		(742)		(47,767)
Transaction costs	—		(54)		—		—		—		(54)
Asset management fees - related party	—		—		—		—		(8,307)		(8,307)
General and administrative expenses	(171)		(225)		—		—		(8,148)		(8,544)
Depreciation and amortization	(10,887)		(33,885)		—		—		—		(44,772)
Impairment loss	(786)		(4,600)		—		—		—		(5,386)
Other income, net	—		6,892		—		—		—		6,892
Realized gain (loss) on investments and other	(159)		7,563		75		—		—		7,479
Equity in earnings (losses) of unconsolidated ventures	—		—		17,819		—		—		17,819
Income tax benefit (expense)	—		(85)		—		—		—		(85)
Net income (loss)	$	(9,756)	$	(24,594)	$	17,894	$	4,667	$	(17,117)	$	(28,906)

_______________________________________

(1)Includes unallocated asset management fee-related party and general and administrative expenses.

Summary of Assets by Segment

The following table presents total assets by segment (dollars in thousands):

	Direct Investments
Total Assets:	Net Lease		Operating		Unconsolidated Investments		Debt Investment		Corporate(1)		Total
September 30, 2022 (Unaudited)	$	84,668	$	891,283	$	205,207	$	—	$	78,081	$	1,259,239
December 31, 2021	104,809		908,517		212,309		—		187,238		1,412,873

______________________________________

(1)Represents primarily corporate cash and cash equivalents balances.

Schedule of Real Estate Properties

The following table presents the operators and managers of the Company’s properties, excluding properties owned through unconsolidated joint ventures (dollars in thousands):

	As of September 30, 2022		Nine Months Ended September 30, 2022
Operator / Manager	Properties Under Management	Units Under Management(1)	Property and Other Revenues(2)		% of Total Property and Other Revenues
Solstice Senior Living(3)	32	4,000	$	82,607	60.5	%
Watermark Retirement Communities	14	1,753	33,770		24.8	%
Avamere Health Services	5	453	14,764		10.8	%
Integral Senior Living	1	44	3,628		2.7	%
Arcadia Management(4)	4	572	1,220		0.9	%
Other(5)	—	—	456		0.3	%
Total	56	6,822	$	136,445	100.0	%

______________________________________

(1)Represents rooms for ALFs and ILFs and beds for MCFs and SNFs, based on predominant type.

(2)Includes rental income received from the Company’s net lease properties as well as rental income, ancillary service fees and other related revenue earned from ILF residents and resident fee income derived from the Company’s ALFs and MCFs, which includes resident room and care charges, ancillary fees and other resident service charges.

(3)Solstice is a joint venture of which affiliates of ISL own 80%.

(4)During the nine months ended September 30, 2022, the Company recorded rental income to the extent payments were received.

(5)Consists primarily of interest income earned on corporate-level cash accounts.

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Business and Organization (Details) - USD ($)	9 Months Ended	92 Months Ended
	Sep. 30, 2022	Sep. 30, 2022	Dec. 31, 2021
Class of Stock [Line Items]
Common stock, shares authorized (in shares)	400,000,000	400,000,000	400,000,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000	50,000,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Net proceeds from issuance of common stock		$ 2,000,000,000
Dividend Reinvestment Plan
Class of Stock [Line Items]
Net proceeds from issuance of common stock		$ 232,600,000
Primary Beneficiary
Class of Stock [Line Items]
Limited partnership interest in operating partnership	99.99%
Advisor
Class of Stock [Line Items]
Non-controlling interest investment in operating partnership	$ 1,000
Special Unit Holder
Class of Stock [Line Items]
Non-controlling interest investment in operating partnership	$ 1,000

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Summary of Significant Accounting Policies - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2022 USD ($) portfolio day	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) portfolio day	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Variable Interest Entities
Operating real estate, net	$ 932,730,000		$ 932,730,000		$ 972,599,000
Mortgage and other notes payable, net	915,964,000		915,964,000		929,811,000
Investments in unconsolidated ventures	$ 205,207,000		$ 205,207,000		$ 212,309,000
Finance Lease Liability
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Operating real estate, net		Operating real estate, net
Finance leases for equipment	$ 2,500,000		$ 2,500,000
Payments of finance lease obligations			$ 400,000	$ 500,000
Finance Lease, Liability, Statement of Financial Position [Extensible Enumeration]	Other liabilities		Other liabilities
Weighted average interest rate (percent)	7.20%		7.20%
Remaining lease term (years)	3 years 4 months 24 days		3 years 4 months 24 days
Identified Intangibles
Number of triple net lease portfolios | portfolio	4		4
Amortization expense for in-place leases and deferred costs	$ 100,000	$ 300,000	$ 300,000	1,300,000
Days notice required for lease termination | day	30		30
Variable lease revenues	$ 2,100,000	3,500,000	$ 9,200,000	10,100,000
Impairment loss	18,500,000	4,600,000	31,502,000	5,386,000
Impairment loss on property damages			600,000
Investments in Unconsolidated Ventures
Impairment recognized			0	0
Allowance for credit losses on receivables	$ 0		$ 0
Acquisition Fees and Expenses
Acquisition fee and expense cap	6.00%		6.00%
Income Taxes
Deferred tax asset	$ 14,500,000		$ 14,500,000
Income tax expense	15,000	$ 59,000	45,000	85,000
Arbors
Identified Intangibles
Impairment loss			18,500,000
Winterfell
Identified Intangibles
Impairment loss			8,500,000	4,600,000
Rochester, NY
Identified Intangibles
Impairment loss			3,900,000
Smyrna
Identified Intangibles
Impairment loss				800,000
Other Income
Identified Intangibles
Grant income				$ 7,400,000
Variable Interest Entity, Primary Beneficiary
Variable Interest Entities
Operating real estate, net	214,200,000		214,200,000
Mortgage and other notes payable, net	$ 173,800,000		$ 173,800,000

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Summary of Significant Accounting Policies - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021	Sep. 30, 2021	Dec. 31, 2020
Accounting Policies [Abstract]
Cash and cash equivalents	$ 95,145	$ 200,473
Restricted cash	12,537	10,465
Total cash, cash equivalents and restricted cash	$ 107,682	$ 210,938	$ 110,524	$ 93,570

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Summary of Significant Accounting Policies - Estimated Useful Lives (Details)	9 Months Ended
	Sep. 30, 2022
Building | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	30 years
Building | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	50 years
Land improvements | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	9 years
Land improvements | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	15 years
Furniture, fixtures and equipment | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	5 years
Furniture, fixtures and equipment | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	14 years

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Summary of Significant Accounting Policies - Future Minimum Lease Payments from Capital Leases (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Accounting Policies [Abstract]
October 1 through December 31, 2022	$ 69
2023	93
2024	60
2025	29
2026	24
Thereafter	28
Total minimum lease payments	303
Less: Amount representing interest	(29)
Present value of minimum lease payments	$ 274

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Summary of Significant Accounting Policies - Deferred Costs and Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Less: Accumulated amortization	$ (117,812)	$ (117,559)
Intangible assets, net	2,337	2,590
In-place lease value
Finite-Lived Intangible Assets [Line Items]
In-place lease value	$ 120,149	$ 120,149

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Summary of Significant Accounting Policies - Schedule of Future Amortization Expense (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Accounting Policies [Abstract]
October 1 through December 31, 2022	$ 84
2023	337
2024	337
2025	337
2026	337
Thereafter	905
Total	$ 2,337

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Operating Real Estate - Identifiable Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Real Estate [Abstract]
Land	$ 121,518	$ 121,518
Land improvements	18,453	17,798
Buildings and improvements	945,526	965,630
Tenant improvements	322	0
Construction in progress	12,154	8,141
Furniture, fixtures and equipment	88,910	84,813
Subtotal	1,186,883	1,197,900
Less: Accumulated depreciation	(254,153)	(225,301)
Operating real estate, net	$ 932,730	$ 972,599

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Operating Real Estate - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Real Estate [Line Items]
Depreciation	$ 9.6	$ 13.5	$ 28.9	$ 43.5
Impairment loss			31.5	$ 5.4
Building and Building Improvements
Real Estate [Line Items]
Accumulated impairment	$ 181.2		$ 181.2		$ 149.7

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Investments in Unconsolidated Ventures - Changes in Carrying Value (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Carrying value	$ 205,207,000		$ 205,207,000		$ 212,309,000
Equity in earnings (losses) of unconsolidated ventures	2,872,000	$ 7,943,000	39,427,000	$ 17,819,000
Cash Distribution	4,033,000	3,942,000	42,173,000	6,971,000
Eclipse, Envoy, Diversified US/UK, Espresso, Trilogy
Schedule of Equity Method Investments [Line Items]
Carrying value	204,927,000		204,927,000		211,988,000
Equity in earnings (losses) of unconsolidated ventures	2,855,000	7,932,000	39,468,000	17,889,000
Cash Distribution	$ 4,033,000	3,942,000	$ 42,173,000	6,971,000
Trilogy
Schedule of Equity Method Investments [Line Items]
Ownership interest (as a percentage)	23.20%		23.20%
Carrying value	$ 130,224,000		$ 130,224,000		126,366,000
Capitalized acquisition costs	9,800,000		9,800,000		9,800,000
Equity in earnings (losses) of unconsolidated ventures	6,052,000	763,000	10,757,000	(2,839,000)
Cash Distribution	$ 2,300,000	0	$ 6,900,000	0
Diversified US/UK
Schedule of Equity Method Investments [Line Items]
Ownership interest (as a percentage)	14.30%		14.30%
Carrying value	$ 69,815,000		$ 69,815,000		80,766,000
Capitalized acquisition costs	13,400,000		13,400,000		13,400,000
Equity in earnings (losses) of unconsolidated ventures	(2,611,000)	(330,000)	(4,060,000)	(2,387,000)
Cash Distribution	$ 358,000	966,000	$ 2,290,000	3,256,000
Eclipse
Schedule of Equity Method Investments [Line Items]
Ownership interest (as a percentage)	5.60%		5.60%
Carrying value	$ 3,295,000		$ 3,295,000		4,856,000
Capitalized acquisition costs	1,300,000		1,300,000		1,300,000
Equity in earnings (losses) of unconsolidated ventures	(344,000)	(194,000)	(940,000)	3,739,000
Cash Distribution	$ 0	2,898,000	$ 620,000	2,898,000
Espresso
Schedule of Equity Method Investments [Line Items]
Ownership interest (as a percentage)	36.70%		36.70%
Carrying value	$ 1,593,000		$ 1,593,000		0
Equity in earnings (losses) of unconsolidated ventures	(242,000)	7,693,000	33,711,000	18,636,000
Cash Distribution	1,375,000	0	32,363,000	0
Gains related to sub portfolio sales			32,000,000
Proceeds from sale of building			27,400,000
Envoy
Schedule of Equity Method Investments [Line Items]
Equity in earnings (losses) of unconsolidated ventures	0	0	0	740,000
Cash Distribution	$ 0	78,000	$ 0	817,000
Solstice
Schedule of Equity Method Investments [Line Items]
Ownership interest (as a percentage)	20.00%		20.00%
Carrying value	$ 280,000		$ 280,000		$ 321,000
Equity in earnings (losses) of unconsolidated ventures	17,000	11,000	(41,000)	(70,000)
Cash Distribution	$ 0	$ 0	$ 0	$ 0
Mezzanine loans | Espresso
Schedule of Equity Method Investments [Line Items]
Carrying value						$ 0
Solstice
Schedule of Equity Method Investments [Line Items]
Noncontrolling interest, ownership percentage by parent (as a percentage)	80.00%		80.00%
Winterfell | Solstice
Schedule of Equity Method Investments [Line Items]
Ownership interest (as a percentage)	20.00%		20.00%
Winterfell | Solstice
Schedule of Equity Method Investments [Line Items]
Noncontrolling interest, ownership percentage by parent (as a percentage)	80.00%		80.00%

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Investments in Unconsolidated Ventures - Assets and Liabilities (Details) - USD ($) $ in Thousands		3 Months Ended						9 Months Ended
		Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	Dec. 31, 2020
Schedule of Equity Method Investments [Line Items]
Operating real estate, net		$ 932,730						$ 932,730		$ 972,599
Other assets		7,829						7,829		10,771
Total assets	[1]	1,259,239						1,259,239		1,412,873
Total liabilities	[1]	942,182						942,182		966,055
Equity		317,057	$ 345,809	$ 436,024	$ 390,031	$ 399,449	$ 403,869	317,057	$ 390,031	446,818	$ 412,062
Total liabilities and equity		1,259,239						1,259,239		1,412,873
Total revenues		47,739			64,414			136,445	185,655
Net income (loss)		(29,513)	$ 6,627	$ (12,981)	(11,753)	$ (6,998)	$ (10,155)	(35,867)	(28,906)
Diversified US/UK and Trilogy
Schedule of Equity Method Investments [Line Items]
Operating real estate, net		1,364,535						1,364,535		1,271,376
Other assets		755,164						755,164		575,573
Total assets		2,119,699						2,119,699		1,846,949
Total liabilities		1,583,870						1,583,870		1,327,531
Equity		535,829						535,829		519,418
Total liabilities and equity		2,119,699						2,119,699		$ 1,846,949
Total revenues		328,072			264,848			895,722	753,056
Net income (loss)		$ 26,081			$ 3,298			$ 46,361	$ (12,199)

[1] Represents the consolidated assets and liabilities of NorthStar Healthcare Income Operating Partnership, LP (the “Operating Partnership”). The Operating Partnership is a consolidated variable interest entity (“VIE”), of which NorthStar Healthcare Income, Inc. (together with its consolidated subsidiaries, the “Company”) is the sole general partner and owns approximately 99.99%. As of September 30, 2022, the Operating Partnership includes $224.2 million and $178.8 million of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. Refer to Note 2, “Summary of Significant Accounting Policies.”

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Borrowings - Schedule of Borrowings (Details) $ in Thousands	1 Months Ended	9 Months Ended
	Jun. 30, 2022 USD ($)	Sep. 30, 2022 USD ($) debt_instrument property	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Debt Instrument [Line Items]
Carrying Value		$ 927,050
Repayments of notes payable		$ 16,514	$ 61,121
Winterfell
Debt Instrument [Line Items]
Number of healthcare real estate properties | property		32
Mortgages and other notes payable
Debt Instrument [Line Items]
Principal Amount		$ 927,050		$ 943,765
Carrying Value		915,964		929,811
Mortgage notes payable, net
Debt Instrument [Line Items]
Principal Amount		$ 927,050		943,765
Mortgage notes payable, net | Rochester, NY
Debt Instrument [Line Items]
Number of debt instruments | debt_instrument		7
Number of healthcare real estate properties | property		7
Mortgage notes payable, net | Arbors
Debt Instrument [Line Items]
Number of debt instruments | debt_instrument		4
Number of healthcare real estate properties | property		4
Mortgage notes payable, net | Winterfell
Debt Instrument [Line Items]
Number of debt instruments | debt_instrument		32
Mortgage notes payable, net | Avamere Portfolio
Debt Instrument [Line Items]
Number of debt instruments | debt_instrument		5
Number of healthcare real estate properties | property		5
Mortgage notes payable, net | Frisco, TX Non-recourse | Frisco, TX
Debt Instrument [Line Items]
Fixed interest rate		3.00%
Principal Amount		$ 26,000		26,000
Carrying Value		$ 25,527		25,431
Mortgage notes payable, net | Frisco, TX Non-recourse | Frisco, TX | LIBOR
Debt Instrument [Line Items]
Basis spread on variable interest rate		2.80%
Mortgage notes payable, net | Milford, OH Non-recourse | Milford, OH
Debt Instrument [Line Items]
Principal Amount		$ 18,394		18,661
Carrying Value		$ 18,169		18,388
Mortgage notes payable, net | Milford, OH Non-recourse | Milford, OH | LIBOR
Debt Instrument [Line Items]
Basis spread on variable interest rate		2.68%
Mortgage notes payable, net | Rochester, NY Non-recourse, February 2025 | Rochester, NY
Debt Instrument [Line Items]
Fixed interest rate		4.25%
Principal Amount		$ 18,385		18,911
Carrying Value		18,338		18,853
Mortgage notes payable, net | Rochester, NY Non-recourse, August 2027 | Rochester, NY
Debt Instrument [Line Items]
Principal Amount		101,081		101,224
Carrying Value		$ 100,443		100,495
Mortgage notes payable, net | Rochester, NY Non-recourse, August 2027 | Rochester, NY | LIBOR
Debt Instrument [Line Items]
Basis spread on variable interest rate		2.34%
Mortgage notes payable, net | Rochester NY Nonrecourse August 2022 | Rochester, NY
Debt Instrument [Line Items]
Principal Amount		$ 11,383		11,732
Carrying Value		$ 11,354		11,716
Mortgage notes payable, net | Rochester NY Nonrecourse August 2022 | Rochester, NY | LIBOR
Debt Instrument [Line Items]
Basis spread on variable interest rate		2.90%
Mortgage notes payable, net | Non-Recourse
Debt Instrument [Line Items]
Principal Amount		$ 927,050		939,851
Carrying Value		$ 915,964		925,897
Mortgage notes payable, net | Non-Recourse | Arbors
Debt Instrument [Line Items]
Fixed interest rate		3.99%
Principal Amount		$ 83,919		85,369
Carrying Value		$ 83,498		84,799
Mortgage notes payable, net | Non-Recourse | Winterfell
Debt Instrument [Line Items]
Fixed interest rate		4.17%
Principal Amount		$ 599,574		608,810
Carrying Value		$ 590,652		597,460
Mortgage notes payable, net | Non-Recourse | Avamere Portfolio
Debt Instrument [Line Items]
Fixed interest rate		4.66%
Principal Amount		$ 68,314		69,144
Carrying Value		67,983		68,755
Mortgage notes payable, net | One-Month LIBOR
Debt Instrument [Line Items]
Principal Amount		130,900
Other notes payable | Non-Recourse
Debt Instrument [Line Items]
Principal Amount		0		3,914
Carrying Value		$ 0		3,914
Other notes payable | Non-Recourse | Oak Cottage
Debt Instrument [Line Items]
Fixed interest rate		6.00%
Principal Amount		$ 0		3,914
Carrying Value		$ 0		$ 3,914
Repayments of notes payable	$ 3,700

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Borrowings - Maturity Schedule (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Debt Disclosure [Abstract]
October 1 through December 31, 2022	$ 4,948
2023	31,032
2024	20,406
2025	670,302
2026	46,964
Thereafter	153,398
Total	$ 927,050

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Borrowings - Narrative (Details) - Digital Bridge - Line of Credit - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 35,000,000
Long-term Line of Credit	$ 0	$ 0

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Related Party Arrangements - Fees to Advisor (Narrative) (Details) - Advisor - USD ($) $ in Millions	Jan. 01, 2018	Sep. 30, 2022
Related Party Transaction [Line Items]
Threshold for asset management fee deduction		$ 75.0
Asset Management Fees
Related Party Transaction [Line Items]
Monthly asset management fees as a percentage of investment amount	0.125%

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Related Party Arrangements - Reimbursements to Advisor (Narrative) (Details) - Advisor - Operating Costs	9 Months Ended
	Sep. 30, 2022 USD ($) quarter
Related Party Transaction [Line Items]
Reimbursement of personnel costs related to executive officers and other personnel involved in activities for which the Advisor receives an acquisition fee or disposition fee | $	$ 0
Number of preceding fiscal quarters | quarter	4
Percentage of average invested assets reimbursable as operating costs	2.00%
Expense reimbursement period (months)	12 months
Maximum
Related Party Transaction [Line Items]
Percentage of net income, without reduction for any additions to reserves for depreciation, loan losses or other similar non-cash reserves and excluding any gain from the sale of the company's assets	25.00%

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Related Party Arrangements - Summary of Fees and Reimbursements (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Related Party Transaction, Due to Related Parties [Roll Forward]
Due to related party, beginning balance	$ 7,338
Incurred	16,321
Paid	(20,312)
Due to related party, ending balance	3,347
Advisor | Asset management | Asset management fees-related party
Related Party Transaction, Due to Related Parties [Roll Forward]
Due to related party, beginning balance	937
Incurred	7,532
Paid	(7,657)
Due to related party, ending balance	812
Advisor | Operating costs
Related Party Transaction, Due to Related Parties [Roll Forward]
Due to related party, ending balance	2,500
Advisor | Operating costs | General and administrative expenses
Related Party Transaction, Due to Related Parties [Roll Forward]
Due to related party, beginning balance	6,401
Incurred	8,789
Paid	(12,655)
Due to related party, ending balance	$ 2,535

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Related Party Arrangements - Issuance of Common Stock to the Advisor (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Related Party Transaction [Line Items]
Share-based payment of advisor assets management fees (in shares)	2,000,000
Issuance of common stock as payment for asset management fees	$ 7,700
Common stock (in shares)	195,078,539	195,078,539
Common stock	$ 1,951	$ 1,930
The Advisor, the Sponsor, and affiliates
Related Party Transaction [Line Items]
Common stock (in shares)	9,400,000
Common stock	$ 36,600
Common stock, outstanding (percentage)	4.80%

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Related Party Arrangements - Incentive Fee (Narrative) (Details) - Advisor - Incentive Fee	9 Months Ended
	Sep. 30, 2022
Related Party Transaction [Line Items]
Incentive fee distributions, percent of net cash flows	15.00%
Incentive fee distributions, minimum non-compounded annual pre-tax return on invested capital	6.75%

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Related Party Arrangements - Investments in Joint Ventures (Narrative) (Details) $ in Millions	9 Months Ended
	Sep. 30, 2022 USD ($)
Solstice
Related Party Transaction [Line Items]
Ownership interest (as a percentage)	20.00%
Solstice
Related Party Transaction [Line Items]
Noncontrolling interest, ownership percentage by parent (as a percentage)	80.00%
Winterfell | Solstice
Related Party Transaction [Line Items]
Ownership interest (as a percentage)	20.00%
Winterfell | Solstice
Related Party Transaction [Line Items]
Noncontrolling interest, ownership percentage by parent (as a percentage)	80.00%
Property management fee expense paid to joint venture	$ 4.1

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Related Party Arrangements - Schedule of Joint Ventures (Details)	Sep. 30, 2022
Eclipse
Related Party Transaction [Line Items]
Ownership interest (as a percentage)	5.60%
Diversified US/UK
Related Party Transaction [Line Items]
Ownership interest (as a percentage)	14.30%
NRF and Partner/ Formation Capital, LLC | Eclipse
Related Party Transaction [Line Items]
Ownership interest (as a percentage)	5.60%
NRF and Partner | Diversified US/UK
Related Party Transaction [Line Items]
Ownership interest (as a percentage)	14.30%

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Related Party Arrangements - Line of Credit - Related Party (Narrative) (Details) - Line of Credit - Digital Bridge - USD ($)	Oct. 21, 2022	Sep. 30, 2022
Related Party Transaction [Line Items]
Maximum borrowing capacity		$ 35,000,000
LIBOR | Subsequent event
Related Party Transaction [Line Items]
Basis spread on variable interest rate	3.50%

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Equity-Based Compensation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Equity-based compensation
Number of shares granted to independent directors (in shares)			49,872	66,840
Equity-based compensation expense	$ 56,875	$ 55,625	$ 150,042	$ 174,458
Unrecognized equity-based compensation	$ 268,125		$ 268,125		$ 223,167
Restricted stock
Equity-based compensation
Number of shares authorized	2,000,000		2,000,000
Restricted common shares grant vesting period			2 years
Number of vested restricted stock (in shares)			4,800
Restricted Stock Units (RSUs)
Equity-based compensation
Restricted common shares grant vesting period			2 years
Unvested shares (in shares)	68,703		68,703		50,130
Independent Directors | Restricted stock
Equity-based compensation
Number of shares granted to independent directors (in shares)			159,932
Aggregate value for restricted common shares granted to independent directors	$ 1,300,000		$ 1,300,000
Independent Directors | Restricted Stock Units (RSUs)
Equity-based compensation
Number of shares granted to independent directors (in shares)			116,712
Aggregate value for restricted common shares granted to independent directors	$ 500,000		$ 500,000

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Stockholders' Equity - Common Stock (Details) - USD ($) shares in Millions, $ in Billions	1 Months Ended	92 Months Ended
	Jan. 19, 2016	Sep. 30, 2022
Class of Stock [Line Items]
Value of common stock issued		$ 2.0
Common Stock
Class of Stock [Line Items]
Number of shares issued (in shares)	173.4
Value of common stock issued	$ 1.7

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Stockholders' Equity - Distribution Reinvestment Plan (Details) - USD ($) $ / shares in Units, shares in Millions	1 Months Ended	9 Months Ended	81 Months Ended	92 Months Ended
	Jan. 19, 2016	Sep. 30, 2022	Sep. 30, 2022	Sep. 30, 2022	Nov. 30, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Apr. 30, 2016
Class of Stock [Line Items]
Value of common stock issued				$ 2,000,000,000
Common Stock
Class of Stock [Line Items]
Number of shares issued (in shares)	173.4
Value of common stock issued	$ 1,700,000,000
Dividend Reinvestment Plan
Class of Stock [Line Items]
Share price (in dollars per share)					$ 3.91	$ 3.89	$ 6.25	$ 7.10	$ 8.50	$ 9.10	$ 8.63
Selling commissions or dealer manager fees paid		$ 0
Notice period served by board of directors to amend or terminate DRP (in days)		10 days
Dividend Reinvestment Plan | Common Stock
Class of Stock [Line Items]
Number of shares issued (in shares)			25.7
Value of common stock issued			$ 232,600,000
Initial Distribution Support Agreement | Dividend Reinvestment Plan
Class of Stock [Line Items]
Share price (in dollars per share)		$ 9.50	$ 9.50	$ 9.50
Follow-on Distribution Reinvestment Plan
Class of Stock [Line Items]
Share price (in dollars per share)		$ 10.20	$ 10.20	$ 10.20
Percentage of offering price		95.00%	95.00%	95.00%
Follow-on Distribution Reinvestment Plan | Dividend Reinvestment Plan
Class of Stock [Line Items]
Share price (in dollars per share)		$ 9.69	$ 9.69	$ 9.69

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Stockholders' Equity - Distributions (Details) - USD ($)	May 05, 2022	Sep. 30, 2022	May 02, 2022	Dec. 31, 2021
Equity [Abstract]
Special distribution (dollars per share)			$ 0.50
Dividends payable		$ 33,419	$ 97,100,000
Payments of dividends	$ 97,000,000
Operating loss carryforwards				$ 226,500,000

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Stockholders' Equity - Share Repurchase Program (Details)	9 Months Ended
	Sep. 30, 2022 shares
Equity [Abstract]
Shares repurchased during period (in shares)	0

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Non-controlling Interests (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Noncontrolling Interest [Abstract]
Net income (loss) attributable to non-controlling interests	$ (73)	$ (100)	$ (298)	$ 73

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Fair Value - Schedule of the Principal Amount, Carrying Value and Fair Value of Certain Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Financial Liabilities
Carrying Value	$ 915,964	$ 929,811
Mortgage and other notes payable, net
Financial Liabilities
Principal Amount	927,050	943,765
Carrying Value	915,964	929,811
Fair Value	$ 883,040	$ 889,485

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Fair Value - Nonrecurring Fair Value (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Operating real estate, net	$ 932,730		$ 972,599
Impairment loss	31,500	$ 5,400
Nonrecurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Operating real estate, net	80,931		11,793
Nonrecurring | Level 3 | Operating Real Estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impairment loss	$ 30,900		$ 5,386

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Fair Value - Narrative (Details) - Discounted cash flow method - Real estate investment - Nonrecurring	Sep. 30, 2022
Minimum | Terminal capitalization rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Measurement input (percentage)	6.00%
Minimum | Discount rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Measurement input (percentage)	8.50%
Maximum | Terminal capitalization rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Measurement input (percentage)	8.00%
Maximum | Discount rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Measurement input (percentage)	10.50%

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Segment Reporting - Narrative (Details)	9 Months Ended
	Sep. 30, 2022 segment
Segment Reporting [Abstract]
Number of segments	5

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Segment Reporting - Segment Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Segment Reporting Information [Line Items]
Property and other revenues	$ 47,739			$ 64,414			$ 136,445	$ 185,655
Interest income on debt investments	0			1,067			0	4,667
Property operating expenses	(35,134)			(45,784)			(101,258)	(136,503)
Interest expense	(11,014)			(15,780)			(31,877)	(47,767)
Transaction costs	(857)			0			(857)	(54)
Asset management fees - related party	(2,428)			(2,769)			(7,532)	(8,307)
General and administrative expenses	(2,859)			(2,432)			(10,300)	(8,544)
Depreciation and amortization	(9,642)			(13,828)			(29,105)	(44,772)
Impairment loss	(18,500)			(4,600)			(31,502)	(5,386)
Other income, net	0			0			77	6,892
Realized gain (loss) on investments and other	325			75			660	7,479
Equity in earnings (losses) of unconsolidated ventures	2,872			7,943			39,427	17,819
Income tax expense	(15)			(59)			(45)	(85)
Net income (loss)	(29,513)	$ 6,627	$ (12,981)	(11,753)	$ (6,998)	$ (10,155)	(35,867)	(28,906)
Direct Investments - Net Lease Segment
Segment Reporting Information [Line Items]
Property and other revenues	724			6,012			1,220	10,942
Interest income on debt investments	0			0			0	0
Property operating expenses	0			0			(35)	(25)
Interest expense	(907)			(2,907)			(2,708)	(8,670)
Transaction costs	0			0			0	0
Asset management fees - related party	0			0			0	0
General and administrative expenses	0			(64)			0	(171)
Depreciation and amortization	(870)			(3,027)			(2,601)	(10,887)
Impairment loss	(18,500)			0			(18,500)	(786)
Other income, net	0			0			0	0
Realized gain (loss) on investments and other	0			0			(206)	(159)
Equity in earnings (losses) of unconsolidated ventures	0			0			0	0
Income tax expense	0			0			0	0
Net income (loss)	(19,553)			14			(22,830)	(9,756)
Direct Investments - Operating Segment
Segment Reporting Information [Line Items]
Property and other revenues	46,715			58,364			134,768	174,633
Interest income on debt investments	0			0			0	0
Property operating expenses	(35,134)			(45,784)			(101,223)	(136,478)
Interest expense	(10,107)			(12,768)			(29,169)	(38,355)
Transaction costs	0			0			0	(54)
Asset management fees - related party	0			0			0	0
General and administrative expenses	(8)			(111)			(24)	(225)
Depreciation and amortization	(8,772)			(10,801)			(26,504)	(33,885)
Impairment loss	0			(4,600)			(13,002)	(4,600)
Other income, net	0			0			77	6,892
Realized gain (loss) on investments and other	325			0			620	7,563
Equity in earnings (losses) of unconsolidated ventures	0			0			0	0
Income tax expense	(15)			(59)			(45)	(85)
Net income (loss)	(6,996)			(15,759)			(34,502)	(24,594)
Unconsolidated Investments
Segment Reporting Information [Line Items]
Property and other revenues	0			0			0	0
Interest income on debt investments	0			0			0	0
Property operating expenses	0			0			0	0
Interest expense	0			0			0	0
Transaction costs	0			0			0	0
Asset management fees - related party	0			0			0	0
General and administrative expenses	0			0			0	0
Depreciation and amortization	0			0			0	0
Impairment loss	0			0			0	0
Other income, net	0			0			0	0
Realized gain (loss) on investments and other	0			75			246	75
Equity in earnings (losses) of unconsolidated ventures	2,872			7,943			39,427	17,819
Income tax expense	0			0			0	0
Net income (loss)	2,872			8,018			39,673	17,894
Debt Investment
Segment Reporting Information [Line Items]
Property and other revenues	0			0			0	0
Interest income on debt investments	0			1,067			0	4,667
Property operating expenses	0			0			0	0
Interest expense	0			0			0	0
Transaction costs	0			0			0	0
Asset management fees - related party	0			0			0	0
General and administrative expenses	0			0			0	0
Depreciation and amortization	0			0			0	0
Impairment loss	0			0			0	0
Other income, net	0			0			0	0
Realized gain (loss) on investments and other	0			0			0	0
Equity in earnings (losses) of unconsolidated ventures	0			0			0	0
Income tax expense	0			0			0	0
Net income (loss)	0			1,067			0	4,667
Corporate
Segment Reporting Information [Line Items]
Property and other revenues	300			38			457	80
Interest income on debt investments	0			0			0	0
Property operating expenses	0			0			0	0
Interest expense	0			(105)			0	(742)
Transaction costs	(857)			0			(857)	0
Asset management fees - related party	(2,428)			(2,769)			(7,532)	(8,307)
General and administrative expenses	(2,851)			(2,257)			(10,276)	(8,148)
Depreciation and amortization	0			0			0	0
Impairment loss	0			0			0	0
Other income, net	0			0			0	0
Realized gain (loss) on investments and other	0			0			0	0
Equity in earnings (losses) of unconsolidated ventures	0			0			0	0
Income tax expense	0			0			0	0
Net income (loss)	$ (5,836)			$ (5,093)			$ (18,208)	$ (17,117)

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Segment Reporting - Summary of Assets by Segment (Details) - USD ($) $ in Thousands		Sep. 30, 2022	Dec. 31, 2021
Segment Reporting Information [Line Items]
Assets	[1]	$ 1,259,239	$ 1,412,873
Direct Investments - Net Lease Segment
Segment Reporting Information [Line Items]
Assets		84,668	104,809
Direct Investments - Operating Segment
Segment Reporting Information [Line Items]
Assets		891,283	908,517
Unconsolidated Investments
Segment Reporting Information [Line Items]
Assets		205,207	212,309
Debt Investment
Segment Reporting Information [Line Items]
Assets		0	0
Corporate
Segment Reporting Information [Line Items]
Assets		$ 78,081	$ 187,238

[1] Represents the consolidated assets and liabilities of NorthStar Healthcare Income Operating Partnership, LP (the “Operating Partnership”). The Operating Partnership is a consolidated variable interest entity (“VIE”), of which NorthStar Healthcare Income, Inc. (together with its consolidated subsidiaries, the “Company”) is the sole general partner and owns approximately 99.99%. As of September 30, 2022, the Operating Partnership includes $224.2 million and $178.8 million of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. Refer to Note 2, “Summary of Significant Accounting Policies.”

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Segment Reporting - Schedule of Properties (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($) unit property property1
Real Estate Properties [Line Items]
Properties Under Management | property	56
Units Under Management | unit	6,822
Property and Other Revenues | $	$ 136,445
Revenue | Customer Concentration Risk
Real Estate Properties [Line Items]
Percentage of Total Property and Other Revenues	100.00%
Solstice
Real Estate Properties [Line Items]
Properties Under Management | property	32
Units Under Management | unit	4,000
Property and Other Revenues | $	$ 82,607
Solstice | Revenue | Customer Concentration Risk
Real Estate Properties [Line Items]
Percentage of Total Property and Other Revenues	60.50%
Watermark Retirement Communities
Real Estate Properties [Line Items]
Properties Under Management | property	14
Units Under Management | unit	1,753
Property and Other Revenues | $	$ 33,770
Watermark Retirement Communities | Revenue | Customer Concentration Risk
Real Estate Properties [Line Items]
Percentage of Total Property and Other Revenues	24.80%
Avamere Health Services
Real Estate Properties [Line Items]
Properties Under Management | property	5
Units Under Management | unit	453
Property and Other Revenues | $	$ 14,764
Avamere Health Services | Revenue | Customer Concentration Risk
Real Estate Properties [Line Items]
Percentage of Total Property and Other Revenues	10.80%
Integral Senior Living
Real Estate Properties [Line Items]
Properties Under Management | property	1
Units Under Management | unit	44
Property and Other Revenues | $	$ 3,628
Integral Senior Living | Revenue | Customer Concentration Risk
Real Estate Properties [Line Items]
Percentage of Total Property and Other Revenues	2.70%
Arcadia Management
Real Estate Properties [Line Items]
Properties Under Management | property	4
Units Under Management | unit	572
Property and Other Revenues | $	$ 1,220
Arcadia Management | Revenue | Customer Concentration Risk
Real Estate Properties [Line Items]
Percentage of Total Property and Other Revenues	0.90%
Other
Real Estate Properties [Line Items]
Properties Under Management | property1	0
Units Under Management | unit	0
Property and Other Revenues | $	$ 456
Other | Revenue | Customer Concentration Risk
Real Estate Properties [Line Items]
Percentage of Total Property and Other Revenues	0.30%
Solstice
Real Estate Properties [Line Items]
Noncontrolling interest, ownership percentage by parent (as a percentage)	80.00%

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Subsequent Events - Narrative (Details) - Subsequent event $ in Millions			1 Months Ended
	Nov. 10, 2022 USD ($)	Oct. 21, 2022	Oct. 31, 2022 property
Subsequent Event [Line Items]
Number of properties sold | property			17
Proceeds from sale of building | $	$ 22.3
Related Party Transition Services Agreement
Subsequent Event [Line Items]
Related party transaction, term of agreement		6 months
Term of contract, extension option		3 months
Minimum notice of termination of contract		6 months
Related Party Transition Services Agreement, Treasury and Accounts Payable Services
Subsequent Event [Line Items]
Related party transaction, term of agreement		12 months